Law & Process of Transfer of Flat after death of owner in a Housing Society in Maharashtra

Law & Process of Transfer of Flat after death of owner in a Housing Society in Maharashtra

Housing Society: The Definition of "Housing Society" under Section 2(16) of Maharashtra Co-operative Societies Act 1960 is: - "Housing Societies" means a Society, the object of which is to provide its members with open plots for housing, dwelling houses or flats; or if open plots, the dwelling houses or flats are already acquired, to provide its members common amenities and services."

These housing societies of occupiers of tenements fall in sub-category:-

1.??Tenant Co-partnership Housing Society;

2.??Tenant Ownership Housing Society; and

3.??Other Societies according to Rule 10(5) of the Maharashtra Co- operative Societies Rules, 1961.

1.??????Tenant ownership housing society: These are housing societies which have the objective of allotting plots or flats on a land parcel that is held either on leasehold or?freehold?basis by the society, while the houses are owned by the members. This is the basic, grass root level housing society that follows the norms as it is under?MCS Act 1960. Put simply, it is a housing society where land is held on a lease-free or freehold basis, and tenants own houses. However, some specific rules and regulations need to be adhered to lease to a subtenant. A tenant ownership cooperative housing society is one where the land is owned by the society and the superstructure or the houses are owned by the members.?

2.??????Tenant co-partnership housing society: These housing societies have the objective to allot flats to its members where both, the land and building, are held either on a freehold or a leasehold basis by the society. They fall under the category of traditional societies, where the society as a whole undertakes the concerned land and buildings either on a lease or on a freehold basis. For formally acquiring the residence, members must pay a consistent monthly rent and, in most cases, an initial stipend.?In a?tenant?co-partnership cooperative housing society, the land with building is?owned?by the society and a tenement in the building for which a member has?contributed, is allotted to him for his use & occupation.

Ownership issues: The basic difference between these two types of societies is one of land ownership. A tenant ownership cooperative housing society is one where the land is owned by the society and the superstructure or the houses are owned by the members, while in a tenant co-partnership cooperative housing society, the land with building is owned by the society and a tenement in the building for which a member has contributed, is allotted to him for his use and occupation.

Normally bungalow type societies or societies with row houses are covered under the first category. In such cases, the society divides its land into independent plots or if the division of the plot is not possible then constructs plinths on the said plots and allots each plinth to each of its member. Then the member is given right to construct his house or superstructure on the independent plot or the plinth as the case may be of his choice. So in the case of a tenant ownership cooperative housing society, there is a dual ownership i.e. the ownership of the society over landed property and ownership of the members on the superstructure.

In the case of a tenant co-partnership cooperative housing society, the member has a transferable interest in the restricted portion of the property owned by the society. Normally societies of buildings with flats fall within this category.

Most Housing Societies shows value of Land and Building in their Audited Balance Sheet as their asset and shows contra entry of similar value as “Contributions” by members on liability side. Housing Societies are also required to take insurance of the Building as Society has insurable interest in the Building, suggesting that Society is the owner of the Building (super structure). Bye law 67 mandates that Housing Society to collect Insurance Charges from Members.

Nomination of a Flat in Housing Society

The Maharashtra Co-operative Societies Act, 1960 ("the Act") allows a member to nominate a person or persons to whom his share and interest in the co-operative society will be transferred by the society in the event of the member's death. Section 25 of the Act provides that a member would cease to be a member of a society on death. However, his holding and other interests do not lapse & they pass on to his heirs or legal representatives and the society is bound to transfer the shares or interest to them as provided in section 30 of the Act. Section 30 provides that the society shall transfer the share or interest of the deceased member to a person/s nominated in accordance with the Maharashtra Cooperative Societies Rules, 1961, and if no such person is nominated then the committee of the society shall transfer it to such person “as may appear to the committee” to be the heir or legal representative of the deceased member.

Therefore, on the death of a member, the society shall transfer the share or interest of the deceased member to a person nominated in accordance with the rules. The purpose of nomination is to make clear the person with whom the society has to deal upon the death of a member. It does not create any interest in favour of the nominee, to the exclusion of those who are in law entitled to the estate of a deceased member. The nominee does not become the absolute owner of the property. He is only empowered to hold the property “in trust” for the real owners for the purpose of dealings with the society. He has “no power, authority or title” to alienate the property to the exclusion of the other legal heirs of the deceased member.

