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PETITIONER: SATYANARAYANA MODI

       Vs.

RESPONDENT: THE  CONTROLLER  OF ESTATE DUTY,   DELHI  AND  RAJASTHAN,NEW

DATE OF JUDGMENT: 31/07/1969

BENCH: SHAH, J.C. (CJ) BENCH: SHAH, J.C. (CJ) RAMASWAMI, V. GROVER, A.N.

CITATION:  1970 AIR  322            1970 SCR  (1) 712  1969 SCC  (2) 380

ACT:      Estate Duty Act 34 of 1953---Section 10--Gift of  fixed deposit  receipts --Donor retaining  important  benefits--If donee  can  be   said   to   assume  immediately  bona  fide possession and enjoyment within meaning of s. 10.

HEADNOTE:      P  held, on April 1, 1953, three deposit receipts  with the  State  Bank of Bikaner.  At her instance  the  receipts were renewed in the joint names of herself and S (son of her adopted  son) payable to either or survivor.  On  August˜16, 1953 P executed a deed of gift in favour of S in respect  of the three receipts.  The gift deed contained a  confirmation by  S’s.  father that he had accepted the gift  for  and  on behalf  of and as the natural guardian of S "to  the  effect that  the  said  S shall be the absolute owner  of  the  sum gifted".  P addressed a letter to the Bank enclosing a  copy of the declaration of gift and intimated the Bank that S was the  sole  owner of the amount of the receipts  and  till  S attained  the age of majority the receipts should remain  in the joint names.  From time to time P presented the receipts for renewal when they matured and obtained fresh receipts in the  joint names of herself and S.  On August 25, 1955,  the third receipt was encashed and out of the amount realised  a part  was  invested  in the name of S  in  National  Savings Certificates and the balance was deposited’ in the name of S alone  with a firm.  The other two receipts were renewed  in the  joint  names  of  P and S.  After the  death  of  P  on February 15, 1956, the two receipts were encashed by S.     The  Assistant  Controller  of  Estate  Duty  held  that possession  and  enjoyment of the gifted  property  was  not assumed,  by the donee to the entire exclusion of the  donor and on that account under section 10 of the Estate Duty Act, 1953,  the amount of the two receipts and  interest  thereon formed  part  of the estate of P and was  liable  to  estate duty.   Regarding the  third receipt it was held  that  even though  the  earlier receipt was discharged  on  August  25. 1955,  i.e. within 2 years of the death of P and the  amount was  invested in the name of S. by virtue of the  provisions of  the Act the amount held in the name of S alone  was  for

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assessment  of  Estate  Duty liable to be  included  in  the estate  of  P.  The Central Board of Revenue  and  the  High Court confirmed this order.     In  appeal  to this Court it was contended  that  P  did everything   possible  10    divest    herself    of     her interest    in   the   money   held by her in  deposit  with the  Bank  and  retained no interest  therein  and  that  in obtaining  renewal  of the receipts in the  joint  names  of herself  and of S,P was merely a benamidar and in any  event was acting on behalf of S.    HELD: Dismissing the appeal,    (i)  The question whether the amount of deposit  receipts was  liable  to estate duty must be determined on  the  true effect  of s. 10 of the Estate Duty Act, 1953.  The  section clearly means that if in respect of any 713 property which is gifted, bona fide possession and enjoyment is  not immediately assumed by the donee  and  thenceforward retained by him to the entire exclusion of the donor of  any benefit  to  him therein the property gifted  shall  not  be excluded from the estate  subject  to  estate duty. [718 B]     In  the  present case P retained important  benefits  in herself  in the fixed deposit receipts.  There was  also  no evidence that in obtaining the receipts in the joint names P acted as a guardian of S nor that she was a benamidar of  S. [718 F]     (ii)  Though the third receipt was encashed  during  the life  time of P, and the amount was invested in the name  of S  .alone, the encashment and reinvestment were  within  two years  of the death of P and the amounts so reinvested  were liable to be included in the estate of P. [718 G]

