Taxation is not just an avenue for filling up the state exchequer but also a pivotal element of the economic governance of the country. In India, both the central and state governments levy taxes. The goal and main aim of taxation are to simplify investment for companies and individual tax payers by eliminating inconsistencies that provide preferential benefits to particular persons or organisations, streamlining progressive tax regimes, and eliminating gaps that benefit particular groups. Through tax reforms, the government can provide impetus and boost economic activity by increasing private investment capital and foreign investment in the market.
The government introduced a new tax reform known as the Goods and Services Tax with the aim of simplifying taxation in India. Tax reforms were a challenge for the unification of the tax code in the whole country. In recent times, India has introduced some important economic reforms to streamline tax code, increase compliance, the corporate tax rate, phase out of exemptions, reduce tax evasion, the black money Act, etc. The local state government body, like a municipality, also levies taxes in India. In India, reforms have been ushered in with the goals of encouraging investment and stimulating the country’s economy.
GST has greatly given impetus to the compliance framework for businesses, drastically reducing compliance costs and thus helping companies in the development and growth of their businesses. The GST collection for February 2024 was Rs. 168337 crore, a 12.5 percent increase from the previous year.
One way of doing this is to reduce marginal tax rates, as it increases people’s disposable income and encourages investment by way of FDI & HNI in enterprises. Increasing the amount that firms can deduct from taxes is another way to encourage investments, make them more affordable, and provide parity between sectors that require a lot of capital and those that don’t, both of which can deduct the entire cost of their investments from taxes.
A reduction of 5% in corporate income tax for domestic businesses in 2019 and 2020 resulted in a notable rise in investment, particularly for larger businesses. In developing countries, a cut in tax encourages foreign investment, with larger local enterprises benefiting more than smaller ones. Thus, a simplified tax regime has the ability to broaden the tax net and bring workers and enterprises into the tax system. This can be accomplished by offering incentives to companies so they register and abide by the tax regulations, as well as by streamlining the tax code to make compliance simpler.
Understanding tax reforms in India
Indian fiscal policies have traditionally relied on tax reforms as a primary tool to influence economic outcomes and achieve government objectives. Tax reforms encompass a broad range of measures aimed at modifying the structure, rates, and administration of taxes. These reforms can have significant impacts across various economic sectors, affecting businesses, individuals, and the overall economy.
In the context of India, where economic development and growth are top priorities, tax reforms become imperative for several reasons. Firstly, tax reforms can help create a more conducive environment for investment. By introducing measures that reduce tax burdens on businesses and individuals, the government can incentivize investment and promote economic growth. For example, lowering corporate tax rates or offering tax incentives for research and development can encourage businesses to invest more in India, leading to job creation and increased economic activity.
Secondly, tax reforms can play a role in addressing income inequality and promoting social justice. Progressive tax systems, where higher earners pay a larger proportion of taxes, can help redistribute wealth and provide resources for government programmes that support low-income individuals and communities. By ensuring that the tax burden is shared equitably, tax reforms can contribute to social stability and inclusivity.
Thirdly, tax reforms can improve the efficiency and effectiveness of government spending. By streamlining tax collection and administration, governments can reduce tax evasion and increase revenue collection. This can provide additional fiscal space for the government to invest in infrastructure, education, healthcare, and other public services, which are essential for long-term economic growth and development.
However, it’s crucial to note that tax reforms need to be carefully designed and implemented to avoid unintended consequences. Sudden or drastic changes in tax policies can create uncertainty and disrupt economic activities. Therefore, tax reforms should be based on sound economic principles, consider the impact on different stakeholders, and be implemented gradually to allow for adjustments and minimise disruptions.
Overall, tax reforms can be a powerful tool for achieving economic development and growth in India, particularly when they are aligned with broader economic policies and development goals. By promoting investment, addressing inequality, and improving government efficiency, tax reforms can contribute to a more robust and inclusive economy. The effects of tax reforms are decisive for all economic activity, big and small, to make judicious investment decisions that promote prosperity and growth. This paves the way for a mutually beneficial connection between the state and its people, and taxation blends that relationship together.
Reforms like decreasing corporate tax rates and providing sops by way of waivers or tax holidays for particular industries have also been put in place to encourage investment and increase economic activity.
Impact on investment decisions
The impact of tax reforms on investment decisions is a complex and multifaceted issue. A number of factors must be considered when evaluating the potential impact of tax reforms on investment, including the type of tax reform, the specific provisions of the reform, and the economic context in which the reform is implemented.
One of the most important factors to consider is the type of tax reform. There are two broad categories of tax reforms: those that increase taxes and those that decrease taxes. Tax increases can have a negative impact on investment, as they reduce the after-tax returns to investment. Tax decreases, on the other hand, can have a positive impact on investment, as they increase the after-tax returns to investment.
The specific provisions of a tax reform can also have a significant impact on investment. For example, a tax reform that reduces the corporate tax rate may encourage businesses to invest more in new equipment and facilities. A tax reform that eliminates a particular tax deduction may discourage businesses from engaging in certain types of investments.
The economic context in which a tax reform is implemented can also affect its impact on investment. For example, a tax reform that is implemented during a period of economic growth may have a more positive impact on investment than a tax reform that is implemented during a period of economic recession.
In addition to these factors, there are a number of other considerations that must be taken into account when evaluating the potential impact of tax reforms on investment. These include the impact of tax reforms on other economic variables, such as consumption and saving, and the impact of tax reforms on government revenues.
Overall, the impact of tax reforms on investment decisions is a complex issue that depends on a number of factors. It is important to carefully consider all of these factors when evaluating the potential impact of a tax reform on investment.
Corporate investments
Any taxation revisions or reforms have a direct impact on any corporate capital infusion decisions because they affect expected earnings and the cost of equity. For example, lower corporation tax rates encourage businesses to hold onto their profits by increasing cash reserves. This includes company expansionary investment and R&D projects, all of which support economic growth.
Take the case of the CFO of a well-known manufacturing company, Mr. Rajesh Sharma. He highlights, “Our investment decisions have been greatly impacted by tax revisions.”. This impacted his company’s decision to leverage more money for market penetration tactics, technical advancements, and capacity development thanks to the recent reductions in the corporation tax rate.
Small and medium enterprises (SMEs)
Small and medium enterprises (SME), which greatly boost GDP growth and job creation in the Indian economy. Tax measures, such as lower tax rates and simplified compliance procedures, are tailored to support small enterprises and SME. Which have a significant impact on their investment decisions. These reforms make them more competitive and support their growth in the process.
The CEO of a tech start up, Ms. Neha Singh, discusses her experience: I am a small business owner, and tax reforms directly affect the investments I make. My tax burden under the new GST regime was greatly reduced. The tax rates and compliance burden were greatly reduced.
This saved her money helped her with resources that she could use for product development and marketing campaigns.
Foreign Direct Investment (FDI)
A better tax regime in India can hugely impact the country’s economy through investment. Any FDI investment can only be lured by a favourable tax climate by implementing tax reforms. The new Indian government has shown its commitment to promote an open and friendly investor tax regime with the introduction of the Direct Tax Code (DTC) plan and the revocation of the Dividend Distribution Tax (DDT).
CEO of a MNC, Mr. John Smith, says, “Their company has made better investment decisions as a result of the tax reforms in India. For overseas investors like them, the Indian market is more alluring due to the lower corporate tax rates and more straightforward tax laws.”
Empowering entrepreneurs
A reduction in tax by way of tax reforms allows entrepreneurs to boost their income and the economy. Tax reform is the process by which taxes are managed and collected by the government. By offering tax advantages to the business communities for an equitable economic field. It is entrepreneurs who play a decisive role in driving economic growth and innovation.
Young business queen Ms. Priya Khanna describes her experience: “That tax incentives offered under the Startup India initiative provided her the confidence to turn her creative ideas into a successful business.”
Though taxes are not the only issue, achieving her goals and generating jobs are also important.
Creating opportunities
By lowering the tax slab on individuals and business ventures and improving the fairness and equity of the tax system , it can help create opportunities for economic growth. This way, tax reforms open a plethora of opportunities for citizens and business entities.
A small-scale startup Mr. Anand Gupta recollects that “he was able to concentrate on growing his business since the GST regime made tax compliance easier and lessened the cascading effect of taxes. It serves as evidence of how changing policies can drastically alter lives.”
Tax reforms promote economic activity more if the burden is lowered on individuals and businessmen. Just by simplifying the tax code, it helps streamline tax payers compliance with all legal requirements without much legal hassle.
Fostering inclusive growth
Tax reforms greatly affect employment rates, foster economic growth stories, pump investments, and all support inclusive growth of the economy. A reduction in corporate tax, for instance, provides a boost and an incentive to business houses to leverage their economic investment, thus augmenting the country’s GDP. But it has other sides too; a tax cut may boost the earnings of entrepreneurs, but it may lower the coffers of the government . This may impact government spending on infrastructure and social welfare schemes and programmes. Some ways to implement tax reforms for inclusive growth include bringing more entities into the tax bracket, ensuring neutral taxation on entrepreneurial income, and minimising tax evasion.
Tax policies that are inclusive guarantee that everyone in society benefits from economic expansion. A recipient of the government’s housing programme, Mrs. Reena Devi says, “I was able to realise my ambition of owning a home thanks to the tax incentives for affordable housing. For me, it’s about giving my family security and dignity, not just a tax advantage.”
This sums up the glaring example of tax reforms in India.
Tax reforms serve as an inclusive guarantee that everyone benefits from the expansion of economic activity. A beneficiary of the government housing programme, Mrs. Reena Devi says that she was able to realise her ambition of owning a house thanks to the tax incentive for affordable housing. For her, it was the stepping stone for providing her family security and dignity, not just a tax advantage”. This sumps up tax reforms in India.
Conclusion
In India, tax reforms have a big impact on investment decisions, which affects how the economy flourishes and develops. To uplift the economy of India as a manufacturing hub, it becomes paramount to bring parity to all categories of corporate tax and other taxes. With a slash in corporate tax, more money is being infused into the economy, thus strengthening the private sector. The private sector is getting more incentives and influxes of money for their businesses. Tax reforms bring prosperity through innovative jobs, and their ripples are felt across from small business owners to big businesses.
The economic impact of these amendments in tax rates will slowly become visible, as reduced corporate tax would leave companies with excess cash to fund their expansions and bring in more growth stories. This, in turn, will help improve the competitiveness of Indian companies in the global market.
On the other hand, a high tax regime on corporate tax may shift investment to lower tax jurisdiction for HNI investors. Which indirectly goes a long way in impacting a country’s growth . The policymakers continue to make the tax system on par with the market and investor friendly to boost the economy. So that all citizens are part of the progress of the country.
The process of recruiting, hiring, training, compensating, developing policies, and developing strategies to retain individuals to accomplish the organisation’s mission, vision and goals is known as human resources management (HRM). HRM is focused on the people that work for an organisation. Despite this, the position is highly significant and demanding due to the dynamic nature of the employees. Over the last two decades, significant transformation has increased its significance in today’s businesses and in HRM as a field. People, in this approach, are seen as the most important resource. The human aspect of an organisation’s management is what it focuses on. It is important to maintain the degree of dedication that each member of the organisation has to acquire and improve their skills and motivate them to reach greater goals, since an organisation is made up of people. Acquisition, development, motivation, and maintenance of human resources are the four primary tasks of the human resource management method. The focus on the growth of the individual, and the group, as well as the interactions between management and employees, are mainly related to those areas of operations that human resource management is responsible for. HRM is also responsible for maintaining positive relationships among individuals in the business. Furthermore, it is focused on the successful integration of organisational and individual goals and the advancement of personal growth. HRM mainly deals with planning, organising, directing and controlling the personnel functions of the business. In order to guarantee the effective use of human resources, the HR department will make optimal use of all other organisational resources. As an organisational resource rather than a factor of production, HRM is concerned with managing people. Recruiting, selecting, hiring, training and developing human assets involves a system that businesses must adhere to. The manner in which management recruits, develops, and uses personnel has a significant impact on the achievement of organisational goals.
Integrating HRM across the organisation: managing employees at all levels
HRM principles and policies assist organisations in achieving their objectives. HRM is a widespread activity that spans the organisation, managing employees from all levels, not just one department. HRM focuses on people as its primary priority. HRM works with and for individuals. It connects individuals and organisations to achieve common aims. HRM is a continual activity that requires ongoing training, development, and replacement to be competitive. HRM is part of the management role. It handles personnel issues such as hiring, training, development, compensation, motivation, communication, and administration. The primary goal of HRM is to maximise staff productivity. HRM aims to effectively achieve organisational goals by matching the right people to the right tasks. Additionally, it aims to provide skilled and motivated staff to assist the organisation in achieving its goals efficiently, make good use of the available human resources, maximise the employee’s job satisfaction and self-actualization, enhance the organisation’s quality of work life (QWL), promote a positive personal and social environment, and assist in the maintenance of ethical policies and behaviours both within and outside of the organisation. To establish and maintain amicable relationships between employees and management and align individual/group goals with organisational goals.
The influence of information technology on HRM and it’s practices
In recent years, IT has had an impact on practically every element of our society, as well as organisational procedures such as HRM methods and practices. To create competitive advantages, effective HRM requires adequate updates. Information on present and potential employees in the employment market. Through development, IT Evolution has enhanced the technique of gathering this knowledge of HRIS systems. HRIS encompasses systems and procedures that link HRM and IT. After the successful adoption of ERP (Enterprise Resource Planning) and CRM (Customer Relationship Management) solutions, which attempt to improve the processes for making decisions concerning workers, enterprises frequently choose to introduce this information system. To increase overall efficiency by boosting the efficiency of HRM, IT has enabled the widespread use of HRIS systems and aid firms. The way HR work is accomplished and continuous innovations in technology will fundamentally change. Information systems have a significant impact on HRM. It altered HR procedures and practices, particularly how organisations acquire, store, use, and communicate information.
For organisations, the quality of HRM is an important success factor. Environmental, social, economic, political-legal, and technical factors should be analysed by the HR professional. HRM has been compelled to adopt new logic, and most HR managers must abandon obsolete habits, ways of thinking and actions. On the other hand, to enhance human capital, they should assist organisations in defining their strategy and developing programmes. In fact, to attract, select, motivate and retain skilled employees in their roles, technology has transformed the way HR processes are currently managed, essentially, how organisations collect, store, use and disseminate information about their HR are the main goals of HR in organisations. HRIS determines the combination of HRM and IT. HRIS is a management system that is specifically developed to provide managers with information to help them make HR choices. A system that allows one to track all of their employees and their information. It is often done in a database or, more commonly, in a set of interconnected databases. In this context, by improving recruitment processes, organisational communication, employee involvement, and HR manager skills, information systems have boosted HRM efficiency. From there to the best technical solutions, HRM departments must link human capital strategy.
The Human Resource Information System (HRIS) enables businesses to manage and automate basic HR procedures. These HR software solutions provide time and attendance, benefits administration, and payroll, among other operations, as well as the storage of employee data such as personal, demographic, and salary information. To support fundamental HR activities that are more linear and quantitative in nature, such as time and attendance management or payroll processing, a Human Resource Information System (HRIS) relies on an employee database. Only a few years ago, large businesses mostly used HRIS solutions. However, it becomes increasingly possible for smaller and growing businesses to reap the benefits and efficiencies of an HRIS as integrated cloud-based systems gain popularity. Here are some instances of firms that have successfully used SAP SuccessFactors solutions to optimise HR procedures:
For over twenty years, with a diversified and dispersed workforce, Growmark has been serving farming enterprises in the United States and Canada. To integrate and automate activities throughout the whole employee life cycle, they utilised SAP SuccessFactors products. While also attracting and nurturing the skills to help its customers flourish, GROWMARK, as a result, can manage effective HR procedures.
By providing extensive product selections at low rates, the Kmart Group transformed shopping in Australia, New Zealand, and Asia. To enhance employee experiences and revolutionise the work in over 500 Kmart, Target, and Catch locations, it turned to SAP SuccessFactors solutions when the company sought to reinvent it HR system.
SAP SuccessFactors is an American multinational corporation that offers cloud-based human capital management software using the Software as a Service model. Workday, Oracle Cloud HCM, and Ceridian Dayforce are some competitors.
Advantages human resources and employees get from HRIS
Human intervention and the possibility of errors can be reduced by automation of tasks. The system stores all information, reducing paperwork and allowing multiple users to access it simultaneously. Multitasking facilitates HR procedures and saves time. Quick response to changes and improvisations. Retrieval and processing of data at a higher speed, ease in classifying and reclassifying data; ad hoc reporting, documentation, and analysis; and customisation, privacy and security for users are offered. HRIS increases transparency in the company by improving communication and connections between management and employees. Every organisation must comply with state and federal labour laws and regulations. By ensuring that the company follows labour regulations and avoids costly penalties, a good HRIS aids the HR staff. It might incur a substantial cost, depending on the role and function of the HR department. Without an HRIS, the HR department might have to pay a variety of charges, including recruitment fees, administrative fees, development costs, and training and development. An effective HRIS brings costs down. Activities such as document collection and transmission, employee time tracking, and payroll generation can be automated by an HRIS. Such a technology automates these operations, allowing HR specialists to concentrate on activities that provide a higher return on investment. An HRIS enables a business to make sure that its workforce adheres to industry standards’ rules and regulations.
Conclusion
Many organisations are implementing HRIS, which combines HR and IT, as a strategic tool to increase corporate competitiveness. To be an enterprise-wide decision support system that helps achieve both strategic and operational goals, HRIS has the potential to enable it. To remain competitive in the market, firms are automating HR operations, implementing HRIS, and utilising the internet and intranet. Addressing the needs of all stakeholders, HRIS serves as the company’s spine. Among firms, HRIS improves effectiveness, efficiency, and competitiveness.
Where information technology facilitates communication freely between integrated features, HRIS must be driven by strategic vision and it should be implemented as an open system. The organisation, HR, and employees are provided numerous benefits by using an HRIS. When the organisation has between thirty and fifty people, working with this type of software usually becomes fascinating. Managing basic employee information in Excel becomes onerous, and simple procedures like approving employee time off need to be standardised. For large organisations, which often employ more advanced HRIS systems to handle various HR functions, using an HRIS is especially helpful. As for small businesses, a simpler HRIS would be appropriate. For Human Resource Planning (HRP), HRIS is a great tool. It improves the accuracy with which vacant openings are identified and analyses each employment position and its title inside an organisation. Despite facing obstacles such as forecasting labour demand and supply, access to information, workforce shortages and recruitment costs, it also gives insight into organisational training needs, selects the best people to educate, and evaluates the efficacy of training programmes.
This article has been written by Jaanvi Jolly. It seeks to analyse the decision of the court in the case of Commissioner of Wealth Tax vs. Chander Sen (1986). It discusses the applicability and effect of Section 8 of the Hindu Succession Act, 1956. It also examines the change in position pre and post the commencement of the HSA, 1956, in matters of devolution of interest in coparcenary property. It also assesses the opinions of various High Courts on the issue and the final opinion of the Apex Court.
Hinduism is considered to be one of the oldest religions due to its roots preserved in the Vedas, along with Shrutis and smritis. One of the most novel and distinguishing aspects of Hindu law was the ‘Joint Hindu family’ or the ‘Hindu undivided family’. Jointness is considered a usual or general condition of Hindu society, and a Hindu family is ordinarily presumed to be joint not only in the property, which is ‘unity in possession’ but also in food and worship. A joint Hindu family originates from a ‘common male ancestor’ and extends to his male descendants, the children of the male descendants, the wives of the male descendants, unmarried daughters, adopted children, the widows of male descendants and the divorced daughters. Therefore, there are three ways in which a person can become a part of the joint Hindu family. First, by taking birth in such a family; second, by marrying into the family; and third, by adoption into the family. This Hindu joint family keeps on continuing until there is a partition in the family.
The common male ancestor is only important for the origination and not for the continuation of the Hindu joint family. Within the wider component of the Hindu joint family, we find the existence of the concept of ‘coparcenary’, which consists only of the male descendants of the common male ancestor up to four degrees from the last male holder alive. For instance, if ‘F’ were the last male holder, the coparcenary would consist of F, FS, FSS, and FSSS. However, by Section 6 of the Hindu Succession (Amendment) Act 2005, even the ‘daughter of a coparcener’ has been made a coparcener by birth in her own right, like the son.
The coparcenary was the unit that had joint ownership of the property of the joint Hindu family, which is the ‘community of interest’ that vests in the coparceners. The share of a coparcener in the joint Hindu family property after his death is determined by the process of survivorship for the surviving coparceners. However, the separate property of such a coparcener, which would include his share in the coparcenary property after partition, would pass down first upon the son, next upon the widow of the deceased and in the absence of both, on the daughter. The position of devolution of both coparcenary and separate property has been modified by the HSA 1956, which is discussed in the article.
Facts of Commissioner of Wealth-Tax vs. Chander Sen (1986)
A joint Hindu family existed between Rangi Lal and his son, Chander Sen (respondent in the present proceeding). The joint family possessed some immovable property along with a family business, which was continued in the name of Khushi Ram Rangi Lal. On October 10, 1961, a partial partition was affected in the family, and only the business was divided between the father and the son. After such partition, the business was carried on in a partnership consisting of the father and the son together. In the following year, the firm’s income tax was calculated as a registered firm with two partners. The father and the son were separately assessed for the share of their income. Despite the business being partitioned, the immovable property of the family remained joint.
On July 17, 1965, the father, Rangi Lal, passed away, leaving behind his son, Chander Sen and his grandson, who was the son of Chander Sen. Chander Sen filed the return of his income for the assessment year 1966-67 (valuation date October 5, 1965), which included the property of the family, which, on the death of Rangi Lal, devolved upon his son Chander Sen by survivorship, along with the assets of the business, which devolved upon Chander Singh after his father‘s death. At the time of Rangi Lal’s death, there was a credit balance of Rs. 1,85,043 that stood to the credit of Rangi Lal after the partition of the business and was not included by Chander Sen in the net wealth of the family. Rather, it was claimed by him as a separate property on the ground that he succeeded to such an amount in his independent capacity and not as the property of the Hindu joint family. This contention of Chandra Sen was refused by the wealth tax officer, who contended that this sum also belonged to the joint Hindu family and not to the respondent alone.
Subsequently for the assessment year 1967-68, a sum of Rs. 23,330 was credited to the account of Rangi Lal, which was the interest on his credit balance subsisting in the account. This sum was claimed as a deduction in the computation of the business income by Chander Sen, as this was now due to him in his individual capacity as an heir of the deceased. At the end of the year, the credit balance in the account of Rangi Lal, amounting to Rs. 1,82,742, was transferred to the account of Chander Sen. Additionally, in the assessment under the Wealth Tax Act for the years 1967-68 the respondent contended that the credit balance in the account of Rangi Lal belongs to him in his separate capacity and not to the joint Hindu family. However, in the income tax assessment, the claim relating to interest was disallowed on the ground that these were payments made by the respondent to himself. Similarly, in the wealth tax investment as well, the sum of Rs. 1,82,742 was included in the wealth of the family and not in the individual wealth of the respondent.
An appeal was filed before the Appellate Assistant Commissioner of Income Tax, who accepted the respondent’s claim that the credit standing devolved upon him in his individual capacity and directed that the income tax assessment of the sum of Rs. 23,330 on account of interest should be allowed as a deduction.
Aggrieved by this decision, the revenue department filed three appeals before the Income Tax Appellate Tribunal, which consisted of two appeals against the assessment under the Wealth Tax Act 1957 for the years 1966-67 and 1967-68 and another appeal against the calculation under the Income Tax Act 1961 for the years 1967-68. All three appeals were dismissed by the tribunal.
Subsequently, two questions were referred to the High Court for its opinion-
Whether, on the facts of the case, the decision of the tribunal that the sum of Rs. 1,85,043 and Rs. 1,82,742 would not constitute the assets of the Hindu undivided family was correct?
Whether, on the facts and circumstances of the case, the interest of Rs. 23,330 was allowable deduction in the computation of the business profit of the Hindu joint family?
The High Court stated that the decision on these questions would depend upon the answer to the following question- Whether the amount of standing credit belonging to Rangi Lal was inherited by the respondent in his individual capacity or in the capacity of the ‘Karta’ of the Hindu joint family?
The amount in dispute was given to Rangi Lal, which included the amassed profits earned by the firm, which fell into his share when the partial partition took place between him and his son. One thing was clear before the High Court that had Rangi Lal been alive, his share in the business would not be said to belong to the Hindu joint family and for Chander Sen and his sons, it constituted the individual property of Rangi Lal and after his demise, the amount devolved upon his son, Chandra Sen, by intestate succession. The High Court discussed the law that existed prior to HSA 1956. Under the traditional Hindu law, when any property was inherited by a son, which was the separate or self-acquired property of his father, that property assumed the character of joint Hindu family property in the hands of the son for his family, which would include his sons. However, the High Court noted that after the enactment of the HSA 1956, this position has undergone a change. Now, as per Section 8, any property of a male Hindu dying intestate is devolved to his heirs as per the provisions of Section 8-13 read with Schedule 1, and the heirs mentioned in the Act would inherit the property in their individual capacity. Thus, the High Court held that Chandra was the only heir and he inherited the property in his individual capacity and not as the Karta of the Hindu joint family and answered both questions in the affirmative in favour of the respondent –
That the amount of Rs. 1,83,043 and Rs. 1,82,000, which was the standing credit in the firm business on account of Ragi Lal, was not the property of the Hindu undivided family
The amount of Rs. 23,330 would be allowed as a deduction.
Subsequently, three appeals were filed against the decision of the Allahabad High Court by filing a special leave under Article 136 of the Constitution before the Supreme Court. Two of these appeals were in regard to the assessment in the years 1966-67 and 1967-68, which originated out of the proceedings under the Wealth Tax Act 1957 and the third appeal was linked to the proceedings under the Income Tax Act 1961 relating to the calculation for the years 1968-69.
Issues raised
Whether the wealth or estate that a son inherits from his father after his demise, (when it has already been divided by partition), would be included as income of the Hindu undivided family of the son or his individual property, that is, whether it would be a coparcenary property or the son’s separate property?
Arguments of the parties
Petitioners
The petitioners claimed that any property that a male Hindu inherits from his father, ‘father’s father’ (grandfather) or from ‘father’s father’s father’ (great grandfather), would be a coparcenary property vis-a-vis his branch, which would include his sons. Therefore, they claim that the property that the respondent inherited after the demise of his father was in the capacity of Karta of the Hindu undivided family and not in his individual capacity.
