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Concept of Hindu Undivided Family (HUF) and ancestral property
Hindus have a peculiar concept of ancestral and personal ownership of assets. Although they do not follow the Hindu religion, Jains, Sikhs and Buddhists are also considered as Hindus, for the purpose of ownership and succession of assets in India. An ancestral asset is one, which is inherited by a Hindu from his father, grandfather or great-grandfather. Such an asset is treated as a family asset and belongs to one’s HUF (Hindu undivided family). The assets earned by a Hindu himself or inherited from anyone except his father, grandfather or great-grandfather, is treated as personal assets. As far as personal assets are concerned, you are entitled to dispose of it, in the way you want and you do not need to obtain consent from anyone including your parents or children.
However, with respect to inherited assets, which are treated as assets of one’s HUF, there are some restrictions on your power to sell/dispose it. It is not that the father, who is generally the ‘karta’ of the HUF, needs to obtain the consent of the other family members including the children, who are entitled to a share in the ancestral property, every time he has to deal with the property. The father, being the karta of the HUF, has some additional powers with respect to the family assets, which other family members do not have. Recently, the Supreme Court had an occasion to deal with the powers of the father, to deal with family assets, without taking the consent of his son, in the case of Kehar Singh (D) through legal representatives vs Nachittar Kaur, which was decided on August 20, 2018.
Rights of the coparceners and karta, to divide/sell an ancestral property
In this case, decided by the Punjab and Haryana High Court and approved by the Supreme Court, one Kehar Singh had sold his ancestral property to some outsiders in 1960. The son of Kehar Singh challenged the sale of the land made by his father, contending that since the property was a family property, thus, the sale made by his father without his consent, was void.
It may be pointed out here that under the Hindu Law, only the coparceners are entitled to ask for partition of the HUF property. Until the amendment of the Hindu Succession Act in 2005, only male members of the family were treated as coparceners. However, after the amendment, sons and daughters are both put on the same footing. Now, both are treated as coparceners and thus, are equally entitled to ask for partition of the HUF property.
On behalf of the buyers and Kehar Singh, it was contended that being the father and karta of the HUF, Kehar Singh had more powers with respect to the property, as compared to other family members. The karta of the HUF has powers to sell or otherwise deal with the family property in certain circumstance and is not required to seek consent of the son/s. While discussing the circumstances under which the father can dispose of the family assets, the Punjab and Haryana High Court had considered various circumstances, under which the karta of the HUF can dispose of the family property, without taking the consent of the son.
Circumstances under which a father can sell a family property
While deciding the above case, the Punjab and Haryana High Court referred to and heavily relied upon the classic work ‘Hindu Law’ by Mulla. In this classic book, Mulla has opined that a Hindu father, in case of legal necessity, has special powers of alienating family property, which no other coparcener has. Mulla had observed that while exercising this special power, the father can make a gift of a portion of the family property, only during certain eventualities, like during distress for the sake of the family and especially for pious purposes.
Mulla further provides that the father can sell or mortgage ancestral property, including the shares of his sons, grandsons and great-grandsons in the property for payment of his own debt, which was an antecedent debt, provided that the debt was not incurred for any immoral or illegal purposes. So, the debt should not be a part of the transaction of the sale or mortgage but should have been incurred prior to the transaction of the sale/mortgage. This clearly entitled the father to sell or mortgage the family property, for repaying or securing his personal debts, also provided the debt incurred is not for any immoral or illegal purpose.
What is a legal necessity
While elaborating what constitutes ‘a legal necessity’, Mulla enumerated various circumstances/ situations. The payment of taxes and debts, with respect to the same property, as well as expenses incurred for the maintenance of the coparcener and other members of the family, are considered as legal necessities. The expenses incurred for marriage or funeral of the family members, as well as family celebrations, are also covered within the ambit of legal necessity, as enumerated by Mulla, in this classic book on Hindu Law.
The list of expenses treated as legal necessities, also include all the legal expenses incurred to defend the estate of the family, or to defend any family member against any criminal litigation. The sale or mortgage of the property, in order to repay any debt incurred for the family business, also constitutes a legal necessity. However, if the debt is incurred by a person other than the father, then, just because the debt is a pre-existing debt, thus, any sale of the property to repay such debt will not come within the power of the karta to sell and alienate the family property.
Decision in the case
It was successfully established before the Punjab and Haryana High Court that the sale of the plot of land was made by the father, without taking consent of the son, for the purpose of repaying debts incurred for the family, as well as for the funds needed to efficiently carry on the agricultural activity on the land owned by the family, which were covered within the ambit of legal necessity. This decision has brought clarity on the limits/freedom on the power of the karta of an HUF, to deal with ancestral property.
(The author is a tax and investment expert, with 35 years’ experience)