JUDGMENT:     CIVIL  APPELLATE JURISDICTION:  Civil Appeal No. 438  of 1967.     ’Appeal from the judgment and order dated April 11, 1966 of the Rajasthan High Court in D.B. Civil Reference  (Estate Duty Act) No. 16 of 1963.     M.C. Chagla, B.D. Sharma and M.. D. Bhargava,  for   the appellant.     Jagdish Swarup, Solicitor-General,  T.A.   Ramachandran, R.N. Sachthey and B.D. Sharma, for the respondent.     The Judgment of the Court was delivered by     Shah, Ag. C.J.  Purnabai widow of Sagarmal Mody held  on April  1, 1953 three deposit receipts of the aggregate  face value  of Rs. 6,26,724-14-0 with the State Bank of  Bikaner. By her letter dated July 22, 1952 Purnabai informed the Bank that  she intended to make a gift of the amounts of two  out of  the three receipts to Suryakant son of her  adopted  son Satyanarayana,  and requested that the receipts  be  renewed for  three months  in the joint names of    "Purnabai   Sagarmal   Mody   and/or   Surya   Kant    S. Mody--payable to either or survivor." and  that  the  renewed fixed deposit receipts  be  sent  to Satyanarayana  at Bombay. Pursuant to this letter two  fresh receipts were issued on August 3, 1953 for Rs. 5,00,000  and Rs.  45,793/4/-.  It  ’appears  that  a  receipt   for   Rs. 80,931 / 10/- was  previously obtained in the joint names of Purnabai and Suryakant on July 4, 1953. 714      On August 16, 1953 Puranabai executed a deed of gift in favour  of  Suryakant  in  respect  of  the  three  receipts containing the following recitals:

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                  "Out of natural love and affection I have               towards    the   said   Suryakant    son    of               Satyanarayana   I  hand  over  to   the   said               Satyanarayana   as  the  father  and   natural               guardian  of the said Suryakant Fixed  Deposit               Receipts total for Rs. 6,26,724/14/- .   .....               F.D.R.N.  222/  8293  dated  3-8-53  for   Rs.               45,793/4/-,  F.D.R.N. 221/ 8292  dated  3-8-53               for  Rs.  5,00,000/- of the  Bank  of  Bikaner               Ltd., Jaipur  and F.D.R. No. 11446  dated 4-7-               53  for  Rs. 80,931/10/- of  Bank  of  Bikaner               Ltd.,  Jhunjhunu  in  the  name  of   Purnabai               Sagarmal   and  Suryakant  Satyanarayana  Mody               payable to either or survivor as and by way of               gift to the said Suryakant on the 15th day  of               August  1953 and that the  said  Satyanarayana               for  and  on  behalf of and  as  the.  natural               guardian  of the said Suryakant  accepted  the               said  gift of Rs. 6,26,724/-  .  .....  gifted               by  me  as aforesaid."     The gift deed contained a confirmation by  Satyanarayana that  he had accepted the gift for and on behalf of  and  as natural guardian of Suryakant "to the intent and effect that the  said Suryakant shall be the absolute owner of  the  sum gifted." On  August  17, 1953 Purnabai  addressed a   letter  to  the Manager  of the Bank enclosing a copy of the declaration  of gift and intimated that her grand-son Suryakant was the sole owner  of the amount of the two fixed deposit  receipts  and till  Suryakant  S. Mody attained the age  of  majority  the receipts  should  remain  in the joint names  as  they  then stood.   From  time  to time Purnabai presented  the  receipts  for renewal when they matured and obtained fresh receipts in the joint  names of herself ,and Suryakant.  On August, 25  1955 the  receipt for Rs. S0,931/10/-  was  encashed and out’  of the   amount   of Rs. 86,732/- realized,  Rs.  5,000/-  were invested  in  the  name of  Suryakant  in  National  Savings Certificates.  The balance  was also deposited alone with  a firm  in Bombay also. in the name of Suryakant  alone.   The other  two  receipts  were renewed in  the  joint  names  of Purnabai and Suryakant. After  the death of Purnabai on February 15, 1956,  the  two receipts   were  encashed  by  Suryakant.    The   Assistant Controller  of Estates duty in procedings for assessment  of estate duty held inter alia that possession and enjoyment of the  gifted  property was not assumed by the  donee  to  the entire exclusion of  the 715 donor,  and on that account the amount of the  two  receipts and  interest thereon formed part of the estate of  Purnabai and  was,  liable  to estate duty.   Regarding   the   third receipt  for   Rs.  80,931/10/-  the  Assistant   Controller observed that even though the earlier receipt was discharged on  August  25, 1955 i.e. within two years of the  death  of Purnabai  and  the  amount  was  invested  in  the  name  of Suryakant,  by virtue of the provisions of the  Estate  Duty Act the amount held in the name of Suryakant alone, was  for assessment  of  estate duty liable. to be  included  in  the estate. of Purnabai.     In  appeal  the Central Board of Revenue  confirmed  the order. The Board held that at all material times during  the currency  of  the fixed deposit Purnabai had  the  right  to receive the money from the Bank by giving discharge for  the same  and that whenever the Fixed Deposit  Receipts  matured

