This article is written by Aditya Anand pursuing a five-year integrated course at Symbiosis Law School, Noida. In this article, he has covered the important aspects of the deed settlement and an effective way to avoid court proceedings.
Table of Contents
The deed of settlement is an effective and efficient way to dispose of the matter. The settlement is a harmonious way to resolve the matters. When people live in a society then it is a common issue of disputes and something that cannot be avoided. The different attitudes and personalities of every person can create any such kind of dispute. The settlement deed gives a better option to avoid the court from settling the disputes. For example, if Ram, Shyam, and Karan are brothers and they have a dispute over the plot of land then they have the option to file the petition in the court but they also have the option to avoid the arguments and litigation process of the court by opting for settlement deed that can be beneficial in terms of both time and money. If there is a dispute between the employer and the employee then there is the option to opt for the settlement to resolve the matter after mutual discussion and consent.
A brief concept
The deed of settlement is a legal document that formalizes an agreement between the parties who have disputes over the matter. It resolves the disputes between the conflicting parties. It has clauses that are legally binding over the parties when they have agreed upon and entered the deed. The settlement deeds act as an alternative to litigation. This agreement or settlement prevents the parties from entering into further litigation. The settlement deed can be declared invalid only by the court decree. The settlement of the deed is deemed to be final. It is a legally binding contract between two parties.
The purpose of the agreement is to settle the disputes between the parties. There should be mutual consent and agreement to resolve the disputes. The parties involved in the dispute must have their interest to resolve the conflict by this procedure. The deed is not binding on the parties other than those who signed the contract. The deed cannot be valid if it is against the public policy or something stated in the deed shouldn’t be against the laws. The purpose of the deed must not be unlawful or any illegal activity. The notice of all the legal costs must be added to the deed. There can be various types of settlement but in India, there are majorly a few types of settlement such as property settlement, family settlement, or any industrial settlement.
Essential elements of a deed settlement
A deed of the settlement has some essential conditions to create the obligation between the parties. The parties must follow some essential conditions to make the contract valid and enforceable.
The mentioning of the date on the day the deed must be entered by the parties. The date should be explicitly mentioned on the day the deed was signed by the parties. The date should be entered when the parties have executed the deed.
Name and details
The name and details of the parties who are ratifying the settlement deed must be stated correctly in the deed. This is vital for identifying the legal parties in case of any disputes between them. The details must be written with utmost care and precision. The mistakes can make the deed probably invalid.
The next essential term is the definitions that are the words or phrases used in the deed for understanding and clarity. The relevance of the settlement deed can only be verified when the parties must have understood clearly the terms and meaning of every essential term. The definition section of the settlement contains some specific terms. The parties are advised to read the definition thoroughly and carefully before its final execution so that both parties should mentally agree on the same terms.
The next term is a recital that sets out the background and outline of the dispute and the terms of the settlement. Recitals are the formal document that describes the reason for the transactions. For example, the recitals in the deed may indicate why the owner is transferring the property. This is the vital element in the settlement deed that can be used by the court to interpret the cases in case of any disputes. This is not the main or operative part of the deed but the court may use it for interpretation. Thus, it is a convenient way of recording the party’s intentions.
The next term is a key obligation also called the terms of the settlement as it mentions the mandatory condition. If there is a condition of payment then it must include the payment deadline. It also includes the name of the person who makes the payment and their after process when the payment is made or other actions completed.
Release of parties
The next term is the Release of parties from the dispute or in other words Parties agree to release each other from all future claims, demands, and actions.
Another essential term is to cover the default actions. It is that clause that sets out the condition that what will happen if the party doesn’t follow obligations or the party doesn’t do what they were required to do under the deal. The deed must be duly signed. In case if one of the parties hadn’t signed the deed then it may invite objections.
The subject matter is one of the essential conditions that should be explicitly mentioned and included in the contract. The exhaustive subject matter gives better clarity of the interest of the parties. The registration of deed hasn’t been explicitly mentioned but the settlement of property requires the registration along with stamp duty. In the case of non-registration, it can become the ground for challenging the validity of settlement.
