The status of Karta and women in HUF explained

(Article answers to the questions like whether younger coparcener can be made Karta when an elder sibling is alive, whether Daughters can also become Karta, whether the wife of the Karta can become Karta, whether there can be a HUF within a HUF, When the father was a Karta in his father’s HUF, who will be the next Karta after the death of existing Karta i.e. Karta’s son or brother, powers of Karta, the partition of HUF properties, why HUF cannot be a partner of the partnership business, etc.)

Under the Hindu Succession Act 1956, the senior-most male member is Karta of a HUF as long as he is alive, by virtue of the fact that he is the senior-most male member. He does not owe his position to the agreement or consent of other coparceners. Generally, when a Karta of the HUF has expired, the next eldest coparcener automatically becomes Karta of the HUF. However, in certain circumstances like the insanity of Karta or Karta is settled abroad and not able to manage HUF affairs or any other disqualifications, the younger coparcener can be made as Karta provided all the major coparceners of a HUF agree for the same. Once this is done the former will cease to be a Karta.  When the father was a Karta in his father’s HUF, then typically the father’s siblings (not his son who is younger to brother),  would have a first claim to be the Karta.

Whenever the name of the Karta is changed, the specific HUF account remains in the same name.  The Bank Account will be allowed to be operated by the new Karta on submission of the death certificate of deceased and declaration cum no objection letter to the bank from all the major coparceners. The request for deleting the name of existing Karta and adding the name of the new Karta in the bank’s records also require his relationship with the deceased and KYC details of the new Karta. In case of a larger balance in the HUF account, many banks obtain affidavit cum indemnity from surviving members and legal heirs with two guarantors confirming their acceptance to one of the coparceners as a new Karta. If the family decides to close the bank account a similar procedure to be followed and balance in the account to be paid to the new Karta. Document requirements may be different in different banks.

Women’s status in HUF:

In a landmark judgment, the Supreme Court on August 11, 2020, Tuesday while it was hearing a batch of appeals, ruled in favour of rights of daughters to have a share in a Hindu Undivided Family (HUF) property. A coparcener is one who shares equally in the inheritance of undivided property. The Court held that a daughter, living or dead, as on the date of the amendment (September 9, 2005), shall be entitled to a share in her father’s property. It means a daughter, living or dead, as on the date of the amendment, shall be entitled to have an equal share in her father’s property. In other words, even if the daughter was not alive on the date of the amendment, her children could claim their rightful portion. This clarification is important since it sets aside a clutch of previous decisions by the top court that she would have the coparcenary right only if both the father and the daughter were alive as on September 9, 2005, when the amendment was notified.

As per amendment to the Hindu Succession Act (2005) to section 6(1) (a) and (b) daughter has equal rights in an HUF. She has the rights in an estate, and can call for partition of the HUF. Daughters can also become Karta as they are coparceners. It is important to note that the Act recognises wives and daughters-in-law only as members of a HUF, not as coparceners. It means they cannot become Karta as only coparceners are eligible to be Karta of HUF, but will get husband’s share in an estate after his death. However, wife can be the guardian of minors in HUF after husband’s death until the eldest child becomes a major.

HUF within a HUF:

Under Hindu law, there can be a HUF within a HUF. Brothers and Sons in the HUF can establish their own independent HUF while they continue to be a member of existing HUF. The Coparceners of a HUF will continue as coparceners until the HUF is partitioned or until a coparcener releases all his/her undivided right, interest, and shares in the HUF in favour of the other coparceners under a duly executed deed of Release. A coparcener can gift his/her assets to the HUF. Normally such gifts are made by a coparcener through a gift deed.

Powers of a Karta of a HUF:

The Karta of a HUF has full control over the finances of the HUF. He can borrow money for the benefit of the family. He is not accountable to other members of the family for the spending made as all his actions are assumed to be carried out for the benefit of the family. The decision of the Karta is binding on other members of the family.

Partition of HUF:

The assets of HUF can be partitioned equally to all coparceners. However, inherited assets cannot be passing on as per an individual’s wish. In other words, Karta cannot divide the estate disproportionately, or use the assets for the benefit of one member, without the consent of others. For the purpose of partition, the HUF is to be first dissolved. The assets and liabilities of the HUF need to be divided among sons, daughters,, and Karta himself equally, in accordance with the Hindu Succession Act 1956.

Bank Account: Bank account can be opened for the Proprietorship business of which HUF is the Proprietor. However, HUF cannot be a partner of a business firm. This is because; H.U.F is not a ‘person’ as it is a group of persons of the same family carrying on the family business.