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PETITIONER: ASSISTANT CONTROLLER OF ESTATE DUTY & ORS.

       Vs.

RESPONDENT: PRAYAG DASS AGARWAL

DATE OF JUDGMENT23/04/1981

BENCH: VENKATARAMIAH, E.S. (J) BENCH: VENKATARAMIAH, E.S. (J) PATHAK, R.S.

CITATION:  1981 AIR 1263            1981 SCR  (3) 576  1981 SCALE  (1)786

ACT:      Estate Duty  Act,  1953-Section  52,  scope  of-Whether under section  52 of  the Estate Duty Act, 1953, the Central Government is  bound to  accept in satisfaction of the whole or any  part of the duty payable under the Act at such price as may be agreed upon between the Central Government and the person accountable  for estate  duty any property passing on the death  of the  deceased when  an application is made for that purpose by such person.

HEADNOTE:      On  the  death  of  his  father  which  took  place  on September 29,  1964 the  respondent  filed  a  statement  of account under  the Estate  Duty Act of the estate passing on the death  of the  deceased.  The  estate  duty  payable  in respect of  the estate  in question  was determined  at  Rs. 3,37,543.40 by  the Assistant  Controller  of  Estate  Duty, Allahabad, by  his order  dated November  30, 1970. When the appeal filed  against the  said order was still pending, the respondent made  an application  under section  52(1) of the Act on  February 16,  1971 to  the Central  Board of  Direct Taxes offering  one of  the items of property passing on the death of  the deceased,  namely, premises  No. 1,  Phaphamau Road, Allahabad,  whose principal  value had been determined at Rs.  2,53,625 in  part payment  of the  balance of estate duty which  was still  payable by  him under  the  order  of assessment. The  said offer  was not accepted by the Central Board of  Direct Taxes but the appellant herein wrote to the respondent stating that the respondent could pay the arrears of estate  duty payable by him in monthly instalments of Rs. 10,000 each  beginning from  October  29,  1971  subject  to payment  of   interest  @   9%  per  annum  on  the  arrears outstanding. Thereupon  the respondent filed a writ petition before the High Court of Allahabad requesting the High Court to issue  a writ  in the  nature of mandamus to the Union of India to  consider the application made by him under section 52(1) on  its merits,  to negotiate  and settle the price of the property  offered by  him in  settlement of part of duty payable by him and to give credit to the extent of the price so determined under the Act. The High Court held that if the accountable person  exercised the  option to  pay the estate duty by  transferring property, the Central Government could

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not refuse  to accept  the offer  and insist upon payment by another mode  when  there  was  agreement  about  the  price between it  and the  accountable  person.  The  High  Court, however, held  that it  was  not  necessary  to  decide  the question whether  it was  open to  the Central Government to refuse the  offer of  property on  a ground  other than  the price as  the impugned order had not disclosed any reason at all for  rejecting the  offer. Accordingly,  the High  Court directed  the  respondents  before  it  to  dispose  of  the application afresh  in accordance with law. Hence the appeal after obtaining special leave of the Court.      Affirming the High Court directions, the Court 577 ^      HELD :1:1.  What section  52(1) of  the Estate Duty Act does is  to set forth one more mode in which estate duty may be recovered.  It is  a provision  made  specially  for  the recovery of  estate  duty.  It  enables  the  Government  to recover the  duty in  accordance with  that mode.  The other statutory modes prescribed under section 51 and specified in the Rules  are  those  where  recourse  by  the  accountable obliges the  Revenue to  accept the  payment made  in any of those modes  and to  treat it,  by compulsion of statute, as satisfaction of  the  dues.  The  peculiarity  of  the  mode provided under section 52(1) is that while recourse to it by the  accountable   person  does   not  automatically   imply satisfaction of  the dues,  there is  the duty  cast on  the Revenue to  consider  the  application  by  the  accountable person offering an item of property as a mode for satisfying the dues.  The Government  must consider  the application on its merits  and in  the  exercise  of  sound  administrative judgment. [587 F-H, 588 A]      1:2. Ordinarily  in every  contract for the purchase of property there are two stages. (i) In the first stage, there is complete  freedom to  the parties  to decide  whether one should enter  into negotiations with the other at all and in that regard  the law  takes no  account of the reason of any party for  not choosing  to entertain  the proposal for sale made by the other however arbitrary, illogical or irrelevant the reason  may  be.  (ii)  The  second  stage  follows  the entertaining of  the proposal  and the  actual  negotiations between the  parties which  may or  may not  fructify  in  a contract. Section  52(1) is  concerned with the first stage, and differs  in this  from the complete freedom to entertain the proposal  in that  the proposal made under section 52(1) by the  accountable person must be considered by the Central Government and  any decision  taken by  it on  that question must  proceed  on  considerations  which  are  relevant  and bonafide. The  price of the property is, however, left to be determined by  agreement in  the  event  of  the  Government deciding to accept the offer made by the accountable person. This forms part of the second stage. [588 A-D]      1:3.  The   Estate  Duty   Act  is   a  fiscal  statute principally intended  to levy  and collect estate duty which when collected  has to  be disbursed in accordance with Part XII of  the Constitution.  It is  not a  law  providing  for acquisition of  a property forming part of the estate of the deceased. Section  52  is  in  the  nature  of  an  enabling provision which  authorises the Central Government to accept a property  in lieu  of estate  duty payable  subject to the conditions mentioned  in it.  It is  true that even enabling words in  a statute  which confer  a discretionary power may have to  be interpreted  as compulsory  where they amount to words clearly  intended to  effectuate a  legal  right.  But ordinarily such words are permissive only. [585 F, 586 C-D]