Respondent
The respondent claimed that after the enactment of the Hindu Succession Act, 1956, the method and process of succession had been overhauled, and since his father died after the commencement of the Act, he would inherit the property as per Section 8 read with Schedule 1. Which mentions only the ‘son’ and not the ‘son’s son’ as a class 1 heir. Consequently, he claims that any property that he has inherited from his father would constitute his separate property inherited in his individual capacity, and he would not inherit it in the capacity of the Karta of the Hindu joint family, which would give his sons a birthright in such property.
Laws/concepts involved in this case
Section 4 of the Hindu Succession Act 1956
This Section provides an overriding effect to the provisions of the Act over ‘any text, rule or interpretation’ of traditional Hindu law or any other law, ‘custom or usage’ that was in force before the commencement of the Act. By effect of this section, the provisions of HSA 1956 would prevail over any contradictory rules provided in traditional Hindu law.
Section 6 of the HSA, 1956 (prior to the Hindu Succession (Amendment) Act, 2005)
This Section brought about a landmark change in the process of inheritance in Hindu law. Prior to the commencement of the HSA 1956, the rule that was followed was that of survivorship, according to which when a coparcener died with an undivided interest in the joint Hindu family property, after his death, his share passed on to the remaining coparceners. However, after the HSA 1956, Section 6 introduced the concept of ‘notional partition’ as per that where a male Hindu coparcener dies with an undivided share in the coparcenary property, it shall be deemed that he sought a partition immediately before his death, and whatever share he would have gotten at that time would be deemed to be a separate share and can be inherited by the class 1 heirs in succession. However, this rule of succession would only apply if the male Hindu had left behind surviving him a female relative in class 1 of the schedule or a male relative who claims to be such a female and has been mentioned in the class 1 schedule. In this case, the rule of survivorship would give way to the rule of succession.
Section 8 of the HSA, 1956
This section provides the general rules for intestate succession in the case of a male Hindu who died intestate. His estate would first devolve upon the class 1 heirs provided in the schedule, in the absence of heirs in class one, then to the heirs mentioned in class two of the schedule. In case there is no heir provided in any of the two classes, then upon the ‘agnates’ (related to the deceased by blood or adoption via male line of descent) of the deceased and in the absence of agnates, upon the ‘cognates’ (related to the deceased by blood or adoption not wholly via line of male descendants) of the deceased, and if there is a failure of heirs, it would devolve upon the government by the ‘doctrine of escheat’ provided under Section 29 of the HSA 1956.
Section 19 of the HSA, 1956
Section 19 describes the mode of succession wherein multiple heirs are entitled to succeed to the property. It provides that where numerous heirs succeed together, they shall take the estate as ‘tenants in common’ and not as ‘joint tenants’. Further, unlike the position in the case of partition, wherein the share is first divided per stripe and subsequently per capita, Section 19 clarifies that heirs inheriting under the Act would be inheriting per capita and not per stripe.
Section 30 of the HSA, 1956
Section 30 deals with the provision of testamentary succession. It allows any Hindu to dispose of his property by Will. The only condition is that he must be competent to dispose of such property as per the provisions of the Indian Succession Act, 1925. As per the explanation, the interest of a male Hindu in the mitakshara coparcenary property is deemed by legal fiction to be property capable of being disposed of by him.
Relevant judgements referred to in Commissioner of Wealth-Tax vs. Chander Sen (1986)
The First view-
Gujarat High Court
Commissioner of Income Tax, Gujarat vs. Dr. Babubhai Mansukhbhai (deceased) (1975) – In this case, the Gujarat High Court opined that under the Mitakshra law, wherever the son inherits the self-acquired property of his father, he takes it not as a separate property but rather as a joint family property for himself and his sons and thus, the correct way for assessment of the income of the son in respect of such property was as a part of the Hindu undivided family property and not as his individual property. The Gujarat High Court refused to accept the approach adopted by the Allahabad High Court mentioned below.
The Second view-
Allahabad High Court
In the case of Commissioner of Income Tax, Uttar Pradesh vs. Ram Rakahpal (1966)– In this case, the High Court held that after the coming up of the HSA, 1956, the wealth or estate which a son inherits from his deceased father, from whom he had already been divided by a partition, would not be assessed as the income of the Hindu undivided family of the son. The act of partition takes away the coparcenary character of the property in reference to the people between whom the partition took place. However, the property remains coparcenary for his unseparated issue. In this case, Ram Rakshpal constituted a Hindu undivided family with his father, but in 1948, he separated from his father by partition. Thereafter, Ram Rashpal and his father both started their own businesses separately. The father died in 1958, leaving behind him his widow, his married daughter, his son, Ram Rashpal, and his grandson, who is the son of Ram Rashpal, as his survivors. As per the provisions of Section 8, read with Schedule 1, the property of the propositus devolved upon his wife, his daughter and his son Ram Rashpal in equal shares. The widow of the father, Ram Rashpal, continued the business inherited by them in a partnership. The nature of the profit share of Ram Rashpal in the business was in issue. It was contended before the income tax officers that this profit was the personal income of Ram Rashpal and could not be considered the property of the Hindu joint family of Ram Rashpal. The income tax officer held that Ram Rashpal contributed his ancestral funds to the partnership business, and hence, the income would be taxable as the income of his Hindu undivided family. This decision was not accepted by the High Court, which finally held that the assets of a business that was inherited by Ram Rashpal would be governed by Section 8 of the Hindu Succession Act and thus would constitute his separate property.
Madras High Court
In the case of Additional Commissioner of Income Tax, Madras vs. P.L. Karappan Chettiar (1978), a partition of the Hindu joint family was effected on March 22, 1954, which was recognised by the revenue department as per the Indian Income Tax Act, 1922. The family consisted of P, his wife, their son K and their daughter-in-law. P was assigned certain property on the partition, and he got separated after taking his share. The son ‘K’, along with his wife and afterborn children, constituted a Hindu joint family. ‘P’ died on September 9, 1963, leaving behind his widow and his son K as his legal heirs. As per the provisions of Section 8 of the HSA 1956, read with Schedule 1 of the Act, both the widow and K succeeded to the property left behind by the deceased P. The property that K received on succession was included in the income tax assessment as the property of the Hindu undivided family. On an appeal, the tribunal held that such property received in inheritance was not the joint family property but rather the separate property belonging to K. In reference proceedings, the High Court opined that under Hindu law, where a male Hindu dies and his property is inherited by his son, the grandsons also get a birthright in the estate. This position underwent a change after the 1956 Act, and as per the language of Section 8 read along with the class 1 heir schedule, the ‘son’s son’ gets excluded as he does not form a part of the class 1 heir enumerated in the class 1 schedule, and the son solely succeeds to the estate to the exclusion of the son. As the intent and the effect of Section 8 of the Act are contradictory to the traditional Hindu law, the express provision must prevail in view of the clear intention of the legislature as per Section 4(1) of the Act. It seeks to give an overriding effect to the provisions in the Act over the text of traditional Hindu law. Therefore, in this case, ‘K’, the son, alone inherits the properties in his individual capacity, and his son or grandson would have no right to that property. Therefore, the income therefrom was to be considered his independent property and was not to be assessed in the hands of the Hindu undivided family. This view is in agreement with the view of the Allahabad High Court above.
Madhya Pradesh High Court
In the case of Shreevallabh Das Modani vs. Commissioner of Income Tax, M.P.-I,(1981)– The court held that where there was no coparcenary that existed between a Hindu male and his sons at the time of the death of the father, the property that he received on his father‘s death could not be so blended with the property that had been allotted to his sons on a partition effected prior to the death of the father. This means that once the coparceners are separated, any property that the son subsequently acquires on the death of his father would constitute his separate property, and his sons and grandsons would have no share in it. The court relied on Section 4 of HSA 1956, which provides an overriding effect to the Hindu Succession Act over the Hindu texts that existed prior to the commencement of the Act on a subject that has been expressly dealt with in the Act. Section 8 is clearly a provision dealing with male succession, which is to be read along with the Class 1 schedule. Under Schedule 1, only the son is mentioned, and ‘son’s son’ does not find a place. Therefore, he would not get any right to the property of his grandfather under the provision if his father were alive. The right that a ‘son’s son’ has in his grandfather‘s property during the lifetime of his father under the traditional Hindu law has been repealed after the commencement of the Hindu Succession Act 1956. The High Court felt that Section 8 of the HSA 1956 should be taken as a self-contained code, providing the scheme of devolution of property for a Hindu dying intestate. According to this, the property devolving on a Hindu on the death of his father, after the coming up of the HSA 1956, would not constitute a HUF property for his branch, including his sons. Thus, the Madhya Pradesh High Court followed the full-bench decisions of the Madras High Court and the Allahabad High Court in the above cases.
Andhra Pradesh High Court.
In the case of the Commission of Wealth Tax, Andhra Pradesh vs. Mukundgirji (1983)– the Andhra Pradesh High Court also had an opportunity to consider this aspect and held that by enacting the Hindu Succession Act 1956, the Parliament wanted to make a clear break from the old Hindu law and to bring it in line with the modern and egalitarian concepts of New India. For the removal of any doubts, Section 4(1)(a) was also inserted to provide an overriding effect to the provisions of the Act. The court believed that it would not be right to construe the provisions of the Act in order to uphold the pre-existing concepts of Hindu law, and such interpretation was not possible because of the clear inclusion of females in class one in schedule one. Therefore, if it were held that the property that devolves upon a Hindu male under Section 8 of the Act would be a coparcenary property in his hands in reference to his own sons, that would amount to the creation of two classes among the heirs mentioned in the class 1 schedule. That means the males in whose hands such inherited property would be coparcenary property and the females in whose hands such property would be a separate property, as no concept of coparcenary property could be applied to them. Further, the court also examined Section 19 of the HSA 1956, which states that where two or more heirs succeed together to the property of the interstate, they take the property as tenants in common and not as joint tenants, whereas according to the traditional Hindu law, where two or more sons succeed to their father‘s property, they hold it as a joint tenant. Therefore, the property that devolves upon the heirs mentioned in class 1 of the schedule read with Section 8 will constitute their separate property, and the sons of the person inheriting it will have no right by birth to own such properties. This view is in line with the decisions of the Allahabad High Court, Madras High Court, and Madhya Pradesh High Court.
Judgement of the case
The Court noted the numerous conflicting decisions that existed on this question of law, with Allahabad High Court, Madras High Court, Madhya Pradesh High Court and Andhra Pradesh High Court on one side, which held that the property devolving by Section 8 of the Hindu succession Act to be separate property of the person inheriting and the Gujarat High Court on the other hand, which held that any property that a Hindu inherits from his father would be as a karta of his branch of the Hindu joint family and not as his separate property. The court accepted the opinions of the Allahabad High Court, Madras High Court, Madhya Pradesh High Court and Andhra Pradesh High Court and rejected the opinions of the Gujarat High Court.
The Court commenced the discussion with reference to the preamble of the HSA 1956, which states that this Act was legislated to ‘amend’ wherever necessary and to ‘codify’ the law relating to succession among Hindus. In light of Section 8, the court stated that where the first schedule enumerates the class one heirs, it is exhaustive. It includes the ‘son’ and also the ‘son of a predeceased son’, but not the ‘son of a living son’. It clearly manifests the intention of the legislature that when the son inherits the property from his father or grandfather as per Section 8, he does not take it as the Karta of his undivided family. Rather, he takes it in his individual capacity. The court stated that acceptance of the view discussed by the Gujarat High Court would lead to absurdity. It would lead to the conclusion that to say that the son of a living son would, by application of the old Hindu law, have a birthright in such property. We cannot ignore the presence of the new Section 8 read with Section 4 of the HSA 1956, which is clear in its intent. They only seek to devolve the share to the class one heirs as per the schedule. The court also affirmed the reasoning of the Andhra Pradesh High Court. Wherein it was stated that if we consider the property received by virtue of Section 8 by a son to be a coparcenary property in his hands in reference to his branch, it would amount to the creation of two classes among class 1 heirs. First, male heirs who would inherit it as coparcenary property vis-a-vis their sons and second, female heirs who inherit in their individual capacity as separate property. Thus, the court held that the express words of Section 8 would prevail and that all heirs under the Class 1 schedule would inherit in their individual capacity. Thus, the credit standard of Rangi Lal inherited by Chander Sen would be his separate property.
Rationale behind this judgement
Position of law pre- Hindu Succession Act 1956
In the book ‘Treatise’ on the Hindu Law of Inheritance by Standish Grove Grady, he discusses the line of descent. In the case of self-acquired property, which is acquired in whatever way, whether by a grant of a gift, via sale-purchase or by own exertion, mental or physical or in any other way, it would devolve in the same manner as the partitioned share in the ancestral property. In the absence of a male issue, the widow of the deceased would take the self-acquired property of her husband and on the failure of the son and the widow, the daughter would inherit it.
In the commentary titled ‘Hindu law and judicature’- from the Dharam Shastra of Yajnavalkya, it is stated that- if a man departs this life without a male issue, then (1) his wife, (2) his daughter, (3) his parents, (4) his brother, and (5) the sons of his brother would succeed to the inheritance each class would inherit upon the failure of the preceding one.
Mulla, in his book Hindu Law, the 22nd edition, discusses the law that existed prior to the HSA 1956. He says that there were two systems of inheritance among the Hindus in India: the Dayabhaga system and the Mitakshara system. The difference between the two systems arises from the fact that the doctrine of religious efficacy was the guiding principle under the Dayabhaga school, and no such guiding principle was found under the Mitakshara school. Sometimes consanguinity and, at other times, religious efficacy were regarded as the guiding principles. Under the Mitakshara law, the right to inherit arises from propinquity, which is the proximity of relationships; it recognises two modes of devolution of property, which are survivorship and succession. The rules of survivorship would apply to joint family property, and the rules of succession would apply to property held in an individual capacity by the last owner.
In N.R Raghavachariars’s Hindu Law Principles and precedents, 8th edition, 1987, a brief description of the nature of property has been explained as follows-
If the property is inherited from a paternal ancestor who is beyond the 3 degrees, then the property is not ancestral against the sons of the inheritor, and he inherited it as his absolute property. If the person inheriting the property has neither a son nor a ‘son’s son’ nor a ‘son’s son’s son’, that is, no male descendant in the three generations below him exists,. The property would be his absolute property until a male descendant is born to him within 3 degrees below him. A property that comes to an inheritor from one of his three lineal male paternal ancestors would be his absolute property till the time he has no sons, grandsons, or great-grandsons, and the moment any of the male descendants mentioned is born, it would become an ancestral property with reference to them, and they would have a birthright in it.
The character of ancestor property would not be taken away by the effect of a partition in the family. Although a share in the property that is allotted to a coparcener on a partition will be his separate property with reference to the people who participated in the partition, it would be ancestral property for the sons, grandsons and great-grandsons, whether born before or after the partition.
However, when a son inherits such property from his father, grandfather or great-grandfather, it would remain his separate property till the time he has no issues, but the moment the son is born to him, he would take a birthright in that property, and it would be considered a coparcenary property for him.
Position of law post-Hindu Succession Act 1956
HSA 1956 intended to ‘amend and codify’ the law governing intestate succession of Hindus. In reference to the property, which was inherited by a son from three generations of paternal ancestors in the male lineage,. The law has clearly established that it would be a coparcenary property in his hands with reference to his male descendants, up to 3 generations, who would acquire a birthright in that property and would be entitled to seek a partition. But after the enactment of the HSA 1956, the law of inheritance with regard to a Hindu male intestate was laid down under Sections 8 to 13 along with Schedule 1. These provisions retained some basic principles of Hindu law, modified others and totally abrogated some of the rules.
Prior to the commencement of HSA 1956, the undivided interest of a coparcener in the Hindu joint family upon his death was survived by the other coparceners. However, after the commencement of the HSA in 1956, the position underwent a change. In case the deceased left behind a female heir specified in the class 1 schedule or any male heir claiming via such female. The share of the interstate in the coparcenary property would not devolve by the principle of survivorship. Rather, a legal fiction by way of a ‘notional partition’ would be performed to calculate the share of the deceased in the coparcenary property, and subsequently, such share would be given in succession. In the case of Gurupad Khandappa Magdum vs. Hirabai Khandappa Magdum (1978), the process of ‘Notional Partition’ was elaborated.To ascertain the share that would devolve upon the heirs, as per the provisions of the Act. The first step is to ascertain the share of the deceased in the coparcenary property. Explanation 1 to Section 6 of the Hindu Succession Act prior to the 2005 amendment provided for a fictional expedient. According to which his share is deemed to be the share in the property that would have been allotted to him had a partition taken place immediately before his death. This share would then be inherited by the heirs as per the class one schedule read with Section 8 by the process of succession.
The position of the son and his interest in the father’s property as the primary heir are still retained, but the only question remains as to what would be the character of this property in his hands with reference to his male issue. If it is considered the separate property of the son, it will exclude the rights of all his descendants, but if it is considered ancestral property, his male descendants up to 3 generations would have a birthright in it.
A son inheriting property from his father, ‘father’s father’ or ‘father’s father’s father’ under HSA 1956, would take it in his independent capacity as his sole property with no right of his male descendants in it. The only situation where classical Hindu law in this respect would be applicable would be where the first inheritance had taken place before 1956, as was discussed in the case of Arshnoor Singh vs. Harpal Kaur (2019), wherein the first inheritance had opened prior to the commencement of HSA 1956. It was held that where the succession opens prior to June 17, 1956, which is the commencement date of the HSA 1956, the parties would be inheriting as per the traditional Hindu law and any property that a son inherits on the death of his father would be a coparcenary property with reference to the male descendants up to 3 degrees below him, and they would have a birthright in that property. So the only question to be asked is, ‘when did the succession open?’
Further, in the case ofC.N. Arunachalam vs. C.A. Mudaliar (1953), the question was if the separate property of the father is received by the son by testamentary succession, that is, by a will, what would be the status of that property for the branch of that son. The Supreme Court held that, as a general rule, any property that a person receives by will is his separate property unless an intention appears from the language of the testament, intending it to be treated as ancestral property in the hands of the son. Thus, the separate property is passed on by the father not to his son but to some other individual. In such a situation, it could not be treated as a coparcenary property for that person’s branch. Applying the same logic to the case of intestate succession, we cannot say that if the son receives property from his father via succession, it would be a coparcenary property for his branch. However, if any other person, for example, the widow or the daughter, inherits the same property, it would be their separate property. There has been no provision that creates grounds for such an interpretation.
Analysis of the case
The Apex Court, in the case at hand, clarified the position of the law of succession and the nature of the property that is received in succession as per Section 8, read with Schedule 1 of the HSA 1956. The separate property of the intestate (including his share in the coparcenary property), which any heir, including the son, inherits on his death after the commencement of the HSA 1956, would be taken in their individual capacity, bereft of any birthright of the branch of the son. This position is further manifested by the provision of Section 19, which declares that the property inherited under the Act by the heirs would be per-capita and not per-stripe. Further,, all the heirs who simultaneously succeed to the property of the deceased would hold the property as ‘tenants in common’ and not as ‘joint tenants’. Thus, any inheritance of property under HSA 1956 would be as a separate property only.
Conclusion
If a person dies after the commencement of the HSA 1956 and there is no Hindu joint family in existence at the time of the demise of such person, the succession of the estate of the deceased to his successors indubitably is the inheritance of coparcenary property. However, with reference to the successor, it will be considered his separate property, and his branch would have no right to such property. A HUF can exist if the ancestral property was inherited prior to HSA 1956, and such status has continued even after the commencement of the Act.
Frequently Asked Questions (FAQs)
What is the doctrine of Escheat?
The doctrine of escheat finds a place under Section 29 of HSA 1956. Where an intestate leaves behind no heir either under class 1, class 2, agnates or cognates and a situation of failure of heirs arises, the property would devolve upon the government, subject to all the obligations and liabilities to which an heir would have been liable. A very heavy burden is cast upon the government to prove that there has been a failure of heirs.
This article has been written by Syed Owais Khadri. This article provides a comprehensive study of the landmark ruling rendered by the Hon’ble Supreme Court in R.D. Shetty vs. The International Airport Authority of India (1979). The article discusses the facts, arguments, judgement, and reasoning in detail. It also sheds light on the point of law involved and discussed in the case. Additionally, the article also attempts to provide an analysis of the judgement.
The recent hoarding collapse in Mumbai that resulted in the deaths of 17 people was nothing but a result of non-compliance with rules and regulations and a lack of accountability and ignorance of the executive or local administration. The hoarding that collapsed was an illegal one that was installed, violating almost every single mandate, rule, or regulation that was in place in that particular regard. Firstly, it was installed illegally without the complete permission of the local administration. Secondly, the size of the hoarding was three times greater than what was generally permitted. Thirdly, the hoarding was not installed following the methods that prevent it from being affected by strong winds. Lastly, and most importantly, the local administration had taken no action against the installer, although it had been present there for a long time.
The aforementioned case highlighted one of the most important concerns concerning government accountability, i.e., the deviation of the executive from the general law in place or the lack of compliance or ignorance of rules and regulations or standard norms by the administration. The case of Ramana Dayaram Shetty vs. The International Airport Authority of India (1979), which is discussed in this article, involves a similar issue of the deviation of the administration from the standard norms or rules set forth by itself.
This case was an appeal filed before the Hon’ble Supreme Court of India, challenging the decision of the Hon’ble High Court of Bombay. The appellant had filed a writ petition before the latter against the International Airport Authority of India and others on the grounds of arbitrary action in awarding the contract for running a restaurant in the international airport in Bombay through the process of tender submission. This petition was rejected by the Hon’ble High Court of Bombay, and subsequently, the appeal was also rejected by the Hon’ble Supreme Court. This article discusses the case in a detailed manner, as follows:
Details of the case
The following are some of the important details of the case discussed in this article:
Case Name:Ramana Dayaram Shetty vs. The International Airport Authority of India (1979)
Case No.: Civil Appeal. 895 of 1978
Parties to the case:
Petitioner(s): Ramana Dayaram Shetty.
Respondent(s): The International Airport Authority of India (hereinafter referred to as “Respondent 1”) and Ors.
Equivalent Citations: AIR 1979 SC 1628, (1979) 3 SCC 489
Court: Supreme Court of India
Bench: Justices. P.N. Bhagwati, V.D. Tulzapurkar, and R.S. Pathak.
Judgement Date: 4th May, 1979
Facts of the case
The International Airport Authority of India, established under the International Airports Authority Act, 1971, issued a notice inviting tenders for setting up and running the business of a second-class restaurant and two snack bars at the International Airport in Bombay on January 3, 1979. Some of the specifications laid out in the notice are as follows:
The period of the contract was 3 years.
The eligibility for sending the tenders was a registered second-class hotelier with a minimum of 5 years of experience in the restaurant business.
The time for submission of the tenders began at 12:30 hours on the same day of the issue of notice, i.e., January 3, 1977, and the deadline was set at 12 hours on January 25, 1977.
The tenders had to be submitted in the prescribed format.
The acceptance of the tender was completely at the discretion of the Airport Director, who had complete rights to accept or reject any or all of the tenders or to negotiate with anyone he considered eligible and fit to award the contract.
Respondent 1 received six tenders, out of which only one tender that was sent by Respondent 4 fully complied with the terms and conditions of the tender form. The rest of the tenders submitted to the airport director lacked compliance with one or the other terms laid down in the notice inviting tenders. Besides, the order submitted by Respondent 4 was also offering the highest bid among all six tenders.
One of the letters submitted by Respondent 4 pointed out that they had 10 years of experience in the catering business. However, the airport director noted that Respondent 4 had experience running canteens but not restaurants, which did not match the requirements/eligibility to submit tenders that were specified in the invitation. In this regard, the airport director asked Respondent 4 to show documentary evidence to prove that they were a registered second-class hotelier with a minimum of 5 years of experience.
Respondent 4 then submitted a letter dated February 22, 1977, to the airport director, pointing out that they had, in addition to what was set out in their earlier letter dated January 24, 1977, experience running canteens for Phillips India Ltd. and Indian Oil Corporation. Moreover, they held an Eating House Licence granted by the Bombay Municipal Corporation since 1973, issued under the Prevention of Food Adulteration Act, 1954. They asserted that they thus had 10 years of experience in the catering line. They also mentioned that their sole proprietor had experience equivalent to that of a second or even first-class hotelier.
Respondent 1, satisfied with the explanation from Respondent 4, accepted the tender bid from them with the terms and conditions specified in the letter, proceeded with the procedural and other requisite work, and successfully entered into the agreement/contract with Respondent 4. Respondent 4 paid a fixed deposit receipt of Rs. 39,999, and the licence fee was fixed at Rs. 6666.66 for one month.
Meanwhile, K.S. Irani filed a suit challenging the decision of Respondent 1 to accept the tender submitted by Respondent 4. He obtained an interim injunction, which was later vacated by the Court on October 10, 1997. He filed an appeal before the Hon’ble High Court of Bombay, which was also dismissed on October 19, 1977.
However, respondent 1 failed to hand over possession of the requisite sites as per the agreement to respondent 4 to carry out the business. The earlier party (A.S. Irani) carrying out the business at those sites refused to give possession despite the expiry of the earlier contract, and the airport director (Respondent 2) did not facilitate it either, as a result of which Respondent 4 was incurring losses.
Besides, A.S. Irani refused to hand over the sites and continued to carry out his business despite the expiration of the old contract. Thus, Respondent 1 handed over two new sites to Respondent 4 for setting up two snack bars. The two sites were different from those occupied by A.S. Irani.
However, Respondent 1 could not give a site to Respondent 4 for setting up the restaurant since there was no other appropriate site available other than the one occupied by A.S. Irani. As a result, Respondent 1 filed a suit against A.S. Irani and obtained an injunction order against Irani. However, A.S. Irani made further attempts to restrain the respondent 4 from peacefully carrying out the business.
Respondent 1 failed to hand over the other site for setting up the restaurant due to the attempts by A.S. Irani. Therefore, the licence fee for only the two snack bars was decided at Rs. 4500 for a one-month mutual agreement.
Furthermore, a civil suit was filed by A.S. Irani on October 24, 1977, to restrict Respondent 4 from setting up and carrying out the business. However, all the attempts eventually failed due to the rejection of suits.
Later, the appellant, in this case, approached the Hon’ble High Court of Bombay by filing a writ petition challenging the decision of Respondent 1 to accept the tender of Respondent 4 (hereinafter referred to as the “impugned decision”).
The said petition was dismissed by a single judge bench of the High Court. It was later appealed before a division bench, which dismissed it as well. Ultimately, the appellant then approached the Hon’ble Supreme Court by filing a Special Leave Petition challenging the dismissal of the writ petition by the Bombay High Court.
Note: The appellant in this case was a person who did not submit the tender as he did not satisfy the conditions laid down in the invitation notice, and he was on the same level as Respondent 4. The appellant approached the court after the tender of Respondent 4 was accepted by Respondent 1 even though it did not satisfy the eligibility conditions on the ground that he was denied equal opportunity.
