The Private Client team at Cyril Amarchand Mangaldas shares their comments and opinions shared in an article in the following Q&A which was published by the Mint Newspaper on 28th Jan, 2020 and the online edition of the same can be found at: https://www.livemint.com/insurance/news/it-is-not-necessary-to-appoint-a-lawyer-as-executor-of-your-will-11580203086115.html
The Private Client team at Cyril Amarchand Mangaldas is delighted to share, via our Private Client blog, our comments and opinions shared in various leading media publications globally. We hope these inputs help our clients and readers gain a practical perspective into key legal, financial, commercial and other aspects that need to be duly considered in Estate Planning.
The following Q&A was published by the Mint Newspaper on 14 Jan 2020 and the online edition of the same can be found at: https://www.livemint.com/money/personal-finance/trust-made-under-will-works-well-for-bequeathing-assets-to-a-minor-11578997625506.html.
For further information, please contact our Partner & Co-Head of our Private Client team, Mr. Rishabh Shroff, at Rishabh.shroff@cyrilshroff.com Continue Reading Trust made under Will works well for bequeathing assets to a minor
The issue of legatees vs. nominees still seems to be causing confusion in the minds of the public. Even after a number of clear judicial decisions on this topic, confirming that legal heirs are the correct persons to inherit assets (over that of a nominee), a new decision re-confirms this issue.
The National Company Law Appellate Tribunal, New Delhi (“NCLAT”), on November 14th, 2019 had held that nomination does not amount to beneficial ownership to an asset and the nominee holds the asset for and on behalf of the legal heirs of the deceased. The Bench of Justice S.J. Mukhopadhyaya and Justice A.I.S. Cheema, in the case of Oswal Greentech v Mr Pankaj Oswal and Ors[1] (“Oswal”) whilst listening to the question of maintainability of the petition under Section 241-242 of the Companies Act, 2013 (“Act”), decided on the said matter. Continue Reading Court Re-Confirms That Legal Heirs Are Preferred Over Nominees
When one is about to get married, there are myriad thoughts crossing one’s mind all at once – from meticulous planning of the upcoming nuptials, to mundane but practical matters such as updating official documents, to creating social media hashtags. A wedding is after all a momentous occasion in a person’s life, and planning is key. It might be safe to say, however, that the thought of how marriage will impact one’s inheritance rights and succession planning in anticipation are usually not top of the list.
In this blog, we discuss this important but rarely discussed topic – the effect of marriage on inheritance rights and planning in anticipation of marriage. As this is a vast topic and issues vary depending on the facts of each case, we have discussed some of the key issues and limited the discussion in this post to Hindus. Continue Reading Wedding (Succession) Planning: Analysing Impact of Marriage on Inheritance Rights of Hindus
The Supreme Court of India, in the case of Mohammed Salim vs Shamsudeen[1], has finalised the views of a number of High Courts by ruling that a child born out of the marriage of a Muslim man and Hindu woman is legitimate and the child is entitled to inherit the property of the father.
This is a very significant judgment in the current socio-cultural milieu, even though inter-faith marriages are still deeply frowned upon.
All matters (except those relating to agricultural land) with respect to intestate succession, special property of females, including personal property inherited or obtained under contract or gift or any other provision of personal law, marriage, dissolution of marriage, maintenance, dower, gifts etc., of Muslim followers are governed by the Muslim Personal Law (Shariat) Application Act, 1937 (Shariat). Shariat extends to the whole of India except the state of Jammu & Kashmir. Continue Reading Supreme Court on the Rights of Inter-faith (Hindu-Muslim) Children
The scourge of ‘black money’ has been a persistent issue for India, becoming a major political issue in the recent past. The problem of black money leads to challenges on multiple fronts, greatest of them being denial of revenue to the Government. The parallel economy created by black money deprives the government of its due share of individual income tax, which in turn leads to reduced funds available for much needed government spending and stimulus. Socially, the problem of black money gives rise to further corruption and enhanced class inequality.
Since coming to power in 2014, the current Government has taken up the issue of black money as a major point of reform and has been gradually escalating its efforts to bring black money, both in India and abroad, to tax. Some of the major measures include establishing the multilateral mechanism for Automatic Exchange of Information, information exchange mechanisms with various countries under the respective tax treaties, the demonetisation drive, enactment of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (BM Act) and the Fugitive Economic Offenders Act, 2018. Continue Reading Prosecution Under Black Money Act for Inherited Foreign Bank Accounts
In recent years, the issue of corporate governance in India has been a hot topic of discussion. As India Inc. has grown by leaps and bounds, corporate India’s attention has evolved from simple ‘management’ to ‘governance’, and now ‘effective governance’. Given the unique challenges that India Inc. faces due to the predominance of family run businesses, there is a pressing need to move from the ‘Raja’ and ‘Praja’ model of governance (wherein the self-interests of the promoter family precedes the interests of other stakeholders) to the ‘Custodian’ model of governance (which is designed to serve the interests of all stakeholders). While some promoters have consciously worked hard to establish a “Ram Rajya” (a democratic-righteous rule), many are still reluctant to yield power and fear that it may lead to an abdication of their throne.
