Full Judgment Text
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PETITIONER:
COMMISSIONER OF WEALTH TAX, MYSORE
Vs.
RESPONDENT:
HER HIGHNESS VIJAYABA, DOWGER MAHARANI SAHEB OF BHAVNAGARPAL
DATE OF JUDGMENT09/03/1979
BENCH:
UNTWALIA, N.L.
BENCH:
UNTWALIA, N.L.
PATHAK, R.S.
CITATION:
1979 AIR 982 1979 SCR (3) 545
1979 SCC (2) 213
ACT:
Wealth Tax Act, 1957-S. 2(m)-By a family arrangement
assessee agreed to pay certain sum to her younger son-The
sum agreed to pay-If a debt owed under s. 2(m)-Whether the
undertaking to pay the sum an agreement without
consideration.
HEADNOTE:
The respondent’s wealth was assessed to Wealth Tax
under the Wealth Tax Act, 1957 for three assessment years
1960-61, 1961-62 and 1962-63 the corresponding valuation
dates being 31-12-1959, 31-12-1960 and 31-12-1961. On 14th
May, 1953 the assessee wrote a letter to her younger son
stating that his late father expressed the wish that he (the
second son) should be paid Rs. 50 lakhs out of the family
properties and that to keep his promise and also to get
peace of mind, if his elder brother did not pay the sum of
Rs. 50 lakhs, she would pay such balance that remains
unpaid. The elder brother paid Rs. 20 lakhs. The balance
liability of Rs. 19 lakhs remained due and continued to be
due on all the three aforesaid valuation dates. It was
finally wiped off in February, 1962. On the question
"whether, while assessing the net wealth of the respondent
within section 2(m) of the Wealth Tax Act, the sum of Rs. 19
lakhs was to be deducted" as debt owed by her, the Wealth
Tax Tribunal held in favour of the respondent. The High
Court held that the sum of Rs. 19 lakhs constituted a debt
owed by the assessee and was deductible under the Wealth Tax
Act from the value of the total assets as on 31-12-1959.
On appeal to this Court, the appellant argued (i) that
the letter dated 14-5-1953 created no debt as the
undertaking given by the respondent to her son on his elder
brother’s failure to pay any portion of the sum was an
agreement without consideration and hence it was void and
therefore it was not enforceable at law on any of the
valuation dates and could not be deducted; (ii) that the
undertaking given by the respondent in her letter dated 14-
5-1953 was a contingent contract within the meaning of
section 31 of the Contract Act.
Dismissing the appeal,
^
HELD: (1) Taking the totality of facts it was a case of
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family settlement or family arrangement which was binding on
the parties. The respondent agreed to purchase peace for the
family and to pay to her younger son the amount which fell
short of Rs. 50 lakhs if her elder son did not pay any
portion thereof. It is well established that such a
consideration is good consideration which brings an
enforceable agreement between the parties and is not hit by
section 25. Even if it be held that the letter dated 14-5-
1953 had not the effect of bringing about the family
arrangement or any binding arrangemen bewteen the parties,
their subsequent conduct upto 12th September 1959 brought a
concluded family arrangement. The respondent paid Rs. 11
lakhs and reiterated her obligation to pay the balance in
the shape of ornaments.
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That was not honoured by reason of which the younger son had
a right to enforce the family arrangement against his
mother. The respondent would have been bound to pay the
balance if a suit had been filed against her as he had
refrained from going to the law court against his brother on
her bringing about the family arrangement. [548 C-G]
(2) Assuming that it was a contingent contract within
the meaning of s. 31 of the Contract act, such a contract
under section 32 of the Contract Act, becomes enforceably by
law when the future event contemplated in the contingent
contract had happened. The contingency in this case was the
liability of the mother to pay a certain sum of money on the
failure by the elder son to pay Rs. 50 lakhs or any part
thereof. In that view, the liability of the mother became
enforceable by law on the latter date, if not earlier.[548
G-H, 549]
Kesoram Industries and Cotton Mills Ltd. v.
Commissioner of Wealth Tax (Central), Calcutta, 59 I.T.R.
767; Standard Mills Co. Ltd. v. Commissioner of Wealth Tax,
Bombay, 63 I.T.R., 470; and Bombay Dyeing and Manufacturing
Co. Lt. v. Commissioner of Wealth Tax, Bombay City-I, 93
I.T.R., 603, distinguished and held inapplicable.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 2170-
2172 of 1972
Appeals by Special Leave from the Judgment and Order
dated 22-7-1971 of the Mysore High Court in T.R.C. Nos. 3, 4
and 5 of 1967.
