THE ATTORNEY-GENERAL, Appellant, and V. RAMASWAMI IYENGAR et al., (Administrato

139-NLR-NLR-V-55-THE-ATTORNEY-GENERAL-Appellant-and-V.-RAMASWAMI-IYENGAR-et-al.-Administrato.pdf

J
Attorney-General v. Ramaswami Iyengar
481
1
1958Present: Gratiaen J. and Gunasekara J.
THE ATTORNEY-GENERAL, Appellant, and V. RAMASWAMIIYENGAR et al. (Administrators of the Estate in Ceylon ofRm. At. At. Rm. Arunachalam Chettiar, deceased),Respondents
8. G. 235—D. G. Colombo, 37 (Special)
Estate Duty—Hindu undivided family—Way of proving a question of foreign law
-r-Death of “ co-parcenary member ” in 1934—Liability of his estate to pay
estate duty—“Passing ” of property—“Executor ”—Ordinance No. 8 of 1919,, ss. 7, 8, 17(6)—Ordinance No. 1 of 1938 (Cap. 187), ss. 24, 77, 79—Wills
Ordinance (Cap. 49), s. 7—Partition Ordinance (Cap. 56), s. 18.
A. C., a Natucottai Chettiar, and his father were the only “ co-parcenarymembers ” of a Mitakshara Hindu undivided family which, regarded as anentity, owned considerable “ joint property ” in various countries includingCeylon. A. C. predeceased his father in 1934. During his lifetime, there hadbeen neither a complete nor a partial division of title or separation of interestsin the joint property of the family.
The Crown claimed estate duty in respect of A. C.’s estate in Ceylon. Theassessees were the admbpstrators of the estate of his father, who had himselfdied subsequently in 1938.
Held, (i) that the law governing a Mitakshara Hindu undivided familyinvolved a question of foreign law which must be regarded as a questionof fact ” of which the Courts in Ceylon cannot take judicial notice. Thedecision of the Court must, therefore, be based upon the testimony of thequalified experts who gave evidence and upon the references to textbooks andjudicial decisions which were incorporated in their evidence.
that, under the Mitakshara law, the joint property belonged to the entirefamily group to the exclusion of its individual members. Upon the death ofA. C. no effective change occurred in the title or possession of the joint propertybelonging to the undivided family. His father who survived him did not, inconsequence*of the death, receive any “property” which he did not havebefore. The Crown’s claim to estate duty failed, because there was neitheran actual nor a notional “ passing ” of property within the meaning of sections7 and 8 of the Estate Duty Ordinance, No. 8 of 1919.
that in regard to the immovable property which formed part of theestate sought,be taxed, section 7 of the Wills Ordinance and/or section 18 ofthe Partition Ordinance had no relevancy to the “ devolution ” of a “ co-par-cener’s” interests in any part of the joint property of a Hindu undividedfamily.
that the present assessees could not be made accountable in the presentcase for any estate duty levied under section 8 (1) (a) of the Estate Duty Ordi-nance, No. 8 of 1919, in view of sections 79 and 24, and the meaning of“ executor ” in section 77, of the later Estate Duty Ordinance (Cap. 187).
iAPPEAL from a judgment of th£ District Court, Colombo.
Waiter Jayatoardena, Crown Counsel, with V. Tennekoon and G. F.Sethukavaier, Crown Counsel, for the appellant.
H. V. Perera, Q.C., with S. J. V. Chelvanayakam, Q.C., Peri. Sunderam,and S. Sharvananda, for the respondents.
21LV
2J. N. B 37004-1,590.(7/54)
Cur. adv. vult.
482GRATIAEN J.—Attorney-General v. jRamaswa/mi Iyengar
_ – |
October 12, 1953. Gratiabn J.—
This is an appeal by the Grown against a judgment 6f the learnedDistrict Judge of Colombo rejecting a claim for estate duty in respectof the estate in Ceylon of a person to whom I shall refer for convenienceas “ Arunachalam Chettiar (jnr.) He died in India on 9th July, 1934,and the assessees are the administrators of the estate of .his father“ Arunachalam Chettiar (snr.) ”, who himself died subsequently in 1938.
The assessees had paid under protest to the Commissioner of EstateDuty a sum of Rs. 283,213 24 representing the duty claimed from themin respect of the son’s estate, the property being described in the formalnotice of assessment as “ the deceased’s interest in the business of] RM.AR. AR. RM. and AR. AR. RM. ” which had been carried on in Ceylon.On the basis of the learned Judge’s decision on their appeal against theassessment, he entered a decree ordering the Crown to refund this amount,with interest, to the assessees.
The case for the Crown is that the Commissioner’s assessment shouldbe restored, subject to the qualification that, upon a correct valuationof the deceased’s property which is claimed to have attracted estateduty in Ceylon, the Commissioner’s computation nmt be a,reduced toRs. 214,085-19 together with interest at 4% from 10th July, 1935.Mr. Jayawardena explained that the Commissioner had erroneouslytaken into account the value of certain assets situated outside thiscountry.
