Kalwa Devadattam And Two Others vs The Union Of India And Others

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeals Nos. 641 and 642 of 1961

Decision Date: 19 April 1963

Coram: J.C. Shah, A.K. Sarkar, M. Hidayatullah

In this matter, the Supreme Court recorded that the petition titled Kalwa Devadattam and Two Others versus The Union of India and Others was decided on 19 April 1963. The judgment was delivered by Justice J.C. Shah, who was joined by Justices A.K. Sarkar and M. Hidayatullah. The parties were identified as Kalwa Devadattam and two other respondents as petitioners and the Union of India together with other respondents as respondents. The official citation of the decision is 1964 AIR 880 and 1964 SCR (3) 191, with later references appearing in several reports such as RF 1966 SC1089, R 1966 SC1370, APL 1967 SC1541, F 1977 SC 409, RF 1978 SC1362, RF 1981 SC1562, R 1981 SC1965, R 1982 SC 760. The statutory provisions concerned were Section 25‑A and Section 67 of the Indian Income‑Tax Act, 1922, together with the Code of Civil Procedure, 1908.

The factual background concerned a joint family headed by Nagappa and his sons, who carried on a business that was assessed for income tax and surcharge by the tax authorities. Because Nagappa failed to pay the assessed tax, the revenue authorities attached fifty‑one immovable properties belonging to the joint family, and subsequently sold thirty‑eight of those properties. The sons of Nagappa filed a suit asserting a decree that would declare the tax assessment orders unenforceable against the attached property, and that the sale of the property by the revenue authorities was without jurisdiction, void and illegal. They also sought an injunction restraining the Union of India and the authorities of the State of Madras from selling the scheduled properties or confirming the sales that had already taken place.

The plaintiffs argued that items numbered forty‑six to fifty‑one did not belong to the joint family at all, because those items had been acquired with funds provided by their maternal grandmother. They further contended that the remaining items of property had been allotted to them under a partition of the joint family estate dated 14 March 1947, an event that occurred before the income‑tax assessment was made by the authorities. On the other hand, the Union of India maintained that the plaintiffs were not entitled to question the correctness of the tax assessment in a civil court, because Section 67 of the Indian Income‑Tax Act expressly excluded such jurisdiction. The Union also asserted that the plaintiffs were precluded from relying on the partition as a defence to the liability for tax payment, in accordance with Section 25‑A(3) of the same Act. Moreover, the Union claimed that the partition was a sham, not intended to be operative, and that items forty‑six to fifty‑one were not part of the plaintiffs’ separate estate.

Additionally, the headnote referred to a related proceeding in which the High Court, on 5 March 1947, passed a decree for ten thousand rupees against Nagappa in favour of Kumaji Sure Mal. Subsequently, on 14 March 1947, a deed of partition was executed that divided the joint family estate of Nagappa and his sons, allocating separate shares to Nagappa and each of his sons. Kumaji obtained certain properties that were later attached in execution proceedings. The sons of Nagappa filed a suit asserting that the debt incurred by Nagappa, being Avyavaharika, did not bind the plaintiffs, and that Kumaji was not competent to initiate the sale of the decree obtained against Nagappa in his individual capacity. The suit also claimed that the plaintiffs’ interest in the joint family property ceased once the joint family status was severed by the partition. The court ultimately held that both suits filed by the appellants must be dismissed, and that the suit against the Union of India failed on three independent grounds, including the in‑applicability of the suit under Section 67, the proper making of the assessment in the absence of an order under Section 25‑A(1), and the lack of operative effect of the purported partition.

In the matter before the Court, a partition deed was executed that divided the joint family estate of Nagappa and his sons, granting separate shares to Nagappa and each of his sons. Subsequent to the partition, Kumaji obtained attachment of certain properties in execution proceedings. The sons of Nagappa instituted a suit asserting that the debt incurred by Nagappa was Avyavaharika, and therefore they were not liable to satisfy that debt. They further argued that Kumaji was not competent to sell the property in execution of the decree obtained against Nagappa in his individual capacity, and that the plaintiffs’ interest in the joint family property ceased after the joint family status was severed and the families’ properties were partitioned. The Court held that both suits filed by the appellants had to be dismissed. Regarding the suit against the Union of India, the Court found three independent grounds for failure. First, the suit, which in substance sought to set aside an assessment, was not maintainable under section 67 of the Indian Income‑Tax Act, 1922. Second, in the absence of an order under section 25‑A(1), the assessment of the Hindu joint family was properly made. Third, even if a partition order had been recorded, the liability of the plaintiffs to pay the income tax assessed on the family could still be enforced jointly and severally under the proviso to section 25‑A(2).

