How is an HUF created after the commencement of Hindu Succession Act 1956?

Delhi High Court recently clarified the position of law in regard to creation/existence of HUF. It was held that an HUF can come into existence prior to passing of the Hindu Succession Act in the year 1956 by a person inheriting property from his paternal ancestor’s up to four degrees. However, after the year 1956, an HUF can come into existence only if a person throws his property into a common hotchpotch. It further held that after 1956, an HUF, does not come into existence on account of inheritance of ancestral property.

This was so held in the matter titled as Dayanand Rajan Vs. Ram Lal Khattar, RFA no. 1064/2017 decided on 3^rd January, 2018

Held:

The High Court relying upon the judgements of Commissioner of Wealth Tax, Kanpur Vs. Chander Sen (1986) 3 SCC 567, Yudhishter Vs. Ashok Kumar (1987) 1 SCC 204 and Sunny (Minor) Vs Shri Raj Singh CS(OS) No.431/2006 decided on 17.11.2015, laid down the following tests:

(i) If a person dies after passing of the Hindu Succession Act, 1956 and there is no HUF existing at the time of the death of such a person, inheritance of an immovable property of such a person by his successors in-interest is no doubt inheritance of an “ancestral” property but the inheritance is as a self-acquired property in the hands of the successor and not as an HUF property although the successor(s) indeed inherits ancestral‟ property i.e. a property belonging to his paternal ancestor.

(ii) The only way in which a Hindu Undivided Family/joint Hindu family can come into existence after 1956 (and when a joint Hindu family did not exist prior to 1956) is if an individual’s property is thrown into a common hotchpotch. Also, once a property is thrown into a common hotchpotch, it is necessary that the exact details of the specific date/month/year etc. of creation of an HUF for the first time by throwing a property into a common hotchpotch have to be clearly pleaded and mentioned and which requirement is a legal requirement because of Order VI Rule 4 CPC which provides that all necessary factual details of the cause of action must be clearly stated. Thus, if an HUF property exists because of its such creation by throwing of self-acquired property by a person in the common hotchpotch, consequently there is entitlement in coparceners etc. to a share in such HUF property.

(iii) An HUF can also exist if paternal ancestral properties are inherited prior to 1956, and such status of parties qua the properties has continued after 1956 with respect to properties inherited prior to 1956 from paternal ancestors. Once that status and position continues even after 1956; of the HUF and of its properties existing; a coparcener etc. will have a right to seek partition of the properties.

(iv) Even before 1956, an HUF can come into existence even without inheritance of ancestral property from paternal ancestors, as HUF could have been created prior to 1956 by throwing of individual property into a common hotchpotch. If such an HUF continues even after 1956, then in such a case a coparcener etc. of an HUF was entitled to partition of the HUF property