Kalwa Devadattam and Two Others Vs.
The Union of India & Ors [1963] INSC 107 (19 April 1963)
19/04/1963 SHAH, J.C.
SHAH, J.C.
SARKAR, A.K.
HIDAYATULLAH, M.
CITATION: 1964 AIR 880 1964 SCR (3) 191
CITATOR INFO:
RF 1966 SC1089 (16) R 1966 SC1370 (31) APL
1967 SC1541 (5) F 1977 SC 409 (16) RF 1978 SC1362 (34) RF 1981 SC1562 (13) R
1981 SC1965 (12) R 1982 SC 760 (13)
ACT:
Income-Tax--Aseessment--Civil Court debarred
from setting aside or modifying assessment--Effect of partition on payment of
Income-tax--Mere execution or registration of partition deed not
decisive--Question of onus--Code of Civil Procedure, 1908 (Act V of
1908).--Indian Income-Tax Act, 1922 (11 of 1922), ss. 25.A, 67.
HEADNOTE:
Nagappa and his sons who formed a joint
family carried on business and they were assessed to income-tax and supertax by
the Income-tax authorities. As Nagappa did not pay the tax assessed, 51 items
of immovable property belonging to the joint family were attached and 38 items
were actually sold A suit was filed by the sons of Nagappa claiming a decree
declaring that the assessment orders were unenforceable against the property
attached and the sale of the property by the revenue authorities was without
jurisdiction, void and illegal and an order restraining the Union of India and
the authorities of the State of Madras from selling the scheduled properties or
confirming the sales already held. The plaintiffs contended that the items 46
to 51 did not belong to the joint family at all as these were acquired by them
with funds provided by their maternal grand-mother and the remaining items of
property were not liable to be attached and sold as those had been allotted to
them on a partition of the joint family estate on March 14, 1947, before the
order of assessment was made by the Income-tax authorities.
The contention of the Union of India was that
the plaintiffs were not entitled to question the correctness of the assessment
of tax in a Civil Court because the jurisdiction of the court was excluded by
s. 67 of the Indian Income-tax Act, that the plaintiffs were precluded from
setting up the plea of partition between them and their father as their defence
to the enforcement of liability for the payment of tax in view of the
provisions of s. 25-A (3), that the partition was sham and not intended to be
operative and items 46 to 51 were not the separate estate of the plaintiff.
192 In another case, the High Court passed on
March 5, 1947, a decree for Rs. 10.000/against Nagappa and in favour am of
Kumaji Sure Mal. On March 14, 1947, a deed of partition was executed by which
the joint family estate of Nagappa and his sons was divided and separate shares
were given to Nagappa and his sons. Kumaji got certain properties attached in
execution proceedings. A suit was filed by the sons of Nagappa claiming that
the debt incurred by Nagappa being Avyavaharika, the plaintiffs were not liable
to satisfy the debt and Kumaji was not. competent to bring to sale in execution
of the decree obtained against Nagappa in his individual capacity, the interest
of the plaintiffs in the joint family property after the joint family status
was severed and the properties of the families were partitioned.
Held that both the suits of the appellants
must be dismissed. The suit against the Union of India must fail on three
independent grounds; The suit which was in substance one for setting aside an
assessment was in law not maintainable because of s. 67 of the Indian Income tax
Act, 1922. In the absence of an order under s. 25-A (1), the assessment of the
Hindu joint family was properly made.
Even if an order recording partition was
made, the liability of the plaintiffs to pay income-tax assessed on the family
could still be enforced against them jointly and severally under s. 25-A (2)
proviso.
Under s. 25-A of the Income-tax Act, if at
the date when the liability to pay tax arose' there was in existence a joint
family, the fax Will still be assessed on the joint family notwithstanding its
disruption after the crucial date. The machinery for recovery of the tax
differs according as an order regarding partition is made or not made. If the
Income-tax Officer is satisfied that the joint family property has, since the
close of the year of account, been partitioned among the various members or
groups of members in definite portions, he must record an order to that effect
and thereupon each member or group of members is liable, in addition to any
income-tax for which he is separately liable, for a share of the tax on the
income so assessed according to the portion of the joint family property
allotted to him. But even after this apportionment of liability for the tax
assessed on the total income of the joint family, the members of the family or
groups thereof remain jointly and severally liable for the tax assessed on the
total income received by the family as such. If no order is recorded under s.
25-A (1), the family shall be deemed, for the purpose of the Income-tax Act, to
continue to remain a Hindu undivided 193 family. Section 25-A merely sets up
machinery for avoiding difficulties encountered in levying and collecting tax
Held also, that properties items 46 to 51 belonged to the joint family and were
liable to be attached and sold in enforcement of the liability for payment of
income-tax, because the alleged partition between Nagappa and his sons was a
sham transaction which was not intended to be operative. The question of onus
probandi is important in the early stages of a case. It may assume importance
where no evidence at all is led on the question in dispute by either side.' In
such a contingency, the party on whom the onus lies to prove a certain fact,
must fail. Where, however, evidence had been led by the contesting parties on
the question in issue, abstract considerations of onus are out of place. Truth
or otherwise of the case must always be adjudged on the evidence led by the
parties.
