Supreme Court Upholds Family Settlement: Khushi Ram vs. Nawal Singh (22 February 2021)

Date of the Judgment: 22 February 2021
Citation: 2021 INSC 87
Judges: Ashok Bhushan, J., R. Subhash Reddy, J.
Can a family settlement be valid if it involves relatives from the maternal side? The Supreme Court of India addressed this question in a recent case, clarifying the scope of family settlements and their validity under Indian law. This judgment revolves around a dispute over agricultural land, highlighting the importance of family arrangements in resolving property disputes. The bench comprised Justices Ashok Bhushan and R. Subhash Reddy, with Justice Ashok Bhushan authoring the judgment.

Case Background

The dispute began with land originally owned by Badlu, who had two sons, Bali Ram and Sher Singh. Sher Singh passed away in 1953 without children, leaving his widow, Smt. Jagno, as his heir. Smt. Jagno inherited half of the agricultural land. In 1991, Nawal Singh and others, who were Smt. Jagno’s brother’s sons, filed a suit claiming ownership of the land based on a family settlement. Smt. Jagno admitted their claim, and a consent decree was passed in their favor on 19 August 1991.

Subsequently, the descendants of Bali Ram (the appellants in this case) filed another suit challenging the validity of the 1991 decree, arguing that it was illegal and without legal necessity. They claimed that Smt. Jagno could not have entered into a family settlement with her brother’s sons, who they considered strangers. The trial court and the first appellate court dismissed their suit. The High Court also dismissed the second appeal filed by the descendants of Bali Ram.

Timeline

Course of Proceedings

The trial court framed nine issues, with the main issue being whether the decree dated 19 August 1991 was illegal, invalid, and without legal necessity. The trial court decided the issues in favor of the defendants, holding that the decree did not require registration as it affirmed pre-existing rights. The first appellate court upheld the trial court’s decision, stating that Smt. Jagno became the full owner of the property under Section 14(1) of the Indian Succession Act and that the defendants were not strangers to her. The High Court also upheld the lower courts’ decisions, stating that the decree merely recognized existing rights created by an oral family settlement.

Legal Framework

The case primarily involves the interpretation of Section 17 of the Indian Registration Act, 1908, which deals with the registration of documents. Specifically, Section 17(1) lists the documents that require compulsory registration, including instruments that create, declare, assign, limit, or extinguish rights in immovable property. However, Section 17(2)(vi) provides an exception for “any decree or order of a Court except a decree or order expressed to be made on a compromise and comprising immovable property other than that which is the subject-matter of the suit or proceeding.”

The court also considered Section 15 of the Hindu Succession Act, 1956, which outlines the general rules of succession for female Hindus. Section 15(1)(d) states that the heirs of the father are included in the list of heirs who could succeed to the property of a female Hindu.

The relevant sections are:

• Section 17(1) of the Indian Registration Act, 1908:
  • (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) leases 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:
• Section 17(2)(vi) of the Indian Registration Act, 1908:
  • (vi) any decree or order of a Court except a decree or order expressed to be made on a compromise and comprising immovable property other than that which is the subject-matter of the suit or proceeding; or
• Section 15(1)(d) of the Hindu Succession Act, 1956:
  • (1)The property of a female Hindu dying intestate shall devolve according to the rules set out in section 16,—
    (d) fourthly, upon the heirs of the father; and
    

Arguments

The appellants argued that Smt. Jagno could not have entered into a family settlement with the respondents, who were her brother’s sons, as they were not part of her family. They contended that a family settlement can only occur between members with pre-existing rights in the property and that Smt. Jagno should have transferred her share following the Transfer of Property Act, 1882, the Indian Registration Act, 1908, and the Indian Stamp Act, 1899. They also argued that the 1991 decree required compulsory registration under Section 17 of the Indian Registration Act, 1908, and since it was not registered, it should be declared inoperative.

The respondents argued that they had pre-existing rights in the property due to a family settlement that took place two years before the 1991 suit. They claimed that the 1991 decree only declared their existing rights and that they were not strangers to Smt. Jagno, being her brother’s sons. They also contended that the term “family” should be given a wide meaning and that the decree did not require registration under Section 17 of the Indian Registration Act, 1908, as it related to the subject matter of the suit.

