M. K. Balakrishnan Menon v. Assistant Controller of Estate Duty-cum-ITO, Ernakulam

A B ## c D E F G H 961 M. K. BALAKRISHNAN MENON _v._ ASSTT. CONTROLLER OF ESTATE DUTY-cum-1.T.O • . ERNAKULAM _October_ 5, 1971 [K. S. HEGDE AND A. N. GROVER, JJ.] _Marunzkkattayam_ _Law-Whether_ _the entire estate passed in the death_ _of_ _the sthanaihdhar to his successors and_ _if_ _the entire property is liable_ _to_ _Estate duty under Estate_ _Duty_ _Act,_ _1953-Interprel!ation_ _of_ _s._ 7(3) _of_ _the Succession Act._ 1956. One T who was the third Stanamdhar of a family, died in 1960. The sthanam owned several properties in his personal capacity. After his death a suit for th; partition of the Sthanam was fi.I{!d by various members of the Ta.rwad. The appellant was appointed a receiver of fhe properties covered by the third Sthanam of which the sthanamdar was the deceased T. The receiver was in these circumstances, treated as an accountable person in respect of the sthanam properties. Pursuant to a notice issued under s. _55_ of the fatale Duty Act, 1953, by the Assistant Controller of Estate Duty, the appellant filed the neciossary accounts. But he raised the contention in the assessm::nt proceedings that according to s. 7 ( 3) of the Hindu Succession Act, 1956, the deceased T was r:ntitled only to !/I !4th share in the sthanam properties and therefore only that share could be taken into account in determining the principal valu~ of the Estate liable to duty. The respondent, howeve·r, held that the entire estate passed on th~ death of the deceased and was liable to duty, The appiollant filed a petition under Art. 226 challenging the assessment order. A learned Single Judge allowed the petition and quashed the assessment order. The respondent filed an appeal before a divisional bench which was heard by a full bench and negatived the contention of the appellant and held that on the dreath cf the Sthanamdar the whole of the Sthanam property passed and was deemed to pass and the Estate duty was payable on the whole of the propc:rty. Dismi~sing the appeal, HELD; (i) In Marumakkattayam branch of the Hindu law, the word 'Jvfarrumakkattayam· i:; inheritance through nephews and ni•;ces. The essential difference bct\vccn Marun1akkattayam and the other schools of Hindu law. is that the former is founded on the r..1a1riarchate whi\~ the latter i'-l founded _upon the agnatic family. In the Mitakshara inint family, the members claim their descent from a common ancestor but in Marumakkat1ay<im family which is known as the tarwad, th~ desc1~nt is from a commo;i ancestress. Tarwad is the name given to a joint family consisting of males and females 'vho have all descended in the family line from a common ancestress. [964 E] (ii) Thre legal fiction created by the word,, "as if the Sthanam property had been divided per capita immediately before the death of the sthanamdar", in s. 7_(3) of the Succession Act, is meant for the puroose of wadually ltqmdatmg the sthanams and distributing the sthanam pro p1~;ttes .among~t t~e . members of. ~he sthanees' tarwad and his oersonal hen"S without mfrmgmg the provIS1ons of the Constitution. Neither the members of the Tarwad nor the personal heirs of the sthanee had any 962 SUPREME COURT REPORTS [l 972] I S.C.R. interest in the sthanam properties. The first part of s. 7 ( 3) el early provides that the property which passes on the death of the sthanamdar is the whole of the sthanam property held by him. The second part only deals with distribution of that property. The Sthanam property held by **the** **sthanamdar** **has** **to pass from** **th1:!** **sthanamdar** **to** **the** **members of** **the** family to which he belonged and his heirs. Legal fiction in the words **wh:ch** **have been set out** **do** **not cut down** **the** **sthanam propefty** **that** **passes** **on** **the** **death of** **sthanarndar** **to a** **per** **capita** **share,** **the fiction having** **been introduced only for determining** **the** **respective** **shares** **.for** **the** **purpose** **of** **distribution** **to** th~ **members of** **the** **family** **and** **the** **heirs of** **the** **stha-** namdar. [96& G] CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 1137 of 1969 and 1421of1971. Appeals by certificate/special leave from the judgment and order dated November 29, 1966 of the Kerala High Court in Writ Appeal No. 119 of 1965. _M._ C. _Chagla_ and _M._ _R._ _K. Pillai,_ for the appellant (in both the appeals). **A** B ## c _S._ _T. Desai, M._ C. _Bhandare_ and _B._ _D._ _Sharma,_ for the respon- **D** dent (in both the appeals). The Judgment of the Comt was delivered by Grover, **J.** This is an appeal by special leave from a judgment of the Kerala High Court in which a question of substantial importance arises relating to the extent of the property that attracts Estates Duty on the death of a Sthar.