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during the lifetime of Purnabai, the receipts were, in fact, discharged  by her alone and in the circumstances  it  could not  be said  that the property was  held’ by the  donee  to the entire exclusion of the donor.     The  Board of Revenue referred the   following  question the High Court of Rajasthan for opinion:                   "Whether   on  the  ’facts  and   in   the               circumstances  of  the  case the  sum  of  Rs.               6,85,193/-  was  correctly  included  in   the               estate  of the deceased as property deemed  to               pass  on  her death under section  10  of  the               Estate Duty Act, 1953 ?" The  High  Court of Rajasthan answered the question  in  the affirmative.   With  certificate granted by the  High  Court this appeal has been preferred.     The  deposit  receipts were renewed from  time  to  time after  August  16, 1953 in the joint names of  Purnabai  and Suryakant  till  August  25,  1955  under  their  terms  the receipts could be encashed by either or the survivor.   Even after Purnabai made a gift of the amount represented by  the three receipts, she continued to obtain the receipts in  the joint names, presumably with the object of not parting  with control over those receipts.     Counsel  for  the appellant however contended  that  the fixed deposit receipts were held by Purnabai in her name  as benamidar  for  Suryakant.  Counsel placed  strong  reliance upon  the letters dated July 22, 1953, August 17,  1953  and the terms of the deed of gift dated August 16, 1953.  By the letter  dated  July 22, 1953  the Manager of  the  Bank  was informed  that in respect of two out of the  three  receipts Purnabai intended to make a gift and the .- 716 Manager  was  requested  that the receipts be  made  in  the joint  .names of Purnabai and Suryakant.  It  was  expressly recited  in the letter:                       "I intend to gift the entire amount of               the receipts to my grandson Mr.  Suryakant  S.               Mody   hence you are requested to prepare  the               receipts in joint names as under:                       "Purnabai   Sagarmall   Mody    and/or               Suryakant   S.  Mody  payable  to  either   or               survivor." The deed of gift also recites that Purnabai had made a  gift of  the  amount  of Rs.  6,26,724/14/-  represented  by  the previous receipts in favour of Suryakant, and that the  gift was  accepted by Satyanarayana on behalf of Suryakant.   The letter   dated  August 17, 1953 recites that a copy  of  the deed of declaration of gift. was sent to the Bank for record and information and proceeds to state:                       "Further  I would like to  state  that               now Suryakant S. Mody is the sole owner of the               above Fixed Deposit Receipts in question  till               Suryakant   S.   Mody  attains  majority   the               receipts  should remain in joint names  as  it               stands now."     is  clear  that Purnabai desired to make a gift  of  the amount represented by the previous deposit receipts and  did in  fact  execute a deed of gift.  The  Bank had  notice  of the  gift  deed.  Counsel for the  appellant  contends  that Purnabai  did everything possible to divest herself  of  her interest in the money held by her, in deposit with the Bank, and  retained  no  interest therein and  that  in  obtaining renewal of the receipts in the joint names of herself and of Suryakant, she was merely a benamidar ’and in any event  was acting  on behalf of Suryakant.  Counsel  further   contends