The settlement agreement is just a special form of contract. It should follow all the essential conditions of a contract along with the special conditions necessary to validate the contract. Some of the essential conditions of the contract such as free consent, consideration, capacity to contract, offer, acceptance, and other such conditions that are required to make the contract valid and enforceable.
Parties to a settlement deed
There are two parties in a settlement deed. The party executing the settlement deed is called Settlor. The settlers are the executants. The party who is the receiver or beneficiary is called the claimant or settler.
A settler is that identity that creates trust in the deed. The settler is also known by various terms such as donor, grantor, trustor, and trustmaker. There are also other terms but irrespective of that its ultimate work is to legally transfer the control of an asset to a trustee, who can also be further appointed to manage one or more beneficiaries. The legal term of settlor can also be stated as the trustor, a person who creates trust by giving real or personal property in trust to the beneficiary. In other words, a person who gives such property is said to settle it on the trustee or claimant.
The person receiving the benefits of the deed is called a claimant. Like the settler, the beneficiary can also be represented by various names like inheritor, recipient, or receiver. The person gets entitled rights mentioned in the deed after its execution.
Types of settlement
There can be two types of settlement. The settlement deed that gets executed can be conditional or absolute also known as unconditional.
In the conditional settlement deed, the settlor can mention conditions in the deed for which the claimant is bound to follow. The conditions can be any terms, for example, the claimant can be instructed to pay a certain amount every month or every year. The nonfulfillment of conditions can also make the settlement void. The settlor can get the right of revocation if there is a breach of any conditions and the settlement can become void.
The beneficiary is obliged to fulfill the agreed conditions otherwise the settlement becomes invalid. So, the settler can insert the conditions as per their own will. The settlement deed conditions are binding on both parties.
In the case of absolute settlement or unconditional settlement, the settlement is not conditional and no condition is mentioned. No condition is explicitly mentioned in the deed by which the claimant is bound. There is no such obligation on the claimant and the property gets transferred to the beneficiary without any condition and the settlor has no right of revocation. There is no such provision that can make the unconditional settlement void as there is no condition due to which the settlement can become invalid.
Registration of a settlement deed
The settlement is a legal document that is legally enforceable. The settlement deed can be oral as well as written but it is mandatory in the case of property. A registered settlement deed can act like a prima facie document. If the settlement deed is oral then it does not require registration. If the purpose of the settlement is collateral then the agreement must be stamped and not registered. If the settlement is written then it must be registered to consider it legal and acceptable in the court of law.
In the case of immovable property, it should be registered. As per Section 17 of the Indian Registration Act, a family settlement to assign immovable property must be mandatorily registered otherwise the deed would be invalid. Also, the stamp duty must be attached with deeds and the amount may vary as per the valuation of the property.
The settlement deed in immovable property can be land or building. This document resolves the differences between parties. A settlement can be valid if it is in written format and gets registered. There is a stated procedure for the registration of a settlement deed. Certain documents have to be attached along with the settlement deed. The encumbrance certificate of property, Identity proof, and other such documents are required as per the case. There can’t be an exhaustive list as it may vary from case to case and it may also include conditions that may be stated in the settlement deed.
The prime value of the settlement deed comes when it gains an advantage over certain other methods of resolving disputes of the matter. Litigation is resolving disputes of the matter in court or any competent authority. Litigation is one of the common processes of resolving disputes where there is a case that has to be settled in a court of law. The other forms can be arbitration and meditation. Certain disadvantages are related to litigation. The litigation is time-consuming as well as the cost incurred. Whereas, settlement is a cost-effective and time-efficient method regarding legal matters.
The settlement can help to finalize the matter rapidly if the interests of both parties are met effectively. The parties can deal only in civil cases as there is no legal acceptance of settlement in cases of criminal matters. The settlement can be done outside the court and reduce the burden over the parties to avoid the stress and costs involved in litigation. The settlement deeds can also have the clause of confidentiality if the parties intend to keep the matter private and confidential.
