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of <h1>Stock exchange membership card and nomination-right proceeds as attachable property or 'money due' under s281B/s226(3) rejected</h1> The dominant issue was whether a stock exchange membership card and the consideration arising from exercise of nomination rights could be treated as the ... Provisional attachment - garnishee notice issued u/s 226(3) of the Income-tax Act, 1961,- issued to the executive director, Stock Exchange by the respondent - Recovery of Tax - stock exchange card and assets of a deceased member - heirs and legal representatives - right of nomination of a deceased or defaulter member - HELD THAT:- The right of membership is merely a personal privilege granted to a member, it is non-transferable and incapable of alienation by the member or his legal representatives and heirs except to the limited extent as provided in the rules on fulfilment of conditions provided therein. The nomination wherever provided for is also not automatic. It is hedged by rules. On the right of nomination vesting in the stock exchange under the rules, that right belongs to the stock exchange absolutely. The consideration received by the stock exchange on exercise of the right of nomination vesting in it, is to be applied in the manner provided in rule 16. The heirs and legal representatives of Rajesh Shah, as already noticed, had informed the stock exchange that they were unable to meet the liabilities of the deceased and the appropriate decision in that behalf may be taken by the stock exchange. It is evident that they did not exercise the right of nomination under rule 11 read with Appendix-C. They did not pay or satisfy the dues and claims as required under rule 15. Under these circumstances the Governing Board exercised the right of nomination in respect of membership of Rajesh Shah which had vested in the stock exchange. In the present case, rule 16 was properly applied by the stock exchange. The membership right in question was not the property of the assessee and, therefore, it could not be attached under section 281B of the Income-tax Act. No amount on account of Rajesh Shah was due from or held by the stock exchange and, therefore, section 226(3) could not be invoked. We are unable to sustain the judgment under appeal holding that in substance the right of membership or the membership card was a right of property which could be attached under section 281B of the Income-tax Act. Thus, we allow the appeal, set aside the impugned judgment and quash the order of provisional attachment dated February 14, 1994, and garnishee notice dated June 14, 1995, issued under section 226(3) of the Income-tax Act, 1961. Issues:1. Provisional attachment order under section 281B of the Income-tax Act, 1961.2. Rights of deceased member's legal representatives in the stock exchange card.3. Interpretation of stock exchange rules regarding membership rights and nominations.4. Application of rule 16 in the case of membership rights vested in the stock exchange.5. Validity of the judgment regarding attachment of membership rights under section 281B.Analysis:1. The case involved a provisional attachment order issued under section 281B of the Income-tax Act, 1961, in relation to the stock exchange card and assets of a deceased member. The stock exchange faced a challenge against this order in the High Court, which was dismissed ([1998] 231 ITR 906). The Supreme Court examined the legality of the provisional attachment and garnishee notice issued to the stock exchange.2. The key issue revolved around the rights of the deceased member's legal representatives in the stock exchange card. The Court analyzed whether the membership rights were a property belonging to the deceased member or a personal privilege granted by the exchange. The High Court held that there was a property element in the membership right, allowing for attachment. However, the Supreme Court delved into the stock exchange rules to determine the nature of membership rights.3. The interpretation of stock exchange rules governing membership rights and nominations was crucial in this case. The Court scrutinized various rules, including rule 9, 10, 11, 15, and 16, to establish that the right of membership is a personal privilege, non-transferable, and subject to specific conditions for nomination. The Court emphasized that the right of nomination vests in the stock exchange under the rules.4. Rule 16 was applied by the stock exchange concerning the membership rights vested in it. The Court highlighted the priority of payments outlined in the rule, emphasizing that the membership right did not constitute the property of the deceased member. The Court's analysis indicated that the stock exchange appropriately exercised its rights under the rules.5. The Supreme Court ultimately concluded that the membership right in question was not the property of the deceased member and, therefore, could not be attached under section 281B of the Income-tax Act. The Court overturned the judgment under appeal, setting aside the provisional attachment order and garnishee notice. The appeal was allowed, and the parties were directed to bear their own costs, bringing clarity to the legal status of membership rights in the stock exchange.
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