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    In the instant case, the very fact that there is a need for an  agreement upon the price of the property between the Central Government  and the  accountable  person  makes  the power of  the Central  Government under section 52(1) of the Act discretionary and permissive. Any other meaning may lead to impractical and incongruous result. [586 D-E]      1:4. On  a plain  construction of section 52 of the Act the Central  Government may  at its discretion either accept the property  offered under  section 52  or may  not if  the circumstances so  warrant.  The  accountable  person  cannot claim 578 that  the   Central  Government  is  bound  to  accept  such property. The  power of the Central Government under section 52 is  purely administrative  and discretionary.  Therefore, the said  power should  be exercised  subject  to  the  same limitations  which   govern  all   such  administrative  and discretionary  powers.   The  Central   Government  or   the authority which  is competent  to  take  a  decision  should exercise its  discretion  bonafide  and  in  good  faith  by addressing itself  to the  matter before  it and  should not allow itself  to be  influenced by extraneous and irrelevant considerations. The question should not be disposed of in an arbitrary or  capricious way.  In this  case, the  Court can only ask  the authority concerned to exercise the discretion vested in  it but  it cannot  be asked  to exercise  it in a particular way. [587 A-B, D-F]      Chella Rama  Bhupal Reddy  v. Central  Board of  Direct Taxes and  Anr.,  [1977]  108  I.T.R.  695  Andhra  Pradesh, approved.      2. In  the instant  case, the  High Court  was right in holding that  it had  not  been  shown  that  the  competent authority had  properly exercised  its discretion. The Board proceeded  on   the  assumption   that  its  discretion  was unfettered even by considerations relevant to administrative law and  did not probe into the question of the availability of liquid  cash in  the hands  of the  respondent to pay tee estate duty  and the  averment of  the respondent  that  the entire liquid cash had been invested in business. [588 E, H, 589 A]

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil Appeal No. 1843 of 1974.      Appeal by  special leave  from the  judgment and  order dated the 6th September, 1972 of the Allahabad High Court in Civil Misc. Writ No. 27 of 1972.      S.C. Manchanda,  Champat Rai and Miss A. Subhashini for the Appellants.      Pramod Swarup for the Respondent.      The Judgment of the Court was delivered by      VENKATARAMIAH,  J.   The  question   which  arises  for consideration in  this appeal  by special  leave is  whether under section  52 of  the Estate Duty Act, 1953 (hereinafter referred to  as the  Act) the Central Government is bound to accept in  satisfaction of the whole or any part of the duty payable under  the Act  at such  price as may be agreed upon between the  Central Government  and the  person accountable for estate  duty any  property passing  on the  death of the deceased when  an application  is made  for that  purpose by such person.      On the  death of  Lala Beni  Madho Agarwal  which  took place on September 29, 1964 his son Prayag Dass Agarwal, the

