“Family above all” is a popular notion, still the Indian Judiciary has been habitual to being presented with cases of family disputes regarding division of properties. Often relationships between members of a family, especially in case of a joint family, becomes complicated. As a result of which, they pursue to reside or exert ownership in a more separate and independent sense, yet maintaining a cordial bond. Taking such sensitive matters before the court may create an extremely hostile situation between the blood relations, thus shattering their association forever.
The concept of ‘Memorandum of Family Settlements’(MOFS) acts as an instrument which enables the family members to mutually decide and record the terms of distribution of the property amongst themselves, while preserving harmony and at the same time avoiding strenuous litigation process
Concept of Memorandum of Family Settlements.
Irrespective of the fact that, ‘Family Settlements’ have not been defined under any Indian statute, the courts nonetheless recognises and upholds its validity. In simple terms, family settlements can be described as transaction between members of the same family for their mutual benefit, so as to maintain and preserve the property, peace and security, thus avoiding any future discourses and court cases and ultimately saving the honour of the family. Similarly, a MOFS refers to a written document which states the arrangement between family members and acts as a record of the mutual agreement regarding the terms of the division of property.
Difference between Memorandum of Family Settlement and Partition Deed.
Under a situation, where one of the co-owner of a jointly held property seeks to obtain his/her undivided share in the property, the need for partition arises. Such partition can be achieved either by way of a Deed of Partition, whereby the co-owners mutually consent to the partition, or in the case where they failed to arrive at a mutual consensus, partition can be instituted through the court process i.e. by filling a suit of partition.
It is a common misconception of most individuals to consider the MOFS and Partition Deed as one and the same thing, however both of these documents have a difference between them. Under a Partnership Deed, the terms of the document focuses on creating, assigning, limiting or extinguishing the rights or title in a property, as a result of which the same shall be compulsorily registered. However, a Memorandum records the terms of family arrangement that were already orally decided and agreed between the family members i.e. recording past transaction of division/ partition of property, thus rendering the same as not mandatory with subject to registration.
Nevertheless, it is pertinent to mention that if the Memorandum aims to alter any rights or title to the property, then registration shall be compulsory.
Essential Conditions of a Valid Memorandum of Family Settlement
- Intention to resolve
This condition was laid down in the case of Kale v. Deputy Director of Consolidation according to which there should be a family dispute or rival claims which requires to be settled by an equitable division or allotment of property between the claimants who are necessarily family members belonging to the same family. The consideration for entering into family arrangement should be preservation of family property, peace & honour and avoidance of litigation.
- Free Consent
Under Kale v. Deputy Director of Consolidation , the Supreme Court also laid down the imperative perquisite that such settlement must be bona-fide, honest, voluntary and it should not be induced by fraud, coercion or under undue influence.
- Existing Antecedent title
In the case of Sahu Madho Das and ors. v. Pandit Mukand Ram and anr. , the court stated that the parties to the family arrangement must have antecedent title, claim or interest. Even a possible claim in the property which is acknowledged by the parties to the settlement shall prove to be sufficient for the same
With regard to Family settlements and MOFS, a number of judgements, including that of the apex court have uphold the validity of the same. The principle rulings and opinions of the judiciary is as follows:
- Minimization of Judicial interference
In the case of S. Shanmugam Pillai and ors. v. K. Shanmugam Pillai and ors., the courts have leaned strongly in favour of a family arrangements that bring about harmony, by way of amicable settlement of any property dispute arising between the close relations. Further, the court shall be reluctant to disturb any peaceful settlement that may arise through mutual consensus of the parties involved.
- Duty to uphold
The court in its judgement of Khunni Lal and ors. v. Kunwar Gobind Krishna Narain and anr ruled that if the true character of the transaction appears to the courts to be a settlement between the several members of the family of their disputes with each one relinquishing all claim in respect of all property in dispute other than that falling to his share, and recognizing the right of the others as they had previously asserted it to the portion allotted to them respectively, the court will effectuate it as a family settlement. It will confer a new distinct title on each other, that the parties themselves seem to have regarded in the arrangement, and it shall be held that it is the duty of the courts to uphold and give full effect to such an arrangement.
