Inheritance and the concept of Escheat in Indian Law

February 9, 2024

This article has been written by Mr AMAR NAGSEN, a 3RD year student of SYMBIOSIS LAW SCHOOL, NAGPUR.

INTRODUCTION

DEFINITION

Inheritance in the context of personal laws refers to the legal process by which the property, assets, and possessions of a deceased individual are distributed among their heirs or beneficiaries according to the laws, customs, or religious principles that govern inheritance within a specific community or jurisdiction.

Different societies and cultures have varying rules and regulations regarding inheritance, often based on religious beliefs, cultural traditions, or legal frameworks. These laws typically outline who is entitled to inherit, the distribution of assets among heirs, the rights of spouses, children, and other relatives, and the procedures for handling estates and wills.

Inheritance laws can be complex, and they might differ based on factors such as marital status, gender, presence of a will, and familial relationships. They aim to provide a fair and systematic way of passing down property and wealth from one generation to the next while considering societal norms and familial structures.

Top of Form

IMPORTANCE OF INHERITANCE LAWS IN INDIA

Inheritance laws in India hold immense significance due to various reasons deeply rooted in the country’s social, cultural, and legal fabric:

Diverse Cultural Landscape: India is a culturally diverse nation with different religious communities, each with its own set of inheritance laws. These laws, such as Hindu Succession Act, Muslim Personal Law, and others, play a crucial role in determining how property is inherited among respective communities.
Protection of Rights: Inheritance laws safeguard the rights of individuals, especially women and children, ensuring they receive a rightful share of the ancestral property. Reforms in these laws, such as amendments in the Hindu Succession Act, have been pivotal in promoting gender equality in property rights.
Economic Stability: Proper inheritance laws ensure the smooth transfer of property and wealth from one generation to another, contributing to economic stability within families. They also encourage investment and entrepreneurship by providing a sense of security regarding asset transfer.
Social Equilibrium: Inheritance laws often intertwine with societal norms and expectations. Changes in these laws can influence social dynamics by addressing issues of inequality, promoting inclusivity, and challenging traditional biases, thereby contributing to social equilibrium.
Legal Framework and Dispute Resolution: Inheritance laws provide a legal framework for handling disputes related to property distribution after someone’s demise. Clear laws help in minimizing conflicts among family members and provide a structured approach to resolving inheritance-related disagreements.
Evolving Nature: In recent years, there have been significant reforms in India’s inheritance laws to address societal changes and contemporary needs. These changes aim to bring about more equitable distribution of property and wealth, reflecting the evolving social and economic landscape.

Understanding and implementing fair and just inheritance laws are crucial for maintaining social harmony, promoting economic stability, ensuring gender equality, and facilitating the smooth transfer of assets from one generation to the next in India.

Top of Form

INTRODUCTION TO ESCHEAT

Escheat is a legal principle that addresses the situation where property or assets are transferred to the government when an individual passes away without leaving a will, and there are no apparent heirs or beneficiaries entitled to inherit. It essentially ensures that unclaimed property or assets don’t remain in a state of limbo but are transferred to the state government.

The concept of escheat is rooted in the idea that property should not remain ownerless or without proper ownership. Instead, it reverts to the state as a means of preventing assets from being abandoned or lost indefinitely.

Escheat laws vary by jurisdiction, and they typically come into effect under specific circumstances, such as when:

No Will or Heirs Identified: If an individual dies without a will (intestate) and there are no known or identifiable heirs or beneficiaries.
Unclaimed Property: When there is unclaimed property, assets, or funds that have been dormant or inactive for a specified period and the rightful owners cannot be located.
Abandoned Property: In cases where property has been abandoned, and no one lays a valid claim to it within a defined legal timeframe.

Escheat laws serve multiple purposes:

Transfer of Ownership: It ensures that unclaimed or ownerless property doesn’t remain in a state of legal ambiguity but is transferred to the government, which then becomes the rightful owner.
Revenue Generation: Assets that escheat to the government might be sold or utilized, contributing to government revenue or serving public purposes.
Protecting Property Rights: Escheat prevents property from being abandoned or remaining without ownership, thereby protecting the rights of legitimate owners and preventing assets from going to waste.

It’s important to note that escheat is a complex legal concept and its application varies significantly based on the jurisdiction’s laws and regulations. Additionally, many governments have established specific departments or agencies responsible for handling escheated property and making efforts to locate rightful owners before taking ownership.

Top of Form

HISTORICAL PERSPECTIVE OF INHERITANCE IN INDIA

Inheritance laws and practices in India have evolved significantly over centuries, influenced by cultural, religious, and societal norms. Historically, inheritance laws varied across different regions and communities within India.

