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Family settlement

(Querist) 21 May 2021 This query is : Open 
In a unregistered MOU of family settlement in respect to immovable property ,one of the clause/terms are none of the signatories can challenge or go to court.in respect to terms & conditions mentioned in the MOU. as it is binding on all signatories

Kindly advice is this condition binding on all signatories ? or it can be challenged in the Court of Law.
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Quick Summary
This discussion explores the validity and enforceability of unregistered family settlement MOUs, particularly concerning clauses that prohibit signatories from challenging the terms in court. While some argue such clauses are void against public policy, others suggest that even unregistered agreements can be binding through the principle of estoppel if acted upon. The impact of a signatory's death on the MOU's validity and the possibility of executing a new agreement are also discussed, with experts clarifying that legal heirs are generally bound by existing terms unless a new settlement explicitly cancels the old one.

J K Agrawal (Expert) 21 May 2021
This condition is null and any body can go to court.
Advocate Bhartesh goyal (Expert) 21 May 2021
No, this condition is against the public policy and principles of Natural justice so has no binding effect.
shyam lal (Querist) 21 May 2021
Attention advocate B. Goyal more so this question was asked because one of the signatory has died hence the living signatories want to draft a new MOU. is it possible?
In continuation does the existing MOU become null and void.after the death of one of the signatories,yes or no.
Advocate Bhartesh goyal (Expert) 21 May 2021
If all the signatories of MOU including deceased signatory's legal heirs desires to execute fresh/new Family Settlement, they can execute, no restrictions. In case fresh/new Family Settlement is executed,a condition is to be mentioned in fresh /new Family Settlement that previously executed Family Settlement will be deem cancelled.
On death of one of signatory of existing MOU ,MOU does not lose it's legality/validity legal heirs of deceased signatory are bound by the terms and conditions of existing MOU.
shyam lal (Querist) 21 May 2021
Advocate Goyal last Query What is the purpose of registered MOU?
Is a MOU alternative to a WILL that is has binding powers on all signatories,
Advocate Bhartesh goyal (Expert) 21 May 2021
( 1 ) Unregistered family settlement ( MOU ) has no legal sanctity/value in eye of law and does not confer title to its executant.
( 2 ) MOU is altogether different to will. A will is declaration of owner of property by which he gives rights of ownership of property as per his wish to his near, dear or relative .It comes in effect after the death of testator while family settlement is mutual agreement of parties for the property left by their predecessor without any testamentary document.it require compulsory registration and stamp duty. Registered family settlement has binding effect on its executants.
shyam lal (Querist) 21 May 2021
01/- as per earlier mentioned"On death of one of signatory of existing MOU ,MOU does not lose it's legality/validity legal heirs of deceased signatory are bound by the terms and conditions of existing MOU. Message"


02/-Unregistered MOU of family settlement in the eye of Law has no Legal santity as stated by you.
As a lay man ,Sir request of your good self to explain the two different statement,it would be highly appreciated.
Dr J C Vashista (Expert) 22 May 2021
I respectfully disagree with experts as unregistered family settlement is valid and enforceable between the family members (common ancesters).

In a recent case, Thulasidhara v. Narayanappa, 2019 SCC OnLine SC 645, the Supreme Court has held that a family arrangement, in the form of a document that mentioned the list of properties which were partitioned, though not registered, would operate as a complete estoppel against the parties to such a family settlement. It was held that even without registration a written document of family settlement/family arrangement can be used as corroborative evidence as explaining the arrangement made thereunder and conduct of the parties.
shyam lal (Querist) 22 May 2021
Experts explanation confusing,awaiting advocate Bhartesh Goyal to my query .
Advocate Bhartesh goyal (Expert) 22 May 2021
With due respect Dr Vashistha sahib my opinion was based on the judgement 2016 ( 8 ) S.C.C 705 Subrata M.N vs Vitthalanath M.N kshetron Apex court held " when family settle men is orally made, no registration is requiered and that would be admissible in evidence, however when reduce in writing registration is essential.
In another case 2018 ( 2 ) civil court cases 806 ( S.C ) Sita Ram Bhama vs Ramavtar Bhama , propositions with regard to family settlement were kaid down in which one of the proposition was as under:-
It is well settle that the registration would be necessary only of the terms of the family arrangement are reduce into writing ,Here also, a distinction should be made between a document containing the terms and recitals of a family arrangement made under the document and a mere memorandum.
Queriest clearly mentioned in query " unregistered MOU containing terms and clauses " which can not be said as memorandum .I think so,
Thanks sir,It is my pleasure that i learned lot of from you.
shyam lal (Querist) 22 May 2021
Lastly I wish to hear from J.L.AGARWAL what is his legal opinion,as other experts have contributed,so that the Query answer is better understood by a lay person.
J K Agrawal (Expert) 22 May 2021
In first settlement the term of restriction of seeking legal remedy is void as per section 28 of Indian Contract Act but the remaining settlement is valid. The parties and their heirs bound with the old settlement if it is acted upon actually. ('Acted upon actually' is condition first)

