Introduction
The Hindu Adoptions and
Maintenance Act, 1956 (‘the Act’) is not a commercial or corporate
legislation, but its importance in today’s business world is being felt
because of succession issues, family separations and family feuds
becoming the order of the day. With an increasing number of families
adopting children, the question often arises as to whether the adopted
child is entitled to succeed the father in the business, property, etc.
In several cases, questions, such as whether the adoption was valid,
what happens if the adopted father has subsequently a natural child,
etc., are raised. Hence, it becomes essential to examine this Act. This
is all the more true in a country such as India where a great number of
businesses are family owned or controlled.
Although a great deal
of the Hindu Law is based on customs and usages, certain portions have
been codified. The Act is one such instance of codified law. It would
hence, overrule any text, custom, usage of Hindu Law.
Application
The Act applies to:
(i) Any person who is a Hindu, Jain, Sikh or Buddhist by religion.
(ii) Any person who is not a Muslim, Christian, Parsi or a Jew.
(iii) Any person who becomes a Hindu, Jain, Sikh or Buddhist by conversion or reconversion.
(iv)
A legitimate/Illegitimate child whose one or both parents is a Hindu,
Jain, Sikh or Buddhist by religion. However, in case only one parent is a
Hindu, Jain, Sikh or Buddhist by religion, then the child must be
brought up by such parent as a member of his community, family, etc.
(v)
Any child, legitimate or illegitimate, who has been abandoned both by
his father and mother or whose parentage is not known and who in either
case is brought up as Hindu, Buddhist, Jain or Sikh. This is a very
important clause which was added by the Amendment Act of 1945. The
reason for this Amendment was that only a Hindu can be adopted. As the
religion of an abandoned child or of a child whose parentage is not
known or cannot be ascertained, the explanation to section 2(1) of the
Act was amended to the effect that a child, legitimate or illegitimate
who has been abandoned by both of his parents or whose religion is not
known, but who in either case is brought up as a Hindu, will be a Hindu
by religion.
The Act does not apply to members of Scheduled
Tribes unless the Government so directs. Manner of making adoption Any
adoption by or to a Hindu must be made in accordance with the provisions
of the Act. It is interesting to note that in case the adoption is not
in accordance with the Act, then it shall be void. The consequences of a
void adoption are:
(a) it does not create any rights in the adoptive family in favour of the adopted child; and
(b) his rights in the family of his natural birth also subsist and continue.
Thus,
in a case of a void adoption, the adopted child would not be entitled
to any inheritance or succession benefits in his adopted family. The
pre-requisites of a valid adoption u/s.6 are as follows:
(a) the adopter is capable of and has a right of adopting under the Act;
(b) the adoptee is capable of being taken in adoption under the Act;
(c) the person giving the adoptee is capable of doing so under the Act; and
(d) all other conditions specified under the Act have been fulfilled.
Capacity of adopter
A male Hindu is capable of adopting a son or daughter:
(a) if he is of sound mind;
(b) if he is a major, i.e., he is above 18 years of age;
(c)
if he has a wife, he shall not adopt except with the consent of his
wife, unless she has renounced the world or ceased to be a Hindu or has
been declared to be of unsound mind. If he has more than one wife, then
the consent of all wives is required.
The wife’s consent must be
obtained before the adoption and not after it. The proviso mandates the
consent as a condition precedent to adoption and hence subsequent
consent cannot validate the adoption.
In Kashibai W/O Lachiram
v. Parwatibai W/O Lachiram 1995 SCC (6) 213, has held that the wording
is mandatory and an adoption without wife’s consent would therefore be
void.
Now a Hindu can adopt a son or a daughter. Under the old
law, adoption of a daughter was invalid except where it was customarily
accepted among certain parts of India.
A female Hindu is capable of adopting a son or daughter:
(a) if she is of sound mind;
(b) if she is a major, i.e., above 18 years of age;
(c)
if she either is not married or her husband is dead or has been
declared of unsound mind or has renounced the world or has ceased to be a
Hindu or her marriage has been dissolved.
Thus, a Hindu married
woman whose husband does not suffer from any of the disabilities
specified above would not be able to adopt a child on her own even with
her husband’s consent. This is a unique position and a departure from
the earlier position under the uncodified Hindu Law. This principle has
also been laid down by the Bombay High Court in the case of Dasharath
Ramachandra Khairnar v Pandu Khairnar, (1977) 79 Bom LR 426. The Court
held that elaborate provisions are made in the Act setting out
circumstances under which a wife could have a capacity to adopt and the
consent of the husband to enable the wife to adopt is not one of the
enabling circumstances under the provisions.
Capacity of adoptee
A person may be adopted if:
(a) he is a Hindu;
(b) he has not been already adopted;
(c) he has not been already married, unless a custom or usage permits married people to be adopted; and
(d)
he must be below 15 years of age, unless a custom or usage permits
persons above 15 years to be adopted. The above conditions equally apply
to females. One of the most relevant conditions to be borne in mind is
that the adoptee must be below 15 years of age.
Capacity of person giving in adoption
The person giving the child in adoption can do so if he fulfils the following conditions:
(a) Only the natural father or mother or the guardian of a child can give him in adoption.
(b) The natural guardian can give consent for adoption to any person including himself, under the following situations:
(i) the natural father and mother are dead, have renounced the world, abandoned the child, been declared of unsound mind, etc.;
(ii) the City Civil Court has granted permission for the same
(iii) before granting permission the Court will have to be satisfied about the welfare of the child and other factors.
Conditions for a valid adoption
The additional conditions for a valid adoption are as follows:
(i)
If the adoption is of a son/daughter, the adoptive father or mother by
whom the adoption is made must not have a Hindu son/daughter,
grandson/granddaughter or great grandson/ granddaughter (whether by
legitimate blood relationship or by adoption) living at the time of
adoption; (where there is a child, adoption cannot be done even with the
consent of the child.)
