D.R. DHANUKA, J.
( 1 ) THE judge's summons raises the following questions for consideration of this Court:
(1) Whether the amount of "margin money" deposited by the applicant with the Bank of Credit and Commerce International (Overseas) Ltd. in pursuance of the mandate contained in the godliness issued by the Reserve Bank of India to secure payments to be made by the bank under its letters of credit opened at the instance of the applicant in favour of the foreign exporter is impressed with the trust in favour of the applicant-depositor to the extent of the unutilised amount and the said amount is refundable in full to the applicant-depositor?
(2) Whether the relationship between the applicant and the bank in respect of the amount so deposited is an ordinary relationship of debtor and creditor and the amount of margin money in this case in liable to be treated as a part of the general asset of the bank available for distribution amongst all its creditors in the event of the bank being wound up?
( 2 ) I answer question No. 1 in the affirmative and question No. 2 in the negative.
( 3 ) THE Reserve Bank of India has filed Company Petition No. 389 of 1991, in this Court for the winding up of the Bank of Credit and Commerce International Overseas) Ltd. , Bombay, under the provisions of the Banking Regulation Act, 1949, read with the Companies Act, 1956, and for the appointment of the State of India, Central Office, Bombay, as liquidator of the Bank of credit and Commerce International (Overseas) Ltd. , Bombay, with all necessary powers under the provisions of the Banking Regulation Act, 1949, read with the Companies Act, 1956. The above referred to baking company is incorporated outside India. The above referred to banking company carried on banking and other business on a large scale in Bombay with the permission of the Reserve Bank of India. The said business is suspended for the moment. A large number of member of the Indian public are thus put in distress.
( 4 ) ON July 15, 1991, this court accepted the above referred to Company Petition No. 389 of 1991, and directed issue of notices.
( 5 ) THE Reserve Bank of India made Application No. 203 of 1991, to this court for the appointment of the State of Bank of India as a provisional liquidator of the Bank of Credit and commerce International (Overseas) Ltd. , Bombay (hereinafter referred to as "the BCCI"). By an ad interim order dated July 15, 1991, this court appointed the State Bank of India as the provisional liquidator in terms of prayers (a) and (b) of the said company application.
( 6 ) ON January 22, 1992, this court passed an order admitting Company Petition No. 389 of 1991, for winding up and issued several consequential directions. On the same day, this court confirmed the appointment of the provisional liquidator. The State Bank of India as the provisional liquidator is in charge of all the assets of the bank situate in India. The above-referred to order dated January 22, 1992, was passed by this court after hearing learned counsel for the joint official liquidators, Cayman Island. By an order dated January 22, 1992, the court has confirmed the appointment of the State of Bank of India as the provisional liquidator. At the hearing of the above-referred to petition and company application, learned counsel for the joint official liquidators did not oppose admission of the petitioner or application for confirmation of appointment of the provisional liquidator.
( 7 ) MS. Priya V. Mehta, the applicant in this Company Application No. 242 of 1991, has taken out this summons for a direction to the Bank of Credit and Commerce International (Overseas)Ltd. represented by its provisional liquidator to make payment of certain amounts to the applicant. It shall refer to the prayers made in this judge's summons and the relevant facts a little later.
( 8 ) ON January 16, 1992, the Reserve Bank of India entered into an arrangement withe joint official liquidators appointed by the court in the Cayman Island in respect of the proposed disposal of the assets of the Bombay branch of the said bank to the buyer suggested by the said joint official liquidators appointed by the court in the Cayman Island, subject to the approval of the Reserve Bank of India and of this court. The said arrangement was arrived at without obtaining prior approval of this court and without obtaining the concurrence of the provisional liquidator on the assumption that an application for approval thereof could be made later on. The state Bank of India, as provisional liquidator appointed by this court, submitted a report to this court for regularisation of the above-referred to memorandum of arrangement dated January 16, 1992, in view of the procedural lapse on the part of the Reserve Bank of India indicated above. By my order dated February 14, 1992, I granted provisional approval to the said memorandum of arrangement dated January 16, 1992, on the conditions that all effective steps to be taken hereafter shall be taken by the Reserve Bank of India with the concurrence of the State Bank of India. By the said order, I also clarified that no legal right shall accrue in favour of the proposed buyer or any other party unless the transaction was approved by this court after the details of the proposed transaction are made available to this court.
( 9 ) SECTION 584 of the Companies Act, 1956, confers jurisdiction on the company court in India to wind up a foreign company incorporate outside India which carries on or which has ceased to carry on business in India as an unregistered company. Section 584 of the Act, empowers the court to wind up a foreign company when it ceases to carry on business in India or its substratum is gone even where it is dissolved in its country of incorporation. The Companies Act, 1956, is applicable to banking companies in so far as the said provisions are not inconsistent with the provisions of the Banking Companies Act, 1949. The BCCI carried on business on a large scale in India and has large assets situate in this country and large number of creditors and members of the Indian public are placed in serious distress by reason of its suspension of banking business and its other operations in India. The provisions contained in section 584 of the Companies Act, 1956, are almost identical with the provisions contained in the English Companies Act. Paragraph 1865 of Halsbury's Laws of England, volume VII, formulates identical principle of law in relation to winding up of a foreign company as an unregistered company by the English courts, i.e., when the foreign company carried on business in England at all material times and its assets and creditors are situate in England. The above provisions are made in the interest of members of the Indian public dealing with a foreign company incorporated outside India. It is, therefore, obvious that this court has jurisdiction to entertain the proceedings although the BCCI is incorporated out of India by reason of the bank having carried on business on a large scale in India and at Bombay until suspension of its business in July, 1991.
