SUPREME COURT HOLDS PLAINTIFFS ENTITLED TO SEEK PARTITION OF SUIT PROPERTY BASED ON A SETTLEMENT AGREEMENT

A two Judge Bench of the Hon’ble Supreme Court comprising of Justice C.T. Ravikumar and Justice S.V.N. Bhatti passed a Judgment dated 09-07-2024 in the matter of Naseem Kahnam and Others Vs Zaheda Begum (Dead) by Lrs. and Others, Civil Appeal No. 1957 of 2011 and observed that once an agreement / deed / document such as a settlement agreement is held valid by a Court, the legal right created by such agreement in the parties, is also held to be valid and binding upon them. Further, the Court held that it would interpret the terms of a settlement agreement in a manner to give effect to the terms of settlement of the rights as agreed upon by the parties.

Facts

i) In the present case, one, Ghouse Khan had purchased a residential house bearing Door No. 6.18.7, East Point Layout, Plot No.10, LIG, T.S. No. 379, Block Nos. 22 and 23 of Waltair Ward, Vishakhapatnam Municipal Corporation (Suit Property) from the Visakhapatnam Urban Development Authority around the 1980s.

ii) Later, Ghouse Khan died on 18-02-1988, leaving behind his sisters, Zaheda Begum and Late Mallika Begum (succeeded by her daughter, Gousia Jasmin) and his brothers, Defendants No. 1-3, as successors to the Suit Property.

iii) Thereafter, the Plaintiffs, Zaheda Begum and Gousia Jasmin and the Defendants entered into a Settlement Agreement dated 07-02-1992, whereby, the Suit Property was divided amongst them as follows:

SN	Suit Property	Share in Suit Property
a)	Western half share	Gousia Jasmin (Plaintiff No. 2)
b)	Eastern half share	¼th share each to be partitioned amongst the following: i)     Zaheda Begum (Plaintiff No. 1) and ii)    Deceased Ghouse Khan’s brothers (Defendants No. 1- 3)

 

iv) Based on the aforesaid arrangement, the Plaintiffs No. 1 and 2 filed a Suit bearing O.S. No. 13 of 2000 before the Ld. Court of Principal District Judge at Vishakhapatnam (Trial Court) seeking partition and possession of their respective shares in the Suit Property.

v) In the said Suit, the Defendant No. 2 contested the execution and enforceability of the Settlement Agreement and claimed that it is a fabricated document. The Defendants No. 1 and 3 remained ex-parte.

vi) The Trial Court held as follows:

a) That the mutual decision of the Executants of the Agreement that the western half share of the Suit Property would be given to the Plaintiff No. 2 alone, was due to her psychiatric problem and ongoing medical treatment in a hospital in Visakhapatnam. The Plaintiff No. 2 was in the care of the Plaintiff No. 1 and to avoid acrimony / spite in distributing the Suit Property, such a mutual decision was taken by the Plaintiff No. 1 and the Defendants No. 1 to 3. Hence, the Settlement Agreement was held to be true and valid.

b) That though the Parties to the Suit had executed the Settlement Agreement, but as per the Mohammedan Law, only the immediate successors of the Deceased- Ghouse Khan i.e. his brothers and sister would be the successors to the Suit Property.

c) Further, in the event the transfer of western half share of the Suit Property in favor of the Plaintiff No. 2 (the Deceased’s niece) is to be considered as a gift, then the Agreement ought to have been registered and stamped. But the said Agreement was an unregistered and inadequately stamped document. Hence, the aforesaid family settlement cannot be deemed to be a valid gift in favor of the Plaintiff No. 2 and as such she was held not entitled to any share in the Suit Property.

d) Accordingly, the Suit Property was divided amongst the brothers and sisters of the Deceased- Ghouse Khan as follows:

SN	Share in Suit Property	Beneficiary
1)	1/7th share	Zaheda Begum (Plaintiff No. 1)
2)	2/7th share each	Deceased Ghouse Khan’s brothers (Defendants No. 1- 3)

