Family Settlement and Property Rights: Supreme Court’s Landmark Ruling

In a significant legal development, the Supreme Court of India has delivered a crucial ruling on family settlement and property rights. This ruling has far-reaching implications for maintaining peace and goodwill within families while ensuring fair property distribution. The case involves intricate details of a family arrangement regarding the transfer of property rights. Let’s delve into the details of this impactful judgement by the Supreme Court.

Facts

• The High Court found that the first defendant had offered to sell his share to the plaintiff.
• The plaintiff could have sent a draft but did not act on the offer.
• The High Court noted the first defendant’s precarious health condition was known to the plaintiff.
• The High Court dismissed the civil suit filed by the appellant as the offer was not accepted.
• Reference to Section 20 of the Specific Relief Act was made, indicating the appellant was not entitled to discretionary relief.
• The High Court found there was no valid and binding contract between the parties due to vague and indefinite clauses.
• The Partition Act was suggested as a solution for the fragmentation issue.
• Section 22 of the Hindu Succession Act was declared unconstitutional by the Court.
• The trial court had initially declared the sale null and void, but the High Court overturned this decision.
• The High Court concluded that the appellant had lost the preemptory right to purchase the share leading to the sale in favor of the second defendant.
• The plaintiff was entitled to specific performance as per the terms and conditions of the agreement dated 31.03.1982 to purchase the share of the first defendant.
• The second defendant contested the matter claiming that the plaintiff never intended to purchase the property and that he was a tenant aware of the family arrangement.
• The trial Court found that the family arrangement was executed and referenced telephone bills as proof of communication between the plaintiff and the first defendant regarding the sale.
• The first defendant violated the family settlement by selling the property to the second defendant without the concurrence of the plaintiff as per the family arrangement.
• The first Appellate Court upheld the decision and found that no proper offer to purchase was made by the first defendant to the plaintiff.
• The disputed house was eventually transferred to three individuals, including the plaintiff, by the Estate Officer of Chandigarh.
• The plaintiff filed a suit to declare the sale deed to the second defendant void and to seek specific performance of the agreement entered into in 1982.
• It was alleged that the sale to the second defendant violated the family arrangement and would result in fragmenting the property.
• The Appellate Court found that the sale to the second defendant was not in accordance with the family arrangement and that the second defendant was not a bona fide purchaser.
• The plaintiff was never offered the opportunity to purchase the share of the first defendant as per the agreement.

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Issue

• The issue in question is whether there was a family settlement.
• Family settlement was pleaded in paragraph 6 of the plaint.
• The key points for decision include whether the family settlement is valid and enforceable.
• The High Court questioned the validity of the family settlement without any plea.
• An additional issue is the impact of absence of written concurrence by brothers for sale.
• The High Court’s decision on the exercise of discretion under Section 20 of the Specific Relief Act is also under scrutiny.
• Another aspect to consider is whether an offer was made by the first defendant to the plaintiff before the sale of the property to the second defendant.

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Arguments

• The appellant’s counsel argued that the family settlement clause required written concurrence from other sharers before a valid sale deed was executed.
• The correspondence revealed that the first defendant’s wife insisted on full payment at Bhilai, hindering conveyance at Chandigarh where the property was located.
• The High Court overlooked the breach of the family settlement rule in favor of the second defendant.
• Courts generally support family settlements for maintaining peace and goodwill.
• There is no absolute prohibition against the first defendant selling his share, especially to his brothers in a family settlement context.
• The appellant was always willing to take the first defendant’s share.
• Technicalities like limitation should not disrupt the implementation of a family settlement crucial for family harmony.
• Under Rule 16 of Chandigarh Estate Rules, 2007, no fragmentation or amalgamation of sites is allowed.
• Such settlements operate under special equity principles ensuring fairness and familial well-being.
• The family settlement required preference to other sharers and written concurrence, serving as a partial prohibition against third parties acquiring family property.
• The purpose of clause (5) was to prevent third parties from claiming entitlement to family property.
• Judgments including K. Naina Mohammed v. A.M. Vasudevan Chettiar, Hari Shankar Singhania v. Gaur Hari Singhania, and Muhammad Raza v. Abbas Bandi Bibi were referenced to support the unique treatment of family settlements over commercial settlements.
• The respondent’s counsel argues that the conversation did not establish the awareness of the family arrangement by the respondent, making the second defendant a bonafide purchaser.
• Clause (11) of the agreement stated that male heirs of Savithri Ammal and Rukmani Ammal could sell their shares only to other sharers at market value, not to strangers.
• The appellant’s counsel asserts that the first defendant must fulfil obligations under the settlement, treating it as a right of preemption, as per a previous court decision.
• The offer of Rs.5 lakhs was considered reasonable, but the plaintiff did not accept it, leading the first defendant to sell to the second defendant.
• The second defendant is argued to be a bonafide purchaser, with the plaintiff refusing the offer despite the first defendant’s urgent need for money.
• The respondent’s counsel supports the High Court’s order and criticizes the Appellate Court for instructing the second defendant to put the plaintiff in possession despite being a protected tenant.