( 10 ) THE relevant facts having a bearing on the subject-matter of the judge's summons are summarised hereinafter.
(a) Ms. Priya V. Mehta is the sole proprietors of Priya Plastics.
(b) At all material times, the Reserve Bank of India had issued mandatory guidelines to all scheduled commercial banks by its circulars dated March 19, 1991, March 26, 1991, and April 22, 1991. Copies of the said circulars are made available to the court. By the said circular dated march 19, 1991 addressed to all scheduled commercial banks, the Reserve Bank of India as the highest statutory authority laid down that at the time of opening of letters of credit for import of goods other than capital goods, the banks must insist on a cash margin of 133 1/3 per cent. in case of imports under OGL. By a circular dated April 22, 1991, issued by the Reserve Bank of india to all scheduled commercial banks, it was laid down that the banks must insist on a cash margin of 200% in the case of imports under OGL instead of 133 1/3 per cent. By a circular dated August 1, 1991, the Reserve Bank of India informed all the scheduled commercial banks that the prescribed minimum cash margin in terms of the guidelines already laid down must be maintained until the same was realised by the bank after the goods were cleared by the customs and the exchange control copy of the customs bill of entry was produced to the bank. Thus, the schedule banks were prohibited by the Reserve Bank of India from opening letter of credit in relation to import of goods unless security deposit/margin money was obtained by the bank from the customer to the extent of 200% of the amount involved in the opening of the letter of credit and the same was earmarked as a separate identifiable fund for the specific purpose of honouring the letter of credit only.
(c) On May 20, 1991, an agreement was arrived at between Priya Plastics and foreign hypsometric carrying on business in Yugoslavia for supply of high density polyethylene Hiplex hhm 5502. Inpea Overseas Ltd. , Limassol, Cyprus, are the beneficiaries named in the said contract representing Hypsometric. By the said contract, the applicant agreed to purchase 50 metric tons of high density polyethylene Hiplex HHM 5502 at the price of US $40,000. It was stipulated as a term of the said contract that the applicant shall have to open an irrevocable letter of credit at site in favour of Inpea Overseas Ltd.
(d) On May 20, 1991, the applicant addressed a letter to the manager of the BCCI, Bombay, forwarding therewith an application for establishing a letter of credit for US $ 40,000 for import of the said goods. It was stated in the said letter, in terms of the Reserve Bank guidelines, that the margin money of 200% in relation to the said letter of credit may be earmarked by appropriating the amount from current account No. 01050676 of the applicant. The applicant requested for issue of a fixed deposit receipt on the footing that the said fixed deposit shall enure as security/margin money for honouring the letter of credit in favour of the foreign buyer. According the BCCI opened the necessary letter of credit in favour of Inpea Overseas Ltd. for the abovereferred to amount of US $40,000, after appropriating 200% of the equivalent amount of the letter of credit as margin money in terms of the mandate of the Reserve Bank guidelines. The said amount of 200% margin money in respect of the said letter of credit worked out at the figure of Rs. 16,66,800. The fixed deposit receipt was issued by the bank on June 14, 1991, for the above referred to amount of Rs. 16,66,800 with endorsement thereon "under lien letter of credit 336059". The above referred to fixed deposit was issued by the bank with superimposition of the stipulation that it would enure as margin money/security in relation to the letter of credit opened or to be opened. The said fixed deposit receipt could not be encashed by the applicant even on expiry of the period mentioned therein as the amount thereof was earmarked and segregated for honouring of the letter of credit in favour of foreign supplier of the goods.
(e) The bank debited the said amount of Rs. 16,70,959 to the current account of the applicant and appropriated the same towards the letter of credit account and transferred the same to a separate account titled "margin account", i.e., FC/336059. The said amount was thus segregated from the current account. Such segregation was in a business and commercial sense of the terms so as to constitute the said amount as a separate identifiable fund earmarked for a specific purpose.
(f) On June 2, 1991, the applicant entered into a contract with the said bank (copy whereof is exhibit 'e' to the affidavit in support of the judge's summons) in order to avoid any loss on account of fluctuations in exchange rates.
(g) On June 12, 1991, the said foreign supplier, Hypsometric, shipped the contracted goods through vessel Vishwapankaj belonging to Shipping Corporation of India and forwarded 10 bills of lading bearing Nos. 301 to 310 to the bank through proper channels.
(h) Inpea Overseas Ltd. , the beneficiary named in the contract dated May 20, 1991, negotiated the relevant documents under the letter of credit through their bankers i. e. , Bank of Cyprus, and claimed reimbursement from the BCCI, Bombay, in terms of the said letter of credit. On July 2 or 3, 1991, the BCCI, Bombay, reimbursed the Bank of Cyprus for the value of the goods through its London branch by appropriating the margin money provided by the applicant to the extent required. The rupee equivalent of the amount paid or payable under the said letter of credit was computed at Rs. 8,51,064. The said amount was paid out of the margin money of Rs. 16,66,800. Thus, the unutilised balance was impressed with trust in favour of the applicant.
