Authors: Adv. Rajneesh Sood and Adv. Gurpreet Singh
Date: April 2022
Deed of Family Settlement versus Memorandum of Family Settlement – Legal nuances
The authors make an attempt to explain the topic in simple words, the nature and character of these documents, how these are different and the implications of stamp duty payment and requirement of registration.
A “deed of family settlement” or “instrument of partition” or “partition deed” by whatever named called, refers to an arrangement whereby the co-owners of any property divide or agree to divide such property in severalty/amongst themselves.
The essentials of a family settlement have been laid down by the Supreme Court in Kale and Ors. V. Deputy Director of Consolidation and Ors. MANU/SC/0529/1976: (1976) 3 SCC 119.
- It must be for a bona-fide one to resolve family disputes (present or probable) and rival claims by a fair and equitable division or allotment of properties between the various members of the family.
- The settlement must be voluntary and should not be induced by fraud, coercion, or undue influence.
- The family arrangement may be oral.
- The members who may be parties to the family arrangement must have some antecedent title, claim or interest – even a potential claim in the property which is acknowledged by the parties to the settlement. Even if one of the parties to the settlement has no title but under the arrangement the other party relinquishes all its claims or titles in favor of such a person and acknowledges him to be the sole owner, then the antecedent title must be assumed, and the family arrangement will be upheld.
A family settlement, which is documented contains the terms and recitals of dividing/partitioning the properties is an instrument of partition under Section 2(15) and is chargeable to stamp duty as per Schedule I, Article 45 of the Indian Stamp Act, 1899. However, such instrument recording division/partition of immovable properties falls within the mischief of Section 17(2) of the Registration Act, 1908 and is therefore compulsorily registrable as such.
An oral family settlement/partition, which is legally permissible and recognised is not liable to stamp duty since it cannot be construed as an instrument of partition as contemplated under Section 2(15) of the Stamp Act, for its being oral only and accordingly, the registration of such family settlement is also neither practical nor necessary.
A “memorandum of family settlement” or “memorandum of family arrangement” by whatever name called has its genesis in oral family settlement arrived at between the family members and refers to a document whereby the existing family members for the sake of posterity record the factum of the property having been partitioned or divided previously. It does not by itself partition the properties for the first time but only records the same as an aid of memory or for information what has already been done by an oral partition.
The division Bench of Delhi High Court in Nitin Jain V. Anuj Jain & Anr. (ILR (2007) II Delhi 271] has held that a memorandum recording an oral family settlement which has already taken place is not an “instrument dividing or agreeing to divide property” in terms of Article 45, Schedule 1 and is therefore not required to be stamped.
The memorandum itself does not create or extinguish any rights in immovable properties as it only records the understanding arrived at between the parties previously and is only written down in a document after the settlement has been arrived at. Therefore, it does not fall within the mischief of Section 17(2) of the Registration Act, 1908 is therefore not compulsorily registrable.
In its latest decision of March 23, 2022, where during the pendency of the suit for partition, the three children and the wife of the deceased with the assistance of their legal Counsels had arrived at a settlement and thereafter the terms of the settlement were incorporated into the “Memorandum of Family Settlement and Arrangement dated October 16, 2018”, the High Court of Delhi in Himani Walia V. Hemant Walia & Ors. has upheld the same ratio that “family settlement are not required to be compulsorily registered and stamp duty is not required to be compulsorily paid in respect of the same, when the settlement has been arrived at initially as an oral partition and is thereafter put into writing for the purpose of information” and therefore cancelled and withdrew the directions of the Court’s registry with respect to furnishing valuation reports of the assets for the purpose of calculating the stamp duty and also the notices that were received by the legal heirs from the Collector of Stamp’s office in respect of the stamp duty payable.
A concerted and smart approach may help save legal heirs from paying stamp duty on family arrangement, adding on to the value that will eventually enhance their respective share in the family property.
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