Arunachalam Chettiar (jnr.) predeceased his father at a time whenthe earlier Estate Duty Ordinance, No. 8 of 1919, was in operation. Theproperty assessed for payment of estate duty on the deceased’s estate had,prior to and until the time of his death, been the “ joint property of aHindu undivided family ” of which he and Arunachalam Chettiar (snr.)were the only “ co-parcenary members ” (I have advisedly inserted thisphrase within inverted commas for reasons which will emerge in a laterpart of my judgment). The Crown claims that the deceased had an“ interest ” in this joint property which “ passed ” on his death withinthe meaning of section 7 of the Ordinance or, in the alternative, that anundivided half-share of the joint property must be “ deemed to havepassed ” on his death within the meaning of either section 8 (1) (a) orsection 8 (1) (b). Section 7 of the Ordinance, which corresponds to section
of the Finance Act, 1894, of England, is in the following terms :
“ In the case of every person dying after the commencement of this
Ordinance, there shall, save as hereinafter expressly provided, be
levied and paid, upon the value of all property settled or not settled,
which passes on the death of such person, a duty called ‘ estate duty ’,
at the graduated rates set forth in the Schedule to this Ordinance. ”
(
Sections 8 (1) (a) and 8 (1) (b), which correspond to sections 2 (1) (a) and
(1) (6) respectively of the English Act, are in the following terms :
“ Property passing on the death of the deceased shall be deemed toinclude the property following, that is to say :
(a} Property of which the deceased wgs at the time of hisdeath competent to dispose.
483
pRATIAEN' J.—Attorney-General v. Ramatwami Iyengar
(b) Property in which the deceased or any other person hadan interest ceasing on the death of the deceased to the1 extent to which a benefit accrues or arises by the cesserof such interest, inclusive of property the estate or in-terest in which has been surrendered, assured, digested, orotherwise disposed of, whether for value or not, to orfor the benefit of any person entitled to an estate orinterest in remainder or reversion in such property,unless that surrender, assurance, divesting, or dispositionwas bona fide made or effected three years before thedeath of the deceased, and bona fide possession and
,enjoyment of the property was assumed thereunder
immediately upon the surrender, assurance, divesting,or disposition, and thence forward retained to the entireexclusion of the person who had the estate or interestlimited to cease as aforesaid, and of any benefit to himby contract or otherwise, but exclusive of property theinterest in which of the deceased or other person wasonly an interest as holder of an office, or recipient oft t£te> benefit* of a charity, or as a corporation sole. ”
It is also necessary, in order to understand the scope of the provisions ofsections 8 (1) (a) and 8 (1) (b) respectively, to examine section 2 (2) (a)[corresponding to section 22 (2) (a) of the Act] and section 17 (6) [corre-sponding to section 7 (7) of the Act]:
“ 2 (2) (a). For the purposes of this Ordinance—A person shallbe deemed competent to dispose of property if he has such an estateor interest therein or such general power as would, if he were sui juris,enable him to#dispose of the property ; and the expression “ generalpower ” includes every power or authority enabling the donee or otherholder thereof to appoint or dispose of property as he thinks fit, whetherexercisable by instrument inter vivos or by will, or both, but exclusiveof any power exercisable in a fiduciary capacity under a dispositionnot made by Jnmself. ”
“ 17 (6). The value of the benefit accruing or arising from the cesserof an interest ceasing on the death of the deceased shall—
(а)IPthe interest extended to the whole income of the property,
be the value of that property ; and
(б)If the interest extended to less than the whole income of the
property, be such proportion of the value of the property
as corresponds to the proportion of the income which passes
on the cesser of the interest. ”
•
The acceptance or rejection of the argument for the Crown ultimatelydepends upon the true nature of the interest which a “ co-parcenarymember ” of a Hindu undivided family enjoys in the joint property solong as the family retains its undivided status. Before this questionis answered, however, it will be convenient to examine the circumstancesin which property actually “ passes ” on a man’s death within the meaning
484
GRATIAEN J.—-Attorney-General v. Ramaswami Iyengar
of section 7, or, in the alternative, nationally “ passes ” on his death soas to attract duty either under section 8 (1) (a) or section 8 (1) (b).Fortunately, there are authoritative rulings of the English Courts to guideus as to the meaning of the corresponding sections of the English Act.In the quotations 'which follow, I propose to substitute the sections of thelocal enactment for the corresponding sections which the Judges hadinterpreted in England :"
“ The principle on which the (Ordinance) was founded is that
whenever property changes hands on death, the State is entitled tostep in and take toll as it passes without regard to its destination or tothe degree of relationship, if any, that may have subsisted betweenthe deceased and the person or persons succeeding. Section' (7)gives effect to that principle … Section (8) is merely subsidiary
and supplemental. If a case comes within section (7), it cannot alsocome within section (8). The two sections are mutually exclusive .Section (7) might properly be headed ‘ "With regard to property passingon death, be it enacted as follows ’. Section (8) might with equalpropriety be headed ‘ And with regard to property not passing ondeath, be it enacted as j follows’. . . . t . Section (8) does notapply to an interest which passes on the death of the deceased. Thatis already dealt with in the earlier section ”.—per Lord Macnaghtenin Cowley v. C. I. R.1
“ The expression ‘ passing on death ’ (in section 7) is evidently
used to denote some actual change in the title or possession of the propertyas a whole which takes place at the death … Section (8), by
providing that property passing at the death shall be deemed to indudecertain kinds of property which do not in fact pass, artificially enlargesthe ambit of the expression ‘ property passing on death’ ”.—perLord Parker.^
“ By sections (7) and (8) a tax is imposed whenever, to use veryuntechnical language, a death occurs, and somebody, in consequence,gets property which he had not before ; and this tax is imposed on theproperty according to its value, irrespective of the question of the kindof interest which the new taker gets, and of his or her relation to thedeceased.”—per Lord Dunedin, in A. C. v. Milne2.
“ The scheme of the (Ordinance) seems to be this. First of all,when a man dies, a graduated duty is to be laid upon the propertypassing on his death (section 7). Secondly, it is to be levied on propertywhich does not pass on his death, but which by his death is in some wayeither set free or altered in the course of its destination (section 8)—per Lord Phillimore in Neville v. I. L. R?