(i) The BCCI received the necessary documents at Bombay. Sometime in July, 1991, the bank ran into difficulties and suspended its operations.
(j) On August 9, 1991, the applicant took out the present judge's summons for a direction to the bank to hand over the documents of title in respect of import of 50 metric tons of the aforesaid goods and for payment of balance of Rs. 8,19,570. By the said judge's summons, the applicant sought a further direction for refund also of a sum of Rs. 5,92,839 and Rs. 35,69,029 in respect of two letters of credit which were cancelled an unutilised to which reference would be made a little later.
(k) By an ad interim order dated August 9, 1991, brother Justice Cazi directed the respondents by a mandatory order to hand over to the applicant all the documents of title to the goods received by the bank under the letter of credit bearing No. FC/336059/91, dated May 23, 1991, to enable the application to take delivery of the goods imported. Ultimately the said documents of title were delivered to the applicant. I am informed that the applicant has already taken delivery of the imported goods covered under the abovereferred to letter of credit.
(l) Factually there is no dispute between the parties. In respect of this particular letter of credit, the applicant had deposited margin money of Rs. 16,66,800 out of which a sum of Rs. 8,19,570 is refundable to the applicant since the value of the goods imported was Rs. 8 lakhs odd and the margin money secured from the applicant at the time of opening the letter of credit was 200% of the amount involved in the opening of the said letter of credit.
( 11 ) I shall now refer to two other transactions which have a bearing on prayers (c) and (d) of the judge's summons.
(a) On June 25, 1991, another agreement was arrived at between the applicant and the foreign buyer by name Hip-petrohenija of Yugoslavia. By the said contract, the applicant agreed to purchase 100 tonnes of high density polyethylene Hiplex for the price of US $84,000. As required by the said contract, the applicant made an application to the BCCI (Overseas) Ltd., Bombay, to open a letter of credit in favour of the beneficiary named therein in a sum of US $ 84,000. Inpea Overseas Ltd. was named as the beneficiary in all the documents in respect of the said letter of credit. In terms of the mandate of the Reserve Bank guidelines, the applicant was obliged to make a cash deposit of margin money equivalent to 200% of the value of the letter of credit as security. On June 26, 1991, the applicant instructed the BCCI (Overseas) Ltd., Bombay, to appropriate a sum of Rs. 28. 14 lakhs from the fixed deposit already held by the bank for the purpose of earmarking of the margin amount and also appropriate a sum of Rs. 7,55,092 from their current account for the same specific purpose. The bank opened the necessary letter of credit in favour of the beneficiary as instructed by the applicant. A sum of Rs. 35,69,092 was segregated and kept apart as margin money in respect of this letter of credit in a sum of US $84,000 as aforesaid. The bank issued the necessary fixed deposit receipt for the said amount subject to the stipulation that the said fixed deposit receipt would operate subject to the stipulation that it was earmarked as a security/margin money in relation to the letter of credit to which it pertained and it was constituted as a separate identifiable fund for the said specific purpose. The said letter of credit was not utilised by Inpea Overseas Ltd. The said letter of credit expired on July 15, 1991. The said letter of credit stood cancelled. The applicant claims refund of the above referred to margin money deposited in this behalf, i. e., Rs. 35,69,029.
(b) There was one more transaction between the parties. On June 11, 1991, an agreement was arrived at between the applicant and Global Petrochemicals for purchase of 22 M. T. of high density polyethylene Hiplex HMM 5502. By letter dated June 12, 1991, the applicant applied to the same bank for establishing a confirmed irrevocable letter of credit for US $13,970 being the price of the said goods. As required by the Reserve Bank guidelines, the applicant was required to keep deposited with the bank an amount equivalent to 200% of the value of the letter of credit as margin money. On June 13, 1991, at the instance of the applicant, the bank debited a total amount of Rs. 5,92,839 from the current account of the applicant for the specific purpose of earmarking the said amount as margin money for the said letter of credit. The said amount of Rs. 5,92,839 was earmarked and segregated from the current account and transferred to margin money account by the bank on June 13, 1991. This letter of credit also expired on July 31, 1991. The letter of credit was not utilised. The applicant is seeking refund of the above referred sum of Rs. 5,92,839 by prayer (c) of the Chamber summons.
(c) Shri S. M. Parade, authorised officer of the State Bank of India, has filed his affidavit dated February 4, 1992, and has annexed copies of the four fixed deposit receipts issued by the bank in this behalf. Shri Nicolas Handley Jones has also filed an affidavit to oppose the application. Several affidavits are filed by the applicant.
( 12 ) THE expression "margin" has been defined in the Black's Law Dictionary as under:
"A sum of money or its equivalent placed in the hands of a stock broker by the principle or person on whose account a purchase or sale is to be made as security to the former against losses to which he may be exposed by subsequent fluctuations in the market value of stocks."
