1971 (4) TMI 109 - HC - Indian Laws

Suit for trust over shares falls u/s 7(iv)(c); share value not basis for court-fee valuation

HC held that the plaintiffs' suit for declaration that defendant held certain shares and dividends in trust, with a consequential injunction against ... - 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether the relief claimed in clause (a) of the plaint constituted only a declaratory relief, and whether clause (b) contained the consequential relief for purposes of court-fee under Section 7(iv)(c) of the Court-fees Act. 1.2 Whether, in respect of reliefs in clauses (a) and (b), the second proviso to Section 7(iv)(c) of the Court-fees Act (as amended by the Punjab Court-fees (Amendment) Act, 1953 and extended to Delhi) applied so as to require valuation not less than the value of the shares in question. 1.3 How the expression 'property' in the second proviso to Section 7(iv)(c) is to be construed, and whether it extends to movable property such as shares or is confined to property whose value is computable in the manner provided by Section 7(v). 1.4 Whether the construction adopted would render the proviso unconstitutional as being violative of Article 15 of the Constitution on the ground of discriminatory valuation of suits for purposes of court-fees. 2. ISSUE-WISE DETAILED ANALYSIS 2.1 Nature of the reliefs in clauses (a) and (b) Interpretation and reasoning 2.1.1 The Court examined clause (a) of the prayer, by which the plaintiffs sought a declaration that the defendant held the shares, the property rights annexed to the shares, and the dividends accruing therefrom in trust and for the benefit of the plaintiffs. 2.1.2 It was held that the entire clause (a) constituted a single declaratory relief, and that the statement that the dividends accruing in respect of the shares were held in trust for the plaintiffs was part of the declaration itself and not a 'consequential relief'. 2.1.3 Clause (b), asking for a permanent injunction restraining the defendant from exercising property rights in respect of the shares, including voting rights and recovery of dividends, was characterised as the consequential relief flowing from the declaration in clause (a). Conclusions 2.1.4 For the purposes of Section 7(iv)(c), clause (a) embodies the declaratory relief, and clause (b) embodies the consequential relief. The suit, as to these clauses, fell under Section 7(iv)(c) as a suit for a declaratory decree with consequential relief. 2.2 Applicability of the second proviso to Section 7(iv)(c) to reliefs in clauses (a) and (b) Legal framework 2.2.1 Section 7(iv)(c) of the Court-fees Act provides for valuation of suits to obtain declaratory decrees or orders where consequential relief is prayed, according to the amount at which the relief is valued in the plaint. 2.2.2 The second proviso, as inserted by the Punjab amendment and extended to Delhi, provides that in suits under sub-clause (c) 'in cases where the relief sought is with reference to any property such valuation shall not be less than the value of the property calculated in the manner provided for Clause (v) of this section'. 2.2.3 Section 7(v) prescribes the manner of valuation in suits for possession of land, houses and gardens, by reference to revenue, net profits, or market value, as the case may be. Interpretation and reasoning 2.2.4 The Court accepted that, absent the second proviso, the valuation of Rs. 200 placed by the plaintiffs on the reliefs in clauses (a) and (b) under Section 7(iv)(c) would be unobjectionable. 2.2.5 The crucial inquiry was whether the second proviso applied to a suit where the 'property' in question consisted of shares, i.e., movable property, in respect of which the valuation could not be made in the manner specified in Section 7(v), which is confined to land, houses and gardens. 2.2.6 The Court observed that the proviso is in the nature of an exception to the main provision and must be strictly construed and applied only where its terms can be fully worked out. The manner of valuation mandated by Section 7(v) could not be sensibly applied to shares or other property not falling within 'land, houses and gardens'. 2.2.7 It was held that a statutory provision or proviso must be applied as a whole; if the method of valuation prescribed by express words in the proviso cannot be applied, the proviso itself cannot be invoked in part, as that would amount to judicial legislation. Conclusions 2.2.8 Since the property involved in the reliefs under clauses (a) and (b) consisted of shares, and its value could not be calculated in the manner provided by Section 7(v), the second proviso to Section 7(iv)(c) was inapplicable. 