Case: Hansa Inds.Pvt.Ltd.  Vs. Kidarsons Inds.P.Ltd

settlement reached between the parties. Even at the time when the settlement was reached the parties were well aware of the strained relationship which existed and the unfortunate events that occurred between the branch of appellant No.2 and the remaining members of the family. Despite this, it was agreed by all of them that the portion in occupation of appellant No.2 shall be allotted to him and the value thereof adjusted against his share. The respondents cannot now be heard to say that it would be inconvenient for them to reside with appellant No.2 and his family members in the same house, though in separate portions. The question as to how the parties will manage their affairs is a matter with which they only are primarily concerned and the Court cannot advise them in the matter. It may be that the architects may provide a solution for their problems, or it may be that in view of the circumstances one party may agree to sell its share or buy the share of the other party with a view to purchase peace, if that becomes necessary. These are matters in which the Court may have nothing to say.17. Clause 14 of the settlement being unambiguous, clear and categoric, it must be given effect because one cannot term the said Clause 14 as vitiated by fraud, or illegal being in breach of any statutory provision, or against public policy, or hit by the principle of impossibility of performance. The settlement was made bona fide by the parties to resolve all their disputes and all facts were known to the parties when they reached the settlement. With their eyes open and fully aware of their experiences of the past, they agreed to share the Golf Links property. The relevant clause in the settlement is not vitiated by any consideration which may impel the court not to give effect to that clause in the settlement. The question of practical inconvenience should have concerned the respondents when they entered into the settlement. They cannot at the stage of implementation of the settlement avoid a covenant in the settlement solemnly incorporated with their consent on the pretext of practical inconvenience of living in the same house, albeit in separate portions, in the unfortunate background of bickerings and acrimony. This issue must, therefore, be decided in favour of the appellants. 18. The next question is whether the judgment of the High Court could be suitably modified to provide for challenge by respondent -Company to any order that may be passed in future by the tax authority imposing capital gains tax on the hypothetical transfers made under the settlement. We find from the judgment of the High Court that the matter was discussed at length and the Court was of the view, prima facie, that the transfers may attract capital gains tax. There was, therefore, justification for deduction of the anticipated capital gains tax liability from the total value of assets. 19. Before us learned counsel for the respondent did not want to join issue on this question and left it to us to pass an appropriate order. Learned counsel for the appellants argued before us that no capital gains tax is payable in the instant case because the transfers are by virtue of an order of the Court and, therefore, Sections 100 to 104 of the Companies Act are attracted. There is in reality no transfer or sale that may attract capital gains tax, in view of the pre-existing right and title of the parties which gets crystalised under a family arrangement. He further submitted that so far as respondent - Company is concerned it does not get any consideration and, therefore, there is no question of any capital gains tax liability so far as respondent - Company is concerned. In any event even if the capital gains tax liability is imposed that will be the liability of the appellants herein, and they will be obliged to discharge that liability in accordance with law. Learned counsel for the appellant made a clear and categoric statement before us that if any liability arises out of the valuation of the assets or capital gains relating to properties covered by the settlement, the appellants shall be liable to discharge that liability. The appellants are willing to execute an undertaking to this effect and to creating a charge on the assets which may fall to their share for discharge of such tax liability, if any, imposed. It was submitted that there was no need to deduct this amount from the value of the assets of the Company and this Court may direct that in case such a liability arises in future and any demand is raised against respondent - Company of capital gains tax, the appellants shall be liable to discharge that liability. Respondent No.1 shall be entitled to challenge the tax demand, if any, for which necessary funds will be made available by the appellants. All this has been stated on the assumption that on a future date there is a demand of capital gains tax by the tax authority on the alleged transfers made under the settlement.20. We are of the view that since no demand of capital gains tax has been made so far, if any such demand is made in future in respect of the transfer of assets under the settlement for which 20% has been deducted by the Chartered Accountants, the respondent - Company shall challenge the demand provided the appellants shall place at its disposal necessary funds for the purpose. In any event the liability under the head "capital gains", if any, shall be that of the appellants who shall furnish an undertaking to this effect accepting their liability, and create a charge over the aforesaid assets to secure payment of capital gains tax, if any, imposed in future. Subject to this being done, there shall be no deduction from the value of the assets of the company of the anticipated liability of capital gains.

