What constitutes an essential prerequisite for a valid and binding family settlement is no more res integra . It is well settled in law that if a family dispute of immovable property is settled by an amicable family settlement then it shall be considered as valid .
The validity of family settlement agreement has had been dealt in various rulings as below :
In Ramcharandas V/s. Girjanandinidevi AIR 1966 SC 323, it was held as follows:
“Such family settlement between the members of the family bonafide to put and end to the dispute amongst themselves is not a transfer. It is also not a creation of an interest. In a family settlement, each party takes a share in the property by virtue of independent title which is admitted to that extent by the other parties. Every party who takes benefit under it need not necessarily be shown to have under the law claim to share in property. All that is necessary to show is that the parties are related to each other in some way and have a possible claim to the property or a claim or even a semblance of a claim on some other ground as, say, affection”
The Supreme Court further spelt out the raison d’être for recognizing such family settlements as valid. It has observed:-
“Courts give effect to a family settlement upon the broad and general ground that its object is to settle existing or future disputes regarding the property amongst members of the family.
In Tek Bahadur V/s. Debi Singh AIR 1966 SC 292 also indicates that:
“Such Family Arrangements can be arrived at orally. Its terms may be recorded in writing as memorandum of what had been agreed upon. The memorandum need not be prepared for the purpose of being used as a document on which future title of parties is to be founded. It is generally prepared as a record of what had been agreed upon in order that there are no hazy notions about it in future. It is only when the family arrangement is reduced to writing with the purpose of using that writing as proof of what they had arranged and where the arrangement is brought about by the document as such, that the document requires registration, because it is then that it would amount to document of title declaring for future what rights and in what properties the parties possess. But a document which is no more than a memorandum of what had been agreed to between the parties does not require compulsory registration under Section 17, Registration Act”
In Kale and Ors. v. Deputy Director of Consolidation 1976 (3) SCC 199, all the principles were condensed in the following terms:
“9…. A family arrangement is an agreement between members of the same family, intended to be generally and reasonably for the benefit of the family either by compromising doubtful or disputed rights or by preserving the family property or the peace and security of the family by avoiding litigation or by saving its honour…
Family arrangements are governed by principles which are not applicable to dealings between strangers. The Court, when deciding the rights of parties under family arrangements or claims to upset such arrangements, considers what in the broadest view of the matter is most for the interest of families, and has regard to considerations which, in dealing with transactions between persons not members of the same family, would not be taken into account. Matters which would be fatal to the validity of similar transactions between strangers are not objections to the binding effect of family arrangements.
In other words to put the binding effect and the essentials of a family settlement in a concretized form, the matter may be educed into the form of the following propositions: (1) The family settlement must be a bona fide one so as to resolve family disputes and rival claims by a fair and equitable division or allotment of properties between the various members of the family;
(2) The said settlement must be voluntary and should not be induced by fraud, coercion or undue influence;
(3) The family arrangements may be even oral in which case no registration is necessary;
(4) It is well settled that registration would be necessary only if the terms of the family arrangement are reduced into writing. Here also, a distinction should be made between a document containing the terms and recitals of a family arrangement made under the document and a mere memorandum prepared after the family arrangement had already been made either for the purpose of the record or for information of the Court for making necessary mutation. In such a case the memorandum itself does not create or extinguish any rights in Immovable properties and therefore does not fall within the mischief of Section 17(2) (sic) (Section 17(1)(b)?) of the Registration Act and is, therefore, not compulsorily registrable;
(5) The members who may be parties to the family arrangement must have some antecedent title, claim or interest even a possible claim in the property which is acknowledged by the parties to the settlement. Even if one of the parties to the settlement has no title but under the arrangement the other party relinquishes all its claims or titles in favour of such a person and acknowledges him to be the sole owner, then the antecedent title must be assumed and the family arrangement will be upheld, and the Courts will find no difficulty in giving assent to the same;
(6) Even if bona fide disputes, present or possible, which may not involve legal claims are settled by a bona fide family arrangement which is fair and equitable the family arrangement is final and binding on the parties to the settlement.”
In Family Arrangement , another moot question which often arises is
whether for a valid settlement, to avoid future disputes, it is a precondition that all members of a family have to enter into a settlement .
This specific issue was dealt in Satya Pal Gupta Vs. Sudhir Kumar Gupta , the Delhi High Court, in RFA (OS) 76/2013, C.M. APPL.10644/2013 , held that
28………………………………………….This Court does not see any condition, or barrier in the form a necessity to involve all members of a family. If the disputes are inter se as between two members, there is no bar to the designation of their settlement as a family arrangement or settlement. It has the objective of orderliness in the title of each member of the family and crucially, ensures peace and harmony amongst all of them. In S. Shanmugam Pillai v K. Shanmugam Pillai AIR 1972 SC 2069, the Supreme court pertinently held as follows:
“To consider a settlement as a family arrangement, it is not necessary that the parties to the compromise should all belong to one family. As observed by this Court in Ram Charan Das v Girijanandini Devi & Ors  3, S.C.R. 841, the word “family” in the context of a family arrangement is not to ‘be understood in a narrow sense of being a group of persons who are recognised in law as having a right of succession or having a claim to a share in the property in dispute. If the dispute which is settled is one between near relations then the settlement of such a dispute can be considered as a-family arrangements’ See Ramcharan Das’s case (supra).”
Thus, even a wider body of persons, and not merely the coparcenary in a given family or a Hindu Undivided Family can be part of a family settlement. Inasmuch as the object of such arrangements is to end potential or existing conflicts, the court finds it irrational that despite the absence of a conflict between the two disputing members (of a family) for a valid and binding settlement, all have to be necessarily made parties. If the law is that those not considered family members can enter into binding “family” arrangements, it cannot be that all members of a family have to be party to a settlement as a precondition for its binding nature. This argument is, accordingly rejected.