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respondent 579 herein filed  a statement  of account  under the  Act of the estate passing on the death of the deceased. The estate duty payable in  respect of the estate in question was determined at Rs.  3,37,543.40 by  the Assistant  Controller of  Estate Duty, Allahabad  by his  order dated November 30, 1970. When the appeal  filed against  the said order was still pending, the respondent  made an  application under  section 52(1) of the Act  on February 15, 1971 to the Central Board of Direct Taxes offering  one of  the items of property passing on the death of  the deceased,  namely premises  No.  1,  Phaphamau Road, Allahabad,  whose principal  value had been determined by the  Assistant Controller at Rs. 2,53,655 in part payment of the balance of estate duty which was still payable by him under the order of assessment. The said application elicited a cryptic  reply dated  September 16,  1971 from  the  Under Secretary of the Central Board of Direct Taxes, the relevant part of which read as follows:-           "I am  directed to  refer to  your petition  dated      16.2.1971 on  the subject  mentioned above  and to  say      that your offer is not acceptable."      The  Assistant   Controller,  however,   wrote  to  the respondent on  October 21,1971  stating that  the respondent could pay  the arrears  of estate  duty payable  by  him  in monthly  instalments  of  Rs.  10,000  each  beginning  from October 29,  1971 subject  to payment  of interest  @ 9% per annum on  the arrears  outstanding. Thereupon the respondent filed a  writ petition  before the  High Court  of Allahabad under Article  226 of the Constitution against the Assistant Controller, the  Central Board of Direct Taxes and the Union of India  requesting the  High Court  to issue a writ in the nature of  mandamus to  the Union  of India  to consider the application made  by him  under section 52(1) on its merits, to negotiate and settle the price of the property offered by him in settlement of part of duty payable by him and to give credit to  the extent  of the  price so determined under the Act. The  respondent contended inter alia that section 52 of the Act  conferred a  right on  an accountable person, if he chose to  do so, to offer an item of property passing on the death of  the deceased  in respect of whose estate, duty was payable under  the Act  in discharge of the whole or part of such duty and that it imposed a reciprocal obligation on the Central Government  to accept  such property  and adjust its price as  may be  agreed upon between the Central Government and the  accountable person  towards the  duty  payable.  He further contended  that the  Central Government had no right to refuse  to accept  the offer  so made  by the accountable person and that he 580 having made  the offer  to pay  the duty  by transfer of the property in  question he  could not  be compelled to pay the duty to  the extent  of its  price. He, therefore prayed for the issue of appropriate direction to the Central Government to comply with section 52 of the Act accordingly.      On behalf  of the  Union Government  it was  inter alia urged that  it was  not bound  to accept an offer made under section  52(1)  of  any  property  and  it  was  within  the discretion of the Union Government to reject the offer.      The High  Court held  that if  the  accountable  person exercised the  option to pay the estate duty by transferring property, the  Central Government could not refuse to accept the offer and insist upon payment by another mode when there was agreement about the price between it and the accountable person. It,  however, held  that it  was  not  necessary  to