The settlement deeds provide flexibility in resolving disputes. The parties can put forth the condition and they have the freedom to discuss negotiations and their interests. There shouldn’t be any conflict of interest between the parties as it would become difficult to settle. The interest of the parties must be satisfied for the effective and efficient settlement of the dispute.
The settlement can be used to prevent litigation or further the course of discourse. Litigation is expensive in terms of both time and money. The cases cannot be resolved in a few days, weeks, or months. In litigation, there is a long procedure and analysis before reaching any conclusion. The matter comes under the judicial officer who is the competent authority and it is solely in his discretion to dispose of the case without any time limitation. There can be low-income people or small businesses who can hardly afford litigation due to the shortage of time and money. So the settlement is an effective method in resolving the disputes by saving both time and money.
The litigation process in business can create the issue of a reputation as it attracts the general public as well as the media. This may harm the reputation of the business as it can negatively Certain disadvantages are in case of settlement, by using the confidentiality clause. The internal disputes in a firm, company or any organization can be kept private by using the confidentiality clauses of settlement.
If the matters are already in court then also the disputes can be resolved by undergoing the deed of settlement. The deed of the settlement must include terms to finalize the proceedings. The terms of the deed should ensure that one party shouldn’t take any future action against another party. There is a notice of discontinuance or consent orders agreed by the parties that should be attached with the deed. When the parties sign the deed while executing then it brings the end to court proceedings. The deed may also include conditions that the court proceedings may resume if one party doesn’t follow obligation or breaks any other conditions.
Cases of property Disputes are common in India. The most common solution is to take the matter to court. It is no doubt that the matters in the court are time-consuming, expensive, and lengthy tasks. The disputes cannot be resolved within a short period as it may invite objections and other concerns related to legal provisions. The most suitable and satisfactory option can be the settlement.
The settlement is a disposition of movable as well as immovable property as per the wish of the owner of the property. The movable property can be jewellery, cash, and other delicate materials while the immovable property is mostly related to land. In the case of family settlement, the parties or the related family members who have an interest in the properties and should have a valid claim over the disputed property. The parties must have family relations. They can distribute the property among themselves after mutual discussion and satisfaction. The importance of family settlement is that it provides a peaceful and harmonious way to settle the dispute.
The registration of family settlement is not mandatory as it has also been mentioned by different courts as taking the case of Ravinder Kaur Grewal v. Manjit Kaur on 7 August 2019 in which the Supreme Court has observed that registration is not mandatory if the document is only the memorandum of settlement and not the terms and recitals of family settlement. Another case of Backiam v. Rm. Subramaniam 2008 the High Court has pronounced the important judgment that whether registration is mandatory or not. The necessary ingredient to keep the family settlement out of the registration is that it shouldn’t contain terms of family arrangement. If the settlement is recorded in writing then it should be registered as it would contain the terms of family settlement.
The family settlement can be oral as well as can be conveyed in the written form. In the case of Tek Bahadur Bhujil v. Debi Singh Bhujil And Ors, 1965. The Supreme Court of India has stated whether registration is mandatory under Section 17 of the Registration Act, 1908. The Supreme Court upheld the oral family settlement and the registration may be required if the document is done in writing along with recitals and terms.
The above judgments and concepts can make the point clear that registration is not a compulsion as it would depend upon the circumstance and the disputed settlement. The validity of the settlement of the deed cannot be concluded by only the registration process. Undoubtedly, the registered deed acts as prima facie evidence in case of any disputes if arisen by any of the parties.
Difference between a gift and settlement
There is a thin line difference between the gift and settlement however these terms are often used interchangeably. In the case of a gift, there is no need for considerations whereas in the settlement in the settlement deed there can be various considerations such as love, affection, mental satisfaction, and marriage. It is mandatory that the gift has to be accepted by the receiver whereas in the case of settlement there is no need for any acceptance.
