TMI Blog2006 (10) TMI 229X X X X Extracts X X X X X X X X Extracts X X X X ..... mains to be paid even after adjustment, the appellants shall pay such amount within a period of two months from the date of the order of the High Court. That no deduction shall be made from the value of the assets of the anticipated capital gains tax liability on the hypothetical sale under the settlement. In case a demand of capital gains tax is made by the tax authority in future against respondent-company, the aforesaid Company shall be entitled to challenge the imposition of such tax subject to appellant No. 2 providing sufficient funds to the respondent-company for this purpose. In any event, the capital gains tax, if found payable, shall be the liability of the appellants to be discharged by them. They shall furnish an undertaking before the High Court accepting such liability, and shall execute a document creating a charge on the assets allocated to them under the settlement to discharge capital gains tax liability, if found payable. - CIVIL APPEAL NOS. 1682 AND 1705 OF 1999 - - - Dated:- 13-10-2006 - B.P. SINGH AND ALTAMAS KABIR, JJ. S. Ganesh, U.A. Rana, Ms. Pinky Anand and Arvind Kumar for the Appellant. Dushyant Dave, A.T. Patra, Nipun Malhotra, Sanji ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein filed a petition for winding up of Respondent No. 1-Company alleging that the agency having been terminated, the main source of income of the Company had vanished and, therefore, it was just and equitable to wind up the Company. On the other hand, the Respondents filed a suit for declaration and for injunction restraining the appellants from carrying on the agency business by holding themselves out as the agent of Thyssen. 5. During the pendency of the proceedings the parties arrived at a compromise whereby appellant No. 2 Narendra Nath Nanda and his group agreed to transfer their equity shares in Kidarsons Industries (P) Ltd. Respondent No. 1-Company, constituting 30.14 per cent of the share capital of Respondent No. 1-Company, in favour of the respondents. The price of the shares was to be paid in specie by transferring to the appellants 30.14 per cent of the assets of the Company. The agency of Thyssen was to be retained by Narendra Nath Nanda, appellant No. 2 and his group. The relevant terms of the settlement are the following: "2. That the price of the aforesaid 5654 (later corrected as 5564) equity shares of Kidarsons Industries (P.) Ltd., will be paid to Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chartered Accountants gave their report and worked out the net assets of Respondent No. 1-Company at Rs. 1,68,95,570. On that basis the value of each share was worked out as Rs. 916. From this the valuers deducted 20 per cent on account of provision restricting transfer of the shares of Respondent No. 1-Company. By this process, the value of each share was worked out to be Rs. 733. 8. Appellant No. 2 filed his objections to the report of the chartered accountants which was dismissed by a learned Judge of the High Court by his Judgment and order dated 5-2-1993. Objections were raised such as those relating to valuation of goodwill, valuation of tenancy rights, valuation of Udyog Nagar plot, deduction from the value of the assets, provision for capital gains tax liability which may be payable on the hypothetical transfer of property, the deductions made from the value of the shares on account of restriction on transfer of the shares, and the question of allotment of a portion of the Golf Links property in favour of appellant No. 2 Shri Narendra Nath Nanda in terms of Clause 14 of the settlement between the parties. In the instant appeal, we are only concerned with two issues name ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age that reports were made to the police. The High Court also observed that being leasehold property, sub-division of the property was not permitted. It further observed that under the settlement, the appellants were entitled to 30.14 per cent of the assets of the Company and only a sum not exceeding 5 lakhs could have been paid by the Company in cash, if the same was found necessary, and vice versa . Having regard to these circumstances the learned Judges held that the interpretation placed on Clause 14 by the learned Single Judge was correct and the said property could not in any manner be given to Shri Narendra Nath Nanda. 10. We may observe that before us counsel appearing on behalf of Shri Narendra Nath Nanda gave up his claim of allotment of the entire Golf Links property to him and submitted that he will be satisfied if the portion in his occupation on the date of settlement is allotted to him. He has very strongly asserted that when a settlement had been reached which is sought to be given effect, the Court cannot re-write the settlement. There is no ambiguity in Clause 14 of the settlement, and there is nothing to indicate that it is unworkable, however inconvenient i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of compromises in the nature of family arrangements. Family arrangements are governed by a special equity peculiar to themselves, and will be enforced if honestly made, although they have not been meant as a compromise, but have proceeded from an error of all parties, originating in mistake or ignorance of fact as to what their rights actually are, or of the points on which their rights actually depend." (p. 125) 12. Reference was also made to the observations regarding the essentials of the family settlement and the principles governing the existence of the same in Halsbury s Laws of England, Volume 17, Third Edition at pp. 215-216 which are as follows : "A family arrangement is an agreement between members of the same family, intended to be generally and reasonably for the benefit of the family either by compromising doubtful or disputed rights or by preserving the family property or the peace and security of the family by avoiding litigation or by saving its honour. The agreement may be implied from a long course of dealing, but it is more usual to embody or to effectuate the agreement in a deed to which the term family arrangement is applied. Family arrangemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim or interest even a possible claim in the property which is acknowledged by the parties to the settlement. Even if one of the parties to the settlement has no title but under the arrangement the other party relinquishes all its claims or titles in favour of such a person and acknowledges him to be the sole owner, then the antecedent title must be assumed and the family arrangement will be upheld, and the Courts will find no difficulty in giving assent to the same; (6)Even if bona fide disputes, present or possible, which may not involve legal claims are settled by a bona fide family arrangement which is fair and equitable the family arrangement is final and binding on the parties to the settlement." (p. 126) 14. The aforesaid judgment of this Court refers to many other decisions to which we need not advert in this case but some of those decisions do take the view that a compromise or family arrangement is based on the assumption that there is an antecedent title of some sort in the parties and the agreement acknowledges and defines what that title is, each party relinquishing all claims to property other than that falling to his share and recognising the right of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 conse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 per cent 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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