( 13 ) IT well-settled that ordinarily there is a relationship of debtor and creditor between the banker and the customer in respect of ordinary deposit made by the customer with the banker. It is equally well settled that there may be special relationship arising from particular circumstances and requirements of the transaction which would rebut such general relationship. There may be situations where a customer deposits an amount with a bank not as a general deposit but a specific deposit for a specific purpose creating the relationship of a bailee and a bailor or trustee and beneficiary or constituting the bank as a sort of stakeholder. In such cases where money is deposited with the bank as a specific deposit for a specific purpose and the same is earmarked as identifiable fund for being utilised in contingencies specified, the bank holds the amount as a trustee and the relationship between the parties in respect of such specific deposit is not that of debtor and creditor. In such a case, the amount so earmarked does not constitute a part of the general assets of the bank.
( 14 ) LEARNED counsel for both sides have invited my attention to several judgments of the supreme Courts and also referred to standard works and various books written on the subject by eminent authors.
( 15 ) I shall first refer to the relevant judgments of the Supreme Court having a bearing on the two questions required to be decided in this judge's summons. To my mind, the judgments of the supreme Court in the case of Shanti Prasad Jain v. Director of Enforcement  2 SCR 297;  33 Comp Cas 231 and in the case of New Bank of India Ltd. v. Pearey Lal, AIR 1962 SC 1003;  32 Comp Cas 91 (SC) are more directly on the point.
( 16 ) IN Shanti Prasad Jain's case  33 Comp Cas 231 (SC), the appellant, Shanti Prasad Jain, had made a claim for compensation against certain German firms in respect of machinery supplied by the German firms to the concern of Mr. Jain. As a result of settlement arrived at, certain amounts were deposited by the German firms with the Deutsche Bank in the account of mr. Jain with the stipulation that the money was to be utilised by Mr. Jain only for the purpose of new machinery which may be purchased from the same firms after obtaining import licences from the Government of India. No. licences were obtained. In respect of the deposit of amount in the account of Mr. Shanti Prasad Jain in Deutsche Bank, Germany, as aforesaid, no permission was obtained from the Reserve Bank of India. The question before the apex court was as the whether the deposit in question evidenced the relationship of a borrower and a lender between the petitioner and the bank or as to whether the bank was merely a custodian or trustee of the said amount like a stakeholder. The question before the court was as to whether section 4 (1) of the Foreign Exchange Regulation Act, 1947, was attracted to such a transaction of "specific deposit" as contradistinguished from general deposit. At page 252 of the above-referred to judgment in Shanti Prasad Jain v. Director of Enforcement  2 SCR 297;  33 Comp cas 231 (SC), Venkatarama Aiyar J. , speaking for the Bench of the apex court extracted passages from Paget's Law of Banking, sixth edition, page 48, and passages from the Corpus juris Secundum, volume 9, page 570, and proved the statement of law laid down therein. The relevant passage from the Corpus Juris Secundum, volume 9, approved by the Supreme Court, reads as under:
"The intention the parties controls the character of the relation between bank and depositor, which may be that of the bailee and bailor, but is ordinarily that a debtor and creditor". And it is pointed out, when money is delivered to a bank 'for application to a particular specific purpose' it is not a general deposit creating the relationship of debtor and creditor, but a 'specific deposit' creating the relationship of bailee and bailor or trustee and beneficiary".
( 17 ) IN such a case, the bank holds the amount as a stakeholder. Thus the apex court held that if the deposit made by the customer was a specific deposit for a specific purpose and there was a special contract concerning the same between the customer and the bank or a special relationship could be inferred from the facts and circumstances relating to the transaction of the amount deposited with the bank, such deposit could not be treated as a loan or create an ordinary relationship of debtor and creditor between the bank and the depositor. At page 330 of the said report, the Supreme Court made observations to the effect that the mere fact of the bank being at liberty to use the said amount in the ordinary course of business did not by itself destroy the fiduciary relationship constituted by transaction of such specific deposit under a special arrangement. On this aspect, the Supreme Court noticed the judgment of the Privy Council in the case of Official Assignee v. Bhat  LR 60 IA 203, where it was held that a trust fund invested in business could be traced on the principle laid down in the well known case known as hallett's Estate, In re : Knatchbull v. Hallett [1879-80] 13 Ch 696.