“ For the purpose of fulfilling the word ‘ passes ’ in section (7)
. .. there must be at the death the property in existence which,
upor the death, continues and passes on to the successor ”.—per Han worthM. R. in 'A. G. v. Quixley 4.
1 {1899) A. C. 198.* (1924) 4- O. 385.
» (1914) A. O. 765.* (1929) 98 L. J. K. B. 652.
< <
GR4.TIAENT J.—Atomy-Gzmral u. Ranasutami Iyengar
485
“ Tile (Ordinance) is only concerned with beneficial interestscapable of valuation, since the object of the (Ordinance) is to levyrevenue ”1—per Maugham L.J. in Scott v. I. B. C. (1935) Ch. 246,affirmed in (1937) A.G. 174.
(/) “In order to test whether it can be said that property ‘ passed ’on death (section 7), one must compare the position as regards the personsbeneficially interested, in the property immediately before the death withthe position immediately afterwards ”.—per Lord Russell of Killowenin Burrell v. A. G.1 In other words, there must be “ an alterationin rights as distinguished from the mere possibility of an alteration”—per Clauson L.J. in Be Bodson s Settlement ~.
» (g) The phrase “ competent to dispose ” in section 8 (1) (a) “ isnot a phrase of art, and taken by itself and quite apart from thedefinition clause, it conveys to my mind the ability to dispose, including,of course, the ability to make a thing your own … The language
of the definition clause seems to me beyond doubt to cover the case of alegatee to whom a legacy has been given and who is in a positioneither to take it or to transfer it to somebody-else or to disclaim it as hethinks fit ’’.—per Lord Greene M.R. in Be Parsons i * 3.
(h) With rSghrd to tlie phrase “ cesser of interest ” in section 8 (1) (6),“ the (Ordinance) gives some assistance in determining what ismeant by an ‘interest’. The section comes into operation if theproperty does not pass under section (7). So, an interest is someright with regard to the property, e.g., an annuity payable out ofthe income to it, which can cease without the property passing. Then,a benefit to someone must accrue or arise by the cesser of theinterest ”.—per Lord Reid in Coatts & Go. v. C. I. B*
According to the Crown, the property in respect of which estate dutyhas been claimed is his “ share ” in the Ceylon assets of the joint propertyof the Hindu undivided family of which he was a “ co-parcener ” at thetime of his death. That “ share ”, it is contended, represents “ somereal and definite proprietary interest which could be the subject of alegal transfer property ”. The argument proceeds on the footingthat “ the proprietary interest ” which the deceased “ acquired ” bybirth into his family (A. I. B. 1931 P. C. 118 at 120) was, by operationof the Mitakshara law as it is applied in the Madras Presidency, trans-mitted qn his death to the sole surviving “ co-parcener ” ArunachalamChettiar (snr.).
If this fundamental proposition can be established, I do not doubtthat the deceased’s share “ changed hands ” in the fullest sense of theterm upon his death, and therefore “ passed ” to his father within themeaning of section 7 of the Ordinance.
The assessed do not dispute that if, as alleged by the Crown, therewas an actual “ passing ” of the property from the deceased to his fatherupon his death, the father would in the first instance have been account-able for estate duty computed on the value of that property. In that
i (1937) A. C. 286.3 (1943) Gh. 12.
'1939) Oh. 343?4 (1953) 2 W. L. R. 364. ,
2*J. S'. B 37004 (7/54)
GKATIAEN J.—Aitorney-General v. Ramaswami Iyengar
486
©vent, they, as the administrators of the father’s estate, concede theirliability to the extent of the reduced amount which the Crown nowclaims to be due from them, namely, Rs. 214,085-19 and interest.
What precisely is the “ interest ” which a “ co-parcenary member ”enjoys in the joint property of an undivided Hindu family ? Thepersons concerned were Natucottai Chettiars, and, being Hindup residentin S. India and domiciled in India, were admittedly governed on questionsof personal law by the Mitakshara law as it is administered in the MadrasPresidency. The problem therefore introduces an extremely difficultquestion of foreign law which must nevertheless be regarded by ms as a“ question of fact ” of which the Courts in Ceylon cannot take judicialnotice. Our decision must be based upon the evidence of the qualifiedexperts who have testified in the actual case, and upon the references totextbooks and judicial decisions which are incorporated in their evidence.—Lazard Bros. & Co. v. Midland Bank Ltd.1
Two distinguished members of the Madras Bar have given evidenceexplaining the incidence of the Mitakshara law as it is administered inMadras. Their competency as experts and the honesty of their respectiveopinions are not challenged. Both agree that the “ stijct Hindu law ”is to be found in the translations of the ancient texts, and that the modi-fications to which it has been subjected from time to time in Madrasare correctly explained in recognised textbooks, and elucidated (inparticular contexts) in decisions of the Privy Council and the superiorCourts of India. Nevertheless, these two experts have arrived at ultimateconclusions which are in sharp conflict with one another. In the result,we are left in the invidious position of having to decide as best we canon the conflicting evidence upon issues with which, I regret to confess,I am completely unfamiliar.—The Sussex Peerage Case.2
.t
It is necessary, before I proceed further, to place on record the agree-ment arrived at by learned Counsel who appeared before us, and for whoseassistance we are very much indebted, that certain additional decisionsof the Privy Council and of the Courts of India concerning the Mitak-shara law should be treated as having been incorporated<in the evidencealready on record. I have examined these authorities and tried to under-stand them, but do not refer to each of them specifically in the judgmentwhich follows. [A list of the additional authorities has, at our request,been filed of record.]<■
To describe the deceased as a “ co-parcener ” in relation to the jointproperty is but to adopt a convenient term in the process of attemptingto analyse a legal concept which has no precise equivalent in this country.The term certainly cannnot be equated in all respects to the term “ co-parcener ” as it is understood in English law. (A. I. R. 1921 P. C. 62at 68). Indeed, the problem before us cannot satisfactorily be solved bythe mere selection of appropriate language.