Schwebo K.8.R.M. Firm through partner
Govindan alias Ramanatham Chettiar v. Subbiah alias Shanmugham Chettiar, I.L.R.
1945 Mad. 138, Wallace Brothers & Co. Ltd. v. The Commissioner of
Income-tax, Bombay City and Bombay Suburban District, (1948) L.R. 75 I.A. 86,
Sir Sunder Singh Majithia v. Commissioner of Income-tax, United and Central
Provinces (1942) L.R. 69 I.A. 119; Commissioner of Incometax West Punjab, North
West Frontier and Delhi Provinces v. Tribune Trust, Lahore: (1947) L.R, 74 I.A.
306, Katragadda China Ramayya v. Chirwvella Venkanraju, A.I.R.
1954 Mad. 864, Ganapatrao Vishwanathappa v.
Bhimrao Sahibrao, I.L.R. 1950 Born. 414 and S.M. Jakati v.S.M. Borkar, [1959]
S.C.R. 1384, referred to.
CIVIL APPELLATE JURISDICTION:Civil Appeals
Nos. 641 and 642 of 1961.
Appeals from the judgment and decree dated
April 11, 1957, of the Andhra Pradesh High Court in A.S. Nos. 95 and 520 of
1952.
A.V. Viswanatha sastri, P.V. Chalapati Rau,
S.N. Andley, and Rameshwar Nath, for the appellants.
K.N. Rajagopal Sastri and R.N. Sashthey, for
respondents Nos. 1 to 4 (in C.A. No. 641 of 1961).
194 C. Kandiah, M. Rajagopalan and K.R.
Chaudhri, for respondent No. 1 (in C.A. No. 642 of 1961).
1963. April 19. The Judgment of the Court was
delivered bySHAH J.--Nagappa son of Pullanna resident Nandyal carried on
business in yarn, drugs and forward contracts.
He acquired in that business a considerable
estate which was treated by him as property of the joint family of himself and
his sons. Nagappa and his sons were assessed by the Incometax authorities to
pay income-tax and supper-tax in the status of a Hindu undivided family as set
out in the following table :-Year of Year of Date of Income-tax and account
assessorder. super-tax ending ment. assessed.
---------------------------------------24-3-44
1944-45 25-2-48 Rs. 51,116-7-0 14-3-45 1945-46 25-2-48 Rs. 21,452-1-0 2-4-46
1946-47 31-3-48 Rs. 21,012-13-0 Besides this amount of income-tax and supertax
he was assessed to pay penalty and excess profits tax aggregating to Rs.
26,602/-. The total amount of tax due for the three years of assessment
1944-45, 1945-46 and 1946-47 aggregated to Rs. 1,23,233/5/-. Nagappa did not
pay the tax. The revenue authorities of the Province of Madras, at the instance
of the Income-tax Department attached 51 items of immovable property as
belonging to the joint family of Nagappa and his sons and put up the same for
sale under the Madras Revenue Recovery Act II of 1864. Out of these 38 items
were sold and were purchased by certain persons.
195 Kalwa Devadattam, Kalwa Devarayulu and
Kalwa Nandi Sankarappa (sons of Nagappa) hereinafter called collectively
"the plaintiffs'--through their mother acting as their next friend
commenced suit No. 52 of 1950 in the Court of the Subordinate Judge, Kurnool,
against the Union of India, the revenue authorities of the State of Madras, the
purchasers of the properties at the auction, and Nagappa, claiming a decree
declaring that the assessment orders made by the Income-tax officer, Kurnool,
for the years 1944-45, 1945-46 and 1946-47 were unenforceable against 51 items
of property of the plaintiffs described in the schedule and sale of their
property by the revenue authorities was without jurisdiction, void and
illegal", and an order restraining the Union of India and the authorities
of the State of Madras from selling the "scheduled properties" or
confirming the sale already held or that may be held after the institution of
the suit. It was the case of the plaintiffs that items 46 to 51 did not at any
time belong to the joint family, having been acquired by them with funds
provided by their maternal grandmother Seshamma, and that the remaining items
of property were not liable to be attached and sold since these had been
allotted to them on a partition of the joint family estate before the order of
assessment was made by the Income-tax authorities.
