Family arrangement

Querist : Anonymous (Querist) 29 October 2022 This query is : Resolved
We have a memorandum of recording of family arrangement-cum-compromise which contains the declaration of heirship, and specify the rights of each heir in ancestor property in future when parents cease to exist. This family arrangement is being prepared, signed and notarized in Maharashtra but the properties mentioned are in Bihar. Request kind guidance from experts if that is ok, and whether any particular issue needs to be taken care in order to ensure validity of this document. Thank you.

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kavksatyanarayana (Expert) 29 October 2022
The family arrangement/settlement arrived at between the parties which is in writing requires registration and an unregistered family settlement will not be admissible as evidence.

My suggestion to you is to get this settlement registered at the earliest.

kavksatyanarayana (Expert) 29 October 2022
As the properties are in Bihar, they shall be registered at Bihar.

Advocate Bhartesh goyal (Expert) 30 October 2022
Yes, family settlement requires compulsorily registration .Get thr family settlement registrred at place where the property is situated.

Dr J C Vashista (Expert) 30 October 2022
I respectfully disagree with experts on the issue of compulsory registration of a "family settlement in the light of:
Observations of Supreme Court in the case of Tek Bahadur V/s. Debi Singh, AIR (1966) SC 292 indicate that “Such Family Arrangements can be arrived at orally. Its terms may be recorded in writing as memorandum of what had been agreed upon. The memorandum need not be prepared for the purpose of being used as a document on which future title of parties is to be founded. It is generally prepared as a record of what had been agreed upon in order that there are no hazy notions about it in future. It is only when the family arrangement is reduced to writing with the purpose of using that writing as proof of what they had arranged and where the arrangement is brought about by the document as such, that the document requires registration, because it is then that it would amount to document of title declaring for future what rights and in what properties the parties possess. But a document which is no more than a memorandum of what had been agreed to between the parties does not require compulsory registration under Section 17, Registration Act.
Similar observations regarding registration are found in AIR (1966) SC 1836, Pulliah v/s. Narasimham.
The nature of Family Settlement and the allied questions whether such settlements amount to “Transfer” for purposes of Capital Gains or Registration have been dealt with by several decisions of the Supreme Court & also by some High Courts which explain what is family settlement and why it does not amount to “transfer” and why the memorandum of family settlement does not require registration.

Querist : Anonymous (Querist) 31 October 2022
Thank you Dr. Vashista, Advocate Goyal and Mr. Kavksatyanarayana for your prompt reply and valuable guidance. Dr. Vashista, I have opportunity to peruse Tek Bahadur case. My understanding from the case is as following: A family arrangement that merely records that Heir 1 and Heir 2 are joint owner of land parcel A and B (property Ancestor or parents acquired) need not be registered. However, if a family arrangement says that Heir 1 has right on Land parcel A and Heir 2 has right on land parcel B, the family arrangement requires registration. Request you to kindly confirm/ correct as appropriate.

Dr J C Vashista (Expert) 31 October 2022
A family settlement is an agreement mutually worked out by a settler among his family or by family members among themselves as to how the common property should be distributed and hold separately in accordance with the agreement. It settles the division or distribution of common property that the family members already own as a common property. It can be used to dispose of a self-acquired property in consideration of marriage or for any charitable or religious purpose. Both movable and immovable property can be disposed of by family settlement.
The document should be registered at the registration office, if it intends to assign immovable property. The stamp duty depending on the value to the property is applicable to such a document.
The Supreme Court in Sahu Madho Das and Others v Pandit Mukand Ram and Another (1955 AIR 481), held: “It is well settled that a compromise or family arrangement is based on the assumption that there is an antecedent title of some sort in the parties and the agreement acknowledges and defines what that title is, each party relinquishing all claims to property other than that falling to his share and recognizing the right of the others, as they had previously asserted it, to the portions allotted to them respectively. That explains why no conveyance is required in these cases to pass the title from the one in whom it resides to the person receiving it under the family arrangement. It is assumed that the title claimed by the person receiving the property under the arrangement had always resided in him or her so far as the property falling to his or her share is concerned and therefore no conveyance is necessary.”
This observation simply means that the parties to the arrangement had an antecedent title of some sort and that the agreement clinches and defines what that title is.
Family arrangement can be arrived at even orally. Its terms can be recorded in writing as a memorandum of what has been settled among the parties.
Such a memorandum is nothing but the minutes of what has already been agreed to by the parties. The memorandum thus drawn up does not create or extinguish any right to immovable property of its own.
In Tek Bahadur Bhujil v Debi Singh Bhujil and Ors (AIR 1966 SC 292), the SC holds:
“Family arrangement as such can be arrived at orally. Its terms may be recorded in writing as a memorandum of what had been agreed upon between the parties. The memorandum need not be prepared for the purpose of being used as a document on which future title of the parties be founded. It is usually prepared as a record of what had been agreed upon so that there be no hazy notions about it in future. It is only when the parties reduce the family arrangement in writing with the purpose of using that writing as proof of what they had arranged and, where the arrangement is brought about by the document as such, that the document would require registration as it is then that it would be a document of title declaring for future what rights in what properties the parties possess“.

Dr J C Vashista (Expert) 31 October 2022
To be more precise about your query extract of para 15 of the Tek Bahadur Bhujil case is as under:
"15. The contention is that the family arrangement of 1942 was not only a recognition of antecedent title of the plaintiff, but it is this document itself which declares or creates the title of the plaintiff in the disputed land. The plaintiff was only the step-brother of Tek Bahadur. The property, even assuming the plaintiffs case to be correct, was acquired by the mother and therefore the plaintiff had no interest in the property in his own right and consequently the title is thus claimed through this document; Section 17 therefore applied to the case.

It is not necessary to refer to the large number of authorities cited by the parties. It is sufficient to say that a document called a family arrangement as such is not immune from registration. But it will be a question of fact to be determined in each case primarily on the interpretation of the document and the surrounding circumstances whether the document in question itself creates title or it only acknowledges the antecedent title to the property.

All the three brothers, although the plaintiff of the present suit was a step-brother, regarded the property as their co-parcenary property and in order to settle the claims of the two brothers each of whom was exclusively claiming the property, the document was executed in which the antecedent claim of the plaintiff was also recognized inasmuch as certain property was held by Tek Bahadur and the plaintiff jointly. This document therefore itself neither creates any title in the plaintiff nor declares his title and does not require registration."

Querist : Anonymous (Querist) 31 October 2022
Thank you Dr. Vashista for explaining the concept. The test (to ascertain the need of registration) is whether the document creates a title or only acknowledges it. I am grateful to you for your kind guidance. Thank you very much.

K Rajasekharan (Expert) 31 October 2022
Here in this issue relating to the registration or non-registration of Family Settlement what Dr Vashista says is the right legal position of the Supreme Court and its forerunner, the Privy Council, even though the dividing line between these two is often misunderstood by many.

I have prepared a write-up on family settlement which deals with this issue as well and that is available at https://lawwatch.in/all-about-family-settlement/

Querist : Anonymous (Querist) 31 October 2022
Thank you very much Advocate K Rajasekharan. Appreciate you sharing your post, it explains a lot of points. Thank you.

P. Venu (Expert) 01 November 2022
To my knowledge, the legal position is that family settlement/arrangement arrived at orally and acted upon is valid even in the absence of registration. Else, the deed of settlement requires to be registered.