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1. The petitioner-Stock Exchange challenges the order of provisional attachment of its deceased memberis card, his security deposit and margin money, issued on February 14, 1994, under section 281B of the Income-tax, Act, 1961, as extended from time to time, and garnishee notice dated June 14, 1995, issued on the Stock Exchange under section 226(3) of the said Act and further action taken thereunder.

2. The impugned order under section 281B of the said Act dated February 15, 1994, a copy of which is at annexure "A" to the petition was an order passed against the assessee, Smt. Dipti R. Shah, as a legal heir of Rajesh Anubhai Shah, on the ground that the assessment proceedings for the assessment years 1989-90 to 1993-94 were pending in the case of the assessee and it was reasonably believed that on completion of the proceedings substantial demand of tax, interest and penalty would arise and since the assessee had not made any provision for the payment of such amounts, it was considered necessary to provisionally attach the property of the assessee described in schedule I to the said order. This property which was provisionally attached consisted of (1) Ahmedabad Stock Exchange Card bearing No. 02-0419-6 in the name of Shri Rajesh Anubhai Shah, (2) Margin money kept with the Stock Exchange, and (3) security deposits kept with the Stock Exchange. The name of Smt. Dipti R. Shah, widow of Shri Rajesh A. Shah, was shown as the assessee, presumably because of the provision of section 159(3), which provides that the legal representative of the deceased shall, for the purposes of the said Act, be deemed to be an assessee.

5. It appears from the minutes of the meeting said to have been held on February 12, 1994, and the contents of paragraph 4 of the petition that the petitioneris case was that the said member Rajesh A. Shah, after his death, was declared as a "deemed defaulter" and because he was a defaulter. His right of membership vested in the Exchange and that is how the Exchange offered to the eligible persons his "disposable membership right" by an auction as per the public notice dated February 16, 1994, which was placed on record during the arguments. There was a slight improvement over the petitioner's case reflected in the petition, during the arguments when it was developed by also contending that the heirs of the deceased had shown their inability to discharge the obligations as per the rules and regulations, before the Governing Board passed resolution dated February 12, 1994. It appears that even while the provisional attachment was operative by virtue of the impugned order issued under section 281B on February 15, 1994, the Governing Board proceeded to dispose of the membership right of the said deceased member by making a resolution on December 5, 1994, after holding the open bid on October 6, 1994, in favour of the UTI Securities Exchange Limited, which was informed about its being admitted as a corporate member of the Stock Exchange on February 23, 1995, as stated in the communication dated January 23, 1996, addressed by the UTI Securities Exchange Limited to the office of the Assistant Commissioner of Income-tax in response to a letter dated September 20, 1995, in which the UTI Securities Exchange Limited was informed that the rights of Rajesh A. Shah were provisionally attached on February 15, 1994, under section 281B and that the Ahmedabad Stock Exchange had no right to transfer those membership rights since it had not obtained any prior approval for such transfer nor did it make any claim against the attachment order under section 281B of the said rules. This is reflected from the copies of the correspondence placed on record during the arguments and referred to by both the sides. The provisional attachment was extended by order dated August 11, 1994, up to February 14, 1995, and by order dated February 10, 1995, up to August 14, 1995. The notice under section 226(3) was issued by the Department to the petitioner on June 14, 1995, and the petitioner sent a reply dated June 20, 1995, to this garnishee notice.

10. Learned counsel appearing for the Revenue, on the other hand, contended that the right to membership of the Stock Exchange was not a mere status, but it had value in terms of money and the membership card could be sold. It was contended that the fact that even if the nomination made by a member is rejected the member had a right to make a fresh nomination under rule 12, clearly showed that the right to nominate granted by rule 11 was a property right. It was further contended that when the member dies or is in default, the right of nomination goes to the Governing Board as a trustee in order to satisfy the outstanding dues of the creditors and the tax dues vis-a-vis the dues of the unsecured creditors will have priority and will have to be satisfied before the dues of ordinary creditors are satisfied. It was submitted that the property which was attached, namely, the membership right, could not have been disposed of by the Exchange during attachment and any transfer purported to have been disposed of by the Exchange during attachment and any transfer purported to have been made by such auction, of the membership right of the deceased, was wholly ineffective and cannot defeat the power of the Revenue to collect the taxes from the dues realised by the petitioner from the estate of the deceased. It was submitted that the impugned notice under section 226(3) and the letter dated October 5, 1995, by which the petitioner-Stock Exchange was called upon the explain its conduct of disposing of an attached property and to pay the dues and to show cause as to why the petitioner should not be treated as an assessee in default, cannot be said to be without jurisdiction. It was submitted that the communication dated October 5, 1995, was not a final order and in paragraph 11 of that communication, the petitioner was required to explain as to why it should not be treated as an assessee in default in respect of the amounts specified in the notice for the reasons mentioned therein. The petitioner has remedies available to it under the Act even in the event of any adverse order being passed and has approached this court at a premature stage. It was also contended that the contentions that the petitioner may raise in these proceedings under section 226(3) will have to be finally adjudicated upon by the concerned authority. As regards the provisional attachment order issued under section 281B of the said Act, it was submitted that the Department could have proceeded to recover the amount from the attached property and if any amount is realised by a wrongful sale by the Stock Exchange of the property while it was under attachment, the amount so realised would continue to be under provisional attachment so long as the order under section 281B remained operative. It is submitted that if during the currency of the order of provisional attachment the petitioner has disposed of the attached property, the statutory consequence would follow. It was submitted that the impugned provisional attachment order was issued in lawful exercise of the powers of the Assistant Commissioner of Income-tax in respect of the property which was attachable.