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decide the  question whether  it was  open  to  the  Central Government to refuse the offer of property on a ground other than the  price as  the impugned order had not disclosed any reason at  all for rejecting the offer. Accordingly the High Court directed the Union Government and the Central Board of Direct Taxes to dispose of the application of the petitioner afresh in  accordance with law. This appeal is filed against the said decision of the High Court under Article 136 of the Constitution.      Section 5(1)  of the  Act provides  that in the case of every person  dying after  the commencement of the Act there shall, save  as expressly provided in the Act, be levied and paid  upon  the  principal  value  ascertained  as  per  the relevant provisions  of the  Act of all property, settled or not settled,  including agricultural  land  situate  in  the territories which  immediately before  November 1, 1956 were comprised in  the States  in the  First Schedule  to the Act which passes  on the  death of  such person,  a duty  called ’estate duty’  at the rates fixed in accordance with section 35 of  the Act.  The rates of estate duty are set out in the Second Schedule  to the  Act. The  principal  value  of  the property liable  for estate  duty has  to be  ascertained in accordance with  the provisions  in Part  V of  the Act. The estate duty  levied under  the Act  can be  collected as per provisions in  Part VII  of the  Act. Section  51 of the Act states that  estate duty  may be collected by such means and in such  manner as  the Central  Board of  Direct Taxes  may prescribe. Rule  18 of  the Estate  Duty Rules  (hereinafter referred to  as ’the  Rules’) made  by the  Central Board of Direct Taxes  in exercise  of the  powers conferred  by sub- section (1) of 581 section 85  of the  Act deals  with payment  of estate duty. That Rule  provides inter  alia that payment of any duty may be made  by delivery of a cheque on a scheduled bank or by a bank draft  issued by  a scheduled bank or by depositing the amount of  duty in  the Government Treasury or by adjustment of any  refund of  income-tax, excess  profits tax, business profits tax or excess profits tax deposit. Section 52 of the Act as  it was  originally enacted  provided that  the Board might prescribe that Government securities could be accepted in payment  of estate  duty on such items as it thought fit. When it  was suggested  that a  provision  corresponding  to section 56(1)  of the Finance (1909-10) Act 1910 as it stood at the  time when  the Act  was enacted  could be introduced into the  Act, it  was not  accepted by  the Indian  Finance Minister. Section 49 of the British Finance Act 1946 (9 & 10 Geo 6  C. 64)  provided that  the  Commissioners  of  Inland Revenue could  accept any  property under  section 56 of the Finance  (1909-10)   Act  1910   in  satisfaction   or  part satisfaction of  any estate  duty and amended the latter Act accordingly. Section 56(1) of British Finance (1909-10) Act, 1910 which  was again  amended by the British Finance Act of 1949 read thus:           "56(1) The  Commissioners may,  if they think fit,      on the  application of  any person liable to pay estate      duty or  settlement estate  duty accept in satisfaction      of the  whole or  any part  of such  duty any such real      (including leasehold)  property as  may be  agreed upon      between the Commissioners and that person."      The legal  position in the United Kingdom as it existed in 1965 in so far as transfer of real and leasehold property in payment  of estate  duty is  concerned is  summarized  in Dymond’s Death Duties (14th Edition) at pages 720-721 thus:      "D-Transfer of Property in Payment of Duty :-

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    (1) Real and leasehold property:-           By s. 56(1) of the Finance (1909-10) Act, 1910, as      extended and  amended by s. 49 of the Finance Act, 1946      (which applies  to deaths  at any time) and the Finance      Act, 1946 (which applies to deaths at any time) and the      Finance Act, 1949, Sched. XI, Pt. IV the Commissioner’s      may, if  they think  fit, on  the  application  of  any      person liable  to  pay  any  Death  Duties,  accept  in      satisfaction of the 582      whole or  part of  such duty  any such  real (including      leasehold) property  as may  be agreed upon between the      Commissioners   and   the   accountable   person.   The      Commissioners have  the right to accept foreign real or      leasehold property,  but they are scarcely likely to do      so. The  property accepted need not itself be liable to      duty. It may be accepted in satisfaction of duty on any      property, real  or personal.  No Stamp  Duty is  to  be      payable on  the  transfer  of  such  property  (Finance      (1909-10) Act,  1910, s. 56(2) . The disposition of any      property accepted  by the Commissioners is provided for      by ss.  50 and 51 of the Finance Act, 1946, under which      the Treasury  may direct  that the  land be transferred      direct to  a body  of persons (e.g. the National Trust)      or to trustees for such a body, etc,. instead of to the      Commissioners, and  the duty  receivable by  the latter      may be  paid out  of the National Land Fund established      by s. 48 of the Act. It is within the discretion of the      Commissioners whether  they will  accept property under      this provision,  but the Chancellor of the Exchequer in      his Budget statement for 1946 said that he expected the      power (which hitherto had not in practice been used) to      operate on  a substantial  scale in  the future:  it is      understood that  seventy properties had been taken over      up to  the 31st  March, 1963.  He referred  also to the      National Trust  and the  Youth Hostels  Association  as      examples of  the bodies not established for profit, and      having for  their object "the provision, improvement or      preservation of amenities enjoyed, or to be enjoyed, by      the public or the acquisition of land to be used by the      public"  to   which  the   land  may   be  transferred.      Particulars of  properties accepted  are given  in  the      Commissioner’s Annual Reports.           There is  no provision for the transfer of land by      a person  other than  the accountable  person, and  the      acquisition price cannot exceed the amount of the duty.           The   Commissioners’    powers   extend   to   the      acquisition of  foreign  immovable  property,  but  are      scarcely likely to be exercised in respect of it."      The position  in the  United Kingdom appears to be more or less  the same  even after  the former  estate  duty  was replaced by the new tax known as capital transfer tax by the British Finance Act 583 1975 (vide section 22 of the Finance Act 1975). The relevant part of paragraph 17 of Schedule 4 to that Act reads thus:           "17 (1)  The Board  may, if  they think fit on the      application of  any person liable to pay tax, accept in      satisfaction of  the  whole  or  any  part  of  it  any      property to which this paragraph applies.           (2) This paragraph applies to any such land as may      be agreed  upon between the Board and the person liable      to pay tax.           (3) This  paragraph also  applies to  any  objects      which are or have been kept in any building-