In a co-operative housing society you are the owner of unit of a share in the society in the form of a flat. Due to this type of ownership, you have to appoint a nominee in co-operative housing societies. The appointed nominee is only a custodian and the actual ownership of the flat will go to legal heirs as per his will through “Will”. Bombay High Court judgment has ruled that "mere nomination to the co-operative housing society does not give the nominee exclusive rights of ownership to the flat – and neither are the rights of other legal heirs lost by such nomination”. So on demise of the owner of the flat, it is the legal heir and not the nominee who bequeath it.

Thus, a nominee is a?custodian?of the asses and not the owner of the asset. A nominee will hold the property as a trustee?and will be legally bound to transfer it to the legal heirs whose names are mentioned in the will. There are judgments of various High Courts and even Supreme Court on this matter.

Nominee: The word nominee means a person who holds or acquires right, property or any other kind of liability incurred on behalf of others. Nominee means a trustee and holds a property on behalf of other legal heirs. Thus, the simple meaning derived from above proposition is that a nominee cannot be a real owner but a trustee who has legal control of property that is kept or invested for another person, company or organization. But, Nomination is not a Will

Rights of Nominee v/s Rights of Legal Heirs as regards Property in a Housing Society

There has been some ambiguity on legal rights of nominees vis-à-vis the legal heirs. One of the pertinent legal questions that have been put to test time and again before various courts is whether the rights of nominees prevail over those of the successors/legal heirs?inter alia?regarding the shares and interest of a member in a co-operative housing society.

Supreme Court, In the matter of?Indrani Wahi v. Registrar of Co-operative Societies and Others (“Indrani Wahi Judgment”), Indrani Wahi (being a married daughter) was made a nominee member by her father Biswas Ranjan Sengupta. The Deputy Registrar of Co-operative Societies did not accept her membership on the ground that Indrani Wahi being a married daughter did not fall within the definition of ‘family’ under the West Bengal Co-operative Societies Act, 1983. This order was challenged by Indrani Wahi?before the Hon’ble High Court of Calcutta and was further appealed before the Hon’ble Supreme Court by Indrani Wahi, wherein the Hon’ble Supreme Court while allowed the transfer of share and interest of her deceased father in the society in favour of Indrani Wahi as a nominee, however, the Hon’ble Supreme Court also specifically observed in this regard that such a transfer in favour of a nominee would have no relevance to the issue of title between the inheritors or successors to the property of the deceased and it would be open to the other members of the family to pursue their case of succession or inheritance, in consonance with law.

Based on the observations of the aforementioned Judgment read with the Act, it can be concluded that the method of nomination in a co-operative housing society does not create any right, title and interest of the nominee in the property of the nominator. The nominee merely performs the function of receiving and holding the property of the deceased nominator until the time the legal heir(s) of the deceased nominator is established and the property is transferred in favour of such legal heir(s).

The apex court had observed that it would be open for other members of the family of the deceased, to pursue their case of succession or inheritance. Therefore, those who are claiming their?rights under inheritance will be entitled to claim the title to the shares in the society on the basis of inheritance.

Status of a Nominee in Housing Society: A nominee holds the flat in a fiduciary capacity, i.e. as a trustee for the legal heirs of the deceased till such time the legal heirs are determined by the applicable succession laws. A nominee does not become the owner of the flat by virtue of the nomination.

The laws suggest that it is the duty of the co-operative or housing society to transfer the deceased’s share in the property to the nominee mentioned by him, but he is only in the representative capacity and shall never be deemed to be the owner of such property. The nominee only holds the property in trust and the legal heirs shall be the ultimate owners as they are free to pursue a suit for inheritance or succession and once they obtain the relevant order, they can submit it to the housing society that in turn is required to transfer the property in the name of the rightful legal heirs or successors. It can be concluded that the rule is for the nominee to stand only as a representative of the legal heirs and it is the legal heirs who will have the ownership rights in the housing property and not the nominee and until that Nominee can only become “Provisional” member.

In light of the above amendment, it is now made amply clear that upon the death of a member, a co-operative housing society should give effect to the nomination by transferring the shares/interest in the society in favour of the nominee; however, such a nominee will only be admitted as a “provisional member” and marked so in all statutory records of the Society. It is only upon the legal heirs of the deceased member furnishing the relevant documents will the society transfer the shares/interest of the deceased member in favour of the legal heirs.