Kotak Committee
In June 2017, Securities and Exchange Board of India (SEBI), constituted a high powered committee under the chairmanship of Mr. Uday Kotak (Kotak Committee) with the aim of improving governance standards of Indian listed companies which came out with detailed recommendations (Kotak Report)[1]. The legal experts on the Kotak Committee included our Firm’s Managing Partner, Mr. Cyril Shroff.
On March 28th, 2018, SEBI’s Board decided on these recommendations whereby (i) 40 out of 80 were accepted without any modifications; (ii) 15 were accepted with modifications; and (iii) 18 were rejected.
Kotak Committee – Key recommendations accepted by SEBI
The Kotak Committee suggested numerous amendments to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, which will consequently impact all listed entities. In this article, we dissect some of the critical proposals and their impact on Indian Promoters. For a full list of recommendations accepted by SEBI, please refer to the press release[2].
Continue Reading India’s Tough New Corporate Governance Regime – Impact on Promoters
Give a man a fish, and you feed him for a day; teach a man to fish, and you feed him for a lifetime.
– Anonymous
Philanthropists the world over have been inspired by this simple but powerful statement, and have evolved from undertaking traditional notions of charity to philanthropy and now more recently, towards impact investing.
Impact investing bridges the gap between pure charity and donations for social, environmental and other causes, and pure investment aimed only at financial gain. As the world and, in particular, India, braces itself to battle increasing demand but diminishing resources, the deployment of monies in a manner that helps solve societal problems and conserve resources is not a luxury, but an urgent necessity.
Impact investing is an idea whose day has come. Mahatma Gandhi believed that the rich should be custodians of their wealth for the benefit of society, leading to a more egalitarian world. In this article, we explore why Indian family offices – being custodians of family wealth – should embrace impact investing that embodies this Gandhian philosophy. In doing so, they will not only contribute to society but also extend family legacies beyond the board room.
Impact Investing
The World Economic Forum describes impact investing as an approach that intentionally seeks to create both financial return as well as positive social and/or environmental impacts that are actively measured. The term is often used narrowly as an asset class, but, in fact, it represents an investment approach or philosophy by which investments are made across asset classes. Such asset classes include venture capital and private equity, social impact bonds, municipal bonds, real estate and contribution to social venture funds.
Pic: Vedic “Theorama” Series, painted by M. F. Hussain
The issue of succession equality and rights for women has been extremely important and perhaps controversial in recent times. However, it is very heartening to see that our Indian Courts have continued to adopt a pro-women approach in a number of legal aspects, one of the most important of which is in relation to ancestral properties.
In a landmark decision, the Supreme Court of India (SC) upheld the right of a daughter to an equal share as a son in an ancestral property, including daughters who were born before the Hindu Succession Act, 1956 (HSA) came into force. The judgement was delivered by Justice A.K. Sikri and Justice Ashok Bhushan on February 1st, 2018 in the matter of Danamma v. Amar[1].
The Bench further clarified that the Hindu Succession (Amendment) Act, 2005 (2005 HSA Amendment) to Section 6 of the HSA makes a daughter a “coparcener” since birth (one who shares equally in the inheritance of an undivided joint family property, and since 2005 this applies equally to both sons and daughters). This fact gives her the same rights and liabilities as a son while asserting that it is applicable in all property disputes filed before 2005 as well. The marriage of the daughter makes no difference to this position.
A Hindu Undivided Family (HUF) is a unique concept that exists under Hindu law. It is a body that has a separate legal personality, comprising of all lineal descendants of a common ancestor and includes their wives and daughters. A ‘coparcener’ is a lineal descendant who is within four degrees from a common ancestor; such a person acquires an undivided interest in the HUF property immediately at birth.
Prior to the 2005 HSA Amendment, a daughter ceased to be a coparcener in her father’s HUF upon her marriage. However, as per the amended law, whilst a married woman becomes a ‘member’ in her husband’s HUF (i.e. she has very limited rights in the husband’s HUF), she also continues to be a coparcener in her father’s HUF.
In 2002, a plea was filed in Karnataka by two sisters of the ‘Savadi family’, seeking a share in their late father Mr. Gurulingappa Savadi’s property. The trial court dismissed their plea in 2007 and held that the sisters were not entitled to any share as they were born prior to the enactment of the HSA, and therefore could not be considered as coparceners. It also rejected the alternate contention that, in any case, the sisters had acquired a share in the HUF property after the 2005 HSA Amendment. The view of the trial court was affirmed by the Karnataka High Court, leading to the appeal in the SC.