Issues raised in R.D. Shetty vs. The International Airport Authority of India (1979)
Whether the decision of Respondent 1 to accept the tender of Respondent 4 despite it not qualifying the eligibility criteria was invalid and consequentially liable to be set aside?
The aforementioned issue involved the examination of various sub-issues, which are as follows:
Whether the requirement of a registered second-class hotelier was invalid and meaningless?
Whether Respondent 1 had the authority to reject all the tenders and directly negotiate with Respondent 4? Whether the effect of it would be the same as that of following the procedure of tendering?
Whether the petition filed by the appellant was maintainable?
Whether the International Airport Authority of India fell within the meaning and definition of “State” under Article 12?
Laws involved
The legal provisions in this case mainly revolved around the constitutional provisions under Part III of the Constitution, specifically the meaning, definition, and scope of the “State” and the right to equality. Some of the relevant legal provisions that were examined in this case are as follows:
Constitution of India
The Constitution of India guarantees various fundamental rights under Part III, which consists of Articles 12 to 35. The fundamental rights and other constitutional provisions that are relevant and were discussed in this case are as follows:
Article 12 of the Constitution
Article 12 of the Constitution lays down the definition of the term “State,” wherein it defines the term as “The State includes the government and parliament of India, the government and legislature of each of the States, and all local or other authorities within the territory of India or under the control of the government of India.”
The provision under Article 12 is of great significance as it lays down the authorities against whom the fundamental rights under Part III of the Constitution can be enforced. Any person aggrieved by the violation of fundamental rights can approach the Court under Article 32 of the Constitution by filing a writ petition only against the authorities who fall under the definition of “state” under Article 12.
The definition of state under this provision has a wide scope since it is not an exhaustive provision but is inclusive, which is reflected through the words “other authorities” in the definition. The scope of the definition of “state,” and more particularly, the scope of the term “other authorities” in the definition, has been expanded by the Hon’ble Supreme Court in various rulings, such as the University of Madras vs. Shanta Bai and Anr. (1953). The Apex Court in the said case held that “other authorities” under Article 12 means any authority performing governmental functions.
Additionally, the Hon’ble Supreme Court of India in the case of Rajasthan State Electricity Board vs. Mohanlal (1967) held that the term “other authorities” includes “every authority created by a statute and functioning within the territory of India, or under the control of the Government of India.” The Apex Court has further expanded the scope of the term in the case of Sukhdev Singh vs. Bhagat Ram (1975).
However, the Hon’ble Supreme Court recently, in the case of Kaushal Kishore vs. State of Uttar Pradesh (2023), ruled that the fundamental rights under Article 19 and Article 21 of the Constitution can be enforced against persons other than the state or its instrumentalities as well.
Article 14 of the Constitution
Article 14 of the Constitution guarantees the right to equality for every individual in India. It prohibits the denial of equality before the law and guarantees equal protection of the law by the state.
The provision encompasses two important aspects of equality, the first being equality before the law, which means that every individual is equal in the eyes of the law and there shall not be any privilege given to any citizen. The second aspect of equality reflects the positive content of the provision according to which the state shall ensure that there is no discrimination of any kind and every citizen is entitled to equal protection of the laws.
The Hon’ble Supreme Court, in the 1973 ruling of E.P. Royappa vs. State of Tamil Nadu (1973), held that any act that is arbitrary in nature is violative of the right to equality under Article 14 of the Constitution.
The right to equality under Article 14 was contended to be infringed in the instant case by the decision of Respondent 1 to accept the ineligible tender of Respondent 4.
Article 32 of the Constitution
Article 32 of the Constitution guarantees the fundamental right to approach the Hon’ble Supreme Court by filing a writ petition for the enforcement of other fundamental rights guaranteed under Part III of the Constitution.
Any person aggrieved by the violation of the fundamental rights enshrined under Part III of the Constitution can approach the Hon’ble Supreme Court under this provision for the enforcement of fundamental rights against the authorities falling within the scope of “State” under Article 12 of the Constitution.
The Hon’ble Supreme Court in State of West Bengal vs. Nuruddin Mallik and Others (1998)ruled that the performance of any duty that is imposed upon certain authorities as per the law is the right of the appellant. The enforcement of such rights can be ensured through the writ of mandamus, which is against the authority not performing the duty.
Article 226 of the Constitution
Article 226 confers the High Courts with powers similar to those provided under Article 32 of the Constitution. It provides a remedy for individuals to approach the High Court by filing a writ petition for enforcement of their rights. Any person aggrieved by the violation of the fundamental rights enshrined under Part III of the Constitution can approach the Hon’ble High Courts for the enforcement of their rights under this provision.
However, it is important to note that the scope of this provision is wider than that of Article 32 of the Constitution. Article 226, unlike Article 32, doesn’t limit its scope to the enforcement of fundamental rights but extends beyond it. Clause 1 of this provision ends with the phrase “…for the enforcement of any of the rights conferred by Part III and for any other purpose.” The words ‘any other purpose’ are not incorporated under Article 32, which makes the scope of this provision wider than Article 32. Therefore, any person can approach the High Courts for enforcement of rights other than fundamental rights as well, which is not possible under Article 32. Moreover, Article 226 doesn’t restrict itself against the ‘State’. It is clarified in Clause 1 that the High Court, under this provision, possesses the power to issue writs against any person or authority, which also makes the scope of the provision wider.
The decision of Respondent 1 to accept the ineligible tender of Respondent 4 was challenged before the Hon’ble High Court of Bombay under Article 226 of the Constitution.
International Airports Authority Act, 1971
The International Airports Authority Act, 1971, was enacted to provide the constitution for an authority for the management of aerodromes providing or intending to provide air transport services or any matter relating to it.
Section 3 of the Act empowered the Central Government to constitute a statutory body known as the International Airports Authority of India. The other provisions of the Act provide for the appointment, disqualification, and other matters relating to the administration of the body.
Arguments of the parties in R.D. Shetty vs. The International Airport Authority of India (1979)
The appellant’s arguments were based on the sole ground of denial of equal opportunity to them, while the respondents countered the contention of the appellant under three main heads of argument. The contentions made by the appellant and respondents are as follows:
Appellant
The appellant’s main contention was based on the ground of denial of equal opportunity to him by Respondent 1 by deviating from the eligibility criteria laid down by itself.
The appellant contended that it was the duty of Respondent 1 to follow the eligibility criterion that was provided in the invitation notice. He contended that such an obligation was imposed on Respondent 1 by virtue of it qualifying as ‘State’ under Article 12 of the Constitution.
He argued that he was in the same position as respondent 4, as he was also not a registered second-class hotelier, nor did he have 5 years of experience. However, he did not submit the tender as he did not meet the eligibility criteria as per the notice.
The appellant contended that the action of respondent 1 accepting the ineligible tender of respondent 4, deviating from its eligibility criteria, resulted in the denial of equal opportunity to the appellant.
Respondent
Respondents 1 and 4 countered the contention of the appellant based on three different reasonings. The arguments presented by the respondents, particularly Respondent 1 and Respondent 4, are as follows:
Firstly, they argued that the grading as first or second class was only given to the hotels and restaurants by the Bombay Municipal Corporation and not to the persons running them, and hence, it was not possible to have a second-class hotelier as mentioned in the invitation notice because there can be second-class hotels and restaurants but not second-class hoteliers. Therefore, they contended that the requirement for a second-class hotelier was meaningless and should not be considered an eligibility criterion.
They further contended that the requirement mentioned in the notice was not to have 5 years of experience already running a second-class hotel or restaurant but to have sufficient experience, of at least 5 years, to run a second-class hotel or restaurant. They argued that respondent 4 satisfied the requirement as he had 10 years of experience, which was sufficient enough to run a hotel or restaurant of second-class grade.
Furthermore, they asserted the point mentioned in the invitation notice that the Airport Director had absolute rights to accept or reject any or all of the tenders submitted to them. He also had the right to negotiate with any person he considered eligible and fit to award the contract. Therefore, it was within the authority of the airport director to reject the tenders received and to negotiate and award the contract to respondent 4.
Secondly, they contended that the action of respondent 1 could not be challenged on the ground of deviation from the eligibility criteria laid down in the notice as it was neither backed by any statutory regulation nor was issued under any administrative rules. Therefore, they argued that even if there was any deviation from what had been specified in the notice, it did not give rise to any kind of cause of action for the appellant to challenge the deviation, nor could it be triable in any court of law.
Lastly, they contended that the writ petition of the appellant was liable to be rejected due to the lack of any bona fide intentions on his behalf. They argued that the appellant was a mere stooge of A.S. Irani, who had been making several attempts to prevent respondent 4 from carrying out the said business or obtaining the said contract. They also argued that he was a stranger to this issue as he had not submitted a tender.
Moreover, it was argued that the petition of the appellant was also liable to be rejected on the grounds of unreasonable delay.
Judgements referred to or relied upon by the respondents
The respondents relied upon the ruling delivered by the Hon’ble Supreme Court in the case of C.K. Achuthan vs. State of Kerala (1958), where it was observed that the government is completely entitled, just like a private individual, to choose the person of their choice to award and fulfil the contracts that it wants to be performed. The Court in the said case held that it could not be held as discrimination in such cases and that it would not give any right to the aggrieved to claim any protection under Article 14 of the Constitution. The respondents, based on this observation, contended that it would not be a violation of Article 14 if the “State” intends or chooses any person of its choice over another to fulfil or award the contract.
The respondents further relied upon the ruling delivered by the Hon’ble Apex Court in the case of Trilochan Mishra vs. State of Orissa (1971). The Court in the said case rejected the challenge of the petitioners to the action of the government not accepting the highest bids of tenders. It held that the government has the right to enter into a contract with a person known to them or a person who has already worked with the government in previous instances. The Court had also held that the government is not bound to accept the highest bid or tender.
The respondents also relied on the case of State of Orissa and Ors vs. Harinarayan Jaiswal and Ors (1972), which involved a scenario similar to the instant case. The said case involved a challenge to the action of the government, which had rejected all the bids and had directly negotiated with some other party. The petitioners in the said case contended that the power of the government to accept or reject any bid was arbitrary and violated constitutional provisions under Articles 14 and 19 of the Constitution. The Hon’ble Apex Court in the said case rejected the contention of the petitioners’ observation that accepting or rejecting a bid is an executive action whose validity is not open to judicial review.
Lastly, the respondents relied upon the judgement delivered in the case of P.R. Quenin vs. M.K. Tandel (1974), where the Court reaffirmed the observations made in the cases of Trilochan Mishra vs. State of Orissa (1971) and State of Orissa and Harinarayan Jaiswal (1972). It was further pointed out in this case that the government should have the liberty to accept or reject any tender without providing any reason, and it should not be considered a violation of Article 14 of the Constitution.
Judgement in R.D. Shetty vs. The International Airport Authority of India (1979)
The Hon’ble Supreme Court upheld the contention of the appellant relating to the decision of Respondent 1. It ruled that the action of Respondent 1 accepting the tender of Respondent 4 despite it not satisfying the eligibility criteria was invalid. It ruled that the decision was in violation of the standard laid down by Respondent 1 in its invitation notice. It ruled that the deviation from the eligibility criteria led to the denial of equal opportunity to the appellant and others who were in contention for obtaining the contract.
The Hon’ble Court rejected the first argument of Respondents 1 and 4, where they contended that the requirement of a registered second-class hotelier was invalid and meaningless. It held that Respondent 1 was not acting illogically and aimlessly while laying down this requirement, and neither was the requirement meaningless or irrational. It held that the requirement had a definite purpose. The Court noted that the language used was inappropriate. However, it held that the expression used by Respondent 1 was intended to mean any person carrying out a business or running a second-class hotel or restaurant. It further ruled that Respondent 4 did not satisfy the eligibility criterion or requirement in any way, and therefore, they were not eligible to submit the tender for the contract. It further held that the action of Respondent 1 accepting the tender of Respondent 4 was in violation of the requirements laid down by Respondent 1 in the invitation notice.
The Court further held the first argument of Respondent 1as irrational and invalid. It ruled that the action of Respondent 1 accepting the tender of Respondent 4 could not be justified on the ground that Respondent 1 had the authority to do so. The Court observed that it would not be right to state that the effect of its action was the same as that would have been if the contract was awarded through the process of direct negotiations because the procedure of tenders was not terminated before directly negotiating with Respondent 4 for awarding the contract to them.
Furthermore, the Hon’ble Supreme Court rejected the contention of Respondents 1 and 4 on the maintainability of the petition on the grounds of the appellant’s irrelevance to this issue as he did not submit any tender. The Court ruled this argument invalid and unsustainable and held that the appellant’s contention of denial of equal opportunity is a valid ground for the challenge or petition, and the writ filed by him is therefore maintainable.
Moreover, the Court held that Respondent 1 is an instrumentality or agency of the government and hence falls within the meaning and definition of “State” under Article 12 of the Constitution.
The Court ultimately ruled that Respondent 1 acted arbitrarily in accepting the tender of Respondent 4, while it was obligated to follow or conform with the eligibility requirement laid down by itself in the invitation notice. It ruled that the decision of Respondent 1 to accept the unqualified tender of Respondent 4 was certainly discriminatory and invalid, as it was violative of the right to equality under Article 14 of the Constitution as well as the judicially evolved rule of administrative law prohibiting arbitrary action of the executive.
The Court observed that the norm of eligibility set forth by Respondent 1 cannot be deviated from arbitrarily. It was further observed that any such deviation from the laid norms would violate the right to equality of opportunity. It would deny opportunity to those who did not submit the tenders, believing that the eligibility norms were to be satisfied mandatorily as a prerequisite.
However, the Court eventually did not set aside the act of Respondent 1 accepting the tender of Respondent 4 and awarding them the contract. It was observed that the case involved peculiar facts and circumstances. It was noted that the petition was not filed immediately but after a certain time period. Therefore, the Court dismissed the appeal and upheld the decision of the High Court of Bombay.
Ratio decidendi
The Hon’ble Supreme Court decided all of the issues in question based on the rationale explained or discussed as follows:
Maintainability of the petition
Locus Standi of the appellant
The Hon’ble Court rejected the respondents’ contention challenging the position of the appellant to file the writ petition based on the ground that he did not even submit a tender for him to be aggrieved by the impugned decision. It held that the appellant did not file this petition on the grounds of the validity of the procedure in which the tender of Respondent 4 was accepted by Respondent 1. Instead, the petition was filed on the grounds of denial of equal opportunity to the appellant with regard to the submission of tenders. It noted that the appellant’s contention was that, if it was informed by Respondent 1 that non-fulfilment of the eligibility criteria or requirements set forth by them in the invitation notice would be no bar for the submission or consideration of a tender, then he would have submitted his tender as well. This was considered a valid argument.
Respondent 1 as State under Article 12
The Hon’ble Supreme Court relied upon the tests set forth in the decisions of Rajasthan State Electricity Board vs. Mohanlal (1967) and Sukhdev Singh vs. Bhagat Ram (1975) to determine whether Respondent 1 can be considered an authority and subsequently a “State” under Article 12 of the Constitution. It referred to the test propounded in the latter case as a satisfactory one and proceeded to examine if Respondent 1 was an instrumentality or agency of the government. It further noted that certain factors have to be taken into consideration for such a determination.
The factors noted by the Hon’ble Court are as follows:
Does the corporation receive any financial or any other kind of aid from the State, and if yes, what is the magnitude of such aid?
Does the State control the management, administration, or policies of the corporation in any manner, and if yes, what is the nature and extent of it?
Do the functions performed by the corporation qualify as public functions or closely resemble them?
However, the Court clarified that the factors mentioned above are not exhaustive but only provide an idea of the nature or kind of factors that have to be investigated or considered to determine if any corporation is an instrumentality of the government. Accordingly, it proceeded to investigate the nature and characteristics of Respondent 1.
Nature and Characteristics of Respondent 1
The Hon’ble Court answered the question of the instrumentality of the government in the affirmative after investigating the nature and characteristics of Respondent 1. It examined the powers and functions exercised by the Central Government in the affairs of Respondent 1 to ascertain its nature. It referred to the provisions of the International Airports Authority Act, 1971 (hereinafter referred to as “the Act” under this heading) and noted the role, power, and functions of the Central Government concerning the affairs of Respondent 1 as follows:
Respondent 1 (the International Airport Authority of India) is a statutory body constituted by the Central Government under Section 3 of the Act.
The Central Government is conferred with power under Section 3(3) of the Act to nominate and appoint the chairman and all other members of Respondent 1.
The Central Government is empowered or authorised to terminate the appointment of any of the members of Respondent 1 or to remove them in certain circumstances under Section 5 and Section 6 of the Act, respectively.
The Central Government is empowered under Section 33 of the Act to withdraw the management of any airport from Respondent 1 and hand it over to any other person or authority.
According to Section 34 of the Act, the Central Government has the authority to suspend Respondent 1 under certain specified circumstances.
According to Section 35 of the Act, the Central Government is empowered to give directions to Respondent 1 occasionally, in written format, relating to policy questions and such directions are binding in nature.
The Central Government provides finances to Respondent 1 for carrying out its functions.
The Central Government has the right and complete authority over the net profit made by Respondent 1 after the exclusion of all charges, debts, etc. as per Section 20 of the Act.
Respondent 1, under Section 21, is required to submit for approval a statement of the financial estimate from the Central Government, and only such expenditures approved by the government can be incurred.
Respondent 1 is obligated under Section 25 to submit its audited accounts along with the audit reports to the Central Government, which is required to present them before both Houses of Parliament.
The officers serving under Respondent 1 are deemed to be public servants according to Section 28 of the Act.
Section 29 provides immunity to Respondent 1, all of its members, officers and employees, from legal prosecution for anything done in good faith or in pursuance of provisions of the Act or any rule or regulation framed under it.
The central government is empowered under Section 36 to formulate rules for the enforcement of the Act.
Respondent 1 is empowered to frame regulations under Section 37 and to provide for penal consequences for acts in contravention of such rules and regulations under Section 39 of the Act.
After noting the role of the Central Government in the administration and functioning of Respondent 1, the Court ruled that Respondent 1 satisfies both the tests laid down in the two cases mentioned above and is undoubtedly an instrumentality or agency of the government. Consequently, it held that Respondent 1 falls within the scope of authority and, subsequently, “State” under Article 12.
Invalidity of the impugned decision
Although the Hon’ble Court acknowledged that there was no statutory or administrative regulation obligating Respondent 1 to award the contract solely through tenders, it also confirmed that Respondent 1 had the right to reject all tenders, provided this did not violate Article 14, and to negotiate with any party deemed suitable for the contract. However, the Court noted that in the current instance, Respondent 1 did not reject all the tenders, nor did it directly negotiate with Respondent 4 to award them the contract. It was noted that the procedure for tenders was not given away. The awarding of the contract to Respondent 4 was done by the same procedure as accepting its tender and not by the process of direct negotiations.
It held that Respondent 1 was obligated to conform with the requirement or eligibility standards outlined in the invitation notice, which was a reasonable and non-discriminatory one, and subsequently was not authorised to award the contract to Respondent 4, who was not qualified as per the eligibility standards. It further held that the impugned decision denied equal opportunity to others in a similar position who wanted to participate in the tender submission process.
As a result, the Hon’ble Supreme Court held that the impugned decision was violative of, firstly, the equality clause under Article 14 of the Constitution and the settled principle of administrative law to conform with the standards set forth. Consequently, the impugned decision was held to be arbitrary and invalid.
Refusal to grant relief
In spite of the fact that the Court observed that the decision of Respondent 1 to accept Respondent 4’s tender was arbitrary, it did not set aside the impugned decision considering the peculiar facts and circumstances of the case. It was noted that the contention of Respondents 1 and 4 was that the appellant was a mere stooge of A.S. Irani, whose main aim was to restrain the latter respondent from running the business and executing the contract. The Court further observed that the affidavit filed by the appellant indicated that he had no legitimate interest in the outcome of this appeal or the writ petition. Furthermore, it also took note of various other litigations that were instituted in the lower courts with the same mala fide intentions.
Besides, the Court also pondered the reason for the delay in filing the writ petition on the part of the appellant. It was noted that the appellant had filed the petition nearly 6 months after the contract was awarded to Respondent 4. It rejected the appellant’s explanation that the appellant was not aware of the impugned decision as naive. In light of these reasons, the Court observed that it had serious doubts about the bona fide intentions of the appellant.
Moreover, the Court also noted that Respondent 4 had, in the meantime, spent around Rs. 1,25,000 to give effect to the contract and run the business of restaurants and snack bars. It was observed that it would be unjust to set aside the contract at this juncture. However, the Court said that the position would have been different if the appellant had filed the writ petition immediately after the contract was awarded or if Respondent 4’s tender was accepted by Respondent 1.
Therefore, the Court refused to grant relief for the reasons discussed above.
Precedents referred to/relied upon
The Hon’ble Supreme Court noted several significant rulings in this case, including those pointed out by the respondents. Although numerous judgements were noted or pointed out as relevant to the issue in question, the Hon’ble Court stressed the following precedents and explained if the said judgements were relevant or not.
Rajasthan State Electricity Board vs. Mohanlal (1967)
This case involved the determination of whether the Rajasthan Electricity Board was an “authority” within the meaning and scope of the expression “other authorities” under Article 12 of the Constitution. The Hon’ble Apex Court in this case ruled that the aforesaid expression encompasses, within its scope, all the authorities, statutory as well as constitutional, on whom powers are conferred by law. It was also held that any authority, statutory or constitutional, could be included within the meaning and scope of the expression “other authorities” if it is entrusted with sovereign powers, i.e., the power to make rules and regulations that have the effect of law. Furthermore, it was held that such an inclusion can also be made if any deviation from the rules, regulations, or directions issued by such authority attracts a penal offence.
The Hon’ble Court in the instant case, from the ratio of the aforementioned case, extracted the test for inclusion of any corporation under the meaning of the expression “other authorities” as follows:
The Court, in the instant case, pointed out that any statutory or constitutional authority would be included under the meaning and scope of the expression “other authorities” under Article 12 if it satisfies any of the following two conditions or criteria:
Possessing statutory power to issue directions that are binding on third parties, deviations from which would attract a penal offence.
Possessing sovereign power to make rules and regulations having the effect of law.
Sukhdev Singh vs. Bhagat Ram (1975)
This was another landmark judgement concerning the interpretation of the meaning and scope of the expression “other authorities” and subsequently the meaning of “State” under Article 12 of the Constitution. The test laid down in the ruling of Rajasthan State Electricity Board vs. Mohanlal (1967) for the determination of inclusion of any corporation within the aforesaid expression was noted by the Court in this case. However, the Hon’ble Apex Court in this case set forth another test for such a determination. It was observed that any corporation would fall within the meaning of the expression “other authorities” and therefore be “State” if such a corporation is an instrumentality or agency of the government.
The Hon’ble Court, in the instant case, noted that the test laid down in the decision of Sukhdev Singh vs. Bhagat Ram (1975) was a broader and more satisfactory one to determine whether any corporation falls within the meaning of the expression “other authorities” and, as a result, is a “State” within the scope of Article 12.
Erusian Equipment and Chemicals Ltd. vs. State of West Bengal (1974)
The Hon’ble Supreme Court referred to the significant notings made in the case of Erusian Equipment and Chemicals Ltd. vs. State of West Bengal (1974). It noted the observations where the Court in that case held that equality of opportunity is equally applicable to public contracts. The Court had noted that while the State has the right to trade, it also has a duty to ensure equality. It was further observed that the State cannot reject persons leading to discrimination. Hence, the Court, in the instant case, noted that the State cannot arbitrarily enter into any kind of contractual relationship with a person or any third party. It was also noted that the decision or act of the State has to be in accordance with non-discriminatory and rational standards or norms.
Rashbihari Panda vs. State of Orissa (1969)
The Hon’ble Supreme Court noted one of the significant principles applied by its Constitution bench in the 1969 decision of Rashbihari Panda vs. State of Orissa, concerning the State’s authority to enter into or refrain from entering into a contractual relationship. It was noted that the government is entitled to reject or refuse a contractual relationship with anyone; however, it must not do so by acting arbitrarily and by choosing any person it likes or favours while discriminating against those who are in a similar position. The Court noted that the government must act in conformity with the standards and norms that satisfy the tests of reasonableness and non-discrimination. It further noted that any deviation from such norms would be invalid unless such deviation is reasonable and non-discriminatory.
Praga Tool Corporation vs. C.A. Immanuel (1969)
The first case referred to by the Hon’ble Supreme Court was the ruling of itself in Praga Tool Corporation vs. C.A. Immanuel (1969). This case involved a writ of mandamus sought by the workmen against the Praga Tool Corporation, which was a company incorporated under the Companies Act and which had 52% of its shares held by the Central Government and 32% shares held by the State Government of Andhra Pradesh. However, the Court in this instant case noted that the aforesaid case did not involve the question of whether the Praga Tool Corporation was an “authority” within the scope of Article 12. It was noted that the question involved in the aforesaid was whether a writ of mandamus could be issued against the corporation or not, and the question was answered in the negative by the Hon’ble Court since no duty was imposed on the corporation by any statute.
Heavy Engineering Mazdoor Union vs. State of Bihar (1969)
The next decision referred to was the one delivered in the case of Heavy Engineering Mazdoor Union vs. State of Bihar (1969). The State of Bihar in this case referred to an industrial dispute between the Heavy Engineering Corporation Ltd. (hereinafter referred to as the ‘Corporation’’) and the Union under Section 10 of the Industrial Disputes Act, 1947. This reference was challenged, wherein the Central Government argued that it should be them who should be referring to the dispute and not the State of Bihar, on the ground that the Corporation was working under the authority of the Central Government. This contention of the Central Government was rejected by the Court since the Corporation was carrying out its functions under the authority of its memorandum of association and articles of association.
The Court, in the instant case, pointed out that the court, by the expression “instrumentality or agency of the government,” does not refer to the corporation being an agent as in a master and servant relationship, but the expression denotes the authority or power the government holds with regard to the functioning and governing of the corporation.
S.L. Agarwal vs. General Manager, Hindustan Steel Ltd. (1969)
The Court also referred to the decision of S.L. Agarwal vs. General Manager, Hindustan Steel Ltd. (1969), in which the question was whether an assistant surgeon in Hindustan Steel Ltd. could be said to be holding a civil post under the State or Central Government for him to fall within the scope of Article 311(2). The Court answered the question in the negative since Hindustan Steel Ltd. was an independent legal entity and not any department of the government. It was affirmed in the instant case, and the Court also noted that the aforesaid case did not deal with the question of “authority” under Article 12.