- Validity of an Oral Settlement
In the case of Tek Bahadur Bhujil v. Debi Singh Bhujil, the bench while upholding oral family arrangement, held that registration would be necessary only if the terms of the family arrangements are reduced into writing.
Similarly in Ramgopal v. Tulshi Ram the court had taken the view that a family arrangement could be oral and if it is followed by a petition in Court containing a reference to the arrangement and if the purpose was merely to inform the Court regarding the arrangement, no registration was necessary.
- Registration not mandatory
In the case of Maturi Pullaiah and anr. v. Maturi Narasimham and ors, the court held that the family arrangement will need registration only if it creates any interest in immovable property in present time in favour of the parties mentioned therein. In case where no such interest is created, the document would be valid, despite it being non-registered.
When a document materially alters legal rights of other heirs of the properties by way of creating new rights or extinguishing existing rights, it shall be compulsorily registrable under Section 17 of the Registration Act, 1908. The Memorandum merely records the mutually agreed upon family arrangements for avoiding ambiguity and hence, it is fairly distinct from a document which modifies the terms and recitals of an arrangement. In such a case, the Memorandum would not fall within the ambit of Section 17 of the Registration Act, 1908 and thus shall be valid even in unregistered. The same view was reiterated by the court in Tek BahadurBhujil v. Debi Singh Bhujil.
- Binding upon parties
By taking reference from the existing judicial pronouncements, a document in the nature of a memorandum of an earlier family arrangement and presents a bona-fide settlement which is fair & equitable shall be final and is binding on the parties.
- Excludes any transfer of property
The Memorandum of Family Settlements only assigns the rights to the signatory family members and does not govern the transfer of property. In order to facilitate any transfers, a separate instrument demonstrating their intention to transfer such property shall be executed.
- Not Taxable
In the case of The Commissioner of Gift Tax (CGT) v. K N Madhusudan , the court observed that family arrangements shall not be considered as transfers under the scope of Section 45 of the Income Tax Act 1961. Family members under the scheme of arrangement have an anterior title to the property which is a subject matter of partition or a family arrangement. Thus, under family settlement there is an adjustment of shares, crystallization of respective rights in the family properties and therefore it cannot be construed as a transfer in under the Taxing statutes. Thus, as there is no transfer in the eyes of law, there is no capital gain and therefore no capital gain tax can be levied on such transfer.
In the recent Supreme Court case of Ravinder Kaur Grewal & Ors. Vs Manjit Kaur & Ors dated July 31, 2020, a family settlement was arrived between closely related parties at with the intervention of respectable persons and family members, where under ownership and possession in respect of the land including constructions thereon was decided, accepted and acknowledged. Under the Settlement, the plaintiff was accepted andacknowledged to be the exclusive owner. The said memorandum was executed by all parties. However, after execution of the memorandum of family settlement, new issues were raised by few parties from the existing family arrangement.
Both parties then filed a plea in the court claiming that they were the owner of the property according to the terms of the Memorandum of Settlement. The first Appellate court (District court) in its judgmentdeclared the original plaintiff as owner of the suit land along with constructions. However, in a second appeal filled by the defendant, the High Court of Punjab and Haryana reversed the decree of the Appellate court stating that registration shall be mandatory for a document that creates a right in favour of the plaintiff for an immovable property in which he had no pre-existing rights. Aggrieved by this judgment of the High Court, the petitioner approached the Supreme Court.
The main question of law which arose was as to whether the Memorandum of Family Settlement was required to be registered as interest in immovable property worth more than Rs.100/ was transferred.
