Commissioner of Wealth Tax, Mysore Vs.
Her Highness Vijayaba, Dowger Maharani Saheb of Bhavnagarpa  INSC 66 (9
CITATION: 1979 AIR 982 1979 SCR (3) 545 1979
SCC (2) 213
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.
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
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 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.
546 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.
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
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 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 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
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 thereof. 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 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
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 550 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.