Mayne's Hindu Law (2nd Edn.) sec. 264 explains that, when one speaksof a Hindu foint family as constituting a “ co-parcenary ”, one includesonly those members of the family who, “ by virtue of relationship,
1 (1933) A. a. 289.* (1884) 11 Hi. & F. 85 at 116.
GRATIAEN J.—Attorney-General v. Ramaewami Iyengar
487
have the right to enjoy and hold the joint property, to restrain the actsof each other in respect of it, to burden it with their debts, and at theirpleasure to enforce a partition. Outside this body there is a fringe ofpersons possessing inferior rights such as that of maintenance ”. Thewhole body of such a family, consisting of males and females, “ constitutesa sort of corporation ”, some of the members of which are “co-parceners ”,that is, persons who on partition would be entitled to demand a share,while others are entitled only to maintenance. So long as the familyretains its undivided status, its joint property continues to “ devolve ”-upon the “ co-parceners ” for the time being “ by survivorship and notby succession ”—sec. 265.
>
What, then, are the “ interests ” of a “ co-parcener ” in the jointproperty of the undivided family to which he belongs ? rrumer L.J.pronouncing the judgment of the Privy Council in (1863) 9 Moore’sI. A. 543 at 611, refers to the property as “ the common property of a unitedfamily …. There is community of interest and unity of possessionbetween all the ‘(“ co-parcenary ”) members of the family ; and uponthe death of any one of them, the others may well take by survivorshipthat in wh^ch tbp^ had during the deceased’s life-time a common interestand a common possession ”. Similarly, in the judgment pronounced in(1866) 11 Moore’s I. A. 75 at 89, Lord Westbury said, “ According to thetrue notion of an undivided family in Hindu law, no individualmember of that family, while it remains undivided, can predicateof the joint and undivided property that he, that particular member,has a certain definite share. No individual member of an undividedfamily could go to the place of the receipt of the rent, and claimto take from the collector or receiver of the rents, a certain definite share.The proceeds must be brought, according to the theory of the undividedfamily, to the dbmmon chest or purse, and then dealt with according tothe modes of enjoyment of the members of the undivided family ”.
I conclude from these observations that, under the strict Mitaksharalaw, no part of joint property can be the subject of individual owner-ship by any members in definite shares unless and until there has beeneither a separation of the family which automatically results in a divisionof title (and is almost invariably accompanied by an actual partition)or at leafjt a division of the title, by mutual agreement, in respect of aparticular property which had previously been the subject of joint enjoy-ment (in which latter event the undivided status of the family, and itscollective ownership of the rest of the joint property, is not affected)'.As a third alternative, a division of title may also take place if one“ co-parcener ”, after due notice to the others, unequivocally separateshimself from th^ family leaving the rest of the property (i.e., apart fromhis share) available to the family which retains its undivided status.It is only upon one or other of these events that there arises, in relationto the entirety of the common property or to a particular asset (as the casemay be) what Lord Westbury described as “ a separation ininterest andin right ”. In other words, so long as the undivided status of the familysubsists, the interest Sf a “ co-parcenary ” member in the joint property
GRATIAEN J.—Attorney-General v. Ramaswami Iyengar
488
of the family of which he remains a member “is not individual propertyat all per Sir Arthur Wilson pronouncing the judgment of the Boardin (1903) I. L. R. 25 All. 407 at 416.f
When property is held in “ co-parceny ” by a joint Hindu family,“ there are ordinarily three rights vested in the “ co-parceners ” : (1)the right of joint enjoyment (2) the right to call for partition and (3)the right to survivorship ”. (1881) 4 I. L. R. Mad. 250. The propertyis managed by the head of the family, i.e., the karta who has, withincertain prescribed limits, a wide discretion in the exercise of his generalpowers of management, and, as “ the individual enjoyment'1 of theco-parceners is ousted by his management”, their right of joint enjoy-ment is virtually limited to the right to receive maintenance from" thekarta. A. I. R. 1918 P. G. 81 at 82. They may also, of course, restrainhim from acting beyond the scope of his legitimate functions, and incertain matters—e.g., the alienation of joint property except for “ familynecessity ”—the power of alienation must be exercised by all the“ co-parceners ” collectively
Before the strict Mitakshara law was modified so as to meet the demandsof a developing society, any alienation by an Individual “ co-parcener ”,whether gratuitously or for value, was wholly null and void, and onegathers that this is still the position in some parts of India. In duecourse, however, the rigid rule of earlier times was relaxed in Madrasand in certain other States. The rights of the creditors of individual
co-parceners first received recognition, so that an execution-purchaserof the right, title and interest of” an individual “ co-parcener ” washeld by the Privy Council to have “ acquired a right limited to that ofcompelling the partition which the debtor might have compelled, had hebeen so minded, before the alienation took place (1877) I. L. B. 3 Cal.198. It was considered, apparently, that this limited concession couldbe made in the name of equity and good conscience without undulyinterfering with the peculiar status and rights of the undivided family.Two years later, the Privy Council also accepted it as settled law in thePresidency of Madras that one “ co-parcener ” may dispose of ancestralundivided estate for value, even by private contract or conveyance, “ to theextent of his own share ”. (1879) I. L. R. 5 Gal. 148 at 166. Suchalienations were “ inconsistent with the strict theory of a joint andundivided Hindu family ”, but the judgment pronounced by Sir JamesColville points out that the law, as established in Madras and* Bombay,had been one of gradual growth, founded upon the equity, which apurchaser for value has, to be allowed to stand in his vendor’s shoes and towork out his rights by means of a partition ”.
