1. This is an application by a subscriber to a chit conducted by the Travancore National Subsidiary Co. Ltd., for payment of a sum of Rs. 820 standing to the credit of the applicant in the accounts of the Travancore National and Quilon Bank Ltd., in preference to the ordinary creditors of the bank. She is a subscriber to a B class chit. According to Rule 1(a) of the rules governing the chit she had to subscribe at the rate of Rs. 40 each month for 25 successive months as the chit amount is Rs. 1000. She subscribed to the chit on 17th January 1938 and on the same day she deposited with the Mylapore Branch of the Travancore National and Quilon Bank a sum of Rs. 990. Her case is that the said amount of Rs. 990 was deposited for the specific purpose of paying the subscriptions-to the chit every month as and when they fell due and the Bank undertook to pay the-same as and when they fell due and therefore as the amount was received by the Bank for the said specific purpose, it was trust money in their hands. As the Subsidiary Company has now failed and the chit-has come to a close, she claims to be entitled to be paid the balance of Rs. 820 remaining, after payment of the instalments which fell due prior to the date on which the company was wound up. The Official Liquidator of the bank contests her claim and his case is that she was no more than an ordinary creditor of the bank. He submitted various, reasons therefor and those are:

(1) The deposit was made only with a view to earn interest at a higher rate;

(2) there was no obligation for any subscriber to deposit the amount in this account;

(3) the applicant was not obliged to have the monthly subscription in respect of her client adjusted from and out of such savings bank account as she had the option of paying the same without recourse to this account; and (4) there is no limit to the amount to be deposited in the said account.

2. It was also pointed out in the counter-affidavit of the Official Liquidator, and this fact was not disputed before me, that Rule 4 of the Chitty Savings Bank Account was-not strictly applied in the case of non-prize subscribers. Rule 4 runs thus:

Amount deposited in the Chit Savings Bank Accounts shall not be available for withdrawal for purposes other than for payment of chit instalments till the termination of the particular chit in respect of which the account was opened.

3. The non-prize subscriber like the applicant was allowed to withdraw the amount-standing to his credit provided he accepted a lower rate of interest allowed in the case of an ordinary savings bank account and further loans were granted on the security' of such amounts in the same way as in the-case of other deposits of the Bank. The main contention of Mr. Viswanatha Sastri is that Rule 18(b) of the Chit Fund Rules read with the rules of the Chitty Savings Bank Account clothe the Bank with a trust in respect of the amount deposited by a subscriber in the Chitty Savings Bank Account of the Bank. Rule 18(b) runs thus:

Arrangements have been made with the Travancore National and Quilon Bank Ltd. and its branches providing facilities to every chit subscriber of the company to open Chit Savings Bank Account with them from which chit instalments will be adjusted as and when they fall due.

4. The rules regarding the Chitty Savings Bank provide that the chit fund subscription due every month will be appropriated and adjusted from the Chitty Savings Bank Account as and when the subscription falls due for payment if there be sufficient balance to the credit in the account. It seems to me that none of these provisions makes the Bank a trustee for the subscriber. The account is opened by the Bank in pursuance of a letter addressed to them to open a deposit account which prima facie indicates that the amount was deposited by way of a deposit. It is no doubt true that the deposit was made subject to the rules relating to that account. So far as the arrangement evidenced by these rules is concerned, it is an arrangement purely with the Bank and the subscriber to which the company is not a party. It is unlike the case of a subscriber who has won the prize and deposited the amount in the Bank in pursuance of an arrangement entered into with the company. No question of an equitable assignment of any debt in favour of the company as in the case of a prize subscriber arises in this case because in the case of a non-prize subscriber there is no debt due to the Bank, though of course he is under a liability to pay the subscription, the failure of which entails some consequences and does not make him a debtor. The penalty for non-payment of future subscriptions is that he is liable to be removed as a subscriber and the subscriptions already paid are returned to him after the termination of the whole chit.

