A ‘Family arrangement’ is an agreement between members of the same family, intended to be generally and reasonably for the benefit of the family either by compromising doubtful or disputed rights or by preserving the family property or the peace and security of the family by avoiding litigation or by saving its honor. Halsbury’s Laws of England, 3rd Ed., Vol. 17, pp 215-16.
The word “Family” is not to be understood in a narrow sense of being a group of persons whom the law recognises as having a right to succession for having a claim to a share in the disputed property. Ram Charan Das v. Girja Nandini Devi., AIR 1966 SC 323, 329.
In the matter of Sahu Madho Das v. Mukand Ram, AIR 1955 SC 481, 490-91, The Supreme Court of India, Held : Ordinarily in case of a family arrangement, it is assumed that the title claimed by ther person receiving the property under the arrangement had always resided in him or her so far as the property falling to his or her share is concerned and therefore no conveyance is necessary.
Family settlement can be made to resolve prospective dispute between the members of the family even though there was no existing dispute pending at the time of arriving of family settlement. Taraknath v. Sushil Chandra Dey (1996) 4 SCC 697, 699.
Family settlement is made just to avoid dispute to maintain the honor and dignity of a family. It is neither a partition nor an exchange. CGT v. S N Zaman & S M Elahi (1996) 221 ITR 842, 846, 846 (Gau).
The consideration for entering into a family arrangement should be preservation of family property, preservation of peace and honor of the family and avoidance of litigation. Kale v. Deputy Director of Consolidation (AIR 1976 SC 807).