·~e or Sthanamdar in a Hindu family governed by the MarumakkaHayam law. It may be mentioned that Civil Appeal No. 1137 /69 was brought to this Court by certificate against the same judgment but the certificate is defective for want of reasons and has therefore to be revoked. #### One K. I( Thampan who was the third Sthanomdar of Kuthi ravattathu Family died on May 17, 1960. The Sthanam owned several properties such as forest lands, agricultural lands, buildings etc. The deceased also own.~d several properties in his personal capacity. Aft.~r his death a suit for the oartition of the Sthanam was filed in a civil court by the various ;;embers of the Tarwad. The appellant before us was appointed a Receiver of the properties covered bv the third Sthanam on which the Sthanamdar was the deceased K. K. Thampan. The Receiver was, in these circumstances, treated as an accountable person in re-pect of th>~ Sthanam properties. Pursuant [1] to a notice issued under s. 55 of th~ Estate Duty Act 1953, hereinafter called the 'Act",, by the Assistant Controller of Estate Duty (respondent herein) the appellant file the necessary accounts. But he raised a contention iri **E** F G **H** BALAKRISHNAN _v._ CONTR. ESTATE DUTY _(Grover,_ _!.)_ 963 **A** th" assessment proceedings that according to s. 7 ( 3) of tlie **Hindu** Succession Act 1956, hereiM~ter caJ!ed the "Succ.ession Act'', the deo~ased Thampan was entitled only to l/114th share in the properties in the Sthanam and therefo1e that share could be taken into account in determining ithe principal value of the ~state liable to duty. The respondent, however, held [1] that the entire estate **B** passed on the death of the deceased and was liable to duty. The appellan't filed a petition under Art. 226 of the Constitution challenging the assessment order. A learned single judge of the High Court allowed the petition and quashed the assessment order. The l'~spondeni filed an appeal before a division bench of the High Court which was heard by a full bench together with other appeals ## c involving a _similar point. Before 1the High Court rt was not dis puted by the appellant that if the Act stood alone the entire properties of the Sthanam were liable to estate duty under the Act. The sole contention was thats. 7 (3) of the Succession Act made a difference inasmuch as by virtw~ of the partition postulated under that provision immediivtely before the death of the Sthanamdar **D** the property that passed or should be deemed to pass on the death· of the Sthanamdar was only his _per capita_ share of the Sthanam property and not the whole property of 1th1~ Sthanam. The full l'~spondeni filed an appeal before a division bench of the High property and not the whole property of 1th1~ Sthanam. The full bench negatived the contention of the appellant and held that on the death of the Sthanamdar the whole of the Sthanam pro;ierty passed and was deemed to pass and the Estate duty was payable E **F** G II on the whole of the property. The Act was enacted to provide for the levy and cdlection of es ta~~ duty. Section 5 ( 1) provides for levy of estate duty and says, _inter a/ia,_ that in the case of every person dying after the commencement of the Act there shall, save as expressly provided. be levied and paid upon the principal value ascertained as provided of all property settled or not settled which pass-~s on the death of such person a duty called "estate duty" at [1] the rate fixed in accordance with s. 35. Section 7, to the extent it is material, i1 repro # duced below : "S. 7. Interests ceasing on death.-( I) Subjects 10 the provisions of this section, property in which the deo~ased or any other person had an interest ceasing on ithe death of the deceased shall be deemed to pass on the de.ceased is d·~ath the extent to which a benefit accrues or anses by the cesser o.f such interest, including, in particular, ~ coparce~ary mterest in the joint family property of a Hmdu family governed by the Mitakshara Marumakkattayam or Aliyas-~nthana law. ' (2) .... · ....... . #### (3) .. ". " ... " SUPREME COURT REPORTS [ 1972 J l 5.C.R. ( 4) The provisions of sub-section (I) shall not apply lo the property in which the deceased or any o,her person had an interest only as holder of an office or recipient of the benefits of a charity, or as a corporation sole. _Explanation.-For_ the removal of doubts, it is hereby declared that the holder of a Sthanam is neither the hold·~r of an office nor a corporation sole within the meaning of this sub-section''. A B In order to de"termine as to what propercy shall be deemed to pass on the death of Sthanamdar it is n.