Hindu Real Estate Law & Sale of Joint Family Property

Can a Head of Hindu Undivided Family, sell the joint family property without the consent of the other shareholders ? Is that decision binding on other shareholders in the family ? Before answering this question, we have to first understand  what is a Hindu Undivided Family and how it is constituted and operated upon. 

Hindu Undivided Family (HUF) consists of all persons directly descended from a common ancestor, and also the wives and daughters of the male descendants. For instance, you and your spouse along with your two children can create an HUF and get certain relaxation in computation of taxes. 

 The Hindu Undivided Family is treated as a ‘person’ under section 2(31) of the Income-tax Act, 1961, for the purpose of assessment under the Act. HUF has its own Permanent Account Number (PAN) and files tax returns independent of members. 

An HUF consists of the karta, who is typically the eldest person or head of the family, while other family members are coparceners. The karta manages the day-to-day affairs of the HUF. Children are coparceners of their father’s HUF. Once a daughter is married, she becomes a member of her husband’s HUF, while continuing to be a coparcener in her father’s HUF. Even though Jain and Sikh families are not governed by the Hindu law, they can also form HUFs. 

 The eldest adult coparcener (head of the family) of an HUF is known as the karta who is responsible for handling the affairs of the family. He is entrusted with the power of managing all assets and other financial matters. All securities of an HUF are typically in the name of the karta. There is no prescribed formal procedure for appointment of the karta in an HUF.Upon the death of a karta, the next senior most member automatically becomes the new karta of the HUF. 

The karta plays a fiduciary role in the HUF as he is entrusted with the management of family property and the general welfare of the family. By virtue of being the senior most member of the family the karta is in addition, morally responsible to act in a bona-fide manner in the best interests of the business and the family as a whole. 

The karta has the power to manage the joint family business which involves the power to contract debt for family purposes, enter into contracts, refer matters to arbitration, enter into compromises, alienate joint family property, acknowledge debts and represent the business in suits. Concurrent to these powers is the duty, to render accounts, release debts due to the family, operate in a reasonable and judicious manner and take the consent of other coparceners in making important decisions such as starting a new business or alienating coparcenary property. 

 Karta and His Rights over Family Assets 

Does a karta have absolute rights over assets of the family ? Can the decision taken by karta be challenged in a court of law?  

A karta has absolute power to manage the family property and as such this power cannot be challenged in a court. However, the dis-satisfied coparcener is always free to demand partition of family property at any point of time. 

As far as the power of alienation is concerned, as per Mitakshara law and rulings of various courts, the karta requires consent of all the other coparceners for alienation of the family property unless there is a legal necessity (Dev Kishan v. Ram Kishan, AIR 2002 Raj 370), or It is for the benefit of the estate (Balmukund v. Kamlavati, AIR 1964 SC 1385). 

The karta may also alienate property without consent of the coparceners for the performance of indispensable duties. A decision taken by the karta in these special circumstances cannot normally be challenged in the court. However, when such a challenge is brought before the court, the burden of proof will lie on the Karta to prove that there was in fact the presence of legal necessity, benefit of estate or indispensable duties. 

Further, if the karta alienates the HUF property for purposes other than the three mentioned above, without taking consent of all the other coparceners, the alienation becomes voidable at the instance of any one of the coparceners. 

Even in the recent case of feud over assets in the Grover Family, it can be seen that the power of alienation of the karta has been challenged before the court by alleging that the karta (Mr. Vishal Grover) misused his position to illegally transfer family properties without the consent of the surviving coparceners. 

The Apex Court in a recent decision in Beereddy Dasaratharami Reddy Vs V. Manjunath and Another1 observed that the right of a karta to execute an agreement to sell or sale deed of a joint hindu family property is settled and is beyond cavil. 

In another case entitled Adiveppa & Ors. Vs. Bhimappa & Anr., it was held that all assets pertaining to Hindu Undivided Family (HUF) are to be treated as joint property of the HUF, unless the contrary is proved as self-acquisition of property through valid documents. 

On the basis of above judgement, as of now it can be safely concluded that a Karta has a  right to alienate joint Hindu family property for legal necessity and Is binding on other coparceners 

Can the wife/daughter of a karta replace him after his death ? 

Can the wife or daughter of a karta replace him after his death ? 

On the demise of a male karta, it is now possible for a daughter to become a karta of the HUF under the circumstance where she is the eldest adult coparcener in the family. The courts have found no restriction in the law preventing the eldest female coparcener of an HUF from being its karta. 

However, in case of wife of the deceased karta, the same argument cannot be extended since the wife of the deceased karta is never treated as a coparcener to the HUF. A widow therefore, cannot act as karta of the HUF after the death of her husband. Interestingly, in cases where the surviving male coparceners were minors, the courts took a view that the widow can be a manager of the HUF while distinguishing the position of a manager from that of a karta. 

Thus, it would be correct to say that as of today, if a woman, who is not a coparcener (widow or wife of a coparcener) has a son above the age of 18 years, in such a case it is not possible for her to be the karta of the HUF. In February, 2016, Delhi High Court in a landmark verdict said that the eldest female member of the family can be its ‘karta’ in a HUF.