Transfer of Interest on death of member as per MCS Act, Rules & Bye laws

?Transfer of shares and interest of a deceased member in the capital & property of the Society to his nominee or heir has to be considered by a Society taking in to account Section 30 of the MCS Act, Rule 25, & Bye laws 32-35.

Section 30: Transfer of interest on death of member.

(1) On the death of a member of a society, the society shall transfer the share or interest of the deceased member to a person or persons nominated in accordance with the rules or, if no person has been so nominated, to such person as may appear to the committee to be the heir or legal representative of the deceased member:

Provided that, such nominee, heir or legal representative, as the case may be, is duly admitted as a member of the society;

Provided further that, nothing in this sub section or in section 22 shall prevent a minor or person of unsound mind from acquiring by inheritance or otherwise, any share or interest of a deceased member in a society

(2) Notwithstanding anything contained in sub section (1), any such nominee, heir or legal representative, as the case may be, may require the society to pay to him the value of the share or interest of the deceased member, ascertained in accordance with the rules.

(3) A society may pay all other moneys due to the deceased member from the society to such nominee, heir or legal representative, as the case may be.

(4) All transfers and payments duly made by a society in accordance with the provisions of this section shall be valid and effectual against any demand made

Rule No 25

?(1) For the purpose of transfer of his share or interest under?sub-section (1) of Section 30, a member of a society may, by a document signed by him or by making a statement in any book kept for the purpose by the society nominate any person or persons. Where the nomination is made by a document, such document shall be deposited with the society during the member's life time and where the nomination is made by a statement, such statement shall be signed by the member and attested by one witness.

(2) The nomination made under sub-rule (1) may be revoked or varied by any other nomination made in accordance with that sub-rule.

(3) (i) Where a member of a society has not made any nomination, the society shall on the member's death, by a public notice exhibited at the office of the society, invite claims or objections for the proposed transfer of the share or interest of the deceased within the time specified in the notice. (ii) After taking into consideration the claim or objections received in reply to the notice or otherwise, and after making such inquiries as the committee considers proper in the circumstances prevailing, the committee shall decide as to the person who in its opinion is the heir or the legal representative of the deceased member and proceed to take action under Section 30.

Bye Law No 32. Procedure for Nomination by a Member and its revocation /revision: A Member and / or Associate Member of the Society may by writing under his hand, in the prescribed form, nominate a person or persons to whom the whole or part of the shares and / or interest of the Member in the capital / property of the Society shall be transferred in the event of his death. The acknowledgement of the nomination by the Secretary shall be deemed to be the acceptance of nomination by the Secretary. No fees shall be charged for recording the first nomination. A Member may revoke or revise his nomination, at any time, by making an application, in writing, under his hand, to the Secretary of the Society. The acknowledgement of the variation in nomination / subsequent nomination by the Secretary shall be deemed to be the cancellation of earlier nomination. Every revision of the nomination shall be charged a fee of Rs. 100/-

Bye Law No 33. Recording of Nomination or revocations / revisions thereof: On receipt of the Nomination form, or the letter for revocation of the earlier nomination, the same shall be placed before the meeting of the Committee, held next after the receipt of the Nomination form, or the letter of revocation of the earlier nomination, by the Secretary of the Society for recording the same in the minutes of the Committee. Every such nomination or revocation thereof shall be entered in the register of nominations by the Secretary of the Society within 7 days of the meeting of the Committee, in which it was recorded.

Bye Law No 34. Transfer of shares and interest of the deceased Member in the capital / property of the Nominee/Nominees: Subject to the provisions of the?Section 30 of MCS Act.?1960, bye-law No. 17A or 19, on the Death of a Member, the Society shall transfer the shares and interest of the deceased Member in the Capital/Property of the Society to the Nominee/Nominees and in proportion with the shares and interest held by the deceased Member, in case property is purchased by Member and associate Member jointly. In the event of death of the Member, Nominee/Nominees shall submit the Application for Membership, within six months from the death of a Member. If there are more than one Nominee, on the death of a Member, such Nominees shall make Joint Application to the Society and indicate the name of the Nominee who should be enrolled as Member. The other nominees shall be enrolled as Joint/Associate Members unless the nominees indicate otherwise. The nominees shall also file an Indemnity Bond in the prescribed form Indemnifying the Society against any claims made to the shares and interest of the deceased Member in the Capital/Property of the Society by any of them, in case only one nominee is indicated by the Nominees for Membership of the Society.