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         (a) If the Board have determined to accept or have      accepted  that   building  in   satisfaction  or   part      satisfaction of  tax or  estate duty,  or .....  " (See      Halsbury’s Statutes  of England (Third Edition) Vol. 45      at page 1870).      Section 52  of the Act was substituted by a new section 52 by  the Direct  Taxes  (Amendment)  Act,  1964.  The  new section reads thus:           "52. Payment of duty by transfer of property-           (1) The  Central Government may, on an application      of the  person accountable  for estate  duty, accept in      satisfaction of  the whole or any part of such duty any      property passing  on the  death of the deceased at such      price  as  may  be  agreed  upon  between  the  Central      Government and  that person,  and thereupon such person      shall  deliver  possession  of  the  property  to  such      authority as  may be  specified by  that Government  in      this behalf.           (2)  Notwithstanding  anything  contained  in  any      other law  for the time being in force, on the date the      possession  of   the  property   is  delivered  to  the      authority under sub-section (1)-      (i)  the property shall vest in the Central Government;           and      (ii) the Central  Government  shall,  where  necessary,           intimate  the   registering  authority   concerned           accordingly;      and the authority shall administer the property in such      manner as the Central Government may direct. 584           (3) Where the price referred to in sub-section (1)      exceeds the aggregate of the amounts due under this Act      in respect  of the  estate of  the deceased, the excess      shall be  applied in the following order to the payment      of any tax, penalty, interest or other amount-      (i)  which the  legal representative of the deceased is           liable  to   pay  in   respect  of   the   income,           expenditure or  wealth of,  or gift  made by,  the           deceased under  any of  the Acts  referred  to  in           clause (c)  of section  2 of the Central Boards of           Revenue Act, 1963;      (ii) which the  executor is  liable to pay under any of           the Acts aforesaid in respect of the estate of the           deceased for  the period  of the administration of           the estate;      (iii)which the  person  beneficially  entitled  to  the           property in question is liable to pay under any of           those Acts;      and  the   balance,  if  any,  shall  be  paid  to  the      accountable person."      In the  Notes on  clauses annexed  to  the  Bill  which ultimately became  the Direct  Tax (Amendment)  Act 1964, it was stated:           "Sub-clause (b) seeks to substitute the provisions      of  section  52  of  the  Estate  Duty  Act  by  a  new      provision, enabling the Central Government to accept at      an agreed  price, the  assets comprised  in  an  estate      passing on the death of the deceased towards payment of      the estate  duty, if  the accountable person so offers.      Provision is  also made  that any  balance of the price      left after  satisfying the amounts due under the Estate      Duty Act will be adjusted against amounts due under the      other Direct  Taxes Act  from the  deceased, his estate      and the accountable person beneficially entitled to the      asset in question in that order."