In Madras, the purchaser’s equities are “ worked out ” by allottingto him at the ultimate partition a share (but not necessarily the particularproperty which he had purported to acquire) out of the corpus which hi«vendor would have received at the date of the transfer (and not merelyat the date of actual partition).—(1902) I. L. R. 25 Mad. 690. Indeed,his claim is not defeated even by the death of his vendor before thepartition has taken place. A. I. R. 1952 Mad. 419. It logically followedthat the claims of the official Assignee of the ectate of an insolvent
t GRATIAE2ST J.—Attorney-General v. Bamaswami Iyengar
489
“co-parcener” should receive similar recognition.—A. I. R. 1925 P. G.18. In thepp respects, then, it must he conceded that some inroadshave been made into the doctrine of survivorship which is an essentialfeature of the strict joint Hindu family system, because the improvidentacts of one “ co-parcener ” might well operate to the detriment of theother members of the larger group.
Does it follow that, by some gradual process of erosion to which thestrict law of earlier times has been subjected by the impact of equitabledoctrines, a “ co-parcener ” must now be regarded as himself continuouslyenjoyiifg a definite vested “ share ” in the joint property, and that this“ share ” may be freely alienated (albeit, the Crown concedes, onlyfor value) without first effecting a separation of the united family of atleast a division in the title to a particular asset of the joint property ?If this be the correct position, the only relevant distinction which nowexists between the position of a Hindu “ co-parcener ” and his counter-part in England would be that the former’s rights are transmitted uponhis death to his surviving “ co-parceners ”, whereas the latter’s rightsare transmitted to his legal heirs. In either case, there would necessarilybe a “ passing ” of property within the meaning of section 7 of theOrdinance* *
With respect, I find myself unable to accept the proposition (whichmay appear to receive some support from the language of judicial pro-nouncements made in other contexts) that the gradual modification ofthe Mitakshara law in Madras during the past century has convertedthe “ interests ” of “ co-parceners ” in the joint Hindu family intoproprietary rights such as we may properly concede to “ co-owners ”governed by the Roman-Dutch Law in this country. Still less do Isubscribe to the view that a Mitakshara “ co-parcener ” always enjoyedin the joint estate a vested proprietary interest or a “ share ” equivalentto “ real property ”. The judgment of the Privy Council pronouncedby Sir George Rankine in A. I. R. 1941P. G. 48 at 50 specially emphasisesthe fact that “ what is loosely described as a ‘ share ’ of a member of aMitakshara fanjity is really the share which, if a partition were to takeplace today would, be a (fractional) share ”, and this fundamental distinctionwas re-iterated in A. 1. R. 1943 P. G. 196 at 199. Indeed, if the positionwere otherwise, I fail to see why execution-purchasers and purchasersfor valuepnust still submit to a mere “ working out ” of their “ equities ”in subsequent proceedings for partition; or why claims to proprietaryrights by transferees (before partition) from such purchasers have neverbeen recognised in any part of India.
The conflict of opinion expressed by the experts called in the lowerCourt must now be examined. The assessees’ expert, Mr. Bhashyam,takes the view'*bhat, upon- the authorities which he has cited, a Hinduundivided family is, and always was, regarded as “ a unit in contradis-tinction to its individual members, and treated as a sort of corporationowning properly just as under other systems of law indi.viduals ownproperty ”. Ownership, according to this witness, “ vests in the familyas such, and every ^member is entitled to its enjoyment. Under theHindu law there is no such thing as succession of property. The joint
GRATIAEN 3—Attorney-General v. Bamaswami Iyengar
490
members of the family take whatever they take by survivorship; infact, there is no question of taking, they had the right, that is, fhey had whatthey had before the death”. If this be so, no “passing” of propertyon the death of Arunachalam Chettiar (jnr.) within the meaning of seetion7 could possibly have taken place.
As against this view, Mr. Rajah Aiyar, who was the expert <nalled bythe Crown, considered that, upon a correct understanding of substantiallythe same authorities as those relied on by Mr. Bhashyam, “ a joint familyis not a corporation in the sense that, as a unit, it possesses propertyapart from the co-parceners who constitute the co-parceny . '. ..
The property is vested in the co-parceners as individuals, each havingwith the others a unity of ownership and unity of possession. In aMitakshara family during its continuance the interests of the co-parcenersare necessarily fluctuating interests, but despite the fluctuations a co-parcener has what might be called a real interest which persons who aremerely entitled to maintenance have not …. A co-parcenerhas proprietary interests in the property and that proprietary interestis taken by the other members upon his death ”. Upon that view of thematter, there would clearly be an actual “ passing ” of property undersection 7, and the alternative submissions with regard to'a'notic/nal passingunder either section 8 (1) (a) or section 8 (1) (6) would not arise.