The Court explained that under section 25‑A of the Income‑Tax Act, if a joint family existed on the date when the tax liability arose, the tax would continue to be assessed on the joint family despite any later disruption of the family. The method of recovering the tax differs depending on whether a partition order has been made. When the Income‑Tax Officer is satisfied that, since the close of the year of account, the joint family property has been partitioned among members in definite portions, he must record an order to that effect. Consequently, each member or group of members becomes liable, in addition to any tax for which he is individually responsible, for a share of the tax on the income assessed in proportion to the portion of the joint family property allotted to him. Nevertheless, even after this apportionment, the members or groups of members remain jointly and severally liable for the tax assessed on the total income of the family as a whole. If no order is recorded under section 25‑A(1), the family is deemed, for the purposes of the Income‑Tax Act, to continue as a Hindu undivided family. The provision therefore establishes a mechanism to avoid difficulties in levying and collecting tax. Finally, the Court held that property items numbered 46 to 51 belonged to the joint family and were liable to be attached and sold to enforce the liability for payment of income tax, because the alleged partition between Nagappa and his sons was a sham transaction that was not intended to be operative.

In discussing the importance of the burden of proof, the Court observed that this issue is especially critical at the beginning of a proceeding. The Court explained that the burden becomes highly significant when neither party presents any evidence concerning the matter in dispute. In such a situation, the party upon whom the burden of proving a particular fact rests must fail to meet that burden. Conversely, when both parties have adduced evidence on the contested issue, the Court held that abstract discussions of the burden are misplaced. The Court emphasized that the truth or falsehood of the case must always be determined on the basis of the evidence actually presented by the parties. The Court then referred to several earlier decisions that illustrated this principle, citing Schwebo K. 8.R.M. Firm through partner Govindan alias Ramanatham Chettiar v. Subbiah alias Shanmugham Chettiar, I.L.R. 1945 Mad. 138; Wallace Brothers and Co. Ltd. v. The Commissioner of Income‑tax, Bombay City and Bombay Suburban District, (1948) L.R. 75 I.A. 86; Sir Sunder Singh Majithia v. Commissioner of Income‑tax, United and Central Provinces (1942) L.R. 69 I.A. 119; Commissioner of Income‑tax West Punjab, North West Frontier and Delhi Provinces v. Tribune Trust, Lahore, (1947) L.R. 74 I.A. 306; Katragadda China Ramayya v. Chirwvella Venkanraju, A.I.R. 1954 Mad. 864; Ganapatrao Vishwanathappa v. Bhimrao Sahibrao, I.L.R. 1950 Born. 414; and S.M. Jakati v. S.M. Borkar, [1959] S.C.R. 1384, all of which were mentioned for their relevance to the doctrine of burden of proof.

The judgment concerned civil appeals numbered 641 and 642 of 1961, which were taken from a decree dated 11 April 1957 issued by the Andhra Pradesh High Court in A.S. Nos. 95 and 520 of 1952. The appellants were represented by counsel, while respondents numbered one to four in appeal 641 and respondent 1 in appeal 642 were also represented by counsel. The judgment, delivered on 19 April 1963 by Justice Shah, began by setting out the factual background. Nagappa, son of Pullanna and a resident of Nandyal, was engaged in the yarn, drugs and forward‑contract business and had acquired a substantial estate which he treated as property of a Hindu undivided family consisting of himself and his sons. The Income‑tax authorities assessed Nagappa and his sons, in the capacity of a Hindu undivided family, for income‑tax and surcharge for the assessment years 1944‑45, 1945‑46 and 1946‑47, as shown in the following table: for the year ending 24‑3‑44 the assessment order dated 25‑2‑48 imposed Rs 51,116‑7‑0; for the year ending 14‑3‑45 the assessment order dated 25‑2‑48 imposed Rs 21,452‑1‑0; and for the year ending 2‑4‑46 the assessment order dated 31‑3‑48 imposed Rs 21,012‑13‑0. In addition to these amounts, Nagappa was assessed for penalty and excess‑profits tax amounting to Rs 26,602, bringing the total tax liability for the three years to Rs 1,23,233‑5‑. Nagappa failed to pay the assessed tax. Consequently, the revenue authorities of the Madras Province, acting on a request from the Income‑tax Department, attached fifty‑one immovable properties deemed to belong to the joint family of Nagappa and his sons and placed them for sale under the Madras Revenue Recovery Act II of 1864. Of these fifty‑one items, thirty‑eight were eventually sold to purchasers at auction.