Sabhajit Tiwari vs. Union of India (1975)
The Hon’ble Court referred to the ruling delivered by itself in the case of Sabhajit Tiwari vs. Union of India (1975). The case involved whether Scientific and Industrial Research was an “authority” under Article 12 of the Constitution. The Court in that case answered the question negatively and held that it was not an “authority” within the scope of Article 12 based on the functioning of the council and facts relevant in this regard. However, the Hon’ble Court in the instant case noted that the aforesaid case does not contain any discussion of features necessary for any corporation to fall within the scope of “authority” under Article 12. It was noted that the Court did not lay down any principles or guidelines for the determination or consideration of any corporation as an authority under Article 12. It further noted that the only question to be ascertained was whether any corporation was an agency of the government.
The Court ruled out the last four decisions among those discussed above as irrelevant since they dealt with issues that were not similar to those in question in the instant case. Meanwhile, it noted the first two rulings as laying down significant tests for the determination of issues that were involved in the instant case.
Additionally, the Court also noted various other significant rulings, such as the rulings in the cases of E.P. Royappa vs. State of Tamil Nadu (1973) and Maneka Gandhi vs. Union of India (1978), where it was held that the provision of equality under Article 14 prevents arbitrary actions of the state and ensures equality and fairness.Furthermore, it also noted the observations made by the Hon’ble High Court of Kerala in the case of V. Punnen Thomas vs. State of Kerala (1968), where the Court observed that a democratic government cannot prescribe inconsistent and arbitrary standards for the choice of persons with whom it intends to deal.
Analysis of R.D. Shetty vs. The International Airport Authority of India (1979)
The instant ruling is a landmark in various aspects. The Hon’ble Supreme Court of India, in this case, made several observations that hold great significance as a precedent concerning the questions of law involved in this case. In addition to deciding upon the direct question of law or challenge involved in this case, the Court proceeded to examine and ascertain the questions of law involved. It shed light on various aspects of legal importance, beginning from the maintainability of the plea to the right against arbitrariness as a part of the right to equality under Article 14 of the Constitution. The Court extensively discussed the concepts of law necessary to adjudicate the issues involved in this case and then ruled accordingly.
The Court referred to several rulings and decisions while discussing and explaining the concepts of law involved and affirmed a few of the pertinent observations made by the Courts concerning the non-arbitrariness, reasonable and non-discriminatory actions of the State, equality of opportunity, etc. It also affirmed the tests for determining the government instrumentality of any corporation, which were laid down by the Hon’ble Supreme Court in various significant decisions.
Moreover, the various observations made by the Court concerning the non-deviation of public authorities from standard norms and regulations indicated an implied affirmation of the doctrine of legitimate expectation. Even though it was not expressly discussed or mentioned in the judgement.
However, the Court ultimately, in spite of making observations upholding the contentions of the appellant, refused to grant any kind of relief to him. It noted the likely presence of ulterior or mala fide intentions or motives of the appellant for filing the writ petition. The Court subsequently, in the appeal, noted the various attempts that were made to prevent Respondent 4 from benefiting from the contract. Although it noted that the decision to award the contract to Respondent 4 was arbitrary, it also noted that the appellant had no real interest in the litigation. More significantly, the Court noted the delay in filing the writ petition, which indicated a lack of real interest. It also includes the financial investments made by Respondent 4 in the meantime to give effect to the contract. Hence, the court refused to grant the relief claimed.
To summarise, the Court in this case delivered a balanced decision where the contentions of both parties were validated to a certain extent and the other inconsistent contentions were rejected. It also has to be noted that all the parties in this case were at fault in one or another manner.
Conclusion
As mentioned earlier, it is a significant ruling considering the extensive observations made on various legal concepts of subjects laying down noteworthy precedents. This case also highlights the necessity of being equipped with legal and factual awareness of the actions of the public authorities to ensure that they are in accordance with the law, which otherwise would affect the rights of individuals. The lack of compliance of public authorities with standard norms and regulations and the lack of awareness in general often lead to disasters like the Mumbai hoarding collapse and other similar cases taking place due to the same reason. Therefore, it is firstly necessary to be legally and factually aware of the actions of the public authority, and secondly, it is important to confront or criticise the administration in cases of lack of compliance with standard rules and norms and to ensure that they do not depart from such norms.
Frequently Asked Questions (FAQs)
Which case set forth the test of instrumentality or agency of the government to determine whether any corporation falls under the meaning of “State” under Article 12?
The test of instrumentality or agency of the government was laid down in the decision of Sukhdev Singh vs. Bhagatram (1975) by the Hon’ble Supreme Court of India to determine whether any corporation falls within the meaning and definition of “State” under Article 12 of the Constitution.
Is the right against arbitrariness a fundamental right?
Yes, the right against arbitrariness has been noted as a part of the right to equality under Article 14 of the Constitution by the Hon’ble Supreme Court in E.P. Royappa vs. State of Tamil Nadu (1973).
What is the doctrine of legitimate expectation?
The doctrine of legitimate expectation refers to the principle that public authorities are expected to act in a certain specified manner or in a manner that is in accordance with the law without departing from rules, regulations, or standard norms laid down by or for such public authority. It means that the general public expects the public authorities to act in a certain manner conforming to the law, and it is legitimate for the public to have such an expectation. The principle provides that it is the duty of the public authorities not to deviate from such expectations, which are legitimate in nature.
In simple words, the public authorities are expected to work in accordance with the law and are not entitled to deviate from such a law.
This article is written by Shenbaga Seeralan S. This article gives the readers a broad perspective about the legislation relating to Stamp Duty within the geographical premise of the State of Tamil Nadu. The article tries to imbibe the necessary understanding about the act to its readers and highlight the judicial pronouncements along the trajectory.
The term absolute ownership was alien to the people of pre-historic times, as they lived a pastoral and nomadic form of life. When the concept of agriculture was understood by them, they began to settle in one place along with their cattle, weapons and other marvellous contraptions. This is when the sense of ownership or claim for property stung the minds of the people. Even then, there was only community ownership rather than individual ownership. During the period of Mahajanapadas, around 2nd – 4th century BCE, the concept of individual ownership surfaced. Any commodity or property that supports a person in his/her livelihood is considered to be under his/her ownership. The King was the sole owner of all the land under his reign. He transferred or gifted the land to his subjects by the means of copper plate inscriptions or stone inscriptions. This was the first form of an official document, evidencing personal ownership of property. Palm leaf manuscripts and cuneiform writings were also prevalent in that time. During the late 10th century, various forms of taxes for land were introduced by the sultanate. This urged the need for registration of documents in the later part of the rule. The first codified act for the registration of any document was introduced by the British. It was The Indian Registration Act, 1908. Eventually, taxes were collected for such registrations. Following this progression, any registration which was made, carried along with it a tax called stamp duty.
The stamp duty can be defined as a type of tax levied by the government on registration of a legal document within its geographical limit. Stamp duty is a type of indirect tax which is usually levied by the Central government but collected and appropriated by the respective states. In India, rules regarding the levy of stamp duty are governed by The Indian Stamp Act, 1899. This act generalises the regulations regarding the charge that is levied on the registration of a tangible or intangible property. States like Maharashtra, Gujarat, Karnataka, Rajasthan, Kerala and Tamil Nadu have standalone acts that add specificity to the stamp duty regulations. The Indian Stamp Act has been amended by the Tamil Nadu government through the Legislative Assembly multiple times. An amendment has been carried out as recently as 2023. The major portion of stamp duty regulation stands by The Tamil Nadu Stamp Act, 2019. Under this act various region specific changes were made and implemented progressively.
Objective of Tamil Nadu Stamp Act, 2019
The major objective of the Stamp Act is to meet the financial needs of the concerned state. It is purely monetary in nature and has nothing to do with the legality of the registration. The Registration Act and the Stamp Act are autonomous yet interdependent upon each other. It is mandatory to pay this indirect tax for the registration of any legally acceptable document. It adds to the prowess of the State’s fiscal condition. In the financial year 2022-23, the total revenue collected from Stamp duty and Registration fees in Tamil Nadu was Rs. 16323 crore which is 14% higher than the previous year. The share of stamp duty out of the total revenue of the state is nearly 11.4%. It should also be noted that though certain documents are exempted from mandatory registration, it does not exempt those documents from the payment of stamp duty. For example, a document ascertaining the lease of a building for duration less than 1 year does not require registration, but it does not exempt that document from the payment of stamp duty.
Stamp duty is a type of tax levied on the document and not on the purpose. For example, when a property is registered, stamp duty is collected on the bond and legal documents registered but not on the property itself. Also, stamp duty is not a piece of evidence to the ownership, rather it serves the purpose of monetary returns to the government for facilitating the service of registration.
Another salient objective of collection of Stamp duty is to increase the transparency in the registration. Let us suppose a property worth Rs. 1 crore is registered but to avoid high registration charges, there is a possibility to undervalue the instrument. As per The Tamil Nadu Stamp (Prevention of undervaluation of instruments) Rules, 1968, the market value of the property has to be furnished before the registration and the valuation of the instrument is calculated based on that. This prevents trickling of stamp duty revenue to the government and improves public trust on governance. This objective of the act was widely discussed in case of Ramesh Chand Bansal v. Magistrate/Collector (1999). This act also facilitates ease of registration by making the charges known upfront to the beneficiaries. In the judgement of Jagdish Narain v. Chief Controlling Revenue Authority (1994), the judge mandated the authorities to correctly calculate the market value, thereby preventing any hardship that might be faced by the appellant.
Important definitions
The Tamil Nadu Stamp Act, 2019 (hereinafter referred to as the “Act”) is an act that extends to the whole of the state of Tamil Nadu. Similar to every other act, Section 2 of this Act describes the terminologies involved to understand the crux of the Act. A few important definitions are discussed below.
“Association” is an organisation that is incorporated to manage the business and allied services related to the product or service offered by the company or institution. This term is defined under Section 2(1) of the act.
“Bond” is an instrument that mandates a person to pay money in exchange for a particular act to be done or not done by another party. The bond carries the attestation of all the parties and the witness. The delivery expected may be a product or an instrument or a service. This term is defined under Section 2(3) of the Act. In the judgement of the case Mariasusai v. A.Francis (2007), it was noted that an instrument which did not create any obligation but merely quantified the work, cannot be termed as a bond.
“Chargeable” means a sum that is applied to the document or the instrument that comes under the precinct of the Act. This is applied at the first execution of such an instrument or to the first person executing. This term is defined under Section 2(4) of the Act. The definition was highlighted in the judgement of the case Narayanachetty v. Karuppathan (1881) as defined by the General Stamp Act,1879.
“Chief Controlling Revenue Authority” is an officer appointed under Section 3(1) of the Registration Act, 1908. This appointment is made by the State Government to perform the function of the Inspector General of Registration. This term is defined under Section 2(5) of the Act.
“Duly stamped” means an instrument that requires registration should carry a stamp impressed on it, having value not less than the prescribed amount. This term is defined under Section 2(9) of the Act. This definition is highlighted in the judgement of Y.A.A.V.R Sethuraman Chettiyar(late) In re, (1946).
“Execution” means an instrument duly signed by the authority and parties. Here the signature also includes electronic record as given in Section 11 of the Information Technology Act, 2000. This term is defined under Section 2(10) of the Act.
“Immovable property” includes anything that is attached to the land, comprising hereditary privileges, pathway, locomotives, benefits from land and things permanently imbibed to earth. However, this definition does not include trees and growing crops. This term is defined under Section 2(12) of the Act.
“Instrument” is a document which creates either a right or liability, that can be created, transferred or extended. This definition under the Act does not include promissory note, bill of lading, letter of credit, insurance policy, transfer of share, debenture and receipt. This term is defined under Section 2(15) of the Act. In the case of Shyamal Kumar Roy v. Sushil Kumar Agarwal (2006), agreement of sale comes under the scope of Instrument within the meaning of Section 2(14) of the Indian Stamp Act.
“Market Value” is a monetary value estimated by the Collector or the Chief Controlling Revenue Authority or the High Court, that the property would fetch if sold in the open market at the time of execution of the instrument. In case of any security, market value denotes the price at which the security will be traded in the stock exchange. This term is defined under Section 2(20) of the Act.
“Mortgage Deed” is a type of instrument that purports a loan or a debt that is created between a transferor and a transferee in exchange of money for specific rights over a property. This term is defined under Section 2(21) of the Act. In the case of Chief Controlling Revenue Authority v. M/s. Rani Pictures (1969), the court held that the essential factor of a mortgage deed is that the property should be a specific property.
“Power of attorney” means empowering a person to act in the name of the person executing such an instrument. Power of attorney cannot be claimed as a title deed as decided by the case of Asha M. Jain v. Canara Bank (2001). This term is defined under Section 2(22) of the Act. This instrument does not carry a charge that is related to court fee.
“Settlement” is a disposition made in writing related to marriage, property, religious donation or charitable purposes. This is made with the use of any instrument that is non testamentary in nature. This term is defined under Section 2(25) of the Act. In the case of Hussain A. Jodhpurwala v. Yusuf A. Jodhpurwala and others (2015), it was held that when a Settlement deed is executed then the settlee becomes the absolute owner of the property so settled.
“Stamp” is defined as the mark or seal made by a person authorised by the State Government or an impressed stamp adhered to the instrument for the purpose of charging the duty under this Act. This term is defined under Section 2(26) of the Act.
Important provisions of Tamil Nadu Stamp Act, 2019
The Act, constructed with a monetary perspective, aims to bring all the registrations under the radar thereby increasing the financial returns to the Government. The Act comprises 8 Chapters, 76 Sections and 1 Schedule. The Schedule comprises 55 Articles, all governing the charges applicable to every type of document registration.
Liability of Instruments to Duty
Section 3 of the Act discusses the applicability and exception to chargeability of an instrument with the duty as mentioned in the Schedule.
Section 3(a) clarifies that the instrument should not be an already executed one.
Section 3(b) relates to any property and its state of execution during the commencement of the Act.
Proviso 1 details the exception to chargeability. Any instrument executed in favour of or on behalf of the State or the Central government is not chargeable.
Section 4(1) of the Act deals with a transaction when multiple instruments are involved, where only the principal document is changeable with the highest duty and other instruments are charged with a duty of one hundred rupees instead of the individual duty. Sub-section (2) of Section 4 provides the discretion to the parties to determine which among the instruments is considered as the principal instrument. In the case of Chief Controlling Revenue Authority v. Madras Refineries (1975), it was held that among the loan note, the deed of mortgage and the guarantee agreement, the Mortgage deed is considered as the principal instrument.
Section 5 of the Act mandates that when an instrument is related to multiple distinct matters, then the duty chargeable is the summation of the amount of individual instrument for a distinct matter. A distinct matter is a distinct transaction as detailed by the judgement of the case Board of Revenue v. Narasimhan (1961).
Section 7 of the Act clarifies that when a loan is raised by a local authority by issuance of a bond or any other security other than debentures shall be charged with the duty of 1 percent of the total amount of the bond. Neither stamping nor further duty is required on renewal or division. Moreover, through Sub-section (2), any outstanding loan is exempted from being stamped and charged, ensuring the validity of such loan is also not retracted. However, if there is a willful default of payable duty, then the local authority can charge 10 percent of the total amount of loan and a consecutive penalty for every month thereafter as prescribed by Sub-section (3).
Section 8 of the Act empowers the State government to remit, reduce or compound the duties payable within the territory. An industrial estate was formed from the assistance of Tamil Nadu Government by the name of Tamil Nadu Small Industries Corporation Ltd. (TANSI), which was exempted from paying stamp duty for registering a sale deed. This was highlighted in the judgement of the case Kartheepan Tourist Bus Service v. Government of Tamil Nadu (2004).
Section 9 of the Act ensures that if any branch of a bank is converted into a wholly owned subsidiary of the bank under the guidelines of the Reserve Bank of India then such conversion along with the transfer of instruments shall not be liable to attract duty.
Stamps and Modes of using them
Section 11 of the Act lists the instruments that require mandatory adhesive stamps. The list includes any instrument that is chargeable with duty more than one rupee, enrolment certificate provided by the State Bar Council, Notarial acts and other instruments as notified by the Government. It is mandatory for the affixed adhesive stamp to be dated not prior to 6 months from execution, contrary to which the instrument becomes inadmissible as evidence as held in the case of Tex India v. Punjab and Sind Bank (2003).
Section 12 of the Act directs the person affixing an adhesive stamp on an instrument, to cancel the stamp to prevent its reuse. Any instrument that is stamped requires cancellation, if it is not followed then the instrument is deemed to be unstamped. The cancellation of stamps is done through writing the name or initials on the face of the stamp with the date. In the case of Audi Ambalam v. Sevani Ammal (2003), it was noted that at the time of execution, the instrument containing the adhesive stamp should be signed across to make the cancellation legally effective.
Section 13 of the Act elucidates that, when an instrument is written on a paper and adhesive stamp is affixed on it, then the stamp is required to be in the face of the paper, ensuring its cancellation. Section 14 of the Act mandates that no second instrument should be written on an already stamped instrument. Section 15 of the Act declares any instrument in contravention to Section 13 and 14 to be deemed unstamped. In the case of Harnath v. Durgalal (1964), it was held that a promissory note endorsed with a receipt though insufficiently stamped can be considered as evidence on payment of penalty.
Time of stamping instruments
Section 17 of the Act mandates that any instrument that is registered within the state should be stamped before or at the time of execution. Whereas Section 18 of the Act provides 3 months time for stamping instruments executed outside the State, from the date of receiving within the State. This power of stamping the instruments executed outside the State lies with the Collector. In the case of State of Rajasthan v. Khandaka Jain Jewellers (2008), it was held that since Stamp Act is a taxing statute, the time of execution shall be predominant for determining the value of the instrument.
Section 19 of the Act dictates on how an instrument related to a property can be charged, if it was executed outside the State prior to 29th day of March 1997. The amount charged would be less than the amount mentioned in the Schedule, if the charges were paid outside already. Also, the instrument is treated in such a way that the instrument is received and executed for the first time in the State, when it is chargeable with higher duty. Section 20 of the Act allows the difference of duty to be paid for such instruments mentioned in Section 19. The difference of duty is calculated based on location, extent and market value of the property according to Sub-section (2). The maximum time allowed to take action for non compliance shall be four years according to Sub-section (4). The action against non compliance shall be initiated by the Collector within the specified period along with penalty provided under Section 44. A sale deed was registered in the State of Kerala, for a property situated in Tamil Nadu. The Collector ordered the party to pay the deficient duty within the specified period. The party went to the High court by filing a writ petition. The Court held that when an alternate remedy is available, the court cannot entertain such a petition under Article 226 of the Indian Constitution in the case of A. Ramaswamy v. District Revenue Officer(Stamps), Coimbatore (2006).
Duty valuation
Section 21 of the Act directs that if the duty is chargeable based on the valuation of the property, and is expressed in currency other than that of Indian currency, the converted rates in Indian currency on the date of execution are taken. Section 22 of the Act says that when stock or security other than debentures are charged with duty, then such a duty shall be the average price of the stock or the securities on the date of execution of the instrument. When the instrument comes along with a statement of rate of exchange or average price, which is duly stamped, then until the contrary is proved, such statement shall be given predominance according to the Section 23 of the Act.
Section 25 of the Act brings forth that a marketable security connected with mortgage, when duly stamped is considered for execution should be charged with duty as applicable to an agreement or memorandum of agreement under Article 5(5) of the Schedule. Section 26 of the Act grants the leeway to the mortgagee to deduct any already paid duty from the duty that is chargeable during the transfer of property to him. Section 27 of the Act details regarding the valuation of duty in case of annuity.
Sub clauses to Section 27 of the Act
Condition
Duty
(a)
Previously ascertained sum payable for a definite period
Ascertained amount
(b)
Sum payable in perpetuity for an indefinite time non terminable with life
Total amount payable during twenty years from the date of first due
(c)
Sum payable for an indefinite time terminable with life
Maximum amount payable during twelve years from the date of first due.
Section 28 of the Act states that when the value of the property is indeterminate, then the duty is calculated based on the highest value as mentioned in the description of the instrument on the date of execution. However, when a lease of mine, for which the value is not known is considered, then the royalty or share paid as rent can be used to calculate the duty. When the lease is given by a person other than the Government, then the value of the share is set at two lakh rupees per year. Section 29 of the Act mandates the party to mention all circumstances clearly that might affect the market value in the instrument. This rule is also highlighted in the case of Joint Secretary, Board of revenue v. K.R. Venkatarama Ayyar (1950).
Section 30 of the Act clarifies on how to deal with the undervalued instruments of conveyance. If the registering officer believes beyond doubt that the market value of the property is not truly mentioned, then he can inform the party to pay the differential duty accordingly. If the party fails to do so, then the officer can refer the matter to the Collector after registering the instrument. The Collector on receipt of such a reference shall ask the party to pay the differential amount after determining the market value of the property. The Collector can take such an action either by reference or suo motu within five years from the date of registration. According to Sub-section (4), when the party liable to pay the differential amount defaults on the payment then the person is liable to pay the duty in addition to one percent interest per month on the default amount for the entire default period. Sub-section(6) grants the party to appeal against the order of the Collector within two months from the date of receipt of the order. When the duty paid is in excess of the amount mentioned in the order, the differential amount shall be refunded to the party based on Sub-section (12) of Section 30 of the Act.
By the notification of the State Government, a Valuation committee is constituted under Section 31 of the Act, in which the Inspector General of Registration is named as the Chairman along with the appointment of other members. The main aim of the committee is to rightly value the properties of the State. This Committee serves as the final authority for valuation, with sub committees performing at district level. They perform the task of estimation, revision and administration of the market value within the State.
Duty payable by whom
Section 34 of the Act details on who should pay the duty for stamping based on the instrument for registration. Each of these instruments is mentioned in the Schedule of the Act.
Sub clause of Section 34
Instrument
Whom payable
(a)
Administration Bond (Article 2)
Person executing
Agreement on title deeds or pledge (Article 6)
Person executing
Bond (Article 12)
Person executing
Bottomry bond (Article 13)
Person executing
Customs bond (Article 23)
Person executing
Further charge (Article 27)
Person executing
Indemnity bond (Article 29)
Person executing
Mortgage deed (Article 34)
Person executing
Release (Article 45)
Person executing
Respondentia bond (Article 46)
Person executing
Security bond (Article 47)
Person executing
Settlement (Article 48)
Person executing
Transfer of debentures (Article 52(a))
Person executing
Transfer of interests (Article 52(b))
Person executing
(b)
Conveyance or Reconveyance of mortgaged property
Grantee
(c)
Lease agreement
Lessee
(d)
Counterpart of the lease
Lessor
(e)
Enrolment certificate in Bar Council
Advocate enrolled
(f)
Instrument of exchange
Parties in equal shares
(g)
Certificate of Sale
Purchaser
(h)
Instrument of partition
Parties in proportion to their respective shares
Adjudication
Section 35 of the Act provides a person with an opportunity to ask for the opinion of the Collector in determining the duty chargeable for a particular instrument by means of making a payment of rupees one hundred. For such purpose, the Collector may ask for related documents and preface about the instrument before determining the charges. The documents furnished by the person shall not be used as evidence against the person furnishing it according to Clause (a) of Sub-section (1) of the Section 35 of the Act. This section is applicable irrespective of whether the instrument is executed or not and whether it is stamped or not.The Collector determines whether the instrument was already stamped or not and whether it requires additional duty to be paid as discussed in the case of Raymond Ltd. v. State of Chhattisgarh (2007). After determining the charges and stamping of the instrument the Collector certifies such instrument by endorsing it under Section 36 of the Act. The Collector also has authority to declare that the instrument presented is not chargeable to any stamp duty. However, he is not entitled to authorise the stamping, in the following cases
After the expiration of one month from the date of first execution
After three months from the date of reception
In regards to an instrument chargeable with duty exceeding one rupee
Mortgage of crop which is not duly stamped.
Instruments not duly stamped
Section 37 of the Act grants authority to a person in charge of a public office as deemed by the State Government, except a police officer, the power to impound the instrument which is not duly stamped. When an instrument is received by the Collector in the mode of referral under Section 35, it can be impounded if not duly stamped. The proviso (a) of the Sub-section (2) mentions that nothing contained in this section is required by the Magistrate or a Judge of a Criminal court before impounding an instrument under the proceedings, except under the proceedings included in Chapter 9 or Chapter 10 of the Criminal Procedure Code, 1973. A Judge of the High court can delegate a person of capacity to examine and impound an instrument under sub clause 2(b). In the case of Trideshwar Daval v. Maheshwar Dayai (1990), it was held that the Collector had the power to impound the order, if the instrument is found to be not duly stamped.
Section 38 of the Act speaks about the recovery of deficient stamp duty. On a certificate from the registrar of the District, that the duty is insufficiently paid, can be recovered from the party responsible or party holding the instrument. This certificate is provided only after a proper enquiry is conducted. Sub-section (3) offers rights to the party to appeal against the certificate issued by the Registrar to the Chief Controlling Revenue Authority within three months from the date of receipt of the certificate. Sub-section (4) grants the Registrar the power equivalent to the Collector in recovery of such deficient duty. Without the issuance of certificate under Section 38, no action can be taken for recovering the deficient duty as mandated by the judgement of the High Court of Madras in the case of R.U. Ebrahim v. District Registrar (1994).
Section 39 of the Act states that any instrument which is not duly stamped cannot be admitted as evidence. It can be admitted as evidence only on the payment of a penalty, usually ten times the amount of the proper duty applicable on the same. Similar event occurred in the case of Thiruvengadam Pillai v. Navaneethammal (2008), where an instrument without a stamp is prohibited to be received as evidence. Under Section 40 of the Act, an admitted instrument cannot be questioned on the grounds of improper stamping, except as per Section 62 of the Act, which deals with the decision of the Court in regards to stamping of an instrument.
Section 42 of the Act provides procedures on how to deal with the impounded instrument. After paying the penalty to recover the instrument from impounding, the person shall send to the Collector an authorised copy of such instrument, with a proof of penalty and a certificate in writing to make the instrument legally valid. Section 45 of the Act provides conditions on releasing an instrument from impound. The person, within one year from the date of execution, has to send in writing to the Collector and should be willing to pay the proper duty, accepting the error caused in payment of duty. Under Section 46 of the Act, the Collector on proper inspection, can endorse such a request, thereby making the instrument legally admissible. While calculating the penalty, the Collector should take account of all the circumstances including the financial status of the person concerned, as cited in the case ofPeteti Subba Rao v. Anumala S. Narendra (2002).
The penalty paid for not duly stamping an instrument can be reclaimed in certain cases. When the amount was bound to be paid by some other person, the penalty can be recovered from such a person under Section 48(1) of the Act or through a court order under Section 48(3). The Chief Controlling Revenue Authority has the power to refund such a penalty if the application is made in writing by the party within one year from the date of payment. Under Section 49 of the Act, if there is a loss or damage to the instrument, when sending it to the Collector for inspection, the person sending it is not liable. A copy of such an instrument that is damaged in the transit can be considered as original thereafter under Section 50 of the Act. Apart from this recovery, all penalties paid under this Act can be recovered as arrear of land revenue under Section 51 of the Act.