I now approach, with considerable diffidence, the task of arriving atmy own decision on this “ question of fact ” upon which such distinguished,professional gentlemen have failed to agree. In favour of Mr. RajahAiyar’s opinion, certain phrases contained in some judicial decisionsdoubtless do tend to support the theory of a transmissible individualproprietary interest which is vested at all material times in a“co-parcener”.Tor instance, the judgment pronounced in A. I. R. 1931 P. G. 118 at 12(1mentions “ the proprietary interest ” which each member “ acquires ”by birth, and in A.l.R. 1927 P. C. 159 reference is made to the “ presentownership ” of the “ co-parceners ” who are even described in one passageas “ oo-owners ”. Similarly, the High Court of Patna has recentlyruled that a Hindu undivided family cannot as a unit be adjudicatedinsolvent because, inter alia, “ the ownership of the family propertybelongs to the individual members who are existing at the time in undividedshares ”. A. I. R. 1947 Pat. 665.
On the other hand, Mr. Bhashyam’s theory of “ corporate ” ownershipin relation to the joint property (as contrasted with “ individual ”ownership) is by no means novel. Apart from the passage in Mayne’sHindu Law sec. 265 to which I have previously referred, BhashyamAyyengar J., in (1901) 25 I. L. R. Mad. 144 at 154, described the jointproperty of an undivided Hindu family as being “ owned by tl e familyas a corporate body ”. In A. I. R. 1941 P. C. 120 it wac decided that,even in the impartible estate of a joint Hindu family, the head of thefamily (whose individual powers so greatly exceed tl ose of the kartaof a partible estate that they even include an unfettered power of dis-position while the family is undivided in status) could not, for incometax purposes, be regarded as the “ owner ” of the property ; he was intruth the “ owner ” of the income arising from it, but the property was
GRATIAEN J.—Attar.iey-Oentral v. Ramaawami Iyengar
4<tt
nevtrtl.eless “ the property of the joint family Similarly, in A. I. R.1937 P. G. 36 at 38, the judgment of the Board, also pronounced by SirGeorge Raiikine, reminds us that, in certain circumstances, property“ belongs to the family as distinct from the individual ” in the eye of theHindu law. In A. I. R. 1948 P. C. 9 reference is made to “ the view ofsome eminent Hindu lawyers that a joint Hindu family is, in its truenature, J> corporation capable of a continuous existence in spite of fluctuatingchanges in its constitution ”. It was considered sufficient, however, inthat particular case to decide that, for the purpose of entering into apartnership transaction, the family may properly be regarded as “anentity’capable of being represented by its manager ” i.e., the Karta. [TheIndian Courts have subsequently decided that such a transaction couldonly take place through the agency of the karta, because “ a joint Hindufamily, though at times spoken of by judges as a corporation, cannotbe taken as a legal person in the strict sense of the term so as to constitutea partnership between an individual on the one hand and a rial corpora-tion on the other.—(1952) 21 Indian Tax Reports 474.]
I venture to take the view that these apparently conflicting theoriesare not incapable of reconciliation. An undivided family obviouslydoes not possess all the attributes of a juristic person capable as such ofsuing and being sued in the Courts, of being adjudicated insolvent, orof entering into commercial transactions except through the mediumof an agent who is a legal persona in the strict sense of the term. Tothis extent therefore, the doctrine of “ semi-personality ” has not receivedfull recognition in the Courts. Nevertheless, “ many of the advantagesof corporate life ” may be enjoyed today by an unincorporated associationof persons (“ capable of a continuous existence in spite of fluctuating:changes in its constitution ”) without the gift of legal personality bythe State.—Paton: Jurisprudence (2nd Edn.) p. 341. This can beachieved by ^%rious means, for example, where a “ semi-personality ”operates through the agency of a legal persona, or where “ a hedge oftrustees ” is established to afford “ a convenient protection behindwhich the corporate life may flourish ”—Paton Jurisprudence (2ndEdn.) p. 342. In the latter case, “ the property (of the quasi-corporation)is deemed by t*be law to be vested, not in its true owners, but in one ormore determinate persons of full capacity, who hold it in safe custodyon behalf of those …. multitudinous persons to whom it in truthbelongs. The law is thus enabled to assimilate collective ownership tothe simpler form of individual ownership ”—Salmond: Jurisprudence(10th Edn.) p. 337.
This method of approach suggests to my mind a logical solution which*without “ laying an axe at the roots ” of the joint family system ofMitakshara law, preserves that system in its substantial integrity withoutin any way ignoring the modifications introduced from time to timefor the protection of bona fide purchasers for value "and others in thatcategory. The following passage, based on Mitakshara 1 PI. 28 to 30rappears in one of the judgments pronounced in A. I. R. 1952 Mad. 419
B. at p. 439, and lends support to this idea :*
“ The family property is held in trust for the members■ then living and*
thereafter to be born .” .
GRATIAEN J.—Attorney General v. Ramaswami Iyengar
492
Applying this line of reasoning, I would say that, so long as the statusOf a Hindu undivided family remains intact, and so long as there, has beenno division of title dr separation of interests in respect of the whole or anypart of the joint property, the true relationship is as follows :
The “co-parceners” for the time being collectively hold the
joint property for the benefit of all the members then living(including themselves) and of members thereafter to be bom ;to this extent, the undivided family, in spite of fluctuatingchanges in its constitution, may properly be regarded as a cor.porate “ entity ” which is “ the true owner ” of the propertyto the exclusion of its individual members ;
That the male “ co-parceners ” for the time being constitute
at any particular point of time a “ hedge of trustees ” who,while enjoying community of interest and unity of possessionin the property, hold it collectively—indeed, as a sub-divisionof the larger group—for the benefit of the entire family : thepowers attaching to the management of the property, and theobligations towards the individual members who constitute theundivided family are centred in the katM who is<ihe hoadof thefamily for the time being; but in certain respects the powerof alienation can only be exercised by all the “ co-parceners ”acting collectively;
That upon the death of any male “ co-parcener ”, his “ interest ”
is automatically extinguished, and the property continues tobe held by the surviving “ co-parceners ” for the benefit of theundivided family; in other words, the interest which theyenjoy upon his death is in truth a “ pre-existing interest ”,no more and no less. (See A. I. R. 1941 P. C. 70 at 78).