The suit was resisted by the Union of India
and also by the purchasers on diverse grounds. The Union contended, inter aria
that the plaintiffs were not entitled to question the correctness of the
assessment of tax in a Civil Court because the jurisdiction of the Court in
that behalf was excluded by s. 67 of the Indian Income-tax Act, that the
plaintiffs were in any event precluded from setting up the plea of a partition
between them and Nagappa as a defence to the enforcement of liability for
payment of tax in view of the provisions of s. 25A (3), that the 196 partition
was sham and not intended to be operative and that items 46 to 51 were not the
separate estate of the plaintiffs as contended by them. The purchasers (who
were impleaded as defendants 5 to 28) contended that there was no invalidity in
the proceedings for assessment of tax and that they having purchased those
properties for the full amounts for which they were sold, sales in their favour
though not confirmed were binding upon the plaintiffs.
Suit No. 52 of 1950 was tried with another
suit being suit No. 54 of 1949 of the same Court in which also the validity of
the partition dated March 14, 1947 fell to be determined, between the sons of
Nagappa and the firm of Kumaji Sare Mal who were creditors under a money decree
against Nagappa. The facts which gave rise to that suit are these: Kumaji Sare
Mal filed suit No. 7 of 1944 in the Court of the Subordinate Judge, Anantpur,
against Nagappa for a decree for Rs. 10,022-10-6 due' at the foot of certain
transactions in yarn. This suit was dismissed by the Trial Court on the ground
that the contracts for the supply of yarn were wagering contracts, but in
Appeal No. 174 of 1945 the High Court of Madras decreed the suit on March 5,
1947 holding that the contracts giving rise to the liability though speculative
were not of a wagering Character. The High Court passed a decree for Rs.
10,000/with interest at 6 per cent from the date of suit and costs. This decree
was soon followed by the execution of the deed of partition,dated March 14,
1947, between Nagappa and the plaintiffs, by which the joint family estate
valued approximately at Rs. 1,25,000/was divided into four shares. To Nagappa
was allotted under that partition property of the value of Rs. 31,150/and he
stood liable to satisfy debts of the value of Rs. 12,236/4/9. In execution of
the decree in suit No. 7 of 1944 Kumaji Sare Mal attached some of the
properties that fell to the share of the plaintiffs 197 under the deed of
partition dated March 14, 1947. Objections to the attachment preferred under
0.21 r. 58 Code of Civil Procedure by the plaintiffs were dismissed by the
executing Court on July 12, 1948. The plaintiffs then filed suit No.
54 of 1949 for a decree setting aside the
summary order passed in the execution proceeding, claiming that the debt
incurred by Nagappa being avyavaharika, the plaintiffs were not liable to
satisfy the debt, and that the firm of Kumaji Sare Mal was incompetent to bring
to sale in execution of the decree obtained against Nagappa in his individual
capacity, the interest of the plaintiffs in the joint family property after the
joint family status was severed and the properties of the family were
partitioned.
Common evidence was recorded in the two
suits.
The Trial Judge held that the properties
items 1 to 45 belonged in the relevant years of assessment to the joint family
of Nagappa and his sons, and in the absence of an order recording partition
under s. 25A (1) of the Indian Income-tax Act, the Income-tax Officer was bound
to assess the undivided family even after partition on the footing that the
family still continued to be joint. He further held that by virtue of s. 67 of
the Indian Income-tax Act, no action questioning the assessment could be
entertained by the Courts, and that there was no irregularity in the
proceedings for sale. But the Court held that on March 14, 1947 division of
property of the undivided family was in fact made between Nagappa and the
plaintiffs: that the partition was effected with the object of defeating the
claims of the creditors including the Income-tax authorities, but it was
nevertheless partition which was intended to be overative. The Court further
held that items 46 to 51 were not proved by the defendants to be the joint
family property of the plaintiffs and Nagappa.
In suit No. 54 of 1949 the learned Judge held
following 198 Schwebo K.S.R.M. Firm through Partner Govindan, alias Ramanathan
Chettiar v. Subbiah alias Shanmugham Chettiar (1), that after a partition
between the members of the joint Hindu family the sons' share in the joint
family property cannot be ' proceeded against in execution so as to enforce the
pious obligation of the sons to satisfy their father's debts under a decree
passed against the father alone. The learned Judge accordingly decreed suit No.
54 of 1949 holding that the only remedy of the firm Kumaji Sare Mal was to
proceed by a suit to enforce the pious obligation of the plaintiffs to
discharge the pre-partition debts.
The plaintiffs appealed against the decree in
suit No. 57 of 1950 to the High Court of Madras and the Union filed
cross-objections to the decree appealed from. Firm Kumaji Sure Mal also
appealed against the decree dismissing their suit No. 54 of 1949. The High
Court of Andhra Pradesh to which the appeals stood transferred for hearing
under the States Reorganisation Act 1956 held agreeing with the Trial Court
that a suit to set aside the assessment of income-tax was not maintainable
against the Union, and that in any event in the absence of an order under s.