( 18 ) IN New Bank of India Ltd. v. Pearey Lal  32 Comp Cas 91 (SC), the customer had paid an amount to the bank for transmission to another branch for issue of a fixed deposit receipt subject to instruction to be issued later on. The amount was transmitted by the head office of the bank to its newly opened branch. No instructions were issued by the customer for issue of a fixed deposit receipt. A moratorium was issued and the bank was prohibited from making payment to its creditors. The question before the apex court was as to whether the bank was a trustee for the said amount and whether the depositor had a right to demand the amount in full. All ordinary creditors were entitled to receive only 70% of the amount of deposit. Shah J. , speaking for the bench of the Supreme Court, held that in this case money was paid by the depositor for a specific purpose with an instruction to retain custody thereof till further instructions were issued for conversion thereof into an ordinary fixed deposit, which instruction were never issued. In paragraph 8 of the said judgment, the Supreme Court approved the ratio of the judgment of the vice Chancellor in Farely v. Turner  26 LJ Ch 710. The facts of this case bear close analogy to the facts of this case. In paragraph 8 of the judgments, the Supreme Courts referred also to the ratio of judgments of the High Court of Madras in the case of Official Assignee v. Natesam Pillai  10 Comp Cas 66; ILR 1940 Mad 845; AIR 1940 Mad 441, and in the case of Official Assignee v. D. Rajam Ayyar  ILR 36 Mad 499 [fb]. In the case of Natesam Pillai  10 Comp Cas 66, the customer had paid the money to the bank with special instructions to retain the same pending further instructions. In D. Rajam Ayyar's case  ILR 36 Mad 499 [fb], the customer had kept the money with the bank with instructions to forward the same to another bank to meet a bill to become due and payable by the customer at a future date and the amount was sent by the banker as directed. In both the above-referred to Madras high Court cases as well as in the case of Farley v. Turner  26 LJ Ch 710, to which I will refer a little later, it was held that the bank held the amount as a trustee and the presumption ordinarily arising from the normal transaction of banking was rebutted in view of the creation of a special relationship by the earmarking of the amount under the specific arrangement arrived at between the bank and the depositor.
( 19 ) SHRI J. I. Mehta, learned counsel for the applicant, also relied on certain standard works on the subject of the law of bankers' commercial credits. Learned counsel relied on the formulation of the relevant principles by the well known author H. C. Gutteridge in his standard work known as The Law of Bankers Commercial Credit sixth edition. At page 54 of the said standard work, it was observed by the learned author as under :
"If the buyer has many transactions of this kind he is normally granted a limit (similar to a limit for advances); or he may in advance place the banker in funds for the purpose of meeting the payment to be made under the particular credit, in which latter case the funds so deposited cannot be utilized by the banker for any other purposes as, e. g. , a set-off against other liabilities incurred by the buyer. "
( 20 ) SHRI J. I. Mehta, learned counsel for the applicant also relied on certain passage from the book known as the Law Relating to Commercial Letters of Credit by David and particularly the passages at page 62. At pages 61-62, the learned author considered the question as to the status of the amount deposited by the customer with the bank becomes so as to enable the bank to meet the seller's dfart. Another question which would rise in such a situation is as to what is to happen if the bank becomes insolvent and the money is not utilised for the specific purpose for which it was handed over by the depositor to the bank. At page 62 of the said book, the learned author dealt with the situation where the amount was specifically appropriated or earmarked to meet the seller's drafts. The relevant passage appearing in the said book in extracted below as it appears to me to have a bearing on the question under consideration in this case:
"In these circumstances the buyer who has deposited them retains, as it were, jura in rem over the cash or securities and, if the banker does not apply them in the way directed by his customer, i. e. , to meet the seller's draft, then he must return them to his customer. Thus, in the event of the banker's insolvency, the buyer will be able to claim back what he has deposited with the banker and will not have the right merely to claim in the bankruptcy or winding-up rateably with the other creditors."
( 21 ) IN all the standard works relied on before me at the hearing, the case of Farely v. Turner  26 LJ Ch 710, has been specifically referred to and relied upon. Our Supreme Court has already approved the ration of the said judgment in the case of New Bank of India Ltd. v. Pearey lal  32 Comp Cas 91 (SC) referred to in the earlier part of this judgment.
( 22 ) IN Farley v. Turner (29 Law Times Reports, 257) Vice Chancellor Kindersley, inter alia, observed as under :
"It is true that the money was not earmarked as if it had been sovereigns in a box, but it was earmarked in this manner. . . . This sum was not deposited as part of the general account, but for the express purpose of being dealt with in a particular way, and beyond that they had nothing to do with it."
( 23 ) IN other words, if the amount is deposited with the bank duly earmarked for a specific purpose such amount is segregated in a business or commercial sense of the term though not in the physical sense of the term and such amount is impressed with trust. It is obvious that such specific deposits are held by the bank as a custodian, bailee or trustee, rather as a stakeholder and can never be treated as part of general assets of the bank.
( 24 ) SHRI J. I. Mehta, learned counsel for the applicant also invited my attention to certain passages from the well known work by an American author on the subject known as Bank credits and Acceptances written by Wilbert Ward, fourth edition. Chapter XIV of the said book is directly relevant on the subject. Learned counsel also relied on the judgment of the New York court of Appeal in Shawmut Corporation v. Borrick Sales Corporation's case (260 NY 499)referred to hereinafter. I shall first discuss the facts and the ratio of this judgment. The facts of this case are of considerable significance. A firm of merchants desiring to purchase goods requested the defendant bank to issue to the seller a commercial letter of credit, which was done. The purchaser of the goods instructed the bank to debit their current account with the amount of the draft plus commission which would be required by the bank for honouring the draft of the seller. The bank debited the current account of the customer and credited the customer with the amount of the draft in an account entitled "prepaid acceptance". In other words, the amount required for honouring the draft in pursuance of the letter of credit opened by the bank was earmarked from the current account of the customer. Before maturity of the draft, the bank was taken over for liquidation by the superintendent of banks and when presented at maturity, payment of the draft was refused. The question before the court was as to the whether the transaction of earmarking the said amount resulting in the entry of the credit for the prepaid acceptance amounted to specific appropriation to meet the acceptance and as to whether the bank held the said amount as a bailee or a trustee. The facts of this case are almost identical to the facts of our case. At page 505 of the report, the court referred to the express purpose for which the general account of the customer was debited. The court held that the moneys were set aside and appropriated by the bank by treating the same as a separate identifiable fund. It was rightly observed by the New York Court of Appeal that, short of physical segregation of cash, it was difficult to see what more could have been done to put a specific sum into an "identifiable fund". It was held by the court that the bank held the said amount as a bailee or as a trustee and the relationship created by the transaction was a special fiduciary relationship.
