Family Settlement Document Which Merely Records Past Transaction Does Not Require Compulsory Registration : Supreme Court

"If we apply the test as to whether the Khararunama in this case by itself 'affects', i.e., by itself creates, declares, limits or extinguishes rights in the immovable properties in question or whether it merely refers to what the appellants alleged were past transactions which have been entered into by the parties, then, going by the words used in the document, they indicate that the words are intended to refer to the arrangements allegedly which the parties made in the past. The document does not purport to by itself create, declare, assign, extinguish or limit right in properties. Thus, the Khararunama may not attract Section 49(1)(a) of the Registration Act," a bench of Justices KM Joseph and SR Bhat remarked in the case Korukonda Chalapathi Rao & Ors v Korukonda Annapurna Sampath Kumar

The bench in the present matter was considering as to whether a family arrangement "Kharurunama" which merely sets out the arrangement arrived at between the brothers was compulsorily registrable or not.

The Supreme Court was deciding an appeal against a judgment of the High Court which held the family settlement document to be inadmissible in evidence as it was not registered and duly stamped.

The Supreme Court set aside the High Court's judgment, holding that the document in question was not hit by the bar under Section 49 of the Registration Act, as it merely recorded a past transaction. The Court also held that the deed did not require stamping as well.

Factual Background

The appellant's case is that on November 17, 1980, a partition list was executed recording the fact of partition which was already effected. Korukonda Annapurna Sampath Kumar ("Respondent" in the present case) and his wife raised a dispute before elders that the portion given to them wasn't sufficient.

Due to the elder's intervention, the respondents & the appellants settled that the respondent would give his portion to the second appellant and his one-third portion in Nadava Margam to the appellants and in consideration, the first appellant (Korukonda Chalapathi Rao) and second appellant had to give Rs 25000 and Rs 75000 to the respondent.

After paying the said amounts, a Kharurunama dated April 15, 1986, was executed recording the facts.

In December 1993, the respondent and his wife informed the appellants that they would vacate the portion in the second appellant's house and leave the same but demanded some more money as they intended to vacate the property. On December 8, 1993, the second appellant paid Rs 2,00,000 to the respondent and the respondent on the same day issued a receipt to the second appellant. Allegedly the respondent vacated and left the portion in his occupation in the house of the second appellant and shifted to a rented portion.

The respondent instituted a suit seeking declaration of title over the plaint schedule properties (listed in Schedule F of the partition deed dated November 17, 1980) and for eviction of Korukonda Chalapathi Rao. The relief of consequential perpetual injunction was also sought against Chalapathi Rao.

In his suit, he argued that while he was in hospital inpatient for treatment of his liver ailment, the appellants allegedly obtained his signatures on papers and made up the Khararunama dated April 15, 1986, and alleged receipt dated December 12, 1983. He also contended that the appellants were in occupation of his property.

On their refusal to vacate and after the exchange of notice, the respondent filed the suit.

Pursuant to the completion of evidence on Sampath Kumar's behalf, appellants filed an evidence affidavit and sought to mark the Kharurnama and receipt dated December 8, 1993. The trial court rejected the respondent's objections to marking the documents and posted the matter for evidence of DW 1 for marking the said documents.

The Telangana High Court on April 22, 2016, found that the documents which were the unregistered family settlement "Khararunama" and receipt of Rs. 2,00,000/- (Rupees two lakhs) by the respondent, in the absence of registration and not being stamped the documents were inadmissible.

Aggrieved, the appellants approached the Top Court.

Counsel's Submissions

Appearing for the appellants Advocate Vijay Bhaskar submitted that the High Court erred in not considering the family settlement "Khararunama" and receipt dated December 8, 1993, in accordance with well-established principles relating to the law of family settlement /family arrangement.

To contend that there could be an oral relinquishment of the share of the family members in the family settlement and family arrangement, the Counsel relied on the Top Court's judgement in Subraya M.N. v. Vittala M.N. (2016) 8 SCC 705.

The counsel also contended that if the terms of the said family settlement was reduced into writing, and it was only a memorandum executed subsequently recording the terms of the oral family settlement, then, no registration was needed.

Appearing for the respondents, Advocate Venkateshwar Rao submitted that the family settlement dated April 15, 1986, required registration u/s 17(1)(b) of the Registration Act,1908 and under the said settlement the appellant had to pay a certain sum to the respondent. He further contended that the document could come into force after the receipt of the consideration.

Court's Observations

With regards to appellant(s) contention that even if the Khararunama dated April 15, 1986, could not be used as evidence to prove the factum of relinquishment of right which took place in the past, but could be looked into to prove the conduct of the parties and the nature of the possession which was enjoyed by the parties, the bench in the judgement authored by Justice KM Joseph observed that,

"The law is not that in every case where a party sets up the plea that the court may look into an unregistered document to show the nature of the possession that the court would agree to it. The cardinal principle would be whether by allowing the case of the party to consider an unregistered document it would result in the breach of the mandate of Section 49 of the Registration Act."

Observing that since the Khararunama by itself, does not 'affect' immovable property, as already explained, being a record of the alleged past transaction, though relating to immovable property, the Court held that there would be no breach of Section 49(1)(c), as it was not being used as evidence of a transaction effecting such property.

"However, being let in evidence, being different from being used as evidence of the transaction is pertinent [See Muruga Mudallar (supra)]. Thus, the transaction or the past transactions cannot be proved by using the Khararunama as evidence of the transaction. That is, it is to be noted that, merely admitting the Khararunama containing the record of the alleged past transaction, is not to be, however, understood as meaning that if those past transactions require registration, then, the mere admission, in evidence of the Khararunama and the receipt would produce any legal effect on the immovable properties in question," bench further observed.

Relying on the Madras High Court judgement in A.C. Lakshmipathy and others v. A.M. Chakrapani Reddiar and others AIR 2001 Madras 135, the bench on the aspect of stamp duty held that it did not require to be stamped.

"As far as stamp duty goes, on our finding regarding the nature of the document, viz., Khararunama, being record of the alleged transactions, it may not require to be stamped", the judgment stated.

With these observations, the court thereafter allowed the appeal and set aside the High Court's judgement.

Case Title: Korukonda Chalapathi Rao & Ors v Korukonda Annapurna Sampath Kumar

Coram: Justice KM Joseph and Justice SR Bhat

Citation : LL 2021 SC 530