Supreme Court on rights of Hindu Muslim Interfaith Children

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.

Inheritance Rights of a Child Born Out of an Irregular Marriage under Muslim Personal Laws

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

Prosecution under Black Money Act for inherited foreign bank accounts

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.

Continue Reading Impact Investing by Family Offices

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.

Continue Reading Daughters Born Before 2005 Have Equal Rights to Ancestral Property: SC

 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

Photo credit: Indian Express, August 23, 2017

Through its historic ruling delivered by a five-judge bench in the case of Shayara Bano and Ors v. Union of India on August 22nd 2017, the Supreme Court of India (SC) liberated Muslim women from the perpetual fear of arbitrary and whimsical divorce. The SC banned the regressive practice of instant ‘triple talaq’, which allowed Muslim men to unilaterally end their marriages simply by uttering the word “talaq” thrice without making any provision for maintenance or alimony. These often happened on the flimsiest of grounds, if any, which left the women at a serious and grave disadvantage.

The long-standing battle to get triple talaq abolished gained renewed momentum in October 2015, when the SC decided to look into the matter of Muslim women facing gender-based discrimination within the community. A Constitutional Bench of the SC was set up to examine if Muslim women face gender discrimination in divorce cases.

Continue Reading Sin! Sin! Sin! : Supreme Court Declares Triple Talaq Unconstitutional!

Over the past few years, many Indian business families have established estate planning structures, many of which comprise one or more family trusts. The main driver for these structures would have been tax driven considerations. Under the recent Finance Bill, 2017 (Finance Bill), there was a key amendment proposed to the Income-tax Act, 1961 (IT Act), which if passed would have had a significant impact on existing and future estate planning structures – by way of a ‘gift tax’ in respect of assets received by taxpayers without consideration or for inadequate consideration (Proposed Amendment).

Subsequently, the Proposed Amendment has been further amended by the Finance Act, 2017, as passed by the Parliament on March 30th, 2017 (Finance Act). In this article, we discuss the said amendment to the gift tax regime.

Under the IT Act, gifts received by individuals and Hindu Undivided Families (HUFs), were taxed, subject to tax certain conditions and exceptions. However, other tax payers, such as unlisted companies, partnership firms and limited liability partnerships were not subject to gift tax, except if they receive shares of unlisted companies without consideration or for inadequate consideration. However, certain exceptions, namely receipts from relatives, gifts on occasion of marriage, etc had been retained.

In order to remove this disparity, the Finance Act provided that the ‘gift tax’ regime shall apply equally to all tax payers post April 1st, 2017.

Continue Reading Update on Finance Act, 2017: A lucky escape for Trusts

A Will is one of the most frequently used tools in the process of succession planning. A Will is made by testators at the appropriate stage(s) of their life, and usually benefits family. However, a fear that looms large in their mind is the risk that someone may challenge the Will, causing it to get stuck in the labyrinth of the Indian court system. This fear is likely to be more acute when the testator knows that there is a specific person, either within the family or outside, who may challenge the bequests (or lack thereof!) under the Will. Unfortunately, there are many instances of such messy and protracted disputes. The main victims who suffer in these disputes are the testator’s family – they will not inherit the estate until the dispute is settled. Hence, the testator’s fears are completely justified.

To avoid these consequences, one option the testator can explore is entering into a contractual waiver with such persons – whereby any one or all of the beneficiaries (those who may benefit under the testator’s will, family or non-family) forego their right to challenge the Will. This would mean that the family can inherit the estate smoothly and quickly, without dispute or hassle.

But why would a beneficiary agree to do so? It ultimately comes down to a commercial decision and negotiation. Beneficiaries will be concerned that certain assets or amounts from the estate should come to them (for reasons which may not always be robust, or which may withstand a deeper legal scrutiny). If the testator can agree to meet such requests through the Will, or even by way of a lifetime transfer, then the beneficiaries may be willing to enter into a contractual waiver of their right to challenge it. But this is a commercial decision that needs to be taken by both parties. Testators are ultimately buying peace for their family after death. This article further explores the legality and practical aspects of such a waiver.

Continue Reading Can You Waive Your Right to Challenge a Will?