Case: Satyanarayana Modi Vs. The Controller Of Estate Duty, Delhi And Rajasthan,N

Krishnamurthi, AIR 1933 Mad 628 in which Beasley, C. J. 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 the money deposited by the testator. In that case one Naidu had deposited a sum of money with the Imperial Bank of India a fixed deposit. Naidu died having bequeathed by his will the amount deposited to his 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 investment 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 Harts 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 not to part with them even at the mandate of his customer for purposes which are inconsistent with the customers fiduciary character and duty," and upheld the claim of Krishnamurthi.10. 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 Purnabais 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 Estate Duty Act 34 of 1953. Section 10 of that Act provides:"Property taken under any gift, whenever made, shall be deemed to pass on the donors 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 donor or of any benefit to him for at least two years before the death. Provided ........ ."The phraseology of the section is some what 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.11. The question which must be determined therefore, is whether in the present case the donee did under the deed of gift immediately assumed 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 to 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 receipts 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 form 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.12. 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.13. 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 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.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]It 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.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 Purnabais 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 byphraseology of the section is some what 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 estateconduct 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 receipts 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 form 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.12. 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.13. 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 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.