Civil Appeal Nos
740 to 743 of 1975
From the Judgment and Order dated 3081974 of the High Court of Madhya Pradesh in Miscellaneous Civil Case No 352 of 1971
BB Ahuja Ms A Subhashini and KC Dua for the Appellant
TA Ramachandran Vinek Gambhir Sanjay Sareen and SK Gambhir for the Respondents
The Judgment of the Court was delivered by VENKATACHALIAH J
These appeals by special leave by the Commissioner of Wealth tax Bhopal arise out of the opinion rendered by the High Court of Madhya Pradesh Bhopal in fourconsolidated wealth tax references under Section 271 of the 
They raise a short but interesting question touching the 230 incidents of what is described as the Quaraza e Hasana  said to be a transaction known in and peculiar to the personal law of the muslims
The matters arise out of the proceedings concerning the assessment to wealth tax of the respondent Abdul Hussain Mulla Mohammad Ali  the assessee  for the four assessment years 1957 58 to 1960 61
In the original returns for the assessment year 1957 58 relevant to the valuation date 3131957 the assessee filed a return of net wealth of Rs857910 which included a sum of Rs400000 representing the principal value of the loan advanced by the assessee to a certain Faizullabhai Mandlawala Sidhpur
Both the assessee and the said Faizullabhai Mandlawala were partners of a firm carrying on business under the name and style Rising Sun Flour  Oil Mills  at Ujjain
The borrower had employed this sum as part of his capital in the firm
In the revised return filed by him the assessee however sought to have the value of that loan excluded from his wealth on the claim that this loan was what was known to Muslim Law as Quaraza e Hasana  a debt of good faith and goodwill carrying with it no legal obligation on the part of the debtor to repay and correspondingly no right on the part of the assessee to expect much less enforce a repayment
The claim for the non inclusion of this asset in the wealth of the assessee was sought to be supported by the declaration dated 2631965 furnished by the debtor that the sum was received by him without any obligation and without any rate of interest and without any consideration 
Reliance was also placed on some extracts of the Quran said to relate to this transaction
Both the Wealth tax Officer and the Appellate Assistant Commissioner in the appeal found it difficult to accept this claim and accordingly brought this sum of Rs400000 to tax on the respective valuation dates
However the Income tax Appellate Tribunal Indore Bench accepting the assessee s appeals held that the loan partook of the character of Quaraza e Hasana  with its special incidents as known to Muslim Law that the transaction was one of good faith and goodwill and lacked the concomitants of a legally enforceable claim for repayment and that therefore the amount was not a debt due to the assessee
The High Court before which the Tribunal at the instance of 231 the Revenue stated a case and referred two questions of law for opinion upheld the view that had commended itself to the Tribunal and answered the questions against the Revenue
The two questions so referred were 1 Whether on the facts and in the circumstances of the case the Tribunal was justified in holding that the amount of Rs4 lakhs cannot be included in the total assets of the assessee 2 Whether on the facts and in the circumstances of the case the Tribunal was justified in accepting that the amount of Rs4 lakhs was in the nature of Quaraza e Hasana  particularly when Rs121500 out of Rs4 lakhs has been repaid 4
Shri BB Ahuja learned counsel for the Revenue contended that the Tribunal as well as the High Court fell into a serious error in their acceptance of the hypothetical incidents of a supposedly peculiar institution of the personal law of the muslims respecting which nothing tangible by way of evidence as to the existence of such rule or tenet of muslim law was forthcoming
Learned counsel invited our particular attention to the following observations of the Tribunal The learned counsel for the assessee Mr Chitale has also stated before us that he has not come across any judicial decision defining or describing the exact characteristics of the expression Quaraza e Hasana  nor has become across any discussion on this matter in any of the treaties on Mohammedan Law
We are therefore satisfied that on the facts and circumstances of this case the amount of Rs4 lakhs cannot be treated as a debt due to the assessee and the same cannot be included in the total asset of the assessee Learned counsel submitted that the inference drawn does not only not flow from the premise but would clearly be antithetical
If the concept of Quaraza e Hasana  and the peculiar incidents attributed to it are not established the plea that there is a debt but yet there is no obligation to repay becomes mutually contradictory
In regard to the subsidiary or supporting reasons for the acceptance by the Tribunal to hold that there was no debt which could be said to be due and owing to the assessee the learned counsel invited our attention to the following reasoning of the Tribunal 232  Faizullabhai in a declaration dated 2631965 has stated that this amount was received by him without any obligation and without any rate of interest and without any consideration
Therefore the question that arises for consideration is whether under this peculiar circumstance it can be said that this sum of Rs4 lakhs which was given by the assessee to Faizullabhai prior to 1950 for which there is no document and for which there is no obligation to repay can be treated as a debt due to the assessee 
