Supreme Court Upholds Karta's Alienation of HUF Property for Legal Necessity, Reverses High Court on Partition Suit

In deciding the dispute in Hindu Undivided Family and the rights of Karta to property alination, the Supreme Court held in favour of the Appellant who purchased the property from the Karta of the HUF.

Sharanappa (then Karta of HUF) executed a sale deed of a land in favour of the Appellant in the year 1995. The other family members of HUF, the Respondnet/Plaintiff herein, challenged the validity of the sale deed executed by the Karta. The sale concerned 9 acres 1 gunta of land in Bablad Village, Gulbarga, which the plaintiff claimed was alienated to the 5th defendant (Dastagirsab) without family necessity or consideration due to the Karta's alleged extravagant habits. The 5th defendant countered, asserting the sale was for valuable consideration and executed for a legal necessity—specifically, the marriage expenses of the Karta's daughter, Kashibai..

Initially, when the suit is filed before the Principal Civil Judge (Senior Division), Gulbarga, it dismissed the suit, finding the sale was indeed for legal necessity. However, the High Court of Karnataka reversed this decision, allowing the plaintiff’s suit for partition and separate possession.

The High Court concluded that the purchaser had failed to prove legal necessity, noting a lack of inquiry into the utilization of the sale consideration and observing that Kashibai’s marriage had taken place prior to the sale.

When the appeal is filed before it, the Supreme Court was tasked with determining the correctness of the High Court's reversal, and the Apex Court allowed the appeal, thereby upheld the Trial Court's dismissal of the suit and setting aside the judgment and decree of the High Court which reverse it.

The Apex Court found that the High Court erred in concluding the sale of HUF property by the Karta was not for legal necessity and that the purchaser was not a bona fide purchaser for valuable consideration. The Court further underscored Karta's wide discretion in determining legal necessity and clarified that the onus on the alienee/purchaser to prove legal necessity was discharged in this instance by establishing a clear nexus between the sale and the family's financial needs, including marriage expenses.

The Respondent/plaintiff's belated challenge to the transaction is also frawned upon by the Supreme Court and it found that the High Court failed to consider crucial evidence, including the Karta's disclosure to the Respondent/plaintiff about family needs and the purchaser's possession via revenue records.

Important Observations by the Judges and Court: Relying on its earlier judgment in case of Beereddy Dasaratharami Reddy vs. V. Manjunath & Anr 2021 the Supreme Court held that the Karta of a Hindu Undivided Family enjoys wide discretion regarding the existence of legal necessity and how such necessity can be fulfilled. When a Karta alienates joint Hindu family property for value, either for legal necessity or the benefit of the estate, it binds the interest of all undivided members of the family, including minors.

Although, there are no specific definition of the legal necessity, however, the existence of legal necessity depends entirely upon the facts and circumstances of each individual case. Mulla's Hindu Law outlines common examples, including marriage expenses of male coparceners and daughters of coparceners, payment of government revenue and debts, and maintenance.

The Apex Court put the onus, on the alienee/purchaser, to prove that a sale made by the Karta on behalf of other coparceners of an HUF was for legal necessity. However, this onus cannot be extended to require the purchaser to prove facts that are within the special knowledge of the coparceners of the HUF, in line with the principle of reverse burden under Section 106 of the Evidence Act, 1872.

In the present case, the Appellant/5th defendant-purchaser discharged the onus by establishing a clear nexus between the sale transaction and the expenses undertaken for Kashibai’s marriage, through effective cross-examination of the plaintiff and other evidence.

The Apex Court observed that families often incur heavy debts to perform marriages of their daughters, and such debts can create a "cascading effect on family finances down the years," which justifies a later sale of property to meet these "family needs,"; even if the marriage occurred some years prior to the sale.

On proving the Appelants/Purchaser's Prudence the Apex Court made reliance on Records, as the appellant/5th defendant purchased the land for valuable consideration, and the execution of money receipts by some coparceners and the daughter whose marriage was the stated reason for sale further supported the purchaser's belief, demonstrating he acted as a man of ordinary prudence.

The Supreme Court analyzed the plaintiff's conduct in belatedly challenging the sale transaction after five years and held that his explanation of unawareness due to non-parting of possession was deemed "wholly facetious," contradicted by mutation certificates and land revenue records establishing the purchaser's continuous possession.

Thus, on the above ground the Supreme Court held that once the factum of existence of legal necessity stood proved, a co-coparcener (son) has no right to challenge the sale made by the Karta of his family.

Coram: Justice Sandeep Mehta and Justice Joymalya Bagchi.