I agree with both the learned advocate Mr Goyal Sahib and Mr Vashista Sahib. Although it is tough to understand the exact law but I try to explain in simple words:-

Case 1
When family members orally divide the property and actually act upon the oral division and actually separates the property by meets and bounds. It requires no registration.
After doing so, if they reduce the terms of the division and list of property and the things which were orally they already made, is called memorandum of division. It also not require any registration.

Case 2
When parties 'think about division' to be taken place in future and reduce the terms and property list in paper and after some time they actually want to divide the property in future as per agreement- It is Family settlement and requires Registration.

If such settlement is not registered but parties acted upon the settlement and they have accepted the terms and further done 'some work' as per settlement (like actual partition of all or a few assets or shifting or erecting boundary walls or doing any act which is as per the settlement) - In such a case the settlement though not registered but as all the parties proceeded as per agreement by their conduct, they are bound with the terms of settlement. It is called rule of Estoppel and parties can not say that the settlement is not binding upon them. For this purpose of 'Estoppel' only the court admits the unregistered settlement otherwise such unregistered family settlement is not acceptable in court.

As such the opinion of both the learned advocates is correct and we got much to learn from them.
shyam lal (Querist) 22 May 2021
Thank you advocate JK AGARWAL ,you have mentioned about "meets & bounds" the MOU states division. of property on respective percentage basis eg.50%-25%-25% ,under these conditions does the MOU have to be registered ?
T. Kalaiselvan, Advocate (Expert) 22 May 2021
Section 49 of the Transfer of property act states that : No document required to be registered under section 17 of this Act shall be valid for creation, operation, declaration, limitation and assignment of any right, title or interest in any immovable property unless it's registered within the specified time period.
a family settlement, though not registered, would operate as a complete estoppel against the parties to such a family settlement.
Estoppel means a rule of evidence whereby a person is barred from denying the truth of a fact that has already been settled.
in the case of S. Shanmugam Pillai and Others v. K. Shanmugam Pillai and Others (1973) 2 SCC 312 it was observed as under:

“13. Equitable, principles such as estoppel, election, family settlement, etc. are not mere technical rules of evidence. They have an important purpose to serve in the administration of justice. The ultimate aim of the law is to secure justice. In the recent times in order to render justice between the parties, courts have been liberally relying on those principles. We would hesitate to narrow down their scope.
Thus the MOU for family settlement can be used as corroborative evidence as explaining the arrangement made thereunder and conduct of the parties.
I agree with the views expressed by learned expert Dr. Vashista in this regard.
K Rajasekharan (Expert) 22 May 2021
Every reply to the query given above is right and proper, it seems.

But some of them appear to be contradictory as each one of such answers deals with a quite different scenario.

Therefore let me try to explain the principle involved in it in my style hoping that it will not confound the existing limited confusion.

A family settlement needs registration if it assigns, declares or limits any right or title to an immovable property at the “present time or future”.

But a family settlement requires no registration if the family settlement is made as a mere record of any “past mutually agreed oral instructions or actions” by the persons involved in it.
If a person who, by exercise of his discretion, accepts a share in an undivided property and if he approaches the court against his accepted position in regard to the property, the court will reject the matter outright.

If a mutually agreed family settlement deed includes a clause that one cannot approach a court, that clause is unsustainable in law. That is because any party can approach the court with any other aspect of the matter except the one he had voluntarily agreed to. One’s fundamental right to approach a court cannot be prevented by a clause in an instrument.

In the present case, if the parties had already divided the property among themselves with set in boundaries and taken possession of the each one’s share well before the family settlement deed was prepared, then it will have legal force or is valid.

