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A Critical Analysis of Family Settlement Agreement


Authored by Triyasa Gope


Keywords:- partition, family arrangement, inheritance rights.

Abstract

In this article, the family settlement agreement is discussed. In this first part, the introduction of the family settlement agreement is discussed. Then the conditions of the family settlement agreement are written and then types of the family settlement agreement and inheritance rights, use of family settlement agreement, and important case laws are discussed in this article. It is very much important in India to use the family settlement agreement as much as possible. Because 80% of civil cases are regarding property issues. If every member is ready to do this agreement then it is better for them and the court also.


Introduction

India's most civil cases are property disputes. The joint family property is the bone of contention of these disputes in India. Now, what is joint family property? According to the Hindu Succession Act, 1956, joint family property is the property of ancestors. The shareholders of this type of property are called Coparceners. The dispute between its shareholders and members are resolved by the family settlement agreement simply. Many people want to avoid the traditional court proceedings because it is very time consuming and also very expensive. And also after court proceedings, it is not guaranteed to get a satisfactory result. That’s why nowadays people are doing a family settlement agreement. It is quite pocket friendly and also less time is taken.


Now, what is a family settlement agreement? According to the Halsbury’s Law of the United Kingdom, 4th Edition, Volume 18, paragraph 13, the concept “Family Settlement” or “Family Arrangement” refers to an agreement made by members of the same family to preserve the family property or compromise disputed or doubtful right. [i] This agreement is signed by the members of the property to acknowledge that the agreement was not made by fraud or coercion or anything. There are two types of agreement- written and verbal. But it is very much advisable to do the agreement in written and registered form to any further misconceptions and confusion.

Important Conditions for Family Settlement Agreement

A family settlement agreement is a valid document if it is correctly executed. If the family settlement agreement is not valid imposed then the existing personal law is imposed on those cases. The certain conditions for valid family settlement agreement are-

· The family members must have an interest in the property:- Every family members have an interest in the property. Like if one person doesn’t want the property portion then he or she will not count as a legal heir.

· Honestly:- Everyone has to honest in this agreement. Anyone has no intention to cheat another heir. The Supreme Court gave this rule in the case of the Kale v. Dty. Director of Consolidation 1976.[1]

· Voluntary act, members should agree without any coercion, fraud:- The settlement agreement is done without any fraud, coercion. It means all the heirs have to do this by their own will. That’s why every heir has to sign the agreement acknowledging for that.

· Relationship between parties:- Not every heir needs to have a common descendant of a family. They can be near relatives. It is also considered as a family arrangement. This rule was first given by the Privy Council in the case of Ramgouda Annagouda v. Bhausaheb.[2]

Advantages of Family Settlement Agreement

· It preserves peace in the family.

· The tax for the property would not arise because it is not a real partition of the property.

· By the agreement, the unnecessary litigation process is avoided.

· The goodwill of the family is preserved.

Who is The Shareholder of The Property (Inheritance Rights):- The inheritance rights of the members are arises either by the will or by succession. The will is governed by the Indian Succession Act, 1925, and the succession is governed by the personal laws of the person.


· Hindu Succession Act, 1956:- Hindu Succession Act, 1956 is only applicable in Hindus and others who are recognized in section 2 of the same. Section 10 and 11 are mainly discussed to whom the property is distributed and what are the rules of distribution of property among Hindus. It is mainly distributed according to the doctrine of survivor ship in the Mitakshara school of law. In the Dayabhaga school of law, the distribution of property is done by succession.


· Muslim Personal Law:- In Muslim Law there has not any provision regarding the distribution of the property. In Islam, they believe that no one has a right to inherit property by birth. The succession of property arises when the person who acquires the property is dead. Muslim personal law or Shariat law is only applicable to Muslims. If one person converted into another religion and he or she is a legitimate child of his or her father then he or she is a legal sharer of his or her father’s property.


The partition is done in two different ways – i. Per Capita Distribution, ii. Per Stripes Distribution.


