Family Settlement Agreement

To resolve a family dispute, the family settlement agreement is a far better option than approaching the court. As Family settlement Agreement is a most valid and enforceable document because we well are aware that violence is a ubiquitous feature in every family. With the help of such a document, the dispute can amicably be settled in families. However, it is not a big deal to have a quarrel in a families, it is often seen in most of the families. In most of the family, the relationship status and family businesses are getting more complicated day by day, individuals in the family are often seeking separate ownership, commercial control on a family business family and also want to achieve greater independence in all of them.

As per the updated data, about 66% of people approach’ court foe seeking judicial intervention to resolve the dispute and finally came up to amicable settlement. Another 10% of disputes are often related to family matters. The context of family settlement agreement strict sense shall not be applicable when a person having a self-acquired property, but where two persons declare each other as owners of the property and having an equal share in the property therein, an arrangement between them through a family settlement agreement is permissible and recognized under the law. Such settling agreements are not only open for the title of property but also it is made to the use and possession thereof.

Introduction

A memorandum of family settlement is a document or we can say a contract, which is signed between members of the family, in which they agree to divide the joint assets of the family among themselves. For instance, if the father passes away without leaving a will then he will leave a lot of property for his other family member for heir’s owns for his daughter and a wife. Since, the property has not been specifically allotted to any particular son, daughter, or wife. They all will be considered as class one heir within the meaning of the Hindu Succession Act. It simply means that since the entire property is considered as one pool, each the wife, the son, the daughter all of them will have an equal share in the property as a whole. The FSA has been explained in the year 1973 case of S. Shanmugam Pillai v. K. Shanmugam Pillai: The apex Court held that “If a family member wants peace and harmony in their family so they can amicably settle the matter. The courts often left the matter in favor of family arrangements. “Now let us suppose, the heirs decide that the time has come to allocate specific properties to each one of them. In short form commonality of undivided interest, they want to specifically demarcate their share of the property. In such a case, a memorandum of a family settlement agreement can be signed”. 

Further, the family settlement agreement has been signed by the signatories who should comprise of the legal heirs of:

  1.  deceased father or
  2.  Deceased husband or,
  3. whoever the deceased parent is

Furthermore, there should agree and decide that this property will come to this person or this is the property will; go to that person. In short, the schedule of the agreement which is a document attached should contain the details of which heir or which descends will get which property. This way once delineation in respecting property share is done then a proper agreement will come into executed the moment it is signed and finally this signe4d agreement of memorandum of family settlement should be presented for registration. It is important to note that since the family settlement agreement purports to create definite shares in the immovable property and assets, like house, office, flats, etc. 

Meaning of Family

In India, the expression family has been defined in the broader sense. The family is generally regarded as a group of persons or a major social institution and a locus of much of a person’s social activity. It is just called a social parameter created by blood, marriage and, adoption etc.

Krishna Biharilal v/s Gulabchand: the court held that the expression family in the family settlement agreement required to be understood in the narrower sense, it denotes a group of people resides in the family and are well recognize by law and have a separate right of succession and can claim a share in the property at the time of dispute arises.

The Need for Family Settlement Agreement

Intestate Succession: Partition without Will:  SECTION 3(1) (G) of HINDU SUCCESSION ACT, 1956 denotes that a person who dies without making a will or any kind of testamentary disposition. Such a person will be deemed to die intestate and such person will be called intestate. A will or testament is an instrument by which one person declares his intention that his property (whether self-acquired or ancestral) will be distributed among such persons whom he desired to give after his death. In short, by the way of will a person is declaring his intention that his property will be distributed after his death among their heirs.

Illustration; The four heirs of a deceased person owned a single bungalow, by per capita distribution and the principle of survivorship, the bungalow must be divided equally among all the 4 heirs. However, it could not possible to practically divide a lavish bungalow among all 4 heirs; so, the heirs must run out of the constant quarrels over the property. 

 However, Disputes can happen even when the person leaves a will after his death. The well-prepared wills may have some loopholes. Further, the heirs can decide among themselves, the appropriate amicable settlement way to divide the property among all of them. Thereby, If a son of the deceased person has permanently settled abroad and has no intention of returning home, in such cases a son may have to relinquish his right on father’s property. To cement on the intention of heirs, they make a family settlement agreement (FSA), an enforceable and valid instrument. 

Testamentary Succession: Partition Through Will

As per the HINDU SUCCESSION ACT 1956 or the INDIAN SUCCESSION ACT 1925, testamentary succession means a holder of the property may dispose of his property by preparing a will before his death. Their estate will be devolved through testamentary succession (will) among the heirs as they bequest in the will. The testamentary succession can be withdrawn during the lifetime of the person who makes the will.

Related Provisions in Respect of Testamentary Succession

SECTION 59 of INDIAN SUCCESSION ACT; says any person with the sound person and who is a major can dispose of the property via a will.