If the division is not already done in the past but the family settlement deed speaks of only about percentage of shares, it has no force in law. In such a scenario the brothers and the legal heirs of the deceased person will have to prepare a new family settlement deed while ignoring the old one. That new deed requires registration.
shyam lal (Querist) 23 May 2021
Expert RAJA.SHEKHARAN bulls eye answer ,one last point of Law can you substantiate following with reference to any court order/judgement as it would make my appeal acceptable.----in context to what you mentioned (division is not already done in the past but the family settlement deed speaks of only about percentage of shares, it has no force in law.)
Dr J C Vashista (Expert) 23 May 2021
Under Section 17 of the Registration Act, the documents which create, declare, assign, limit or extinguish any right, title or interest of the value of Rs. 100 and upwards, are to be registered. Under Section 49 of the Registration Act no document required by Section 17 or by any provision of the Transfer of Property Act to be registered, shall be received as evidence of any transaction affecting an immovable property.
Thus, as provided by Section 49 of the Registration Act, any document, which is not registered as required under the law would be inadmissible in evidence and cannot therefore be produced and proved under Section 91 of the Evidence Act.
In the light of the above, what is the legal position with regard to a family settlement or a family arrangement in respect of property? Whether such family settlement or arrangement, which is not registered, can be received in evidence?
This issued was considered by a 3-judge bench of the Supreme Court in the case of Kale v. Deputy Director of Consolidation (1976) 3 SCC 119. It was held that by virtue of a family settlement or arrangement, members of a family descending from a common ancestor or a near relation seek to sink their differences and disputes, settle and resolve their conflicting claims or disputed titles once for all in order to buy peace of mind and bring about complete harmony and goodwill in the family. Family arrangements are governed by a special equity peculiar to themselves, and will be enforced if honestly made, although they have not been meant as a compromise, but have proceeded from an error of all parties, originating in mistake or ignorance of fact as to what their rights actually are, or of the points on which their rights actually depend.

The Supreme Court further held that the object of the family arrangement is to protect the family from long-drawn litigation or perpetual strife which mar the unity and solidarity of the family and create hatred and bad blood between the various members of the family. It promotes social justice through wider distribution of wealth.
It was, therefore, observed that Courts lean in favour of family arrangements. Technical or trivial grounds are overlooked. Rule of estoppel is pressed into service to prevent unsettling of a settled dispute.

It was held that family arrangement may be even oral in which case no registration is necessary. Registration would be necessary only if the terms of the family arrangement are reduced into writing. Here also, a distinction should be made between the document containing the terms and recitals of a family arrangement made under the document and a mere memorandum prepared after the family arrangement had already been made either for the purpose of the record or for information of the court for making necessary mutation. In such a case the memorandum itself does not create or extinguish any rights in immovable properties and therefore does not fall within the mischief of Section 17(2) of the Registration Act and is, therefore, not compulsorily register-able.

It was held that, therefore, a document which is in the nature of a memorandum of an earlier family arrangement and which is filed before the court for its information for mutation of names is not compulsorily register-able and therefore can be used in evidence of the family arrangement and is final and is binding on the parties.

The Supreme Court held that even if a family arrangement which required registration was not registered, it would operate as a complete estoppel against the parties who have taken advantage of the family arrangement.
shyam lal (Querist) 23 May 2021
Eagerly awaiting answer from experts . specifically to my last thread of query addressed to expert Rajasheharan
K Rajasekharan (Expert) 23 May 2021
I have arrived at the above answer not by referring to a single case law but by reading mainly the provision of law and a catena of judgements on the topic which altogether makes one's understanding wholistic.

Of course, one can find judgements stating just the opposite as well.

It seems some of the case laws which I referred to while preparing an article (linked below) on the topic would be of help to you in this regard. The case laws are available on the Indiankanoon website

The article is at https://lawwatch.in/what-a-family-settlement-essentially-is/
ashok kumar singh (Expert) 30 May 2021
In a nutshell, a family settlement is an agreement where family members mutually work out how a property should get distributed among themselves. All the parties should be related to each other and have a claim to a share of the disputed property.
Property disputes are a common occurrence in India. Since greed is a great leveller, wars over wealth take place across the strata, from low-income households to ultrarich families. Even an iron-clad will may be challenged by unhappy beneficiaries. The obvious solution for most squabbling relatives is to take the matter to the court.
shyam lal (Querist) 31 May 2021
In a nut shell Expert Ashok ,your reply is not at all specific. it is well known fact if fate has it one has go to the court,and,when he hires a person with your knowledge he had it.Thank you for the reply.

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