Allowances for stamps
Section 52 of the Act grants power to the Collector to make allowances to the spoiled stamps, if there is error in writing, if the document is not signed or executed, if found unfit for use to be void ab initio or if the person is dead before executing the instrument. Spoiled nature also comprises deficient value, becomes useless in the course of transaction or spoiled by design. Section 53 of the Act allows application of allowance within two months of the date of execution of the instrument if the stamp is spoiled because of the refusal or non acceptance by the parties, within six months from the date of spoil when no instrument is executed in the stamped paper and if the instrument is executed , then the period is six months from the date of execution. Section 54 of the Act empowers the Collector to grant allowance for the spoiled stamp, if the person inadvertently used a stamp of lower or higher value or rendered useless under Section 13 or 15. If the allowance is made, the Collector gives another stamp of the same value and description to the person under Section 55 of the Act. If a person possesses a stamp, after making a valid, legal purchase and found it to be spoiled then the Collector shall repay such person with the value of the stamp, deducting ten paise for each rupee under Section 56 of the Act. In the case of Gajadhar Lal Agarwal v. State of Uttar Pradesh (1943), it was held that the limit of six months is to claim the money back for the stamps for which there is no immediate use, but not for usage of the stamp.
Reference and Revision
Sub-section (2) of Section 57 of the Act allows the Collector to refer the issue to the Chief Controlling Revenue Authority if he feels doubtful regarding the amount of duty chargeable. After consideration, the Chief Controlling Revenue Authority shall assess the case and send the decision to the Collector. Similarly Chief Controlling Revenue Authority can also be referred to by the High Court of Madras, provided that a three judge panel makes such a decision under Section 58 of the Act. According to the judgement of the case of Manganti Suryanarayana v. Board of revenue (1976), it was held that the Inspector General of Registration or the Chief Controlling Revenue Authority is the final fact finding authority for the court while hearing a reference. Under Section 59 of the Act, if the High Court is not satisfied with the statement of the Authority, it can send it back to the Authority, to add alterations. Any Court other than the High Court can also make reference to the Authority under Section 61 of the Act.
Under Section 62 of the Act when a decision regarding stamping, payment of duty or penalty comes under the purview of the court, then the Court of first mention can make such decision or revision. The order of the Court is sent to the Collector, who in turn impounds the instrument in contention and prosecutes any person for offence against the Stamp law. However, the prosecution can only be initiated for evading payment of proper duty. In the case of Gurunanak Medical and Surgical Agencies v. Sitaram Shivhare (2011), it was held that when a document is admitted by the trial court, then the appellate court cannot reject the document from using it as evidence.
Criminal offences and Procedures
Section 63 of the Act penalises a person other than a witness who signs an instrument that is not duly stamped with a fine which may extend up to five thousand rupees. However, if a penalty is paid already on the instrument, then the amount paid as penalty is deducted from the fine that may be imposed on the same instrument under the same section. The same penalty applies for the company issuing a share warrant which is not duly stamped. The penal provisions under the Act are held constitutionally valid by the judgement of Kamala Mills Ltd v. State of Bombay (1965). Any person who fails to cancel an adhesive stamp as prescribed by Section 12 of the Act, is punishable with a fine of five hundred rupees under Section 64 of the Act. Any person who fails to pay the differential duty under Section 20 of the Act, is punishable with a fine of five hundred rupees under Section 65 of the Act. Any person trying to defraud the Government is penalised with a simple imprisonment of up to one year or with a fine of five thousand rupees under Section 66 of the Act. An unauthorised sale of stamps shall be penalised with imprisonment of up to six months or with a fine up to five thousand rupees or both under Section 68 of the Act. The place of trial of such offences under Section 70 of the Act is fixed at the district or metropolitan area where the instrument is executed. In the case of Brojedra Nath v. Emperor (1918) it was held that mere non-payment of duty does not attract punishment under Section 64 of the Act, rather the intention to defraud the Government has to be proved by the prosecution.
Section 71 of the Act mandates that all public officers who hold records of duty, should always make the records available for inspection to the person as authorised in writing by the Collector. In the case of District Registrar and Collector v. Canara Bank (2005), it was held that the inspection is ordered when it may lead to securing any duty or it may tend to prove any fraud or it may lead to any discovery related to fraud. Power to make any rules or change any rules in relation to stamps and recovery of finance lies with the State Government under Section 72 of the Act. It was held in the case of Eswara Pillai v. State of Tamil Nadu (1972), when the rules made are in contravention to the Law, they are not binding on the parties or the officers associated.
Prevailing stamp duty charges under the Act
The duty and charges that are levied under the provisions of the Act are detailed in the Schedule 1 of the Act. Each instrument is specified with a stamp duty and regular revisions are made by the means of Amendment to the Act. These charges are levied according to the levying under Section 3 of the Act.
S.No
Article
Description of the Instrument
Stamp Duty
1
Article 1
Acknowledgement of a debt
One rupee
2
Article 2
Administration bond
Four rupees for every one hundred rupees, to a maximum of five thousand rupees
3
Article 3
Adoption deed
One thousand rupees*
4
Article 4
Affidavit, including affirmation or declaration
Two hundred rupees*
5
Article 5(a)
Sale of bill of exchange
One rupee for every ten thousand rupees to a maximum of one hundred rupees
Article 5(b)
Purchase or sale of Government security
Thirty paise for every ten thousand rupees to a maximum of fifty rupees
Article 5(c)(i)
Purchase or sale of shares, stocks, scrips, bonds or debentures or any marketable security between the members of stock exchange
Fifteen paise for every two thousand five hundred rupees
Article 5(c)(ii)
Between others
Fifty paise for every two thousand five hundred rupees
Article 5(d)
Purchase or sale of un-ginned cotton
Thirty paise for every unit (One unit ~ Four thousand five hundred kilograms)
Article 5(e)
Purchase or sale of bullion
i) Ten paise for every kilogram of silverii) Fifty paise for every kilogram of goldiii) One rupee for every unit of 250 sovereign
Article 5(f)
Purchase or sale of oil seeds
Fifty paise for every unit of 25 metric tons
Article 5(g)
Purchase or sale of yarn, non-mineral oil or spices
Ten paise for every Two thousand five hundred rupees
Article 5(h)
Purchase or sale of Hydro sulphite of Soda
Ten paise for every two thousand five hundred rupees
Article 5(i)
Building construction
One rupee for every hundred rupees of the proposed cost of construction or that is specified in the agreement
Article 5(j)
If not provided
Two hundred rupees*
6
Article 6(1)
Agreement related to title deed
Five rupees per thousand rupees
Article 6(2)
Agreement related to pawn or pledge
i) Term is more than three months then five rupees per thousand rupeesii) Term is less than three months then two rupees per thousand rupees
7
Article 7
Appointment in execution of power
One hundred rupees
8
Article 8
Appraisal or valuation
i)Amount less than thousand rupees then it is same as Bottomry bondii)otherwise forty rupees
9
Article 9
Apprenticeship deed
Twenty rupees
10
Article 10
Articles of association of a company
Five hundred rupees on every ten lakh rupees to a maximum of five lakh rupees
11
Article 12(a)
Award for the value of property not exceeding one thousand rupees
Same as bottomry bond
Article 12(b)
Value greater than one thousand but less than five thousand rupees
Fifty rupees
12
Article 13b(i)
Bill of exchange payable not more than three months
i) Amount does not exceed five hundred rupees – Thirty paiseii) Amount between five hundred and one thousand – Sixty paiseiii) For every additional one thousand rupees – Sixty paise
Article 13b(ii)
Payable between three months to six months
i) Amount less than five hundred – Sixty paiseii) Amount between five hundred and one thousand – One rupee twenty paiseiii) Amount exceeding one thousand – One rupee twenty paise for every thousand rupees
Article 13b(iii)
Payable between six months to nine months
i) Amount less than five hundred rupees – Ninety paiseii) Amount between five hundred and one thousand rupees – One rupee eighty paiseiii) Amount exceeding thousand rupees- One rupee eighty paise for every one thousand rupees
Article 13b(iv)
Payable between nine months to one year
i) Amount less than five hundred rupees – One rupee twenty five paiseii) Amount between five hundred and one thousand rupees – Two rupee fifty paiseiii) Amount exceeding one thousand rupees – Two rupee fifty paise for every thousand rupees
Article 13c
Payable more than one year
i) Amount less than five hundred rupees – Two rupee fifty paiseii) Amount between five hundred and one thousand rupees – Five rupeesiii) Amount exceeding one thousand rupees – Five rupees for every thousand rupees
13
Article 14
Bill of Lading
One rupees
14
Article 15
Bond
Amount less than Ten rupees
Fifty paise
Amount between Ten and Fifty rupees
One rupee
Amount between Fifty and One hundred rupees
Two rupees
Amount between One hundred and Two hundred rupees
Four rupees
Amount between Two hundred and Three hundred rupees
Six rupees
Amount between Three hundred and Four hundred rupees
Eight rupees
Amount between Four hundred and Five hundred rupees
Ten rupees
Amount between Five hundred and Six hundred rupees
Fifteen rupees
Amount between Six hundred and Seven hundred rupees
Seventeen rupees
Amount between Seven hundred and Eight hundred rupees
Twenty rupees
Amount between Eight hundred and Nine hundred rupees
Twenty two rupees and fifty paise
Amount between Nine hundred and one thousand rupees
Twenty five rupees
Amount exceeding One thousand rupees
Twelve rupees for every exceeding five hundred rupees
15
Article 16
Bottomry bond
i) Amount between one hundred and one thousand – Four rupeesii) Amount exceeding one thousand rupees – Twenty rupees for every exceeding five hundred rupees
16
Article 17
Cancellation
One thousand rupees*
17
Article 18
Certificate of Sale provided in public auction
i) Amount not exceeding Ten rupees – One rupeesii) Amount between Ten and twenty five rupees – Two rupeesiii) Amount between Twenty five and Fifty rupees – Three rupeesiv) Other cases – Same duty as conveyance
18
Article 19
Certificate or other document
One rupees
19
Article 20
Charter party
Ten rupees
20
Article 20A
Chit agreement
Ten rupees
21
Article 22
Composition Deed
Sixty rupees
22
Article 23
Conveyance
Five rupees for every one hundred rupees
23
Article 24
Copy or Extract
One hundred rupees
24
Article 25
Counterpart or Duplicate
i) Same duty as original if the original is chargeable not exceeding five rupeesii) Other cases – Five hundred rupees
25
Article 26
Custom bond
i) Amount not exceeding one thousand rupees – duty same as bottomry bondii) Other cases – Forty rupees
26
Article 27
Debentures
i) Issuance – 0.005%ii) Transfer or Re-issue – 0.0001%
27
Article 28
Delivery order in respect of goods
One rupees
28
Article 29
Divorce
Twenty five rupees
29
Article 30
Entry as an Advocate in Advocates Roll of Madras High Court
i)Advocate – Six hundred and twenty five rupeesii) Previously enrolled in other courts – Three hundred and twelve rupees fifty paiseiii) Attorney – three hundred and twelve rupees fifty paise
30
Article 31
Exchange of Property
Same as conveyance
31
Article 32
Further change
i) Same as conveyance when original mortgage is describedii) When possession is not given then its same as Bottomry bond
32
Article 33
Gift
Same as conveyance
33
Article 34
Indemnity
Same as Security bond
34
Article 35
Lease (advance or security deposit whether repayable or not)*
i) Period less than thirty years – One rupee for every one hundred rupees ii) Period between thirty and ninety nine years – Four rupees for every one hundred rupeesiii) Period above ninety nine years – Seven rupees for every one hundred rupees
35
Article 36
Letter of allotment of shares
One rupee
36
Article 37
Letter of credit
One rupee
37
Article 38
Letter of licence
Sixty rupees
38
Article 39
Memorandum of Association of a company
i) If accompanied by Articles of Association – Two hundred rupeesii) If not accompanied – Five hundred rupees
39
Article 40
Mortgage Deed
i) When possession is given – Same as Conveyanceii) When possession is not given – Same as Bottomry bondiii) when collateral is duly stamped – Two rupees fifty paise
40
Article 41
Mortgage of a crop
When the period of repayment is under three months from date of the instrument
i) Sum not exceeding two hundred rupees – Fifty paiseii) For every exceeding two hundred rupees – Fifty paise
When the period of repayment is more than three months but not more than eighteen months from the date of the instrument
i) Sum under one hundred rupees – One rupeesii) For every exceeding one hundred rupees – One rupee
41
Article 42
Notarial Act
Ten rupees
42
Article 43
Note or Memorandum
i) Goods of value exceeding twenty rupees – One rupeeii) Security of value exceeding twenty rupees – Maximum of fifty rupees forty paise for every ten thousand rupees
43
Article 44
Note of protest by the master of a ship
Five rupees
44
Article 45
Partition
i) Among family members – One rupee for every one hundred rupeesii) In other cases – Same as bottomry bond. It shall include legal heirs of deceased family member *
45
Article 46
Partnership
Article 46A
i) Instrument where capital does not exceed five hundred rupeesii) In other cases
Fifty rupees One thousand rupees*
Article 46B
i) Dissolution of immovable properties not among family members ii) Dissolution among family members iii) Other cases
Seven rupees for every one hundred rupeesOne rupee for every one hundred rupeesOne hundred rupees
46
Article 47
Policy of Insurance
Drawn singly
Drawn in duplicate
Article 47A(1)
i)Voyage premium not exceeding one -eighth percent of the amount
Five paise
Five paise
ii) in other cases, every full sum of one thousand five hundred rupees
Five paise
Five paise
Article 47A(2)
i) Full sum of one thousand rupees with term not exceeding six months
Ten paise
FIve paise
ii) Term between six months and twelve months
Ten paise
Fifteen paise
Article 47B
Fire Insurance
i) Sum not exceeding five thousand rupees – Twenty five paiseii) Other cases – five paise
Article 47C
Accident and Sickness Insurance
i) Railway accidents – Five paiseii) Other cases – Ten paiseiii) Insurance against death , with premium payable does not exceed two rupees fifty paise per thousand rupees – five paise
Article 47CC
Insurance by indemnity
Five paise
Article 47D
Life or Group Insurance
Drawn singly
Drawn in duplicate
i) Sum insured not exceeding two hundred and fifty rupees
Ten paise
Five paise
ii) Sum above two hundred and fifty rupees but not exceeding five hundred rupees
Ten paise
Five paise
iii) Sum exceeding five hundred rupees and for every thousand thereafter
Twenty paise
Ten paise
Article 47E
Reinsurance by an Insurance
One quarter of the duty but not less than fifty paise
47
Article 48
Power of attorney
Sole purpose of securing registration
Five hundred rupees*
Authorising a person in a transaction
Five hundred rupees*
Authorising not more than five persons to act jointly in more than one transaction
One thousand rupees*
Authorising more than five but not exceeding ten persons, to act jointly in one transaction
One thousand rupees*
Authorising attorney to sell any immovable property
Same as Conveyance for the market value*
Attorney who is a family member, authorised to sell immovable property
One thousand rupees*
When attorney is not a family member
One rupee for every one thousand rupees*
Other cases
One thousand rupees for each person*
48
Article 49
Promissory note
When payable on demand
i) Amount less than two hundred and fifty rupees – Five paiseii) Amount between two hundred and fifty and One thousand rupees – Ten paiseiii) Other cases – Fifteen paise
Payable otherwise than demand
Same as Bill of Exchange
49
Article 50
Protest of Bill or Note
Ten rupees
50
Article 51
Protest by the Master of a Ship
Ten rupees
51
Article 52
Proxy
Fifteen paise
52
Article 53
Receipt
One rupee
53
Article 54
Reconveyance of Mortgaged property
Value not exceeding One thousand rupees
Same duty as Conveyance
Other cases
One thousand rupees*
54
Article 55 A
Release – One rupee(Includes legal heirs of a deceased family member)*
B) i) Release of Binami rights – One rupee for every one hundred rupeesii) Immovable property – Eight rupees for every one hundred rupeesiii) other property – Seven rupees for every one hundred rupees
Article 55C
Release of right in favour of co-owner
i) Immovable property – Eight rupees for every one hundred rupeesii) Other properties – Seven rupees for every one hundred rupees
Article 55D
Release of right in favour of partner
i)Between family members – Three rupees for every hundred rupeesii) Not between family members – Eight rupees for every hundred rupees
55
Article 56
Respondentia Bond
Same as Bottomry bond
Article 56A
Securities other than Debentures
Issuance
0.005%
Transfer on delivery basis
0.015%
Transfer on non delivery basis
0.003%
d)i) Derivatives future
0.002%
ii) Derivatives options
0.003%
iii) Currency and interest rates
0.0001%
iv) Other derivatives
0.002%
e) Government securities
0%
f) Repo on corporate bonds
0.00001%
56
Article 57
Security Bond or Mortgage Deed
i) Amount not exceeding one thousand rupees – Same as Bottomry bondii) Other cases – Five hundred rupees*
57
Article 58a
Instrument of dower
i) Settlement in favour of members of family
One rupee for every one hundred rupees
ii) Other cases
A)Immovable property – Eight rupees for every Hundred rupeesC) Other property – Seven rupees for every one hundred rupees
Article 58b
Revocation
Same as Bottomry Bond to the maximum of One thousand rupees*
58
Article 59
Share warrants
Nine rupees for every one hundred rupees
59
Article 60
Shipping order
One rupee
60
Article 61
Surrender of lease
i) Duty not exceeding thirty rupees – duty chargeableii) Other cases – One thousand rupees*
61
Article 62
Transfer
c)i) Mortgage deed, duty not exceeding forty rupees ii) Other cases
Under Section 76-A of the Indian Stamp Act, 1899 certain rules were formulated for the custody, sale, distribution of stamps, appointment of ex-officio stamp vendors, licensed vendors etc. Section 74 of the Indian Stamp Act, 1899 empowers the Chief Controlling Revenue Authority through the Board of Revenue to make such rules.
Rule 1: These rules are hereby called the Tamil Nadu Stamp Rules.
Rule 2: These rules apply to all non-judicial stamps. The Non-judicial stamps include postal stamps, match excise banners, revenue stamps, stamp paper etc.
Rule 3: Definition clause for terms including Act, State, Superintendent of Stamps.
Rule 4: A General Stamp office is constituted in Chennai under the charge of the Superintendent of Stamps. The duties of the office are to maintain a stock of adhesive stamps and non-postal stamps. The stock should be not less than the probable requirement for usage in treasuries for next four months.
Rule 5: The Assistant Superintendent of Stamps, Chennai will be in charge of the stamp depot. He is entitled to maintain stock of stamps as mentioned in Rule 2, for the next one year. In addition to that a reserve stock, required for the next four months should also be maintained.
Rule 6: The Assistant Superintendent of Stamps is responsible for counting or supervising the counting of the stamps on receipt from the Controller of Stamps. He is also responsible for the entities made in the stock books after verifying the stamps to the invoices.
Rule 7: Stamps that are found to be unfit for use shall be sent to the Controller of Stamps for free replacement. When the stamps are found unfit for use owing to reasons other than faulty manufacture are disposed of according to the rules prescribed.
Rule 8: Every district treasury shall be a depot for the storage and sale of non judicial stamps. They are required to maintain a stock not less than probable consumption for next four months in addition to the stock required.
Rule 9: When the stocks run low in any depot before the receipt from Central Stamp Store, the officer in charge of the depot shall send a letter of indent to Superintendent of Stamps, Chennai, requesting supply from the nearby depot. However, when the depot is located in the neighbouring State, then that transfer requires special orders from both the State Governments. On receipt of such a letter of indent, the Superintendent of Stamps shall inform it to the Board of Revenue, Chennai.
Rule 10: As soon as the supply arrives from the Central Stamp Store, the officer incharge of the depot shall personally examine each box for any external damages. He is mandated to open and count the packets of stamps of higher denominations, which is higher than Twenty five rupees. In case of smaller denominations only ten percent of the boxes are allowed to be opened. The boxes and individual packets should be placed in a strong room, and each box should be opened one at the time under the supervision of the officer. The officer in charge will be responsible for verifying the value, number and signature on the supply. The wrappers containing the stamps should be preserved until the whole supply is accounted for and verified.
Rule 11: The officer in charge of the local depot should send a report to the Controller of Stamps, if the stamps supplied were found in excess or less than the requisite. All details of such a differential should be properly accounted for in the stock book.
Rule 12: When stamps are found unfit for use, due to manufacturing fault, then such stamps are sent to the Controller of Stamps, Nasik Road for replacement free of cost. When Stamps are found unfit for use, owing other than manufacturing fault, then if the value is under three hundred rupees, such stamps are destroyed by the order of Collector or District Revenue Officer. If the value of unfit stamps exceeds three hundred rupees then their destruction requires permission from the Board of Revenue. When the value exceeds One thousand rupees, then the order of full Board is required in writing, to destroy them.
Rule 13: When a loss is incurred by the State Government due to the actions of a Government servant, then pecuniary actions can be taken against him, along with other actions as prescribed by Article 300(3) of the Tamil NAdu Financial Code, Volume 1.
Rule 14: All Stamps that are found spoiled, unused or cancelled according to the Act, shall be destroyed monthly by the officer in charge of the local depot. The unused stamps received from the public or from sub depots shall be dealt with as per the instructions of the Collector or District Revenue Officer. Those stamps shall be re-issued, issued or destroyed.
Rule 15: Stamps that are available in the local depot, with no real time demand, shall be reported to the Superintendent of Stamps, Chennai, who in turn shall make arrangements to send those stamps to depots, where there is a demand. If such transfer is not possible, then the stamps are destroyed as per the provisions of the Act.
Rule 16: The stamps that are to be destroyed should be properly registered in the books of record. Those entries should be verified by the officer in charge before the stamps are actually burnt in presence of the Treasury Officer. A certificate shall be issued verifying the details and value of the stamps that were burnt. This certificate shall be sent to the Accountant General, Chennai on or before 6th of every month.
Rule 17: The entries of destruction shall be maintained in Monthly plus and minus memoranda, stock register and monthly accounts of local depot. A copy of the entries should be sent to the Accountant General, Chennai and the Superintendent of Stamps, Chennai. Any discrepancies in the records should be communicated to the Accountant General, Chennai.
Rule 18: The value of the double lock stored stamps along with the denomination has to be noted in the register. The officer in charge of the depot should verify the entries and make calculations to verify the values. The register shall be placed along the stamps in the double lock receptacles. It is not allowed to remove the register once it is stored. The stamps should be placed face to face and never back to back, in a properly dry environment. For the calculation of values, either manual multiplication or pre-mandated tables can be used. It is sufficient to verify ten percent of the total stock by the officer in charge.
Rule 19: The appointment of the treasurer, who is an ex-officio vendor shall be made by the Board of Revenue or the State Government. The Ex-officio vendors are licensed by the Collector or the District Revenue Officer to be a vendor of stamps. The vendors are only permitted to sell the stamps entrusted to them to the public. No sale can be made from the double locked storage.
Rule 20: The Treasury Officer is entitled to take the stamps and register out of the double lock to meet the demand and again properly place the register along the stamp in the double lock. It is mandatory to check the records every time the stamps are taken out from the double lock and placed back in. A fortnightly check is made by the officer in charge on the balance of stamps. The Sub Treasury Officer I should make the mandatory check of the balance of stamps with the Sub Treasury Officer II, once a month instead of twice a month as mentioned in Rule 20.
Rule 21: The ex-officio vendor shall sell the stamps to the public and other licensed vendors. The value of sold stamps can be remitted from the treasury and need not be paid in cash to the ex-officio vendor. The ex-officio vendor shall make entries in the register regarding the sale and the value of sale in English language.
Rule 22: The details regarding the quantity of sale and value of stamps sold shall be inspected by the officer in charge of the depot. The report prepared, thus, should be submitted to the Treasury officer, on the first of every month. Counter-signature should be sought from the Treasury officer for such records.
Rule 23: When an indent or cheque is presented to the ex-officio vendor requesting stamps, the indent is allowed to pass through only after the money is paid into the treasury.
Rule 24:
When the ex-officio vendor sells stamps to a non- licensed vendor, the details like date of sale, the name, the residence of the purchaser shall be written on the face of the stamp paper, below the impression of serial number. If the purchase is made by the person other than the person who intends to use it, the name , value and residence of the purchaser should be written in their own words by the purchase along with the ordinary signature. If a person makes any false endorsements, then he shall be punished under the Indian Penal Code, 1860. For hundies, endorsement should be made in the back side of the stamp paper.
When the demand of a stamp is made by a person with the required value in any currency accepted by the Government, the ex-officio vendor shall without any delay deliver the stamp in his possession.
Any stamp held as discontinued by the authority shall not be sold by the ex-officio vendor.
The ex-officio vendor shall maintain the record as prescribed by the State Government and at any time shall allow the Collector or the District Revenue Officer to inspect the accounts and register.
On demand of the Collector or the District Revenue Officer, every ex-officio vendor shall deliver all the stamps that are in his possession.
The Treasury officer is mandated to provide the impressed sheet of particular value upon demand. He should provide such details in the fewest sheets possible.
When the demanded value is higher than the highest value which a vendor is allowed to sell, he should not attempt to sell multiple numbers of stamp sheets of the demanded value.
No discounts are provided for the ex-officio vendor. Certain special remuneration is allowed in rare cases.
Rule 25:
The post of Licensed Stamp Vendor is created by the Chief Controlling Revenue Authority for the sale of stamps
The place of sale of stamps along with the proper address should also be specified by the Chief Controlling Revenue Authority after creating the post of Licensed Stamp Vendor. The new places should not interfere with the existing licensed vendors.
The ratio for non-licensed stamp vendors to the total population of the district should be 1:10000. While new posts are created, the existing demand and other relevant factors are to be kept in mind.
The posts of licensed vendors are filled by the District registrars. They are responsible for granting leave, determining the place of sale, cancellation of licence and transfer of vendors to a new location. Not more than three months of leave shall be granted to a licensed vendor. If the licensed vendor is continuously absent for more than one year, then his licence is cancelled.
When the post of licensed vendor falls vacant, the District Registrar shall post a notification in the notice boards of District Registrar Office, Taluk Office, Sub-Registrar Office, Village Chavadi and Panchayat Office. On the reception of application, the candidates are interviewed to find the best suitable person.
The factors considered while selecting a person as licensed vendor are locality, experience, health, education and solvency.
The order of preference to select a person as a licensed vendor are
Physically handicapped
Adi Dravidar and Tribals
Widows
Ex-Servicemen
*Omitted on 19th April 2000 by Notification S.R.O C.5/2000
General
The licence granted to any vendor shall be as per the rules mentioned and documenting of details like name, description and address are mandated. The licence granted can be revoked at any time for disobeying the rules without any valid reason. However, an opportunity has to be provided to the vendor to validate his reasons.
