Primacy of family settlements upheld

Introduction
Facts
Decision
Comment

Introduction

Family settlements and the documents relating thereto have been the subject of litigation for various reasons. One such litigious issue is whether the documents pertaining to family settlements must be registered under the Registration Act 1908. Under Section 49 of the act, if a document is not registered when it is required to be by law, such document will not:

• affect any immovable property provided for in the document; or
• qualify as admissible evidence of any transaction recorded in the document.

In the recent case Ravinder Kaur Grewal v Manjit Kaur,(1) the Supreme Court held that a memorandum of family settlement (MOU), which merely records the terms of a family settlement already acted on by the concerned parties, need not be registered.

Facts

The dispute arose among the members of a joint family with respect to land. In 1970, soon after the disputed land was purchased, discord arose between Harbans Singh(2) (the appellant) and his brothers Mohan and Sohan Singh (the defendants)(3) regarding its ownership. As such, a family settlement was agreed, which stipulated that:

• the appellant owned the land and the constructions thereon; and
• the revenue record would continue to name the defendants as the owners of half of the land.

The appellant constructed approximately 16 shops and a shrine for his wife on the disputed land. Further, both defendants were given properties that were registered in the name of the appellant and his immediate family members. However, disputes subsequently arose, wherein the defendants claimed ownership of the portion of the disputed land which the appellant owned under the family settlement. As a result, on 10 March 1988 the parties executed an MOU to record the above terms which had already been agreed in the family settlement. After the MOU's execution, the defendants raised new issues to resile from the family arrangement, pursuant to which the appellant filed suit before the trial court seeking a decree that he was the owner of the disputed land.

In its 19 January 2000 judgment, the trial court granted partial relief to the appellant and declared him to be the owner of a portion of the disputed land.

The appellant appealed to the district judge, who ruled entirely in his favour and declared him to be the owner of the disputed land and the constructions thereon.

The defendants filed an appeal before the Punjab and Haryana High Court, which allowed the appeal and restored the order of the trial court. The high court held that the MOU created rights for the appellant in the disputed land over which he had no pre-existing rights and thus had to be registered.

The appellant appealed the high court's order before the Supreme Court. The substantial question of law that arose before the Supreme Court was whether the MOU, which recorded the terms of the family settlement, had to be registered by law.

Before the Supreme Court, the appellant's primary argument was that the MOU, which had been executed in 1988, merely recorded the terms of the family settlement, which had been agreed in 1970. The appellant pleaded that as the parties to the family arrangement had already acted on the terms agreed in 1970, the MOU did not create any new rights and need not be registered. However, the defendants challenged the evidentiary value of the unregistered family settlement and the MOU, which merely contained the terms of the family arrangement.

Decision

The Supreme Court referred to the facts recorded by the district judge during the first appeal and observed that there was a family arrangement, on which both parties had acted. The Supreme Court agreed with the district judge that the family settlement could not be considered a mere document containing the terms of a family arrangement and was in fact an MOU which recorded the terms of the family arrangement. Accordingly, the Supreme Court held that the MOU need not be registered. The Supreme Court also held that as the defendants had benefited from the family settlement, they were estopped from resiling from the arrangement.

Comment

In the landmark case Kale v Deputy Director of Consolidation,(4) the Supreme Court set out the essential features of family arrangements, including the fact that oral arrangements need not be registered. With respect to written family arrangements, the Supreme Court distinguished between documents which contain the terms of a family arrangement and a memorandum, which is merely for recording or amendment purposes, and held that while the former requires registration, the latter does not. The present judgment reiterates this principle. In a separate case, the Supreme Court also ruled that irrespective of registration, a written document concerning a family settlement or arrangement can be used as corroborative evidence as to the arrangement and the parties' conduct.(5)

Family members often seek to resolve conflicting claims or disputed titles through family settlements. It is an established principle that such settlements should be governed by a special document, which should be enforced if made honestly. The Supreme Court's decision in the present case reinforces this principle. By relying on Kale, the Supreme Court has clarified that once family members have agreed to and acted on certain terms, they cannot approach the court to unsettle a settled dispute.

Historically, family settlements have served as a useful tool for settling family disputes and estate planning. To achieve such objectives and avoid litigation regarding the validity of family settlements, family settlement arrangements should be documented appropriately. A careful analysis of the terms and conditions of the arrangement is crucial to determine whether the document concerned need be registered.

For further information on this topic please contact S R Patnaik, Akshara Shukla or Nikhil Agarwal at Cyril Amarchand Mangaldas by telephone (+91 22 2496 4455) or email (sr.patnaik@cyrilshroff.com​, akshara.shukla@cyrilshroff.com or nikhil.agarwal@cyrilshroff.com). The Cyril Amarchand Mangaldas website can be accessed at www.cyrilshroff.com.

Endnotes

(1) Civil Appeal 7764/2014.

(2) Subsequently represented by his legal heir, Ravinder Kaur.

(3) Subsequently represented by their legal heirs.

(4) AIR 1976 SC 807.

(5) Thulasidhara v Narayanappa (2019) 6 SCC 409 and Subraya MN v Vittala MN, AIR 2016 SC 3236.