Family Settlement: registration, enforceability &
stamp duty
The
family settlement, to many, would appear to be a vexed issue and that is not
without reason, in as much as, the legal aspect of the family settlement as
evolved over the years have also faced some collateral situations, leading to
ambiguity. For instance, whether a family settlement, shall require
registration, as a mandate of law or a family settlement can also be executed
and enforced without registration? If stamp duty is payable on a family
settlement, whether any exception is carved out when no stamp duty is payable,
if so, what are those circumstances? What are oral family settlement and its
legal implication? These are some aspects which shall be delved, deliberated
and the answers shall be found out.
In
the very anvil a judgment of Delhi High Court captioned as Himani Walia
Vs Hemant Walia bearing no. Ex P 26/2019 is worthy of reference.
The
fact of Himani Walia (Supra) in nutshell may be culled out as
under:
(i)
The execution petition emanated from a judgment and decree in a suit seeking
partition and other reliefs, being CS (OS) No. 442/2018 in respect of estate of
Late Sh. S.S. Walia , filed by his legal heirs.
(ii)
The deceased had a large number of moveable and immovable assets which included
the business of a petrol station, export business, various immovable
properties in prime localities in Delhi
and Noida, fixed deposit receipts and bank accounts, paintings, antiques,
artworks, shares in various companies and vehicles, etc.
(iii)
During the pendency of the suit itself, the three children and the wife of the
deceased with the assistance of their Counsels had arrived at a settlement.
(iv)
The terms of settlement were incorporated into the ‘Memorandum of Family
Settlement and Arrangement’.
(v)
The settlement which was agreed upon by the parties had merely been put
into writing in the said ‘Memorandum of Family Settlement and Arrangement’
dated 16th October, 2018.
(vi)
The said family settlement was approved and a decree in terms thereof was
passed by the Delhi High, vide order dated 16th October, 2018.
(vii)
The family settlement and order passed in this regard clearly reflected that
the parties had orally agreed to partition and the manner thereof, are set out
below:
‘Memorandum
of Family Settlement and Arrangement’ dated 16th October, 2018: “AND WHEREAS
for the sake of records and to serve as an aid memoir, the parties
hereto have decided to execute these presents to reduce the decisions taken by
them with regard to the inter se distribution and allocation of the property
and assets in writing.”
(viii)
While decree sheet was being prepared, the Registry of the High Court called
upon the decree holder to furnish valuation reports of the assets for the
purpose of calculating the stamp duty.
(ix)
The decree holder was seeking waiver of payment of stamp duty in respect of the
assets inherited by the various parties from the estate of Late Sh. S.S. Walia
and his sister Dr. Urmila Walia.
(x)
The applicant/DH had received notices from the Registry of the High Court of
Delhi, as also from the Office of the Assistant Collector (Kalkaji), New Delhi
for payment of stamp duty and according to decree holder the notices should be
cancelled.
The
hon’ble Delhi High Court in Himani Walia (Supra) has noted that
the legal heirs of the deceased persons became part owners of the assets
belonging to the two deceased individuals i.e., Mr. S.S. Walia and Dr. Urmila
Walia, immediately upon their demise. The said assets were not transferred to the
legal heirs, but have been inherited by them upon the demise of Mr. S.S. Walia
and Dr. Urmila Walia. The ‘Memorandum of Family Settlement and Arrangement’
dated 16th October, 2018, was merely a record of the oral agreement as to the
mode and manner of partition. Thus. it was in the nature of a family settlement
which was arrived at between the parties. The partition had been agreed upon
between the parties by way of oral agreement with the intervention of their
counsels. The memorandum of settlement does not itself partition the
properties, but only records the same as an aid of memory.
Discussion &
Law
As
per the settled proposition of law as regards a family settlement if an
understanding has been arrived at between the parties previously, and it is
only written down in a document after the settlement has been arrived at, the
same would not require registration. The reference in this regard could be of Kale
& Ors. v. Deputy Director of Consolidation & Ors. [3 (1976) 3 SCC 119].
The
Supreme Court after placing reliance on Kale (Supra) in Sita
Ram Bhama v. Ramvatar Bhama [AIR 2018 SC 3057] has categorically held
as under:
“10. The only question which
needs to be considered in the present case is as to whether document dated
09.09.1994 could have been accepted by the trial court in evidence or trial
court has rightly held the said document inadmissible. The Plaintiff claimed
the document dated 09.09.1994 as memorandum of family settlement. Plaintiff's
case is that earlier partition took place in the life time of the father of the
parties on 25.10.1992 which was recorded as memorandum of family settlement on
09.09.1994. There are more than one reasons due to which we are of the view
that the document dated 09.09.1994 was not mere memorandum of family settlement
rather a family settlement itself. Firstly, on 25.10.1992, the father of the
parties was himself owner of both, the residence and shop being self-acquired
properties of Devi Dutt Verma. The High Court has rightly held that the said
document cannot be said to be a Will, so that father could have made Will in
favour of his two sons, Plaintiff and Defendant. Neither the Plaintiff nor
Defendant had any share in the property on the day when it is said to have been
partitioned by Devi Dutt Verma. Devi Dutt Verma died on 10.09.1993. After his
death Plaintiff, Defendant and their mother as well as sisters become the legal
heirs under Hindu Succession Act, 1955 inheriting the property being a class I
heir. The document dated 09.09.1994 divided the entire property between
Plaintiff and Defendant which document is also claimed to be signed by their
mother as well as the sisters. In any view of the matter, there is
relinquishment of the rights of other heirs of the properties, hence, courts
below are right in their conclusion that there being relinquishment, the
document dated 09.09.1994 was compulsorily registrable Under Section 17 of the
Registration Act”.