( 25 ) THE relevant passage from the book on the subject of Bank Credits and Acceptances by wilbert Ward and Henry Harfield (pages 248 to 254) clearly project the through that the segregation by the bank if an amount sufficient to cover the letter of credit and treatment thereof in a separate account amounts to the bank holding the said amount as a bailee or as a trustee. At page 253, the learned authors summed up their conclusions as under:
"To sum up, therefore, it appears that the better rule, and one amply justified by decisions to date, is that in the case of a prepaid letter of credit which has expired unused where the bank issuing the letter of credit has become insolvent, the customer should, in the case of a dollar credit, be reimbursed in full, unless the transaction has taken on the color of a remittance or foreign currency in order to meet its position under the letter of credit. "
( 26 ) SHRI J. I. Mehta is fully supported in his submission by the authorities cited at the Bar. I am in agreement with each of the submissions of learned counsel for the applicant. The submissions made are correct and deserve to be accepted.
( 27 ) LEARNED counsel appearing for the Reserve Bank of India invited my attention to some of the passage from the Law of Banker's Commercial Credits by the late H. C. Gutteridge and Maurice Megrah, seventh edition. At page 32 of the said standard work, it is observed as under:
"It must of course, be borne in mind that where a bank receives moneys for the express purpose of satisfying a debt for its customer it cannot utilize these moneys for any other purpose and there is some authority for saying that if it communicates to the creditor the fact that it holds such moneys at the disposal of the creditor in satisfaction of the debt an action will lie against the bank for money had and received if the amount is no paid over in due course."
( 28 ) THE above referred to passage supports the case of the applicant and not of the Reserve Bank of India.
( 29 ) SHRI J. I. Mehta learned counsel for the applicant, also relied on the judgment of the High court of Madras in Manasubha and Co. Pvt. Ltd. , In re : Official Liquidator v. N. Chandranarayanan  43 Comp Cas 244. In this case, the applicant concerned had deposited certain amount with the company in liquidation for a specific purpose. After considering a large number of decided cases, the Division Bench of the High Court of Madras held that the agreement between the company and the applicant clearly created a trust and the applicant was entitled to preferential payment of the amount. The Division Bench of the High Court of Madras in terms interpreted, analysed and applied the ratio of the judgment of the Supreme Court in the case of Rai Bahadur Seth Jessa Ram Fatechand v. Om Narain Tankha  37 Comp Cas 204;  2 SCR 429; AIR 1967 SC 1162. After discussing a large number of Indian, English and American cases, the Division Bench of the High Court of Madras concluded in the above referred to case that the amount of security deposit in question was liable to be regarded as trust money. I am in respectful agreement with the ratio of the said judgment. Shri N. G. Thakkar, learned counsel for respondent No. 2 has relied upon the ratio of the judgment of the Supreme Court of India in the case of Rai Bahadur Seth Jessa Ram Fatechand  37 Comp Cas 204 and also emphasised certain facts as summarised hereinafter in support of his submission that the amounts in question are not impressed with the character of a trust:
(a) That the bank had issued fixed deposit receipts for the amounts of margin money as desired by the applicant;
(b) That the bank had agreed to pay interest on the amounts of margin money as evidenced by the contents of fixed deposit receipts copies whereof were annexed to the affidavit in reply;
(c) The bank was entitled to use the amount of margin money in the course of its business and there was no segregation or earmarking of the said amount for any specific purpose;
(d) The amounts in question were liable to be treated as part of the general assets of the bank available for distribution to its creditors generally in the event of the bank being would up.
( 30 ) IN Rai Bahadur Seth Jessa Ram Fatechand v. Om Narain Tankha  37 Comp Cas 204 (SC), the appellants had deposited a certain sum of money with certain mills as a security for performance of a contract of selling agency of the mills. The facts showed that there was no segregation. The mills had to pay interest. The agreement provided that though the period fixed in the agreement came to an end, the agreement would continue if the security deposit was not refunded and the commission due was not paid. Having regard to various clauses of the agreement and the totality of the facts and circumstances of the case the court came to the conclusion of the facts and circumstances of the case, the court came to the conclusion that the deposit was in the nature of a debt and not a trust. After considering a large number of Indian and English cases, the Supreme Court held that the question whether the security deposit in a particular case can be said to be impressed with a trust will have to be decided on the basis of the terms of the agreement, the fact and circumstances of each case and the conduct of the parties. If the terms of the agreement if it is in writing, clearly indicate that the deposit was in the nature of a trust, the court will come to that conclusion in spite of the fact that interest is provided for in the agreement. In this case, it was held by the apex court that the fact whether segregation was provided for or not would be one circumstances to be taken into consideration. When the segregation is provided for, the court would lean towards the deposit being in the nature of a trust. Even where segregation is not provided for and the deposit is permitted to be mixed with other funds, the transaction may evidence relationship of trustee and beneficiary. It all depends upon the mutual intent of the parties and the inference to be drawn from the totality of facts and circumstances of the case. In my judgment the ratio of this judgment does not support the submission of Mr. Thakkar.