25A(I) of the Indian Income-tax Act, recording a partition, the Income-tax
authorities were bound to assess tax on the Hindu undivided family as if that
status continued. The High Court also held that the partition set up by the
plaintiffs was a transaction which was nominal and sham, 'and that the evidence
established that times 46 to 51 were purchased with the aid of joint family
funds and not with ,he funds supplied by Seshamma and therefore all the
properties it mes 1 to 51 were liable to satisfy the tax liability of the joint
family. The High Court also held that the firm Kumaji Safe Mal was entitled to
recover the debt due to them in execution proceeding, there being no real
partition (1) I. L.R. (1945) Mad, 138.
199 between Nagappa and the plaintiffs prior
to the date of attachment. The High Court accordingly dismissed both the suits.
We will reserve for separate consideration
the common question which arose in these two appeals, namely, whether the
partition by the deed dated March 14, 1947 between Nagappa and his sons the
plaintiffs was a sham transaction.
Even on the footing that the partition was
real and intended to be operative, suit No. 52 of 1950 filed by the plaintiffs
against the Union was bound to fail for more reasons than one. For the
assessment year 1943-44 the Hindu undivided family of Nagappa and his sons was
assessed to income-tax.
In the years 1944-45, 1945-46 and 1946-47 the
family was also assessed to pay income-tax, super-tax and excess profits tax,
as set out hereinbefore. Nagappa maintained his accounts according to the
Telugu year. and the last year of account corresponding to the assessment year
1946-47 ended on April 2, 1946. Under the Indian Income Tax Act liability to
pay income.tax arises on the accrual of the income, and not from the
computation made by the Taxing authorities in the course of assessment
proceedings: it arises at a point of time not later than the close of the year
of account. As pointed out by the Judicial Committee of the Privy Council in
Wallace Brothers and Co, Ltd. v. The Commissioner of Income-tax, Bombay City
and Bombay Suburban District (1):
"The general nature of the charging
section is clear. First, the charge for tax at the rate fixed for the year of
assessment is a charge in respect of the income of the 'previous year,' not a
charge in respect of the income of the year of assessment as measured by the
income of the previous year. x x x Second the rate of tax for the year of
assessment may be fixed after the close of the previous (1) (1948) L.R. 75 I.A
86.
200 year and the assessment will necessarily
be made after the close of that year. But the liability to tax arises by virtue
of the charging section alone, and it arises not later than the close of the
previous year though quantification of the amount pa yable is postponed."
Liability of the Hindu undivided family of Nagappa and his sons therefore arose
not later than the close of each account year and account period for which the
tax was assessed and it is not the case of the plaintiffs that the family
estate was partitioned before the liability of the undivided family to pay tax
arose. There is no dispute in the suit filed by the plaintiffs against the
Union that the business carried on by Nagappa was the business of the joint family.
It is on the footing that the business carried on by Nagappa was of the joint
family, and the income earned in the conduct of the business and the property
was joint family income that the plaintiffs have filed this suit.
Under s. 25A of the Income-tax Act, if at the
date when the liability to pay tax arose there was in. existence a joint family
which has subsequently disrupted, the tax will still be assessed on the Joint
family. The machinery for recovery of the tax however. differs according as an
order recording partition is made or not made. If the Income-tax Officer is
satisfied on a claim made by a member of the family that the joint family
property has, since the close of the. year of account been' partitioned among
the various members or groups of members m definite portions, he must' record
an order.. to that effect and thereupon notwithstanding anything contained in
sub-s. (1) of s. 14 of the Act each member .or group of members is liable in
addition .to any income-tax for which he. is separately liable for a share of
the tax on the income so assessed according to the portion. of the .joint
family property allotted to him or it. But even after this apportionment of
liability for the tax 201 assessed on the total income of the joint family, the
members of the family or groups thereof remain jointly and severally liable for
the tax assessed on the total income received by the family as such. If no
order is recorded tinder sub-s. (1) of S. 25A, by virtue of sub-s. (3) the
family shall be deemed, for the purposes of the Act, to continue to remain a
Hindu undivided family. Section 25A merely sets up machinery for avoiding
difficulties encountered in levying and collecting tax, where since the income
was received the property of the joint family has been partitioned in definite
portions, while at the same time affirming the liability of such members or
group of members, jointly and severally to satisfy the total tax in respect of
the income of the family as such. The section seeks to remove the bar imposed
by S. 14 (1) against recovery of tax from an individual member of a joint Hindu
family in respect of any sum which he receives as a member of the family, and
to ensure recovery of tax due, notwithstanding partition. The incidence of tax,
but not the quantum is readjusted to altered conditions.
