Report No. 17
80. Section 66.-
It was suggested that in section 66 the word "wrongfully" should be omitted so as to make the principle applicable whether the mixing of the trust funds is rightful or wrongful. The basis for the suggestion is the decision of the Judicial Committee in Official Assignee, Madras v. Krishnaji Bhatt, ILR 56 Mad 570. The aforesaid decision, however, does not support the view underlying the suggestion. Where the mixing is rightful, the relationship would then be reduced to that of a debtor and creditor, as the money in the hands of the trustee in such an event would cease to bear the character of a trust.
If, on the other hand, a trustee wrongfully mixes trust funds with his own, the trust continues and the right to follow the trust property will accrue.1 In the case before the Judicial Committee2 the fund itself was deposited with a view to investment and, therefore, initially in the hands of the trustee it was impressed with trust. Whether the trustee thereafter invests it separately or invests in his own business, that is, whether the disposition is rightful or wrongful, makes no difference as he still continues to hold the property as trustee. It is not a case of wrongful mixing of trust money at the inception. We therefore, think that the word "wrongful" need not be omitted.
1. See the discussion in Mulla Law of Insolvency in India, (1958 Edn.), p. 451.
2. 56 ILR (Mad) 570.