The Inspector of Registration shall not intervene with the appointments made by the District Registrar, unless the person is absolutely unsuitable for the post. A person aggrieved by the order can appeal to the Inspector of Registration within 30 days of order. The second appeal can be made before the Deputy Inspector General of Registration within 90 days of the order. However, a delay in appeal can be atoned for a valid reason.
The Inspector General of Registration in accordance with the order passed by the Deputy Inspector General of Registration, within 90 days, shall call for records associated with the order. If he deems the order to be fit and in the absence of any appeal, can validate the order and let the legal actions proceed.
No order shall be passed without giving proper opportunity for the aggrieved person to represent.
On appeal, the order passed by the subordinate officer shall be kept suspended.
The Licensed vendor shall sell the stamps as prescribed in the rules and only within the geographical limit of the State of Tamil Nadu.
The Licensed vendor should have sufficient stock of stamps as prescribed by the rules and should also be empowered to collect the stamps from the sub-treasury through indent.
Judicial pronouncements
R. Mahalakshmi v. The Sub-Registrar, Royapuram, Chennai (2014)
The facts of the above-mentioned case are such that a sale deed was registered by the petitioner on 6th August, 2013 in the office of Sub-Registrar, Royapuram, Chennai, who was the first respondent. The document number of the registered sale deed was no. 2309 of 2013 in Book 1. However, a notice was issued by the Special Deputy Collector, who was the second respondent, under Rule 4 of the Tamil Nadu Stamp (Prevention of Under Valuation of Instruments) Rules,1968. According to Rule 4, on reference under Sub-section (1) of Section 47A of the Indian Stamp Act,1899 from a registering officer, the Collector or the competent authority should send a notice in Form 1 of the Rules to every person concerned to the registered instrument. Through this Rule, the Collector can enquire any person concerned with the instrument, ask for the market value of the property, examine records, inspect the property and pass the order according to the findings of the proceeding. The Collector is mandated to send such notice within fifteen days from the date of receipt of the reference. Also, he can demand the production of evidence related to the instrument within twenty one days of the service of notice.
The petitioner challenging the impugned order issued by the second respondent, filed a Certiorarified Mandamus writ under Article 226 of the Indian Constitution before the Honourable High Court of Madras to call for records connected to the order by second respondent and quash the orders issued. The petitioner was represented by counsel Mr. Manohar and the respondents were represented by counsel Mr. R. Vijayakumar. After hearing the arguments, the learned Judge suggested that the proper response from the petitioner side in this case would be to file an objection, participate in the enquiry and await the order. Owing to such reasons, the writ petition was dismissed and the competent authority was commanded to finish the enquiry within four weeks and pass an apt order.
Ravi @ K.N. Annamalai v. The Chief Controlling Revenue Authority, Chennai (2021)
In this case, the appellant registered a sale deed on fifteenth of May, 2013. A sale agreement was also registered between the parties. The Special Deputy Collector (Stamps) determined the market value of the property as Twelve Lakh rupees. The first respondent (The Inspector General of Registration, Chennai) initiated a suo-moto revision under the Section 47A(6) of the Indian Stamps Act, 1899. The reasons quoted for the revision were wrong calculation of market value, not considering the circumstances of the locality of the property. The first respondent was also of the view that the Special Deputy Collector made an erroneous decision in fixing the market value. This made the appellant to file a Civil Miscellaneous Petition under Section 47A(10) read with Rule 9(5) of Tamil Nadu Stamp (Prevention of Undervaluation of Instruments) Rules,1968 against the order of the first respondent. The learned counsel for the appellant Mr. Suresh argued that the market value fixed by the first respondent has no documents to support it and no proper communication was provided to defend themselves. The appellant contended that the procedures followed were not in accordance with the Statutes and Rules. The Respondent was represented by the Special Government Pleader Mr. T.M Pappiah, who disputed the arguments citing various reasons. The said property was mentioned as agricultural land. However, there was no agricultural activity that was going on in the property. The location of the property was paramount in determining the market value. This property was located 5 kilometres from the Villupuram bus stand, in the Villupuram Chennai Highway. Keeping in mind the locality and commercial nature of the property, it was a mistake made by the Special Deputy Collector to quote the market value as 12 Lakhs, though the agricultural lands in that area were sold at around 35 lakhs. This made the first respondent to initiate a revision and revise the market value. This was done under the authority provided by Section 47A(6) of the act and no provisions were bypassed.
Hearing the arguments from both the sides, the High Court took a view that it does not have any scope in determining the market value, as it is the function of the expert body, rather, the court can only determine whether the procedures as dictated by the Statutes and Rules are followed properly. The court referred to the Stamp duty as the revenue of the State, which is the source of all the welfare activities carried out and the social schemes implemented. Thus, it is mandatory for the public servants to give utmost importance in collection of State’s revenue. The court took cognizance of the fact that a sale agreement was registered before the Sub-Registrar after the sale deed, in which the property value was mentioned as Rs. 76,50,000. Whereas, the market value as determined by the Special Deputy Collector was Rs. 12,00,000 in the registration of sale deed. This is highly contradictory and unacceptable in the view of the court. The first respondent after revision quoted the market value as Rs. 51,00,000, which is less than the amount quoted by the appellant in the sale agreement.
The court held that proper opportunity was provided to the appellant to show their defence against the order of the first respondent and the first respondent acted upon the authority provided to him by the Statute. Another contention regarding not following Rule 5 of the Tamil Nadu Stamp (Prevention of Undervaluation of Instruments) Rules, 1968 was also set aside by the court, quoting that the authority concerned should take into consideration all the circumstances as mentioned in the Rules to determine the value of the property. The Court also ordered the State to formulate “Anti Corruption Special Cells” in every department to look for any erroneous decisions made by the authorities to acquire illegal financial benefits. The court gave guidelines on how mis-conduct and mis-appropriation by the authorities have to be dealt with. Thus, taking all these views into consideration, the court dismissed the petition.
Tata Coffee Limited v. The State of Tamil Nadu (2018)
In this case, writ appeals were made against the order of the single judge dated 03, November, 2007. The appellant of this case was Tata Coffee Limited represented by the learned counsel Mr. A.L. Somayaji. The respondents were the State Government of Tamil Nadu, The Sub-Registrar, Anamalai, the District Revenue Officer (Stamps), Coimbatore and Tata Tea Limited. The first three respondents were represented by the Advocate General Mr. N. Vijay Narayan and the fourth respondent is represented by the learned counsel Mr. Joy Joseph. The facts of the case were, the appellant is a subsidiary to the fourth respondent. Due to consistent losses, the subsidiary was decided to be sold in 2005. The properties included 4 tea estates in Anamalai, Coimbatore and 3 tea estates in Kerala, encompassing a total of 9873.86 acres of land. As argued by the appellant, a stamp duty of Rs. 3,20,64,000 and a registration fee of Rs. 40,08,000 was paid to register a sale deed in the concerned Sub-Registrar office. The Sub-Registrar was not satisfied with the determination of market value, hence withheld the registration and referred the matter to the third respondent under Section 47A of the Indian Stamp Act, 1899. The writ petition was filed in 2007 challenging the order of the second respondent, which was allowed and the order was set aside by the learned Judge. The second appeal is made to the bench of Justice Huluvadi Ramesh and Justice K.Kalyanasundaram. The appellant argued that the reference by the second respondent was made without stating any reasons and it would be of no value if the order is pursued further. However, the Advocate General argued that Section 47A of the Act contains provisions which should be looked upon when the decision of reference is made. It relates to undervaluation of instruments of conveyance and the methods to deal with it. The market value assessed by the Sub-Registrar was Rs. 237,67,11,018, whereas the stamp duty was paid for Rs. 40,08,00,000. There was a difference of Rs. 197,59,11,018, which is very huge and gives every probable reason for the third respondent to pass a revision order.
It was held by the court that the second respondent had every reason to refer the matter to the third respondent. According to Rule 3(3) of the Tamil Nadu Stamp (Prevention of Undervaluation Of Instruments) Rules, 1968, the registering officer can make necessary enquiry and inspect documents to determine the true market value of the property. The Court concluded that the order passed by the second respondent satisfied the procedure and Statutes. The Court also directed the third respondent to pass appropriate orders within three months from the date of service of judgement.
Vasantha Vellaisami v. Vivek Sivagiri (2021)
This is the case concerning a Civil Revision Petition filed under Article 227 of the Indian Constitution to set aside the impugned order of the Assistant City Civil Court, Chennai. The case came before the Honourable Justice G.K Ilanthiraiyan. The petitioner was represented by learned counsel Mr. Thriyambak J. Kannan. The respondent filed a suit for declaration and injunction regarding the suit property in the city Civil Court against the petitioner of this case. The power of attorney was given to the father-in-law of the respondent, who was also the prosecution witness of the suit. The power of attorney was marked as Exhibit A1. Exhibit A1 was printed in a Hundred rupees stamp paper purchased in India but executed in the USA. However, the instrument was not presented before the Collector within three months for validating under Indian Stamp Act. Thus such an exhibit is contested to be considered as unstamped and unregistered. Under Section 35 of the Act, an instrument which is not duly stamped cannot be considered as evidence. Also, according to Tamil Nadu Stamp Act, when an instrument not duly stamped and executed outside India, is brought before a competent authority or Judge he can impound such an instrument. The impounding power is also provided under Section 33 of the Indian Stamp Act. The respondent side counsel was not present and the notice was served.
The court after examining the provisions was of the view that any unstamped instrument is not allowed to be presented as evidence. Also, the competent authority is allowed to impound such an instrument under the powers granted to him by the Stamp Act and the Tamil Nadu Registration Act, 1908. The court ordered the concerned authority to impound the instrument and levy a penalty that is applicable. Thus, the impugned order issued by the Assistant Civil Court was set aside and the civil revision petition was allowed.
Mr. S.V.L.S. Ranga Rao v. The Secretary to the Government (2009)
This is a case, where a certiorarified mandamus writ petition was filed under Article 226 of the Indian Constitution to call for records from the respondent and quash his orders. The facts of the case were, a property belonging to one Mr. S.V. Ranga Rao, who is the grandfather of the petitioner. After his demise in 1974 he left his properties to his wife Samarla Leelavathi and his son Koteswara Rao, who were his legal heirs. The grandmother of the petitioner executed a will on her share before her death. Now, the father of the petitioner Mr. Koteswara Rao and his children became the shareholders of the property. After the death of the petitioner’s mother, Mr. Koteswara Rao married a woman named Samarla Manjula. On the death of the petitioner’s father, Samrala Manjula filed a suit of partition claiming her share of 5/32 of the property. This suit ended in compromise and the petitioner’s step mother received the 5/32nd share of the property. Few years later, out of love, the petitioner’s step mother executed a deed of release, relinquishing her rights over the property and granting the entire rights to the petitioner and his brother. This was executed in the office of the second respondent. The stamp duty paid for this registration was in accordance with Article 58 of Schedule I of the Indian Stamp (Tamil Nadu Amendment) Act, 2004. The registration fee of Rs. 2000 was paid in addition.
The Second respondent withheld the instrument and referred it to the Collector under Section 31 and Section 47(A) of the Indian Stamp Act, 1899. Also, the petitioner was asked to pay the differential stamp duty and registration fee. It was argued by the counsel of the respondent Mr L.S.M Hasan Fizal, that the instrument executed by the stepmother cannot be considered as an instrument executed by a family member. As per the elaboration of Article 58 of the Schedule I of the act, father, mother, husband, wife, son, daughter, grandchild, adoptive father, adoptive mother, adoptive son and adoptive daughter are considered as family. There is no mention of the term “stepmother” in the elaboration of the Article. Also, the counsel argued that the second respondent had jurisdiction under Section 40(1)(b) of the act to direct parties to pay the deficit duty.
The learned counsel for the petitioner Mr. V. Srinivasa Babu, argued that the term “family” cannot be taken in a narrow sense. The relation of stepmother also comes under the vicinity of the term family. He also noted that, the second respondent has the powers to refer the matter to the Collector but not to hold the document and ask for the deficit duty to be paid. If there was a contention related to the stamp duty, the second respondent should have referred the matter to the Collector under Section 41A of the Act and left the decision to his adjudication.
Examining all the facts and views, the court came to a conclusion that the term “family” should be construed in a broader perspective. If the relation of “adopted mother” is included under the canopy of the family, then definitely “stepmother” should also be taken into the strata. It was also noted that Stepmother is one of the Class I heirs under the Hindu Succession Act, 1956. The court set aside the orders of the second respondent and allowed the writ petition. The second respondent was also urged to return the documents to the petitioner without asking for a deficit stamp duty or registration charges within two weeks from the reception of the court order.
Conclusion
A financial statute to regulate the registration in the State is broadly governed by the Tamil Nadu Stamp Act, 2019, the Indian Stamp (Tamil Nadu Amendment) Act, 2004 and various other Rules framed according to the provisions of these legislations. Though most of the implementations are derived from the Central Act, the charging provisions are based on the Schedule of State act. More importantly, the provisions are amended periodically to match the revenue with the financial stratification. The Centre recently proposed a revamped Stamp Act in the name of the Indian Stamp Bill, 2023. The major features in the proposed bill are, to increase the penalties based on the gravity of the fault as well as the economic impact, to incorporate a system to better identify the market value of the property, to give validation to the digital credentials and its usage, to make reference and appeal with a much more quantified set of rules, to introduce new instruments and their respective charges, to identify areas of facilitation and areas of leakage in revenue collection and append it.
However, Stamp duty being a tax that is collected and appropriated by the State, it would be apt for the states to determine the areas of concern and regulate the norms accordingly. Every State has its own financial segmentation and capabilities. The levy of charges should also be based upon it. A State like Tamil Nadu, where there is a spike in developmental and infrastructural activities, the Government should look for the opportunities to sap revenue by the means of Stamp duty. Keeping the essential services affordable, the higher spheres of registration should be charged with higher duty based on the current inflation in a transparent manner. By this way, an equitable society can be created by spearheading the governmental investments and regulating the wealth distribution.
Frequently Asked Questions (FAQs)
What are the allied rules associated with stamps in Tamil Nadu?
Various rules related to stamps in Tamil Nadu are:
The Tamil Nadu Stamp (Prevention of Undervaluation of Instruments) Rules, 1968;
The Tamil Nadu Stamp (Fixation of Remuneration for Licensed Stamp Vendors) Rules, 1999;
The Tamil Nadu (Fixation of Commission to Department of Posts) Rules, 2004;
Indian Stamp (Collection of Stamp Duty through Stock Exchange, Clearing Corporations and Depositories) Rules, 2019;
The Tamil Nadu Town Panchayats, Third Grade Municipalities, Municipalities and Municipal Corporations (Duty on Transfer of Property) Rules, 2011; and
The Tamil Nadu Stamp (Constitution of Valuation Committee for Estimation, Publication and Revision of Market Value Guidelines of Properties) Rules, 2010.
What is the surcharge along with stamp duty introduced in Tamil Nadu?
In accordance with sub-section (1) of Section 175 of the Tamil Nadu Panchayats Act, 1994, the surcharge on duty imposed by the Indian Stamp Act, 1899, is levied in the State of Tamil Nadu, on instruments related to immovable properties under the jurisdiction of Village Panchayats. The surcharge is fixed by the Government of Tamil Nadu, not exceeding five percent of the amount specified in the instrument. The instruments that are leviable are
Settlement of immovable property other than in favour of a member or members of a family
The modification to this surcharge came in the form of notification by the Rural Development Department (No. II(2)/RUL/77(e)/2003), which was published in Part -II of Section 2 of Tamil Nadu Government Gazette. By this notification, the Governor of Tamil Nadu fixes the rate of surcharge at one percent for every instrument of Mortgage with possession of immovable property.
This article was written by Pruthvi Ramkanta Hegde. This article explains the facts, issues, observations and judgement in the case of John Vallamattom vs. Union of India (2003). This judgement comments on the validity of Section 118 of the Indian Succession Act, 1925. An overview of Section 118 of the Indian Succession Act and how it violates the fundamental rights of the Constitution of India is also covered by the author.
This article has been published by Shashwat Kaushik.
Table of Contents
Introduction
The concept of Uniform Civil Code (UCC) has been highly discussed and debated in India. UCC seeks to establish a single set of laws that apply to all citizens, regardless of their religion. Thereby it replaces the various personal laws derived from religious scriptures and customs. The main aim of UCC is to promote equality and unity.
One of the critical aspects that a UCC would address is the discriminatory provisions in personal laws, such as those found in the Indian Succession Act of 1925. The landmark case of John Vallamattom vs. Union of India (2003) brought to light the unequal treatment of the Christian community under Section 118 of the Indian Succession Act, 1925. This Section imposes certain restrictions on Christians in bequeathing property for religious and charitable purposes, and the Section does not apply to other religious communities.
Facts of John Vallamattom vs. Union of India (2003)
A Christian priest named John Vallamattom filed this writ petition before the Honourable Supreme Court of India.
Through this writ petition, he challenged Section 118 of the Indian Succession Act of 1925.
The petitioner contended that this Section discriminates against Christians who want to leave their property for religious and charitable purposes.
Section 118 originated from the British Mortmain statute and was included in the Indian Succession Act.
Issues raised
Whether Section 118 of the Indian Succession Act, 1925, violates Article 14 of the Indian Constitution?
Whether Section 118 of the Indian Succession Act, 1925, resulted in discriminatory treatment of Christians compared to followers of other religions?
Petitioner’s contentions
The petitioner contended before the honourable Supreme Court that Section 118 of the Indian Succession Act, 1925, was discriminatory and unconstitutional. His contentions mainly pointed to the unequal treatment of Christians in comparison to other religious communities in India, especially concerning the bequeathal of property for religious and charitable purposes.
The petitioner asserted that Section 118 imposed unfair restrictions solely on Christians. This provision stipulated that Christians could not bequeath property for religious or charitable uses unless the will was executed at least twelve months before the testator’s death and deposited in a legal repository within six months of its execution.
It was further contended by petitioner that such strict conditions were not imposed on Hindus, Muslims, Buddhists, Sikhs, or Jains. Thereby, this was an unreasonable and unjust classification that was solely based on religion.
Another contention raised was that this discrimination is not reasonable as it violates the fundamental rights of the Constitution of India, especially Articles 14, 15, 25 and 26 of the Constitution.
According to the petitioner, the provision directly contravened Article 14. It is one of the fundamental articles confirmed under the Indian Constitution. Article 14 ensures equality before the law and equal protection of the law.
The petitioner contended that Section 118 failed to treat all citizens equally, as it singled out Christians for differential treatment.
Further, it was pointed out that Article 15 prohibits discrimination on grounds of religion, race, caste, sex, or place of birth. As per Section 118 of the Indian Succession Act, imposing special restrictions only on Christians would violate Article 15 of the Indian Constitution, which prohibits discrimination on grounds of religion.
The petitioner contended that Article 25 guarantees freedom of conscience and the right to freely profess, practice, and propagate religion. Charitable giving was an integral part of Christian religious practice, and these restrictions hindered this religious expression.
It was asserted that the impugned section applies only to Christians, except in Goa, and imposes strict conditions. Further, Hindus, Muslims, Buddhists, Sikhs, and Jains are not subjected to these restrictions.
Further, Article 26 provides the freedom to manage religious affairs. The petitioner contended that the Section’s restrictions impeded Christians from freely managing their religious and charitable endowments.
Section 118 created an unfair and discriminatory burden on Christian testators who had nieces, nephews, or near relatives. These testators had to comply with Section 118 while making their wills, unlike those without such relatives.
The petitioner emphasised that these restrictions had no substantial relation to the objective of ensuring valid and genuine charitable bequests.
Observations of the Supreme Court
While deciding this case, the Honourable Supreme Court observed that when it comes to bequeathing property for religious and charitable purposes as per Section 118 of the Indian Succession Act, there is no justification for retaining the impugned provision in the statute book. It is arbitrary and violates Article 14 of the Constitution. According to this provision, a Christian with a nephew, niece, or closer relative cannot bequeath property for religious or charitable purposes unless:
The will is executed at least 12 months before the testator’s death.
The will is deposited within six months of execution in a legally designated place.
The will remains in deposit until the testator’s death.
This strict procedure does not apply to Hindus, Muslims, Buddhists, Sikhs, or Jains, as per Section 58 of the Act. Since no exemptions are granted to Christians under Section 3, they must create a new will every 12 months if the testator does not pass away within the year.
The Court further observed and compared the same restriction with other religions. Accordingly, Muslims, on the other hand, face no such restrictions when bequeathing property for religious or charitable purposes. A Muslim can validly bequeath up to one-third of their net assets if the heirs exist. The only requirements are that the legator must be of sound mind and not a minor. If the legatee causes the legator’s death, the will becomes void. Under Muslim law, a will can be made in favour of an individual, institution, non-Muslim, minor, or insane person, and any property can be bequeathed.
For Hindus, founding a temple or charitable institution is seen as a religious duty and an aspect of Dharma.
Further, the court referred to the mortmain statutes, which are the basis for originating this provision, Section 118 of the Indian Succession Act, 1925. However, the legal basis for Section 118 no longer exists because it was repealed by the Charities Act of 1960.
The Court further observed that it also violates Articles 25 and 26 of the Constitution, which protect religious freedoms. For Christians, giving property for religious and charitable purposes is considered a fundamental aspect of their faith. The same is encouraged by the Bible. When a fundamental right, like the freedom of religion, is claimed to be violated, the Court must examine whether the act in question aims to protect order, morality, and health. Additionally, it aligns with other constitutional provisions. It is also authorised by law to regulate associated economic, financial, political, or secular activities, or to provide for social welfare and reform. The Court is obliged to conduct this examination.
While deciding this case, the Court observed the case of D.S. Nakara vs. Union of India(1983). The Court emphasised several key points regarding Article 14 of the Constitution and its implications on legislation:
The fundamental principle of Article 14 of the Constitution is that it prohibits laws that treat different groups unfairly. But it allows for laws that classify people or things based on reasonable distinctions. For such a classification to be valid, it must meet two tests:
Intelligible Differentia: The classification must be based on characteristics or conditions that distinguish the included group from those excluded from it.
Rational Nexus: This differentia must have a rational connection to the objective of the law. The Honourable Supreme Court first addressed this doctrine in the case of Chiranjit Lal Chowdhuri vs. Union of India (1950). In subsequent rulings, the Court has underscored that differentiation is not inherently discriminatory when there is a logical link between the classification and its purpose.
The Court also noted in the above judgement that society is inherently unequal by nature. Therefore, a welfare state must take both executive and legislative actions to help those who are less privileged.
The Court also referred to the judgement of the Kerala High Court in the Preman vs. Union of India (1998) case and discussed several points regarding Section 118 of the Indian Succession Act, 1925:
It discriminates against Christians compared to non-Christians.
It discriminates against testamentary dispositions through wills by Christians compared to non-testamentary dispositions.
It discriminates against the religious and charitable use of property compared to other uses, including less desirable purposes.
It discriminates against Christians who have relatives like nephews, nieces, or nearest relatives compared to those who do not have such relatives.
It discriminates against Christians who die within 12 months of making a will, which they have no control over.
The Kerala High Court, having found these discriminatory aspects, declared Section 118 unconstitutional under Articles 14 (equality before law), 15 (prohibition of discrimination on grounds of religion), 25 (freedom of conscience and free profession, practice, and propagation of religion), and 26 (freedom to manage religious affairs) of the Constitution.
Legal aspects
Section 118 of the Indian Succession Act, 1925
Section 118 of the Indian Succession Act, 1925, states the restrictions on bequests for religious or charitable purposes. Accordingly, it includes:
A person with a nephew, niece, or closer relative cannot leave property for religious or charitable purposes in their will unless:
The will is made at least 12 months before the death.
The will is deposited within six months of its creation in a legally designated place for storing living persons’ wills.
Exceptions:
This rule does not apply to Parsis.
Examples:
If a person with a nephew makes a will (not following the above rules) to:
Help poor people
Support sick soldiers
Build or maintain a hospital
Educate orphans
Support scholars
Build or maintain a school
Build or repair a bridge
Build roads
Build or repair a church
Support ministers of religion
Create or support a public garden
All these bequests will be invalid.
Judgement in John Vallamattom vs. Union of India (2003)
In its judgement, the honourable Supreme Court held that Section 118 of the Indian Succession Act, 1925, discriminates against Christians in matters of testamentary disposition for religious and charitable purposes. The Court further held that Section 118 of the Indian Succession Act violates Articles 14, 15, 25, and 26 of the Indian Constitution. Article 14 ensures that everyone is treated equally under the law. The Court found that Section 118 of the Act unfairly treated Christians differently by imposing strict rules on how they could leave property for religious or charitable purposes.
The rules, like requiring the will to be made a year before death and deposited, were not applied to other religious groups. This unequal treatment based on religion led the Court to declare Section 118 unconstitutional under Article 14. The Section imposed unfair conditions on Christian testators. Such as the requirement for a will to be executed at least 12 months before death and deposited within six months. It was further held that since these conditions were not imposed on other religious communities, they created discrimination against Christians.
Upon examining both Indian and international legal precedents, the then Honourable Chief Justice V.N. Khare determined that imposing restrictions on bequests for charitable purposes, which serve the public good, is unjustified and constitutes discrimination. The Chief Justice’s examination of Indian and international laws led to the conclusion that the restrictions were unjustified, emphasising the philanthropic nature of charitable purposes. Charitable purposes, like helping the poor, education, healthcare, and public welfare, are philanthropic and not solely tied to religion. Therefore, treating bequests for both religious and charitable purposes differently under Section 118 of the Indian Succession Act, 1925, was seen as unfair and against Article 14 of the Constitution, which guarantees equality under the law.
The Court also held that Article 15 of the Constitution protects the rights of individuals against discrimination based on religion, rather than protecting groups or communities as a whole. It focuses on ensuring equality for individuals, irrespective of their religious affiliation. Ultimately, the Chief Justice, along with the unanimous decision of the Court, allowed the petition and declared Section 118 of the Indian Succession Act, 1925, unconstitutional because it violated Article 14 of the Constitution by discriminating against testamentary dispositions for charitable purposes.
As a result, the Court allowed the writ petition. The Court also declared Section 118 of the Indian Succession Act of 1925 unconstitutional.
Conclusion
This case highlighted the need for a Uniform Civil Code (UCC) in India. Accordingly, UCC aims to replace the different personal laws of various religions with a single set of rules for all citizens. Article 44 of the Indian Constitution encourages the government to work towards creating and implementing a UCC to ensure equal treatment for everyone. However, UCC is not directly mentioned in this Article.
