Wednesday 22 April 2015

ORAL PROPERTY TRANSACTIONS


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While dealing with properties, you may come across many types of transactions, and encounter documents like Koorchit, 'Memorandum Recording Ear­lier Oral Partition,' 'Memoran­dum Recording Family Arrangement,' Baagappirivinai Kathu and so on.

You will find that large properties have been transacted orally. Such transactions could have taken place in the case of proper­ties owned by you or properties which you intend to purchase. How valid are these transactions? Are these docu­ments valid? Let us see what the law says.

A partition means division of a property. It can also be a specific determi­nation of shares held by co-own­ers. A family arrangement, on the other hand, is a settlement of issues or an arrangement on the basis of claims that may arise regarding the property.

At times, this claim can be no­tional. However, the claims must have a basis. The family arrangement may combine the elements of a partition.
You will find that the docu­ments are not usually stamped and registered. Whether such documents require be stamping and registering is an im­portant issue.

OWNERSHIP TRANSFORMED

Partition is a process by which joint ownership is transformed into enjoy­ment in severalty. Each one of the sharers will have had a prior title. In other words, all the owners are already owners of the share concerned.

The process is determina­tion of the specific share or iden­tification of his or her share by metes and bounds. Therefore, this is not regarded as a con­veyance and there is no conferment of a new title.

One also has to understand as to what is meant by a 'Family' for the purposes of a family ar­rangement. This is vital as the word 'Family' will be interpret­ed depending on the nature of the document and the transac­tion.

For example, the word 'Family' for the purposes of a settlement under the Indian Stamp Act, will mean, father, mother, husband, wife, son, daughter and grandchild. In the case of any one whose personal law permits adoption, 'father' shall include an adoptive father, 'mother' an adoptive mother, 'son'  an  adopted son, and 'daughter' an adopted daugh­ter.

The same concept is extended to transactions like 'Release' and 'Partition’. However, in the case of a fam­ily arrangement, the word 'Family' has to be understood in a wider sense so as to include not only close re­lations or legal heirs, but even those who may have some sort of antecedent title, a semblance of a claim or a pos­sible claim. The reason for this is that it ensures that future disputes are settled permanently.

The members of a family, in­stead of fighting amongst themselves, and thereby wasting time, money and energy on fruitless litigations, can devote their attention to things more con­structive.

In this background, we have to un­derstand as to when the family ar­rangement can be effected. It is now well settled that all that is necessary is that the parties must be related to one another and has a claim or a possible claim or even a sem­blance of a claim to the property. This ground could be something like "affection," "legal claims," "claims that have arisen," "claims that could arise in fu­ture," etc. These claims need not have strict legal backing or validity.

FAMILY ARRANGEMENT

If such a situation arises and members of the family feel that in order to maintain peace or to bring about harmony or to avoid future dis­putes, it is necessary, a family arrangement can be made.

In an oral arrangement, the parties con­clude the terms of the arrange­ment or partition orally. The parties also implement the ar­rangement by tak­ing possession of their respective shares.

The parties may subsequently reduce this to a mem­orandum or execute, stamp and register a document. Both types of documents are val­id.

The legal position as far as these transactions are concerned is as follows. 
A partition or a family ar­rangement can be made orally. If made orally and there being no document, the question of stamping or registration does not arise.

STAMPING NECESSARY

However, if the family arrangement or partition is re­duced to writing and it purports to create, declare, assign, limit or extinguish any right, title or interest of any immovable prop­erty, it must be stamped and registered as per the Indian Stamp Act and the Indian Registration Act.

Wheth­er the terms have been documented is a question of fact in each case to be determined by the nature of phrase­ology and the circumstances in which and the purpose with which it was writ­ten. However, a document like a memorandum, evi­dencing a family arrangement or a partition which had already been entered into and had been prepared merely as a record, in order that there are no hazy no­tions in future, need not be stamped or registered

If the division takes place under the terms of the document, then the same re­quires be stamping and registering. In other words, if the transaction is contemporane­ous, the document would re­quire stamping and registration. If the transaction has already taken place, and is merely recorded as a past transac­tion, then stamping and regis­tration may not be required.

If the family arrangement or partition is stamped but not reg­istered, it can be examined by courts for collateral purposes. Whether the purpose is a collat­eral purpose, is a question of fact depending on the facts and circum­stances of each case.

A person cannot claim a right or title to a property under the said document, which can be considered only for collateral purposes.

If the wordings are such that the family arrangement or partition re­quires stamping and registra­tion, then a person cannot get a valid title under such a document. It will not be accepted as evidence in Court.

Mere usage of the past tense will not, by itself, indicate a prior ar­rangement or transaction. The document has to be read as a whole. Therefore, the wordings in the document and the facts and circumstances relating to the oral transactions are crucial.

All these factors will have to be considered in determining whether the document is valid or not. It would be better to check the documents in the light of the above position and take remedial ac­tions wherever needed.

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