The judicial Committee of Privy Council in
Sardar Bahadur Sir Sunder Singh Majithia v. Commissioner of Income-tax, United
and Central Provinces (1), analysed the scheme of S. 25A as follows :"Section
25A is directed to the difficulty which arose when an undivided family had
received income in the year of account but was no longer in existence as such
at the time of' assessment. The difficulty was the more acute by reason of the
provisionan important principle of the Act-contained in S. 14 (1) "The tax
shall not be payable by an assessee in respect of any sum which he receives as
a member of a Hindu undivided family." (1) (1942) L. R, 69 I. A. 119, 202
"Section 25A deals with the difficulty in two ways, which are explained by
the rule, applicable to families governed by the Mitakshara, that by a mere
claim of partition a division of interest may be effected among coparceners so
as to disrupt the family and put an end to all right of succession by
survivorship. It is trite law that the filing of a suit for partition may have
this effect though it may take years before the shares of the various parties
are determined or partition made by metes and bounds. Meanwhile the family
property will belong to the members as it does in a Dayabhaga family--in effect
as tenants in common. Section 25A provided that if it be found that the family
property has been partitioned in definite portions, assessment may be made,
notwithstanding S. 14 (1), on each individual or group in respect of his or its
share of the profits made by the undivided family, while holding all the
members jointly and severally liable for the total tax." In the present
case no order under S. 25A (1) was recorded. It is true, that Nagappa had made
before the Income-tax Officer on January 19, 1948 the following statement :
"I am at present living singly. My sons
divided from me about ten months back. There is a document to this effect. The
document was registered. My sons are as follows" :
After recounting the names of his three sons
and their respective ages, lie proceeded to state "The guardian to these
minor children is my wife. I divided my family properties between myself and my
children. The properties 203 belonged to our joint family. The business also
belonged to my joint family." It may be assumed that by this statement
within the meaning of S. 25A it was claimed "by or on behalf of any member
of a Hindu family hitherto assessed as undivided" that a partition had
taken place among the members of his family and that the Income-tax Officer was
bound to make an inquiry contemplated by S. 25A. But no inquiry was in fact
made and no order was recorded by the Income-tax Officer about the partition :
by virtue of sub-s. (3) the Hindu family originally assessed as undivided had
to be deemed for the purposes of the Act, to continue to be a Hindu undivided
family. If by the assessment of the family on the footing that it continued to
remain undivided, Nagappa or his sons were aggrieved their remedy was to take an
appropriate appeal under S. 30 of the Indian Income-tax Act and not a suit
challenging the assessment. The method of assessment and the procedure to be
followed in that behalf are statutory, and any error or irregularity in the
assessment may be rectified in the mariner provided by the statute alone, for
S. 67 of the Indian Income-tax Act bars a suit in any Civil Court to set aside
or modify any assessment made under the Act. The Income-tax Officer made the
assessment of tax under the Act : granting that he committed an error in making
the assessment without holding an inquiry into the partition alleged by
Nagappa, the error could be rectified by resort to the machinery provided under
the Act and not by a suit in a Civil Court. In Commissioner of Income-tax, West
Punjab, North-West Frontier and Delhi.Provinces, Lahore v. Tribune Trust,
Lahore (1), the judicial Committee observed :
" x x x x the only remedies open to the
taxpayer, whether in regard to appeal against assessment or to claim for refund
are (1) (1947) IR. 74 I. A. 306, 316, 204 to be found within the four corners
of the Act. This view of his rights harmonises with the provisions of S. 67, x
x x that no suit shall be brought in any Civil Court to set aside or modify any
assessment made under the Act. It is the Act which prescribes both the remedy
and the manner in which it may be enforced." The suit filed by the
plaintiffs against the Union must therefore fail on three independent grounds,
each of which is sufficient to nonsuit them.
(1) The suit which was in substance one for
setting aside an assessment was in law not maintainable because of S. 67 of the
Indian Income-tax Act ;
(2) That in the absence of an order under S. 25A
(1) assessment of the Hindu joint family was properly made ; and (3) Even if an
order recording partition wag made the liability of the plaintiffs to pay
income-tax assessed on the family could still be enforced against them jointly
and severally under S. 25A(2) proviso.
The plea of irregularity in holding the sale proceedings
set up in the Trial Court was negatived by the Trial Court as well as the High
Court, and has not been canvassed before this Court.
