Security deposit held as debt, not trust, after agreement showed no segregation and allowed use of funds as own.

A security deposit paid by a sole selling agent was held not to be impressed with a trust, because the agreement did not require segregation, permitted the money to be used as the recipient's own, and provided for interest on the deposit. Clause 9 also treated the security deposit and unpaid commission on the same footing, and the commission claim was itself only a debt. On a true construction of the agreement and surrounding facts, the relationship was debtor and creditor, not fiduciary. Priority in liquidation was therefore unavailable, and the claimant ranked only as an ordinary creditor.

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Issues: Whether the security deposit of Rs. 50,000 paid by the sole selling agent under the agreement was impressed with a trust and entitled to priority in liquidation, or whether it created only a debtor-creditor relationship.

Analysis: The determinative question was whether the terms of the agreement and the surrounding facts showed that the deposit was to be held in a fiduciary capacity. The absence of any stipulation for segregation, the permission to use the money as its own, and the provision for payment of interest all pointed away from a trust. Clause 9 further treated the security deposit and unpaid commission on the same footing, and the commission claim could only be a debt. On a true construction of the agreement, these features indicated that the deposit was not intended to be impressed with a trust.

Conclusion: The security deposit was not held on trust and the appellant was only a creditor; the claim for priority failed.

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