India: Unregistered Memorandum Of Family Arrangement: Valid Instrument Recording Antecedent Title To Immovable Property

1. INTRODUCTION

The High Court of Bombay ("Court") recently in a case¹ held that a Memorandum of Family Arrangement ("MFA") executed among family members recording an antecedent title to the immovable properties belonging to family members, for the purpose of ensuring maintenance of family peace and harmony, does not amount to a conveyance or creation of any new right in such immovable properties. The Court further held that such a family agreement does not require any registration. Further, it was observed by the Court that a co-operative housing society cannot refuse to rely upon such family agreement for recognizing rights of transmission, merely on the ground that such an instrument is not stamped, IndusLaw had appeared for the party arguing that such a document does not require registration.

2. BACKGROUND

The Plaintiffs were nominated by their grandmother ("original owner") in respect of her share in a flat situated in Mumbai ("Flat"). After the death of the original owner, all legal heirs of the original owner executed a Memorandum of Family Arrangement confirming that the Flat shall be devolved upon the Plaintiffs, in the ratio of their nomination and that apart from the Plaintiffs, none of the other legal heirs of the original owner shall have any right, title and interest in the Flat. There was a dispute in the implementation of MFA, resulting in one of the signatories to the MFA instituting a suit in the High Court of Delhi. The matter was thereafter referred to mediation where the legal heirs of the original owner executed a settlement agreement ("Settlement Agreement"). This Settlement Agreement again confirmed that the Plaintiffs shall have the ownership of the Flat and the other legal heirs of original owner shall not have any right, title and interest in the Flat.

The Plaintiffs, also, instituted a suit in the Court seeking partition of the Flat by metes and bounds and possession of the Flat ("Suit"). One of the prayers in the Suit was to get an order against the society (where the Flat is situated) ("Society") to mutate names of the Plaintiffs in the share certificate in place of the original owner.

In the meantime, the Plaintiffs filed necessary forms with the Society for mutating their names in the share certificate of the Flat in place of original owner, on the basis of the MFA and the Settlement Agreement. The Society, however, merely updated their names as provisional members as nominees of the original owner. The Society refused to mutate the names of the Plaintiffs, mainly on the ground that the MFA was not a registered document and no stamp duty was paid on the same. The Plaintiffs, aggrieved by this action of the Society, argued before the Court that the action of the Society is erroneous. The Plaintiffs argued that Section 154 (B)(13) of the Maharashtra Co-operative Housing Societies Act, 1960 ("the Act") permits instruments such as a Memorandum of Family Arrangement to be considered as valid for transferring rights of a deceased member in the manner as stated in such Memorandum of Family Arrangement. The Plaintiffs further argued that such family agreements or arrangements are not legally required to be registered and the Society cannot refuse to consider the MFA merely because stamp duty is not paid as such a requirement in not envisaged under the Act. The Plaintiffs also argued that no new rights were created in the Flat under MFA. Hence, there is no requirement for registration of MFA as opposed to what was argued by the Society.

3. DECISION AND ANALYSIS OF THE COURT

The Court was primarily required to determine whether the MFA and Settlement Agreement which recorded the understanding among all family members of the original owner, require registration under Section 17 (1)(B) of the Registration Act, 1908 and whether non-payment of stamp duty makes it incapable of being relied upon while seeking the right of transmission on its basis. The Court observed that MFA was entered upon by the legal heirs of the original owner to give effect to the last wish of the deceased (original owner) having several properties, both movable and immovable. The Court noted that the MFA was executed with an intention to supersede any previous understandings, arrangements, authorizations, whether or not reduced to writing and to operate basis what the MFA records, in order to avoid any disputes among legal heirs of the original owner (recital to the MFA).

The Court followed the precedent of the Supreme Court of India in Kale & Ors. v. Deputy Director of Consolidation and Ors.² ("Kale") to interpret and analyze the true connotation of the word 'family' in India. The Court observed that courts should make every effort to give effect to a Family Settlement upon the broad and general ground that its object is to settle the existing or future disputes regarding the property among the family members and to bring peace and harmony amongst the family members. It was further observed that the word 'family' was construed in a broader sense by not restricting it only to a group of persons who are recognized in law as having right of succession or having claim to a share in the property in a dispute. The aim of family settlement is to ensure that the relationship between members of a family, co-exist with comity. In other words, the Courts endeavor to ensure that the descendants of the same flesh and blood, can appreciate something which is far more valuable than any monetary gains. The Court further observed that the meaning of 'family' held in Kale was further followed by a Full Bench of the Court in Chief Controlling Revenue Authority v. Abdul Karim Ebrahim Baiwa (Shri) and Ors.³. The Full Bench recorded that such agreement was nothing but a mere record of fact which took place between the parties with the efforts of settlement of disputes inter se. In view of the above, the Court negated the argument made by the Society that the MFA is nothing but conveyance by the legal heirs of the original owner to the Plaintiffs. Hence, the Court noted that the principle laid down in Kale applies in the present case and stated that the MFA was executed to honour and fulfill the wish of the original owner. Hence, the MFA and Settlement Agreement could not have been said to be a conveyance or an instrument creating fresh rights in an immovable property. Since this family arrangement records antecedent title to immovable properties, it would not fall in the category of "conveyance" requiring it to be registered.

Further, the Court observed that Section 154 (B)(13) of the Act deals with transfer of interest on the death of a member. The said provision includes document of family arrangement and when such family arrangement is produced before the Society, the Society is duty bound to give effect to the same and hence, the MFA and Settlement Agreement are not required to be registered. The Society cannot insist on it being stamped as the same is not the intention of the Act.

4. QUICK VIEW

The term 'family' is to be understood in a wider sense so as to include not only close relations or legal heirs, but even those persons who may have some sort of antecedent title, a semblance of claim, or even if they have a spes successionis⁴. This will ensure that future disputes never arise inter se and the family may devote its attention to more constructive work. Family arrangements are governed by principles which are not applicable to dealings between strangers. Since such documents do not create any new rights in the property, there is no transfer of property. Thus, the transmission of immovable property through family arrangements cannot be considered to be a conveyance of title for the purpose of registration. Such documents, therefore, do not require registration to be legally valid and effective. Also, a party cannot seek to deny or refuse to refer to a family agreement to give effect to the intentions described under it merely on the ground that such an agreement is not stamped.

Footnotes

1. Anurag Kumar Singhania & Ors. v. Hemant Garg & Ors. Interim Application (L) No. 28049 of 2021 in Suit No. 214 of 2023

2. (1976) 3 SCC 119

3. 2000 Supp Bom CR 353 (FB)

4. possibility of inheriting someone's property after the owner's death.

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