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    Let us  now analyse section 52 of the Act. A proceeding under section  52 does  not commence until an application is made by  the person  accountable  for  estate  duty.  It  is entirely at  his option  whether a  property passing  on the death of  the deceased  should be  transferred so  that  its price can  be adjusted  towards payment  of the estate duty. The Central  Government cannot compel him to do so. When the accountable person voluntarily applies to the Central 585 Government, the  section says  that the  Central  Government ’may’ accept  the property  offered in  satisfaction of  the estate duty  at such  price as may be agreed upon between it and the  accountable person.  Section 52 of the Act does not say that  the Central  Government shall  do so but it may do so. The  question  in  this  case  is  whether  the  Central Government is  bound to  do so.  We  shall  revert  to  this question later  on. Then the price of the property has to be agreed  upon   between  the   Central  Government   and  the accountable  person.   The  price   so  agreed  upon  should naturally relate  to the date on which agreement takes place and it  cannot certainly  be  the  principal  value  of  the property determined  in the  estate duty  proceedings.  This provision may  perhaps indirectly act as a deterrent against excessive valuation  of the  property  in  the  estate  duty proceedings because  when the  question of  determination of its price under section 52 of the Act arises there ought not to  be   a  wide   disparity  between  the  principal  value determined in  the  estate  duty  proceedings  and  what  is offered by the Central Government as the price under section 52. When once the price is agreed upon, then the accountable person is  bound to  deliver possession  of the  property to such  authority   as  may   be  specified   by  the  Central Government. On  such delivery  the  property  vests  in  the Central  Government  without  any  further  formality.  Sub- section (3) of section 52 of the Act provides that where the price agreed upon exceeds the amount due as estate duty, the excess amount  shall be  applied to  the payment  of any tax penalty, interest  or other  amount  payable  in  the  order mentioned   in  clauses  (i)  to  (iii)  thereof.  If  after adjusting all  such dues,  any balance  still remains,  such balance shall be paid to the accountable person.      The Act  is a  fiscal statute  principally intended  to levy and  collect estate duty which when collected has to be disbursed in  accordance with  Part XII of the Constitution. It is  not a  law providing  for acquisition  of a  property forming part  of the estate of the deceased. Part VII of the Act in  which sections  51 and  52 occur  only provides  the machinery for  collection of the duty. Whereas section 51 of the Act  authorises the  Board to  prescribe the  means  and manner in which the estate duty may be collected, section 52 gives the  option to  the  accountable  person  to  offer  a property passing  on the  death of  the deceased so that its price may  be adjusted  towards the  payment of  the  estate duty. Rule  18 of  the Rules  made by  the Board pursuant to section 51  enables the  accountable person to discharge his liability in  one or  more ways  mentioned therein and there the Central Government is left with no choice 586 about them.  Payment  of  duty  in  any  of  the  said  ways discharges the liability of the accountable person under the Act. Section  52 of  the  Act  however,  appears  to  be  an alternative mode  by which  such liability can be discharged but it  has some  distinguishing features.  Indisputably the price of  the property  offered thereunder  has to be agreed upon between  the Central  Government  and  the  accountable

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person which  introduces an  element of  consensus into  the proceeding. But  the point on which the parties are at issue in this  case is  whether the Central Government is bound to accept a  property offered  by the  accountable person under section 52  and initiate  proceedings to settle its price by negotiation. The  language of  the statute  prima facie does not compel  the Central  Government to do so. The section is in the  nature of an enabling provision which authorises the Central Government  to accept  a property  in lieu of estate duty payable  subject to  the conditions mentioned in it. It is true that even enabling words in a statute which confer a discretionary power may have to be interpreted as compulsory where they  amount to words clearly intended to effectuate a legal right.  But ordinarily such words are permissive only. In the  instant case  the very  fact there  is a need for an agreement upon the price of the property between the Central Government and the accountable person makes the power of the Central  Government   under  section   52(1)  of   the   Act discretionary and  permissive. Any other meaning may lead to impractical and  incongruous result.  The Central Government cannot be compelled to accept the properties in discharge of the estate  duty when no agreement is possible on its price, and when  law does  not provide for a machinery to determine the price  when there  is no  agreement. The  history of the corresponding legislation  in the  United  Kingdom  and  the language of  section 52  read with  the ’Notes  on  clauses’ attached to  the relevant  Bill extracted above suggest that the Central  Government has  the option  either to accept or reject the offer made by an accountable person under section 52. This  has to  be so  having regard to the administrative difficulties involved  in the  matter. As mentioned earlier, the Act is a fiscal statute intended to collect duty and not to acquire  property. If section 52 of the Act is held to be mandatory then  the Central  Government will  be obliged  to acquire properties  in several  parts of  India where it may not  find  any  use  for  them  and  spend  money  on  their management and  upkeep and  arrange for  their disposal. The cost of  administration involved  in the  Act in  that  case possibly may be much more than the duty realisable under the Act. Further  if such  is the construction to be placed then what happens  if the  price of  the property offered is more than the  duty payable  ?  Then  in  every  such  case,  the Government would be compelled to acquire property by paying 587 to the  accountable person  the amount which is in excess of the duty  and other  sums payable  under section 52(2)(i) to (iii) even  when it does not need such property. Surely such could not  have been the intention of the Parliament. We are of the  view that  on a  plain construction of section 52 of the Act, the Central Government may at its discretion either accept the  property offered  under section 52 or may not if the circumstances  so warrant. The accountable person cannot claim that the Central Government is bound to accept to such property. The  power of the Central Government under section 52 is  purely administrative  and  discretionary.  The  High Court was  in error in holding that if an assessee wanted to pay the estate duty by transferring property, the Government could not refuse to accept the offer and insist upon payment by another  mode, provided  there was agreement on the price of the property between the Government and the assessee.      When once  it is  held that the power of the Government under  section   52  of   the  Act   is  administrative  and discretionary, it  follows that  the said  power  should  be exercised subject  to the  same limitation  which govern all such administrative  and discretionary  powers. The  Central