27. The case of the petitioner-Stock Exchange is that the said member Rajesh A. Shah died on February 7, 1994, and "since he failed to discharge his obligations" (see paragraph 4 of the petition), the Governing Board of the Stock Exchange declared him a "deemed defaulter" on February 12, 1994, as during his lifetime he had defaulted in carrying out his obligations. A copy of the minutes of the board meeting held on February 12, 1994, was referred to by the petitioner's counsel during his arguments and it was pointed out that the deceased was treated as a "deemed defaulter" and his membership rights were resolved to be disposed of by inviting offers for which the minimum floor price of Rs. 25 lakhs was fixed. Pursuant to this resolution, the petitioner issued a public notice on February 16, 1994, in Sandesh inviting the claimants to put up their claims before the defaulter committee. It was submitted that since the member was declared as a "deemed defaulter" on February 12, 1994, under rules 9 and 53, his right of nomination and membership vested in the Exchange. Rules 53 to 63A deal with default and readmission to membership. Under bye-law 316 of the Stock Exchange, a member is to be declared a defaulter by the Board or the President, if he fails to fulfil his obligations as mentioned in that bye-law. Under bye-law 325, the defaulters' committee is required to make a strict enquiry into the dealings of the defaulter and report to the Board. A defaulter can apply for readmission under rule 58 and can be readmitted under rule 62 on conditions mentioned therein. A defaulter shall not be required to obtain a nomination before readmission unless the Governing Board has already exercised the right of nomination, as provided by rule 55. Thus, the scheme of the rules and regulations of the Stock Exchange indicates that only a living member can be declared as a defaulter and there is no provision for declaring a dead member as a deemed defaulter. When a person dies before being declared a defaulter, his heirs of Appendix "C" step in for the limited right of nomination provided by rule 11(b). As per regulation 8.38, if a member dies on or before the pay-in-day and after the clearing house has received the clearing forms, the procedure to be followed in clearing and settling the account of such member shall be the procedure prescribed for clearing and settling the account of a defaulter, provided that with the permission of the Governing Board the heirs or legal representatives of such deceased member may receive and deliver securities and make and receive payments on account of such deceased member or any member of whom the Governing Board approves, may deliver securities and make payment on account of such deceased member. It will be noted from this provision that only the procedure for clearing and settling the account of a defaulter is required to be followed when a death occurs of a member during clearing and there is no scope of declaring him as a deemed defaulter after his death under the said provision. In the present case when the death occurred on February 7, 1994, the provisions of rule 11(b) read with clauses (i) to (v) of Appendix "C" became operative, enabling the heirs of the deceased member to make nomination, subject to rules particularly rules 15 and 50 and there was no total extinction of that limited right as may happen when the defaulter is right of membership lapses and vests in the Exchange immediately when he is declared as a defaulter under rule 54. Thus, when the impugned provisional attachment order was issued under section 281B on February 15, 1994, on the widow of the deceased member presumably treating her as a deemed assessee under section 159(3), she as a widow specified in Appendix "C" along with other heirs, if any, mentioned therein, was entitled to the limited and hedged in right of selling the "nomination" with the sanction of the Board subject to the rules and regulations including rules 15 and 50 of the rules, which required the claims admitted by the Board against the deceased to be paid up before the nomination could be approved. This and this alone was the right of the heirs of the deceased member, which could be attached under the impugned provisional attachment order while attaching the membership card of the deceased member. The impugned attachment order cannot, therefore, be said to have been made without jurisdiction.