Learned counsel submitted that neither the circumstance that the loan was advanced prior to 1950 nor the self serving declaration by the borrower nor even that no repayment had been made during the accounting years or earlier would by themselves detract from the existence and incidents of a debt which was otherwise admitted
Learned counsel pointed out that admittedly on 2471961 a sum of Rs121821 had been repaid by the borrower to the assessee
Learned counsel said that both the Tribunal and the High Court while rightly noticing that the special incidents of what was called Quaraza e Hasana  had not been established however by excluding the sum from the wealth gave the benefit of this doubt as to the very existence of this institution of Quaraza e Hasana  to the assessee
Referring to the reliance by the High Court on the incidents Hiba ba shart ul evaz  learned counsel submitted that the reasoning of the High Court based on this form of a mussalman gift was destructive of the assessee s case inasmuch as the kind of gift envisaged by Hiba ba Shart Ul Evaz  expressly stipulated contemporaneous liability for a return
Shri Ramachandran learned counsel for the assessee sought to support the conlusion of the High Court also another independent ground that at all events by entering into this transaction the parties did not intend to create a legal obligations between them and that therefore the debt remained a debt of honour
We will presently refer to the possibilities of this contention in the facts of this case
No authoritative texts nor any principle or precedent recognised in Muslim Law was cited before the High Court to show that a transaction of this nature and incidents is known to and recognised by the personal law of the Muslims
As no material was placed before the High Court or before us to establish the content and incidents of this 233 idea of what is referred to Quaraza e Husana  it is not possible to say one way or the other whether Courts can recognise and act upon such a rule of Muslim Law much less afford relief to the proponent of that rule
Indeed literature on the Principles of Islamic Banking Unlawful gain and legitimate profit in Islamic Law Nibil A Saleh Cambridge University Press 1986 does not appear though we do not want to be understood to have pronounced on the subject finally to support the particular incidents of the non existence of the element of repayability attributed to this kind of loans
Learned author says that Sharia distinguishes between two types of loans one the Ariya  the loan for use  which transfers the usufruct of the property temporarily and gratuitously while ownership of the loaned object remains with the lender and the second the qard 
In regard to this second type of loan the qard  the author says at pages 35 and 36 The second type of loan recognished by Sharia is the qard which involves the loan of fungible commodities that is goods which may be estimated and replaced according to weight measure or number
In this case the borrower undertakes to return the equivalent or likes of that he has received but without any premium on the property which would of course be construed as interest
The most likely object of a qard loan would be currency or other standard means of exchage emphasis supplied On the question whether the lender of Qard  is entitled to derive any advantage from it the learned author refers to the views of the different schools namely Hanafia Hanbalis Malikis Shafi and Ibadis
See pages 41 to 43
Again the learned author refers to Qard Hasan  as interest free loan
Explaining its incidents the author says Qard Hasan means an interest free loan which is the only loan permitted by Sharia principles
We have seen previously that not only can interest not be charged on the lent capital but no advantage whatsoever should be derived by the lender from the loan
Of course each school of law has its own interpretation of what constitutes advantage  and that we have already seen in detail  
One may wonder how lending could be a business 234 proposition once interest is abolished    emphasis supplied see page 89 The learned author also proceeds to enumerate the circumstances in which the Islamic Financial Institutions are advised to make use of Qard Hasan 
From what is gatherable from the author s observations of course if the concept of Qard Hasan  is the same as that Quaraza e Hasana  the obligation on the part of the debtor of the loan to repay nor the right of the creditor to repayment are excluded
The only incident appears to be that it is interest free 
However we do not want to be understood to have pronounced on this question finally as neither side has produced nor relied upon any literature of Islamic Law on the point
The extracts of the Quran relied upon merely calls some loan a beatific loan which blesses the giver
The incidents of the transactions are not found in the passages
Nor does the reliance by the High Court on the well recognised institution in Muslim Law of Hiba ba Shart ul Iwaz  advance the case of the assessee any further
In Principles of Mohammadan Law Mulla 16th Edition page 165 this kind of gift is explained Where a gift is made with a stipulation shart for a return it is called hibaba shart ul iwaz  
The main distinction between Hiba bil Iwaz as defined by older jurists and Hiba ba shart ul Iwaz is that in the former iwaz proceeds voluntarily from the donee of the gift while in the latter it is expressly stipulated for between the parties