Ancient Period: In ancient India, the concept of inheritance was shaped by religious texts and customary practices. The laws were diverse across different kingdoms and societies. For instance, the Mitakshara and Dayabhaga schools of Hindu law had varying principles regarding property inheritance, particularly concerning joint family property and individual rights.
Hindu Laws: Hindu inheritance laws were influenced by texts like Manusmriti and other Dharmashastras. These laws were patriarchal, often favoring male heirs over female heirs. The system of coparcenary and ancestral property played a significant role in inheritance among Hindus, where property passed down through generations with specific rules governing its division.
Muslim Laws: Islamic inheritance laws were based on the Quran and Sharia. They defined shares for different relatives and heirs, with a fixed portion for spouses, children, parents, and other family members. The laws aimed to ensure fair and just distribution among heirs, emphasizing the importance of providing for family members.
Colonial Influence: During British colonial rule, there were attempts to codify and consolidate various personal laws, leading to the enactment of laws like the Hindu Succession Act, 1956. This Act aimed to bring about more uniformity and reforms in Hindu inheritance laws, ensuring better rights for women in property matters.
Post-Independence Reforms: Post-independence, India witnessed significant reforms in inheritance laws to promote gender equality and social justice. Amendments were made to various personal laws to provide equal rights to daughters in ancestral property, challenging the traditional biases against female inheritance.
Recent Developments: In recent times, there have been further amendments and reforms aimed at addressing issues of inheritance and property rights. Changes in laws, such as the Hindu Succession (Amendment) Act, 2005, brought about substantial shifts, granting daughters equal rights in ancestral property.

Throughout history, inheritance laws in India have undergone reforms to adapt to changing social norms, promote gender equality, and ensure fair distribution of property among heirs. These changes reflect the evolving nature of society and the efforts to create more equitable legal frameworks for inheritance.

Top of Form

DIFFERENCE BETWEEN INHERITANCE LAWS IN HINDU AND MUSLIM LAWS

The inheritance laws in Hindu and Muslim traditions differ significantly in terms of their principles, rules of succession, and the distribution of assets among heirs:

Basis of Laws:
- Hindu Laws: Hindu inheritance laws draw from texts like the Manusmriti, Dharmashastras, and various school-specific commentaries. These laws have evolved over time, with the Hindu Succession Act, 1956, and subsequent amendments being crucial in modernizing inheritance practices.
- Muslim Laws: Muslim inheritance laws are primarily based on the Quran and Sharia. The Quran lays out specific rules governing inheritance, specifying shares for different relatives based on their relationship to the deceased.
Principles:
- Hindu Laws: The principles of Hindu inheritance laws often involve joint family property, coparcenary rights, and rules of succession that traditionally favored male heirs. However, recent amendments have aimed at providing more equitable rights, particularly to daughters, in ancestral property.
- Muslim Laws: Islamic inheritance laws emphasize fair and predetermined shares for specific heirs. It specifies fixed portions for spouses, children, parents, and other relatives, ensuring that each receives their prescribed share according to their relationship with the deceased.
Succession Rules:
- Hindu Laws: Succession in Hindu laws can vary based on the specific school of law followed within Hinduism. It traditionally included concepts like coparcenary, survivorship rights, and distinctions between ancestral and self-acquired property.
- Muslim Laws: In Muslim inheritance laws, the system follows fixed shares (Fara’id) that are predetermined by the Quran. These shares are allocated among specific heirs such as daughters, sons, spouses, parents, and others, with percentages allocated to each category.
Gender Equality:
- Hindu Laws: Historically, Hindu inheritance laws were skewed towards favoring male heirs, especially in matters of ancestral property. However, reforms have been introduced to ensure gender equality, granting daughters equal rights in ancestral property.
- Muslim Laws: Islamic inheritance laws allocate specific shares to male and female heirs, aiming to provide fair and just distribution among family members based on their relationships and the prescribed shares outlined in the Quran.

While both Hindu and Muslim inheritance laws have undergone reforms, especially concerning gender equality and property rights, the fundamental principles and mechanisms of inheritance remain distinct due to their respective religious and cultural underpinnings.

AMENDMENTS AND REFORMS IN INHERITANCE LAWS Inheritance laws have evolved significantly over time to reflect changes in society, family structures, and values. Several amendments and reforms have been proposed or enacted to address various aspects of inheritance. Here are some common areas where amendments and reforms often focus:

Intestacy Laws: These laws govern how an estate is distributed when a person dies without a valid will. Amendments often clarify the hierarchy of beneficiaries in such cases, considering spouses, children, parents, and other relatives.
Spousal and Child Rights: Reforms frequently aim to protect the rights of surviving spouses and children, ensuring they receive a fair share of the estate. This might involve adjustments to the portion of the estate that a spouse or child is entitled to inherit.
Equality and Gender Rights: Amendments aim to eliminate gender bias in inheritance, ensuring equal rights for male and female heirs. In some regions, changes have been made to provide equal inheritance rights for daughters and sons.
Inheritance Tax Reforms: Changes to inheritance tax laws often occur, adjusting tax rates, exemptions, and thresholds. Reforms might also focus on reducing the tax burden on inheritors, especially for smaller estates or family-owned businesses.
Protection of Vulnerable Beneficiaries: Laws can be updated to protect vulnerable individuals such as minors, individuals with disabilities, or elderly heirs, ensuring their inheritance is managed appropriately through trusts or other legal structures.
Recognition of Non-Traditional Families: In many places, reforms aim to recognize and accommodate non-traditional family structures, including same-sex couples, blended families, and cohabiting partners, ensuring their rights to inherit in line with their relationships.
Digital Assets and Inheritance: Amendments may address the inheritance of digital assets such as cryptocurrency, social media accounts, and online assets, establishing guidelines on how these should be passed on or managed after death.
Estate Planning and Probate Procedures: Reforms might streamline probate processes, making them more efficient and cost-effective. Additionally, reforms may encourage individuals to engage in comprehensive estate planning to avoid complications in inheritance.

These reforms and amendments seek to modernize inheritance laws, making them more equitable, inclusive, and reflective of societal changes. They aim to balance the interests of various stakeholders while ensuring a fair and just distribution of assets among heirs.

UNDERSTANDING THE CONCEPT OF ESCHEAT

DEFINITION AND PURPOSE OF ESCHEAT

Escheat is a legal concept that refers to the process through which property reverts to the state when an individual dies without a will or any ascertainable heirs, or when the property is abandoned without any legal claimants. The term originates from the Old French word “eschete,” meaning “to fall to.”

The purpose of escheat laws is to ensure that unclaimed or ownerless property doesn’t remain in limbo indefinitely. When a person dies without leaving a will or any identifiable heirs, or when the rightful owners of property cannot be located, the property is transferred to the state. Escheat prevents property from remaining dormant and allows the state to take possession and potentially redistribute or utilize it for public benefit.

Here are some key points about escheat:

Unclaimed Property: Escheat typically applies to property, assets, or estates that have no identifiable legal claimants or heirs.
Transfer to the State: When property escheats, it legally becomes the property of the state or government. The government then becomes the custodian of the property until a rightful claimant comes forward.
Timeframes: Escheat laws usually have specific timeframes within which the property must remain unclaimed or without a rightful owner before it reverts to the state. These timeframes can vary depending on jurisdiction and the type of property.
Recovery by Rightful Owners: Even after property escheats to the state, rightful owners or their heirs can often reclaim it by providing evidence of their ownership claim. States typically maintain databases or offices where individuals can search for and claim unclaimed property.
Public Benefit: Escheated property might be sold, auctioned, or used by the state for public projects, services, or other purposes that benefit the community.

Escheat laws vary by jurisdiction, so the specifics of how property is handled, the duration before escheat occurs, and the process for reclaiming property can differ from one place to another. Overall, escheat serves to prevent assets from remaining in a state of uncertainty and to facilitate their potential redistribution or use for public welfare.

Top of Form

LAWS WHICH GOVERN ESCHEAT IN INDIA

In India, laws related to escheat are primarily governed by state legislation. The principles and regulations regarding escheat vary from state to state. The legal framework for escheat is often rooted in older laws, and certain states have specific statutes or regulations that address unclaimed property and its transfer to the government.

The Transfer of Property Act, 1882, includes provisions related to escheat in Sections 84 to 111. However, these sections deal more with the transfer of property when an owner dies without leaving a will or without legal heirs, rather than specifically addressing escheat to the government.

States might also have their own laws or rules governing unclaimed property and escheat, such as:

The Unclaimed Deposits Act: Some states might have specific acts or regulations dealing with unclaimed deposits in banks and financial institutions, specifying the process and duration after which unclaimed deposits are transferred to the government.
State Escheat Laws: Certain states have their own escheat laws or regulations that outline the process by which unclaimed property, assets, or estates are transferred to the state government when no rightful claimants or heirs are found within a specified period.
Revenue Codes or Regulations: State revenue codes or regulations might contain provisions related to unclaimed property and the process of escheat.
Administration by Revenue or Finance Departments: Typically, the revenue or finance departments of respective state governments are responsible for administering escheat laws and managing unclaimed property.

The specifics of escheat laws, including the duration after which property is considered unclaimed, the process for transferring it to the state, and the procedures for reclaiming such property by rightful owners or their heirs, vary among states.

It’s important to refer to the specific state laws or regulations in India to understand the details and procedures related to escheat in a particular region. Each state might have its own nuances and provisions regarding unclaimed property and escheat.

