Work out an amicable solution

Amit Kumar

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It has often been seen that lack of fair, equitable and amicable settlement of the dispute relating to immovable properties between members of family lead to protracted legal battle that benefit none.  Family settlement/arrangement among the members of the family who are entitled to share in the immovable properties is the best way to avoid litigation among the family members and maintain harmony in the family. Family settlement is an amicable way to settle these issues without going through tiresome and costly legal process.

Draft carefully

Family settlement is a document of perpetual nature. Family arrangements not only govern the present generation but are also binding on future generations. Therefore, due care should be taken in drafting the terms of family settlement and clauses of family settlement should be clear and unambiguous. Help of experts should be taken in drafting family settlement. The deed of family settlement should contain full description of the property.  

It must also contain the shares allotted to the members in family settlement.  

The language of the deed must be clear and it must be easily understood by the members of the family. It has been seen that disputes arise between the family members with regard to rights of the parties with regard to common areas of the building like stairs, water tank, terrace, lobby, lawn etc. Therefore, due care should be taken in the deed to address the issues relating to common areas. 

Family settlement is often accompanied with maps of immovable property demarcating the share of each party. So it should be ensured that properties have been described correctly and shares of the parties involved should be marked in different colours.  

It should be signed by all members of the family. It is advisable to execute this settlement deed in the presence of independent witnesses. Separate relinquishment deed by each member of the family cannot take the shape of a family arrangement. Therefore, parties to the family arrangement should put their signature on deed of family settlement showing their voluntary consent and willingness to resolve the dispute amicably, equitably and in a fair manner.  

Essentials points

Supreme Court in its celebrated judgment of Kale and others versus Deputy Director of Consolidation and others (1976) 3 SCC 119 has laid down the essentials of a family settlement.  It held that family settlement must be a bonafide one so as to resolve family disputes and rival claims by fair and equitable division or allotment of properties between various members of the family and it must be voluntary and should not be induced illegally. 

It held that registration of family settlement would be necessary if terms of family settlement are reduced into writing. It also held that members to family settlement must have some antecedent title, claim or interest in the property acknowledged by the parties.  It is also necessary that all members of the family having claim in the property should agree and be party to the settlement.  

Though the family settlement can be arrived at orally also but it is advisable to have it in writing and it should be registered so as to obviate any dispute regarding existence or otherwise of the family settlement. 

It can be registered with the Registrar who is authorised to register Will, sale deed, gift deed, power of attorney etc. State government  in every district have established office for this. 

This type of settlement is not considered as a transfer. It is just a sort of allocation, distribution, re-distribution of pre-existing rights and any transaction which is arising out of it will not bring any capital gains tax liability. 

This settlement is neither a transfer nor a gift between the parties. 

However, this type of settlement, if entered with the object of escaping the tax liability may lead to allegation of fraud. Hence, intention plays a vital role before opting for the family settlement and it must be done in good faith. 

— The writer is Advocate on record, Supreme Court