~cessary to decide the nature C of 1the Sthanam property and the interest of tlre Sthanamdar in that propePty. For this purpose we have to turn to the Marumakkattayam branch of Hindu law and then consickr what is the exact ambit and scope of the changes which have been made under that law so far as succession is concerned in the case of Sthanamdar by the Succession Act to the eX!lent it is material in the p1esent case. As pointed out in Mayne's Hindu Law and D Usage, 1950 Edn. Marumakkattayam law is a body of customs and usages which have receiV>Jd judicial recognition. It prevails among a consid.~rable section of the people inhabiting the west coast of south India. The literal meaning of the word "Marumakkattayam" is inheritence through nephews and nieces. The essential difference between Marumakkattayam and th~ other schools of Hindu Law is •that the former is founded on the matria1chate while the latter is founded upon the agnatic family. In the Mitakshara joint family th.~ members claim their descent from a common ancestor but in a Marumakkattayam family which is known as the •tarwad the descent is from a common ancestress. Tarwad is the name given to a joint family consisting of F males and females who have all descended in the family line from a common ancestress. Many compares a tarwad to a family corporation. Every member of a tarwad has equal rights in the property by reason of his or her birth in the tarwad. H was laid down in a course of judicial decisions in the nineteenth century that one or more members of a tarwad cannot claim partition and G separate possession of his or their share of the «arwad property without •the consent or concurrence of all the members of the tarwad. The Madras legislature enact.~d certain statutes giving a right of partition to the membef5 of a tarwad to enforce parti!ion of a •tarwad property. The shares on partition were to be on per capita basis. G H Now Sthanam and Sthanamdar emerged in this manner. Some 'Of the aristocratic Hindu families in the west coast had attached to A B ## c D E F G H BALAKR!SHNAN _v._ CONTR. ESTATE DUTY _(Grover,_ _J.)_ 965 their familie> an office called Sthanam meaning literally "status,. rank or digni'tV". The holder of Sthanam was called a Sthance or Slhanamdar. ·The rulers grnnted S.hanams to their chieftains and important public officers which were usually accompanied by a grant of land for th.e maintenance of the dignity of the officer. In addition to the families of princes and chieftains 'ihere were other families which possessed Sthanams wi•thout any particular dignity attached to them. The incidents of the ins<itu<tion were that the senior most member of family became the Sthanamadar who was usually the male member; but •there were instacces where the senior most female member became 'ihe S!hanamdar. Separate prooerties belonged to each Sthanam and they vested in the holder of the office for the time being and descended to the successors in office. One important feature was that Sthanamdar ceased •to have any interest in •the property of hi& tarwad and tb~ members of his tarwad had in their tmn only reversionary rights to the Srhanam properties. The Sthanamdar had a limited est<rte in the sense !hat he could encumber or alienate the Sthanam properties only for a l.egal necessity like any limited owner but otherwise he was absolutely entitled to •the income accruing during his tenure of office. His position was analogous to that of a holder of an impartible esfate, His successor had no interest in it and the right of the successor was nothing more <than a _spes successions._ There is a good deal of discussion on these matters in a judgment of this Court in _Kava/appara Kottarahi/ Kochuni_ & _Others_ v. _The State_ _of Madras_ & _Ors._ (1) which is on the same lines as above. In that case the constitutionality of the provisions of the Madras Marumakkattayam (Removal of Doubts) Act, 1955 passed by the Madras Legislature soon after a decision of the Privy Council declaring that the properties in possession of the Sthanamdar were sthanam properties in which the members of •the tarwad had no intemst had been challenged. By s. 2 of that Act it had been provided that any sthanam in respect of which there was or had been, at any time, an iniermingling of the properties of the sthanam and ~.he properties of the tarwad or the· members of the tarwad had been receiving maintenance from the P'Op·~rtics of lhe sthanam or there had been a vacancy caused by there being no male member of the tarwad eligible to succeed to the sthanamdar, shall 1:-e deemed to be a Marumakkattayam tarwad and the pro pert!es appert~ining to such sthanam shall be deemed to be properties belo~gmg 1o th: tarwa~ .. It was held in the majority judgment that the aforesaid prov1st0ns of the Madras Act were a device to deorive the sthanam of its properties and v.est them in the tarwad and as such they were directlv hit bv Art 19 ( 1 )(f) and could not be saved by Art. 19 ( 5) of the Constitution. (I) [1960] 3 S.C.R. 887. 