NRI or OCI Family Property Partition
The Partition Act (1893) gives one the authority to claim rights over his/her shares. By definition, property includes land, building, furniture and intangible things such as trademarks, copyrights and patents. In India, there is more than one law that deals with partitioning and transfer of property. Non-Resident Indians (NRIs), Overseas Citizens of India (OCI) and Persons of Indian Origin (PIOs) normally tend to inherit land, buildings and bank accounts from their family.
Partitioning a property entails dividing a property held by co-owners (also known as joint owners) or co-proprietors into individual portions, so that they may own and hold their respective share independently of each other.
What are the kinds of property under Indian Law:
There are two kinds of properties that can be partitioned under Indian Law and the same laws apply to NRIs, OCI and PIOs:
This type of property is that which a person acquires with his/her own money and is not inherited. Also, any property acquired by gift or will is also considered as a Self-Acquired Property. In the following situations property is categorized as self-acquired:
- Acquired or purchased with one’s own resources
- Inherited as a legal heir, for example receiving a share in ancestral property after partition
- When a hindu dies intestate, i.e. without a will, his property is divided as per Section 8 of the Hindu Succession Act and becomes self acquired by the legal heir
- Acquired by way of gift
- Acquired by way of a testamentary document such as a will
Any property inherited by a Hindu from his father, grandfather or great grandfather is considered ancestral property. There are some conditions for a property to be recognized as ancestral by the Courts:
- The property should be four generations old.
- The property should not have been divided by the owners in the joint Hindu family (as after division property becomes to be categorized as self acquired).
- The right to a share in ancestral property accrues by birth itself, unlike other forms of inheritance, where inheritance opens only on the death of the owner.
In other words, property acquired by a Hindu great grandfather, which then passes undivided down the next three generations up to the present generation of great grandson/daughter is ancestral property. Properties inherited from mother, grandmother, uncle and brother, by will or gift are not ancestral properties.
The laws governing the partition of NRI/OCI/PIO property under Indian Law are as follows:
Indian Succession Act, 1925
As per the Indian Succession Act, 1925 there are two ways of succession of property – testamentary succession where the property is divided as per a written document known as ‘Will’ and intestate succession whereby upon the death of a person in absence of a Will, the property would be transferred according to his religious law. In case person law does not apply, the Indian Succession Act will apply.
Partition Act, 1893
Under the Partition Act, 1893, the Court has the power to direct the selling of a property and distribute proceeds amongst the shareholders. Furthermore, the Court can allow a shareholder to buy out other shareholders as per market value of the property. And the Act also contains structured provisions on dispute resolution between shareholders.
Hindu Succession Act, 1956
The Hindu Succession Act, 1956 governs property relating to individuals who are Hindu by religion. Previously, if any person renounced the Hindu religion or converted into another religion, he could not claim his right in the ancestral property but the change was brought through the Caste Disability Removal Act and therefore, now such persons are under-protected under Law.
Methods of partition of NRI/OCI/PIO property
There are various methods of dividing ancestral property, detailed below:
A partition deed is a legal document that divides property between the co-owners of the property and segregates their shares making them rightful independent and absolute owners of their respective share of the property. When the property is owned by several individuals, a partition deed makes sure there’s a legal division of the property.
Upon the execution of a partition deed, each co-owner is entitled to transfer, gift or sell their share of the property according to their will.
The partition deed must be registered and executed on stamp paper in a very clear and unambiguous manner, specifying the share each co-owner has been given.
In case co-owners are not willing to execute a partition deed, then a lawsuit is required to be filed in the court.
Where all members of a family are in agreement regarding the shares of each member or are able to successfully conclude shares following negotiations there would be no requirement to approach the court of law. A family settlement deed can be used to divide the property accordingly. The family settlement deed need not be on stamp paper or be registered. Also, it need not be written but it must be with the complete satisfaction of all the co-owners.
Partition through Will Probate
The Indian Succession Act, 1925 states that probate is official proof of a will. Probate, as defined in the India Succession Act, 1925, is ‘A copy of will certified under the seal of a court of competent jurisdiction with a grant of administration of the estate of the testator’. Probate is issued to the executor or the person who is authorized to implement or execute the will and thereby adds a legal character to the will.
After obtaining the probate, property can be divided into respective shares accordingly.
When a party or parties claim rights over a piece of land or building and files a case in court, due to a property dispute issue that arose in the family, it is called a Partition Suit. The resulting document is called a Partition Deed, an official document created either by Court Order or through negotiation by the parties. It defines the respective portions of the property that would be claimed by each party.
This new partition deed must be registered at the office of the Sub-Registrar to give it a legal and binding effect. Next, the party or parties have to get the deed registered and drafted on a stamp paper in a clear and unambiguous manner. The partition deed will specify each family member’s respective shares in the property.
If a property is being divided between two people who have invested in the purchase, the division is based on their respective contribution. If the ratio of their contribution is 60:40, the division would be in this manner. However, the law assumes each member to have an equal share in an undivided property, unless documentary proof stating otherwise is produced.
In case of inherited property, co-owners would get their share in a property based on their treatment in the inheritance law governing their religion.
Once the partition deed comes into effect, each share in the property becomes an independent entity. Each divided share of the asset gets a new title. Also, members surrender their claim in the shares that have been allocated to the other members.