Top of Form

COMPARISON BETWEEN INHERITANCE AND ESCHEAT

Inheritance and escheat are two legal concepts related to the transfer of property, but they operate under different circumstances and have distinct purposes:

Purpose:
- Inheritance: Inheritance refers to the legal transfer of property, assets, or rights from a deceased person (the decedent) to their heirs or beneficiaries according to a will or the laws of intestacy (when there’s no will). Its primary purpose is to facilitate the passing of assets to chosen beneficiaries or legal heirs.
- Escheat: Escheat, on the other hand, occurs when property has no identifiable heirs or rightful claimants, or when the owner dies without a will and no lawful heirs can be found. Its purpose is to prevent ownerless property from remaining dormant and to ensure it doesn’t go unclaimed indefinitely by transferring it to the state for public benefit.
Transfer of Property:
- Inheritance: In inheritance, property is transferred from the deceased person to specific individuals (heirs or beneficiaries) designated by the decedent’s will or by laws of intestacy.
- Escheat: Escheat involves the transfer of property from an ownerless or heirless estate to the state or government. This occurs when there are no identifiable heirs, the property is abandoned, or the rightful owners cannot be located.
Legal Process:
- Inheritance: Inheritance involves a legal process that can include the execution of a will, probate proceedings, and the distribution of assets according to the decedent’s wishes or legal guidelines.
- Escheat: Escheat is a legal process initiated by the state or government when there are no apparent heirs or when property remains unclaimed for a specified period. It involves the transfer of property to the state’s ownership.
Beneficiaries:
- Inheritance: The beneficiaries or heirs in inheritance are typically specified by the decedent in their will or are determined by laws of intestacy, often including family members or chosen individuals.
- Escheat: In escheat, the state becomes the ultimate beneficiary of the ownerless or unclaimed property. However, rightful owners or heirs can sometimes reclaim the property from the state if they can prove their rightful claim.
Purpose of Property Handling:
- Inheritance: The purpose of inheritance is to pass down property to chosen individuals or legal heirs and to fulfill the decedent’s wishes regarding asset distribution.
- Escheat: Escheat serves the purpose of preventing property from remaining ownerless or unclaimed, putting it to use for public benefit, or facilitating the process for rightful owners to reclaim their property.

In summary, while both inheritance and escheat involve the transfer of property, they operate under different circumstances, with inheritance focusing on the passing of assets to specified beneficiaries and escheat dealing with ownerless or unclaimed property by transferring it to the state.

CASES RELATED TO INHERITANCE AND ESCHEAT

The Collector of Masulipatam v. Cavaly Vancata Narrainappah (Privy Council, 1860)

The Privy Council rendered a decision in this case, which dates back to before independence. In this instance, the issue of whether British India’s sovereign power had the right to seize a Brahmin’s estate by escheat upon his death without heirs emerged. According to the Sadar Diwani Adalat, the Crown has a broad right to escheat in the event that heirs fail, however there is a legal exception to this rule for Brahmin property. According to Manu and other ancient sources, it seemed that a Brahmin’s beneficial enjoyment of his property should not pass to the King at his death if he had no heirs.

The Privy Council ruled that when a Hindu died intestate, his properties should be passed down according to Hindu law, but only if he left any heirs, creating the possibility of private succession.

Biswanath Khan and Ors. v. Prafulla Kumar Khan (1988, Cal HC)

The Privy Council ruled that when a Hindu died intestate, his properties should be passed down according to Hindu law, but only if he left any heirs, creating the possibility of private succession. However, in the event of a complete failure of heirs, the properties and succession become subject to the general law of universal application, which states that “private ownership not existing, the State must be the owner as of the ultimate Lord,” rather than the personal law of succession.

Pierce Leslie and Co. Ltd. v. Violet Ouchterlony Wapshare (1980, SC)

According to a Supreme Court decision, when a business dissolves, its assets are vested in the government. The Court declared that it is commonly recognized in India for the government to be able to confiscate properties as bona vacantia (because there is no legal owner) or through the escheat of owners who die without leaving a valid will. In the case that there is no heir, the government is authorized by a number of federal, state, and local laws to seize personal and real property. It is based on the notion of ultimate sovereignty and represents ownership of all property that is under the jurisdiction of the State.

State of Bihar v. Radha Krishna Singh (1983, SC)

In this instance, the Honorable Supreme Court reaffirmed that the appellant bears a major burden of proof in demonstrating the respondent’s worldwide absence of heirs when the government files an escheat claim. If the requirements for escheat are not met in full, the court will not permit the taking of an estate by escheat. The Court decided that accepting an escheat plea requires first publishing a notice to the public. The government must issue the public notice in order for any claimant, anywhere in the nation or the world, to present himself in opposition to the state’s claim.

REFERENCES

February 9, 2024