Recording of memorandum of family settlement prepared after the family arrangement does not require registration

Ravinder Kaur Grewal & Ors. v. Manjit Kaur 6& Ors (SC) MANU/SC/0570/2020

THE SUPREME COURT HELD THAT

Recording of memorandum of family settlement prepared after the family arrangement does not require registration.

BRIEF FACTS

1. This appeal emanates from the judgment and decree dated 27.11.2007 passed by the High Court of Punjab and Haryana at Chandigarh1 in R.S.A. No. 946/2004, whereby the second appeal filed by the respondent Nos. 1 to 3 (heirs and legal representatives of Mohan Singh ¬ original defendant No. 1) came to be allowed by answering the substantial question of law formulated as under: ¬

"Whether the document Ex.P¬6 required registration as by way of said document the interest in immovable property worth more than Rs.100/¬ was transferred in favour of the plaintiff?"

2. The suit was filed by the predecessor of the appellants herein Harbans Singh, son of Niranjan Singh, against his real brothers Mohan Singh (original defendant No. 1) and Sohan Singh (original defendant No. 2) for a declaration that he was the exclusive owner in respect of land. He asserted that there was a family settlement with the intervention of respectable persons and family members, whereunder his ownership and possession in respect of the suit land including the constructions thereon.

3. The suit was resisted by the defendants by filing written statement. Harbans Singh (plaintiff) filed replications.

On the basis of rival pleadings, the Civil Judge (Junior Division), Sangrur in Suit No. 187/1988 B.T. No. 185 of 18¬1¬95 (18¬1¬95) framed following issues: ¬

i) . Whether the plaintiff is owner in possession of suit land? OPP
ii) Whether there was any family settlement between the parties on 10.3.1988 and memo of family settlement was executed by parties on that day? OPP
iii) Whether the plaintiff constructed shops, a service station and boundary wall around the disputed property? OPP
iv) Whether the plaintiff has become owner of suit land by adverse possession? OPP
v) Whether the property in dispute was purchased out by the income of Joint Hindu Family coparcenary property and construction on the suit land was also purchased by Joint Hindu Family coparcenary property? OPD
vi) Whether Sohan Singh, Mohan Singh and Harbans Singh constitute a Joint Hindu Family? OPD
vii) Whether the defendants are estopped from denying the execution of memo of family settlement by their act and conduct? OPP
viii) Relief."

During the pendency of the suit, Harbans Singh (plaintiff) expired and, therefore, the appellants herein were brought on record being his legal heirs.

The trial Court vide judgment and decree dated 19.1.2000, partly decreed the suit in the following terms: 

"RELIEF 30. In view of my discussion on various issues above, the suit of the plaintiff partly succeeds and partly fails. Therefore, his suit is decreed partly to the extent that he is declared to be owner in possession of khasra no. 935/1/1/2 (5¬18) and to the extent of ½ share in khasra no. 935/1/1/1 (5¬19) with construction there upon. Keeping in view the relationship between the parties and the circumstances of the case, no order as to cost. Decree sheet be prepared accordingly. File be consigned to the record room."

4. However,the defendants raised dispute claiming half share in respect of which Harbans Singh(plaintiff) was accepted and acknowledged to be the exclusive owner and as a result ofwhich it was decided to prepare a memorandum of family settlement incorporating theterms already settled between the parties.

5. The stated memorandum was executed by allparties on 10.3.1988.

6. However, after execution of the memorandum of family settlementdated 10.3.1988, the defendants once again raised new issues to resile from the familyarrangement.

7. One of the issues raised was whether there was any family settlementbetween the parties on 10.3.1988 and memo of family settlement was executed byparties on that day?

8. The Hon'ble Supreme Court held that that document dated 10.3.1988 executed betweenthe parties was merely a memorandum of settlement, and it did not require registration.The memorandum recording the family settlement itself does not create or extinguish any rights in the immovable property, therefore not compulsorily registrable; Those entering into the family settlement must have an antecedent title, claim, or interest in the property.

