Family settlement is sui generis

Historically and socially we in India have inherited the unique concept of the Hindu Undivided Family. It is a social unit that has the pride of place in our social fabric. Our cinema has celebrated it and even when our families went nuclear our cinema went critical about it. Even as a legal unit it has found recognition. A two judge bench of the High Court at Hyderabad in a recent verdict went on deal with the taxiing facet of the same in the context of a family settlement.

A Hindu Undivided Family (HUF) – an assesse under the Income Tax Act had executed a document called ‘family arrangement’. Under the document the Kartha provided a specified sum in favour of his six minor daughters in the form of fixed deposits. When the taxing authorities proceeded to treat the interest from the said fixed deposits as income of the HUF, the litigation was kick started. The revenue came to the conclusion that the document does not amount to partial partition and it does not have the effect of taking away the corresponding wealth from the purview of the HUF.

The bench thus dealt with the unique position of a family settlement in a HUF. The bench said, “It needs to be noted that the family arrangement is a typical legal phenomena that does not fit into those which are specifically recognised under law. The transfer of immovable or moveable property as the case may be does not take place under the arrangement, but it is substantially different from the one that is contemplated under the Transfer of Property Act or the Sale of Goods Act.

No formal registered document is executed and the nature of consideration is not amenable to any legal analysis.” In a verdict that recognised the unique place of the HUF in our jurisprudence, the court recalled an earlier view of the Apex Court which ruled that the family arrangements are governed by a special equity peculiar to themselves and would be enforced if honestly made.

The court saw such family settlements as a process to resolve conflicting claims or disputed titles once and for all in order to buy peace. The court on that occasion had said, “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 various members of the family.

Today when we are striving to build up an egalitarian society and are trying for a complete reconstruction of society, to maintain and uphold the unity and homogeneity of the family which ultimately results inthe unification of the society and therefore of the entire country, is the prime need of the hour.” The court perceived it as a ‘milestone in the administration of justice’.

The bench dealing with the matter in hand faulted the tribunal for not taking into account the decision went on to fault the larger social system and the times we live in. The bench said, “Contemporary social scientists or those who claim to be so have to reconsider their approach towards the expressions like ‘egalitarian society ‘or ‘social justice’ if they happen to understand the message contained in the famous judgement.

Unfortunately those two expressions have been pressed into service in the past few decades to connote not so noble and congenial ideas but only disruptive and divisive ideas.” Recognising its unique status the bench said, “The family arrangement wherever it exists and is proved is a sui generis i.e. a class by itself with full legal enforceability de hors the fact that it is not dealt with under any specific provision of an enactment.”