2.2.9 The plaintiffs were therefore entitled to value the reliefs in clauses (a) and (b) at Rs. 200 under the main part of Section 7(iv)(c), and court-fee was payable on that valuation; the trial court's direction to value these reliefs by reference to the value of the shares was erroneous. 2.3 Construction of the term 'property' in the second proviso to Section 7(iv)(c) Interpretation and reasoning 2.3.1 The contention was that the use of the word 'property' (instead of 'immovable property' as in a corresponding Madras amendment) indicated an intention that the proviso apply to all kinds of property, movable and immovable, including shares, and that the valuation must, in every such case, not be less than the value of the property. 2.3.2 The Court held that 'intention' inferred from the use of different words in another State's amendment was not a safe or conclusive guide. Even assuming that the Punjab draftsman had the Madras model before him, the difference in language could equally be due to omission. 2.3.3 The Court stated that the correct approach was to construe the proviso in a way that gives effect to all its words, particularly the expression 'calculated in the manner provided for Clause (v) of this section'. 2.3.4 It was reasoned that the clear legislative intention was that the proviso should apply only where valuation can in fact be calculated in accordance with Section 7(v). Accordingly, 'property' in the proviso must be read as referring only to such property whose value is computable in that manner. 2.3.5 It was emphasised that this was a matter of construction, not of adding words to the statute. Reading 'property' as limited to that capable of valuation under Section 7(v) avoided rendering the reference to Clause (v) meaningless and avoided difficulties in application. 2.3.6 A prior decision construing 'property' in the proviso as referring to leasehold rights in respect of immovable property was distinguished on the ground that in that case the applicability of Section 7(v) was assumed and not in issue; the Court there was deciding only whether the relevant 'property' was the leasehold interest or the underlying factory. Conclusions 2.3.7 The term 'property' in the second proviso to Section 7(iv)(c) is confined to property whose value can be calculated in the manner laid down in Section 7(v), namely, land, houses and gardens and cognate interests; it does not extend to shares and other property not so computable. 2.3.8 On this construction, the proviso does not apply to suits under Section 7(iv)(c) where the relief is with reference to shares, and such suits remain governed by the main provision of Section 7(iv)(c), permitting plaintiff's valuation. 2.4 Alleged violation of Article 15 of the Constitution Interpretation and reasoning 2.4.1 It was contended that, if the proviso is construed to apply only to suits concerning land, houses and gardens (or property computable under Section 7(v)), there would result an unconstitutional discrimination, as suits with reference to different kinds of property would attract different bases of valuation and court-fee without intelligible differentia. 2.4.2 The Court rejected this contention, holding that the Court-fees Act is a taxing statute and it is within the legislative competence to prescribe different rates or bases of court-fee for different classes of suits. 2.4.3 The Court held that, under the adopted construction, suits under Section 7(iv)(c) relating to land, houses and gardens (or property falling under Section 7(v)) constitute one class, and suits under Section 7(iv)(c) relating to other kinds of property constitute another. This classification was held to be an intelligible differentia. 2.4.4 The Court also referred to the principle that the quantum and incidence of court-fee is a matter of legislative policy not normally open to judicial interference, and that the Legislature is competent to fix differing levies for various kinds of matters taken to a court of law. Conclusions 2.4.5 The construction limiting the operation of the proviso to property whose value is computable under Section 7(v) does not offend Article 15 of the Constitution. Differential valuation for different classes of property in suits under Section 7(iv)(c) is constitutionally permissible. 2.5 Final disposition on the court-fee issue Conclusions 2.5.1 The order of the trial court directing the plaintiffs to amend the plaint, affix the value of the shares, and pay court-fee on such value in respect of the reliefs in clauses (a) and (b) was set aside. 2.5.2 The direction of the trial court regarding payment of court-fee on the relief of mandatory injunction in clause (e) and on the injunction concerning future dividends in clause (C1) was left undisturbed. 2.5.3 The revision was partly allowed and the matter remanded to the trial court for further proceedings in accordance with this interpretation of the court-fee provisions.