Difference between partition and settlement
The partition is a division of property by the person who has a joint interest in the ownership of common property that gets divided among them. Each shareholder of the property gets absolute ownership of its shares and each share is determined by the law of inheritance or it can be a partnership deed whereas the settlement is a transfer of property that is owned by third persons and is settled in favor of those persons who has no previous interest in the said property and share may vary as per the wishes of the settler. The settlement can be only for that property that is acquired by own.
Requirements of the settlement deed
The settlement deed is like other agreements and it also follows certain procedures of agreement. The settlement deed should have the mutual consent of all the parties. There should be free consent without any kind of external factors such as fraud, coercion, or misrepresentation. The settlement can be oral as well as the written form. If the settlement is in writing then it must be signed by all the parties. There must be attestation by two witnesses.
If the settlement deed is executed for the division of family property then it must be signed by all the parties. If any of the siblings are not included or have not signed the deed then the deed becomes void. Settlement deed once executed then it becomes binding upon the parties.
Can the settlement deed be executed abroad
The siblings of one family who are residing in a foreign country can execute the deed at their residing places. If the settlement deed is of the property division and it was executed in the foreign country then to validate that deed in India the parties must pay stamp duty and get the deed registered. If it comes under the mandatory conditions then registration must be done in the sub-registrar office where the property is located.
If any document is executed in a foreign country then the parties must pay stamp duty in India at the office of the sub-registrar within three months of receiving to make the document legal in India. The assigned officer will authenticate the documents.
If the documents are signed then they should be registered within four months of their execution. If the documents are executed abroad then the four months starting from the day it was received in India.
Grounds for challenging a settlement deed
There are several grounds for which the settlement deed can be challenged.
Fraud is an intentional act to deceive another party for an unlawful gain. This act can be committed by those persons who are parties to a contract. There can be any active concealment of a fact by having knowledge or belief of the act. The innocent party may falsely believe in the facts and trust in another party. The party can also make a promise or agree to the conditions of the settlement without any intention of performing it. There must be some representation of material facts in the settlement deed to prove the dishonest intention of the other party. The victim party may challenge the settlement deed if he falsely believed or he was unaware of some material facts that need to be mandatorily mentioned.
Coercion is the act of threatening another person for some purpose that is forbidden by law. The other party can induce the victim party to sign the settlement deed and thus it can be concluded as coercion. There would be no free consent and the other party must use the express or implied threats of violence or any conditions of repercussions if the deed is not signed. There can also be any intimidating behavior that may put the person in immediate fear of consequences. The other party can compel the victim party to sign the settlement deed against his or her will. The settlement deed can be declared void by the court if the victims prove that the execution of the deed was not agreed with free consent.
Misrepresentation is the false representation of a material fact. It is a false statement but the other party may believe it to be an honest and a true statement in its complete sense. The false statement of a material fact may affect other party decisions in the execution of the settlement deed. The party must believe the statements must be true. The settlement can be declared void if the victim party proves that there was the intent to misrepresent the facts by the other party.
This can be the strong ground for challenging the validity of the settlement deed. There can be varieties of conditions that can come under improper execution. For example, the name and details of the person are wrongly written or the documents got wrongly submitted. After the utmost care and precision, if something is improperly executed then it provides the ground to the party for improper execution.
The deed of settlement provides an alternative option to resolve the matter peacefully. The conflict of interests is a common phenomenon among the people as there can be disputes among people. The settlement deed is the alternative step to avoid the hectic and tedious task of the court procedure. If the dispute is something that can easily be resolved after mutual discussion then the settlement agreement is the best option. This type of negotiation can easily be executed between the parties as they depend upon the will of the parties. The importance has been discussed thoroughly and how relatively it can be a beneficial method to resolve the disputes. Arbitration and Mediation are some other common ways to dispose of the matter other than litigation. The settlement depends on the discretion of the parties and nobody would have to face any negative side of disputes as the court generally takes stringent measures to settle the disputes.
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