Civil Appeal Nos
2170 2172 of 1972 Appeals by Special Leave from the Judgment and Order dated 22 7 1971 of the Mysore High Court in TRC Nos 3 4 and 5 of 1967
B B Ahuja and Miss A Subhashini for the Appellant
section T Desai I N Shroff and H section Parihar for the Respondents
The Judgment of the Court was delivered by UNTWALIA J
These are three appeals by special leave filed by the Commissioner of Wealth Tax Mysore from the Judgment of the Mysore now Karnataka High Court
The assessee is the Dowger Maharani of Gondal
Her husband His Highness Bhojjrajji Maharaja Saheb of Gondal died intestate on 3171952 leaving considerable moveable and immoveable properties
Certain disputes and differences arose after his death between his two sons namely Maharaja Vikramsinghji and his younger brother Shivaraj Singhji in respect of the assets left by the late Maharaja Saheb
The younger brother was contemplating legal proceedings against his elder brother
Their mother intervened
The idea of litigation thereupon was dropped because the assessee gave a letter dated 1451953 to Shivaraj Singhji stating therein Your father had expressed in the presence of many people that he will give you rupees fifty lakhs
To keep up his words and promise and also that I should get peace of mind I am writing to you that if your brother Vikramsinghji Maharaja of Gondal does not give you the full amount then you 547 must get the balance of amount from me
That is my sincere desire
I will also press Vikram that the should give you the amount of Rs fifty lakhs
Vikram Singhji paid only Rs 2000000 to Shivaraj Singhji
The latter therefore claimed the balance amount of Rs 3000000 from the assessee on the basis of her letter dated 1451953
On or about 1291959 pursuant to her commitment made in the letter aforesaid the assessee transferred War Stock valued at Rs 1100000 to Shivaraj Singhji and also agreed to hand over certain ornaments in full settlement of his claim
The ornaments were however not given
That led to disputes between the mother and the son but eventually they were also settled on 2221962 which settlement was evidenced by a document setting out all the relevant facts of the history of the dispute
By virtue of this settlement a sum of Rs 1000000 was paid by the assessee to Shivaraj Singhji
The assessee s wealth was assessed to wealth tax under the Wealth Tax Act 1957 for the three assessment years in question viz 1960 61 1961 62 and 1962 63
The corresponding valuation dates of the said assessment years are 31121959 31121960 and 31121961
It would be noticed that the assessee under the arrangement arrived at between the parties became liable to pay the balance of the amount of Rs 3000000 to Shivaraj Singhji as vikramsinghji out of the sum of Rs 5000000 mentioned in the letter dated 1451953 paid only Rs 2000000 The assessee succeeded in wiping off her liability to the extent of Rs 1100000 on 1291959 by transfer of War Stock
The balance of the liability ie Rs 1900000 remained due and continued to be due on all the three valuation dates aforesaid
It could be wiped off by a further settlement only in February 1962
In respect of the three assessment years in question however a question arose as to whether while assessing the net wealth of the assessee within the meaning of clause m of section 2 of the Wealth Tax Act the said sum of Rs 1900000 was to be deducted
The Wealth tax Tribunal held in favour of the assessee
At the instance of the Revenue for all the three years a common question of law was referred to the High Court for its opinion
The questions being in identical terms it would suffice to quote the question with respect to the assessment year 1960 61
It reads as follows Whether on the facts and circumstances of the case the sum of Rs 19 lakhs could constitute a debt owed by the assessee and deductible under the Wealth Tax Act from the value of the total assets as on 31121959 548 The High Court has answered the question in the affirmative in favour of the assessee and against the department
Hence this appeal
Mr Ahuja appearing in support of the appeal contended that by the letter dated 1451953 no debt was created as the undertaking given by the assessee to her son agreeing to pay the deficit in respect of Rs 5000000 on his elder brother s failure to pay any portion of the sum was an agreement without consideration and hence under section 25 of the Contract Act it was void and was not saved by any of the exceptions mentioned therein
He therefore contended that it was not an enforceable liability on any of the valuation dates and could not be deducted from the valuation of the assessee s wealth
In our opinion the argument is not sound
Taking the totality of the facts as found by the Tribunal and mentioned in the impugned judgment of the High Court it was a case of family settlement or family arrangement which is binding on the parties concerned
The assessee agreed to purchase peace for the family and to pay to her son the amount which fell short of Rs 5000000 if her elder son did not pay any portion thereof
It is well established that such a consideration is a good consideration which brings about an enforceable agreement between the parties
Section 25 of the Contract Act does not hit this
It may be further pointed out that even if it be held that the letter dated 1451953 had not the effect of bringing about the family arrangement and any binding agreement between the parties their subsequent conduct upto 1291959 brought about a concluded family arrangement
Vikramsinghji paid Rs 2000000 
Out of the balance of Rs 3000000 the assessee discharged her liabilities to the extent of Rs 1100000 and reiterated her obligation to pay the balance of Rs 1900000 in the shape of ornaments
That was not honoured
Shivaraj Singhji had a right to enforce the family arrangement against his mother as arrived at partly in writing and partly orally as evidenced by the conduct of the parties
The assessee would have been bound to pay Rs 1900000 if a suit had been filed against her by Sivaraj Singhji as he had refrained going to the law court from against his brother on her bringing about the family arrangement
Mr Ahuja then submitted that at best the undertaking given by the assessee in her letter dated 1451953 was a contingent contract within the meaning of section 31 of the Contract Act
Even so under section 32 such a contract becomes enforceable by law when future even contemplated in the contingent contract has happened
