The Supreme Court held that daughters like sons have an equal birthright to inherit coparcenary property and said the 2005 amendment made to the Hindu Succession Act of 1956 will have a retrospective effect. Rishabh Shroff, Partner, Cyril Amarchand Mangaldas explains the implications of the verdict.
What was the 2005 amendment?
The amendment was passed in 2005 to confer equal status to both sons and daughters of coparceners. Prior to the amendment, coparcenary rights were granted only to sons of a coparcener.
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A coparcener is one who acquires rights to their father’s property upon birth and can claim a partition of the coparcenary at any time.
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Whilst the amendment sought to grant equal rights to both sons and daughters, the wording used left scope for various lacunae, which lead to contradictory views being taken by the Supreme Court on this issue. Until the judgment, equal status was only granted on those daughters whose father (coparcener) was alive when the amendment came into force on September 9, 2005. The judgement has now clarified that the equal rights being given to daughters of coparceners would be granted at their birth, irrespective of the date of death of their father. The SC clarified that the amendment would be applicable retrospectively, and not only to cases where the father is alive on the date of the amendment.
What are the conditions for applicability of the verdict?
This would be applicable subject to the condition that the coparcenary property should not have been partitioned by the father prior to December 20, 2004. As long as the property remained coparcenary property and was not partitioned as of this date, a daughter can now claim interest in the same.
What are different categories of persons in Hindu Undivided Family (HUF)?
One is the coparcener, to whom alone the verdict impacts. The second category is a member (wife), who is only entitled to maintenance and would not be granted any inheritance rights or right to seek partition in the coparcenary.
What can daughters do now?
Daughters will now be treated at par with sons of coparceners, and will be granted equal coparcenary rights in their father’s property upon birth itself. Even their marital status would not affect the rights being conferred by them by way of the amendment – hence, they continue to be part of their father’s HUF post marriage and they can seek a share and can bequeath their HUF share under their Will to any beneficiary they choose.
What about impact of the verdict on family businesses and others?
To be clear, this judgement only applies to HUF property, and does not affect personal or self-acquired assets held individually.
In reality, most personal wealth, including ownership in valuable family businesses, are either held in personal names of the patriarch / promoters, or in private trusts or holding companies /limited liability partnerships (LLP).
The ‘older’ business families may continue to hold some ancestral wealth in HUFs, but the scale and materiality of such holdings is usually limited. Almost no business family is setting up new HUFs, and actually most existing HUFs are being dissolved.