 

vii) Aggrieved by the Trial Court Order, the Plaintiffs No. 1 and 2 filed a First Appeal in S. No. 22 of 2007 before the Hon’ble High Court of Andhra Pradesh.

viii) The High Court, vide Order dated 13-08-2009, observed that though the Trial Court held the Settlement Agreement to be true and valid, but the Trial Court denied the reliefs to the Plaintiffs No. 1 and 2. But the High Court held that once a document is held valid, the legal right created by such document in the parties, is also deemed to be valid and binding upon them. As a result, the Plaintiffs would be entitled to seek partition of the Suit Property on the strength of the Settlement Agreement:

“Being a party to the document, the second respondent cannot extricate himself from the consequences that flow out of it. In the absence of Ex. A.6, there would not have been any occasion for the appellants to claim rights, as they did, in relation to the property. Ex. A.6 has created a legal right in the parties and, in particular, the second appellant, and she is certainly entitled to seek partition on the strength of it.”

Supreme Court Observations

Aggrieved by the High Court Order dated 13-08-2009, the Legal Representatives of the Defendant No. 2 filed Civil Appeal No. 1957 of 2011 before the Hon’ble Supreme Court. The Apex Court, vide Order dated 09-07-2024, made the following observations:

1) That the Settlement Agreement is a true and valid document executed by the Parties to the Suit, as held by the Trial Court.

2) That as per the terms of the Agreement, all the Executants treated themselves as the legal heirs of the Deceased-Ghouse Khan and mutually agreed to give the western-half share of the Suit Property to the Plaintiff No. 2 and ¼^th share each of the eastern portion to the Plaintiff No. 1 and the Defendants No. 1 to 3.

3) That the interpretation of an agreement entails interpretation of the terms or language of the document and not interpretation of what the parties thought was the meaning of such terms.

“It is a well-settled principle of interpretation that in the interpretation of a deed, the question is not what the parties to the deed may have intended to do by entering into that deed, but what is the meaning of the words used in the deed. The Court can understand the true intent of the deed only by the words used in the deed. It does not matter what the parties, in their most state of mind, thought what the terms meant. They may have meant different things, but still the terms or the language used in the deed should bind them. It is for the court to interpret such terms or language used in the deed.”

4) That in the present case, the Settlement Agreement clearly mentions the understanding between the Parties that the western-half share of the Suit Property was agreed to be given to the Plaintiff No. 2 and ¼^th share of the eastern portion was agreed to be given to the Plaintiff No. 1 and the Defendants No. 1 to 3 each, based on their own justifiable reasons. But all the formalities to create exclusive rights were deferred to a future date for performance at the convenience of the Parties. Thus, the Settlement Agreement did not by itself create, transfer or confer any right in favor of the Plaintiffs No. 1 and 2; which implies that the said Agreement need not be registered in order to be considered valid and binding upon the Parties. Rather once the Settlement Agreement is held duly executed by all the Parties, the Court would interpret the terms of the said Agreement in a manner to give effect to the terms of settlement of the rights as agreed upon by the Parties.

Conclusion

Thus, based on the aforesaid observations, the Supreme Court upheld the High Court Order dated 13-08-2009 that observed that as the Settlement Agreement is held valid, the legal right created by such Agreement in the Parties, would also be valid and binding upon them and therefore, the Plaintiffs would be entitled to seek partition of the Suit Property on the strength of the Settlement Agreement. As a result, the Appeal filed by the Defendant No. 2 was dismissed.

Editor’s Comments

The Apex Court has time and again held that the intention of the parties will be given effect to, so long as the terms agreed between the parties is legally enforceable. In keeping with this line of thinking, the Supreme Court has once again reiterated that if parties have made a settlement agreement, the terms of which are valid and legal, the said settlement agreement will be binding on all concerned parties and a Court can uphold and give effect to such an agreement by passing appropriate orders.

 

Harini Daliparthy

Lead Senior Associate

The Indian Lawyer & Allied Services

 

Edited By

Sushila Ram Varma

Chief Consultant

The Indian Lawyer & Allied Services