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Analysis

• The will stipulated that after the death of the sisters, their male heirs would acquire absolute rights in the properties with the limitation that they shall not sell the properties to strangers.
• The restriction against selling to strangers was considered void due to violating the rule against perpetuity.
• The male heirs of Savithri Ammal and Rukmani Ammal accepted the conditional conferment of title of the properties.
• In a case involving a compromise, it was determined that the plaintiff and first wife couldn’t transfer the property to a stranger as per the agreement.
• The court discussed pre-emption rights in the context of the property transfer conditions.
• Family settlements that aim to keep properties within the family generally receive court approval.
• Ownership was designed to pass on to the legal heirs of the two wives generation by generation.
• The primary right of a pre-emptor is the offer of a thing about to be sold, followed by a secondary right to acquire the thing sold despite preferential rights of other pre-emptors.
• The clause in question is part of a family settlement between Mehta brothers.
• The appellant acknowledged the reasonable offer made by First Defendant’s wife of selling his share for Rs. 5 Lakhs.
• There was no response from the plaintiff to the final request made by First Defendant’s wife before the property went into the hands of the children.
• The Court found that the second defendant, a tenant already occupying the property, was involved in discussions and correspondence regarding the sale.
• The agreement between the brothers was considered to have given the plaintiff the right of first preference to purchase.
• The High Court ruled against the plaintiff’s plea regarding the uncertainty or vagueness of the family settlement.
• The Court emphasized the importance of the written concurrence from the brothers before any sale is finalized.
• Potential methods of payment and communication for finalizing the deal were discussed in the correspondence.
• The Court found that the dispute arose when First Plaintiff’s second wife sold/mortgaged her share of the property before her death.
• The Court acknowledged that any relief under law entitled to the plaintiff should also be granted.
• Section 22 of the 1952 Act deals with certainty in agreements.
• Illustrations of agreements with certainty include agreements for the sale of specific quantities of oil and rice.
• Rule 14 of the Chandigarh Sale of Sites and Building Rules, 1960 prohibits fragmentation of sites.
• Rule 16 of the Chandigarh Estate Rules, 2007 governs fragmentation and amalgamation.
• Definitions of terms like ‘site’, ‘building’, and ‘transferee’ are provided in the Act.
• Section 3 grants power to the Central Government to transfer land or buildings in Chandigarh.
• Compliance requirements and restrictions on building erection and occupation are outlined in Sections 4 and 5.
• The appellant’s contentions are rejected regarding the assignment in favor of the second defendant involving fragmentation.
• The deposition of the plaintiff mentioned the partition of the house into three portions.
• One-third share was transferred and mutated in the name of the second defendant by the Chandigarh Administration.
• Communication dated 19.12.1997 indicated the transfer of rights of a site held by Vishnu Dutt Mehta to the second defendant.
• The transaction was conducted before the 2007 Rules came into force.
• The appellant cannot challenge the transaction based on the ground of fragmentation according to the Partition Act, 1893.

Decision

• The appeals were dismissed.
• Each party will bear their own costs.

Case Title: TILAK RAJ BAKSHI Vs. AVINASH CHAND SHARMA(DEAD) THROUGH LRS.

Case Number: C.A. No.-001524-001525 / 2019

Click here to read/download original judgement