Note: In case of acquiring Membership on the basis of Nomination, such Member shall hold the flat / unit in ‘trust’ till all the Legal Heirs are brought on record and shall not have the right to ownership and shall not create third party interest or alienation in any way whatsoever.

Byelaw 35: Where a member of the Society dies without making a nomination, or no nominee comes forward for transfer, the society shall invite, within one month from the information of his death, claims or objections to the proposed transfer of shares and interest of the deceased member in the capital/property of the Society, by a public notice, in the prescribed form exhibited on the notice board of the society. It shall also publish such notice in at least two local newspapers, having wide circulation. ?The entire expenses of publication of the notice shall be recoverable from the value of share and interest of the deceased member in the capital/ property of the society. After taking in to consideration the claims or objections received, in response to the said notice, and after making such inquiries as the committee considers proper, in the circumstances prevailing, the committee shall decide as to the person, who in its opinions, is the heir or legal representative of the deceased member.

Such a person will be eligible to be a member of the Society subject to the provisions of the bye-laws Bye Laws Nos.17 (a) or 19 provided that he gives an indemnity bond, along with his application for membership in the prescribed form, indemnifying the Society against any claims made to the share and interest of the deceased member in the capital/property of the society, at any time in future by any person. If there are more claimants than one, they shall be asked to make the affidavit as to who should become a member of the Society and such person, named in the affidavit shall furnish the indemnity bond as indicated above along with application for membership, referred to above. If, however, the committee is not able to decide as to the person who is the heir/legal representative of the deceased member or the claimants do not come to the agreement, as to who should become the member of the Society, the committee shall call upon them to produce succession certificate from the Competent Court. If, however, there is no claimant, the shares and interest of the deceased member in the capital/property of the Society shall vest in the society.

Bye Law No 17(a) Eligibility for Membership of the Society?

Bye Law No 17(b) Eligibility of Minor or a Person of unsound mind for Membership of the Society

Bye Law No 17(c) Admission of person to society's membership subject to the approval of The concerned Competent Authorities such as Collector of the District and the land grant terms as applicable, (provided if the Society has been given land by Government/CIDCO/MHADA/SRA” or any other authority)

Bye Law No 19(a) Conditions for Individuals desiring to be Member of the Society: An individual / applicant who is eligible to be the Member and who has applied for Membership of the Society in the?prescribed form,?may admitted as Member by the Committee on complying with the conditions.

Right, Title and Interest, a Legal?Triplet: It signifies ownership and is generally used in drafting Property Agreement or deeds of transfer to denote ‘anything and everything’ in a property. ‘Right’ stands for ‘legal right’ in a property and ‘Interest’ manifests outcome of ownership with ‘right & title’, including enjoyment in all & whatsoever manner that “Owner” desires whereas ?‘Title’ indicates legal recognition of ‘ownership’ of a property. Thus what the Flat owner in a Housing Society has is “occupancy right” in the flat and share certificate denotes proportionate ownership in the land & superstructure but Land ownership & conveyance will continue to be owned by the Housing Society. (https://www.dhirubhai.net/pulse/what-right-title-interest-property-harshad-shah/?trk=pulse-article_more-articles_related-content-card)

Probate & Succession Certificate

Probate?is a legal process in which the court certifies the authenticity of the Will.?It establishes the legal character of the Executor to implement the Will and to the validity of the Will.?Probate can be granted only to the executor appointed by the Will. The appointment may be expressed or implied.?A probate means a copy of the Will, certified under the seal of a competent Court with a grant of administration of the estate to the executor of the testator. It is the official evidence of an executor's authority.

A probate is mandatory when the Will is executed by a Hindu, Jain, Sikh, Buddhist, Christian or Parsi in the jurisdiction of High Courts of Bombay, Calcutta or Madras, or pertains to immovable property situated in jurisdiction of these High Courts like Maharashtra, Bengal & Tamilnadu.

One of the primary purposes of the laws governing succession is to give effect to the deceased person’s intention. The law, within its framework, tries to honour the Will of the person made with complete freedom and knowledge. However, sometimes the validity of the Will may be challenged in a court of law. This is when a probate of the Will is required?to prove the existence and enforceability of a Will.