About the title of the plaintiffs to items 46
to 51 in the schedule annexed to the plaint, the High Court disagreed with the
Trial Court. These properties were purchased in the names of two of the three
plaintiffs by the sale deed Ext. A-230 dated March 15, 1944. The consideration
of the sale deed was Rs. 23,500/-of which Rs. 5,019/-had been paid in advance
in four installments before March 15, 1944, 205 and the balance of Rs. 18,481/was
paid before the SubRegistrar to the vendors who conveyed the properties to
Devadattam and Devarayulu two of the three plaintiffs acting by their mother
Narayanamma as their guardian. The properties having been purchased in the
names of the two plaintiffs the burden prima facie lay upon the Taxing
authorities to establish that the sale deed was taken for and on behalf of the
joint family or with the aid of joint family funds. Evidence was led by both
the sides to support their respective versions. The Trial Court held that the
plaintiffs' case that their grandmother Seshamma provided the consideration was
not proved, but there was also no evidence to show that the consideration was provided
by the joint family, and as the burden of proof lay upon the Union, their case
must fail. The High Court however held that the burden which lay upon the Union
to prove that the properties were purchased out of the joint family funds was
duly discharged. The question of onus probably is certainly important in the
early stages of a case. It may also assume importance where no evidence at all
is led on the question in dispute by either side; in such a contingency the
party on whom the Onus lies to prove a certain fact must fail.
Where however evidence has been led by the
contesting parties on the question in issue, abstract considerations of onus
are out of place; truth or otherwise of the case must always be adjudged on the
evidence led by the parties.
But in support of the case that Seshamma had
provided the consideration three witnesses P.W. 4, P.W. 5, and P.W. 8 were
examined. Seshamma had died a few months before evidence was recorded in the
suit. That evidence was found by the Trial Court as well as the High Court to
be discrepant and in essential particulars so improbable that it could not be
relied upon. P.W. 4 Narayanamma plaintiffs' mother-deposed that the properties
had been 206 purchased for the plaintiffs by her mother Seshamma with the money
given to Seshamma" by her husband. This money according to Narayanamma was
given to Nagappa and Nagappa paid it to the vendors in the presence of the
Sub-Registrar.
But this story stands wholly discredited by
her admission that Seshamma's husband and his brothers were joint in business
and estate till the former's death. Again there is on the record a statement
made by Seshamma, before the Income-tax authorities, wherein she had stated
that when her husband died, she might have had with her about Rs. 4,000/to Rs.
5,000/which she gave to her daughter. Nagappa was questioned in regard to this
statement and he suggested that the statement was obtained by coercion from
Seshamma by the Income-tax authorities. The story that Seshamma Owned a large
amount of cash, is not supported by any documentary evidence and it is
difficult to believe that a trading family would not have invested the amount,
if it was in truth devised to Seshamma by. her husband. In crossexamination
Narayanamma altered her version. She stated that Seshamma's uncle had left
everything to her as he had no children or family but he did riot execute any
document in favour of Seshamma and that at the time of his death he stated
orally that Seshamma should take all the properties and that Seshamma and her
brother knew about what she received from her paternal uncle. P. W. 5
Venkatsami who was originally a clerk of Nagappa, said that he was acting as a
clerk in the employment of Narayanamma. He swore that he had seen Seshamma
giving Rs,6,000/to Narayanamma about four years ago and that a month later
Seshamma brought Rs. 3,000/and gave them to Narayanamma and that about *,en
days thereafter Seshamma brought Rs. 12,000/and gave them to Nagappa and
Narayanamma. He admitted that Seshamma had no immovable property other than a
house which she had bequeathed to her daughter under a will. The witness did
not know 207 how Seshamma got the amount. He, however, stated somewhat
inconsistently under cross-examination that on the date of registration of Ext.
A-230 Seshamma had asked her daughter 'Narayanamma to bring the money.' On that
day the key of the iron safe was with Narayanamma and that Narayanamma brought
some cash which was counted and paid over to the vendors.
Both the Courts found that this witness was
unreliable and a bare reading of his recorded testimony confirms that view.
Nagappa said that Seshamma had paid the
consideration for the sale-deed, but in cross-examination he made diverse
statements which threw doubt upon the truth of that story.
He was interested in devising ways and means
for saving the properties for the benefit of his sons. It was he who had
instigated and had prosecuted the suits. His bare statement that the
consideration for the sale-deed was advanced by Seshamma not supported by any
documentary evidence is unreliable, especially having regard to the statement
which Seshamma had made before the Income-tax authorities. It must therefore be
held that the Courts below were right in holding that the plaintiffs have
failed to establish that the properties conveyed by the sale-deed were
purchased with the funds supplied by Seshamma. It is common ground that the
plaintiffs had no other source of income. As admitted by Nagappa and his clerk
Venkatsami, Nagappa made large profits in his business, and Rs. 18,481/out of
the consideration payable under Ext. A-230 were actually paid to the vendors by
Nagappa. There were before the Court two versions-one by the plaintiffs who
alleged that the consideration for the sale-deed was supplied by Seshamma.
