Apex court’s ruling strikes at gender discrimination in HUFs

| Updated on August 13, 2020

But businesses too need a mindset change for ensuring that this ruling makes a difference to deserving women seeking their rightful place in business

In a landmark ruling that more firmly establishes the rights of women to inherit joint property in Hindu families, a three-judge Bench of the Supreme Court has settled an important point of law relating to the Hindu Succession Act as amended in September 2005. The amendment had anointed daughters as coparceners with the same rights and liabilities as sons in Hindu Undivided Families (HUFs), vesting them with the right to demand a share of ancestral or personal properties of their father if he died intestate. The amendment also allowed daughters to function as kartas (or heads) of HUFs in managing their family’s business affairs. Subsequent litigation however, questioned if this change would apply only prospectively from the date of the amendment, with courts handing out conflicting judgments. A three-judge Bench from the Supreme Court has now looked beyond these differing interpretations into the underlying spirit of the law and concluded that the main purpose of the amendment was to end gender discrimination and create inheritance rights in favour of the daughter of the family. It has ruled that daughters acquire their inheritance rights by virtue of their very birth and that they are entitled to claim them with retrospective effect, even if they were born prior to the September 2005 amendment. This ruling may help settle many legacy disputes in small enterprises, as family-owned outfits, which make up over 80 per cent of the unincorporated enterprises in India, commonly use the HUF structure to hold their assets.

While the ruling is welcome for its recognition that gender cannot be grounds for denying anyone their inheritance rights, it is by no means a guarantee that Indian business families will willingly cede reins to their women members. The practice of passing on the succession of the family enterprise only to sons stems from deep-rooted tradition and the patriarchal notion that daughters from the moment of their birth are destined for marriage, with any sums expended in their education or training in business likely to be ‘wasted’ when they leave the family fold. Forget small enterprises, even among the leading lights of India Inc, women in business families are forced to fight a pitched battle to secure board seats or have a rightful say in management. Women are often relegated to figurehead positions meant to fulfil statutory quotas or aid related-party deals that pad up family coffers.

Given this context, it is quite likely that some business families after this ruling, will bypass the HUF route and use Trusts or other vehicles to park their assets or write Wills to bequeath assets in favour of male heirs. Bringing about a change in this mindset and ensuring that women have access to the same opportunities as men in acquiring educational qualifications and the training needed to run an enterprise, will be critical to ensuring that this ruling makes a difference to deserving women seeking their rightful place in business.

Published on August 13, 2020

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