Jagdish Sahai, J. - (1.) This special appeal is directed against an order passed by Mootham, J., (as he then was) in exercise of company jurisdiction on the 2nd of January J.951. The facts involved in this case are very short. The appellants Messrs. R.B. Seth Jessa Ram Fateh Chand (hereinafter called the appellants) were appointed by an agreement dated the 18th of December, 1948, made between them and the respondent No. 2 the Vijay Lakshmi Sugar Mills Limited (hereinafter referred to as the mills), the sole selling agents of the Mills for one year upon the terms and subject to the conditions therein set out. In accordance with the terms of the agreement the appellants deposited with the Mills a sum of Rs. 50,000/- as security for the due performance of their obligation under that agreement. In 1949 the Mills went into voluntary liquidation and by an Order of this Court dated 8th November, 1949, the liquidation was directed to continue under the supervision of the Court. The appellants claimed the sum of Rs. 50,000/- deposited by them along with the stipulated interest at 6 per cent per annum from the liquid ators as also a sum of Rs. 24,500/- on account of commission on the sale of sugar, claiming priority over other creditors in respect of these two sums. Later on, however, the claim with respect io the sum of Rs. 24,500/- was abandoned by the appellants and the liquidators were concerned onty with the amount of Rs. 50,000/- along with the interest mentioned above. The controversy between the parties was in respect of the essential quality of the deposit of Rs, 50,000/-. It was contended on behalf of the appellants that it was in the nature of a trust whereas the position taken by the liquidators was that it was nothing more than, a debt and consequently there could be no question of any priority between the debtors inter se. The liquidators not having agreed to give priority to this amount, the matter was taken before the learned Company Jugde who on 2nd January, 1951, passed an order by which he held that this sum could not be treated to be anything other than a debt and consequently no question of priority arose. Dissatisfied with that order the appellants have filed the present appeal.
(2.) The only question involved in this special appeal is with regard to the essential nature of the deposit. Learned counsel have not addressed us on any other question, and in our judgment no other question arises. A large number of authorities have been brought to our notice by learned counsel for the parties in respect of their rival contentions. Before we advert to those authorities we think it proper to first deal with the question on first principles. The relevant paragraphs in the agreement are paragraphs 8 and 9 which read as follows : "8. That the firm has deposited a sum of Rs. 50,000/- with the said Mill as a security tor the due performance of the contract on their part, on which amount the Mill shall pay interest to the said firm at the rae of 6% per annum. 9. That thei Mill shall refund the said security deposit of Rs. 50,000/- with interest thereon at the said rate on termination of the agency. In case the said amount is not refunded with interest thereon the firm shall be entitled to commission at the rates mentioned above as if agency has not terminated. In other words as long as security with interest is not refunded and commission due is not paid this agreement will not be terminated." A perusal of the various clauses in the agreement would clearly reveal that in fact no trust was created. The appellants had Undertaken to perform some services to the Mills and in connection wi'h those services large stocks of goods had to pass through their hands, they being the selling agents. It was agreed between the parties that the appellants should deposit a sum of Rs. 50,000 in cash with the Mills. This would show that at no time the relationship between a trustor and llrustee was created. This sum came to the Mills, as their own money. They had full control and dominion over it. They were not liable to render accounts of this amount to the appellants and were free to spend it in any manner they liked subject to the ultimate liability of refunding that amount to the appellants after the agreement between the parties ceased to bind them. The essential quality of a debt is that the ownership of the debt amount is transferred to the debtor with complete dominion and control over that amount and a full right to spend it in any manner he likes without being liable to render accounts to the creditor. In the case of a trust the trustee is always liable to render account to the trustor and is not free to spend that amount in any manner he likes. On the other hand he has got to spend it and utilise it only for the specific purposes for which the trust was created. In other words, the trustee has no volition with regard to the manner in which the amount is to be spent. The amount is given to him under specified conditions for a specified object and it is not in his power to divert either of the two. There is another basic difference so far as our law is concerned between a trust and a debt. Whereas for the recovery of a debt the law always prescribes a period of limitation, there is no limitation for the recovery of the trust amount. In the present case there cannot be any manner of doubt that once the sum of Rs. 50,000/- got into the hands of the Mills the Mills had complete right to spend it in any manner they liked and to treat it as their Own money. Consequently it does not appear to us that this amount can on any rational basis be treated to be a trust amount. Our attention has been invited to a Full Bench decision of this Court in Maheshwari Bros. v. Official Liquidators, Indra Sugar Works Ltd., AIR 1942 All 119. The facts of that case were similar to ours and the learned Judges who constituted the Full Bench laid down two tests which they considered to be fair for determining the question whether a particular amount is debt money or trust money. The first test was whether interest was payable and their Lordships held that if interest was payable it would normally be a case of a debt. The second test was whether or not the parties intended that the money should be kept as a sacred amount for a specified purpose earmarked for a specified object. In case that was the intention of the parties it would be a case of a trust, otherwise that of a debt. Both the tests fully apply to the facts of the present case and we find it difficult to see how the Full Bench case can be distinguished from the one before us.
(3.) Mr. Jagdish Swarup who has appeared for the appellants has strenuously contended that the mere payment of interest cannot be a conclusive consideration. We may straightway say that in all human transactions normally there rarely is a conclusive consideration but there are paramount considerations and it cannot be denied that the payment of interest, considering human nature and normal course of business, is a paramount consideration for determining whether or not a particular advance is a debt or a trust.;