A number of the attached items were sold at public auction and were purchased by various persons. The three sons of Nagappa—Kalwa Devadattam, Kalwa Devarayulu and Kalwa Nandi Sankarappa—who are hereinafter referred to collectively as “the plaintiffs,” filed suit No 52 of 1950 in the Court of the Subordinate Judge, Kurnool. They instituted the suit through their mother, who acted as their next friend, and sued the Union of India, the revenue authorities of the State of Madras, the purchasers of the auctioned properties, and Nagappa himself. The plaintiffs prayed for a decree declaring that the assessment orders made by the Income‑tax Officer, Kurnool, for the assessment years 1944‑45, 1945‑46 and 1946‑47 were unenforceable against the fifty‑one items of property listed in the schedule. They further asserted that the sale of those properties by the revenue authorities had been undertaken without jurisdiction and was therefore void and illegal. In addition, the plaintiffs sought an injunction restraining the Union of India and the Madras revenue authorities from selling the “scheduled properties,” from confirming any sale already effected, and from confirming any future sale that might be held after the institution of the suit. The plaintiffs contended that items numbered 46 to 51 had never formed part of the joint family estate because they had been acquired with money supplied by their maternal grandmother, Seshamma. They further maintained that the remaining items could not be attached and sold because those properties had already been allotted to them by a partition of the joint family estate that took place before the tax assessment was issued. The Union of India and the purchasers opposed the suit on several grounds. The Union argued, inter alia, that the plaintiffs were not entitled to challenge the correctness of the tax assessment in a civil court because Section 67 of the Indian Income‑tax Act excluded such jurisdiction. The Union also submitted that, even if jurisdiction existed, the plaintiffs were barred from invoking the partition as a defence to the liability for tax under Section 25A(3). Moreover, the Union claimed that the partition was a sham, not intended to be operative, and that items 46 to 51 did not constitute a separate estate of the plaintiffs as they alleged. The purchasers, who were impleaded as defendants 5 to 28, contended that there was no invalidity in the tax assessment proceedings. They further argued that, having purchased the properties for the full amounts required at the auction, the sales—although not yet confirmed—were binding upon the plaintiffs.

Suit No 52 of 1950 was tried together with another proceeding, Suit No 54 of 1949, which was pending in the same court. That second suit also required determination of the validity of the partition dated 14 March 1947, a partition between the sons of Nagappa and the firm of Kumaji Sare Mal, who were creditors under a money decree against Nagappa. The factual background of the second suit was as follows: Kumaji Sare Mal had filed Suit No 7 of 1944 in the Court of the Subordinate Judge, Anantpur, against Nagappa for a decree of Rs 10,022‑10‑6 arising out of certain yarn transactions. The trial court dismissed the claim on the ground that the contracts for the supply of yarn were wagering contracts. On appeal, however, the Madras High Court in Appeal No 174 of 1945 reversed that decision on 5 March 1947, holding that although the contracts were speculative, they were not of a wagering character. The High Court therefore awarded a decree for Rs 10,000 with interest at six per cent from the date of suit and costs. That decree prompted the execution of a deed of partition, dated 14 March 1947, between Nagappa and the plaintiffs. Under the deed the joint family estate, valued at approximately Rs 1,25,000, was divided into four shares. Nagappa received a share valued at Rs 31,150 and was obligated to satisfy debts amounting to Rs 12,236‑4‑9. In execution of the 1944 decree, Kumaji Sare Mal attached some of the properties that fell…

In the earlier proceedings, the plaintiff Nagappa instituted suit No 7 of 1944 in the Court of the Sub‑ordinate Judge, Anantpur, seeking a decree for the sum of Rs 10,022‑10‑6 that he claimed was due as a result of certain yarn transactions. The trial court dismissed the suit on the ground that the contracts for the supply of yarn were wagering contracts. Nagappa appealed that decision under Appeal No 174 of 1945, and the High Court of Madras delivered a decree on 5 March 1947. The High Court held that although the contracts were speculative, they were not wagering in character, and therefore the suit could proceed. It granted Nagappa a decree for Rs 10,000, directed interest at six per cent per annum payable from the date of the suit, and awarded costs.

Following the high court decree, the parties executed a deed of partition dated 14 March 1947, which divided the joint family estate—valued at approximately Rs 1,25,000—into four separate shares. Under that partition, Nagappa received property valued at Rs 31,150 and was held liable to satisfy debts amounting to Rs 12,236‑4‑9. In the execution of the decree in suit No 7 of 1944, the firm Kumaji Sare Mal attached several properties that fell within the share allotted to the plaintiffs by the 14 March 1947 partition. The plaintiffs objected to the attachment pursuant to Order 21 Rule 58 of the Code of Civil Procedure, but the executing court dismissed those objections on 12 July 1948.

The plaintiffs subsequently filed suit No 54 of 1949, seeking a decree that would set aside the summary order passed in the execution proceeding. In that suit they contended that the debt incurred by Nagappa was “avyavaharika” (non‑commercial) and therefore the plaintiffs should not be liable to satisfy it. They further argued that Kumaji Sare Mal was not competent to conduct a sale in execution of a decree obtained against Nagappa in his individual capacity, because the joint family status had been severed and the family property had already been partitioned. The evidence presented in suit No 54 of 1949 was largely the same as that recorded in the earlier suit.

The trial judge, after considering the evidence, held that items numbered 1 to 45 had, during the relevant assessment years, belonged to the joint family of Nagappa and his sons. He observed that, in the absence of a formal order recording a partition under section 25A(1) of the Indian Income‑Tax Act, the Income‑Tax Officer was obligated to assess the undivided family even after the alleged partition, on the premise that the family continued to exist as a joint entity. The judge further held that, pursuant to section 67 of the same Act, the courts could not entertain any action that questioned the assessment, and that there was no irregularity in the sale proceedings.

