TMI Blog1975 (9) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... the estate of his deceased father. The Assistant Controller of Estate Duty, after due and proper enquiry, passed an order of assessment on January 27, 1973, assessing the total value of the estate of late Venkatarami Reddy at Rs. 7,77,569 which included the value of agricultural lands worth Rs. 4,17,695 and other immovable properties valued at Rs. 1,03,250 and levied an estate duty of Rs. 1,54,971.18 After adding interest payable under section 70(2) of the Act read with rule 42 of the Estate Duty Rules, 1953 (hereinafter called " the rules "), a total demand of Rs. 1,53,362.25 has been raised by the Assistant Controller of Estate Duty. After deducting an amount of Rs. 67,298.50 paid towards provisional estate duty, the balance demand outstanding amounted to Rs. 96,067.25 On February 17, 1973, the petitioner submitted an application under section 52 of the Act to the Secretary, Ministry of Finance, Government of India, New Delhi, offering Ac. 76-44 cents of agricultural lands situate in different villages in the districts of Kurnool and Mahboobnagar and whose value has been adopted in the estate duty assessment at Rs. 99,132 for acceptance towards the balance of estate duty due and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of the Andhra Pradesh Land Reforms (Ceiling on Agricultural Holdings) Act, 1973, whereunder the State of Andhra Pradesh is declared to be the owner of all agricultural lands in excess of the ceiling limit and the prohibition imposed on alienations of agricultural lands by landholders like the petitioner herein, and the absence of any Governmental establishment or machinery to maintain and manage agricultural lands in this State. The petitioner's counsel replied that there is nothing like unbridled absolute discretion not reviewable by courts in a socialistic democratic country like ours. Upon the respective contentions advanced on behalf of the contending parties, the following two questions arise for decision. " (1) Whether, the provisions of section 52 of the Act are mandatory and no discretion to reject the offer made by an accountable person is left to the Central Government as contended by the petitioner, or the Central Government is clothed or invested with absolute power and discretion either to accept or reject the offer as urged by the respondents ? (2) Whether or not, on the facts and in the circumstances of this case, the Central Board of Direct Taxes i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exercise of the power vested thereunder by the Central Government either to accept or reject the offer so made by the concerned accountable person. It is pertinent to notice that the accountable person is obliged to offer under this provision only such " property passing on the death of the deceased " but not any other property possessed or owned by him. The offer also must emanate from the accountable person who is due and liable to pay estate duty to the Government and such offer must be towards the arrears of estate duty. The Central Government is not invested with suo motu power to accept any property in satisfaction of the whole or any part of the estate duty due and payable by an accountable person but it has to step in and move in the matter only on the accountable person initiating the proposal in writing offering any property passing on the death of the deceased towards the estate duty due and payable by him. On the filing of an application by the accountable person, the Central Government " may ... accept in satisfaction of the whole or any part of such duty ", the property so offered, provided the price of the same has been agreed upon between both the sides. The sovere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t or reject the offer so made by the accountable person. In order to appreciate the scope of the respective contentions of the parties, we may notice a few passages in the text books of learned authors, which elucidate the expressions " may ", go must " and " shall ". Maxwell on the Interpretation of Statutes says: In ordinary usage, ' may ' is permissive and ' must ' is imperative, and, in accordance with such usage, the word ' may ' in a statute will not generally be held to be mandatory. In some cases, however it has been held that expressions such as ' may ' or ' shall have power ' or ' shall be lawful have--to say the least--a compulsory force, and so their meaning has been modified by judicial exposition." Crawford on Statutory Construction and Interpretation of Law states : " Mandatory and directory are permissive words. Ordinarily, the words ' shall ' and ' must ' are mandatory, and the word ' may ' is directory, although they are often used interchangeably in legislation. This use without regard to their literal meaning generally makes it necessary for the courts to resort to construction in order to discover the real intention of the legislature. Nevertheless, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssive, depends upon the effect the suggested construction has upon public and private rights. If the requirements of the statute must be regarded as mandatory in order to promote justice, it should be so construed, and if a mandatory construction operates mischievously, then the statute should be given a permissible, construction, for in construing a statute it is not reasonable to presume that the legislature intended to violate a settled principle of natural justice or to destroy a vested right or to enact a mischievous law. " In the application of the principles laid down by the learned authors, we have no hesitation to hold that the word " may " used in sub-section (1) of section 52 cannot be interpreted or construed as "shall and must " and, consequently, the power vested in the Central Government thereunder is only directory but not mandatory. It cannot be said that Parliament has used the word " may " without adequate reason or sufficient justification. The sovereign Parliament, in its wisdom, has advisedly used the expression " may " thereby empowering the Central Government in appropriate cases to exercise its discretion and accept the offer of property by an accountabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... null