For example, Goa has a uniform civil code for all its residents, regardless of religion, since it continued using the Portuguese Civil Code after its liberation in 1961. Similarly, in 2024, Uttarakhand became the first state in India after independence to implement a UCC.
By introducing the Uniform Civil Code, India can ensure that laws are fair and equal for all citizens, regardless of their religious background. This case stipulates how different laws for different communities can lead to discrimination and the violation of fundamental rights.
The Court decided that the rules under Section 118 of the Indian Succession Act, 1925, which restricted how property could be left for charitable purposes, were not fair. After this decision, people now have more freedom to decide how they want to leave their property for charitable causes.
Frequently Asked Questions (FAQ’s)
What is the Uniform Civil Code (UCC)?
The Uniform Civil Code (UCC) is a proposed law in India that aims to replace the personal laws of different religions with one common set of rules that applies to all citizens. This means that instead of having different laws for various religious communities, there would be one uniform law for everyone.
What changes does this ruling bring for Christians in India?
After Section 118 was declared unconstitutional, Christians in India no longer faced the stringent restrictions previously imposed on their ability to bequeath property for religious and charitable purposes. This helps them have the same rights as members of other religious communities in matters of testamentary dispositions.
What is a testamentary disposition and what can be included in it?
A testamentary disposition refers to the allocation of an individual’s property or assets as specified in their will, which takes effect upon their death. This includes, but is not limited to, real estate, personal belongings, financial assets, digital assets, and intellectual property.
We know that all contracts are agreements, but not all agreements are contracts. And an agreement without consideration is void ab initio. Consideration can be of any kind, payment is one of the most important kinds of consideration and plays a very important role in a contract and its execution.
Therefore, clarity in the contractual payment schedules is not only essential from a legal point of view but also from an administrative as well as an execution point.
Definition of contract
In general terms, contracts are agreements, and what differentiates a contract from an agreement is its quality of enforceability through law. The Indian Contract Act of 1872, specifically in Section 2(h), defines a contract as an agreement enforceable by law. This means that not all agreements are considered contracts. Only those agreements that meet certain legal requirements and can be enforced in a court of law qualify as contracts.
One of the key elements of a contract is that it must be legally binding. This means that there must be an offer, acceptance, and consideration (something of value exchanged between the parties). Additionally, the parties to the contract must have the capacity to enter into a legally binding agreement, and the purpose of the contract must be lawful.
Furthermore, Section 10 of the Indian Contract Act provides additional criteria for determining whether an agreement is a contract. According to Section 10, all agreements are considered contracts if they are made with the free consent of the parties, are for a lawful consideration and object, and are not expressly declared void by any law.
In summary, a contract is a legally enforceable agreement that meets certain requirements, including offer, acceptance, consideration, capacity of the parties, and a lawful purpose. Only those agreements that fulfil these criteria and are not expressly declared void by law are considered contracts.
What is a contractual payment schedule
The contractual payment schedule is not defined under the India Contract Act, but there is a concept of contingent contract and performance of contract in the act and the contractual payment schedule is very similar to these concepts. Contingent contracts are those in which happenings and non-happenings depend upon the acts of the contracting parties. The contractual payment schedule is the payment timeline that will be paid during the contract’s lifetime and based on the progress of the contract. Contractual payment is a performance-based promise that creates joint liability for the parties.
Types of contractual payment schedule
While drafting a contract in which payment is involved as a mode of consideration, special emphasis should be given to drafting the terms of payment. There are many kinds of payment schedules, and some of them are as follows:
Deposit and final payment
This type of contractual payment schedule is adopted when the project is smaller, in which a portion of the project amount is given in advance to let the contractor/supplier arrange for men and materials to start the project. The final payment shall be made upon completion of the project.
Progress payment
A progress-based contractual payment schedule is linked with the progress of the project, which means that for every percentage of work completed, an equal percentage of payment will be made. This type of contractual payment schedule is in practice for medium to large-size projects. Under this payment schedule, the payment flows are arranged so that the status of the project can be estimated through the percentage of the payment made.
Time-based payment
The time-based payment schedule means the payment schedule is designed based on periods such as monthly, quarterly, half-yearly, or annual. It is a predetermined payment plan that divides the total cost of the project between the amounts paid over the agreed time intervals.
Milestone based
The milestone-based payment schedule is the payment schedule that is linked with certain important milestones of the project. Milestones signify the key stage/events of the project. For example, in a building construction project, the milestones can be like the foundation stone, first-floor roof, second-floor roof, etc.
Completion based
The completion-based payment schedule is generally adopted when project costs are prepared in an itemised manner. For example, in a building construction project, a specific amount is mentioned for the foundation work, the first floor, the second floor, etc., and that specific amount will be released upon completion of the foundation work, the first floor, and the second-floor work.
Retainage
In this type of payment schedule, some portion of payments are retained by the project owner or main contractor and only released after satisfactory completion of the project. Often, the retainage amount can exceed a contractor’s entire profit margin, which works as a motivator for the contractor to complete the project on time.
How to ensure clarity in the contractual payment schedule
It should be the endeavour of all parties to a contract to make the terms and conditions of the payment schedule to the point without any ambiguities. To ensure clarity in the contractual payment schedule, the following are some points that should be kept in mind while formulating the terms and conditions of a contractual payment schedule:
Specify the payment terms:
Clearly state the total contract price and any applicable taxes or fees.
Indicate if payments will be made in instalments or as a lump sum.
Specify the currency in which payments will be made.
Establish payment milestones:
Identify specific milestones or deliverables that trigger payments.
Define the scope and acceptance criteria for each milestone.
Ensure that milestones are objective, measurable, and verifiable.
Determine payment frequency:
Specify whether payments will be made weekly, monthly, quarterly, or upon completion of certain milestones.
Consider the cash flow needs of both parties when determining the payment frequency.
Define payment methods:
Provide detailed instructions on the acceptable methods of payment, such as bank transfers, checks, or online payment systems.
Include the necessary bank account information or payment addresses.
Set due dates and late payment terms:
Specify the exact due dates for each payment.
Outline the consequences of late payments, such as interest charges or additional fees.
Consider including a grace period before late payment terms are applied.
Provide progress invoicing:
If payments are tied to milestones, include a process for submitting and approving progress invoices.
Specify the documentation required to support each invoice, such as timesheets, delivery receipts, or inspection reports.
Address change orders and variations:
Anticipate the possibility of changes in the contract scope or deliverables.
Outline the process for handling change orders and how they will impact the payment schedule.
Include dispute resolution mechanism:
Incorporate a clear and concise dispute resolution mechanism in the contract.
Specify the steps to be taken in case of disagreements over payments or payment terms.
Review and approval:
Ensure that both parties thoroughly review and understand the payment schedule before signing the contract.
Obtain written confirmation or signatures from both parties to indicate their agreement with the payment terms.
Communication and transparency:
Maintain open communication throughout the project or business agreement.
Promptly address any questions or concerns related to payments to avoid misunderstandings.
By incorporating these elements into contractual payment schedules, businesses can ensure clarity, minimise disputes, and foster a mutually beneficial relationship between the parties involved. And additionally:
The use of vague terms/words should be avoided.
The payment terms should be specific:- when, how much, and to whom the payment will be made.
The payment terms must include balancing terms to protect the interests of both parties, payer and payee for delayed payment as well as delays in delivery of works.
All the milestones should be such that they can be easily measured.
The procedures for invoicing and the procedures for examining the milestones should be mentioned in the terms and conditions of the contractual payment schedule.
The procedure for change request and its impact on the payment schedule must be defined.
To make the contractual payment schedule with more clarified, the following are some points that can be added to terms and conditions of a contractual payment schedule-
Clarity in verification of work done.
Clarity in mode of payment.
If a cross-border contract, then the currency in which payment will be accepted.
Clarity regarding all applicable taxes.
Clarity regarding whether the payments include taxes or not will be calculated separately.
The curative time- it is mentioned with clarity that after any breach of the contractual payment schedule, what is the curative time during which remedial action must be taken by the parties?
The incentive/penalty clause should be mentioned with clarity.
What are the advantages /disadvantages of a contractual payment schedule
While drafting a contractual payment schedule, a carrot and stick policy should be adopted, which means incentives for efficient and early completion of tasks and penalties for late completion. There are many advantages and disadvantages to a contractual payment schedule, and some of them are as follows:
Advantages of a contractual payment system
It removes ambiguity and confusion about payment. A payment schedule makes the process smoother and it also provides clarity to all parties about their obligations.
A contractual payment system helps to avoid confusion, disputes, and unnecessary expenses.
Both parties know about the penalties related to their failure to fulfil obligations related to the contractual payment schedule.
It makes it easy to monitor the progress of the project and the availability of the funds.
Disadvantages of a contractual payment system:
It is a double-edged sword; it penalises either party for their failure to fulfil their obligations in the agreed-upon manner.
Sometimes, it works as a hurdle because if any party fails to fulfil their agreed obligation, it leads to disputes and delays in project completion.
Any change request leads to a change in the main contract and delays the project’s completion.
Content of payment schedule
The contents of a payment schedule vary by nature and type of project, but some common points are typically included while preparing most of the payment schedule.
Project information: The project name, location, and descriptions, including commencement and completion date.
Name of the parties, including subcontractors, only those who are bound by the contract.
Work’s scope: Include works, materials, and services that are part of the contract.
Payment: Parties wise payment details and payment due dates.
Payment schedule: Payment timing, such as the due date or date/interval of the next payment or based on the milestones, should be clearly indicated.
Payment method: Whether the payment will be made through cheque, RTGS, electronic, etc. transfer
Payment terms: The terms and conditions regarding penalties or other invoicing requirements should be given.
Dispute resolution mechanism: If any dispute arises, how will it be resolved, whether through arbitration, mediation, or other mechanisms?
Signatures of the parties: Signatures of all the stakeholders
Case law
In the case of Grove Developments Limited vs. Balfour Beatty Regional Construction Limited (2016), the central legal dispute revolved around the interpretation of a construction contract and the entitlement to interim payments. Grove Developments Limited (GDL), the claimant, sought legal relief regarding two specific issues related to the construction of a contract with Balfour Beatty Regional Construction Ltd. (BBRCL), the defendant.
The crux of the matter was that the construction work was not completed within the agreed-upon timeframe, resulting in a disagreement between the parties. GDL contended that they were entitled to interim payments, even if those payments were not explicitly specified in the agreed-upon payment schedule. However, the UK court ruled against GDL, holding that a contractor is not entitled to any interim payments that fall outside the scope of the mutually agreed-upon payment schedule.
This landmark decision clarified the legal principles governing interim payments in construction contracts. The court emphasised that the payment schedule forms an integral part of a construction contract and serves as a crucial tool for managing cash flow and ensuring the timely completion of projects. By limiting interim payments to those specified in the payment schedule, the court sought to uphold the sanctity of contractual agreements and prevent contractors from seeking additional payments beyond what was originally agreed upon.
The Grove Developments case has far-reaching implications for the construction industry in the United Kingdom. It reinforces the importance of carefully drafting construction contracts, particularly regarding payment terms and schedules. Contractors must ensure that they negotiate and agree upon a payment schedule that accurately reflects the project’s scope, timeline, and financial requirements. Failure to do so could result in disputes and potential financial losses, as GDL experienced in this case.
The legal principles established in the Grove Developments case serve as a valuable precedent for future construction contracts. They provide guidance to contractors, subcontractors, and project owners alike, helping them navigate the complexities of construction payments and avoid costly disputes. By adhering to the agreed-upon payment schedule and seeking legal advice when necessary, parties involved in construction projects can protect their rights and ensure the smooth completion of their endeavours.
Conclusion
The clarity in the contractual payment schedule not only ensures hindrance-free project works but also makes it easy to monitor compliance and take timely remedial action for any failure in the implementation of the project. Therefore, while drafting a contractual payment schedule, a summary of some of the best practices that can be adopted, like avoiding ambiguous language and payment dates, should be specifically mentioned, including late fees, offering of any incentives for early project completion, etc.
This article has been written by Ajay Wadekar, pursuing the Personal Branding Program for Corporate Leaders Course from Skill Arbitrage, and edited by Koushik Chittella. This article will deal mainly with the “inner soul” of traditional farming, irrespective of modern farming equipment and infrastructure that can still be used as a support mechanism.
Table of Contents
Introduction
India is an agricultural country. She is regarded as “कृषीप्रधान देश” (Krishi Pradhan Desh), or country, dominated by agriculture as a main business. More than 60 to 70 percent of the population in India depends on agriculture for their livelihood. The agricultural produce not only fulfils in-country demands, but a few commodities are also attracting major business prepositions for export. While traditional farming is still practiced in villages, advanced farming techniques and methods are taking precedence in the rich and educated countryside.
Organic farming: meaning
Organic farming would basically mean “farming with no usage of chemical, synthetic, artificial, or pesticide fertilisers.” All the fertilisers and pesticides that are used in organic farming are essentially bi-products of either animals or plants. Land is a basic ingredient that is needed for growing crops. And the crucks lie in bringing the soil or land to a “fertile” condition. Maintaining soil fertility is then ensured by using manures and pesticides, which are derivatives of animals and plants.
History of organic farming
Since time immemorial, India has been known for its agricultural practices. It was only “organic,” or what was then called “natural” farming. There was no use of any chemical fertilisers, synthetic fertilisers, or pesticides. All these needs were fulfilled by in-house products that were not harmful for either the soil or the consumers of the produce.
There is a famous song,“Mere Desh Ki Dharati Sona Ugle, Ugle Hire Moti,” which means the land of my country produces gold, diamonds, and pearls. The song further narrates traditional farming specialties like the use of bulls, ploughing, sowing, and harvesting. It even talks about the worshipable status of soil. In this spirit, farming was performed, and the soil, nature, and health of consumers were well protected.
Current state of affairs
In the endeavour to increase yield in the early 1960s, what came into existence was “dosage of synthetic minerals and chemical-based pesticides.” It gave immediate results apparently and gross produce was increased multifold. This huge increase in agricultural produce was under the umbrella of an initiative called the Green Revolution हरित क्रांती. The crop deficiency was overcome by this endeavour, but it had substantial negative effects on the overall health of the soil strata. This included unnatural erosion of soil, drastically diminished soil fertility, forced killing of useful microorganisms, and most importantly, carrying forward hazardous toxic chemicals in foods consumed by all of us.
Fertilisers and pesticides directly affect the quality of the groundwater
The State of Punjab is among the few largest users of chemical fertilisers and pesticides. As depicted in the illustration above, chemical pesticides contaminate groundwater directly and harm crops, but all the flora and fauna in nearby areas, including living entities like birds, earthly microorganisms, and aquatics, are badly affected. The Malwa region in the state of Punjab consumes nearly two-thirds of total consumption in the state. The research shows that the health issues arising out of this abnormal situation in this region are alarming. It has gained a bad name as the “Cancer Capital” of India due to the high number of cancer cases.
The need to switch to organic farming
We must take a lesson from studies and stories that are revealed and spoken about the state of Punjab. Experiential learning is a good option in this case! Innumerable ill-effects of chemical-based fertilisers and pesticides have been realised lately by them and society in general. Some of them are mentioned here:
Quality of groundwater and soil fertility: The run-off from agricultural lands in the monsoon season contains heavy amounts of chemicals, which are directly mixed into river flows and water bodies. A majority of it is absorbed in soil, deteriorating it further. Any type of waste contains high amounts of chemicals that only worsen the situation.
Vegetables become dangerous for human consumption: Vegetables are found with heavy chemical substances on two counts. One, by virtue of use of pesticides and fertilisers; and second, because of usage of water from rivers and water bodies that contain an alarming content of heavy metals and chemicals such as chromium, nickel, copper, lead, cadmium, and uranium.
Serious health issues: Consumption of “almost poisonous” food and water results in serious health issues. Premature childbirth, cancer, and bodily impairments are common signs that are the result of such a polluted environment.
There is a serious need for change here!
Challenges in propagation of organic farming
There are various “controllable” and a few “wishful thinking” parameters that are considered detrimental to the propagation of organic farming. The farmer communities are trying hard to work on controllable factors, while on other parameters, they depend on external influence for a positive and futuristic vision for the development and sustenance of organic farming.
Perspective of yield
This is perhaps a “controllable” factor. Nevertheless, it largely affects the initiative and interests of the farming community to go for it. The yield or output from organic farming is negatively affected by factors such as:
Uncontrollable diseases and pest attacks: In the absence of chemical pesticides, crops are affected by seasonal pests. While “farming in general” is not affected by such pest attacks, organically grown crops fall prey to them. The percentage of yield drops to almost 50% in such cases. Effective sorting of the produce is therefore needed to avoid it going to customers. This fallout in produce is also the reason for “costlier” organic produce. This poses the challenge of convincing customers of these high costs.
Inherent low yield ratio: Ideally, local seeds are expected to be used for the purpose of organic farming. Because these seeds are not treated chemically, unlike commercially available seeds, the inherent crop output depends on the condition, age, and storage method of the seeds. If cropping is affected in some parts of the fields, then replantation is needed. This reduces the output and also affects the assumed timetable for harvesting.
Criticality in sustenance
Overall initial costs incurred in organic farming are governed by preparing the soil so that it demonstrates all organic properties. If one is starting a green field project, it could still be affordable. But if one wants to switch to organic farming from farming in practice, then it is a time consuming cycle and also requires a lot of efforts to eradicate the already acquired non-organic properties due to heavy usage of chemical fertilisers and pesticides. These initial investments propel farmers away from organic farming. Also, to maintain organic soil properties, one needs to heavily depend on the use of biomass, which is, in the present scenario, a costly affair unless you have your own cattle in-house. These factors involve high initial investments and considerable running costs, which make it an unsustainable proposition for farmers in general.
Awareness deficit
There is a huge need for awareness campaigns about organic farming. In villages, farmers do not even know that there is something called organic farming, and one can expect crops without using chemical fertilisers and pesticides. Even if they know the ill effects of using chemicals in growing crops, they keep on using them because of low or next to no awareness. In my personal experience, when I asked village farmers how to take care of a particular type of pest on crops, they immediately enumerated the number of pesticides they use and “effectively” took care of that. When I told them that we should not use those chemical pesticides, they were almost laughing at me, and they said, “It is impossible otherwise!” There is an extreme need for awareness campaigns about organic farming.
Customer base
Indian household customers in general do not believe in such high-cost propositions of organic products. They see that “good-looking” vegetables and food products are available at about 25% less cost than organic stuff.
In image: Organic Conventional
Price: INR 80/Kg INR 20/Kg
The mentality “Low costs do not mean bad quality, and high costs may not ensure good quality” drives them largely. Ordinarily or conventionally grown vegetables and food stuff are visually seen as enchanting, while organic products may not have that “showbiz” quality. Customers come across this dilemma while choosing what they want.
Inappropriate interests and allurements
India is supposed to be a manufacturing hub for chemical fertilisers and pesticides. There is a big lobby for these commodities, right from manufacturers, logistics service providers, dealers, stockists, franchises, retailers, and even small vendors in cities and villages for these products. The Central and State Government bodies (which could be steered by conflicts of interest among a few office bearers) also engage themselves in the promotion of these synthetic fertilisers and pesticides and tend to subsidise them during suitable times in the year. Instead of propagating natural or organic farming, due to huge business interests, these synthetic commodities harmful to traditional farming are promoted.
During plantation season, the fertilisers are subsidised. During cropping seasons, pesticides are promoted by way of advertisements and abundant sales activities. During harvesting and stocking seasons, synthetic preservatives are advertised. Farmers fall prey to these cheap options and subsidies and continue using these hazardous commodities without even knowing the ill-effects of all those things. Thus, these promotions prove to be detrimental to the promotion and knowledge of organic farming.
Mitigation and adaptation
Even considering all the facts and negativity around, there is no need to be disheartened. The situation is improving because of the efforts and sincere endeavours of many passionate people in farming communities and the government’s support. We will try to summarise those below:
Initiatives around us
Many small communities do exist for learning, education, and the promotion of organic farming. These communities organise training on-site and help farmers by providing support in all aspects of organic farming. The subjects covered during these trainings are:
Preparation of soil and measurement of soil fertility
Use of natural manures. Preparation of manures and its dosage
Importance of livestock at farm
Use of biomass in Organic farming
Preparation and use of natural pesticides
Advice and guidance on marketing of organic food products
Government support
Fortunately enough, the central and state governments are realising the importance of Traditional/natural/organic farming, and a lot of initiatives are either already existing or planned in huge ways. The issue remains theirs until they reach the actual users. The government is endeavouring to the fullest to ensure that the farmers use the facilities and benefits to cultivate awareness and propagate organic farming. Our Prime Minister, Shri Narendra Modi, during his address to the nation in 2019, made a mention of the importance of natural/organic farming, which underlines the seriousness and commitment that the government demonstrates towards organic farming.
Some initiatives are:
Subsidies for Animal Husbandry: The support covers all training on buying, sheltering, feeding, manure management, etc.
How to use bi-products of livestock: These cover the buying, installation, and maintenance of biogas equipment, the use of biogas for cooking, and the use of slurry as a natural manure and fertiliser supplement.
Various methods used for seed and sibling preservation, soil fertility measures, enhancement of microorganisms in soil, natural pesticides using biomass, etc. are part of the website of NITI Aayog. This also shows the commitment of the government to organic farming.
Due to various hurdles, it is imperative that modern and innovative farming techniques are deployed to improve yield and reduce wastage of farm produce. Various practical and usable techniques are proposed by the farming communities mentioned.
Use of natural manures (Jivamrut, Biogas Slurry): Jivamrut is a concoction made from cow dung, cow urine, gramme flour, and jaggery. This has proven to be rich in all nutrients for vegetation and crops. There is ample information available on social media about its composition and the way it needs to be prepared and disposed of in the field.
Drip irrigation over traditional furrow irrigation: Watering plantations or crops has always been a tricky process. The traditional furrow irrigation method is harmful for the soil condition. It essentially erodes the soil, and all the nutrients and microorganisms are flown away as runoff. In the long run, dead soil is a result. This method could only be recommended for large farm fields where other methods may prove costly.
In contrast to this method, drip irrigation reduces the consumption of water and also retains the fertility count of the soil. With initial investments in setting up drip irrigation, the prolonged savings can prove to be beneficial.
Vertical farming: To increase yield, it is imperative that the available land be used efficiently and effectively. There is an innovative method of using the land vertically. It can be in many layers. The effective number of layers generally used is three. The containers are mounted on a stand with three layers. The soil is prepared (3 equal parts of rice husk, red soil, and cow dung manure) and put in containers. In this case, drip irrigation becomes a must.
Actual site photo of Vertical farming at Neelkamal Farms
Generally, leafy vegetables are produced by using this type of vertical farming.
Using poly house/poly tunnels: In heavy rainfall zones during monsoons and in hot summers, crops get affected. In the rainy season, the crops are washed away, and in the summer, they just do not give any yield and get dried up due to the hot sun. Poly houses or poly tunnels serve the purpose of protecting crops from the danger of getting washed out in the rainy season and getting dried up during hot summers.
Actual site photo of Poly Tunnel at Neelkamal Farms
Diversified crops: Repeated crop production deteriorates the nutrient composition of the soil owing to the consumption of the same nutrients all the time. Taking multiple and varied combinations of crops increases soil health and improves effective yield. A diverse/cross/multiple system does not limit itself to only plantations in farmland but also includes the planting of diverse and productive trees along the borders of farmland. This not only improves the microbial health and pollination of crops but also provides additional seasonal income to farmers. The trees on the borders of farmland could be various types of seasonal fruits, such as mangoes, coconuts, guavas, custard apples, and many more, depending on the region and weather at a particular place.
It was my passion that brought me to practice farming first, and later organic farming. Through social media and through one of my social groups, we got enough information about the ill-effects of conventional farming. We became aware of the status quo of farming in Punjab. It is said that farmers in Punjab grow organically for themselves on a small piece of land and grow conventionally for commercial purposes. This was horrifying. We had a piece of land, and we decided to pursue organic farming in its soul and spirit.
Getting Started
We browsed all the available information on organic farming. It was such a confusing quantum of information that we decided to take some advice from competent authorities available nearby. We underwent a three-day training programme on organic farming. The training module encompassed inputs normally needed by newcomers:
Farming Techniques
Use of Livestock in farming
Preparation of organic manures
Use of slurry as an outcome from Bio-Gas equipment
Selection of crops suiting the soil strata
Exotic Vegetables and Indian vegetables
Group Farming
Direct marketing support.
Implementing the training
We decided that we would implement the farming module that was taught to us during the training programme. We needed to prepare the farming soil where we would be growing local seasonal vegetables. Around the farming land on the borders, we planted seasonal fruit trees and local varieties of productive trees.
We started growing local vegetables like brinjals, tomatoes, lady fingers, cauliflower, gourds, etc. On the farm borders, we planted coconut, mango, and neem trees. The most important aspect of organic farming remains the organic manure-producing infrastructure. The basic requirement here is to have livestock on the farm. We engaged service providers to install the biogas equipment as well. We went for full-fledged equipment producing biogas, biogas burners in the kitchen, slurry filters, and arrangements (pumps and filters) for the dissipation of slurry through a drip irrigation system that directly reaches crops.
Actual site photo of cow and Biogas equipment
I must say, the satisfaction of practicing organic farming on our own farmland was next to none. The next task was to find a market for the produce.
Market Research
We started searching for local groups where organic vegetables and food items are available. We built relationships with farmers who were already members of those groups. We connected with group admins and narrated our story to them. Because of their interest in promoting organic farming, they too were very happy to hear us out.
The group, including administrators and farmers, are cooperative with each other, and they tried to support any issues during farming or in the sale of produce.
Learnings
Enormous learnings on account of technicalities, intricacies, government policies, and knowledge of organic farming are the smallest of the outcomes! We had opportunities to meet various personalities during our journey. Farmers, rich and poor, passionate people handling NGOs, knowledge groups and marketing group admins, natural food-loving customers, and many more. The list is endless. Our belief was affirmed!
“केल्याने होत आहे रे, आधी केलेची पाहिजे”, meaning… “It will happen if we do, we first but have to do”. Unless we start something, there cannot be progress.
Conclusion
Organic farming in India has huge potential to grow. It will bring good health to the masses in general, and if consumption of organic foodstuffs increases, the pricing of them could also be within reach of the general public. More emphasis on awareness campaigns about organic farming is essential for government and public partnerships. This could be well taken advantage of by sponsorships from NGOs, CSR initiatives from big industrial giants, and government subsidies.
Also, the government should run awareness programmes for already existing and planned initiatives, as a major chunk of farming communities are unaware of those. And of course, in view of our healthy future, each one of us must make commitments towards the consumption, propagation, and sponsorship of organic farming.