Nevertheless, the court concluded that the division of property on 14 March 1947 was, in fact, a genuine partition between Nagappa and the plaintiffs. Although the partition had been effected with the intention of defeating the claims of creditors, including the Income‑Tax authorities, it was nonetheless a partition intended to be operative. Finally, the court found that the defendants had not proved that items numbered 46 to 51 formed part of the joint family property of the plaintiffs and Nagappa.

In the matter concerning the property of the plaintiffs and of Nagappa, the trial judge in suit No 54 of 1949 relied on the decision in Schwebo K.S.R.M. Firm through Partner Govindan, alias Ramanathan Chettiar v. Subbiah alias Shanmugham Chettiar (1) and held that once a partition had been effected among members of a joint Hindu family, the sons’ portions of the former joint family property could not be subjected to execution in order to enforce the moral duty of the sons to satisfy their father’s debts under a decree that was directed solely against the father. Accordingly, the learned judge decreed that the only appropriate remedy for the firm Kumaji Sare Mal was to institute a suit to enforce the plaintiffs’ moral obligation to discharge debts that arose before the partition. The plaintiffs challenged this decree by filing suit No 57 of 1950 in the High Court of Madras, while the Union entered cross‑objections to the appealed decree, and the firm Kumaji Sure Mal also appealed the decree that dismissed its suit No 54 of 1949. The appeals were transferred for hearing to the High Court of Andhra Pradesh pursuant to the States Reorganisation Act 1956, where the court concurred with the trial court’s view that a suit seeking to set aside the income‑tax assessment could not be maintained against the Union. Moreover, the High Court observed that in the absence of an order under section 25A(I) of the Indian Income‑tax Act recording a partition, the tax authorities were required to assess tax on the Hindu undivided family as if that status continued. The court further found that the partition purportedly effected by the plaintiffs was a nominal and sham transaction; the evidence demonstrated that items 46 to 51 had been purchased with joint family funds rather than with the funds supplied by Seshamma, and consequently all properties numbered 1 to 51 were subject to the joint family’s tax liability. The High Court also held that the firm Kumaji Safe Mal was entitled to recover the debt due to it in execution proceedings because no genuine partition existed between Nagappa and the plaintiffs prior to the attachment. On these grounds, the High Court dismissed both suits. The Court indicated that it would later consider separately the common issue raised in the two appeals, namely whether the partition deed dated 14 March 1947 between Nagappa and his sons was a sham transaction. Even assuming that the partition was real and operative, the Court noted that suit No 52 of 1950 filed by the plaintiffs against the Union was bound to fail for several reasons. For the assessment year 1943‑44, the Hindu undivided family of Nagappa and his sons had been assessed to income‑tax, and in the subsequent years 1944‑45, 1945‑46 and 1946‑47 the family was also assessed to pay income‑tax, super‑tax and excess profits tax as previously set out. Nagappa maintained his accounts according to the Telugu year, and the last year of account corresponded to the assessment year 1946‑47 ending on 2 April 1946.

The Court observed that, for the purposes of the present taxation dispute, the assessment year designated as 1946‑47 terminated on the 2nd day of April 1946. It was explained that, under the Indian Income‑Tax Act, the liability to pay income tax arises at the moment the income is accrued, not merely when the tax authorities compute the amount during assessment proceedings, and that this liability must arise no later than the closing date of the relevant accounting year. The Court then referred to the decision of the Judicial Committee of the Privy Council in Wallace Brothers and Co Ltd v Commissioner of Income‑Tax, Bombay, noting that the Committee described the charging provision as imposing a tax for the income of the preceding year, that the rate may be fixed after the close of that year, and that the liability to tax arises solely by operation of the charging provision and therefore cannot arise later than the end of the previous year even though the exact amount may be assessed later. Consequently, the Court held that the liability of the Hindu undivided family comprising Nagappa and his sons arose not later than the close of each accounting year for which the tax was assessed, and that the plaintiffs could not claim that the family estate had been partitioned before the tax liability of the undivided family had come into existence. The Court observed that there was no dispute in the suit filed by the plaintiffs against the Union that the commercial activities carried on by Nagappa were undertaken in the name of, and for the benefit of, the joint family. Because the business and the resulting property generated income that was considered joint‑family income, the plaintiffs instituted the suit on the premise that the income derived from the joint family business was subject to tax liability. The Court explained that, under section 25A of the Income‑Tax Act, if a joint family exists at the moment the liability to pay tax arises, the tax is assessed on the joint family even if the family later disintegrates, and that the procedure for recovery of tax differs depending on whether an order recording partition has been made. Accordingly, when the Income‑Tax Officer is satisfied, upon a claim by a family member, that the joint‑family property has been divided into definite portions among various members or groups since the close of the relevant accounting year, he must record an order reflecting that partition, and, notwithstanding the provisions of sub‑section (1) of section 14, each member or group thereafter becomes liable in addition to any separate tax liability for the share of tax attributable to the income assessed.