B. B. Ahuja and Miss A. Subhashini for the Appellant.
S. T. Desai, I. N. Shroff and H. S. Parihar for the
Respondents.
The Judgment of the Court was delivered by
UNTWALIA J.-These are three appeals by special leave
filed by the Commissioner of Wealth Tax, Mysore from the
Judgment of the Mysore (now Karnataka) High Court. The
assessee is the Dowger Maharani of Gondal. Her husband, His
Highness Bhojjrajji Maharaja Saheb of Gondal, died intestate
on 31.7.1952 leaving considerable moveable and immoveable
properties. Certain disputes and differences arose after his
death between his two sons namely Maharaja Vikramsinghji and
his younger brother Shivaraj Singhji in respect of the
assets left by the late Maharaja Saheb. The younger brother
was contemplating legal proceedings against his elder
brother. Their mother intervened. The idea of litigation,
thereupon, was dropped because the assessee gave a letter
dated 14.5.1953 to Shivaraj Singhji stating therein:-
"Your father had expressed in the presence of many
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people that he will give you rupees fifty lakhs. To
keep up his words and promise and also that I should
get peace of mind I am writing to you that if your
brother Vikramsinghji Maharaja of Gondal does not give
you the full amount, then you
547
must get the balance of amount from me. That is my
sincere desire. I will also press Vikram that the
should give you the amount of Rs. fifty lakhs.
Vikram Singhji paid only Rs. 20,00,000/-to Shivaraj
Singhji. The latter, therefore, claimed the balance amount
of Rs. 30,00,000/-from the assessee on the basis of her
letter dated 14.5.1953. On or about 12.9.1959, pursuant to
her commitment made in the letter aforesaid, the assessee
transferred War Stock valued at Rs. 11,00,000/- to Shivaraj
Singhji and also agreed to hand over certain ornaments in
full settlement of his claim. The ornaments were however not
given. That led to disputes between the mother and the son
but eventually they were also settled on 22.2.1962 which
settlement was evidenced by a document setting out all the
relevant facts of the history of the dispute. By virtue of
this settlement a sum of Rs. 10,00,000/- was paid by the
assessee to Shivaraj Singhji.
The assessee’s wealth was assessed to wealth-tax under
the Wealth Tax Act, 1957 for the three assessment years in
question viz. 1960-61, 1961-62 and 1962-63. The
corresponding valuation dates of the said assessment years
are 31.12.1959, 31.12.1960 and 31.12.1961. It would be
noticed that the assessee, under the arrangement arrived at
between the parties, became liable to pay the balance of the
amount of Rs. 30,00,000/-to Shivaraj Singhji as
vikramsinghji, out of the sum of Rs. 50,00,000/-mentioned in
the letter dated 14.5.1953, paid only Rs. 20,00,000/- The
assessee succeeded in wiping off her liability to the extent
of Rs. 11,00,000/- on 12.9.1959 by transfer of War Stock.
The balance of the liability, i.e., Rs. 19,00,000/-remained
due and continued to be due on all the three valuation dates
aforesaid. It could be wiped off by a further settlement
only in February, 1962. In respect of the three assessment
years in question, however, a question arose as to whether
while assessing the net wealth of the assessee within the
meaning of clause (m) of section 2 of the Wealth-Tax Act the
said sum of Rs. 19,00,000/- was to be deducted. The Wealth-
tax Tribunal held in favour of the assessee. At the instance
of the Revenue for all the three years a common question of
law was referred to the High Court for its opinion. The
questions being in identical terms it would suffice to quote
the question with respect to the assessment year 1960-61. It
reads as follows:-
"Whether on the facts and circumstances of the
case, the sum of Rs. 19 lakhs could constitute a debt
owed by the assessee and deductible under the Wealth-
Tax Act from the value of the total assets as on
31.12.1959?"
548
The High Court has answered the question in the
affirmative, in favour of the assessee and against the
department. Hence this appeal.
