Civil Appeal No 438 of 1967 Appeal from the judgment and order dated April 11 1966 of the Rajasthan High Court in DB Civil Reference Estate Duty Act No 16 of 1963
MC Chagla BD Sharma and M D Bhargava for the appellant
Jagdish Swarup Solicitor General TA Ramachandran RN Sachthey and BD Sharma for the respondent
CJ Purnabai widow of Sagarmal Mody held on April 1 1953 three deposit receipts of the aggregate face value of Rs 626724 14 0 with the State Bank of Bikaner
By her letter dated July 22 1952 Purnabai informed the Bank that she intended to make a gift of the amounts of two out of the three receipts to Suryakant son of her adopted son Satyanarayana and requested that the receipts be renewed for three months in the joint names of Purnabai Sagarmal Mody andor Surya Kant section Mody payable to either or survivor and that the renewed fixed deposit receipts be sent to Satyanarayana at Bombay
Pursuant to this letter two fresh receipts were issued on August 3 1953 for Rs 500000 and Rs 457934 
It appears that a receipt for Rs 80931  10 was previously obtained in the joint names of Purnabai and Suryakant on July 4 1953
714 On August 16 1953 Puranabai executed a deed of gift in favour of Suryakant in respect of the three receipts containing the following recitals Out of natural love and affection I have towards the said Suryakant son of Satyanarayana I hand over to the said Satyanarayana as the father and natural guardian of the said Suryakant Fixed Deposit Receipts total for Rs 62672414 
FDRN 222 8293 dated 3 8 53 for Rs 457934  FDRN 221 8292 dated 3 8 53 for Rs 500000 of the Bank of Bikaner Ltd Jaipur and FDR No 11446 dated 4 7 53 for Rs 8093110 of Bank of Bikaner Ltd Jhunjhunu in the name of Purnabai Sagarmal and Suryakant Satyanarayana Mody payable to either or survivor as and by way of gift to the said Suryakant on the 15th day of August 1953 and that the said Satyanarayana for and on behalf of and as the
natural guardian of the said Suryakant accepted the said gift of Rs 626724 
  gifted by me as aforesaid
 The gift deed contained a confirmation by Satyanarayana that he had accepted the gift for and on behalf of and as natural guardian of Suryakant to the intent and effect that the said Suryakant shall be the absolute owner of the sum gifted
 On August 17 1953 Purnabai addressed a letter to the Manager of the Bank enclosing a copy of the declaration of gift and intimated that her grand son Suryakant was the sole owner of the amount of the two fixed deposit receipts and till Suryakant section Mody attained the age of majority the receipts should remain in the joint names as they then stood
From time to time Purnabai presented the receipts for renewal when they matured and obtained fresh receipts in the joint names of herself and Suryakant
On August 25 1955 the receipt for Rs S093110 was encashed and out  of the amount of Rs 86732 realized Rs 5000 were invested in the name of Suryakant in National Savings Certificates
The balance was also deposited alone with a firm in Bombay also
in the name of Suryakant alone
The other two receipts were renewed in the joint names of Purnabai and Suryakant
After the death of Purnabai on February 15 1956 the two receipts were encashed by Suryakant
The Assistant Controller of Estates duty in procedings for assessment of estate duty held inter alia that possession and enjoyment of the gifted property was not assumed by the donee to the entire exclusion of the 715 donor and on that account the amount of the two receipts and interest thereon formed part of the estate of Purnabai and was liable to estate duty
Regarding the third receipt for Rs 8093110 the Assistant Controller observed that even though the earlier receipt was discharged on August 25 1955 ie within two years of the death of Purnabai and the amount was invested in the name of Suryakant by virtue of the provisions of the the amount held in the name of Suryakant alone was for assessment of estate duty liable
to be included in the estate
of Purnabai
In appeal the Central Board of Revenue confirmed the order
The Board held that at all material times during the currency of the fixed deposit Purnabai had the right to receive the money from the Bank by giving discharge for the same and that whenever the Fixed Deposit Receipts matured during the lifetime of Purnabai the receipts were in fact discharged by her alone and in the circumstances it could not be said that the property was held  by the donee to the entire exclusion of the donor
The Board of Revenue referred the following question the High Court of Rajasthan for opinion Whether on the facts and in the circumstances of the case the sum of Rs 685193 was correctly included in the estate of the deceased as property deemed to pass on her death under section 10 of the  The High Court of Rajasthan answered the question in the affirmative
With certificate granted by the High Court this appeal has been preferred
The deposit receipts were renewed from time to time after August 16 1953 in the joint names of Purnabai and Suryakant till August 25 1955 under their terms the receipts could be encashed by either or the survivor
Even after Purnabai made a gift of the amount represented by the three receipts she continued to obtain the receipts in the joint names presumably with the object of not parting with control over those receipts
Counsel for the appellant however contended that the fixed deposit receipts were held by Purnabai in her name as benamidar for Suryakant
Counsel placed strong reliance upon the letters dated July 22 1953 August 17 1953 and the terms of the deed of gift dated August 16 1953