( 31 ) SHRI N. G. Thakkar, learned counsel for respondent No. 2, also relied upon the Division bench judgment of our High Court in the case of Velji Lakhamsey and Co. v. Dr. B. R. Banaji  25 Comp Cas 395. In this case, Chagla C. J. speaking for the Division Bench of our High court held that the relationship between a banker and a customer was that of debtor and creditor in the absence of specific directions of the customer to the bank constituting the bank as its agent. Shri Thakkar emphasised the following passage from the judgment of the learned Chief justice from the said judgment (at page 402):
". . . . . . . the safe test which may be applied in order to determine whether an amount deposited in a bank by a customer in impressed with any trust is to find out whether the bank is entitled to use that amount in the ordinary course of its business, whether it belongs to its general funds or whether it is specially appropriated for a particular purpose and cannot be utilised by the bank for its ordinary business."
( 32 ) THE test laid down in this judgment cannot be considered in isolation. The relevant tests are to be applied cumulatively to the facts of the case as formulated by the apex court in three of its judgments referred to hereinabove. No one test can be considered decisive or conclusive.
( 33 ) IN my judgment, the following propositions of law clearly emerge from the relevant case-law cited by learned counsel and on a study of the relevant legal literature with the assistance of learned counsel :
(a) Ordinarily, there is a relationship of debtor and creditor between the bank and its customer in respect of deposits made. Such a relationship is presumed subject to rebuttal thereof.
(b) If an applicant makes a specific deposit with the bank for a specific purpose and the amount is earmarked or segregated in the business of commercial sense of the term though not in the physical sense of the term, the presumed relationship of debtor and creditor is rebutted. It follows that in such cases the bank is the custodian of the amounts entrusted to it in a fiduciary capacity and such amounts are impressed with trust. In such a case, the relationship constituted between the bank and the customer is that of bailor and bailee trustee and beneficiary. In some of the situations, the bank holds the amount merely as a sort of stakeholder. In such cases, the insolvency of the bank, if any, has no adverse effect on the beneficiary and moneys are refundable to the beneficiary in full. In such a case, such specific amounts held by the bank do not form part of the general assets of the bank and can never be available to its creditors for rateable distribution in the event of the company being wound up.
(c) The ratio of three of the judgments of the Supreme Court in the cases listed below must be applied to the facts of each case. No one test is conclusive or decisive. The three leading cases on the subject are as under: (1) Shanti Prasad Jain v. Director of Enforcement  33 Comp Cas 231 (SC); (2) New Bank of India Ltd. v. Pearey Lal  32 Comp Cas 91 (SC); (3) Rai Bahadur Jessa Ram Fatechand v. Om Narain Tankha  37 Comp Cas 204 (SC). To some extent, the observations made in the Division Bench judgment of the High Court of bombay in the case of Velji Lakhamsey and Co. v. Dr. B. R. Banaji  25comp Cas 395 appear to be inconsistent with the ratio of the three Supreme Court judgments referred to hereinabove. I must, therefore, hold that the observations made by Chagla C. J. in the above referred to case do not hold the field to the extent of their inconsistency with the observations and ration laid down in the Supreme Court judgments as aforesaid:
(d) The questions to be asked are as under: Whether the amount is liable to be considered as a general deposit or as a specific deposit or as a specific purpose to the knowledge of the bank? Whether the amount is earmarked or segregated in the business sense of the terms as a separate identifiable fund? What is the intent of the parties? If after application of the relevant tests the court comes to the conclusion that the deposits in question are held by the bank in a fiduciary capacity for a specific purpose or as a sort of stakeholder, it makes no difference that the bank is permitted to use of money till the contingency for refund thereof to the beneficiary arises or provision is made for payment of interest during the interregnum. IF the trustee mixes up the trust fund with his other assets or uses the same during the course of his business or uses the trust amount for the purposes of his business during the interregnum, the amounts in question do not cease to be trust money. In such cases also, the question are refundable to the depositor in full notwithstanding the fact that the moneys are not kept in a separate box or strong room and are not segregated in the physical sense of the term. The court will have to apply the relevant tests to the facts of the case and address itself to the question a to whether the transaction evidenced fiduciary relationship between the parties or whether the transaction evidenced fiduciary relationship between the parties or whether the relationship constituted in respect of the transaction was of debtor and creditor or bailor and bailee or trustee and beneficiary. If the moneys entrusted to the bank for a specific purpose are used by bank for its own purpose, the equivalent amount would be payable by the bank to the applicant in full and the doctrine of tracing the trust fund would apply so as to protect the interest of beneficiary in the trust fund or its equivalent.
