Supreme Court settles family property dispute: Jugal Kishore Khanna vs. Sudhir Khanna (2024) INSC 224

Introduction

Date of the Judgment: March 19, 2024
Citation: 2024 INSC 224
Judges: Vikram Nath, J., Ahsanuddin Amanullah, J.
Can a family settlement regarding property be valid if it’s not registered? The Supreme Court of India recently addressed this question in a dispute between family members over two properties in Delhi. The core issue was whether an oral agreement to transfer a share in a property was valid and if a payment made was for the transfer of property or for some other purpose. The bench, composed of Justices Vikram Nath and Ahsanuddin Amanullah, delivered the judgment, with Justice Ahsanuddin Amanullah authoring the opinion.

Case Background

The dispute involves the descendants of Late Shri Tek Chand Khanna (TCK). TCK had two sons: Shri Roop Kishore Khanna (RKK) and Shri Attar Chand Khanna (ACK). The appellants are descendants of RKK, while the respondents are successors of ACK. In 1941, RKK purchased a plot of land in Kamla Nagar, Delhi, in the name of his father TCK, where a residential house was constructed in 1950. Another property at Malcha Marg, New Delhi, was acquired and constructed in the name of Smt. Shyama Khanna, wife of ACK. The appellants claimed that the Malcha Marg property was purchased with funds from RKK and family income. After RKK’s death in 1978, ACK claimed a share in the Kamla Nagar property, asserting it was joint family property. The appellants contended that in 1979, an oral settlement was reached, where they paid Rs. 55,000 to ACK for his share in the Kamla Nagar property. In 1983, after ACK’s death, his legal representatives filed suits for partition of properties in Shimla and the Kamla Nagar property. The Trial Court dismissed the suit regarding the Kamla Nagar property but ruled against the appellants on the Malcha Marg property, stating insufficient evidence to prove it was bought with joint family funds.

Timeline

Course of Proceedings

The Trial Court dismissed the suit by the respondents regarding the Kamla Nagar property, holding that the appellants were the owners due to an oral family settlement and payment of Rs. 55,000. However, the Trial Court ruled against the appellants on the Malcha Marg property, stating the evidence was insufficient to prove it was bought with joint family funds. The respondents appealed to the High Court against the Trial Court’s decision on the Kamla Nagar property (RFA No. 439 of 2008), while the appellants appealed against the decision on the Malcha Marg property (RFA No. 483 of 2008). The High Court reversed the Trial Court’s decision on the Kamla Nagar property, ruling that the payment of Rs. 55,000 was not for the purchase of the share of ACK, and dismissed the appeal of the appellants on the Malcha Marg property, upholding the Trial Court’s decision. The present appeals before the Supreme Court arise from this judgment of the High Court.

Legal Framework

The case primarily revolves around the interpretation of Section 17 of the Registration Act, 1908. This section specifies which documents require mandatory registration to be legally valid. According to Section 17 of the Registration Act, 1908:

“17. Documents of which registration is compulsory .—(1) The following documents shall be registered, if the property to which they relate is situate in a district in which, and if they have been examined on or after the date on which, Act XVI of 1864, or the  Indian Registration Act, 1866 (20 of 1866), or the  Indian Registration Act, 1871 (8 of 1871), or the Indian Registration Act, 1877 (3 of 1877), or this Act came or comes into force, namely —
(a) instruments of gift of immovable property;
(b) other non-testamentary instruments which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immovable property;
(c) non-testamentary instruments which acknowledge the receipt or payment of any consideration on account of the creation, declaration, assignment, limitation or extinction of any such right, title or interest; and
(d) lease of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent;
(e) non-testamentary instruments transferring or assigning any decree or order of a Court or any award when such decree or order or award purports or operates to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immovable property:”

This provision mandates that any document that creates, declares, assigns, limits, or extinguishes any right, title, or interest in immovable property worth more than one hundred rupees must be registered. The respondents argued that since the alleged oral family settlement was not registered, it had no legal validity.

Arguments

Arguments by the Appellants:

• The appellants argued that the Trial Court had correctly held that the Kamla Nagar property belonged solely to them because it was originally joint family property between RKK and ACK, and later, the 50% share of ACK was bought by the appellants in a family settlement.
• They contended that the payment of Rs. 55,000 was explicitly for the purchase of ACK’s share in the Kamla Nagar property, and this was admitted by witnesses during cross-examination.
• The appellants emphasized that ACK’s Wealth Tax Returns from 1979 until his death did not mention any claim on the Kamla Nagar property, indicating that he had relinquished his share.
• They argued that the High Court’s conclusion that the payment of Rs. 55,000 was for “some other account” was baseless and presumptuous, lacking any evidence.
• The appellants also pointed out that the payment of Rs. 55,000 was received by ACK in his personal account, suggesting it was for a personal settlement and not for any business or HUF purpose.
• Regarding the Malcha Marg property, the appellants maintained that they had only raised a preliminary objection that the suit was bad for partial partition, without actively claiming ownership.

Arguments by the Respondents:

• The respondents argued that the Trial Court erred in accepting the family settlement and payment of Rs. 55,000 for the Kamla Nagar property, a mistake that the High Court rightly corrected.
• They highlighted that during cross-examination, it was admitted that no valuation was done, and there were no documents to prove that the payment was a full and final settlement for ACK’s share.
• The respondents relied on Section 17 of the Registration Act, 1908, arguing that any transfer of rights in immovable property valued over Rs. 100 requires a registered document, which was absent in this case. Therefore, the oral settlement was invalid.
• They contended that both the Trial Court and the High Court had correctly held the Malcha Marg property to be exclusively theirs, given the lack of evidence to show it was bought with joint family funds.