Explanation1; A married woman is capable of disposing of a property by the way of will only such property that she can alienate during her lifetime.

Explanation 2; A person who is dumb, deaf or blind ca prepare a will only in such cases if they can prove that they were aware of what they are doing.

Explanation 3; A person who is mentally insane or ill.

Therefore, if a person who prepares a will while he is sound mind and then subsequently becomes insane after preparing. In such a case, the will made by him considered a valid will and it is not rendered invalid by subsequent insanity.

SECTION 62 of INDIAN SUCCESSION ACT, states that the will be revoked or altered anytime during the lifetime of the testator

SECTION 70 of HINDU SUCCESSION ACT, deals with a manner to revoke a will;

  1. The Revocation must be written and signed by the testator in the presence of two persons as witnesses and attested by both of them too.
  2. Revocation clause in new “will” will make old will ineffective, if there is no revocation clause in new will then old “Will” will be ineffective for the part which is inconsistent with a new will. If there is no inconsistency then both the “will” will read together.

Family Settlement Under Hindu Undivided Family

The family settlement agreement is generally related to HUF. Since Hindu law, HUF is a collection of the male members in the family, they run the business or they may take a share in the profit of the business. Many a time we see there is a settlement between HUF, the HUF gets broken and each member tends to do his own business. There may be a case where one member is getting out from HUF and other members will continue their work.

Explanation: There is a Hindu Undivided Family of a five-member, and one of the members is moving out from HUF and he started his own business. As per the agreement made between the other members of the HUF, that the outgoing member would receive Rupees 10,000 every month as an expense. So he agrees on that point and moved out of the HUF. Further, he started his own family business, he has one wife and two kids. In a couple of months, he got rupees 10,000 from the members of HUF. Later on, this member who had moved out died. Now the member of HUF stops giving him compensation as per the agreement written by them. Further, aggrieved by this, the wife of the deceased member went to the Karta of HUF said they stop giving me the compensation, the Karta said, “I have a contract with your husband; the HUF and your husband were the parties to the contract. Now since your husband died I m not supposed to continue with the contract because the contract end with the death of a husband and you are no one to claim the compensation”.

Further, the wife has moved out in the family settlement agreement, will get the right of compensation or the claim of the Karta to be upheld by the court and court will support the right of the wife because in case of a family settlement wherein a HUF is involved the wife of the member also is considered to be a beneficiary. When this member was getting compensation, the court assumes that compensation would be used for the benefit for the man and the family’s welfare, and the wife of the member also a part of the family. So, she also receives the compensation because she is a beneficiary and the court gives her the right to claim compensation. If Karta still does not give the compensation, she approaches the court and gets the compensation by the order of the court. So, this is how we use the concept of family settlement in terms of HUF.

Partition of Joint family Property Through Family Settlement

The family settlement agreement is a kind of agreement that is held between the members of the family. These settlements are done outside the parameters of courts with the help of arbitration, conciliation, and Lok-Adalat. Wit the exercising of power the tribunal pass the amicable settlement between the family members held in the case of Lala Khunni Lal v. Kunwar Gobind,. The format of making a family settlement agreement is the same as in Partition deed.  However, a family settlement agreement does not require stamping and registration. The oral FSA is also deemed as an enforceable and valid form of a document. In the case of Tek Bahadur v. Debi Sing 1966: The apex courts uphold the validity of an oral FSA by ruling that registration could only be required when the instrument is in written form.

“It is necessary that a family settlement agreement has to be signed by all the family members by their individual’s consent, without any undue influence, coercion, force or peer pressure from any family member”.

  1. It is not necessary under the Hindu law that the partition shall only be executed by the reregistered document, written document; even orally the partition took place. There is no need to have a written document in partition, you can also do partition by a written document.
  2. Even a family compromise between the coparcener would be sufficient to effect a partition. If all the family member may enter into a compromise and by way of such a compromise, also the partition may be affected.

Now, we will discuss the different, modes of partition, how a partition will be affected are as follows

Declaration

The partition may be affected by the declaration, a clean indication desire by a single member of a joint family who wants to separate his sufficient to effect a partition. Being a coparcener in the property each coparcener having a right, he can declare it at any time and can claim partition.

Father

Father is competent to make a partition during his life and the partition so made by him binds his son even a minor son. So, being a father he is always empowered to effect a partition and if the father affected a partition then, such partition will be binding to all the son including the minor son, but if the particular partition affects the interest of the minor son, then the minor son can challenge that partition.

Agreement

The partition of Hindu undivided family can be affected by agreement between the coparceners. The agreement may be oral or by writing, once all the coparcener may enter into the agreement and by the way of such an agreement, the partition will be affected.

Arbitration

All the coparceners may appoint an arbitrator to divide the joint family property. Whatever the decision made by the arbitrator that will be binding to the coparceners. By arbitration also the partition may be affected.

Notice

The intention to separate may be express by serving notice by a member, on the other coparcener or a manager. One coparcener can send a notice to other coparcener or the Karta of the joint family, by declaring his intention that he wants a separate share.