 Referring to what distinguishes Hiba bil Iwaz from Hiba ba shart ul Iwaz the learned author Syed Ameer Ali in Mahommadan Law  4th Edition Vol
I p 158 excerpting from Fatawai Alamgiri says Iwaz or consideration was of two kinds one which was subsequent to the contract of gift the other which was conditioned in it In the other kind the consideration was expressly stipu 235 lated in the contract and when once it was received the transaction acquired the legal character of a sale
The modern hiba ba shart ul iwaz has unquestionably sprung from the above
 Then in the last analysis what follows as a logical consequence is that the debt though a passive debt  would require to be treated as due and payable to the assessee
It was not the assessee s case that the debt was a bad and irrecoverable debt
The declaration of the debtor itself establishes its existence
But then Shri Ramachandran anticipating the inherent infirmity of the claim based on Quaraza e Hasana  sought to treat us to a resourceful argument that the conclusion of the High Court is at all events supportable on an independent ground that an agreement will not by itself yield legal obligations unless it is one which can reasonably be regarded as having been made between the parties in contemplation of legal consequences and that in the present case the parties had excluded the contemplation of legal consequence flowing from the transactions
This proposition is stated in Chitty on Contracts  25th Edn
Volume I para 123 thus An agreement even though it is supported by consideration is not binding as a contract if it was made without any intention of creating legal relations
Of course in the case of ordinary commercial transactions it is not normally necessary to prove that the parties in fact intended to create legal relations emphasis supplied Learned counsel cited certain cases to illustrate the point
In Rose and Frank Co vs JR Crompton and Bros Ltd 1923 2 KB 261 Sccutton LJ said  
Now it is quite possible for parties to come to an agreement by accepting a proposal with the result that the agreement concluded does not give rise to legal relations
The reason of this is that the parties do not intend that their agreement shall give rise to legal relations
This intention may be implied from the subject matter of the agreement but it may also be expressed by the parties
In social and family relations such an intention is readily implied while 236 in business matters the opposite result would ordinarily follow   At page 293 Atkin LJ said  
To create a contract there must be a common intention of the parties to enter into legal obligations mutually communicated expressly or impliedly The novelty of the clause in the contract relied upon in that case did not miss the learned Judge s notice
He observed 
I have never seen such a clause before but I see nothing necessarily absurd in business men seeking to regulate their business relations by mutual promises which fall short of legal obligations and rest on obligations of either honour or self interest or perhaps both   This contention of Shri Ramachandran was not in this form urged before the High Court
It was not the case of the parties that apart altogether from the Rule of Muslim Law relied upon they had agreed otherwise also that no legal obligation should arise
The contention has no doubt its possibilities
But where as here the tax implications of large financial obligations are sought to be put an end to the burden is heavy on the assessee to establish that what would otherwise be the incidents of the transaction were excluded from contemplation by the parties
Here one partner has lent a large sum to the other to be utilised as capital in the partnership venture
The transaction is in the context of a commercial venture
The presumption is that legal obligations are intended
The onus is on the parties asserting the absence of legal obligations and the test is not subjective to the parties but is an objective one
Chitty says para 123 supra  
The onus of proving that there was no such intention is on the party who asserts that no legal effect is intended and the onus is a heavy one
Where such evidence is adduced the Courts normally apply an objective test emphasis supplied The observations of Atkin LJ in the case cited by counsel are also worth recalling 237  
Such an intention ordinarily will be inferred when parties enter into an agreement which in other respects conforms to the rules of law as to the formation of contracts
It may be negatived impliedly by the nature of the agreed promise or promises as in the case of offer and acceptance of hospitality or of some agreements made in the course of family life between members of a family as in Balfour vs Balfour   In Edwards vs Skyways at 355 Megaw J said In the present case the subject matter of the agreement is business relations not social or domestic matters
There was a meeting of minds an intention to agree
There was admittedly consideration for the company s promise
I accept the propositions of counsel for the plaintiff that in a case of this nature the onus is on the party who asserts that no legal effect was intended and the onus is a heavy one
 Again in Bahamas Oil Refining Co vs Kristiansands Tankrederie AS and Others and Shell International Marine Ltd 1978 Lloyds Law Reports 211 it was said 
In deciding whether or not there was any animus contrabendi in relation to a certain transaction or whether or not sufficient notice of a certain term was given the law applies an objective and not a subjective test   
