Builders' Agreement Cannot Modify Shares Of Family Members Laid Down In Memorandum Of Family Settlement: Delhi High Court

A division bench of Justices Anil Kshetarpal and Harish Vaidyanathan Shankar further observed that the family members, entering into a builder's agreement for the construction of floors, do not affect their shares. It reasoned,

“The Memorandum of Family Settlement does not create any right, title or interest in the immovable property for the first time by this document. Hence, it is not required to be registered…Once, by virtue of the Memorandum of Family Settlement, the respective shares of the family members were identified, the Builders' Agreement, which is essentially an agreement to construct the building, will not result in its modification or novation.”

In the case at hand, the descendants of Santosh Prashar were before the Court, against a single bench decision which decreed partition of the property as per the family agreement.

The Appellants argued that one, the Family Settlement partitioned the property by metes and bounds and hence, required to be registered as well as stamped; and two, the agreement with the builder to demolish the property and construct floors did not correctly record the allotment of members' shares.

On a careful reading of the Family Settlement, the High Court said, “It becomes evident that it is a Memorandum of Family Settlement…Such a settlement does not require registration because neither any new right is sought to be created nor extinguished, only the manner of enjoyment of suit property has been delineated, which does not result in the creation of any right.”

It relied on Kale & Ors. vs. Deputy Director of Consolidation & Ors. (1976), where the Supreme Court held that a Memorandum of Family Settlement apportioning the property between the family members without the creation of new rights does not require registration.

In the present case, it said, once by virtue of the Memorandum of Family Settlement the respective shares of the family members were identified, the Builders' Agreement will not result in its modification. It held,

“Modification, novation and alteration of a contract is regulated by Section 62 of the Indian Contract Act, 1872. Its first requirement is that the parties to the contract agree to substitute a new contract, which is not the case herein…The second requirement is that there should be an intention to substitute the previous contract with a new contract, which cannot be gathered from the facts of the present case.”

As such, the Court dismissed the appeal.

Appearance: Mr. Tanmaya Mehta, Mr. Anirudh Bhatia and Ms. Shreya Sethi, Advs. for Appellants; Mr. Sanjay Gupta, Mr. Ateev Mathur and Mr. Anmol Sharma, Advs. for Respondents

Case title: Suman Singh Virk & Anr. v. Deepika Prashar & Anr.

Citation: 2025 LiveLaw (Del) 988

Case no.: RFA(OS) 61/2024

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