According to the portion of the joint family property that was allotted to a particular member, that member became liable for the tax assessed on the total income of the joint family in respect of his share. Nevertheless, even after such apportionment of liability, the members of the family or any groups of members continued to be jointly and severally liable for the tax that was assessed on the total income received by the family as a whole. When no order was recorded under subsection (1) of section 25A, subsection (3) deemed that, for the purposes of the Act, the family would continue to be regarded as a Hindu undivided family. Section 25A therefore establishes a mechanism for removing the difficulties that arise in levying and collecting tax when the income was received before the joint family property was partitioned into definite portions, while simultaneously confirming that the members or groups of members remain jointly and severally responsible for paying the total tax on the family’s income. The provision seeks to eliminate the bar created by section 14(1), which prevents recovery of tax from an individual member of a Hindu undivided family for any sum that he receives as a member of the family, and to ensure that tax due can be recovered notwithstanding any partition that has taken place. The incidence of tax, though not the amount, is adjusted to reflect the altered circumstances.

The Judicial Committee of the Privy Council, in the case of Sardar Bahadur Sir Sunder Singh Majithia v. Commissioner of Income‑tax, United and Central Provinces (1), examined the scheme of section 25A and explained that the section was intended to address the difficulty that arose when an undivided family received income in the relevant year of account but no longer existed as such at the time of assessment. The difficulty was intensified by the principle embodied in section 14(1), which states that “The tax shall not be payable by an assessee in respect of any sum which he receives as a member of a Hindu undivided family.” Section 25A dealt with the problem in two ways, as explained by the rule applicable to families governed by the Mitakshara school. A mere claim of partition could create a division of interest among coparceners, thereby disrupting the family and terminating the right of succession by survivorship. It is well‑settled law that the filing of a suit for partition may have this effect, even though it may take years before the actual shares of the parties are determined or a physical partition is effected. In the interim, the family property would belong to the members in the same manner as it does in a Dayabhaga family, effectively as tenants in common. Section 25A provided that if it was found that the family property had been partitioned into definite portions, assessment could be made, notwithstanding section 14(1), on each individual or group in respect of his or its share of the profits, while still holding all members jointly and severally liable for the total tax.

In the matter before the Court, it was observed that the tax assessment had been made against the undivided Hindu family while holding every member jointly and severally liable for the entire tax liability. The Court noted that, in the present case, no order under section 25A(1) of the Income‑Tax Act had been recorded. The record showed that the taxpayer, Nagappa, had appeared before the Income‑Tax Officer on 19 January 1948 and had made the following statement: “I am at present living singly. My sons divided from me about ten months back. There is a document to this effect. The document was registered. My sons are as follows.” After enumerating the names of his three sons and stating their respective ages, he proceeded to say, “The guardian to these minor children is my wife. I divided my family properties between myself and my children. The properties belonged to our joint family. The business also belonged to my joint family.” The Court inferred that, by this declaration, Nagappa was, within the meaning of section 25A, claiming that a partition of the family had taken place and that, accordingly, the Income‑Tax Officer was bound to conduct the inquiry envisaged under section 25A. However, the Court found that no such inquiry was ever conducted and that the Income‑Tax Officer had not recorded any order regarding a partition. By virtue of subsection (3) of section 25A, the family that was originally assessed as undivided was to be deemed, for the purposes of the Act, to continue to be a Hindu undivided family. Consequently, if the assessment was made on the basis that the family remained undivided and if Nagappa or his sons were dissatisfied with that assessment, their remedy was to file an appropriate appeal under section 30 of the Indian Income‑Tax Act rather than to institute a suit challenging the assessment. The Court emphasized that the method of assessment and the procedure to be followed are prescribed by statute, and any error or irregularity in the assessment could be corrected only through the remedial mechanisms provided by the statute, because section 67 of the Indian Income‑Tax Act prohibits a civil suit from being filed to set aside or modify any assessment made under the Act. Although the Income‑Tax Officer had made the assessment of tax under the Act, and even assuming that he had erred by failing to conduct an inquiry into the alleged partition, the Court held that such an error could be rectified only by resorting to the statutory machinery and not by a suit in a civil court. The Court also referred to the decision in Commissioner of Income‑Tax, West Punjab, North‑West Frontier and Delhi Provinces, Lahore v. Tribune Trust, Lahore (1947) I‑R 74 I.A. 306, 316, where the Judicial Committee observed that the only remedies available to the taxpayer, whether by way of an appeal against assessment or a claim for refund, must be found within the strict confines of the Act, and that this interpretation is in harmony with the provisions of section 67 which expressly forbid any civil suit to set aside or modify an assessment.

The Court observed that the suit filed by the plaintiffs against the Union could not succeed on any of three separate legal grounds, each of which alone was sufficient to defeat the suit. First, the suit was essentially an attempt to set aside an income‑tax assessment, and such a suit was barred by section 67 of the Indian Income‑tax Act. Second, the assessment of the Hindu joint family had been made in accordance with the provisions of section 25A(1), and therefore no order under that section was required to validate the assessment. Third, even assuming that a partition order had been issued, the liability of the plaintiffs to pay the income‑tax that had been assessed on the joint family could still be enforced against them jointly and severally under the proviso to section 25A(2). The Court noted that the plaintiffs’ allegation of irregularity in the sale proceedings had been rejected by both the Trial Court and the High Court, and that issue had not been raised before the present Court.