That version, for reasons already stated,
cannot be accepted. On the other hand there is the version that the funds
belonged to the joint family of which Nagappa was the Manager and that Nagappa
paid the consideration. No documentary evidence in support of either version is
forthcoming :
208 even Nagappa's accounts have not been
produced. But if the moneys were actually paid by Nagappa and the story about
Seshamma having provided the amount be disbelieved, it would be a legitimate
inference consistent with probability that Nagappa had for purchasing the
property provided the funds out of the joint family earnings. It appears that
Kumaji Sare Mal who are the respondents in Appeal No. 642 of 1961 had in the
suit filed by them in 1942 obtained an order for attachment before judgment
over the immovable property of the joint family in the hands of Nagappa. This
attachment before judgment was outstanding at the date of the saledeed Ext.
A-230. This order for attachment before judgment was vacated when the suit was
dismissed by the Trial Court on August 31, 1944. This circumstance in the
context of the other evidence strongly supports the contention of the Union
that with a view to protect the properties from his creditors Nagappa thought
of purchasing the properties in the names of his sons the plaintiffs and the
consideration was advanced by him. The High Court was therefore right in
holding that the properties items 46 to 51 were of the joint family and liable
to be attached and sold in enforcement of the liability for payment of
income-tax. Civil Appeal No. 641 of 1961 must therefore fail.
We may now deal with the questions which fall
to be determined in Civil Appeal No. 642 of 1961-one of the questions being
common in Appeals Nos. 641 and 642 of 1961.
Suit No. 7 of 1944 was filed by the firm
Kumaji Sare Mal for damages for breach of Contract. That suit was decreed by
the High Court on March 5, 1947. Within nine days thereafter the deed of
partition came into existence. The plaintiffs contended that the debts due by
Nagappa to Kurmaji Sare Mal being immoral or avyavharika their share in the
properties was not liable to be sold. In any event, they contended, 200 the
shares allotted to them under the deed of partition were not liable to be attached
and sold in execution proceeding in enforcement of the decree against their
father Nagappa, and the remedy of the creditor even if the debts were not
avyavharika was to file a suit to enforce the pious obligation of the
plaintiffs and not in execution of the decree obtained against Nagappa alone.
The creditors contended that the deed of partition was a sham transaction and
therefore they were entitled to proceed in execution.
Alternatively, it was contended that even if
the deed of partition did not evidence a sham transaction, it was open to them
as holders of a decree obtained before the partition to enforce the pious
obligation of the plaintiffs to discharge the debts of their father in
execution of the decree, and it was not necessary for them to file a separate
suit. On the question as to the proper procedure for enforcement of the
liability of a Hindu son to discharge the debts of his father which are not
avyavharika, where since the passing of the decree on the debt against the
father there has been a partition between the father and son, there has arisen
difference of opinion. The Madras High Court in Schwebo K.S.R.M..Firm v.
Subbiah (1), held that the son's share in the property cannot be proceeded
against in execution, as the division of status brought about by the partition
will stand, notwithstanding the avoidance of the partition as a fraudulent
transfer. This was reaffirmed in a Full Bench judgment of the Madras High Court
in Katragadda China Ramayya v. Chiruvella Venkunraju (2), where the Court held:"
A son under the Hindu law is undoubtedly liable for the pre-partition debts of
the father which are not immoral or illegal. If a decree, however, is obtained
against the father alone and there is a partition of the family proper' ties,
in execution of such a decree, the son's share cannot be seized by the creditor
as by (1) I.L.R, (1945) Mad. 138.
(2) A.I.R. (1954) Mad. 864.
210 reason of the partition the disposing
power of the father possessed by him over the son's share under the pious obligation
of the son to discharge the father's debts can no longer be exercised. With the
partition, the power comes to an end. The liability thereafter can be enforced
only in a suit. After partition, the son's share can no longer be treated as
property over which the father had a disposing power within the meaning of S.
60 Civil P.C." On the other hand the Bombay High Court has held in
Ganpatrao Vishwnathappa v. Bhimrao Sahibrao that a decree obtained against the
Hindu father may after partition be executed against the son's interest by
impleading the son as a party to the executing proceeding against the father.
There is no clear expression of opinion by
this Court on this question, though in S.M. Jakati v. S.M. Borkar (2), this
Court has held that the liability of a Hindu son to discharge the debts of his
father which are not tainted with immorality or illegality is founded in the
pious obligation of the son which continues to exist in the life time and even
after the death of the father and which does not come to an end as a result of
partition of the joint family property: all that results from partition is that
the right of the father to make an alienation comes to an end. In that case the
property of the family was sold in execution of a money decree against the
father and the sons sued to set aside the sale in so far as is affected their
interest in the property and for a decree for possession of their share. The
Court held that it was not proved that the liability which was incurred by the
father was illegal or immoral and the sale of the joint family property
including the share of the sons for satisfying the debts was valid
notwithstanding the severance of the joint family status effected before the
sale was held through Court. We do not think it necessary to express our
opinion on the question whether the (1) I.L.R. (1950) Bom. 414.