· Per Capita Distribution:- In a per capita distribution, the succession is according to the number of heirs. Among the members the estate is equally distributed, therefore each member gets an equal quantity of property from the heritable assets of the deceased. This method is largely followed by Sunnis.


· Per Stripes Distribution:- In a per stripes distribution, the several heirs who belong to different branches get their share only from that property which is available for the branch to which they belong. And this method is mainly followed by Shias.

those who don’t have any personal law are ruled by the Indian Succession Act, 1925.


Types of Family Settlement Agreement

There are two types of agreement. These are -


· Written Agreement:- The family settlement agreement should be in a written form. Because written documents have a value in the eyes of law and to avoid further misunderstanding. There is no requirement of registration of family settlement under Section-17 of the Registration Act, 1908.


· Oral Agreement:- Oral agreement means the coparceners are divided the property orally. The real property remains the same. But the coparceners can enjoy their rights according to the oral agreement. The oral agreement for the property has no value in the eyes of the court.

When The Family Settlement Agreement is Mainly Used?

· Testamentary Partition Through Will:- A person who makes the will is called a testator and a person in whose favor the will is created is called a legatee. Nothing in the Hindu Succession Act 1956 or the Indian Succession Act 1925 restricts the persons to whom a testator may bequeath his/ her self-acquired or self-owned properties over which he/ she has full disposing power, though personal law restricts devolution of inherited ancestral property. [ii] Here is no need for personal laws because through the will the testator describes his or her intention as to whom he or she wants to give his or her property.

If one person made a will for his son who lived in a foreign country and no intention to return then he can give up his property, then the other heirs can distribute the property through a family settlement agreement.


Intestate Succession Without Will:- When the owner of the property dies before making the will then his or her intention of distributing the property becomes unknown. In that case, the distribution of property is done through their laws of inheritance.

For example, the owner of 10 Bigha land dies without making any will and there have 3 heirs for that property. Then the property will be distributed through their laws of succession.

The issue arises when a Family Settlement Agreement and a will or other partition deed prescribe different modes of the partition of the same family property. A mutually prepared agreement should be of preponderance, considering that it involves the explicit consent of the family members, and is less likely to be contested. Yet, the issue is whether it can legally supersede existing inheritance rights.The heirs of the property distribute it in a mutually beneficial manner. For that, they prepare a family settlement agreement as a valid document.

Important Judgements Regarding Family Settlement Agreement

· In Maturi Pullaiah v. Maturi Narasimham,[3] the court held that the conflict for the property in present or future is not a condition for validation of family agreement.

· In the case of Commissioner of Income Tax v. A.N. Naik Associates [4]by the Memorandum of Family Settlement, the court held that the distribution of the property is done according to the family agreement deed as the heirs decided to do. The other various things like business and assets are distributed separately and partitioned.

· In Tek Bahadur v. Debi Singh and Ors.[5], the court held that the validity of the family settlement agreement is very important. The deed may or may not registered according to section 17 of the Registration Act, 1908. If anything wrong Is done in this agreement then the parties can amend the agreement into a new document.

Conclusion

In this article, the analysis of the family settlement agreement is done. And by the above analysis, it is clear that the court should resolve the property-related disputes amicably. When every family member is done an agreement by coming to the same point then the court should not delay delivering the judgment. It also helps the court to lose some burden over the judiciary. The family also does this because they want quick and satisfying results. And after acquiring the property they can freely enjoy the right over the property. They can also sell this to any other person.

Foot Notes:

[1] (1976) 3 SCC 119 [2] (1927) 29 BOMLR 1380 [3] AIR 1966 SC 1836 [4] (2004) 187 CTR Bom 162 [5] AIR 1966 SC 292 Reference


[i] ‘Family settlement deed- why, when and how it is formed'(lawnn.com) < https://www.lawnn.com/family-settlement-deed/> accessed 2 September. 2020

[ii] Aditya Pratap, ' Introduction to Family Settlement Agreement' (lawzilla) < http://lawzilla.in/uncategorized/introduction-to-family-settlement-agreement/> accessed 3 September 2020