It
is sufficient to refer to the judgment of this Court in Kale and Ors. v.
Deputy Director of Consolidation and Ors. MANU/SC/0529/1976 : (1976) 3 SCC 119.
The propositions with regard to family settlement, its registration were laid
down in paragraph 10:
“10.
In other words to put the binding effect and the essentials of a family
settlement in a concretised form, the matter may be reduced into the form of
the following propositions:
(1)
The family settlement must be a bona fide one so as to resolve family disputes
and rival claims by a fair and equitable division or allotment of properties
between the various members of the family;
(2)
The said settlement must be voluntary and should not be induced by fraud,
coercion or undue influence;
(3)
The family arrangement may be even oral in which case no registration is
necessary;
(4)
It is well settled that registration would be necessary only if the terms of
the family arrangement are reduced into writing. Here also, a distinction
should be made between a document containing the terms and recitals of a family
arrangement made under the document and a mere memorandum prepared after the
family arrangement had already been made either for the purpose of the record
or for information of the court for making necessary mutation. In such a case
the memorandum itself does not create or extinguish any rights in immovable
properties and therefore does not fall within the mischief of Section 17(2) of
the Registration Act and is, therefore, not compulsorily registrable;
(5)
The members who may be parties to the family arrangement must have some
antecedent title, claim or interest even a possible claim in the property which
is acknowledged by the parties to the settlement. Even if one of the parties to
the settlement has no title but under the arrangement the other party
relinquishes all its claims or titles in favour of such a person and
acknowledges him to be the sole owner, then the antecedent title must be
assumed and the family arrangement will be upheld and the courts will find no
difficulty in giving assent to the same;
(6)
Even if bona fide disputes, present or possible, which may not involve legal
claims are settled by a bona fide family arrangement which is fair and
equitable the family arrangement is final and binding on the parties to the
settlement”.
The
Division Bench of Delhi High Court has held in Nitin Jain v. Anuj Jain
& Anr. [ILR (2007) II DELHI 271] that a memorandum recording an
oral family settlement which has already taken place is not an instrument
dividing or agreeing to divide property and is therefore, not required to be
stamped. The relevant observations from the said judgment have been extracted
below:
“6.
A Partition Deed is an instrument of partition and has been defined in Section
2(15) of the Stamp Act. The said investment is chargeable to duty as per
Schedule 1. Article 45 of the Stamp Act. Stamp duty payable on an instrument of
partition is @ 1% of the value of the property. A decree of partition passed by
a Court is also an instrument of partition as defined in Section 2(15) of the
Stamp Act, which reads as under: "2(15). "Instrument of
partition" means any instrument whereby co-owners of any property divide
or agree to divide such property in severalty, and includes also a final order
for effecting a partition passed by any revenue-authority or any Civil Court
and an award by an arbitrator directing a partition."
According
to Delhi High Court, though, the Courts have recognised oral partitions in
cases of joint families. An oral partition is not an instrument of partition as
contemplated under Section 2(15) of the Stamp Act. As it is not an instrument,
thus, on an oral partition no stamp duty is payable. It is thus held in Himani
Walia (Supra) as under:
“8.
The Courts have recognised that it is legally permissible to arrive at an oral
family settlement dividing/partitioning the properties and thereafter record a
memorandum in writing whereby the existing joint owners for the sake of
prostriety record that the property has been already partitioned or divided.
The memorandum does not by itself partition the properties but only records for
information what has already been done by oral partition. The memorandum itself
does not create or extinguish any rights. A record of oral partition in writing
is created. The writing records a pre existing right and does not by itself
partition the properties for the first time. As the memorandum only records
oral partition which has already taken place but does not in praesenti create
any right, it cannot be treated as an instrument creating partition. [Refer. Tek
Bahadur Bhujil v. Debi Singh Bhujil and others reported in AIR 1966 SC 292),
Bakhtawar Singh v. Gurdev Singh reported in (1996) 9 SCC 370, Kale v. Dy.
Director Consolidation reported in (1976) 3 SCC 119, Roshan Singh
v. Zile Singh reported in AIR 1988 SC 881 and Bachan Singh v. Kartar Singh and
others reported in 2001 (10) JT (SC) 64.]”.
It
was thus concluded in Himani Walia (Supra) as under:
9.
In view of the legal position explained above. it follows that a decree of
partition is an instrument of partition and therefore is required to be stamped
under Schedule I of Article 45 r/w Section 2(15) of the Stamp Act. However, an
oral family settlement dividing or partitioning the property is not required to
be stamped. Similarly, a memorandum recording an oral family settlement which
has already taken place is not an instrument dividing or agreeing to divide
property and is therefore not required to be stamped.”
“10.
Thus, it is clear that family settlements are not required to be compulsorily
registered, and stamp duty is not required to be compulsorily paid in respect
of the same, when the settlement has been arrived at initially as an oral
partition and is thereafter put into writing for the purpose of information.
Considering the said position, it is clarified that there is no requirement of
valuation of the suit properties in the present case. The payment of stamp duty
by the legal heirs of Late Sh. S.S. Walia and Dr. Urmila Walia shall stand
waived. Notices issued by the various authorities shall also stand cancelled
and withdrawn, without any further orders”.
As
illustrated above and as is held in several judgments referred to above, the
parameter of family settlement its enforceability and whether or not it is
liable to be registered and its effect has been answered in clear terms.
------
Anil K Khaware
Founder & Senior Associate
Societylawandjustice.com
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