India: Supreme Court Ruling On Alimony And Clarificatory Amendment To Trust Law

SUPREME COURT RULES ON BENCHMARK FOR ALIMONY

The Supreme Court of India in its recent decision1 held that a benchmark of 25% of the net salary of a husband was held to be a "just and proper" amount as alimony to his former wife. The Court, has referred to and concurred with its previous ruling2 delivered in 1970.

Factual Background

Rita Dey Chowdhury (Respondent), and her husband Kalyan Dey Chowdhury (Appellant) were married in the year 1995, at the Appellant's residence at Kalna, West Bengal. The Respondent gave birth to a son (who is now a major) in 1996, in her maternal home where she was staying with her parents. After the birth of her son, the Respondent allegedly continued to live with her parents and refused to return to her matrimonial home, insisting that the Appellant move cities and into her parents' house in Chandannagore.

Both the Appellant and Respondent were embroiled in multiple litigations over the years, which began when the Appellant filed for an application for restitution of conjugal rights against the Respondent. In response, the Respondent lodged a case of husband or relative of husband subjecting her to cruelty as well as criminal breach of trust against the Appellant and his parents. Simultaneously, the Respondent also filed a maintenance case, claiming maintenance for herself and her minor son.

In the year 2003, the Respondent filed for judicial separation from the Appellant, and the District Court delivered an ex parte decree for judicial separation and permanent alimony was ordered under Section 25 of the Hindu Marriage Act, 1955 (HMA) at INR 2,500 per month to the Respondent, and INR 2,000 per month to their minor son.

In 2007, the Appellant filed for a divorce petition for dissolution of his marriage with the Respondent, in which the Respondent once again filed for an application for permanent alimony and was granted the enhanced amount of maintenance of INR 8,000 per month, by the Additional District Judge in Hoogly.

In 2010, the Respondent filed an amendment application under Section 25 (2) of the HMA requesting enhancement of the maintenance amount of INR 10,000 per month for herself and INR 6,000 for their minor son. The application was allowed and maintenance granted for both the Respondent and her son each, at the rate of INR 6,000 per month. Aggrieved by this, the Respondent preferred revision petitions to the Courts with competent jurisdiction and as a consequence, the Single Judge of the High Court of Calcutta enhanced the amount of maintenance to INR 23,000 per month. By then, the Appellant had remarried and was borne a second child from this wedlock. Unhappy with this verdict, the Appellant therefore preferred an appeal before the Supreme Court.

Supreme Court's Ruling

The Supreme Court noted that the amount of permanent alimony awarded must be befitting the status of the parties and the capacity of the spouse to pay maintenance. It has stated that "maintenance is always dependent on the factual situation of the case and the court would be justified in moulding the claim for maintenance passed on various factors". In order to reach a benchmark rate for payment of permanent alimony, the Supreme Court relied on its past decision wherein it was held that 25% of the net income of the husband is a "just and proper" amount as alimony.

The Supreme Court took into consideration that the Appellant's net salary in February 2015 was INR 63,842, whereas in February 2016, the net salary of the Appellant was INR 95,527. It was also acknowledged that the Respondent herself earns INR 30,000 per month and that their son is no longer a minor. Further, the Supreme Court additionally reasoned that the Appellant is now remarried and is hence required to provide for his new family. In consideration of the aforementioned facts, the Supreme Court directed that the maintenance amount payable to the Respondent and her son, be reduced from INR 23,000 per month to INR 20,000 per month.

Khaitan Comment

Section 25 of the HMA confers powers upon the court to grant a permanent alimony to either spouse who claims the same by making an application. The section also confers ample power on the court to vary, modify or discharge any order for permanent alimony or permanent maintenance in the event of "change in the circumstances of the parties". Section 125 of the Code of Criminal Code, 1973, also criminalizes the neglect or refusal of a person to maintain his wife, children or parents.

Although the reasoning of the Supreme Court in the above decision can be appreciated for the logic being applied in tandem with the circumstances and facts of the case; the Court has shied away from revisiting the rationale to adopt the 25% benchmark. In the Dr Kulbhushan Kumar case, the learned Bench, while referring to an older case3, wherein 25% of the income of a deceased husband's estate was payable as maintenance to his wife, itselfacknowledged that there was no principle behind the determination of this proportion of "25%". Further, in the Dr Kulbhushan Kumar case, the cap of 25% of the husband's income was with respect to the maintenance amount for the (former) wife only and not the child, who had a separate maintenance amount that was capped at 15% of her father's income. The Supreme Court ought to have considered all sources of income of the husband and not just the net salary.

Relevant factors such as number of dependents that need support, their special needs, lifestyle of parties etc. may influence the quantum of alimony and the same should be considered. Although the quantum of alimony in India is currently decided at the Court's discretion, it would be useful for a special committee to examine this issue in detail as may be applicable for each community (since matrimony and divorce is governed by personal law in India) and provide recommendatory guidelines enumerating relevant considerations that should be factored while deciding matters concerning maintenance and alimony.

AMENDMENT TO INDIAN TRUSTS ACT, 1882 TO WIDEN PERMISSIBLE INVESTMENTS

Introduction

The Indian legislature has enacted (with effect from 17 April 2017) the Indian Trusts (Amendment) Act, 2016 (Amendment), and amended a specific provision of the Indian Trusts Act, 1882 (Trusts Act).

A trust is an obligation attached to the ownership of property, which arises out of a confidence reposed in and accepted by the owner (author or settlor), or declared and accepted by him for the benefit of others (beneficiaries). Since the trustee being the legal owner of the trust property, shall govern and administer it for the benefit of the beneficiaries, the author or settlor includes certain terms for such governance and administration in the trust deed. Further, the trustee is also bound by the rules specified in the Trusts Act. The power to make investments using the trust property, for the benefit of the beneficiaries is one such provision.

The amended Section 20 of the Trusts Act deals with permissible investments of the trust property by the trustee of a trust and permits investments in promissory notes, debentures, stocks, annuities, securities, etc.

Amendment to Trusts Act

The Amendment has broadened the scope of investments that may be made by a trustee. A trustee may now make any investment that is expressly authorised by the settlor by way of the deed of trust.

Khaitan Comment

Prior to the Amendment, a trustee was permitted to only invest the trust property in "any securities or class of securities" that were expressly authorised in the deed of trust. This amendment widens the scope and discretion of the trustee to invest the trust money in any asset, provided such investment is expressly stated and authorised in the trust deed. In the context of discretionary trusts, this amendment should be adequately accounted for; with specific provisions for investment mandates to be included in the deed of trust.

The Trusts Act is a legacy of the British Raj and is one of the oldest legislations in India. Despite minor revisits from time to time, the Trusts Act has remained largely untouched and has provided a solid base for numerous trust structures for over a century. This legislative reliability is a major reason for trust structures to have picked up traction in recent years, as effective tools of succession planning, as well as asset management and protection. Providing the flexibility to invest trust money as per the preferences of the parties of the trust is a welcome move and a step in the right direction.

Footnotes

1 Kalyan Dey Chowdhury v Rita Dey Chowdhury, SLP(C) No. 34653 of 2016

2 Dr Kulbhushan Kumar v Raj Kumari and Anr., AIR 1970 SC 234

3 Judicial Committee in Mt. Ekradeshwari v Homeshwar, Privy Council, 1929.

The content of this document do not necessarily reflect the views/position of Khaitan & Co but remain solely those of the author(s). For any further queries or follow up please contact Khaitan & Co at legalalerts@khaitanco.com

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