Tax Hotline February 14, 2012

All that is yours is mine?

BRING ABOUT A COMMUNITY PROPERTY LAW: HIGH-LEVEL INDIAN GOVERNMENT PANEL SUGGESTS



A high-level Government Panel, with representatives from the Law and Home Ministries, has recently suggested proposals with respect to rights of spouses over each other’s assets, with features similar to what is referred to as the community property law worldwide.

Before we get into what the Panel has suggested, let’s look at what the community property law, a concept which has never existed in India (except in Goa), is all about.

COMMUNITY PROPERTY LAW

Community property law is a regime prevalent in civil law countries, where marriage is considered to be a contract as opposed to being an institution, which is the case in India.

The law states that a couple in “commune” or marriage acquire rights on each other’s assets and liabilities, the assets which they hold together being referred to as “community property”. This essentially means that at the time of separation, divorce or dissolution of the marriage, the spouse will get 50% of the share of the entire community property regardless of how much each one has contributed. Some countries give the right to couples to exclude their pre-marriage assets out of the purview of community property by making a formal declaration.

Both spouses have equal rights to the control and management of community property and must jointly consent for the lease, sale or encumbrance thereof. Further, debts incurred by either party during their marriage can be claimed against such property. Also, on the death of one spouse, unless there is a will to the contrary, such property automatically passes to the surviving spouse.

However, since this can be misused by wayward spouses in terms of getting a share of the other party’s assets or creating huge liabilities for the other, the law also permits these couples to enter into contracts, being pre-nuptial or post-nuptial agreements to protect themselves and their assets in the event of a divorce or dissolution of marriage.

THE INDIA STORY

India being a common law jurisdiction, marriage is not a contract and any contract in relation to marriage is considered void.

Goa however has a code which is different from the rest of India - the Goa Civil Code, which follows the Portuguese Civil Code.

In Goa, there are four different marital options under the law (a) community property, (b) absolute separation of property, (c) separation of assets existing prior to marriage and communion of property after marriage, and (d) dotal regime. Where there is no express contract indicating the option adopted, the law governing option (a) becomes automatically applicable. Under such law, the total of the assets (and liabilities) that the spouses possessed prior to marriage as well as those obtained by inheritance gets converted to community property. These assets cannot be disposed of or encumbered by one spouse without the express consent of the other.

PROPOSALS

To provide legal recognition to women as an equal partner in a marriage and for her contribution to the household, the Panel has proposed that all assets acquired by a married couple or a couple living together should be viewed as joint property, regardless of who bought it and that such joint property should be divided equitably in the event of separation or desertion.

As a related measure, the Panel has also suggested that maintenance laws should be amended such that the quantum of maintenance awarded to wives and children enable them to live at the same standard of living that they have been used to and that all provisions in existing laws linking a woman's conduct with the grant of maintenance be removed.

On the procedural front, the Panel has recommended that the laws should be amended so as to place the onus on the husband to prove his income.

VIEWS OF THE WORKING GROUP

In a similar direction, the Planning Commission’s working group on Women’s Agency and Empowerment, points out that there is “an urgent need to consider the enactment of a standalone comprehensive legislation, which will ensure that all assets that have been acquired by the family are divided in an equitable manner" and which would be applicable to all communities.

OUR ANALYSIS

Introduction of community property provisions will result in conflict with the underlying Indian laws dealing with marriage, succession and maintenance, not to mention over-turning the concept of marriage as understood under Indian laws.

Community property law in civil jurisdictions is always coupled with the freedom to enter into enforceable pre-nuptial or post-nuptial arrangements to protect the interest of either spouse. These agreements and agreements related to marriages are currently void under the Indian Contract Act, 1872. Thus, needless to mention that if community property law is introduced, pre-nuptial and post-nuptial agreements will have to be recognized as legally enforceable to allow spouses to protect themselves from future claims and liabilities. Accordingly, corresponding amendments will have to be introduced in the Indian Contract Act for validating such agreements.

Further, introduction of this law will also conflict with various personal laws which govern right to property between spouses, viz: (i) under Hindu law, there is the concept of Streedhan, being property granted on marriage to a woman by her maternal relatives, which devolves back on her maternal relatives on her death, (ii) under Muslim law, there is the concept of Dower, being property that the wife is entitled to receive from her husband in the event of dissolution of the marriage.

Succession laws provide the devolution pattern and shares of a person who has died intestate. These will also have to undergo a change in the light of introduction of this law, in order to avoid conflict.

The manner in which the proposed regime is to be reconciled with these regimes would also be very important, given the potential of the unreasonable level of difficulties that absence of or improper reconciliation could lead to.

But the real question that remains is, whether India is ready to replace its definition of marriage as a sacred union between two people forming an institution with that of a contractual arrangement between two individuals.


– T.P. JananiHanisha Amesur & Bijal Ajinkya 
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