In this case the cotingency was the liability of the mother to pay a certain sum of money 549 on the failure by her elder son to pay Rs 5000000 or any part there of
This did happen sometime between 1451953 and 1291959
In that view of the matter if not earlier the liability of the mother became enforceable by law on the latter date
Learned counsel for the appellant cited three decisions of this Court to support his argument viz Kesoram Industries and Cotton Mills Ltd vs Commissioner of Wealth Tax Central Calcutta1 Standard Mills Co Ltd vs Commissioner of Wealth Tax Bombay2 and Bombay Dyeing and Manufacturing Co Ltd vs Commissioner of Wealth Tax Bombay City I3
None of them is quite apposite on the point at issue before us
In the case of Kesoram Industries it was held that debt owed within the meaning of section 2m of the could be defined as the liability to pay in praesenti or in futuro an ascertainable sum of money
It was held that a liability to pay income tax was a present liability though the tax became payable after it was quantified in accordance with ascertainable data
Subba Rao J as he then was delivering the majority opinion said at page 780  The said decisions also accept the legal position that a liability depending upon a contingency is not a debt in praesenti or in futuro till the contingency happened
But if there is a debt the fact that the amount is to be a scertained does not make it any the less a debt if the liability is certain and what remains is only the quantification of the amount
In short a debt owed within the meaning of section 2m of the can be defined as a liability to pay in praesenti or in futuro an ascertainable sum of money
The other two decisions of this Court were concerned with the question as to whether the liability of the assessee to pay gratuity to its employees on determination of employment was a mere contingent liability which arose only when the employment of the employee was determined by death incapacity retirement or resignation and whether it could be deducted as a debt in computing the net wealth of the assessee
The answer given was against the assessee
In the present case we have held that the liability of the assessee was created by the family arrangement arrived at between the parties and even if it was a contingent liability the contingency did happen and the assessee became liable 550 to pay the amount as a debt before 1291959 which is anterior to the relevant valuation dates
The sum of Rs 1900000 was a subsisting debt on the said valuation dates
For the reasons stated above we hold that there is no merit in this appeal
It is accordingly dismissed with costs
NKA Appeal dismissed


Summary:
The respondent s wealth was assessed to Wealth Tax under the Wealth Tax Act 1957 for three assessment years 1960 61 1961 62 and 1962 63 the corresponding valuation dates being 31 12 1959 31 12 1960 and 31 12 1961
On 14th May 1953 the assessee wrote a letter to her younger son stating that his late father expressed the wish that he the second son should be paid Rs 50 lakhs out of the family properties and that to keep his promise and also to get peace of mind if his elder brother did not pay the sum of Rs 50 lakhs she would pay such balance that remains unpaid
The elder brother paid Rs 20 lakhs
The balance liability of Rs 19 lakhs remained due and continued to be due on all the three aforesaid valuation dates
It was finally wiped off in February 1962
On the question whether while assessing the net wealth of the respondent within section 2m of the Wealth Tax Act the sum of Rs 19 lakhs was to be deducted as debt owed by her the Wealth Tax Tribunal held in favour of the respondent
The High Court held that the sum of Rs 19 lakhs constituted a debt owed by the assessee and was deductible under the Wealth Tax Act from the value of the total assets as on 31 12 1959
On appeal to this Court the appellant argued i that the letter dated 14 5 1953 created no debt as the undertaking given by the respondent to her son on his elder brother s failure to pay any portion of the sum was an agreement without consideration and hence it was void and therefore it was not enforceable at law on any of the valuation dates and could not be deducted ii that the undertaking given by the respondent in her letter dated 14 5 1953 was a contingent contract within the meaning of section 31 of the Contract Act
Dismissing the appeal  HELD 1 Taking the totality of facts it was a case of family settlement or family arrangement which was binding on the parties
The respondent agreed to purchase peace for the family and to pay to her younger son the amount which fell short of Rs 50 lakhs if her elder son did not pay any portion thereof
It is well established that such a consideration is good consideration which brings an enforceable agreement between the parties and is not hit by section 25
Even if it be held that the letter dated 14 5 1953 had not the effect of bringing about the family arrangement or any binding arrangemen bewteen the parties their subsequent conduct upto 12th September 1959 brought a concluded family arrangement
The respondent paid Rs 11 lakhs and reiterated her obligation to pay the balance in the shape of ornaments
546 That was not honoured by reason of which the younger son had a right to enforce the family arrangement against his mother
The respondent would have been bound to pay the balance if a suit had been filed against her as he had refrained from going to the law court against his brother on her bringing about the family arrangement
548 C G 2 Assuming that it was a contingent contract within the meaning of section 31 of the Contract act such a contract under section 32 of the Contract Act becomes enforceably by law when the future event contemplated in the contingent contract had happened
The contingency in this case was the liability of the mother to pay a certain sum of money on the failure by the elder son to pay Rs 50 lakhs or any part thereof
In that view the liability of the mother became enforceable by law on the latter date if not earlier548 G H 549 Kesoram Industries and Cotton Mills Ltd vs Commissioner of Wealth Tax Central Calcutta 59 ITR 767 Standard Mills Co Ltd vs Commissioner of Wealth Tax Bombay  and Bombay Dyeing and Manufacturing Co Lt vs Commissioner of Wealth Tax Bombay City I  distinguished and held inapplicable