There is an impression that the more complex a document , the greater its value. This is not correct. Certain documents reducing an oral family arrangement to record are those which cover large-value properties. The documents may be so simple that the simplicity itself may throw doubt on the documentation. Further, this is a matter which frequently comes up for discussions. The relevant queries are collated in question-answer format to enable an easy understanding.
1. What is a family arrangement?
Broadly speaking, it is an arrangement or an agreement between members of one family. It is usually in the nature of settling a dispute. The object is to preserve the property and the good name of the family by recognising that it is not in the good interest of the family for the members to engage in fights or disputes. It is essentially in the nature of a compromise. The idea is to preserve and protect the peace, security and the interest of the family and its members as a whole.
2. What are the critical aspects of a family arrangement?
The arrangement should be made in good faith. Good faith can be stated to be the essence of the family arrangement. It should not be made with a view to circumvent provisions of law relating to stamp duty or provide an advantageous position with regard to stamp duty and registration costs. It must not be in the nature of extinguishing or limiting the rights of a family member who is not a consenting party to the arrangement. It should be in the nature of settling disputes, promoting harmony and not in the nature of inciting disputes or disrupting the harmony. There should not be any fraud or undue influence played in any member or members of the family. It must be a voluntary arrangement.
3. What is the consideration involved in a family arrangement?
If you take the case of sale, the sale price is usually the consideration for conveyance of the property. However, in a family arrangement, the settlement of disputes, harmony within the family, honour of the family, prevention of disputes, compromise of disputes, preservation of property and, in general, matters in the nature of protecting the interest of all concerned will be treated as sufficient consideration, so long as the arrangement is made in good faith.
4. Can a family arrangement be made orally?
A family arrangement can be made orally. It is legally valid and recognised. However, all the critical factors of a valid family arrangement would be applied to find out whether such arrangement would be valid and fair. The circumstances have to be looked into.
5. What is the basis on which the rights of the members to a family arrangement is recognised?Online GST Certification Course by TaxGuru & MSME- Click here to Join
A family arrangement is not treated as a conveyance. It is only in the nature of allocation, distribution, re-distribution or recognition of pre-existing rights. This is like re-alignment of rights. In the process, some of the pre-existing rights of one of more members may even be extinguished by their consent. So long as it meets the other requirements of a valid family arrangement, this is also recognised. The matter to be considered is the recognition of a claim or a right and not the transfer of the same even though there could be relinquishment by one or more members or acknowledgement of rights of others by one or more members.
6. What can be termed as a “Family Dispute”?
The dispute could relate to any aspect, but is usually relates to the rights or claims in respect of property, assets, enjoyment of rights in respect of properties, claims, shares, possible claims, family feuds, refusal to recognise rights of family members, etc.
It could relate to any aspect which may threaten the rights of any member or the family as a whole, if the disputes are prolonged or escalated or in the nature of creating situations or circumstances that the members are not able to meet eye to eye. It could be a genuine dispute or a controversy, rival claims, assertions and denials. It is unfortunate that many disputes revolve around the sheer ego of the persons involved. The law takes it that these disputes are not in the best interest of the members of the family.
7. Does a family arrangement require to be duly stamped and registered?
This depends on the manner in which the document is made. Generally, if it is a memorandum recording a past transaction or is a record or a chit or a list merely reducing the earlier oral family arrangement, then there may not be any necessity for payment of stamp duty and registration charges as this is not a document of title. Otherwise, if it is intended to be a document of title containing declarations of rights of parties, then it has to be properly stamped and registered. This is the most difficult and controversial part of family arrangements. It is advisable to obtain proper advice from a lawyer in this regard.
8. How to determine whether a particular document relating to a family arrangement requires to be stamped and registered?
This depends on various facts and circumstances and the document itself. One has to look into the manner in which it is made; the phraseology and wordings employed; the setting out of rights and terms and conditions; reference to pre-existing rights of the members; reference to the parties being members of Joint Hindu Family; timing of the document, besides other matters which may be relevant on a case to case basis.
9. What is the difference between a family arrangement and partition?
A family arrangement may be based on disputed or potential or possible or even notional claims. In a partition, there should be very clear pre-existing rights. In a family arrangement, as is obvious, some degree of relationship is involved. A partition can be entered into between persons who have no family relationship, but are co-owners of property. A family arrangement can be in the nature of re-aligning, re-distributing or even consolidating certain claims and rights. A partition is always in the nature of division of property. There could be other differences on a case-to-case basis.
10. Is it possible to have a summary of matters relating to family arrangement?
A family arrangement can be made orally. It need not be necessarily reduced to writing. If it is implemented in oral form, the question of stamping or registration does not arise.
Depending on the wordings employed, facts and circumstances and other factors, it may or may not required to be stamped and registered. Each document has to be scrutinised on the basis of the wordings contained in the document to arrive at a conclusion whether the same requires to be stamped and registered or otherwise.
At times, it may only be stamped, but not registered in which case it can be looked into for collateral purposes. If it is required to be stamped and registered, but is not properly stamped and registered, it cannot be looked into for any purpose. Whether a purpose is collateral or not, is a matter which has to be gathered from the facts and circumstances concerned.
(The author is partner, RANK Associates, Advocates)