Mr. Ahuja appearing in support of the appeal contended
that by the letter dated 14.5.1953 no debt was created as
the undertaking given by the assessee to her son agreeing to
pay the deficit in respect of Rs. 50,00,000/- on his elder
brother’s failure to pay any portion of the sum was an
agreement without consideration and hence under section 25
of the Contract Act it was void and was not saved by any of
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the exceptions mentioned therein. He, therefore, contended
that it was not an enforceable liability on any of the
valuation dates and could not be deducted from the valuation
of the assessee’s wealth. In our opinion the argument is not
sound. Taking the totality of the facts as found by the
Tribunal and mentioned in the impugned judgment of the High
Court it was a case of family settlement or family
arrangement which is binding on the parties concerned. The
assessee agreed to purchase peace for the family, and to pay
to her son the amount which fell short of Rs. 50,00,000/- if
her elder son did not pay any portion thereof. It is well
established that such a consideration is a good
consideration which brings, about an enforceable agreement
between the parties. Section 25 of the Contract Act does not
hit this.
It may be further pointed out that even if it be held
that the letter dated 14.5.1953 had not the effect of
bringing about the family arrangement and any binding
agreement between the parties, their subsequent conduct upto
12.9.1959 brought about a concluded family arrangement.
Vikramsinghji paid Rs. 20,00,000/-. Out of the balance of
Rs. 30,00,000/- the assessee discharged her liabilities to
the extent of Rs. 11,00,000/- and reiterated her obligation
to pay the balance of Rs. 19,00,000/- in the shape of
ornaments. That was not honoured. Shivaraj Singhji had a
right to enforce the family arrangement against his mother,
as arrived at partly in writing and partly orally as
evidenced by the conduct of the parties. The assessee would
have been bound to pay Rs. 19,00,000/- if a suit had been
filed against her by Sivaraj Singhji as he had refrained
going to the law court from against his brother on her
bringing about the family arrangement.
Mr. Ahuja then submitted that at best the undertaking
given by the assessee in her letter dated 14.5.1953 was a
contingent contract within the meaning of section 31 of the
Contract Act. Even so, under section 32 such a contract
becomes enforceable by law when future even contemplated in
the contingent contract has happened. In this case the
cotingency was the liability of the mother to pay a certain
sum of money
549
on the failure by her elder son to pay Rs. 50,00,000/- or
any part there of. This did happen sometime between
14.5.1953 and 12.9.1959. In that view of the matter, if not
earlier the liability of the mother became enforceable by
law on the latter date.
Learned counsel for the appellant cited three decisions
of this Court to support his argument viz.-Kesoram
Industries and Cotton Mills Ltd. v. Commissioner of Wealth-
Tax (Central) Calcutta;(1) Standard Mills Co. Ltd. v.
Commissioner of Wealth-Tax, Bombay(2) and Bombay Dyeing and
Manufacturing Co. Ltd. v. Commissioner of Wealth-Tax, Bombay
City-I(3). None of them is quite apposite on the point at
issue before us. In the case of Kesoram Industries it was
held that "debt owed" within the meaning of section 2(m) of
the Wealth-tax Act, 1957 could be defined as the liability
to pay in praesenti or in futuro an ascertainable sum of
money. It was held that a liability to pay income-tax was a
present liability though the tax became payable after it was
quantified in accordance with ascertainable data. Subba Rao
J., as he then was, delivering the majority opinion said at
page 780 :-
"The said decisions also accept the legal position
that a liability depending upon a contingency is not a
debt in praesenti or in futuro till the contingency
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happened. But if there is a debt the fact that the
amount is to be a-scertained does not make it any the
less a debt if the liability is certain and what
remains is only the quantification of the amount. In
short, a debt owed within the meaning of section 2(m)
of the Wealth-tax Act can be defined as a liability to
pay in praesenti or in futuro an ascertainable sum of
money.
The other two decisions of this Court were concerned
with the question as to whether the liability of the
assessee to pay gratuity to its employees on determination
of employment was a mere contingent liability which arose
only when the employment of the employee was determined by
death, incapacity, retirement or resignation and whether it
could be deducted as a debt in computing the net wealth of
the assessee. The answer given was against the assessee. In
the present case we have held that the liability of the
assessee was created by the family arrangement arrived at
between the parties and even if it was a contingent
liability the contingency did happen and the assessee became
liable
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to pay the amount as a debt before 12.9.1959, which is
anterior to the relevant valuation dates. The sum of Rs.
19,00,000/- was a subsisting debt on the said valuation
dates.
For the reasons stated above, we hold that there is no
merit in this appeal. It is accordingly dismissed with
costs.
N.K.A Appeal dismissed.
551