By the letter dated July 22 1953 the Manager of the Bank was informed that in respect of two out of the three receipts Purnabai intended to make a gift and the  716 Manager was requested that the receipts be made in the joint names of Purnabai and Suryakant
It was expressly recited in the letter I intend to gift the entire amount of the receipts to my grandson Mr Suryakant section Mody hence you are requested to prepare the receipts in joint names as under Purnabai Sagarmall Mody andor Suryakant section Mody payable to either or survivor
 The deed of gift also recites that Purnabai had made a gift of the amount of Rs 62672414 represented by the previous receipts in favour of Suryakant and that the gift was accepted by Satyanarayana on behalf of Suryakant
The letter dated August 17 1953 recites that a copy of the deed of declaration of gift
was sent to the Bank for record and information and proceeds to state Further I would like to state that now Suryakant section Mody is the sole owner of the above Fixed Deposit Receipts in question till Suryakant section Mody attains majority the receipts should remain in joint names as it stands now
 is clear that Purnabai desired to make a gift of the amount represented by the previous deposit receipts and did in fact execute a deed of gift
The Bank had notice of the gift deed
Counsel for the appellant contends that Purnabai did everything possible to divest herself of her interest in the money held by her in deposit with the Bank and retained no interest therein and that in obtaining renewal of the receipts in the joint names of herself and of Suryakant she was merely a benamidar and in any event was acting on behalf of Suryakant
Counsel further contends that the Bank having notice of the gift could not have parted with the money except only for the benefit of the minor and by obtaining renewal of the receipt in favour of the minor Suryakant and Purnabai the latter retained no possession or enjoyment of the money represented by the receipts
Counsel invited our attention to a decision of the Madras High Court in Imperial Bank of India Madras vs section Krishnamurthi and another1 in which Beasely CJ speaking for the Court observed that when a Bank having notice that the administrators of the estate of the depositor intended to commit a breach of trust by seeking to invest monies contrary to express directions of the will paid out the money the Bank was liable to make good to the beneficiary 1 AIR 1933 Madras 628
717 the money deposited by the testator
In that case one Naidu had deposited a sum of money with the Imperial Bank of India in fixed deposits
Naidu died having bequeathed by his will the amount deposited to Iris son Krishnamurthi who was then a minor
Naidu had appointed by his will two persons to be guardians of Krishnamurthi with authority to receive the amount in fixed deposit with the Imperial Bank and to apply the same for the maintenance and education of Krishnamurthi
The guardians obtained from the High Court of Madras grant of letters of administration with copy of the will annexed
After the death of one of the guardians the surviving guardian withdrew the money from the Bank on the pretext that he wanted to invest it on more advantageous terms in house property or some other form of in vestment and misappropriated it
On attaining the age of majority Krishnamurthi sued the Bank
It was held by the High Court that the Bank knowing of the trust created by the will had parted with and delivered the amount deposited to the administrator who intended to commit a breach of the trust
The learned Chief Justice quoted a passage from Hart s Law of Banking Edn 3 at p 159 that A banker who receives into his possession moneys of which his customer to his knowledge became the owner in a fiduciary character contracts the duty and to part with them at the mandate of his customer for purposes which are inconsistent with the customer s fiduciary character and duty and upheld the claim of Krishnamurthi
It is unnecessary to consider whether
in the present case the investment was made by renewal of fixed deposit receipts after August 16 1953 for a purpose which the Bank knew was inconsistent with Purnabai s fiduciary character and duty
We are not concerned in this case to decide whether the Bank could have refused to pay the amount of the renewed deposit receipts if demanded by Purnabai
Whether the amount of deposit receipts was liable to estate duty must be determined on the true effect of section 10 of the 34 of 1953
Section 10 of that Act provides Property taken under any gift whenever made shall be deemed to pass on the donor s death to the extent that bona fide possession and enjoyment of it was not immediately assumed by the donee and thenceforward retained to the entire exclusion of the donor or of any benefit to him by contract or otherwise Provided that the property shall not be deemed to pass by reason only_ that it was not as from the date of the gift exclusively retained as aforesaid if by means of the surrender of the reserved benefit or otherwise it is subsequently enjoyed to the entire exclusion of the 718 donor or of any benefit to him for at least two years before the death
Provided    The phraseology of the section is somewhat involved
The purport of the section is however clear
The section clearly means that if in respect of any property which is gifted bona fide possession and enjoyment is not immediately assumed by the donee and thenceforward retained by him to the entire exclusion of the donor or of any benefit to him therein the property gifted shall not be excluded from the estate subject to estate duty