Issues Framed by the Supreme Court

The Supreme Court framed the following issues for consideration:

1. Whether the decree dated 19.08.1991 passed in Civil Suit No. 317 of 1991 requires registration under Section 17 of the Indian Registration Act, 1908?
2. Whether the defendant Nos. 1 to 3 were strangers to defendant No. 4 so as to disable her to enter into any family arrangement with defendant Nos. 1 to 3?

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Judgment

The Supreme Court analyzed the submissions of both parties and the relevant legal authorities. The Court held that the decree dated 19 August 1991, did not require registration under Section 17(2)(vi) of the Indian Registration Act, 1908, because it pertained to the subject matter of the suit. The Court also held that the respondents, being Smt. Jagno’s brother’s sons, were not strangers to her and could be part of a valid family settlement.

The Court also considered how the authorities were viewed:

• Bhoop Singh Vs. Ram Singh Major and Ors., (1995) 5 SCC 709: *The Court distinguished this case, stating that the decree in Bhoop Singh created new rights, whereas the decree in the present case merely recognized pre-existing rights.*
• Som Dev and Ors. Vs. Rati Ram and Anr., (2006) 10 SCC 788: *The Court followed this case, stating that it supported the view that decrees recognizing pre-existing rights do not require registration.*

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following:

1. The decree in question was based on a family settlement and was intended to resolve a family dispute.
2. The decree did not create new rights but rather recognized pre-existing rights arising from the family settlement.
3. The respondents were not strangers to Smt. Jagno, as they were her brother’s sons and thus part of her family for the purpose of a family settlement.
4. The term “family” should be interpreted broadly to include not only close relations but also those with a semblance of a claim.
5. The decree related to the subject matter of the suit and was therefore exempted from registration under Section 17(2)(vi) of the Indian Registration Act, 1908.

The Court emphasized that family settlements are favored in law to avoid long-drawn litigation and to maintain peace and harmony within families.

Logical Reasoning

The Court reasoned that the decree dated 19.08.1991, was a consent decree that recognized a family settlement. The Court noted that Smt. Jagno had admitted the claim of the plaintiffs in the civil suit, and the decree was passed based on this admission. The Court also considered the fact that the decree was related to the subject matter of the suit and therefore, exempted under Section 17(2)(vi) of the Indian Registration Act, 1908.

Regarding the validity of the family settlement, the Court reasoned that the term “family” should be interpreted broadly. It held that the respondents, being Smt. Jagno’s brother’s sons, were not strangers to her. The Court emphasized that family settlements are favored in law to avoid long-drawn litigation and to maintain peace and harmony within families.

The Court quoted the following from the judgment:

“The object of the arrangement is to protect the family from long-drawn litigation or perpetual strifes which mar the unity and solidarity of the family and create hatred and bad blood between the various members of the family.”

“The courts have, therefore, leaned in favour of upholding a family arrangement instead of disturbing the same on technical or trivial grounds.”

“Even if one of the parties to the settlement has no title but under the arrangement the other party relinquishes all its claims or titles in favour of such a person and acknowledges him to be the sole owner, then the antecedent title must be assumed and the family arrangement will be upheld and the courts will find no difficulty in giving assent to the same.”

The Court did not find any dissenting opinions.

Key Takeaways

• Family settlements are favored in law to resolve disputes and maintain harmony within families.
• The term “family” should be interpreted broadly to include not only close relations but also those with a semblance of a claim.
• Decrees that merely recognize pre-existing rights based on a family settlement do not require registration if they relate to the subject matter of the suit.
• The decision reinforces the principle that courts should not disturb family arrangements on technical or trivial grounds.

Directions

No specific directions were given by the Supreme Court.

Development of Law

The ratio decidendi of the case is that a consent decree based on a family settlement that recognizes pre-existing rights does not require registration under Section 17(2)(vi) of the Indian Registration Act, 1908, if it pertains to the subject matter of the suit. Additionally, the term “family” for the purpose of a family settlement is to be interpreted broadly, including relatives from the maternal side. This decision clarifies and reinforces the existing legal position regarding family settlements and the interpretation of registration laws.

Conclusion

The Supreme Court dismissed the appeal, upholding the validity of the family settlement and the consent decree. The Court clarified that the decree did not require registration and that the respondents were not strangers to Smt. Jagno for the purpose of a family settlement. This judgment reinforces the legal principle that family settlements are favored in law and that the term “family” should be interpreted broadly.