A person to whom a grant of Probate or Letters of Administration is made (Executor or Administrator) is required to file a full and true inventory of the property and credits of the estate and of all the debts owing by any person in Court within 6 months, or such further time as the Court may allow from the date of the grant and to render accounts within 1 year, or such further time as the Court may allow.

How to obtain a probate of a Will?

A probate is a copy of a Will certified by a court of competent jurisdiction. It proves that it is the last and final Will of the deceased penned on a particular date. A probate is granted with the court seal and has a copy of the Will attached to it. An administrator or executor appointed under the Will may not be able to administer its provisions without a probate. It may also be necessary when the deceased leaves behind securities with various nominees and there is a dispute on their division. The nominee can only hold the assets in trust till these are divided as indicated in the Will after a probate has been obtained. In the absence of a Will or Nomination, succession laws come into play.?The application for a Probate has to be made to the competent court (a pecuniary jurisdiction may require a higher court to issue a probate for high-value immovable assets) through a lawyer.?The court usually asks the petitioner to establish the proof of death of testator, proof that the Will has been validly executed by the testator and that it is the last Will and testament of the deceased.?The court may impose a percentage of assets as a fee to issue a probate. In Maharashtra a court fee of RS 75,000 is payable.?On top of that you have to incur expenses on Lawyer’s fees for drafting & appearing which in city like Mumbai can be Rs.1 lakh to Rs.5 lakh. Time period could be 1-5 years and until then property cannot be sold.

What happens when the Probate is not obtained?

A probate for a Will is required to be obtained only under circumstances mentioned in Section 213 of Indian Succession Act, 1925. Section 213 of this Act requires that no person claiming a right as executor or legatee of a Will can establish such right in any court of justice under the Will unless he has been granted a probate or Letters of Administration with the Will or a copy of the authenticated copy of the Will annexed, by a court of competent jurisdiction.

A Will that requires to be probated loses its legal enforceability if it is not probated by a court of competent jurisdiction. Thus, in such a scenario, the successors stand to lose their claim over the?inherited property?and the executors of the Will do no possess the power to take any action towards claiming ownership.

Succession Certificate

In the absence of a Will, if there is no survivor amongst the account holders and a no nomination had been done by the holder(s) earlier, a Succession Certificate is to be the primary document through which the heirs can stake a claim to the assets of a deceased relative.?A Succession Certificate, under the Indian Succession Act, is a document that gives authority to the person who obtains it, to represent the deceased for the purpose of collecting debts and securities due to him or payable in his name.?

Is Probate Compulsory?

A probate for a Will is required to be obtained only under circumstances mentioned in Section 213 of Indian Succession Act, 1925. Section 213 is reproduced for ready reference:-

“Section 213: Right as executor or legatee when established –

(1) No right as executor or legatee can be established in any court of justice, unless a court of competent jurisdiction in India has granted probate of the will under which the right is claimed, or has granted letters of administration with the will or with a copy of an authenticated copy of the will annexed.

[(2) This section shall not apply in the case of wills made by Mahommedans and shall only apply in the case of wills made by any Hindu Buddhist, Sikh or Jains where such wills are of the classes specified in ‘Clauses (a) and (b) of Section 57.’]

The above sub-s (2) is substituted, by the Indian Succession, (Amendment) Act 16 of 1962 dated 30 March 1962, by the following:

(2) This section shall not apply in the case of wills made by Mahommedans, and shall only apply -

(i) in the case of wills made by any Hindu, Buddhist, Sikh, or Jains where such will are of the classes specified in (a) and (b) of s 57; and

(ii) in the case of wills made by any Parsi dying, after the commencement of the Indian Succession (Amendment) Act 1962 where such will are made within the local limits of the ordinary civil jurisdiction of the High Courts of Calcutta, Madras and Bombay and where such wills are made outside those limits, in so far as they relate to immoveable property situate within those limits.”

Thus it is very clear from the above provision that a probate is required only under following circumstances:

(i) All Wills of Hindus etc. made on and after 1 September 1870, within the provinces of Bengal, Bihar, Orissa and Assam and within the local limits of the ordinary original civil jurisdiction of the High Courts of Madras and Bombay.

(ii) All such Wills made outside the territories mentioned in (i) above relating to immovable properties situate within the said territories must also be proved and probate thereof obtained, before any right as executor or legatee can be established.