966 SUPREME COURT REPORTS [ 1972] 1 S.C.R. Now all the sthanams would gradually get completely liqui·dated by the provisions of the Succession Aot. Section 7 of the Succession Act deals with devolution of interest in the property of a tarwad etc. Sub-sections ( 1) and ( 3) of that section which are material for our purposes may be reproduced : "7 ( 1) When a Hindu to whom 1he marumakkattayam or nambudri law would have applied if this Act had not been passed dies after the commencement of this Act, having at the time of his or her death an interest in the property of a tarwad, tavazhi or illom, as the case may be, his or her inP2rest in the property shall devohre by testamentary or intestate succession, as the case may be, under this Act ancf not according to 1he marumakkattayam or nambudri Jaw. ## Explanation ............. . ( 3) Notwithstanding anything contained in subsection ( 1), when a sthanamdar dies after the commencemen't of this Aot, the sthanam property held by him shall devolve upon the m2mbers of the family to which th.~ sthanamdar belonged and the heirs of the sthana_mdar as if the sthanam property had been divided per capita immediately before the death of the sthanamdar among himself and all the members of his family then living, and the shares falling to the memb~rs of his family and the heirs of the sthanamdar shall be held by them as their separate property. ' _Exp/anation.-For_ <the purposes of this sub-section, the family of a sthanamdar shall include ev.~ry branch of that family, whether divided or undivided, the male members of which would have been enti'tled by any custom or usage to succeed to the position of sthanamdar if this Act had not been passed". A B ## c D E F The resuH of the enactment of s. 7 ( 3) of the Succession Act is that 1th.~ sthanams continued till the death of the sthanamdar and G . thereafter the sthanam property d•2volved upon the members of the family to which ·the sthanamdar belonged and the heirs of the sthanamdar (his personal heirs). The division was to be per capita on the basis of a national partition having taken place immediately before the death of the sthanamdar. The points for consideration are : H 1. Whether th~ provisions of the Succession Act can affect and ;are relevant for the levy of estate duty under the Act ? BALAY.RISHNAN _v._ CONTR. ESTATE DUTY _(Grover,!.)_ 967 ( 2) What is the true effect of the provisions of s. 7 ( 3) of •the Succession Act ? ( 3) Whether the estate duty would be leviabLe on the entire property which belonged to th·e sthanamdar or it can be levied only on 11ll4•th share in the sthanam properties to which a10ne the deceased Thampan would haw been entiiled if a partition had taken place under s. 7 ( 3) of the Succession Act immediately before his death ? As regards the first point it has already been mentioned that before the High Court there was no dispute that if th~ court had to look 'to the provisions of the Act alone the entire property of the sthanam was liable to estaie duty. On behalf of the appellant it has been contended before us that in order to determine the mterest in property which ceases on the death of the deceased and which is deemed to pass on his death and the b~nefit which accrues or arises by the cesser of such interest within the meaning of s. 7 ( 1) of the Act it is essential to turn 'to the law by which the deceased is govemzd for the purpose of ascer•taining the the extent of his interest in the property. The provisions of s. 7 of the succession Act have to be mad together with s. 7 of <the Act for determining the interest which the deeo..ased had in the sthanam property on which the estate duty would be kwiable. This position is not controvei'ted by the counsel for the respondent. The controversy thus narrows down to the true scope and ambit of the provisions of s. 7 ( 3) of the Succession Act. On behalf of the appellant it has been maintained that on a proper construction of the language employed in s. 7 ( 3) it should be held that before the d•zath of the sthanamdar which ·:ook place in accordance with what is provided in sub-s. ( 3) of the sthanam property and 1that on his death all that devolved on his heirs was the share which the sthanamdar would have got in that paP:ition. It is pointed out that th~ legal fiction of partition or division is created by subs. ( 3) for the definite purpose of alloting a share in the sthanam properties to the personal heirs of th·~ sthanamdar wh'ch could not be done under the general Marumakkattayam law. · The partition thus had •to be real and effective and the sthanamdar should be considered to hav.