The Supreme Court in its observations concluded that the High Court did not deal with the factual aspects of the matter properly. The apex court further observed that between the parties, not only an univocal family arrangement had been established but also the same had been actively performed by them. In its ruling, the Supreme Court reiterated that a Memorandum of family settlement is just a recording of the terms of settlement between the parties which was previously agreed between them and in such a case, the registration of such document is not compulsory yet valid before the law as it in itself does not create or extinguish any right or title.
The idea behind upholding the concept of Memorandum of Family Settlements is to promote an amicable arrangement between close relations seeking to resolve their conflicting claims and disputed titles in a harmonious manner, eliminating any bad blood which may arise due to the strenuous nature of litigation process, and thus mutually sustaining the honour of the family.
Regarding the question of registration of the Memorandum, the same shall depend upon the subject matter of the terms and recitals incorporated in the deed. MOFS which records earlier agreed terms of oral partition between family membersshall not be compulsorily registered and on the on the hand, if a MOFS alters/modifies any rights or titles of the parties, the registration of the same shall be mandatory.
ABOUT THE AUTHOR
Snigdha Ganguly is an advocate enrolled under the Bar Council of Delhi.
In Content Picture: Vakilno1.com
Kindly note that the views and opinions expressed are of the author and not of the Indian Journal of Law and Public Policy.
What is Memorandum of Understanding between family members? ›
A memorandum of understanding (MoU) is a legally non-binding agreement between two or more parties. It outlines the terms and conditions of their cooperation and is often used to establish a working relationship between parties, such as between family members.What is family settlement deed in India? ›
A Family Settlement deed is an amicable and mutual agreement between the members of a family regarding distribution of assets of the family. A Family Settlement deed should be preferably written and signed by all the members of the family.How can I resolve my property dispute in India? ›
Some of the key ways to resolve property disputes in India include negotiating a settlement through mediation, filing a civil suit in court, or using alternative dispute resolution mechanisms such as arbitration or conciliation.How much stamp duty payable on family settlement deed in maharashtra? ›
It is around 3% of the property value. Yes share certificate can be transferred on the basis of settlement deed.Can memorandum of family settlement be registered? ›
Registering a memorandum of family settlement is not mandatory. However, getting the document registered not only makes the settlement more definite, but also increases the sanctity of the same.Are memorandum of agreement legally binding? ›
The purpose of an MOA is to have a written formal understanding of the agreement between parties. An MOA details the obligations and commitments of the parties and allocates and minimizes each party's risks. It can also be referred to as a contract and is legally binding.Can family settlement be challenged? ›
While a duly executed family settlement cannot be revoked, except by a court decree, it can be challenged in a court of law under the following circumstances. Any misrepresentation of facts regarding the title of the disputed property, too, can lead to future altercations. Improper execution.Is family settlement required to be registered? ›
"A family arrangement may be even an oral arrangement, in which case, no registration is necessary. It is only necessary if the terms of family arrangement are reduced into writing," the Court said.Is family settlement deed valid in India? ›
In the Tek Bahadur versus Debi Singh and Others case, the court had considered the validity of a family settlement deed. It upheld the validity of an oral family settlement and ruled that registration is required only when it is written.How do I resolve a property dispute with my family? ›
The obvious solution for most is to drag the matter to courts instead of settling down. However, most people don't realize that apart from being a tedious and expensive process, courts in no way guarantee a satisfactory resolution. It is, therefore, advisable to opt for a family settlement.
How long does property case take in India? ›
The average pendency of a land acquisition dispute is 20 years.How can I settle a dispute without going to court in India? ›
- There are ways to resolve disputes without going to court. ...
- Negotiation involves discussing issues to try to reach an agreement. ...
- Mediation involves a neutral person helping the parties agree. ...
- Collaborative practice features negotiating a settlement collaboratively.
