Partition of Property Amongst Family Members

Partition of Property Amongst Family Members

Ever since the beginning of time, the property is deemed to be a mark of high economic status. Numerous displays of family disputes over property in movies and novels, only go on to prove this point. The partition of property amongst family members may be:

Contested – In this case, a lawsuit may be filed in the court, and the decree passed by the court on the basis of the inheritance document or facts of the case, will be binding.

Uncontested – In this case, the following may be drafted:

Partition Deed – It allows a joint division of the family property, amongst its members, as per the law applicable to them, so that each member becomes an owner of the share allotted to him.

Family Settlement – It does not require registration and stamping like a partition deed, however, as per Halsbury’s Laws of England- It is an agreement of compromising the doubtful or disputed property rights and avoiding litigation to save the family honour. In Lala Khunni Lal v. Kuwar Gobind, the Privy Council held that courts must give full force to family settlements, which are bona fide and without fraud.

Advantages of family settlements

  • Capital Gains tax does not arise because such transaction is not treated as a transfer.
  • Clubbing provisions of land will not be applicable on the same.
  • There is equitable distribution of property, rather than claiming as per laws applicable.
  • Registration of oral agreements is not necessary.

Essentials for family settlements

Registration is necessary when you are doing partition of property amongst family members where the terms of the family settlement are reduced to writing, and any unregistered document shall not be admissible as evidence in the court. However, there is a difference between the document containing terms and recitals of the family settlement and a memorandum prepared for the purpose of record or information of the court for making necessary mutation.

Features of the divided property

  • It acquires a new title and each owner gives up his interest in the share of the co-owners.
  • Each owner may sell, transfer, exchange or gift his property as its absolute owner.
  • The property in share is inheritable.
  • If an NRI or Person of Indian Origin (PIO) inherits such property, wealth tax will not be attracted to it.
  • If the division is done by way of a partition deed, it is necessary to register it in the office of the sub-registrar, as it creates new owners of the property. The deed should also contain the date from when the partition is effective and names of parties with respective shares.

PARTITION OF HINDU UNDIVIDED FAMILY PROPERTY

partition of property in hindu undivided family

The Hindu Law defines a Hindu Undivided Family (HUF) as a family which consists of male lineage decedents from a common ancestor and also includes their wives and unmarried daughters. HUF is also a separate legal entity under the Income and Wealth Tax Act and is liable to pay tax. It is common knowledge that the affair of the HUF is managed by the Karta. Hindu Law is comprised of two schools of law, Dayabhaga and Mitakshra school. Dayabhaga is applied in West Bengal and Assam and Mitakshra are applied in rest of India.

Partition means ending the status of Joint Hindu Family. Under Hindu Law when the Joint Family status comes to an end there is division of property among members and joint ownership of property comes to an end. Partition of the HUF property can be of two types under the Hindu Law i.e. total and partial. In total partition, all the member of the HUF ceases to be members of the HUF and the whole property ceases to be the HUF property. In partial partnership, the willing members of the HUF opt out of the partnership and the rest of the people continue to be members of HUF. Partial partition can be property specific too where the property is divided between members and the rest of the property continues to HUF property.

To start partition proceedings all that is necessary is a clear indication by a member of the HUF to separate himself from the family. Such declaration should be known to the members of the HUF who would be affected by the decision. Partition of the property will only take place when all the members of the HUF agree to the terms of the partition.

Partition of HUF can be done through family settlement or through partition deed. Stamp duty is not required for family settlement and thus is not required to be registered, whereas partition deed attracts stamp duty and must be registered. Due to huge expenses that come along with partition, family settlement is preferred.  Things to keep in mind while perusing with the option of family settlement is that the partition should be voluntary and should be without any force, threat, coercion or fraud. It should be fair and equitable settlement and though it is unstamped and unregistered it is binding on every member.