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that  the  Bank  having notice of the gift  could  not  have parted  with  the money except only for the benefit  of  the minor  and by obtaining renewal of the receipt in favour  of the  minor  Suryakant and Purnabai, the latter  retained  no possession  or  enjoyment of the money  represented  by  the receipts.   Counsel invited our attention to a decision   of the Madras High Court in  Imperial Bank of India, Madras  v. S.  Krishnamurthi  and another(1) in   which  Beasely,  C.J. speaking  for  the Court observed that when  a  Bank  having notice  that  the  administrators  of  the  estate  of   the depositor intended to commit a breach of trust by seeking to invest  monies  contrary to express directions of  the  will paid out the money, the Bank was liable to make good to  the beneficiary (1) A.I.R. 1933 Madras, 628. 717   the  money  deposited by the testator.  In that  case  one Naidu had deposited a sum of money with the Imperial Bank of India  in fixed deposits.  Naidu died having  bequeathed  by his will the amount deposited to Iris son Krishnamurthi  who was  then  a  minor.  Naidu had appointed by his   will  two persons to  be guardians of Krishnamurthi with authority  to receive  the amount in fixed deposit with the Imperial  Bank and to apply the same for the maintenance and  education  of Krishnamurthi.   The guardians obtained from the High  Court of  Madras grant of letters of administration with  copy  of the  will annexed.  After the death of one of the  guardians the  surviving guardian withdrew the money from the Bank  on the pretext that he wanted to invest it on more advantageous terms  in house property or some other form of in   vestment and  misappropriated it.  On attaining the age  of  majority Krishnamurthi sued the Bank.  It was held by the High  Court that  the Bank knowing of the trust created by the will  had parted  with  and  delivered the  amount  deposited  to  the administrator who intended to commit a breach of the  trust. The  learned Chief Justice quoted a passage from Hart’s  Law of  Banking (Edn. 3)  at p. 159 that "A banker who  receives into  his  possession moneys of which his  customer  to  his knowledge  became  the  owner  in  a  fiduciary   character, contracts  the duty and to part with them at the mandate  of his  customer for purposes which are inconsistent  with  the customer’s  fiduciary  character and duty," and  upheld  the claim of Krishnamurthi.       It is unnecessary to consider whether. in the  present case  the  investment was made by renewal of  fixed  deposit receipts after August 16, 1953 for a purpose which the  Bank knew  was inconsistent with Purnabai’s  fiduciary  character and  duty.    We are not concerned in this  case  to  decide whether the Bank could have refused to pay the amount of the renewed  deposit receipts if demanded by Purnabai.   Whether the  amount  of deposit receipts was liable to  estate  duty must be determined on the true effect of s. 10 of the Estate Duty Act 34 of 1953.  Section 10 of that Act provides:                        "Property  taken  under  any    gift,               whenever made, shall be deemed to pass on  the               donor’s  death to  the extent that  bona  fide               possession  and   enjoyment  of  it  was   not               immediately   assumed   by   the   donee   and               thenceforward retained to the entire exclusion               of  the  donor  or of any benefit  to  him  by               contract  or   otherwise:  Provided  that  the               property   shall  not be  deemed  to  pass  by               reason only_ that it was not, as from the date               of   the   gift,   exclusively   retained   as               aforesaid, if by means of the surrender of the

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             reserved   benefit   or   otherwise,   it   is               subsequently  enjoyed to the entire  exclusion               of the 718               donor  or of any benefit to him for  at  least               two    years           before    the    death.               Provided  ........  " The  phraseology of the section is somewhat  involved.   The purport  of  the  section is  however  clear.   The  section clearly means that  if in respect  of any property which  is gifted,    bona   fide  possession  and  enjoyment  is   not immediately  assumed by the donee and thenceforward retained by  him  to  the entire exclusion of the  donor  or  of  any benefit  to  him therein the property gifted  shall  not  be excluded from the estate subject to estate duty.     The  question  which  must be  determined  therefore  is whether  in the present case the donee Suryakant  did  under the  deed  of gift immediately assume bona  fide  possession and  enjoyment of the fixed deposit receipts gifted to  him, and thenceforward  retained the same to the entire exclusion of Purnabai or of any benefit arising to her by contract  or otherwise.   The conduct of Purnabai clearly indicates  that she had no intention to part with control over the property; the  deposit  receipts  were obtained in  joint  names,  and Purnabai had authority to withdraw the amount from the Bank, without  consulting the guardian of Suryakant.  The  deposit receipts  were renewed on several occasions even  after  the execution  of  the  deed  of gift in  the  joint.  names  of Purnabai and Suryakant.  Purnabai alone presented the  fixed deposit recepits for renewal.  She could under the terms  of the  receipts receive the moneys to the entire exclusion  of Suryakant.   We  are unable to hold, in  the  circumstances, that  bona  fide  possession and enjoyment of  the  property gifted   was   immediately   assumed   by   Suryakant    and thenceforward  retained by  him to the entire  exclusion  of Purnabai.    The  right  retained by Purnabai  to  have  the receipts made out in her name jointly with Suryakant and the power  to  recover  the amount from  the  Bank  without  the concurrence  of Suryakant clearly indicate that she was  not excluded, but she had retained important benefits in herself in the fixed deposit receipts.     It  is true that the third receipt was  encashed  during the  life time of Purnabai, and the amount was  invested  in the  name  of  Suryakant  alone.   But  the  encashment  and reinvestment were within two years of the death of  Purnabai and the amounts so reinvested were liable to be included  in the estate of Purnabai.     The  argument that fixed deposit receipts  had  remained exclusively in the possession of Satyanarayana as   guardian of Suryakant and they were obtained by him from Purnabai for the  purpose  of renewal is not supported by  any  evidence. There is 719 also no evidence that in obtaining the receipts in the joint names Purnabai acted as a guardian of Suryakant nor that she was a benamidar of Suryakant.  We are of the view that   the High  Court was right in answering the question against  the appellant. The appeal fails and is dismissed with costs. R.K.P.S.                                   Appeal dismissed. Sup C I/69 --2 720