Submissions Table

Issues Framed by the Supreme Court

The Supreme Court considered the following issues:

1. Whether the High Court was correct in reversing the Trial Court’s decision regarding the Kamla Nagar property.
2. Whether the High Court was correct in upholding the Trial Court’s decision regarding the Malcha Marg property.
3. Whether the payment of Rs. 55,000 was for the purchase of the share of ACK in the Kamla Nagar property or for some other purpose.

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following legal provisions:

• Section 17 of the Registration Act, 1908: This section specifies which documents require mandatory registration to be legally valid, particularly those related to the transfer of immovable property.

Authorities Table

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

The Court considered Section 17 of the Registration Act, 1908* in the context of the respondent’s argument that the oral family settlement was invalid due to lack of registration. However, the Court did not explicitly rule on the validity of the oral settlement under the said provision, but instead focused on the factual finding that the payment of Rs. 55,000 was indeed for the purchase of the share of ACK in the Kamla Nagar property.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the factual circumstances and the conduct of the parties. The Court emphasized that the payment of Rs. 55,000 was made by the appellants to the respondents, and there was no evidence to suggest it was for any purpose other than the purchase of ACK’s share in the Kamla Nagar property. The Court noted that the respondents did not claim any share in the rent from the tenants of the Kamla Nagar property, which was a significant factor in determining that ACK had relinquished his claim to the property. The Court also considered the Wealth Tax Returns of ACK, which did not show any claim on the Kamla Nagar property after 1979, as further evidence supporting the appellants’ claim.

Fact:Law Ratio

Logical Reasoning

The Court considered the argument that the oral settlement was invalid under Section 17 of the Registration Act, 1908. However, the Court did not explicitly rule on this point. Instead, it focused on the factual circumstances, such as the payment of Rs. 55,000 and the conduct of the parties, to conclude that the appellants were the exclusive owners of the Kamla Nagar property. The Court rejected the respondents’ claim that the payment was for the upkeep of the HUF, as it was illogical given that the respondents were not residing in the property. The Court also considered the fact that the respondents did not claim any share in the rent from the tenants, which further supported the appellants’ claim.

The Supreme Court’s decision was based on a comprehensive analysis of the facts and circumstances, with a focus on the conduct of the parties and the available evidence. The Court did not explicitly address the legal question of the validity of oral family settlements under Section 17 of the Registration Act, 1908, but instead focused on the factual finding that the payment of Rs. 55,000 was for the purchase of the share of ACK in the Kamla Nagar property. The Court’s reasoning was logical and well-supported by the evidence on record.

The Court quoted, “the findings, unearthed during trial indicate that Rs.55,000/- (Rupees Fifty-Five Thousand) was paid by the appellants’ side to the respondents’ side. There is nothing on record to indicate that it was paid for the upkeep of the HUF or on some other account or to fulfil some other purpose.”

The Court further quoted, “The plea of the respondents that the said amount was for the upkeep of the HUF does not stand to reason for it is the admitted position that the respondents or their ancestors were never living in the Kamla Nagar property.”

The Court also noted, “the appellants having enjoyed possession right from the time the property was purchased and even letting out the premises to tenants and collecting/taking rent from the tenants without any claim raised at any point of time, would also support the claim that ACK had not claimed any right or title over any portion of the Kamla Nagar property during his lifetime.”

Key Takeaways

• The Supreme Court emphasized the importance of factual evidence and conduct of parties in property disputes.
• The Court upheld the concurrent findings of lower courts regarding the Malcha Marg property, highlighting the significance of consistent findings.
• The judgment indicates that a payment made in a family settlement for property transfer must be clearly demonstrated to be for that purpose and not for some other reason.
• The Court’s decision underscores the need for clear documentation in property transactions, although in this case, the court relied on the factual evidence to uphold the family settlement.

Directions

The Supreme Court set aside the High Court’s judgment regarding the Kamla Nagar property and restored the Trial Court’s order. The Court also held that the appellants are the exclusive owners of the Kamla Nagar property. The High Court’s judgment regarding the Malcha Marg property was upheld. The interim order of status quo was vacated. The parties were directed to bear their own costs.

Specific Amendments Analysis

There were no specific amendments discussed in the judgment.

Development of Law

The ratio decidendi of this case is that in a family settlement, the court will look at the factual evidence and the conduct of the parties to determine the intention behind the payment of money. The Supreme Court did not explicitly rule on the validity of oral family settlements under Section 17 of the Registration Act, 1908, but instead focused on the factual finding that the payment of Rs. 55,000 was for the purchase of the share of ACK in the Kamla Nagar property. This case emphasizes that the factual matrix of the case is of utmost importance and that the court will not be swayed by technical arguments alone.

Conclusion

The Supreme Court allowed the appeal regarding the Kamla Nagar property, ruling that the appellants were its exclusive owners based on the factual evidence of the oral family settlement and payment of Rs. 55,000. The Court dismissed the appeal regarding the Malcha Marg property, upholding the concurrent findings that it belonged exclusively to the respondents. The judgment underscores the importance of factual evidence and conduct of parties in property disputes and that the court will not be swayed by technical arguments alone.