(iii) Wills other than those in categories (i) and (ii) above made before 1 January 1927, i. e to say, such Wills made outside the territories mentioned in (i) above, relating to movable property situate inside or outside the said territories or immovable property situate outside the said territories are not required to be proved or probated [see s 213 (2), infra].

(vi) Where a Will is not executed within the territories mentioned in Para (i) or the Will does not relate to property situate within the territories mentioned in Para (ii), sub-s (1) of s 213 is not attracted.

This will apply to all properties located in the jurisdiction of the High Courts of Calcutta, Madras and Bombay, irrespective of the place of making a Will.

The Will is admissible in evidence even though it is not probated in accordance with Section 213 of Indian Succession Act, 1925.

If there is any dispute among the heirs about the Will e.g. one heir insists that the Will is genuine and is the last Will of the testator and the other heir or heirs insist that it is not, and then the person carrying out the instructions should insist that they should be proved in Court.

MCS Law on Transmission of a Flat (including Commercial Office or Shop) in Co Operative Housing Society in Maharashtra

The cooperative societies having been conferred a constitutional status by the 97th Amendment; the whole concept of cooperatives has undergone a major change. Now with Introduction of Chapter XIII-B in the form of Section 154B, a separate Chapter has been introduced to deal exclusively with issues in Co Operative Housing Societies (CHS) in Maharashtra. This amendment was incorporated vide Maharashtra Co-operative Societies (Amendment) Act, 2019, which was notified on 20th June, 2019. Ordinance for this was originally issued on 26th October, 2018, which was re-promulgated on 9th March, 2019 and thus becomes legal requirements applicable to all CHS from 26th October, 2018 onwards.

Section 154B

Clause (18) (C) defines “provisional Member” means a person who is duly admitted as a Member of a society temporarily after death of a Member on the basis of nomination till the admission of legal heir or heirs as the Member of the society in place of deceased Member

Transfer of interest on death of a Member.

Section 154B-13: “On the death of a Member of a society, the society shall transfer share, right, title and interest in the property of the deceased Member in the society to a person or persons on the basis of testamentary documents or succession certificate or legal heirship certificate or document of family arrangement executed by the persons, who are entitled to inherit the property of the deceased Member or to a person duly nominated in accordance with the rules : Provided that, society shall admit nominee as a provisional Member after the death of a Member till legal heir or heirs or a person who is entitled to the flat and shares in accordance with succession Act or under Will or testamentary document are admitted as Member in place of such deceased Member ; Provided further that, if no person has been so nominated, society shall admit such person as provisional Member as may appear to the Committee to be the heir or legal representative of the deceased Member in the manner as may be prescribed.”

It is therefore clear that till any one of these documents (testamentary documents or succession certificate or legal heirship certificate or document of family arrangement) are produced by the legal heir, Provisional Member cannot be treated as regular Member.

What do these documents mean?

The letter of testamentary is a document issued by a probate court. A probate court is the type of court that validates and processes Wills after someone dies. A probate is granted with the court seal and has a copy of the Will attached to it.?Under Section 57 of the Indian Succession Act, the Will is required to be probated. The transfer of property by inheritance takes place in 3 Metropolitan Cities i.e. Bombay, Calcutta and Madras only by Letter of Probate. While in other cities, it can be on the basis of the documents in support thereof with an affidavit or declaration before the appropriate authority. Succession is testamentary if the deceased has executed a Will which is a legal declaration of the intention of the testator with regard to his properties to be carried into effect after his death.

A?Succession Certificate?is a document that is granted by a civil court to the legal heirs of a deceased who dies without leaving a will. So a person who dies has either made a ‘Will’ or died ‘intestate’. If a person has made a ‘Will,’ the ‘Will’ has to be submitted for Probate after the death of the person. If a person dies ‘intestate,’ then all the legal heirs have to apply to a competent court for a ‘Succession Certificate’ so that his property can be transferred upon his successors.

Legal Heir certificates?are issued by the tahsildar of the district to recognize the actual deceased person living heirs.

A?Family Arrangement?is an?agreement?between members of the same?family, intended to be generally and reasonably for the benefit of the?family, either by compromising doubtful or disputed rights or by preserving the?family?property or the peace and security of the?family?by avoiding litigation or by saving its honour.?The intention of the arrangement is to shield the family from long drawn litigation or perpetual strives which mark the unity and solidarity of the family and create hatred and bad blood between the various members of 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 that their rights actually are, or of the points on which their rights actually depend.