MEMORANDUM OF FAMILY SETTLEMENT

Often an individual invests his hard-earned money to purchase immovable property for his enjoyment during his lifetime. Post the demise of the owner, the property left behind by him is inherited by his legal heirs either as per his wishes as spelled out in his Will or in case, he dies without leaving a Will, then in accordance with the provisions of the Succession Act applicable to such individuals.
It is common to find such cases where upon the demise of the owner, the properties left behind by him devolve jointly on his legal heirs and such legal heirs are entitled to enjoy the rights, title, and interest in such properties jointly.
The joint enjoyment of such properties continues until one or more of the legal heirs (being the co-owner) desires to separate and seeks the partition of his undivided share in such property(ies). The need of partition arises as soon as one of the co-owners seeks the partition of his undivided share. By virtue of a partition, a property is divided amongst co-owners by clear identification and demarcation of their respective ownership share of such property.

Partition can be achieved by the co-owners either by the mutual consent of all co-owners or in case the co-owners fail to arrive at a mutual consent then the only option left is to seek partition through court of law by filing a suit for partition.
Consequently, there are no stamping or registration requirements for such an oral partition under the Registration Act, 1908 and Indian Stamp Act, 1899.
However, an oral partition may be subsequently recorded in a written instrument/ deed namely, Memorandum of Family Settlement for the purposes of keeping a record of the terms orally agreed in respect of the partition of the property(ies) between the co-owners.

A Memorandum of Family Settlement is a preferred mode adopted by the families to record the terms of the division/ partition of family property(ies) in comparison to a partition deed as it is not a compulsorily registrable instrument and the stamp duty implications on MOFS are considerably lesser than in case of a partition deed. MOFS in simple words is a document/ arrangement between the family members that records the orally agreed terms of division of property(ies) inter-se between them.
According to Halsbury's Laws of England, "A Family Arrangement is an agreement between members of the same family, intended to be generally and reasonably for the benefit of the family, either by compromising doubtful or disputed rights or by preserving the family property or the peace and security of the family by avoiding litigation or by saving its honour.

The agreement may be implied from a long course of dealing. But it is more useful to embody or to effectuate the agreement in a deed to which the term family agreement is applied."

The essentials of a family arrangement were laid down by the Supreme Court in the case titled as Kale & Ors vs. Deputy Director of Consolidation which are as follows:

1. The family arrangement should be bonafide in order to resolve present or possible future disputes among family members and to ensure equitable distribution of property among the family members.

2. The family arrangement needs to be honest, voluntary and should not be induced by fraud, coercion, and undue influence.

3. Family arrangement can either be oral or written.

4. The memorandum recording the family arrangement itself does not create or extinguish any rights in the immovable properties, therefore, not compulsorily registrable.

5. The members of a family who are parties to a family arrangement must have an antecedent title, claim, or interest in the property. If the rights of a property are relinquished in favour of a member in a family arrangement who has no antecedent title in the property than it shall be presumed that such person has an antecedent in the property.

6. The family arrangement which is fair and equitable is final and binding on the parties to the settlement.
MOFS and partition deeds are often confused to mean one and the same thing. 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 property.
Another important difference between the two is that a partition deed requires compulsory registration as it creates, assigns, limits or extinguishes rights or title in a property whereas MOFS is not a compulsorily registrable deed.

PLEASE NOTE THAT:

The Supreme Court in the category of judgments has held that registration of MOFS is not compulsory. SC held that in case a memorandum of family settlement is just recording the terms of settlement between the parties that was previously agreed between them then registration of such document is not compulsory as it in itself is not creating or extinguishing any right or title.

On the contrary, if the memorandum contains the terms and recitals of family arrangement made under that document then registration of MOFS would be compulsory.

In the said judgment, SC reiterated the observations of its earlier judgement that a MOFS prepared after family arrangement was already made for the purpose of recording the information or for the information of the court, is not required to be registered.

In view of the above it is clear that the registration requirements of the MOFS would depend on the terms of the MOFS. MOFS which records earlier agreed terms of oral partition between family members needs to be carefully drafted to convey this intent. In case such document/ deed is ambiguous then it is open to various interpretations and may be construed to be a partition deed which shall be required to be registered and attract payment of stamp duty.