Daughter’s right in father’s property: What the Supreme Court ruling means for India Inc

By virtue of the 2005 amendment, the daughters take rights in the coparcenary on the same footing as the sons –since the children of the son are considered as coparceners would the same principle extend to the daughter’s children?

Daughter’s right in father’s property: What the Supreme Court ruling means for India Inc
On July 27, the state government had assured the top court that it would not proceed with the recruitment process to fill up the vacancies on the basis of 12 per cent Maratha reservation till September 15

India, in ancient times bore the zeitgeist concepts of traditional joint Hindu family. A unit consisting of individuals related by blood, sharing a common roof, joined in food and worship and common ownership of properties for the benefit of the family. This concept has been institutionalized in the Mitakshara School of Hindu Law and is known coparcenary which consists of the propositus who a male ancestor is always and three lineal male descendants ie a total of four generations. These properties owned by a coparcenary are referred to as ‘coparcenary’ property. Traditionally, coparcenary interest in a joint Hindu family property was limited to only male lineal descendants, who acquired an interest in
coparcenary property by birth. If a coparcener dies, his share was inherited by way of survivorship by remaining coparceners.

The concepts of joint Hindu family and coparcenary property found its way in the Indian statute books when certain aspects of personal law governing Hindus was codified after independence. The Hindu Succession Act, 1956 (HSA) dealt with matters of succession and recognized the concept of coparcenary interest. Independently of this the Income-tax law recognized ‘Hindu Undivided Family’ (HUF) as a separate taxable entity. It needs to be noted, however that an HUF and a Joint Hindu Family are distinct from each other in law.

Further, Companies Act also implicitly gave recognition to an HUF by acknowledging holding of its interests by a Karta – the manager of an HUF, for and on behalf of the HUF. When the HSA was enacted, it did away with inheritance of coparcenary interest by survivorship to a limited extent. After almost half a century, a watershed amendment was brought about in HAS by the amendment in 2005. The amendment provided that daughters of a coparcener will have the same rights in the coparcenary property as the son. The raison d’etre of this amendment, as was noted in the statement of objects and reasons of the amendment was to change the patriarchal mindset and to bring the son and the daughter of a Hindu on the same pedestal in matters relating to inheritance to coparcenary property.

While this change was hailed, there were several disputes which emanated from the interpretation of the amendment. Various issues came up before various judicial fora of and many a times conflicting decisions were delivered. In the latest development, in the case of Vineeta Sharma v Rakesh Sharma (CA No 32601/2018), the Supreme Court has settled the confusion created by conflicting judgments of two benches of the Supreme Court. The Court categorically held that a right of the daughter is secured at the time of her birth. The father being alive or not on the date of the amendment will not affect her rights in any manner.

What does this mean for India Inc? Successful Indian business families have often used HUFs as asset-holding and income-generating structures. Valuable business assets were held jointly or through HUF structures, either for purposes of tax planning or just as a common succession structure for the family assets. Now, any kind of partition or distribution of such assets will certainly have to take into consideration the implications of this judgment on rights of the daughters of the family.

By virtue of the 2005 amendment, the daughters take rights in the coparcenary on the same footing as the sons – since the children of the son are considered as coparceners would the same principle extend to the daughter’s children? Would they also acquire rights by birth as coparceners? The maternal grandchildren may end up getting shares in both patrilineal and matrilineal joint properties. Could this be the intention of the legislature? This aspect certainly require clarity.

The Supreme Court ruling may give rise to further litigation as there could be a demand to reopen partitions undertaken after 2005 if the partition considered the daughters as an outsider for the purpose of coparcenary property. Interestingly, the law provides that partitions concluded prior to 20 December 2004 (that is when the bill to amend the HSA was tabled in the Rajya Sabha) cannot be reopened provided that they have been undertaken by way of a registered instrument or a final decree. The Court, in the instant case, noted that the intention of having a special definition to the word partition is not to jeopardise the interest of a daughter. It is to avoid sham or frivolous defence of oral partition to block the
rights of a daughter as a coparcener. The Court has made it clear that if there is a plea of an oral partition in a suit, the courts should seek evidence in the form of contemporaneous public documents for backing of such claims. Any such claim should be considered cautiously while exercising all safeguards of protecting the rights of the daughters.

The 174th Law Commission Report – the report in which the commission recommended amending Section 6 – was prima facie of the view of abolishing the concept of coparcenary and HUF in toto from the HSA. But such an abolition would still not be beneficial to daughters as coparcenary properties existing as on date will be continued to be held and owned only by male lineage. The amendment to the HSA underpinned on an egalitarian thought process and achieving equality between sons and daughters. However, from a commercial and business standpoint some of the open issue highlighted above may prove to be a hinderance against achieving the said objectives. It would be interesting to see how
this concept of Hindu customary law will shape up in the much-touted Uniform Civil Code.

  • Bijal Ajinkya and Shabnam Shaikh are both Partner at Khaitan & Co.

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First published on: 03-09-2020 at 05:27:58 pm