Validity of family Arrangement

Family Arrangements are rarely invalidated, as the Courts accord sanctity to their principal objectives of avoiding disputes and ensuring cordial family relations.?Family Arrangements are likened to agreements under the law. Hence, they must satisfy all of the requirements of a legally enforceable agreement, such as the absence of fraud, undue influence or coercion. The existence of the dispute or a threatened dispute between the members of the family is considered to be a precondition for a valid Family Arrangement and such disputes and the consequent giving up of claims and counter-claims between the various members of the family constitutes good and valid consideration between the parties for enforcement of the rights and obligations created by such Arrangement. The Family Arrangement, therefore, is not founded on existing rights or liabilities but rather on existing claims and disputes between the parties which are amicably resolved &?notices may be given by contending parties, even suits may be filed matters may be referred to arbitration and Arbitration Award may work out as Family Arrangement/Settlement.

Registration of Family Arrangement

As per decision of the Supreme Court, Family Settlement Document Which Merely Records Past Transaction Does Not Require Compulsory Registration as it should not be confused with a partition deed. The need of partition arises as soon as one of the co-owners seeks the partition of his undivided share. By virtue of a partition, a property is divided amongst co-owners by clear identification and demarcation of their respective ownership share of such property. Memorandum of Family Settlement should not be confused with partition deed (which is required to stamped & registered). Memorandum of Family Settlement or Arrangement just records the terms of family arrangement, mutually agreed amongst family members.

The essentials of a family arrangement were laid down by the Supreme Court in the case of Kale & Ors vs. Deputy Director of Consolidation which are as follows:

·????????The family arrangement should be bonafide in order to resolve present or possible future disputes among family members and to ensure equitable distribution of property among the family members;

·????????The family arrangement needs to be honest, voluntary and should not be induced by fraud, coercion and undue influence;

·????????Family arrangement can either be oral or written;

·????????The memorandum recording the family arrangement itself does not create or extinguish any rights in the immovable properties, therefore, not compulsorily registrable.

Stamp duty of Family Arrangement

Since the family arrangement itself does not create or extinguish any rights in the immovable properties, hence not compulsorily registrable, it normally doesn’t require any stamping. However, it is advisable to record this on a Stamp Paper as per local laws which could vary Rs.100-500. It is also advisable to get this notarized to avoid any future dispute about its authenticity.

Why CHS should not insist only on Probate in Maharashtra?

In a co-operative housing society you are the owner of unit of a share in the society in the form of a right to occupy the flat as Land is owned by Housing Society. This is similar to fractional ownership in a Company where you own all assets including properties propionate to your share in that company. In the case of Listed Companies, these shares are held in your D’mat Account and Depositary Participants provides Nomination facilities to all Account holders and upon death of account holder, the share is transferred to the nominee. Thus what each member of CHS is holding is a Share in Capital and right over the property of Society similar to the Share in a Limited Company. Most Limited Companies hold properties and while transfer of share after the death of the member to the nominee, DP doesn’t insist on Probate. ?This position has been upheld by courts in India. Housing Society is the legal owner of the land & super structure and the member holds proportionate interest in that (Land & superstructure) through the Shares held the capital of the Society and hence this transfer of share is very similar to transfer of share in Limited Company. Hence Maharashtra Government amended the MCS Act in 2019 to recognise this situation and brought out elaborate change in terms of documents needed in Section 154B-13 of the MCS Act (discussed above).????

Therefore, Probate is required in respect of independent Property not forming part of CHS located in Maharashtra, where in the owner has conveyance in his/her name along with right, title & interest including possession as regards such property.

Old Cases where “Transfer” has already been done by CHS without "Probate"

The question also arises of old cases, prior to amendment. In those old cases, where transfer of name has been carried in CHS, based on nomination and the nominee`s name is still there as Member and as such?Nominee should be treated as “provisional member” in Society`s records and Society should insist on Probate?(or other documents specified above)?before transfer of flat happens (if not transferred or sold already) by sale or otherwise by “Provisional Member”.

If any such transaction of sale or transfer takes place now or in the past then the buyer of the Property would get property with inherent defect in its title and runs the risk associated with such deficiency in title.

CA Harshad Shah, Mumbai [email protected]