The position as set out above represents, in my opinion, the true distinc-. tion between the property rights of the family unit on the one hand and ofits individual “ co-parcenary ” members on the other, so long as thefamily remains undivided in status. This distinction is preserved untilthere has occurred either a complete or partial “ division of title andseparation of interests ” between the “ co-parcenary ” members, in oneor other of the modes recognised by the Mitakshara law. The “ co-parceners ” are no doubt invested with power to remove the ‘“hedge ”which protects the property rights of the so-called “ corporation ”. Itis also possible, as an alternative, to pass some part of the propertybeyond the reach of the protecting “ hedge ”. But, generally speaking,the concept of individual ownership of joint property is ruled out whilethe corporate existence of the family is still intact.
c
In this view of the matter, it follows that, during the lifetime of Aruna-chalam Chettiar (jnr.), there had been neither a complete nor a partialdivision of title or separation’ of interests in the joint property of theundivided fafiiily of which he was at all material times a “ co-parcenary ”member. Upon his death, therefore, no effective change occurred inthe title or possession of the joint property belonging to the undivided
GRATIAEIST J.—Attorney-General v. Ramaswami Iyengar
493
family. His father who survived him did not, in consequence of thatevent, receive any “property ” which he did not have before. In theresult, section 7 does not apply.
The circumstance that, upon the death of Arunachalam (jnr.) hisfather became the sole surviving “ co-parcener ” does not, in my opinion,introduce an alteration of property rights. For, although the powerswhich a sole surviving “ co-parcener ” over the joint property became,according to Mitakshara law, virtually unfettered except by moralconsiderations, nevertheless the death of Arunachalam (jnr.) did notoperate* either to disrupt thje undivided family or to bring about anextinction of the beneficial ownership of that family in the property.The'surviving “ co-parcener ” still continued, as he had previously done,to hold the property in fact and in law for the benefit of thefamily.
[After we reserved our judgment on this appeal, the consequences of aman becoming the “ sole surviving co-parcener ” of what was previously“ the joint property of a Hindu undivided family ” was more fullydiscussed during the argument in the connected appeal (S. G. 236 of1951 ID. G. Colombo 38 Sprpial *). I see no reason to alter the views whichI have ventured to express in my present judgment.]
A question was raised in this Court for the first time as to whether,in regard to the immovable property which forms part' of the estate soughtto be taxed, the lex situs brings into operation section 7 of the WillsOrdinance (Cap. 49) and/or section 18 of the Partition Ordinance (Cap.56). These sections were introduced for the purpose of preventing theshare of a co-owner, in the strict sense of the term, from devolving bysurvivorship instead of by succession on his death. The intention,apparently, was to exclude the incidence of “ joint tenancy ” under theEnglish Law, but the sections have no relevancy to the “ devolution ”of a “ co-parcener’s ” interests in any part of the joint property of aHindu undivided family.
I have so far concluded that an actual “ passing ” of property did nottake place witlthl the meaning of section 7. I therefore proceed toconsider whether there was at any rate a notional “passing” undersection 8 (1) (a) or section 8 (1) (b). The latter section can more con-veniently be disposed of first. Was there a “ cesser ” of the deceased’sor anyon<3 else’s “interest ” in the property upon his death, and if so,did a “ benefit accrue or arise ” to his father by reason of that cesser 1The precise nature of an “ interest ”, whose cesser attracts estate dutyif the second condition laid down by section 8 (1) (b) is also fulfilled,can only be understood by an examination of the connected section17 (6). The deceased or someone else must have enjoyed in respectof the property *a beneficial interest capable of valuation in relation to theincome which the property yields.
In the present case, the deceased did not enjoy during his lifetimean interest which “ extended ” either to the whole or to 'a fractionalpart of the income. A. I. R. 1941 P. G. 120 at 126. He merely had
* See page 496 [infra).—Ed.
GRATIAEN J.—Attorney-General v. Ramaswami Iyengar
494
a right to be maintained by the Jcarta out of the common fund to an extentwhich was at the Jcarta’s absolute discretion; in addition (he could, ifexcluded entirely from the benefits of joint enjoyment, ’have takenappropriate proceedings against the Jcarta to ensure a recognition of his-future maintenance rights and also to obtain compensation for Ms earlierexclusion. I find it impossible to conceive of a basis of valuation wMch,in relation to such an “ interest ”, would conform to the scheme pre-scribed by section 17 (6). Nor do I think that, upon a cesser of thatso-called “ interest ”, a “ benefit ” of any value can be said to haveaccrued to the surviving “ co-parcener ” when the deceased’s “ interest'ylapsed. Section 8 (1) (6) is therefore 'inapplicable to the presentcase.
