Introduction
A Family Arrangement may be defined as an agreement between the family members intended to be generally and reasonably for the benefit of the family, by compromising disputed rights or through preserving the family property to avoid litigation. It is useful to embody or to effectuate the agreement in a deed where the term family agreement is applied[i].
The court held in Ravinder Kaur Grewal & Ors v. Manjit Kaur & Ors.[ii] that a memorandum of family settlement is merely a recording of the terms and conditions of the settlement between the parties being previously agreed between them and the registration of such document is not mandatory in itself as it does not create or extinguish right or title.
A case study of Korukonda Chalapathi v. Korukonda Annapurna Sampath Kumar[iii]
The Apex Court[iv] was hearing an appeal against the order of the High Court of Telangana, wherein it had set aside the order passed by the Trial Court that held that the unregistered and unstamped family settlement and receipt of Rs. 2,00,000 (Rupees Two Lakhs Only) by the respondent were not admissible as a piece of evidence. The court in the instant matter[v] held that “If the Khararunama does not ‘affect’ immovable property then there would be no breach of Section 49(1)(c) of the Registration Act, as it is not being used as evidence of a transaction affecting such property.”
Facts in brief
- In the instant matter, the respondent who was the younger brother of the appellants had instituted a suit wherein he sought a declaration of title over the schedule property.
- He also sought the appellant’s eviction and consequential perpetual injunction.
- There was a partition between the appellants, the respondent, and their other siblings. Under some disputes between the parties, a Khararunama was executed wherein the facts were recorded.
- The respondent contended that the Khararunama needs to be registered u/s 17(1)(b) of the Registration Act, 1908 and the appellants ought to pay a certain sum to the respondent. The document would be enforced after the receipt of the consideration.
Relevant statutory provisions
Section 17(1)(b) of the Registration Act (for short ‘Act’) makes ‘other non-testamentary instruments’, that purport to create, assign, limit or extinguish whether in present or in future any right or interest whether vested or contingent of the value of Rs.100/- and upwards in an immovable property compulsorily registrable.
Section 17(1)(c) of the Act says “Non-testamentary instruments which acknowledge the receipt or payment of any consideration on account of the creation, declaration, assignment, limitation or extinction of any such right, title or interest.”
Section 49(c) of the Act prohibits the admission of documents that are compulsorily registrable and are unregistered as evidence of any transaction affecting immovable property unless it has been registered.
Essentials ingredients of a Family Settlement[vi]
- It should be bona fide in nature to resolve family disputes containing details of equitable division of properties amongst the members of the family;
- The agreement must be voluntary and shall not be induced by fraud, coercion, or undue influence;
- Such an arrangement can be oral and no registration is necessary;
- Registration would only be necessary if the terms of the family arrangement are reduced into writing.
- A distinction is to 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 for recording or information of the court for mutation purposes.
- The memorandum does not create or extinguish any rights in immovable properties and it does not fall within the mischief of Section 17(2) of the Registration Act and hence, it is not compulsorily registrable.
- Even if bona fide disputes that do not involve any legal claims are settled through a family arrangement that is fair and equitable such an arrangement is final and binding on the parties to the settlement.
- Hence, the memorandum of a family settlement does not require registration.
Issues before the court
- Whether family settlement requires registration?
- Whether the Khararunama affected rights in the immovable properties in question?
Court Analysis
Issue 1
The court opined that an unregistered document can be used as evidence of any collateral transaction; it clarified that the said collateral transaction shall not itself be one that must be effected by a registered document.
In the case of K. Panchapagesa Ayyar v. K. Kalyanasundaram Ayyar[vii]– The High Court of Madras stated that “It is well settled in a long series of decisions which have since received statutory recognition by the Amending Act of 1929 (vide the concluding words of the new proviso to Section 49 of the Act) that a compulsorily registrable but an unregistered document is admissible in evidence for a collateral purpose that is to say, for any purpose other than that of creating, declaring, assigning, limiting or extinguishing a right to immovable property”.
Issue 2
The Bench stated that according to the words used in the document it intends to refer to the arrangements which the parties made in the past. The said document did not create, assign, extinguish or limit right in the properties.
What is the evidentiary value of Khararunama?
According to Section 49(1)(a) of the Act, a compulsorily registrable document, which is not registered, cannot produce any effect on the rights in immovable property by way of creation, declaration, assignment, limiting, or extinguishment. The said provision bars an unregistered document that is being used ‘as’ evidence of the transaction affecting the immovable property.
The bench stated that “If the Khararunama by itself, does not ‘affect’ immovable property, being a record of the alleged past transaction, though relating to immovable property, there would be no breach of Section 49(1)(c) of the Act, as it is not being used as evidence of a transaction affecting such property.”
In the case of Muruga Mudallar v. Subba Reddiar[viii] – The Court held that “the consequence of non-registration is to prohibit the document from being received not “in” evidence, but “as” evidence of any transaction affecting such property.”
Regarding the stamp duty, the bench stated that since the Khararunama was a mere record of the past transaction and hence it did not require to be stamped.
The decision of the court
The Division Bench comprising of Justices K.M Joseph and S. Ravindra Bhat, held that an unregistered family settlement document is admissible to be placed in evidence if it does not affect the transaction though the same cannot be allowed “as” evidence. The bench clarified and held that:
- The transaction could not be proved through Khararunama as evidence of the said transaction.
- “Merely admitting the Khararunama containing a record of the alleged past transaction, is not to be, understood as meaning that if those past transactions require registration, then, the mere admission, in evidence of the Khararunama and the receipt would produce any legal effect on the immovable properties in question.”
The bench concluded that when there had been a partition between the parties, there is no scope for invoking the concept of antecedent right, and hence as the appellants and the respondents had partitioned their joint family properties, the properties mentioned in the Khararunama would be separate properties of the respondent. By allowing the appeal the Apex Court set aside the order of the High Court.
[i] Halsbury’s Laws of England
[ii] Appeal (Civil), 7764 of 2014, Judgment Date: Jul 31, 2020
[iii] 2021 SCC OnLine SC 847
[iv] https://main.sci.gov.in/supremecourt/2016/29076/29076_2016_40_1501_30501_Judgement_01-Oct-2021.pdf
[v] https://www.scconline.com/blog/post/2021/10/05/is-a-family-settlement-not-affecting-immovable-property-compulsorily-registrable-document-will-it-be-admissible-as-evidence-supreme-court-decides/
[vi] Kale & Ors. v. Deputy Director of Consolidation & Ors (1976) 3 SCC
[vii] 1956 SCC OnLine Mad 141
[viii] 1950 SCC OnLine Mad 136
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