and void acts done in neglect of this duty would work serious general inconvenience, or injustice to persons who have no control over those entrusted with the duty, and at the same time would not promote the main object of the legislature, it has been the practice to hold such provisions to be directory only, the neglect of them, though punishable, not affecting the validity of the acts done." It is profitable to refer to a very salutary test laid down by the learned judge, Ray C.J., in In re Presidential Election, 1974 AIR 1974 SC 1682 at page 1686 for the purpose of determining the question whether a particular provision is mandatory or directory : " In determining the question whether a provision is mandatory or directory, the subject-matter, the importance of the provision, the relation of that provision to the general object intended to be secured by the Act will decide whether the provision is directory or mandatory. It is the duty of the courts to get at the real intention of the legislature by carefully attending to the whole scope of the provision to be construed. ' The key to the opening of every law is the reason and spirit of the law, it is the animus impone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... priate cases for the transfer at the instance of the accountable person, of any property passing on the death of the deceased to the Central Government towards the estate duty due and payable, as one of the modes of recovery which was but for this provision not permissible. To put it differently, the scope of section 52 which was limited to Government securities alone has now been enlarged to all kinds of property passing on the death of the deceased. The modes of collection provided in rule 18 of the rules as well as those indicated in sections 70, 71 and 73 when read with the relevant provisions of the Indian Income-tax Act and the Revenue Recovery Act applicable for the recovery of estate duty and penalty due and payable, do not include the one indicated in section 52(1). It is well-settled that the modes of recovery or collection of public revenue provided for by the legislature in a taxing statute are only supplementary and complementary to each other but not in conflict with or contrary to each other. The provisions pertaining to the modes of recovery of public revenue under a taxing statute must be interpreted and construed invariably in a manner consistent with the object a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... And it must be exercised within the limit, to which an honest man competent to the discharge of his office ought to confine himself. " The discretion conferred by a statute or a statutory rule must invariably be exercised by the authority who is called upon to exercise it. The use of the word " may " in section 52(1) of the Act would not only not absolve the Central Government of, but, on the other hand, charges it with, a duty in every case where an offer has been made to apply its mind and examine the merits and thereby exercise the statutory discretion vested in it reasonably and fairly in one way or the other notwithstanding the fact that this provision does not indicate the manner and method of the exercise of the discretion vested in the Central Government. To put it differently, the decision of the authority on whom the discretionary power is conferred must be based upon a weighing of considerations and factors material and pertinent to the object of administration. In Roberts v. Hopwood [1925] AC 578 at page 613 (HL), Lord Wrenbury ruled: " A discretion does not empower a man to do what he likes merely because he is minded to do so ...... he must in the exercise of h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment to reject the offer made under this provision for valid and justifiable reasons. This refusal also cannot be made arbitrarily or according to the whim and fancy of the Central Government. The Central Government would be within its limits if it does not accept the offer of an accountable person under section 52 where it honestly and bona fide thinks that by resorting to another mode of recovery permissible to the State the arrears of estate duty could be easily recovered or realised. It cannot be said that this provision is enacted only to benefit the accountable persons and to alleviate their hardships only and the Central Government must invariably accept the offer of every accountable person irrespective of the consequences or the circumstances of each case. We do not find any basis or warrant for such an assumption from the very provisions of section 52 when read with the scheme of the Act and the setting in which that section has been placed. Reverting to the plea of absolute and unfettered discretion being conferred on the Central Government advanced by Sri P. Rama Rao, the standing counsel for the income-tax department, we must express our inability to accept the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, some...... official, some bureaucrat ...... Absolute discretion is a ruthless master. It is more destructive of freedom than any of man's other inventions'. United States v. Wunderlich [1951] 342 US 98....... That is why the courts have devised various methods of judicial control so that power in the hands of an individual officer or authority is not misused or abused or exercised arbitrarily or without any justifiable grounds." The aforesaid pronouncements are authorities for the proposition that there is nothing like absolute, untrammelled and unfettered discretion being conferred on an authority functioning under a statute or a statutory rule, which is immune from judicial reviewability, and statutory discretion invariably and necessarily implies good faith in the discharge of public duties and it must be exercised properly and objectively but not capriciously, arbitrarily or maliciously. We are, therefore, unable to agree with Sri P. A. Chowdary when he contends that section 52(1) is mandatory and imperative and it does not leave any discretion with the Central Government to refuse the offer made by an accountable person. Nor are we prepared to accede to the extreme stand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... word " may " used in section 52(1) must be read as " shall " and " the Government is bound to accept the property in satisfaction of estate duty provided there is an agreement between the Government and the assessee with regard to its price rejecting the contention advanced on behalf of the department that section 52 only enables the Central Government to accept property in satisfaction of the demand for estate duty and it does not cast any statutory duty or obligation to invariably accept the property as and when offered. The learned judges opined that this provision was introduced to alleviate the hardship caused or created to accountable persons who are unable to dispose of property or may not obtain adequate price and is intended to benefit them and such benefit cannot be taken away by the Government by arbitrarily refusing to accept offers of property. Another reason which found favour with the learned judges is that section 52 occurring in Chapter VII, which deals with collection, of estate duty provides an additional mode of payment of estate duty besides those enumerated in rule 18. With great respect to the learned judges we are not persuaded to agree with the contrary vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as stated by Mr. Chowdary, no reasons have been assigned in support of their opinion. For all the reasons stated, our answer to question No. 1 is that the provisions of section 52(1) are not mandatory but only directory, that the Central Government is not clothed or invested with absolute power and discretion either to accept or reject the offer of property by an accountable person which is immune from judicial reviewability, but the discretion vested in the Central Government either to accept or reject the offer of property by an accountable person is only a statutory discretion and it has to exercise the same objectively, properly, honestly, fairly and in accord with the rules of natural justice and decide every application on its merits and on a fair and proper appraisal of the facts and circumstances. We shall now take up question No. 2. Sri P. A. Chowdary's contention that the impugned order is liable to be quashed is based on two grounds, i.e., (1) that it has not been passed by the Central Government as required by section 52(1) of the Act ; and (2) that it is laconic and does not contain any reasons for the refusal to accept the petitioner's offer of property. True, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prohibited alienation of agricultural lands in excess of prescribed limits with effect from May 2, 1972, and later, the Andhra Pradesh Land Reforms (Ceiling on Agricultural Holdings) Act, 1973, was also passed and the case of the accountable person is hit by, and his excess holdings vest in the State under the provisions of the latter Act, and, therefore, the applicant has no right to insist upon the acceptance of his offer, good, bad or indifferent. On a perusal of the origi- nal file, we cannot but hold that the agricultural lands sought to be offered by the petitioner might in all probability or would have vested in the State Government by virtue of the provisions of the Andhra Pradesh Land Reforms (Ceiling on Agricultural Holdings) Act, 1973, and the petitioner is also prohibited from either offering or transferring those lands to the Central Government. The Central Government did not reject the petitioner's application without considering it on merits. Objective and dispassionate enquiry has been made -by the Central Government in this regard. In fact, a report has been called for from the Controller of Estate Duty, Hyderabad. In the remarks submitted by the Controller of Est ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determine the question and if those reasons are proper and valid, a quasi-judicial order, though not speaking but only laconic, should not be struck down in a writ proceeding merely because formal reasons are not recorded in the very order itself. This view of ours gains support from the decision of the Calcutta High Court in Hari Prasad Singh v. Commissioner of Income-tax AIR 1972 Cal 27 at page 34, wherein it fell for consideration whether an order of removal of an Income-tax Officer, which did not indicate the reasons, was or was not liable to be quashed in a writ proceeding. The court, after stating that the quasi-judicial authorities should indicate in the orders the reasons for making the same, observed thus: "... if the reasons can be found out either from the order itself or from other documents it would not be proper to strike down the order merely because the formal reasons had not been recorded in the order itself." We may add that a Division Bench of this court, in Writ Petition No. 2041 71, dated 14-11-1972 [Smt. R. D. Chand v. Central Government [1977] 108 ITR 717 (AP)], refused to quash a similar order passed under section 52 on the ground that reasons were giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ed 2d 170, 182 is cited for the proposition that the courts or counsel cannot substitute their discretion for that of an administrative agency and such attitude would be incompatible with the orderly functioning of the judicial review and the courts must not enter into the domain which the " Congress has set aside exclusively for the administrative agency ". In Burlington Truck Lines v. United States US SCR 9 L Ed 2d 207, 215 the court had to consider the scope of the power of the concerned authority while granting to a motor carrier a certificate of public convenience and necessity. At page 215, it was observed: " Expert discretion is the life-blood of the administrative process, but unless we make the requirements for administrative action strict and demanding, expertise, the strength of modern government, can become a monster which rules with no practical limits on its discretion .......... The commission must exercise its discretion under section 207(a) within the bounds expressed by the standard of ' public convenience and necessity '. And for the courts to determine-whether the agency has done so, it must ' disclose the basis of its order ' and ' give clear indication that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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