Trust money in winding up: interest stops at petition date, not at actual payment, under insolvency rules.

In the winding up of an insolvent company, a claimant whose deposit was treated as trust money was held entitled to interest only up to the date of presentation of the winding-up petition, not until actual payment. The claim was not a preferential debt under section 230 of the Indian Companies Act, 1913, and its earlier priority rested on trust character rather than that provision. Section 23 of the Indian Trusts Act, 1882 did not apply because the case did not involve trustee interest receipts or unreasonable delay. By section 229 of the Indian Companies Act, 1913, insolvency rules applied, and interest ceased on adjudication, which related back to the petition date.

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Issues: Whether, in the liquidation of an insolvent company, a claimant whose deposit was treated as trust money was entitled to interest only up to the date of presentation of the winding-up petition or up to the date of actual payment.

Analysis: The claim did not fall within the preferential debts governed by section 230 of the Indian Companies Act, 1913, and the earlier finding of priority in respect of the sum of Rs. 15,000 rested on its character as trust money, not on section 230. The claim nonetheless remained subject to the ordinary rules applicable to debts provable in liquidation. Section 23 of the Indian Trusts Act, 1882 did not assist the claimant, since the case did not involve receipt of interest by the trustee, presumed receipt of interest, or unreasonable delay in paying trust money. The governing provision was section 229 of the Indian Companies Act, 1913, which imports the insolvency rules into the winding up of an insolvent company. Under the insolvency law, interest ordinarily stops on adjudication, and by virtue of the relation-back rule in section 28(7) of the Provincial Insolvency Act, 1920, adjudication takes effect from the date of presentation of the petition. Section 168 of the Indian Companies Act, 1913 similarly treats the commencement of winding up as the date of presentation of the winding-up petition.

Conclusion: The claimant was entitled to interest only up to the date of presentation of the winding-up petition, and the demand for interest till the date of payment was not maintainable.

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