~ died as a divided member. In other words the true position, according to the leamzd counsel for <the appellant, is that th.e division per capita under s. 7 ( 3) took place immediately before the death of the s•thanamdar with the r.~sult that the interest which he had in the sthanam property was only to the extent of hi~ share which alon•z devolved upon his heirs. On the other hand the position taken up on behalf of •the resoondent before the .High Court, which was accepted and which has. been reiterated before us. is that s. 7 (3) merely creates a legal fiction _(_ A B ## c D E F G H 968 SUPREME COURT REPORTS [ 1972] I S.C.R. for the purpose of distribution of the properties which is to 'take place after the death of s•thanamdar and that bjng the sole pur po&'~ for whic(l the legal fiction was introduced it could not be extended fu: ther so a, to include an accual division or partition having been effected in the lifetime of the sthanamdar with the resui't that he became a divided m~mber for all purposes. We have had occasion to notice in some detail the incic!•"nts of the ins•titution of sthanam and sthanamdar as also the natmc of the sthanam property kid by the sthanamdar. H has not been disputed before us on behalf of the appdlant that during his lifetime the sthanam property !;donged to ·the sthanamdar. Certain restrictions were placed on his powers of alienation but that did not detract from the natu1e of the es•late held by him. The cesser of his interest in the sthanam property would be of the whole of that property and the benefrt that would accm~ or arise ~ the cesser of such interest would also be of the entire s:hanam property. Position would be diffe1 ent only if s. 7 ( 3) of the Succession Act is so construed as to lead to the result that a parti A B ## c _D_ E tion or division of the sthanam property shall be deemed to have taken place during his lifetime. Jn our judgment such an interprntation of s. 7 (3) of the Succession Act is likely to involve the constitutionality of that provision in view of the decision of this Court in _K._ _K._ _Kochuni's(_ [1 ] ) case. Jn other words by bringing about a statutory division or parlition of the sthanam property by which the sthanamdar will be deprived of that property except to th.e extent of a per capita share therein will be infringement of A1 t. 19(1 )( f) of the Constitution. The court ought not to interplet statutory provisions unless compelled by their language in such a manner as would involve its constitutionalrty because tho legislature is presumed to enact a law which does not contraven.~ or violate 'the constitutional provisions. The other construction F which has been accepted by the High Couf't appears to be more in consonance with the background in which s. 7 ( 3) of the Succession Act has been enacted. Tb;: legal fiction also which has been inti oduced should only be limited to that purpose and •there can be no justification for ex•tending it. The legal fiction created by the words "as if the sthanam property had been divided per capita immediately before the c!•;:ath of 'the sthanamdar" appears to be G meant solely for the purpose of gradually liquidatin>; the sthanams and distributing the sthanam properties amonQst 1he members of the sihanee's tarwad and his personal heirs wi1lwut infr'nging the provisions of the Constitution. It may be poin'ed oul •hai neither the members of the tarwad nor the personal heirs of the stlianec had any int•;:rest in the sthanam properties. The first part of H s. 7 !3) clearlv nrovicles that the prop.~rty which paS>cs on the H (I) [t960] 3 S.C.R. 887. _A_ B # c D BALAKRISHNAN _v._ CONTR. ESTATE DUTY _(Grover,_ J.) 969 death of the sthanamdar is the whole of the sthanam property held by him. The second part only deals with distribution of that property. We have no doubt that the High Court was right in sayin)! tha!t the word "devolve'" as used in the first part has the meaning given to it by Leach M. R. in _Perr_ v. _Parr(')_ of passing from a person dying to a person living. Thus the sthanam property held by the sthanamdar has to pass from the sthanamdar to the members of the family to which he belonged and his heirs. Legal fiction in the words which have been set out do not cut down the sthanam property that passes on the d.~ath of sthanamdar to a per capita share, the fiction having been introduced only for determining the respective shares for,the purpose of distribution to the members of th•i family and the heirs of sthanamdar. For all the reasons given above we affirm the decision of the High Court and dismiss this appeal (C.A. 1421/71) but in view of the entire circumstances make no order as to costs. The other appeal (C.A. 1137 of 1969) is dismissed owing to the certificate being defective for want of reasons. S.N. _Appeals dismissed_ (I) 2 L.J. Ch. 167. 10-Lll9Sup.CI/72