An interesting issue recently fell for the consideration of the Bombay High Court- whether DEMAT accounts could be held in the name of deities. The Court answered this question in the negative, relying on largely practical and partially moralistic reasons in coming to its conclusions.
The decision was pronounced by a Division Bench of the Bombay High Court in Ganpati Panchayatan Sansthan Trust v. Union of India, on a writ petition filed against an order of the National Securities Depository Ltd. [“NSDL”], refusing to grant permission for the opening of a DEMAT account in the name of some deities. The petitioner was a private unregistered trust, of which the deities were shareholders. The primary contention of the petitioner was that the deities were artificial legal persons, and were recognised as such under Indian law and the Income tax Act. The Senior Counsel appearing for NSDL, Mr. Dwarkadas, contended that only natural persons could hold a DEMAT account, and that there was no provision which allowed an account to be opened in the name of a deity.
However, disappointingly for those interested in the legal rationale adopted by the Court, the contentions of the respondent, and the decision of the Court accepting these contentions make little mention of any legal provision disallowing accounts in the name of artificial persons. Neither do they point out that a natural reading of the provision allowing for DEMAT accounts can extend it only to natural persons.* The rationale adopted by the Court for holding the refusal by NSDL to be valid, and dismissing the writ petition rested primarily on three bases- (a) a DEMAT account requires regular monitoring, and “personal skill, judgment and supervision”, which cannot be done by an artificial entity; (b) since the petitioner is an unregistered private trust, in the case of an irregularity, neither the deity nor the trust will be held accountable; and (c) that the petition essentially amounted to “bringing the Gods/Goddesses into share transaction business”, which the Court frowned upon. Of these, the first two are clearly pragmatic considerations, while the third is one which reflects the Court’s reluctance to allow the entry of religious deities into commercial transactions. However, by basing its decisions on these grounds, the Court leaves open the larger question of DEMAT accounts for non-religious entities, for which there may be better accountability mechanisms. Thus, while arguably reaching the appropriate conclusion on the facts of the case before it, the judgment does fall short in providing a legal framework for subsequent issues which may arise in similar fact scenarios.
*(The only mention made is that of a SEBI Circular (¶ 8), the relevant provisions of which have not been reproduced in the decision. Any comments from readers as to which circular is being referred to, or its relevant provisions, are most welcome).
The write-up observes: The high court has dismissed the writ petition primarily on one of the bases- “(c) that the petition essentially amounted to bringing the gods/goddesses into share transaction business”, – “which the court frowned upon”.
Instantaneously, one is obliged to remind self of a tax case, wherein the apex court came to strongly express itself against the judiciary giving in to emotions to have a role in the due process of law/ adjudication.
That was T.A. Quereshi’s case (DR. T.A. QUERESHI V. CIT [2006] 157 TAXMAN 514/287 ITR 547 (SC)). The apex court was called on to adjudicate on the issue of deductibility of any loss / expenditure incurred by an assessee in the course of his carrying on an illegal or unlawful activity. The assessee, a medical practitioner, as per the findings, was engaged in the illegal activity of manufacturing and selling heroin. The value of heroin seized from him was brought to tax as ‘unexplained income’. The assessee claimed deduction for the heroin seized as loss of stock-in-trade, from its value taxed as income. The high court, reversing the tribunal’s favorable order, ruled against the assessee.
The apex court held that the view taken by the high court couldn’t be sustained, with inter alia the following observations:
“. . . the high court has adopted an emotional and moral approach rather than a legal approach. We fully agree with the high court that the assessee was committing a highly immoral act in illegally manufacturing and selling heroin. However, cases are to be decided by the courts on legal principles and not on one’s own moral views. . . .” [para 15]
As to what precisely are the legal principles that the apex court would in the above context have had in mind is not discernible from a plain reading of the judgment. However, by a reasonable inference, besides the other several relevant propositions, reference was possibly to the predominant one well settled by case law, namely this:
Under any circumstances, court cannot substitute its own impressions, ideas or notions of justice, in place of the legislative intent as borne out on a plain reading of the statutory provision(s).
IN A LIGHTER VEIN: ACCORDING TO THE HINDU MYTHOLOGY, GOD ID THE GIVER OF EVERY THING ON EARTH – INCLUDING THE HUMANITY ITSELF SO ALSO WEALTH (MATERIAL OR OTHERWISE). SHOULD THAT BE SO, IS IT NOT BUT ONLY FAIR FOR WE, THE MORTALS, TO EVINCE AT LEAST AN IOTA OF GRATITUDE BY PERMITTING THE GIVER TO SHARE IN (or suffer!)THE BOOTY.
SAYING TO SELF: ENOUGH IS ENOUGH; IT IS OPEN TO THE READER TO FILL IN WHATEVER ARE THE BLANKS LEFT ACCORDING TO HIS OWN INDIVIDUAL MINDSET.
vswaminathan