The Court then turned to the question of the plaintiffs’ title to the properties listed as items 46 to 51 in the schedule annexed to the plaint. The High Court had disagreed with the Trial Court’s view on this point. The properties had been purchased in the names of two of the three plaintiffs by a sale deed marked Ext. A‑230, dated 15 March 1944. The total consideration for the sale deed was Rs 23,500/‑, of which Rs 5,019/‑ had been paid in advance in four instalments before the date of the deed, and the remaining Rs 18,481/‑ had been paid to the vendors before the Sub‑Registrar at the time the conveyance was effected. The two plaintiffs, Devadattam and Devarayulu, acted through their mother, Narayanamma, who was appointed as their guardian. Because the conveyance had been made in the names of the two plaintiffs, the burden of proof prima facie rested on the Taxing authorities to demonstrate that the sale deed had been executed for, or on behalf of, the joint family, or that joint family funds had been used to meet the consideration. Both parties had led evidence to support their respective versions. The Trial Court held that the plaintiffs’ claim that their grandmother Seshamma had provided the consideration was not proved, and that there was also no evidence that the joint family had provided the consideration; consequently, the burden remained on the Union and the plaintiffs’ case failed. In contrast, the High Court held that the Union had discharged the burden of proving that the properties had been purchased from joint family funds. The Court remarked that the allocation of onus was a question of importance in the early stages of a case and could become decisive where no evidence was offered by either side on the disputed issue, in which event the party bearing the burden would fail. However, when both parties had adduced evidence on the issue in dispute, abstract rules of onus were not applicable, and the truth of the matter had to be determined on the basis of the evidence placed before the Court.

In support of the allegation that Seshamma had provided the consideration, the trial and appellate courts examined three witnesses identified as P.W. 4, P.W. 5 and P.W. 8. The deceased, Seshamma, had passed away a few months before evidence was recorded in the suit. Both the Trial Court and the High Court found the evidence presented concerning her contribution to be discrepant and, in essential particulars, so improbable that it could not be relied upon. The first witness, P.W. 4, identified as Narayanamma, the mother of the plaintiffs, deposed that the properties had been purchased for the plaintiffs by her mother Seshamma using money that had been given to Seshamma by her husband. According to Narayanamma, that money was handed to Nagappa, who in turn paid the vendors in the presence of the Sub‑Registrar. This narrative was wholly discredited by Narayanamma’s own admission that the husband of Seshamma and his brothers had been joint partners in the family business and estate until the husband’s death. Additionally, on the record there existed a statement made by Seshamma before the Income‑tax authorities, wherein she claimed that at the time of her husband’s death she possessed only about Rs 4,000 to Rs 5,000, which she subsequently gave to her daughter. When questioned about this statement, Nagappa suggested that the Income‑tax authorities had obtained the statement through coercion of Seshamma. The contention that Seshamma owned a large sum of cash was unsupported by any documentary evidence, and it was difficult to believe that a trading family would leave such an amount uninvested if it had truly been devised to her by her husband. In cross‑examination, Narayanamma altered her version of events, asserting that Seshamma’s paternal uncle had left all his property to her because he had no children or other family, but that he had not executed any formal document in Seshamma’s favour. She further claimed that at the time of the uncle’s death he had orally directed that Seshamma should take all the properties and that both Seshamma and her brother were aware of what she received from the uncle. The second witness, P.W. 5, Venkatsami, who had originally been a clerk of Nagappa and was then employed as a clerk by Narayanamma, swore that he had observed Seshamma giving Rs 6,000 to Narayanamma about four years earlier. He added that a month later Seshamma brought Rs 3,000 and gave them to Narayanamma, and that about ten days thereafter Seshamma delivered Rs 12,000 to both Nagappa and Narayanamma. Venkatsami admitted that Seshamma possessed no immovable property other than a house that she bequeathed to her daughter under a will, and he did not know the source of the cash. Under cross‑examination, he gave an inconsistent account, stating that on the date of registration of Exhibit A‑230 Seshamma had asked her daughter Narayanamma to bring the money. On that day the key to an iron safe was with Narayanamma, who brought some cash that was counted and handed over to the vendors. Both the Trial Court and the High Court concluded that this witness was unreliable, and a plain reading of his testimony confirmed that view.

In the testimony of Nagappa, it was stated that he had paid the consideration for the sale‑deed, yet his answers on cross‑examination were inconsistent and cast doubt on the veracity of that assertion. The record showed that he sought ways to preserve the properties for the benefit of his sons and that he had both instigated and prosecuted the suits. His simple claim that Seshamma had advanced the consideration for the sale‑deed lacked any documentary support and was deemed unreliable, particularly in light of the statement Seshamma had given before the Income‑Tax authorities. Consequently, the courts below were correctly found to have concluded that the plaintiffs had not demonstrated that the properties transferred by the sale‑deed were bought with funds supplied by Seshamma. The parties agreed that the plaintiffs possessed no other source of income. Both Nagappa and his clerk Venkatsami admitted that Nagappa earned substantial profits in his business and that Rs 18,481 out of the amount payable under Exhibit A‑230 had actually been paid to the vendors by Nagappa himself.