Will

Partition may be affected by a way of a will. One coparcener may declare his intention by the way of preparing a will that he wants his share separated.

Conversion

The partition may be affect6ed by conversion. When one person of the joint family converts and accepts the religion. So the partition will be affected by the date when the person converts to another religion and other members of the joint family may continue as a joint family member.

Marriage Under Special Marriage Act 1954

According to SECTION 19, provided that when a Hindu person registered their marriage into the special marriage Act it means he/she is marrying in a different religion. So, he no longer is being a member of the Joint family property. By this way, the partition may be affected

The Procedure of Family Settlement Agreement

A family dispute can be settled through arbitration and conciliation process, as these settlements can be done outside the court. It is a process where 3rd person, it may be an advocate or a senior member of the family, assist the disputed family member to arrive at a conclusion.

A family settlement is not being a single legal document incorporating the distribution of the joint family property; hence, it is a series of documents consist of the property rights of every member of the family.


For Instance, there is a family of two sisters and a brother having a quarrel over ancestral jewelry, flat, and an office. They all could come to a settlement and make an agreement stating that the oldest brother gets the office, the sister bags office and the jewelry goes to the remaining sibling. The incumbent thing to observe in the above instance is that the document is neither deemed as a gift nor as a transfer of property as per the Income Tax Act. In order to transfer the property, one would have to make a separate document of transfer of property with respect to the family settlement agreement.

Can Family Settlement of Self-Acquired Property Take Place

A self-acquired property shall not stand with family arrangement means that a settlement of Self-acquired property cannot be executed during the lifetime of a person who had acquired it, but on the other hand, the self-acquired property automatically transferred to the ancestral property at the time of death of such person. However, the self-acquired property can be transferred to any person by making a will on his/her name.

Registration of a Family Settlement Agreement

Since, the Family arrangement is oral in which the FSA deed is not required to register given in the case of Maturi Pullaiah v. Maturi Narasimhan: the court upheld that FSA is not a mandatorily registerable document, as it does not create rights in it. It is further observed that FSA would only require registration, in case a newer interest creates in the family property. It refers that when the instrument itself alters or deleted the legal rights of other heirs in the family properties and creates new rights, then it is compulsory to register a document under s. 17 (2) of the Registration Act, it was held by the Apex Court in case of “Sita Ram Bhama v. Ramavtar Bhama”. Herein, FSA holds the pre-created interest in the property hold by the family members, it would be deemed as valid even if it is unregistered. 

Thereby, the registration of such an agreement is compulsory under section 17 of the registration Act. However, it is always advisable in the absence of any will and all the legal heirs have arrived at a common settlement to execute a properly registered family settlement in which they can agree to divide all the assets of the property among themselves and this will ensure peace and harmony between members and will preclude any further property dispute and litigation from arising.

Conclusion

In my open-ended conclusion, I recommend that the family settlement agreement is just a pocket saving and time-consuming process for the devolution of property and other family matters. Here means, rather initiate the legal proceeding before the court, one can try to resolve the dispute or settled the matter outside the court through arbitration, conciliation, mediation and Lok-Adalat, etc. Hence, the family settlement deed must be fair, unjust, and reasonable and provide the equitable distribution of property between the members of the family.

References

  1. Krishna Beharilal v. Gulab Chand (1971) 1 SCC 837
  2. Maturi Pullaiah and anr. v/s. Maturi Narasimham and ors. AIR 1966 SC 1836 
  3. Tek Bahadur Bhujil v. Debi Singh Bhujil and ors. AIR 1966 SC 292
  4. Sita Ram Bhama v. Ramavtar Bhama (2018) 15 SCC 130
  5. S. Shanmugam Pillai and ors. v. K. Shanmugam Pillai and ors. (1973) 2 SCC 312
  6. Hindu suceesion 1956, Bair Act legal commentaries
  7. Lala Khunni Lal v. Kunwar Gobind, AIR 1966 SC 292
  8. Ibid, section 17 of Registeration of property Act.
  9. Ibid, Section 59 of Hindu Succession Act, 1956
  10. Ibid, Section 62 of Hindu Succession Act, 1956
  11. Ibid, Section 70 of Hindu Succession Act, 1956
  12. Goel, Shivam, The Registration Act, 1908: Critical Analysis of the 1908 Act (October 9, 2016). Available at SSRN: https://ssrn.com/abstract=2850052 or http://dx.doi.org/10.2139/ssrn.2850052
  13. Deepti Bajpai, Shaurya Joshi, “Family Arrangements in India” Legal Service India.

Questions

  1. Whether the family settlement deed requires registration?
  2. Can family settlement of self acquired property take place?
  3. Define the term “family” under Hindu law with the help of cases?
  4. When does the need for family settlement agreement arise?
  5. Critical Analysis of the Family Settlement Agreement?
  6. How the partition of the joint family affected?

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