The question which must be determined therefore is whether in the present case the donee Suryakant did under the deed of gift immediately assume bona fide possession and enjoyment of the fixed deposit receipts gifted to him and thenceforward retained the same to the entire exclusion of Purnabai or of any benefit arising to her by contract or otherwise
The conduct of Purnabai clearly indicates that she had no intention to part with control over the property the deposit receipts were obtained in joint names and Purnabai had authority to withdraw the amount from the Bank without consulting the guardian of Suryakant
The deposit receipts were renewed on several occasions even after the execution of the deed of gift in the joint
names of Purnabai and Suryakant
Purnabai alone presented the fixed deposit recepits for renewal
She could under the terms of the receipts receive the moneys to the entire exclusion of Suryakant
We are unable to hold in the circumstances that bona fide possession and enjoyment of the property gifted was immediately assumed by Suryakant and thenceforward retained by him to the entire exclusion of Purnabai
The right retained by Purnabai to have the receipts made out in her name jointly with Suryakant and the power to recover the amount from the Bank without the concurrence of Suryakant clearly indicate that she was not excluded but she had retained important benefits in herself in the fixed deposit receipts
It is true that the third receipt was encashed during the life time of Purnabai and the amount was invested in the name of Suryakant alone
But the encashment and reinvestment were within two years of the death of Purnabai and the amounts so reinvested were liable to be included in the estate of Purnabai
The argument that fixed deposit receipts had remained exclusively in the possession of Satyanarayana as guardian of Suryakant and they were obtained by him from Purnabai for the purpose of renewal is not supported by any evidence
There is 719 also no evidence that in obtaining the receipts in the joint names Purnabai acted as a guardian of Suryakant nor that she was a benamidar of Suryakant
We are of the view that the High Court was right in answering the question against the appellant
The appeal fails and is dismissed with costs
RKPS Appeal dismissed


Summary:
P held on April 1 1953 three deposit receipts with the State Bank of Bikaner
At her instance the receipts were renewed in the joint names of herself and S son of her adopted son payable to either or survivor
On August16 1953 P executed a deed of gift in favour of S in respect of the three receipts
The gift deed contained a confirmation by S section father that he had accepted the gift for and on behalf of and as the natural guardian of S to the effect that the said S shall be the absolute owner of the sum gifted
P addressed a letter to the Bank enclosing a copy of the declaration of gift and intimated the Bank that S was the sole owner of the amount of the receipts and till S attained the age of majority the receipts should remain in the joint names
From time to time P presented the receipts for renewal when they matured and obtained fresh receipts in the joint names of herself and section On August 25 1955 the third receipt was encashed and out of the amount realised a part was invested in the name of S in National Savings Certificates and the balance was deposited  in the name of S alone with a firm
The other two receipts were renewed in the joint names of P and section After the death of P on February 15 1956 the two receipts were encashed by section The Assistant Controller of Estate Duty held that possession and enjoyment of the gifted property was not assumed by the donee to the entire exclusion of the donor and on that account under section 10 of the  the amount of the two receipts and interest thereon formed part of the estate of P and was liable to estate duty
Regarding the third receipt it was held that even though the earlier receipt was discharged on August 25 1955 ie within 2 years of the death of P and the amount was invested in the name of section by virtue of the provisions of the Act the amount held in the name of S alone was for assessment of Estate Duty liable to be included in the estate of P
The Central Board of Revenue and the High Court confirmed this order
In appeal to this Court it was contended that P did everything possible 10 divest herself of her interest in the money held by her in deposit with the Bank and retained no interest therein and that in obtaining renewal of the receipts in the joint names of herself and of SP was merely a benamidar and in any event was acting on behalf of section HELD Dismissing the appeal i The question whether the amount of deposit receipts was liable to estate duty must be determined on the true effect of section 10 of the 
The section clearly means that if in respect of any 713 property which is gifted bona fide possession and enjoyment is not immediately assumed by the donee and thenceforward retained by him to the entire exclusion of the donor of any benefit to him therein the property gifted shall not be excluded from the estate subject to estate duty
718 B In the present case P retained important benefits in herself in the fixed deposit receipts
There was also no evidence that in obtaining the receipts in the joint names P acted as a guardian of S nor that she was a benamidar of section 718 F ii Though the third receipt was encashed during the life time of P and the amount was invested in the name of S alone the encashment and reinvestment were within two years of the death of P and the amounts so reinvested were liable to be included in the estate of P 718 G