The question has often arisen before the Courts as to whether such family settlements result in transfer of properties from one person to another and whether such transfer can be said to be without consideration. A reference may be usefully made to the decision of the Supreme Court in the case of Ramcharandas V/s. Girjanandinidevi, AIR 1966 SC 323.
The Supreme Court has therein observed 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”.
In the same case, the Supreme Court has given the reason d’tre 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. The word “family” in the context is not to be understood in a narrow sense of being a claim to share in the property in dispute”.
Observations in the case of Tek Bahadur V/s. Debi Singh, AIR (1966) SC 292 also indicate 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. Similar observations regarding registration are found in AIR (1966) SC 1836, Pulliah v/s. Narasimham.
The nature of Family Settlement and the allied questions whether such settlements amount to “Transfer” for purposes of Capital Gains or Registration have been dealt with by several decisions of the Supreme Court & also by some High Courts which explain what is family settlement and why it does not amount to “transfer” and why the memorandum of family settlement does not require registration.
There are various settled laws by supreme court in this regard.
Further the land revenue department cannot rely on the court judgment to deny the mutation or reject any application based on any judgment including that of supreme court. The judgement alone cannot be a blanket bar for all other cases which are referred for mutation before the land revenue department. The department has to follow the rule in this regard and cannot quote judgement as a reason for their rejection until the said judgment has been issued as a circular to all the state governments to implement this decision..
You can issue a legal notice demanding the reason for rejecting and can file a suit for remedy through a court of law.