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Government or  the authority  which is  competent to  take a decision should  exercise its  discretion bona  fide and  in good faith  by addressing itself to the matter before it and should not  allow itself  to be influenced by extraneous and irrelevant  considerations.   The  question  should  not  be disposed of in an arbitrary or capricious way. In this case, the Court  can only  ask the authority concerned to exercise the discretion  vested in  it but  it  cannot  be  asked  to exercise it in a particular way. On this question we approve the decision of the Andhra Pradesh High Court in Chella Rama Bhupal Reddy v. Central Board of Direct Taxes & Anr.      The true  legal position  may be  summarised thus. What section 52(1)  does is  to set  forth one more mode in which estate duty  may  be  recovered.  It  is  a  provision  made specially for  the recovery  of estate  duty. It enables the Government to recover the duty in accordance with that mode. The other  statutory modes  prescribed under  section 51 and specified in  the Rules  are those  where  recourse  by  the accountable person obliges the Revenue to accept the payment made in any of those modes and to treat it, by compulsion of statute, as satisfaction of the dues. The peculiarity of the mode provided  under section 52(1) is that while recourse to it by  the accountable  person does  not automatically imply satisfaction of the 588 dues, there  is the duty cast on the Revenue to consider the application by  the accountable  person offering  an item of property as  a mode  for satisfying the dues. The Government must consider  the application  on its  merits  and  in  the exercise of  sound administrative  judgment.  Ordinarily  in every contract  for the  purchase of  property there are two stages. (1) In the first stage, there is complete freedom to the  parties   to  decide  whether  one  should  enter  into negotiations with  the other  at all  and in that regard the law takes no account of reason of any party for not choosing to entertain the proposal for sale made by the other however arbitrary, illogical  or irrelevant  the reason  may be. (2) The second  stage follows  the entertaining  of the proposal and the actual negotiations between the parties which may or may not  fructify in  a contract.  Section 52(1)  now  under consideration concerned with the first stage, and differs in this from  the complete freedom to entertain the proposal in that  the   proposal  made   under  section   52(1)  by  the accountable  person   must  be  considered  by  the  Central Government and  any decision  taken by  it on  that question must proceed  on considerations  which are relevant and bona fide. The  price of  the property  is, however,  left to  be determined by  agreement in  the  event  of  the  Government deciding to accept the offer made by the accountable person. This forms part of the second stage.      In the instant case, the High Court was, however, right in holding  that it  had not  been shown  that the competent authority had  properly exercised  its  discretion.  In  the counter affidavit  filed  by  the  Assistant  Controller  of Estate Duty,  some reasons  were given  in  support  of  the decision of  the Board.  That counter affidavit is of no use for the  deponent could  not speak  on behalf of the Central Government or  the Board. In the counter affidavit of Balbir Singh, Secretary,  Central Board  of Direct Taxes and Deputy Secretary to  the Government of India, two principal grounds were mentioned for rejecting the offer-one, that the Central Government was  not bound  to accept the offer and two, that it had been shown that "the cash in hand, cash in bank, book debts, business  profits, rent  and share of the deceased in the firm  of  Ramnarain  Lal  Beni  Madho  amounted  to  Rs.

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4,57,462 which  amount was  more than  sufficient to pay the entire estate duty demand". On the other hand the respondent contended in  his reply affidavit that he had no liquid cash to pay  the estate duty as it had been invested in business. But there  appears to  have been  no further  probe into the question. It is also obvious that the Board proceeded on the assumption  that  its  discretion  was  unfettered  even  by considerations relevant to administrative 589 law. In  these circumstances,  we feel  that  there  was  no proper exercise of the discretion by the Board.      We, therefore,  affirm the direction issued by the High Court but  subject to the observations made above and direct the Board to dispose of the application afresh in accordance with law.      The appeal is accordingly disposed of. No costs. V.D.K. 590