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Property, Divorce and Prenuptial Agreement

Saturday, April 28, 2018

In the unfortunate event of a failed marriage in Hindu Undivided Family, the wife may claim share from husband or from his undivided share in HUF. It could create trouble for the family and property. Advocate Tanmay Ketkar tries to look for a way out

In India there are two important types of families, i.e. joint family and nuclear family. Both types have its own pros and cons. Our taxation statutes recognize H.U.F. i.e Hindu Undivided Family as a legal entity. To save taxes many people establish such HUFs and moreover route most of transactions through such HUFs. These transactions include buying of properties as well.

So long as the family and its members are united there is absolutely no problem. However, as a family grows, naturally there is possibility of disintegration of family. In event of disintegration the outgoing member or members are to be given their proportionate shares in HUF. As far as moveable properties are concerned it is easy to calculate and alienate the proportionate share.

This is not the case with the immoveable properties i.e. house, offices, bungalows etc. It is always difficult to calculate and further more difficult to alienate the proportionate share of outgoing member. For example, suppose there is a house belonging to HUF worth of 1 crore and one of 5 members of HUF is exiting the HUF. In this case it is not possible to physically cut the house, the only options left is either to give the money equivalent to proportionate share or to sell the property and distribute the proceeds among all members. However, if there is dispute about the proportionate share and its value, the dispute eventually reaches judiciary.

‘Troubled’ property
Exactly same trouble could be there in case of divorce. Whenever there is a marriage, the newly-wed bride automatically gets the share in property of husband. In case of nuclear family, it is easier to calculate such share as compared to the joint family or HUF. In the unfortunate event of failed marriage, wife may claim share from husband in nuclear family, however in case of HUF the wife may claim share from husband or from his undivided share in HUF. It could create trouble and threat for entire joint family and joint family property.

If the dispute is resolved amicably not a problem, however if the dispute reaches judiciary, the property of husband or joint family property may also be subject of the petition filed and claims raised. Whenever the property is in dispute, it naturally reduces the marketable value of the property.

It is always said and suggested that precaution is better than cure. Could there be precaution against the claims arising out of failed marriage or divorce? The solution could be prenuptial agreements. Prenuptial agreement is an agreement entered into by bride and groom concerning ownership of assets should the marriage fail. Such an agreement predetermines the sharing of assets in case of failure of marriage or divorce. The prenuptial agreement could clear the air and doubts about the possible claim.

Need for specialised law
In India, currently we do not have any law governing prenuptial agreements. Therefore, the prenuptial agreement would be governed by the prevailing contract Act.
Prenuptial agreement in a way fixes the quantum of claim and prevents the parties to raise the claim or initiate legal proceedings, which is contradictory to the provisions of section 28 of the contract Act. As per section 28, any agreement in restraint of legal proceedings is void. Therefore, prenuptial agreement in India cannot legally prevent anyone from initiating legal proceedings, which ultimately defeats the very cause of prenuptial agreement i.e. no litigation.

In nutshell, the marriage gives bride right in property of husband or in his undivided share of common property and, currently, the prenuptial agreement also cannot help in case of failed marriage. However, considering the rising rate of divorce, we need a specialised law governing prenuptial agreements, which would save husband and wife from litigation and, at the same time, protects their respective rights.

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