In the absence of such evidence how can the Court assume even if it might be relevant in law that the master did not intend to enter into a contract   11
The arguments of learned counsel proceeds on the general proposition that in addition to the existence of an agreement and the presence of consideration there is also a third contractual element in the form of intention of the parties to create legal relations
This proposition though accepted in English Law has not passed unchallenged
In Cheshire and Fifoot s Law of Contract 10th Edn it is said  the criticism of it made by Professor Williston demands attention not only as emanating from a distinguished American jurist but as illuminating the whole subject now under discussion
In his opinion the separate 238 element of intention is foreign to the common law imported from the Continent by academic influences in the nineteenth century and useful only in systems which lack the test of consideration to enable them to determine the boundaries of contract   at page 97 Be that as it may the point however to note and emphasise is that this intention not to create legal obligation is not inferable from the application of any objective text
The non enforceability of debt was pleaded not as a part of what is permissible in law of contracts but specifically as some inexorable incident of a particular tenet peculiar to and characteristic of the personal law of the Muslims
That not having been established no appeal in our opinion could be made to the principle of permissibility of exclusion of legal obligations in the law of contracts
We are afraid both the Tribunal and the High Court accepted somewhat liberally perhaps what was at best an argument of hypothetical probabilities
The admitted existence of a debt implies an obligation to repay
No legal bar of the remedy is pleaded
What was set up and unsubstantiated was the non existence of the remedy itself
Accordingly the appeals are allowed and in reversal of the view taken by the High Court the questions referred for opinion are answered in the negative and in favour of the Revenue with the attendant implication that the loan would become includible in the wealth of the assessee for the relevant assessment years
In the circumstances of the case we make no order as to costs
RSS Appeals allowed


Summary:
The respondent landlord had filed a petition against the appellant tenant under section 141a and 141b of the Delhi Rent Control Act 1958 for eviction from a residential cum commercial premises inter alia on the ground that the appellant had sublet assigned or otherwise parted with possession of the premises to his sons who were running their partnership business in the name of Bindra Tent House with which the tenant had no concern
The tenant contested the petition on the ground that he was in exclusive possession of the premises and was carrying on his business therein with the help of his sons who were members of his Joint Hindu Family
In support of his plea that the tenant had parted with possession the landlord had produced documentary evidence which included copy of a statement made by the tenant before the Income Tax officer which indicated that the tenant had sold his proprietary business to his sons
The Additional Rent Controller held that there was no subletting by the tenant but he had unlawfully parted with the possession of the premises in favour of his sons and as such was liable to be evicted
During the pendency of the appeal the tenant sought permission under order 6 Rule 17 of the Code of Civil Procedure to amend his written statement to state that the property was taken on rent by Ms Bindra Tent House
The Tribunal did not permit this belated amendment as this would have introduced an entirely new case
On merits the Tribunal dismissed the appeal of the tenant
The High Court did not find any substantial question of law in the tenant s second appeal and dismissed the same
Allowing the appeal it was 326  HELD 1 The only ground perhaps upon which the landlord A was seeking eviction was parting with possession
It is well settled that parting with possession meant giving possession to persons other than those to whom possession had been given by the lease and the parting with possession must have been by the tenant
User by other person is not parting with possession so long as the tenant retains the legal possession himself or in other words there must be vesting of possession by the tenant in another person by divesting himself not only of physical possession but also of the right of possession
So long as the tenant retains the right to possession there is no parting with possession in terms of clause b of section 141 of the Act
329G H 330A 2 Even though the father had retired from business and the sons had been looking after the business in the facts of this case it cannot be said that the father had divested himself of the legal right to be in possession
330B 3 In the instant case if the father was carrying on the business with his sons and the family was a joint family it is difficult to presume that the father had parted with possession legally to attract the mischief of section 141b of the Act
330D E 4 In these days of acute shortage of accommodation both for living and for vocation one has to take the reality with a pinch of salt and the manner in which the original tenant has conducted himself in shifting his defence would not disentitle him to the benefit of the law
330Gl Subashini Mojumdar vs Krishna Prasad Mahatoo AIR  Ms Modi Spinning and Weaving Mills Co Ltd vs Ms Ladha Ram and Co  and Smt
Krishnawati vs Shri Hans Rai  referred to