The court observed that two competing narratives had been presented. The first, advanced by the plaintiffs, alleged that Seshamma had supplied the consideration for the sale‑deed; this version could not be accepted for the reasons already discussed. The second narrative asserted that the money belonged to the joint family over which Nagappa acted as manager and that Nagappa himself had paid the consideration. Neither version was backed by documentary evidence, and even Nagappa’s own accounts had not been produced. Nevertheless, if the funds were indeed paid by Nagappa and the claim that Seshamma provided them was disbelieved, it was a reasonable inference—consistent with probability—that Nagappa had drawn the money from the joint family earnings to purchase the property. The record also showed that Kumaji Sare Mal, the respondents in Appeal No 642 of 1961, had obtained an order for attachment before judgment in a 1942 suit over the joint family’s immovable property held by Nagappa. This attachment remained in force at the time of the sale‑deed (Exhibit A‑230) and was later vacated when the trial court dismissed the suit on 31 August 1944. In the context of the other evidence, this circumstance strongly supported the Union’s contention that Nagappa, intending to shield the property from his creditors, had arranged for the purchase in the names of his sons, the plaintiffs, and had advanced the consideration himself. Accordingly, the High Court was right to hold that items 46 to 51 were joint‑family assets subject to attachment and sale for the enforcement of income‑tax liability. As a result, Civil Appeal No 641 of 1961 was dismissed, and the court proceeded to consider the issues remaining in Civil Appeal No 642 of 1961, which shared a common question with Appeal No 641.

In 1944 the firm Kumaji Sare Mal instituted a suit seeking damages for breach of contract, alleging that the defendant Nagappa owed the firm money. The High Court entered a decree in favour of the plaintiff on 5 March 1947, granting the relief claimed. Within nine days after the decree, a deed of partition was executed, dividing the family property among the parties.

The plaintiffs argued that the debts owed by Nagappa to Kumaji Sare Mal were immoral or “avyavharika,” and therefore the portion of the property allotted to them under the partition deed could not be sold to satisfy the decree. They further asserted that even if the debts were not characterized as immoral, the shares granted to them by the partition could not be attached and sold in execution of the decree against their father, Nagappa. The plaintiffs maintained that the creditor’s proper remedy, in that circumstance, was to file a separate suit to enforce the pious obligation of the children, rather than to rely on execution of the decree obtained solely against Nagappa.

The creditors countered that the deed of partition was a sham transaction, designed to evade the creditor’s rights, and consequently they were entitled to proceed with execution against the plaintiffs’ shares. Alternatively, the creditors contended that even if the partition deed was genuine, the creditors, as holders of a decree granted before the partition, could enforce the pious obligation imposed on the plaintiffs to discharge their father’s debts, without the necessity of filing an additional suit.

The procedural issue before the Court concerned the appropriate method for enforcing a Hindu son’s liability to discharge his father’s debts that are not immoral, where a decree against the father existed prior to a partition of the joint family property. Divergent opinions existed on this matter. The Madras High Court, in Schwebo K.S.R.M. Firm v. Subbiah (1), held that the son’s share could not be subject to execution because the partition created a division of status that persisted even if the partition were later deemed a fraudulent transfer. This principle was reiterated by a Full Bench of the Madras High Court in Katragadda China Ramayya v. Chiruvella Venkunraju (2), which observed: “A son under the Hindu law is undoubtedly liable for the pre‑partition debts of the father which are not immoral or illegal. If a decree, however, is obtained against the father alone and there is a partition of the family proper ties, in execution of such a decree, the son’s share cannot be seized by the creditor as by reason of the partition the disposing power of the father possessed by him over the son’s share under the pious obligation of the son to discharge the father’s debts can no longer be exercised. With the partition, the power comes to an end. The liability thereafter can be enforced only in a suit. After partition, the son’s share can no longer be treated as property over which the father had a disposing power within the meaning of Section 60 of the Civil Procedure Code.”

The Bombay High Court, in Ganpatrao Vishwnathappa v. Bhimrao Sahibrao, held that a decree against a Hindu father may be executed against the son’s interest after partition by impleading son as a party to execution. The Supreme Court has not expressed a clear view on this specific question, although it addressed a related issue in S.M. Jakati v. S.M. Borkar. In that decision the Court held that a Hindu son’s liability to discharge his father’s non‑immoral, non‑illegal debts arises from a pious obligation that continues throughout the son’s lifetime and even after the father’s death. The Court further explained that partition does not terminate this obligation; it merely ends the father’s right to alienate the joint family property. The case involved the sale of family property to satisfy a monetary decree against father; the sons sought to set aside the sale where it affected their interests and to obtain possession of the share. The Court found the father’s liability was neither illegal nor immoral and held that the sale of joint family property, including sons’ shares, to satisfy the debt was valid despite severance of joint family status. The Court stated that it was not necessary to express an opinion on whether a creditor must file a suit to enforce the son’s obligation after a decree against father and severance of joint family. The Court further expressed that it considered the partition to be a sham transaction that was not intended to be operative.