There remains the alternative submission wMch was based on section8 (1) (a). The arguments presented on behalf of the Crown, if I correctlyunderstood them, were to the following effect:
(а)that (having regard to the recognition now given to the rights of
purchasers for value) a “ co-parcener ” is at any point of time“ competent to dispose ” of a fractional share of the jointproperty for value, the appropriate fraction ebbing ascertainedby reference to the total number of “ co-parceners ” thenalive;
(б)that, in the alternative, a “ co-parcener ” may at any time form
a unilateral intention to separate Mmself from the undividedfamily and to communicate that decision to the other “ co-parceners ”; he would thereupon become vested with a■«“ definite and certain share ” of which he would be “ competent
to dispose ” in any way he pleased.
c
I reject the first of these submissions. An alienee for value does notbecome vested immediately with a definite share in specie of any partof the joint property. No share is “ carved out ”, so to speak, of thejoint property until the Court has subsequently “ worked out the equities ”between the purchaser and the non-alienating “ co-parceners ” inappropriate partition proceedings. Before that occurs, it cannot besaid that there is actually in existence any “ property ” of which a “ co-parcener ” is “ competent to dispose ” within the meaning of section8 (1) (o). I h'aye assumed in this connection, although I do'not hold,that the section’ applies if a man can “ dispose of ” specific propertyonly for valuable consideration but not in any other way.
With regard to the alternative submission, I concede that, upon thecommunication of his unilateral decision to separate himself in statusand title from the undivided family, a “ co-parcener ” immediatelybecomes “ competent to dispose ” of the definite share wMch he thusacquires for the first time. A. I. R. 1916 P. C. 104. But no such“ competence ” exists until the necessary disposing qualification (i.e.,by the formation of an intention followed by its communication to theothers) has been first attained. In the facts of the present case, Aruna-chalam Chettiar (jnr.) had, until he died, formed noc intention to separate
GRATIAEN J.—Attorney-General v. Ramaswami Iyengar
495
himself from the family; still less had he communicated such an intentionto his fatheij; in the circumstances, he enjoyed at best an option (whichhe could have exercised) of attaining competency to dispose of a frac-tional share of the property, and that option, being personal, died withhim. A man is not “ competent ” to do something until he has placedhimself in a position to do it effectively.
Mr. Jayawardena relied strongly on the decision of Luxmoore J. inBe Penrose1, where a person was held to be “ competent to dispose ”of property within the meaning of section 5 (2) of the Finance Act, 1894,of England, if he can achieve that result by taking “ two steps insteadof one ”, namely, by an appointment to himself, followed by a subsequentgift’by way of disposition. The necessity of visualising a succession ofacts done by a person in order to qualify himself for “ competence todispose ” of property no longer seems to arise in England, because theCourt of Appeal has since decided that “ the ability to make a thing yourown ” is by itself sufficient to satisfy the requirements of section 5 (2)of the act—In re Parsons 2.
The ruling in Penrose’s case {supra) cannot assist the Crown in thepresent c^se. J’or the purposes of section 8 (1) (a), “ competence todispose ” must exist at a single moment of time, namely, the momentimmediately preceding a man’s death. Section 5 (2) of the FinanceAct, 1894, of England, on the other hand, contemplates a period of timewithin which there is scope for a number of separate and distinct acts to takeplace in a given order of succession. On the other hand, section 8 (1) (a)does not apply unless the formation of an intention to separate and thecommunication of that intention to others, have both preceded the potential“ disposition ” of property by a “ co-parcener ”. I do not think that eitherthe words of the section or the spirit of the Ordinance require a Court, forthe purpose of Sanctioning the imposition of estate duty, to contemplatea notional synchronisation of a succession of distinct events. The Penrosecase must not be regarded as deciding that the deceased person concernedwas competent to dispose of the fund “ at the time of his death ”. More-over, I do not find myself compelled to place a construction on ’section8 (1) (a) which would have the effect of attracting estate duty where adeceased person did not in fact dispose of any property before he died,and where, in consequence, his interest in that property lapsed upon hisdeath without consequential benefit accruing to anyone who survivedhim. The Ordinance was not enacted to impose a penalty for thenon-disposition of rights which become extinguished on.'deoth.
Finally, the present assessees could not be made accountable in thepresent case for any estate duty levied under section 8 (1) (a). Theoriginal machinery for the assessment and collection of duty payableunder the Ordinance had, before any assessment was made, been super-seded by the machinery laid down in the later Estate Duty Ordinance(Cap. 187—see sec. 79). Under section 24 of the new Ordinance, the“ executor ” of a deceased’s estate is the person primarily accountablefor duty levied on property which he was “ competent to dispose ” athis death. The assessees in this case are the administrators only of1 (1933) Ch. 793.a (19m Ch. 72..
Ramaswami Iyengar v. Attorney-General
496
the deceased father’s estate, and were not “ executors ” of the deceasedbecause, even if the definition of that term in section 77 wpre called inadd by the Crown, neither they nor Arunachalam Chettiar (snr.) had“ taken possession or intermeddled with ” the deceased’s property afterhis death. Such “interests” as the deceased enjoyed in the joint pro-perty during his lifetime were automatically extinguished when, he died.A man cannot intermeddle with something that does not exist.
In the result, I would hold that the Crown’s claim to estate dutyfails, because there was neither an actual “ passing ” of property undes?■section 7 nor a notional “ passing ” of property under section k uponthe death of Arunachalam Chettiar (jnr.). The appeal must accordinglybe dismissed with costs.
It is no longer necessary to deal with the assessees’ contention (whichwas submitted in appeal before us with very little enthusiasm) thatsection 73 of the new Ordinance operates retrospectively so as to exemptthe joint property of a Hindu undivided family even in the case of“ co-parceners ” dying before 1st April, 1937. Section 73 of the newOrdinance does not appear to me to have any relevancy either way to•the consideration of this appeal.e» <=>«
<Gunasekaba J.—I agree.
Appeal dismissed.