This article is written by Harshita Agrawal. The article signifies the legal interpretation of wills concerning ancestral property within the Hindu Mitakshara law framework. The Supreme Court held that if a will explicitly states that property should be treated as ancestral, then the son would inherit it as such with respect to his male descendants. The article highlights key principles under Mitakshara law and examines the court’s judgements and subsequent decisions, coupled with various statements and arguments pertinent to this legal precedent.
The evolution of Hindu law during the age of commentaries and digests marked the formation of various schools with opposing doctrines. Mitakshara is a highly significant school of Hindu law, as it provides a comprehensive commentary on the Smriti authored by Yajnavalkya. This school is followed throughout India except in West Bengal and Assam. The inheritance law of the school of Mitakshara is based on the concept of propinquity, which means that the closest blood relative inherits. The provision of the Hindu law is that the father acting as a Karta has the authority to give a portion of the movable joint family assets to any close relatives as an expression of love and affection. Karta, under Mitakshara law, has also the right to gift or will of his property according to his choices and the decision cannot be questioned by anyone. The contention arises when a father gifts or wills his movable or immovable property to one of his sons, excluding the others, and whether the son inherits the ancestral property or self-acquired property, and the subsequent impact on the rights of male descendants. However, there are no clear words describing the kind of interest from the will or gift as mentioned in the case of C. N. Arunachala Mudaliar vs C. A. Muruganatha Mudaliar, (1953)which further complicates the issue.
Details of the case
Name of the case: C. N. Arunachala Mudaliar vs. C. A. Muruganatha Mudaliar and Another
Name of the court: Supreme Court of India
Date of the judgement: 14 October, 1953
Equivalent citations: 1953 AIR 495, 1954 SCR 243, AIR 1953 SUPREME COURT 495, 1966 MADLW 1072
Bench: J. B. K. Mukherjea, J. Mehr Chand Mahajan, J. B. Jagannadhadas
Authored by: J. B. K. Mukherjea
Petitioner: C. N. Arunachala Mudaliar
Represented by: P. Somasundaram with R. Ganapathy Iyer
Respondent: C. A. Muruganatha Mudaliar and Another
Represented by: B. Somayya with K. R. Chowdhury
Facts of the case
C. N. Arunachala Mudaliar had two sons from his first marriage, Muruganatha and his brother. After the death of his wife, he remarried. The Plaintiff, Muruganatha Mudaliar (respondent No. 1 in this appeal), filed a case seeking specific allotment of one-third of his father’s property. He alleged that these properties were jointly owned by himself, his father, C.N. Arunachala Mudaliar (Defendant No. 1 in this appeal) and his brother (the plaintiff’s brother).
According to the allegations in the complaint, the conflict arose after the arrival of his stepmother in the household, as the father began to claim sole ownership of the joint family property, refusing to acknowledge any rights of his sons, resulting in the filing of the suit.
The plaintiff sought partition of various assets, including agricultural land, a house, jewellery, furniture, brass utensils, and cash in his father’s name. However, the father denied the existence of property that the plaintiff could claim, as he stated that the agricultural land and houses were his separate property and he inherited them through a will from his father. The other assets, like cash, furniture, and brass utensils, were his separate property, and jewellery belonged exclusively to his second wife (defendant No. 3).
The will of C. N. Arunachala was straightforward, as he owned all the properties independently, acquired without any ancestral fund. The will stipulated that upon his demise, the properties would pass to all his sons, as mentioned, and they should be granted full ownership rights, including the ability to sell, gift, or exchange the properties to their descendants. The father had previously allocated certain properties to his brother’s wives and his own wife during their lifetimes, with these properties reverting to one of his sons after their demise as specified in the will.
The plaintiff’s brother supported his brother (Muruganatha Mudaliar), and the second wife of their father clearly stated that she was not a part of this proceeding in any manner, and regarding the question about the jewellery, it solely belonged to her, so nobody could have the right to claim it.
As the trial proceeded further, the trial judge concluded that the properties inherited by Defendant No. 1 from his father should be held to be ancestral properties in his hands, and those acquired using ancestral income were deemed to be joint properties.
The subordinate judge issued a preliminary decree in favour of the plaintiff and granted relief as requested in the complaint, with the exception of certain jewellery articles considered non-existent.
The High Court ruled in favour of C. A. Muruganatha Mudaliar and stated that the properties gifted by his father were self-acquired and not ancestral. The decision of the High Court underscored the clarifications regarding ancestral and self-acquired properties and the rights associated therein.
Issues raised
Whether the son has any claim to property independently acquired by the father?
Whether the properties acquired by defendant No. 1 through his father’s will should be classified as ancestral or self acquired properties in his possession?
Arguments of the parties
Petitioners
The petitioner cited the Mitakshara law, which emphasises a man’s religious duty to ensure support, and concluded, “They who are born, and they who are yet conceived and those still in the womb need support. Therefore, no gift or sale should be made.” The petitioner also claimed that the properties in his possession were ancestral and he had a claim to them, including the right to partition, and the father had claimed sole ownership of the joint family property and self-acquired rather than the ownership being a shared asset within the family. The properties were exempted by the father from division under customary joint family rules.
Respondent
The respondent argued before the court that all of the father’s assets were self-acquired and he received them through his father’s will. He also contended that under the Hindu law, the father retained absolute authority over his self-acquired assets including the right to gift them to his son. This perspective emphasised that such gifted properties remained as self-acquired in the ownership of the son rather than automatically converting into ancestral assets subject to partition among family members.
Laws/concepts involved in the case
Section 1, Chapter 5 of the well-known text of Yagnavalkya- Itrefers to the fact that where the division of a grandfather’s wealth among his grandsons was mentioned, the grandsons had a right by birth to the estate of the grandfather and were entitled to shares upon partition, though their shares would be determined per estate of descendants and not per capita.
Section 1, Chapter 1 of Mitakshara- It concerns a father’s rights over his self-acquired property and the interests of his sons and grandsons in such property. The property in the paternal or ancestral estate was acquired by birth, and though the father had independent power over the disposal effects other than the immovables for indispensable acts for essential duties and legally prescribed purposes such as gifts made out of affection, family support, or relief from distress, consent should be obtained regarding immovable property. It applied whether the immovable property was acquired by the father himself or inherited from his ancestors since it stipulated though immovables or bipeds had been acquired by a man himself, a gift or sale should not be made without convening all the sons.
Text of Narada- Itwas referred to as per the above-mentioned section that there were three types of property which were exempted from division and any favour conferred by a father i.e., what is earned through bravery, the wife’s wealth and the knowledge acquired through education. The Mitakshara is fairly clear on placing the father’s gift separately and in several places that were exempted from partition.
Section 2, Chapter 1 of Mitakshara- Itstated that a gift from a father to his son automatically became ancestral property in the hands of the recipient and with this viewpoint, a clear response was provided to the argument that such gifted property should be divided between the father and sons as it did not fit the definition of “self-acquisition”.
Section 4, Chapter 1 of Mitakshara- It stated about properties not subjected to partition and property obtained through the father’s favour and listed among those that could not be divided. As per paragraph 13 of this relevant section through a son born after the partition took the whole of his parent’s property, any property affectionately given to a separated son remained with him. As per paragraph 28 of the above-mentioned section, property obtained through the favour of the father possessed significant meaning. Both the ancestral and self-acquired property could be divided by a Mitakshara father even without his sons’ agreement, but the law guidelines must be followed if he chooses to divide it. However, when a father gave gifts as acts of generosity, no legal rule should be bound at his discretion, as the text also outlined the permissible inequality between elder and younger sons.
Section 5, Chapter 1 of Mitakshara- It stated that the grandson had a right to prohibit his undivided father from donating or selling effects inherited from the grandfather. However, he lacked the authority to intervene in assets acquired by the father. The notion that the father’s right to dispose of his self-acquired property was as restricted as it was for ancestral property was countered. Although the son had a right by birth in both his father’s and grandfather’s property, he remained dependent on his father regarding the paternal estate. Since the father had a predominant interest in the property he acquired himself, the son should acquiesce in the father’s disposal of his self-acquired property.
Yagnavalkya, Book 2, Verse 129- These treaties are foundational texts in Hindu law, and Book 2 focuses on civil law, including property and inheritance. Verse 129 is significant in the context of property rights and inheritance. This verse underscores the father’s intention and decision regarding the importance of property and affirms his complete autonomy over self-acquired property. It also stated that his family members have no grounds to challenge his decisions regarding the disposal of this property.
Mayne’s Hindu Law- Mayne’s Treatise on Hindu Law is a significant work in the field of Hindu law and provides valuable insights into the legal principles and customs governing Hindu society including the Manusmriti, the Dharmashastra, and Yagnavalkya’s Smriti. The original treatise was first published in 1878, has been widely referenced, and remains a valuable resource for legal scholars and practitioners. Despite the ancient origins of Mayne, the conflicting texts on various legal matters make it challenging to determine a definite version of classical Hindu law. The treatise covers various aspects of Hindu law, including property rights, adoption, joint families, widowhood, and more. It also includes commentaries on several important acts, such as the Hindu Marriage Act, Hindu Succession Act, Hindu Adoption and Maintenance Act, and Hindu Minority and Guardianship Act.
Judgement in C.N. Arunachala Mudaliar vs. C.A. Muruganatha Mudaliar (1953)
The Supreme Court referred to the principles of Yagnavalkya, Book 2, Verse 129 which underscored the significance of the property of the owner in determining the status of the property and Mayne’s Hindu law to support the interpretation that if a father would clearly express the intention for the property to remain separate. It also asserted the pivotal role of the testator’s intent in property determination under the Mitakshara school of Hindu law.
The Honourable Court gave the judgement that the father’s intention regarding whether the property should be considered separate or joint family property is significant. The High Court of Madras addressed the issue of whether properties inherited by a Hindu son from his father should be deemed ancestral or self-acquired. The High Court’s ruling laid the groundwork for a subsequent appeal to the Supreme Court, which upheld the interpretation and reinforced these principles. The decision of the lower court was reversed, and the plaintiff’s lawsuit was dismissed. This signifies that the testator chose to grant his son complete ownership of the property as specified in his will.
The Supreme Court concluded the appeal was to be upheld, setting aside the judgements and decrees of both lower courts and thereby dismissing the plaintiff’s suit. The significance of the fact, which had sparked considerable judicial debate, was that the plaintiff himself was a pauper. Therefore, the court ordered each party to bear their own costs across all of the court’s proceedings.
Relevant judgements referred to in the case
A reconciliation was attempted in an early Calcutta case by suggesting that the rights of the sons in their father’s self-acquired property were imperfect and unenforceable by law. In the case of Rao Balwant Singh vs. Rani Kishori, (1898) the issue was addressed by the Judicial Committee, and while delivering the judgement, Lord Hobhouse noted that Hindu law texts often mix religious and moral considerations with legal rules. It was held that in a joint Hindu family, the father had complete and unrestricted discretion over the disposal of his self-acquired property. Under Mitakshara law, the male descendants had no right to challenge the father’s unfettered rights. The various High Courts in India had rightly held that a Mitakshara father could sell his self-acquired property to a stranger without his son’s consent and gift such property to one son over another, even distributing his property unequally among his heirs.
The Calcutta High Court in the case of Gurumukh Singh vs. Kamod Singh, (1863) 1 M.I.A. 367 ruled that the property inherited from the father became ancestral in the hands of the son. The judicial opinions were divided, with each case being interpreted based on its unique circumstances.
The High Court of Madras held in the case of Bavisetti Venkata Surya Rao vs. Muthayya, (1963) that if a father did not specify or determine whether the bequeathed property be ancestral or self-acquired, the property should be considered ancestral. The judgement is supported by the full bench of the Patna High Court, and the decision of the Calcutta High Court interpreted this as well.
On the other hand, the Bombay High Court in the case of Thamma Venkata Subbamma vs. Thamma Rattamma (1987) was of the opinion to hold such gifted property as self-acquisition of the donee unless the donor explicitly stated it to be ancestral. The same perception is supported in the case of Lallu Singh vs. Gur Narain, (1922) by the Allahabad High Court and the Lahore High Court.
This judicial conflict was brought to the attention of the Privy Council in Lal Ram Singh vs. Deputy Commissioner of Pratapgarh, (1923) but the judicial committee did not resolve the issue as it was not necessary for that particular case.
The 11th edition, paragraph 280 and page 344 of Mayne’s Hindu Law presented another argument favoured by the Patna High Court in a full bench case, which stated that the exception for a father’s gift applied only to partitions between the donee and his brothers and remained partial when it came to the donee’s male descendants. The theory of equal ownership of ancestral property between a father and son did not apply to a father’s gifts. Therefore, a property gifted by a father to his son did not become ancestral property simply because the son received it from his father or ancestor.
Rationale behind this judgement
As referred to in the Calcutta case Vide Muddan vs. Ram Doss, (1872), 31 M.I.A. 358 the court shared views on two main points. The first ground is Mitakshara, following Yagnavalkya’s authority, which states that there will be equal ownership of ancestral property shared by father and son. The other ground includes that the definition of “self-acquisition” given by Mitakshara does not include such a gift of this character and should be considered as property that can be divided between the son and the children.
The Supreme Court, in its reasoning, stated that in the case of ancestral or grandfather’s property passed down to the father, the son shared equal rights with his father, and in the father’s self-acquired property, the rights would be unequal as the father had independent control and greater interest in it. The court noted that the son could only claim the right equally with his father only when the property of the grandfather had passed down to the father upon the death of the grandfather or through a will made by the grandfather during his lifetime and became ancestral property in his hands. As per the above-mentioned conditions, the grandfather’s property came down to the father due to his legal right as a son or descendant of the former, and if the father received the property as a gift and not by virtue of the latter’s legal rights, but his father chose to bestow a favour on him that could have been given to anyone else, the rights in such property solely depended on the grandfather’s intentions.
Hence, the court asserted that to determine whether a property is ancestral in someone’s possession, it is crucial to consider not only their relationship with the owner but also the process of transfer.
It was well established in Mitakshara law that a father had sole authority over his self-acquired property; it could explicitly be decided by him when he made a gift whether the recipient would receive it solely for themselves or for the benefit of their family. When the deed of gift or will includes clear provisions, there should be no confusion and the son’s interest would depend on these terms only. However, if there were no clear words describing the nature of the interest, the court would need to interpret the intention of the donor based on the language of the document or the circumstances laid thereupon. Essentially, the court would determine whether the donor intended to gift the property outright or set it aside for future partition. The focus would be on understanding the intent behind the disposition rather than its formal wording.
Analysis of C.N. Arunachala Mudaliar vs. C.A. Muruganatha Mudaliar (1953)
As per Mitakshara law, the father had absolute authority over his self-acquired property to which no objections were taken from his male descendants, and as per the opinion of the Supreme Court, it was incorrect to assume that property given or willed to a son automatically becomes ancestral property in which the son’s children would acquire co-ordinate interest.
Upon reviewing the will and considering the circumstances surrounding it appeared that the primary intention of the testator was to provide adequately for close family members whom he held in affection and wished to bestow. He did not want to divide his property among his heirs in a customary manner, likely to prevent future disputes expected after his death. He would certainly have granted his wife an equal share as his sons and allocated a quarter share to his unmarried daughter if he had intended a partition as per Hindu law.
The current consideration in this case was his intent regarding the kind of interest that his sons were to take in the properties passed to them. The will was explicit in granting the son absolute rights with full powers of alienation by way of sale, gift, and exchange. These properties were not intended to be held for the benefit of their families or future generations. The testator desired that his sons should have full ownership of the properties bestowed on them and entrusted them entirely with the responsibility of caring for their families and children.
Conclusion
The case of C. N. Arunachala Mudaliar vs. C. A. Muruganatha Mudaliar (1953) represents a notable balance in support of the order authored by J. B. K. Mukherjea that the father’s intention regarding whether the property should be considered separate or joint family property is significant, and in the absence of any clear intent, the nature of the property is determined on the basis of the language of the deed and the surrounding circumstances. As per the interpretation of the will by the judge, the testator did not intend for the property to pass to the sons as ancestral property. This signifies that the testator chose to grant his son complete ownership of the property as specified in his will. The judgement underscores the principle of the Mitakshara school as it recognises the self-acquired property along with the individual’s autonomy over his self-acquired assets, as the property acquired by an individual through personal efforts or received via gift is considered a self-acquired one and intended to remain separate. These properties do not become part of coparcenary property.
Frequently Asked Questions (FAQs)
What are the types of schools in Hindu law?
The schools of Hindu law are the commentaries and digestives of the smritis and broaden the scope contributing to its development. The two major laws of Hindu law are:
Mitakshara: It is one of the significant schools of Hindu law. It is a comprehensive commentary on the Smriti authored by Yajnavalkya. This school is applicable throughout India except in West Bengal and Assam. Although it has broad jurisdiction, the different parts of the country practice law differently because of regional variations in customary law.
Dayabhaga: It is also recognised as one of the most significant schools of Hindu law and a comprehensive digest of the leading Smritis. It prevails in Assam and West Bengal and primarily addresses the issues related to partition, inheritance and joint family matters. The Dayabhaga School aims to rectify the shortcomings and limitations of previously established principles.
How do the Dayabhaga and Mitakshara schools of Hindu Law differ from each other?
Grounds
Dayabhaga
Mitakshara
Involvement
Both male and female members are included in this school
Only male members are included
Inheritance
The right to acquire property is only after the father’s death
The right to acquire properties is by birth
Partition
It is based on individual ownership
It is based on shares
Rights
This school has a concept of stridhan and equal rights of women in husband’s property
There is no concept of equal rights in this school
Significance
It is more of a liberal school
It is a conservative school
What do you mean by will under Mitakshara law?
As per the Mitakshara law, the allocation of parental property follows the principle of inheritance by birth. Moreover, a man has the right to bequeath his property through a will. Coparceners are the individuals to whom the joint family properties are passed and belong to the next three generations.
What is will under Hindu law?
A will under Hindu law is a legal declaration that expresses the intention of a person to transfer their property to another person, who may or may not be a legal heir. A will becomes effective after the death of a person.
What are the key characteristics of ancestral property under Mitakshara law?
Ancestral property refers to property inherited from a parental ancestor. As per the Mitakshara law, any property inherited by a male Hindu from his father, grandfather, or great-grandfather is considered as ancestral property, and any property inherited from another relative is deemed separate property. The key characteristic of ancestral property is that the sons, grandsons, and great-grandsons of the person who inherits it automatically acquire an interest in and rights attached to such property from the moment of their birth.
What is a testator in a will?
A testator refers to a person who made a will that was valid at the time of their death. Even if they have already passed away, they are referred to as the testator if a legal and valid will exists. While the term is somewhat old-fashioned, it remains commonly used in discussions related to wills.
In the chronicles of human history, as we recognise, the history of organised crime has cast a long and dark shadow, leaving a trail of violence, corruption, and chaos in its wake. Organised crime has had a significant impact on both society and the economy. The rule of law was undermined, public trust in institutions was eroded, and social instability was caused. In addition, the illegal activities of these crime groups, such as drug trafficking and money laundering, have severe economic consequences, causing an increase in costs for law enforcement and hindering economic growth. Insights from human psychology and their nature highlight violence as the major component of human society as it satisfies the craving for power, a source of gaining money through less effort and quenches the immense thirst for ego. Throughout history, various types of organised crime groups have emerged, each with its own unique characteristics and activities. Groups such as the Sicilian Mafia and Yakuza in Japan have adapted their methods to exploit opportunities for profit and power, operating in diverse regions and cultures. Whether it is the drug cartels in South America or the triads in China, organised crime groups have thrived by engaging in activities such as smuggling, extortion, prostitution, and cybercrime, leaving a lasting impact on societies worldwide.
Defining organised crime
According to the United Nations Office on Drugs and Crime (UNDOC), the defining characteristic of organised crime is its organisation. Unlike random, unplanned, and individual criminal acts, organised crime involves planned and rational acts carried out by groups of individuals. This distinction is crucial in understanding the nature and scope of organised crime.
The organisation of criminal groups allows them to operate systematically and efficiently, enhancing their ability to commit crimes and evade detection. They typically have a hierarchical structure with leaders, managers, and foot soldiers, each with specific roles and responsibilities. This structure enables them to specialise in different aspects of criminal activity, such as drug trafficking, human trafficking, or money laundering.
Moreover, organised crime groups often establish networks and partnerships with other criminal organisations, both domestically and internationally. These alliances allow them to share resources, information, and expertise, further enhancing their criminal capabilities. They may also engage in corrupt practices, such as bribing public officials or infiltrating legitimate businesses, to facilitate their criminal activities and gain protection from law enforcement.
The organisation of criminal groups also contributes to their resilience and adaptability. When individual members are arrested or incapacitated, the group can quickly replace them with new recruits, ensuring continuity of operations. Additionally, organised crime groups are often able to adapt their activities in response to changing law enforcement strategies or shifts in the criminal landscape.
The distinction between organised crime and other forms of criminal conduct is important for several reasons. Firstly, it helps law enforcement agencies prioritise their resources and target the most serious and sophisticated criminal threats. Secondly, it allows policymakers to develop targeted interventions and prevention strategies that address the unique characteristics of organised crime. Finally, it raises awareness among the public about the dangers posed by organised crime and the need for collective action to combat it.
According to Section (1)(e) of Maharashtra Control of Organised Crime Act, 1999 “organised crime” means any continuing unlawful activity by an individual, singly or jointly, either as a member of an organised crime syndicate or on behalf of such syndicate, by use of violence or threat of violence or intimidation or coercion, or other unlawful means, with the objective of gaining pecuniary benefits, or gaining undue economic or other advantage for himself or any person or promoting insurgency;
Origins and evolution of organised crime groups
The origins of violent crime groups can be traced back to the 1930s in the USA, when organised crime started operating right after the enactment. Initially, their business consisted of selling illegal/contraband liquors. With each illegal activity, they earned a high margin of profit, which resulted in more treacherous crimes. This in the later part resulted in addition to hijacking of liquors, extortion, kidnapping, and protection to weaker gangs, brothels, gambling, etc. In doing so, they faced several gang rivalries to expand the area of business; bloodshed was common to achieve power, thrive for the post of supremacy amongst them was common. As the industry in America became organised, organised crime groups were also becoming organised as they kept adapting and improving with the changing times.
To grasp the phenomenon of organised crime, we need to look not only at our country but at the world. There is nothing new to the concept, as it traces back to the same old days; rather, the definition of crimes has been changed or renamed from old to new. As we see, banditry and piracy, as well as smuggling, existed from the very start. The rampaging hordes of Ghengis Khan and Attila the Hun need no repetition. Thugs and Pindaris used to cause huge destruction by looting travellers and killing thousands of innocent lives. All of them had their own closed-knit groups, either based on caste and tribe or based on a common profession.
In organised crime groups, many of the people come from the lower tribe/cast or caste, are illiterate and find no job alternatives. A few emerge from political confusion and make full use of power vacuums and unrest caused by social pressure, how people act towards each other, and other factors to establish their control. Others arise from organised illegal businesses, which expand to include more violence and money-making trips/businesses. Their operations have been further enhanced by the advancement of technology over time, enabling smooth communication and coordination across huge distances.
Structure and hierarchy
Central to the functioning of armed crime groups is their (related to certain things being ranked above or below other things) structure, similar to military organisations. A small group of people at the top who hold power plan the operations and provide orders on the specification of the jobs to be done successfully. Lieutenants and enforcers who are below them are in charge of executing and preserving the orders and discipline within their rank. This pyramid of power not only secures/makes sure of wasting very little while working or producing something but also breeds a culture of fear and loyalty, where disagreement is met with fast and often violent/difficult or brutal results.
Activities and enterprises
Armed crime groups start/work on many illegal activities, ranging from drugs and arms to moving things illegally from one place to another secretly and illegally by taking out or bringing in theft by threatening and human trafficking. These operations are often managed and done with high-quality military or organised tactics, using fancy or smart strategies to get away from the police and make money as big as possible. The huge sums of money created fuel further acts of something getting bigger, wider, etc., enabling these groups to break into legal/real and true businesses and be dishonest in a way that ruins your trust in the public (people in charge of something) without being punished.
Growth of organised crime
A gang generally starts with a single person committing a crime and recruiting a few goons under him. He succeeds in making money through his single module operandi, be it smuggling, bootlegging, or any other illegal profession. Once he is established in a small area, he buys protection from the police and customs for himself and his goons through bribery. When this stage is reached, the next step is to turn on the small-time criminals seeking protection under his shed, either by joining him or by providing protection money. However, new territories are exploited as illegal money flow increases. The third stage turns out to be gang rivalry, gang wars resulting in bloodshed where one of the strongest and most ruthless gangs or groups emerges and takes over the new area, making its territory bigger under its control.
The vast amount of money flow increases the operandi of business investing to boost protection by bribing the superior authorities, such as supporting the government winning elections by providing funds and muscle power, safeguarding oneself and family members in the absence, and hiring the best defence advocates. The funds accumulated from gangs are invested in legitimate businesses such as hotels, real estate, cinema halls, transport companies, travel agencies, etc.
Motive
The fastest and largest amounts of money can be earned through organised crimes. The gang members receive high pay even at the lowest level of the ladder as a result. Through honest work, they have been able to maintain a lifestyle they couldn’t have achieved. Criminally inclined youths are attracted to join armed organised groups because of the opportunity to earn huge sums of money with reasonably small risks. With very little risk and the assurance of exceptional legal aid and medical facilities for protection.
Most popular armed groups organisation
Among several criminal gangs actively operating in India, the most popular include the Mumbai underworld, the D-Company, the Chhota Rajan gang, and the Bawaria gang. These gangs are involved in a range of illegal operations, such as contract assassinations, extortion, and drug trafficking. In India, particularly, the Northeastern part has also long been involved in quelling civil wars that are dispersed around the nation, combating separatist insurgencies, especially in the North East and controlling civil conflicts that are spread across different parts of the country. Terrorism and transnational crime are particularly prevalent in India due to several factors, such as being a major heroin exporter and producer, as well as regional drug trade through overland and maritime routes.
Majorly in the north-eastern part of our country, conflicts arising from the fighting for ethnic identities and homelands and some running the insurgency as an industry to spin easy money without any political ideology gave rise to few popular groups, viz.
the United People’s Democratic Solidarity (U.P.D.S.).
Conclusion
The government must strengthen its collaboration to disrupt transitional networks and stop the flow of illegal commodities. Apart from this, the core causes of organised crime, such as poverty, inequality, and political corruption, must be addressed. The fight against armed criminal gangs may appear overpowering in the presence of such a powerful opponent. However, the presence of strong willpower, cooperation, and unwavering dedication to justice can make it a possible war to win. By lifting the curtains on organised crimes and throwing lights into the shadowy areas of society, expectations of creating a safe environment for the upcoming generations can be visualised.
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