(2) (1959) S.C.R. 1384, 211 remedy of the
creditor is to file a separate suit to enforce the pious obligation of a Hindu
son to discharge the debts of his father, where since the decree against the
father on a debt there has been a severance of the joint family status, or
whether he can proceed to execute the decree against the son's interest in the
property, after impleading him as a party to the execution proceeding, for we
are definitely of the that partition was a sham transaction which was not
intended to be operative.
On March 14, 1947 the deed of partition was
executed and registered. The object of this partition it is alleged was to
protect the interest of his minor sons against their father who was acting to
the detriment of his sons and was not even living with the family. The High
Court relied upon a large number of circumstances in support of its view that
the partition was nominal. The deed was executed within a week after the decree
was passed by the High Court in Kumaji Sare Mal's suit. Nagappa had acquired an
extensive property which was on acquisition treated as joint family property
and there was nothing to show that Nagappa was ill-disposed towards his sons or
was actuated by any desire to harm their interest. The real purpose of the
partition was to save as much property as possible and to preserve it for his
children. The deed of partition showed apparently an equal distribution of
property valued at Rs. 1,24,600/into four shares each of the value of Rs.
31,150/but the properties allotted to the share of Nagappa were in reality not
worth that amount. Nagappa had also to discharge a debt for Rs.
12,236/4/9 -for which he was rendered liable
under the deed and that debt could not be satisfied out of the property
allotted to him. Again immediately after the deed of partition, Nagappa settled
upon his wife Narayanamma a major fraction of that share and sold away one of
the houses. The intention 212 of Nagappa to make it appear to the Income-tax
Department that no useful purpose would be served by taking coercive steps as
the property -allotted to him and remaining after disposal of a good part of it
as indicated above was wholly insufficient to meet the demands of the
Department, is indeed clear. It was Nagappa who had instigated and prosecuted
the suits. Narayanamma was an illiterate and ignorant woman, who knew nothing
about Nagappa's transactions, and dealings. She did not even know what property
had fallen to the share of her sons. Admissions made by her disclose that she
did not manage the property though apparently she was treated as the guardian
of her sons in the partition deed. The story that Nagappa was living with a
mistress, and was not looking after the education and welfare of his minor sons
does not appear to be supported by any reliable evidence. The eldest son was at
the date of the alleged partition 14 years of age, and the youngest was three
years old, and in the absence of any serious cause for differences between
Nagappa and Narayanamma, partition of the estate could not have been thought
of. Witness Singari Seshanna D.W.I. has deposed that Nagappa, his wife and
children were living together in the family house even at the date of the suit
and that Nagappa was collecting rents from all the houses. This statement does
not appear to have been challenged in cross-examination. P.W. 5 Venkatsami the
clerk of Narayanamma, who claimed to be looking after management of the
properties on behalf of Narayanamma, admitted that he could not say which of
the houses were leased and to whom; he was unable', to give any particulars
with regard to some of the houses. This ignorance on the part of the alleged
manager lends support to the testimony of Singari Seshanna D.W. 1 that it was
Nagappa who remained in management of the property, and that the family lived
together and in fact there was no disruption of the joint family. It is true
that many documents were produced to show that 213 the properties were entered
in the names of the sons after the deed of partition. It also appears that
taxes were paid separately in respect of the houses to the local Municipality
and receipts were issued in the names of persons in whose names they stood in
the municipal records.
But these receipts do not show the names of
the persons by whom the amounts acknowledged in the receipts were paid.
The High Court has believed the evidence of
Singari Seshanna D.W. I that it was Nagappa who continued to remain in
management. It is true that the plaintiffs have led evidence of two witnesses
P.W.6 and P.W. 7 who have deposed that they had assisted in making the
partition. The deed of partition was undoubtedly executed and was registered,
but the mere execution of the deed is not decisive of the question whether it
was intended to be effective. The circumstances disclosed by the evidence
clearly show that there was no reason for arriving at a partition. Counsel for
the plaintiffs practically conceded that fact, and submitted that Nagappa's
desire to defeat his creditors, and to save the Property for his sons, was the
real cause for bringing the deed of partition into existence. Counsel claimed
however that Nagappa had adopted the expedient of affecting a partition with
the object of putting the property out of the reach of his creditors, and the
genuineness of that partition should not be permitted to be blurred by the
unmeritorious object of Nagappa. But the continued management of the property
by Nagappa since the partition, and the interest shown by him in prosecuting
the suits do clearly support the inference that the deed of partition was a
nominal transaction which was never intended to be acted upon and was not given
effect to. If it be held that the partition was a sham transaction the
plaintiffs' suit or setting aside the summary order passed in execution
proceeding on the application filed by the plaintiffs for setting aside the
attachment must fail, 214 The Appeal No. 642 of 1961 must therefore also fail.
Both the appeals are therefore dismissed with
costs.
Appeals dismissed.
Back
