HOW TO UNDERTAKE A PARTITION OF A FAMILY BUSINESS
In today’s
era the term partition is very commonly seen in between family members which
results to a division of assets in between them, some partition took when there
a dispute arises among members of the family, some took because the thinking of
every family members does not match for a same cause and many more causes are
there which results to a partition in a family Business. In this article what
is partition, its kinds, who have rights to claim a partition and under what
conditions there can be a division of a family business.
The term
partition used in the law of real property to describe an act by a court order
or to divide a concurrent estate into separate positions representing the
proportionate interest of other members of the family. A practical division of
property would involve not only the fractional share of a family members is
entitled to, but it also decides the exact boundaries of the property of Joint
Family. As we all know that the partition is the severance of the status of the
Joint Hindu Family which is known as the Hindu Undivided family mentioned under
law. In the joint Hindu family the head of the family is known as KARTA he is
the one, who manages day to day expenses of the family and looks after the
family business. The Karta contains a limited powers but he has also a power to
compromise all disputes related to family business.
In the Hindu
law it is said that once the status of Hindu family is put to an end then there
is notional division of properties among the members & the joint ownership
of property will come to an end. For an effective partition it is not necessary
to divide the properties in METES & BOUNDS. Here the determination of metes
& bounds can be done through mutual agreement or the court will appoint a
commissioner to do the same. There are 2 types of partition which are described
under Hindu Law they are as follows:-
1. Total Partition
2. Partial Partition
In the total partition the whole property of a Hindu Undivided Family
undergoes in a total division of property & the same will be divided in
between all the coparceners and family cease to exist as a Hindu Undivided
Family, where as the partial partition can also be made when some of the
members go out on partition & other members continue as being a member of
the family & in this case the remaining property will belong to the
undivided family.
Now it is very necessary to know that who have a right to
claim a Partition in a family business, so in this regards I am spreading a
light on it, in any family where a disputes arises and which results to a
partition in a Family Business there any coparcener has a right to claim a
partition in a Family business and it is not mandatory also that other
coparceners should agree to the partition which was sought by one of the
coparceners. Even minors can also claim for a partition in the family business
& the claim can be made through their guardian until the minor reaches in
his age of majority.
The partition
in a family business on the death of the coparcener but it cannot bring an
automatic partition and on such death the other living members would continue
to remain as joint. But in the Hindu
Succession Act there is a provision which says that there is a deemed partition
for a limited purpose of determining the share of the deceased coparcener for
the purpose of succession mentioned in the act of 1956, HINDU SUCCESSION ACT.
The another clause which also arise here is the ownership of the property
received by a member on a total partition of Hindu undivided family , here the
property which will be received by the male member of the family on the total
property will retain its character as a joint family property and if he is
single then it will be Hindu undivided family property after the marriage and a
Sole member has a right to constitute a hindu undivided family on marriage .
Any member can demand for the partition in the family business by entering into
the DEED OF PARTITION, here parties are considered purely as a contractual in
nature but the parties have to file a suit in a Civil Court for a decree of
partition, the decree is registered with the Sub-Registrar of Assurance
mentioned under the INDIAN REGISTRATION
ACT and after the successful registration it can obtains the loans in future as
the financial institutions would
accompany you more comfortably & accepting to the property as a security if
there a court decree lies which opposed to the mere contract in between the
family. One thing to be kept in mind always is validity of partition between
the widow mother and sole surviving coparcener son here a mother or a wife has
no right to claim for a partition but if the partition is affected then a mother
or a wife will get an equal share as of the son, there is also a clause where a
property is capable of physical division when the partition was made by the
physical division only, if the property of Hindu undivided family does not
admit the physical division. For instance it was never expected that the
utility of the property is lost by compelling the physical partition and in
such case the property will be partitioned to its extent possible manner. In
general the partition can be made orally also and there is no provision in law
that the said partition must be evidenced by a written agreement only, although
the partition of the immovable property of the Hindu undivided family can be
made through an oral agreement as well.
A business cannot be
partitioned by metes and bounds in case of partition for conversion of family
business into partnership , it may however noted that a partition can be
effected orally and the claim will not be upheld and the income generated from the
business will be held assessable in the hands of Hindu undivided family itself.
The validity of penalty on Hindu undivided family after a total partition gives
the mandate to an assessing officer to levy penalty on Hindu undivided family
provided under Section-171(8) of Income tax act. The procedure by which the
partition gets its recognition are as follows:-
1. The Hindu undivided family which has
been here to assessed must make a claim to the Assessing officer that the Hindu
undivided family property are subjected to the total partition.
2. Then Assessing Officer will make an
inquiry to the claim.
3. Then the Assessing officer will issue
a notice to all the members of Hindu Undivided Family.
4. If he is satisfied that the claim is
correct then he will record a finding that there was a Total Partition of the
Hindu undivided family and he will also mention the date when it took place.
Let me now share my views on the Deed of Partition and what role it Play
during the Partition; Deed of partition is a deed by which lands held in
common, coparcener, or joint tenancy are separated into different portions and
distributed among several members who takes them in severalty, and if the deed
of partition is executed then there will not be any difficulty with respect to
the rights of the parties under deed and with the respect to the principles of
law applied in the case. The original Deed of partition will always remain in
the custody of 1st party and the duplicate copy of deed will be in
the custody of other party.
Conclusion:-
In India the
existence of a family business does not operated by contract but it is governed
by the principles of Hindu law. As family business do not have any written
partnership agreement or they doesn’t have any certificate of incorporation of
company. Even the family Business also have a great impact on the global
economy too. In general its really easy to carry out a business in association
with the family members but when the breakage occurs in the bond of family
members then a partition among them takes place, as I have mentioned above any
coparcener can claim for a partition in the family business and the partition
can be carried out by the Deed of partition. The assessing officer plays a
vital role when a total partition is claimed by the Hindu undivided family, he
will make an inquiry on the given claim and after issuing a notice to all the
members of Hindu undivided family and if he is satisfied with the claim which
seems to be correct then he will record the finding that there was a total
partition claimed by the Hindu undivided family and he will record the date
also when it took place.
BY,
UTKARSH KUMAR
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