The SC considered two questions:
Setting aside the High Court order, the SC held that a daughter’s share in ancestral property could not be denied on the ground that she was born before the 2005 HSA Amendment; and the amendment was applicable to all partition suits filed before 2005 and pending when the amendment was framed.
The bench added that the law was amended to give daughters equal status to that of a son in succession related matters. The bench added that:
“These changes have been sought to be made on the touchstone of equality, thus seeking to remove the perceived disability and prejudice to which a daughter was subjected.”
The SC correctly took the view that the amendment of Section 6 of the HSA vide the 2005 HSA Amendment clinches the issue, beyond doubt, in favour of the appellants and held that:
“This amendment now confers upon the daughter of the coparcener as well the status of coparcener in her own right in the same manner as the son and gives same rights and liabilities in the coparcener properties.”
Sixteen years since the partition suit was filed, the Savadi sisters were finally granted justice. The SC’s decision crystallizes the inheritance rights of women under Hindu law, irrespective of their marital status. The 2005 HSA Amendment fundamentally altered the status of women, by making daughters equal coparceners in the same manner as the sons in the HUF property. However, it did not expressly provide for the retrospective operation of law.
The SC had the option of taking either a very narrow view of the law, or choosing to do what they did. They chose wisely. This decision has made it law that a daughter will be entitled to an equal share as that of a son (i.e. her brother) in her father’s property. This categorical assertion by the SC has clarified the law, leaving very little scope for misinterpretation by other courts.
For daughters wanting to claim a share in their ancestral property, they can now do so regardless of their year of birth. Even children of a pre-deceased daughter who was living at the time of the 2005 HSA Amendment, can claim a share in HUF property to the extent it would have devolved upon their mother. The SC has, while referring to its earlier Judgment in the case of Prakash and Ors vs Phulvathi and Ors(2015)[2] clarified that living daughters of living coparceners in or after the 2005 HSA Amendment would have equal rights of inheritance as that of a son. Hence, the SC held that the rights granted to daughters under the 2005 HSA Amendment would be applicable to living daughters of “living coparceners as on 9th September, 2005 irrespective of when such daughters are born”. In simpler terms, this means that if either the daughter or the father were not alive on or after September 9th, 2005, then the daughter would have no legal right over the coparcenary property of her father.
However, in practice, most daughters do not claim a share in their ancestral property and relinquish it in favour of their brothers, often for little or no compensation. Societal and family pressures force women to do so, and this is unlikely to change in the medium term across India. Even awareness or knowledge about their personal wealth and the need for succession planning is very limited or non-existent, let alone awareness of such nuanced issues on family property. This reflects a very sorry and sad state of affairs in the Indian male dominated environment.
It is important to note that Section 6 of the HSA applies only to intestate succession (i.e. default succession under the law), and not to bequests of personal assets through testamentary instruments (i.e. a Will or Codicil). Families looking to bequeath their assets to specific persons should do so by way of a professionally drafted Will, which clearly lays out the manner of bequest. This helps mitigate the risks posed by the change in law and ensure that the assets do not get locked up in litigation for many years.
Today, women are playing a pivotal role in the business world, far beyond just their family businesses. Given the evolving nature of inheritance & succession law, they must take steps to understand their inheritance rights, and do something proactive about it. Women, we encourage each of you to think about your succession and legacy very carefully, and to consider putting in place your Wills at the earliest.
* The author was assisted by Tanmay Patnaik, Principal Associate – Designate and Kavya Keshari, Associate.
[1] 2018(1)SCALE657; Civil Appeal Nos. 188-189 of 2018 [SLP (C) Nos. 10638-10639 of 2013] http://sci.gov.in/supremecourt/2013/3186/3186_2013_Judgement_01-Feb-2018.pdf
[2] 2015(6) Kar L J 177
A Will differs from contracts and other executed documents in one important aspect. Unlike other documents, a Will only takes effect from the death of the person who has made it (called the testator). The testator’s testimony is not available to determine whether the Will is valid and whether it constitutes the testator’s true intentions. Thus, the validation and interpretation of a Will is rather unique for the significance of surrounding circumstances, and the identity and status of parties.
This being the case, it becomes advisable not only to prepare a Will that is clear and legally valid, but also to ensure that if a challenge to the Will is anticipated, suitable safeguards to fortify it have been put in place. In this post, we discuss the legal grounds on which a Will may be challenged, and some of the commonly adopted precautions that testators may put in place to help validate their Wills and to assist in giving effect to their desired intentions.
Grounds for Challenge
After the testator passes away, the Will may be challenged before a Court by any person who claims to have an interest in the testator’s estate. If the Court finds, based on the evidence placed before it, that the challenge is sustainable, it will declare the Will void and set it aside.
Continue Reading Fortify Your Will: Safeguards to Ensure that Your Will is Validated