However, 2.5 per cent of the property value has to be paid as stamp duty in case the property is being transferred in the name of father, mother, son, sister, daughter-in-law, grandson or daughter as a gift.Is stamp duty payable on transfer of property between family members in Maharashtra? ›
|Conveyance deed||Stamp duty rate|
|Gift deed stamp duty for residential/agricultural property passed on to family members||Rs 200|
In case you are planning to sell your inherited property, you must understand that inherited property is exempted only from gift tax, estate duty and stamp duty. Capital gains, both short and long term, received through the sale of the property would be taxable..What is the difference between family settlement and Memorandum of family settlement? ›
The primary difference between the two is that under a partition deed the terms and recitals of a family arrangement are made whereas a MOFS just records the terms of family arrangement that were already orally decided and agreed between the family members i.e. recording past transaction of division/ partition of ...Is Memorandum of agreement legally binding in India? ›
It is a well-established rule of law that if a MOU fulfils all the conditions laid down u/s 10 of The Indian Contract Act, 1872 then, such a MOU shall be legally binding.What is the Supreme Court ruling on family settlement? ›
Family Settlement Document Which Merely Records Past Transaction Does Not Require Compulsory Registration : Supreme Court. The Supreme Court has held that a family settlement document which merely sets out the existing arrangement and past transaction will not be compulsorily registrable under Section 17(1)(b) of...Does a memorandum of agreement need to be notarized? ›
Under the Civil Code, a contract is valid and binding if all its elements are present, i.e., the elements of consent, object, and cause. Thus, even if the contract is not notarized, it is valid provided these elements are present.Can a memorandum of agreement be terminated? ›
Termination – This MOA may be terminated in good faith for any cause upon mutual consent of the parties in writing or upon notice in writing by either party to the other which shall take effect only after thirty (30) days from receipt of the written notice of the MOA termination.
What is the purpose of memorandum? ›
A memorandum (memo) is used to communicate something of immediate importance to people within a business or organization. A memo also can be sent to people or firms that have close or long-standing relationships, such as vendors or consultants. Like a business letter, a memo is a permanent record of your communication.How property is divided in family law? ›
Partition of the property by mutual agreement can be done by Partition Deed or Family settlement. Partition Deed divides the property between the co-owners of the property. This deed is prepared in order to divide the property so that each person gets an absolute title over his own part of the property.How effective is family dispute resolution? ›
Of the three ways that parents make parenting arrangements – lawyers, courts and family dispute resolution - those who use FDR are more satisfied (73.6%) than those who use lawyers (60%) and courts. Most satisfied of all are those who work things out for themselves (89%).What is the purpose of Memorandum of Understanding? ›
A Memorandum of Understanding (MOU) is required of an agency when an application for funds includes an explicit non-financial collaboration with partnering organizations. The MOU provides documentation that demonstrates the organizations have consulted and coordinated the responsibilities of their grant activities.What is the difference between MOU and HoA? ›
The key difference between an HoA and an MoU is their contents and the intention behind each document. There is widespread confusion as to the distinction between the two. HoA's and MoU's are both frequently incorrectly used.How legally binding is a Memorandum of Understanding? ›
A memorandum of understanding is an agreement between two or more parties outlined in a formal document. It is not legally binding but signals the willingness of the parties to move forward with a contract. The MOU can be seen as the starting point for negotiations as it defines the scope and purpose of the talks.What should a Memorandum of Understanding include? ›
An MOU clearly defines how the parties will work together and lays out each one's expectations and responsibilities. The goal is to achieve a mutual understanding of the partnership, so you can move forward into an enforceable contract everyone feels confident about.What are the four 4 types of memorandum? ›
There is a standard format for all memos, but there are four different types of memos based on their other purposes. Those memos are the response memo, meeting minutes memo, status memo, and field report memo.Is memorandum of understanding legally binding in India? ›
MOUs are typically not considered to be legally binding, and as a result, the parties to the memorandum of understanding can steer clear of any types of legal repercussions. Even though the contract does not have the force of law, both parties treat it with seriousness and respect.Why is MoA the most important document? ›
A company cannot be registered without having an MoA. It helps anyone who wants to enter into a contractual relationship with the company to gain knowledge about the company. It is also called the company's charter, as it contains all the company's details, its members and their liabilities.