The deed of partition was formally executed and subsequently registered on 14 March 1947, which gave the partition legal recognition under the applicable registration statutes. It was alleged that the partition’s true purpose was to protect the petitioners’ minor sons from a father who allegedly acted against their interests and no longer lived with the family. The High Court, after examining numerous surrounding facts, concluded that the partition was merely nominal and did not represent a genuine division of the family assets. The execution of the deed occurred within a week of the High Court’s earlier decree in the suit brought by Kumaji Sare Mal, indicating a close temporal connection between the two judicial actions. Nagappa had acquired a large estate, which on acquisition was classified as joint family property, and the record showed no indication that he harbored ill will toward his sons or was motivated by hostile intent. Consequently, the evidence did not support any conclusion that the partition was motivated by a desire to deprive the sons of their lawful shares. The court therefore inferred that the partition served primarily as a procedural device rather than an authentic transaction intended to alter ownership rights.

In this case the Court observed that there was no indication that Nagappa intended to injure the interests of his children; rather, the genuine purpose of the partition was to preserve as much property as possible for them. The partition deed appeared to allocate an equal share of property valued at Rs 1,24,600 into four portions, each valued at Rs 31,150, yet the portion allotted to Nagappa was in reality worth considerably less than that stated amount. Moreover, Nagappa was made liable under the deed to discharge a debt of Rs 12,236 4/9, a liability that could not be satisfied from the property assigned to him. Soon after the execution of the deed, Nagappa transferred a substantial part of his share to his wife, Narayanamma, and sold one of the houses, apparently to create the impression before the Income‑tax Department that the remaining property was insufficient to meet the Department’s demands and therefore no coercive action would be justified. The Court noted that Nagappa himself had initiated and pursued the related suits. Narayanamma, described as illiterate and unaware of Nagappa’s transactions, testified that she did not manage the property even though the partition deed designated her as guardian of her sons. The allegation that Nagappa was cohabiting with a mistress and neglecting the education and welfare of his minor sons was found to lack reliable evidence. At the time of the alleged partition the eldest son was fourteen years old and the youngest three years old, and absent any serious discord between Nagappa and Narayanamma, a partition could not have been logically contemplated. Witness Singari Seshanna, a declared witness, testified that Nagappa, his wife and children continued to reside together in the family house at the date of the suit and that Nagappa collected rents from all the houses; this testimony was not contradicted on cross‑examination. The clerk of Narayanamma, PW 5 Venkatsami, admitted that he could not identify which houses were leased or to whom, and he was unable to provide particulars regarding several of the houses. This lack of knowledge on the part of the alleged manager reinforced Singari Seshanna’s statement that Nagappa remained in charge of the property, that the family lived together, and that there was no disruption of the joint family. Although numerous documents were produced to show that, after the partition deed, the properties were entered in the sons’ names, the Court found that the mere execution and registration of the deed did not conclusively demonstrate its intended effectiveness, given the surrounding circumstances.

In this case, the Court observed that the municipal records showed separate tax payments for each house, and that the municipality issued receipts in the names of the owners recorded in its registers. However, those receipts did not disclose the identity of the persons who actually made the payments acknowledged in the receipts. The Court accepted the testimony of Singari Seshanna, who was identified as D.W. I, that Nagappa continued to remain in charge of the management of the property after the alleged partition. It was also noted that the plaintiffs produced the testimony of two witnesses, identified as P.W. 6 and P.W. 7, who stated that they had assisted in preparing the partition deed. The Court acknowledged that the deed of partition had indeed been executed and subsequently registered, but it emphasized that mere execution and registration did not conclusively determine whether the partition was intended to be effective. The evidence, according to the Court, demonstrated that there was no legitimate reason for effecting a partition in the circumstances presented. The counsel for the plaintiffs essentially conceded this point and argued that Nagappa’s primary motive was to evade his creditors and to preserve the property for his sons, which prompted the creation of the partition deed. Nevertheless, the counsel contended that Nagappa’s purpose in effecting the partition was to place the property beyond the reach of his creditors and that the authenticity of the partition should not be dismissed merely because of Nagappa’s improper motive. The Court, however, found that Nagappa’s continued management of the property after the partition and his active participation in litigating related suits clearly indicated that the partition deed was a nominal or token transaction that was never intended to be implemented or given effect. Consequently, the Court held that if the partition were deemed a sham, the plaintiffs’ suit for setting aside the summary order issued in the execution proceedings, as well as the application for setting aside the attachment, would fail. Accordingly, the Court concluded that Appeal No. 642 of 1961 must also fail, and it ordered that both appeals be dismissed with costs.