Court's decision (1 = petition accepted / positive for appellant, 0 = rejected / negative): 1

Reasoning from the judgment:
1[ds]16. It is true that the High Court has taken note of the practicalities of the situation and has proceeded on the basis that the appellants and the respondents cannot peacefully live in the same premises. The High Court has, therefore, not favoured allotment of a portion of the house in favour of appellant No.2 and has approved the allotment of the house to the respondents who owned the majority shares in the respondent No.1 Company. This was done with a view to ensure that the parties live separately but in peace and harmony. We cannot find fault with the concern shown by the High Court, but the problem which arises in the instant case is that the High Court was not considering a matter in which it could have exercised its discretion to make allotment one way or the other as in a case of family partition. The decree of the Court is based upon a settlement reached between the parties. Even at the time when the settlement was reached the parties were well aware of the strained relationship which existed and the unfortunate events that occurred between the branch of appellant No.2 and the remaining members of the family. Despite this, it was agreed by all of them that the portion in occupation of appellant No.2 shall be allotted to him and the value thereof adjusted against his share. The respondents cannot now be heard to say that it would be inconvenient for them to reside with appellant No.2 and his family members in the same house, though in separate portions. The question as to how the parties will manage their affairs is a matter with which they only are primarily concerned and the Court cannot advise them in the matter. It may be that the architects may provide a solution for their problems, or it may be that in view of the circumstances one party may agree to sell its share or buy the share of the other party with a view to purchase peace, if that becomes necessary. These are matters in which the Court may have nothing to say.17. Clause 14 of the settlement being unambiguous, clear and categoric, it must be given effect because one cannot term the said Clause 14 as vitiated by fraud, or illegal being in breach of any statutory provision, or against public policy, or hit by the principle of impossibility of performance. The settlement was made bona fide by the parties to resolve all their disputes and all facts were known to the parties when they reached the settlement. With their eyes open and fully aware of their experiences of the past, they agreed to share the Golf Links property. The relevant clause in the settlement is not vitiated by any consideration which may impel the court not to give effect to that clause in the settlement. The question of practical inconvenience should have concerned the respondents when they entered into the settlement. They cannot at the stage of implementation of the settlement avoid a covenant in the settlement solemnly incorporated with their consent on the pretext of practical inconvenience of living in the same house, albeit in separate portions, in the unfortunate background of bickerings and acrimony. This issue must, therefore, be decided in favour of thefind from the judgment of the High Court that the matter was discussed at length and the Court was of the view, prima facie, that the transfers may attract capital gains tax. There was, therefore, justification for deduction of the anticipated capital gains tax liability from the total value ofcounsel for the appellant made a clear and categoric statement before us that if any liability arises out of the valuation of the assets or capital gains relating to properties covered by the settlement, the appellants shall be liable to discharge that liability. The appellants are willing to execute an undertaking to this effect and to creating a charge on the assets which may fall to their share for discharge of such tax liability, if any,No.1 shall be entitled to challenge the tax demand, if any, for which necessary funds will be made available by the appellants. All this has been stated on the assumption that on a future date there is a demand of capital gains tax by the tax authority on the alleged transfers made under the settlement.20. We are of the view that since no demand of capital gains tax has been made so far, if any such demand is made in future in respect of the transfer of assets under the settlement for which 20% has been deducted by the Chartered Accountants, the respondent - Company shall challenge the demand provided the appellants shall place at its disposal necessary funds for the purpose. In any event the liability under the head "capital gains", if any, shall be that of the appellants who shall furnish an undertaking to this effect accepting their liability, and create a charge over the aforesaid assets to secure payment of capital gains tax, if any, imposed in future. Subject to this being done, there shall be no deduction from the value of the assets of the company of the anticipated liability of capital gains