Is an unregistered family settlement of property admissible in evidence?

Under Section 17 of the Registration Act, the documents which create, declare, assign, limit or extinguish any right, title or interest of the value of Rs. 100 and upwards, are to be registered. Under Section 49 of the Registration Act no document required by Section 17 or by any provision of the Transfer of Property Act to be registered, shall be received as evidence of any transaction affecting an immovable property.

Thus, as provided by Section 49 of the Registration Act, any document, which is not registered as required under the law would be inadmissible in evidence and cannot therefore be produced and proved under Section 91 of the Evidence Act.

In the light of the above, what is the legal position with regard to a family settlement or a family arrangement in respect of property? Whether such family settlement or arrangement, which is not registered, can be received in evidence?

This issued was considered by a 3-judge bench of the Supreme Court in the case of Kale v. Deputy Director of Consolidation (1976) 3 SCC 119. It was held that by virtue of a family settlement or arrangement, members of a family descending from a common ancestor or a near relation seek to sink their differences and disputes, settle and resolve their conflicting claims or disputed titles once for all in order to buy peace of mind and bring about complete harmony and goodwill in the family. Family arrangements are governed by a special equity peculiar to themselves, and will be enforced if honestly made, although they have not been meant as a compromise, but have proceeded from an error of all parties, originating in mistake or ignorance of fact as to what their rights actually are, or of the points on which their rights actually depend.

The Supreme Court further held that the object of the family 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. It promotes social justice through wider distribution of wealth. It was, therefore, observed that Courts lean in favour of family arrangements. Technical or trivial grounds are overlooked. Rule of estoppel is pressed into service to prevent unsettling of a settled dispute.

It was held that family arrangement may be even oral in which case no registration is necessary. Registration would be necessary only if the terms of the family arrangement are reduced into writing. Here also, a distinction should be made between the document containing the terms and recitals of a family arrangement made under the document and a mere memorandum prepared after the family arrangement had already been made either for the purpose of the record or for information of the court for making necessary mutation. In such a case the memorandum itself does not create or extinguish any rights in immovable properties and therefore does not fall within the mischief of Section 17(2) of the Registration Act and is, therefore, not compulsorily registrable.

It was held that, therefore, a document which is in the nature of a memorandum of an earlier family arrangement and which is filed before the court for its information for mutation of names is not compulsorily registrable and therefore can be used in evidence of the family arrangement and is final and is binding on the parties.

The Supreme Court held that even if a family arrangement which required registration was not registered, it would operate as a complete estoppel against the parties who have taken advantage of the family arrangement.

Likewise, in the case of Subraya M.N. v. Vittala M.N.(2016) 8 SCC 705, the Supreme Court held as under:

“There is no provision of law requiring family settlements to be reduced to writing and registered, though when reduced to writing the question of registration may arise. Binding family arrangements dealing with immovable property worth more than rupees hundred can be made orally and when so made, no question of registration arises. If, however, it is reduced to the form of writing with the purpose that the terms should be evidenced by it, it required registration and without registration it is inadmissible; but the said family arrangement can be used as corroborative piece of evidence for showing or explaining the conduct of the parties.”

It was further held that in the present case, the family arrangement/settlement already arrived at between the plaintiffs and the defendant was recorded in writing in the resolution passed by the village panchayat which was signed by the panchayatdars and the plaintiffs and the defendant. When the terms of the family settlement/arrangement between the parties had been reduced to writing, it had to be registered. It was held that, but the panchayat resolution reduced into writing, though not registered can still be used as a piece of evidence explaining the settlement arrived at and the conduct of the parties in receiving the money from the defendant in lieu of relinquishing their interest in the family properties in question.

Similarly, in a recent case, Thulasidhara v. Narayanappa, 2019 SCC OnLine SC 645, the Supreme Court has held that a family arrangement, in the form of a document that mentioned the list of properties which were partitioned, though not registered, would operate as a complete estoppel against the parties to such a family settlement. It was held that even without registration a written document of family settlement/family arrangement can be used as corroborative evidence as explaining the arrangement made thereunder and conduct of the parties.