( 34 ) IN my judgment, the facts of this case clearly indicate that the margin moneys in question were undoubtedly impressed with trust and the bank held the same as trustee for the benefit of the depositor to the extent of unutilised amount. In view of the background of the Reserve Bank guidelines and segregation of the amounts from the current account of the applicant for a specific purpose, it must be held and it is held that the amounts deposited by the applicant were impressed with the trust and are refundable to the applicant in full to the extent of the unutilised amount. In my judgment, it is relevant that the mode followed by the bank was that of issuing the four fixed deposit receipts in favour of the applicant after segregation of the amounts from the current account of the applicant for the specific purpose as aforesaid. The applicant was not at all free to utilise the said fixed deposits or the amounts thereunder. The applicant could not seek encashment of the fixed deposit receipts even on expiry of the due dates of the fixed deposit receipts at least so long as the letters of credit subsisted. The said margin money was constituted as a separate id
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entifiable fund for honouring of letters of credit by the bank and for refund thereof to the applicant to the extent of credit by the bank and for refund thereof to the applicant to the extent of money not utilised for the specific purpose. The said fixed deposits were also impressed with trust as the same were earmarked for a specific purpose, i. e. as a separate and distinct identifiable fund for honouring of letters of credit. Having regard to the nature of the transaction, it is clear that the transaction entered into between the bank and the applicant was in a special fiduciary capacity. It is, therefore, irrelevant that the bank agreed to pay some interest to the applicant. The applicant did not deposit these amounts in fixed deposit in order to earn interest. The bank was not willing to open a letter of credit unless the applicant furnished security/margin money in terms of the Reserve Bank guidelines and retained the same till the letters of credit were worked out or cancelled on expiry thereof. Even if it is to be assumed that the bank had the permission of the applicant to use the amount of specific deposit in the meanwhile for purposes of its business, it would make no difference to the conclusion of the court. A trust money does not cease to be trust money merely because of user thereof by the trustee. In such a case, the bank in bound to reimburse the beneficiary an equivalent amount and the doctrine of tracing the trust fund would clearly apply. The principles laid down in Hallet's case [1879-80] 13 Ch 696 were clearly approved by the Privy Council in the case of Official assignee v. Bhatt  LR 60 IA 203 and by our Supreme Court in Shanti Prasad Jain's case  33 Comp Cas 231 (SC). Thus, the factual aspects emphasised by Mr. Thakkar noted in paragraph 23 of this judgment have not bearing on the ultimate conclusion of the court on the principal questions formulated in paragraph ( 35 ) I cannot part with this case without expressing my gratitude to learned counsel on all sides who have assisted me extremely well in a case which appeared to be of some complexity in the beginning. When I started with the hearing of this case, I felt that the questions involved in this case were rather complex. After going through all the cases cited at the Bar and studying the legal literature produced by learned counsel for the petitioner and listening to their clear and lucid arguments, I feel issues involved are plain and simple and the application must be allowed without any hesitation. ( 36 ) IN the result, I make the judge's summons absolute in terms of prayers (b), (c) and (d ). Prayers (b), (c) and (d) of the Judge's summons read as under: "(b) That the respondents or either of them as may be found necessary or liable be directed by the mandatory order of this Hon'ble court to forthwith pay to the applicant the sum of Rs. 8,19,570 being the balance amount standing to the credit of margin account No. FC/336059 after adjusting the value of letter of credit No. FC/336059/91, dated 23rd May, 1991, at the agreed exchange rate of US $4,700 per Rs. 100 as per foreign exchange forward sales contract No. PCB. 6088/91; (c) That the respondents or either of them as may be found necessary or liable be directed to forthwith pay to the applicant the sum of Rs. 5,92,839 being the margin money deposited for establishing Letter of credit No. FC/336081/91 and lying with the respondents in margin account no. FC/3360801; (d) That the respondents or either of them as may be found necessary or liable be directed to forthwith pay to the applicant the sum of Rs. 35,69,029 being the margin money deposited for establishing letter of credit No. FC/336091/91 and lying with the respondents in margin account no. FC/336091;" ( 37 ) HAVING regard to the facts and circumstances of the case, there shall be no order as no costs. ( 38 ) THE State Bank of India as provisional liquidator shall refund the amounts in question to the applicant as directed immediately on expiry of six weeks from today. ( 39 ) AT this stage, Shri Rajesh C. Shah, the learned advocate for the applicant, prays that interest be awarded to the applicant on the amounts to be refunded in case the amount is not refunded by the bank by a particular date. No prayer is made for grant of interest in the judge's summons. I had specifically inquired of learned counsel for the applicant during the course of arguments as to whether the applicant was pressing for award of interest and the reply was in the negative. At this stage, I am not inclined to allow a change of stand. Shri N. G. Thakkar opposes the application for grant of interest. I am of the opinion that at this late stage, at the stage of delivery of judgment, the applicant cannot be permitted to make an additional claim. Accordingly, the prayer for award of interest is rejected. ( 40 ) THE application is made absolute in terms of prayers (b), (c) and (d) with no order as to costs. ( 41 ) ISSUE of certified copy of this judgment is expedited.