5. The question therefore is, what is the relationship constituted under such circumstances between the Bank and the subscriber by virtue of the deposit in the Chitty Savings Bank Account? Prima facie, it is a deposit to his credit in the Bank. Therefore according to the rule which regulates the relationship between a banker and a customer, the banker is the debtor and the customer is the creditor and the amount deposited is a loan to the Bank. This relationship is in no way modified by Rule 18(b) and the rules relating to the Chitty Savings Bank Account. Rule 18(b) only states that facilities have been provided for by arrangement with the Bank to enable subscribers to make deposits in the Bank in order to provide for the regular payment of subscriptions. It only secures an advantage for them in that they get a decent rate of interest for the amount deposited and as and when the subscriptions fall due, the amount will be paid according to the directions given to the Bank on the due dates. So far as the rules relating to the Chitty Savings Bank Account are concerned, they only amount to an authorization to the Bank to pay the amount of subscription as and when it becomes due. In substance, the transaction is that instead of the sub-scriber operating on the account every month by drawing the required amount of subscription payable and paying it to the company, he gives a standing order to the Bank to pay every month on his behalf the subscriptions as and when they fall due. It is nothing more than a mandate given to the Bank; that is to apply the money which he has to his credit in a particular manner. The mere fact that a customer gives directions to a banker to apply the money to his credit in a particular manner would not clothe the Bank with a trust. Considerable reliance was placed by Mr. Viswanatha Sastri, who argued the case on behalf of the applicant, on Farley v. Turner (1857) 26 L.J. Ch. 710 and on my decision reported in Gopalakrishnan v. Official Liquidators T.N. & Q. Bank Ltd. (1939) 26 A.I.R. Mad. 337 which followed the said decision and also on Official Assignee of Madras v. Oriental Government Security Life Assurance Co. Ltd (1910) 33 Mad. 150. It seems to me that none of the decisions apply to the facts of this case. The scope of the decision in Farley v. Turner (1857) 26 L.J. Ch. 710 has been much misunderstood. As I understand that decision, it is this : Where a certain sum of money is entrusted to a banker with a direction to apply it to a particular purpose and not to carry it to his account in the Bank and the Bank receives and undertakes to apply it to the said purpose, there is a trust created in favour of the person who so entrusts the money for the said purpose. On a close examination of the facts of that case it will be seen that Goodwin, who was a customer of the Bank of Farley and Turner having an account in the Bank paid in a further sum of £707 with an intimation that £500 out of that should be set apart for meeting an acceptance of a bill by him at Messrs. Roberts & Co. Turner's Bank did advise Roberts & Co., of this fact and sent them sufficient amount for meeting that acceptance. The Bank failed before the acceptance was met but it was held that the Bum of £500 was trust money and that it belonged to Goodwin. It is no doubt true that the clerk of Turner's Bank credited the sum of £707 to his general account and debited him with £500. It was pointed put by Kindersley V.C. that that was not carrying out the instructions of Goodwin and in his view it was not a deposit at all and the Bank could have directly sent the sum of £500 without crediting it into the general account. Turner's Bank was so to speak an agent of Goodwin in respect of £500. This is clear from the following observations made by him in the judgment:

I admit that the money is not a particular deposit with the bankers but it is money placed in their hands to be applied in a particular way. What I now decide will not trench upon the authorities which decide that money paid into a banker's is not a deposit which you may receive back in the identical notes and sovereigns, but that it is a debt. That is quite a different case.

6. No doubt Turner's Bank carried out the instructions of Goodwin and therefore it may be deemed to have appropriated the amount even assuming the money was paid to the credit of the customer and carried to his general account. But the ground of the decision was not rested on the principle of appropriation as it is sometimes understood. Where a sum of money is paid to the general account of the customer with a direction that it must be applied in a particular manner when occasion arises, until the said sum of money is appropriated in the manner directed, no question of trust would arise. The matter would rest in a mere mandate. What happened in the present case is that the money was paid to the banker to be credited in the savings bank account in the ordinary way money is credited with a banker. The bank was dealt with by the customer not in the capacity of a pure agent who is entrusted with a sum of money on his behalf but as a banker who is to have his money in respect whereof an account is to be opened with him and which has to be operated upon according to his directions. As pointed out in In re Agra and Masterman's Bank Ltd. Ex. parte Anderson (1867) 8 Eq. 337, persons lend moneys to the bankers for the convenience of having it repaid in driblets as they want it. It is always open to a customer to give directions as to how his money has to be repaid. Under the rules governing such accounts it was stipulated that the bank should pay on his behalf subscriptions to the company as and when they fall due. The condition as to withdrawal was only made in the interest of the subscriber so that there may be enough money in the bank for him to meet his obligations. As pointed out in the counter-affidavit of the Official Liquidator, the provision as to withdrawal was never insisted on in the case of a subscriber like the applicant and the subscriber is allowed to withdraw provided he agrees to accept a lower rate of interest applicable to ordinary savings bank. It is not like the case in Farley v. Turner (1857) 26 L.J. Ch. 710, where money was not intended to be carried into account. In this view I think it is unnecessary to deal with the cases cited by the counsel for the Official Liquidator, namely 39 L.J. Ch. 635 and 91 L.T. 225. The ground on which, if I may say so with respect, Sir John Romily in 39 L.J. Ch. 635 sought to distinguish Farley v. Turner (1857) 26 L.J. Ch. 710 is not warranted by the observations of Kindersley V. C. In my decision in Gopalakrishnan v. Official Liquidators T.N. & Q. Bank Ltd. (1939) 26 A.I.R. Mad. 337, it will be seen that the amount was given by the employee of the Bank as cash security and not for the purpose of investment in current account or fixed deposit and he could not operate on it during the period of his service nor could the Bank operate on it on his behalf or under his directions except in a certain contingency and therefore it was not an ordinary banking transaction resulting in the relationship of a debtor and creditor. In Official Assignee of Madras v. Oriental Government Security Life Assurance Co. Ltd (1910) 33 Mad. 150 money was received by Arbuthnot & Co. from the Oriental Life Assurance Co. for the purpose of paying the amount to Mariam Chandy who had no account with Arbuthnot & Co. Furthe? Mariam Chandy did not intend to keep any account with them and called upon them to pay the money. In those circumstances it was held that Arbuthnot & Co. held the money in trust for Mariam Chandy. I am therefore of the opinion that there is no question of any trust in this case; the Bank is not a trustee for the applicant and her claim for preferential payment must therefore be negatived and. she can only rank as an ordinary creditor. Her name is directed to be included in the list of claims already settled by me.