(ii) If the adoption is by a male and
the person to be adopted is a female, the adoptive father is at least 21
years older than the person adopted;
(iii) If the adoption is
by a female and the person to be adopted is a male, the adoptive mother
is at least 21 years older than the person to be adopted;
(iv) The same child may not be adopted simultaneously by two or more persons;
(v) The child to be adopted must be actually given and taken in adoption by the parents or guardians concerned or under their authority with intent to transfer the child from the family of its birth or in the case of an abandoned child or a child whose parentage is not known, from the place or family where it has been brought up, to the family of its adoption.
Effect of adoption
From the date of adoption the child will be considered to be the natural child of the adoptive family and all the ties with the original family are severed. The three exceptions to this Rule are:
(i) The child cannot marry any person whom he could not have married had he continued in the original family of his birth;
(ii) The adopted child is not deprived of the estate vested in him or her prior to his/her adoption when he/she lived in his/her natural family, subject to any obligations arising from such vesting of the estate; and
(iii) The adopted child shall not divest any persons in the adoptive family of any estate vested in that person prior to the date of adoption. For instance, a Hindu widow absolutely inherits property on her husband’s death. Thereafter, she adopts a son. He cannot challenge the alienation made by the widow on the grounds that now he has an interest in such property since the property had already vested in the widow and the adoption does not relate back — Joti v. Mankubai, AIR 1988 Bom. 348/ Banabai v. Wasudeo, (1980) 82 Bom. LR 388.
(iv) A valid adoption by a Hindu female operates as a valid adoption even by her husband. The principle has been laid down in Sawan Ram v Kala Wanti, 1967 AIR 1761 (SC). The Supreme Court held that “it is well-recognized that, after a female is married, she belongs to the family of her husband. The child adopted by her must also, therefore, belong to the same family. On adoption by a widow, therefore, the adopted son is to be deemed to be a member of the family of the deceased husband of the widow. ………… thus, itself makes it clear that, on adoption by a Hindu female who has ‘been married, the adopted son will, in effect, be the adopted son of her husband also.”
A valid adoption once made cannot be cancelled by the adoptive father or mother or any other person. Further, the adopted child also cannot renounce his adopted parents and return back to his natural family. If the adoption process has been properly followed, the consequences of the same cannot be undone and then the motive of the adoption has no relevance — Devgonda Patil v. Shamgonda Patil, AIR 1992 Bom. 189.
In the case of Chandan Bilasini v. Aftabuddin Khan, (1996) 7 SCC 13, the legal effects of an adoption have been well summarised:
“Section 12 of the Hindu Adoptions and Maintenance Act clearly provides that an adopted child shall be deemed to be the child of his adoptive father or mother for all purposes with effect from the date of the adoption and from such date all ties of the child in the family of his or her birth shall be deemed to be severed and replaced by those created by the adoption in the adoptive family. As a consequence, when a widow adopts a child, the child not merely acquires an adoptive mother but also acquires other relationships in the adoptive family, unless there is anything to the contrary in the Hindu Adoptions and Maintenance Act.
This position is reinforced by section 14(4) which sets out that where a widow or an unmarried woman adopts a child, any husband whom she marries subsequently shall be deemed to be the step-father of the adopted child. In other words, the family relationship gets crystalised as at the date of adoption. The child will be deemed to be the child of the parent who adopts the child and the existing or deceased spouse of that parent (as the case may be), if any, will be considered the child’s father or mother. A spouse subsequently acquired by the adoptive parent becomes the step-parent of the adopted child. The adopted child, however, cannot divest any person of any property already vested in that person [section 12(c)].”
The Supreme Court in Smt. Sitabai v. Ramchandra, AIR 1970 SC 343, referred to the scheme of the Hindu Adoptions and Maintenance Act and held:
“………. the child adopted is tied with the relationship of sonship with the deceased husband of the widow. The other collateral relations of the husband would be connected with the child through that deceased husband of the widow. For instance, the husband’s brother would necessarily be the uncle of the adopted child. The daughter of the adoptive mother (and father) would necessarily be the sister of the adopted son, and in this way, the adopted son would become a member of the widow’s family, with the ties of relationship with the deceased husband of the widow as his adoptive father.”
The Act also empowers the adoptive parents to dispose of their property either by way of sale, gift, exchange, etc., or by way of a will. Thus, merely because they have made an adoption that by itself is no bar on them from disposing of their properties in any manner as they deem fit.
Adoption and other Acts
Under the Income-tax Act, 1961, the definition of a child expressly includes an adopted child. Hence, clubbing provisions applicable to a minor child would also apply to an adopted child. An interesting issue would arise u/s.56(2)(vii), viz. would a gift of money/ property received by an adopted child from his or her parents be exempt? Would an adopted child be a lineal descendant of an adoptive parent? The Andhra Pradesh High Court had an occasion to consider a similar issue in the context of the Estate Duty Act, 1953, in the case of Estate of Nuli Lakshminarayana, 116 ITR 739 (AP). The Court held that the expression ‘lineal descendant’ takes in an ‘adopted son’. It is submitted that the ratio of this decision should be extended to section 56(2)(vii) also.
Section 6 and Schedule IA to the Companies Act, 1956 define the term relatives. The Schedule states that the term ‘son’ includes a step-son. However, it is silent as to whether an adopted son is included. The Department of Company Affairs in a clarification given at a meeting with Chamber of Commerce has stated that on adoption a person cannot be regarded as a relative of the persons who are relatives in his natural family. A corollary to this should mean that an adopted son is a son for Schedule IA.
The Bombay Stamp Act, 1958 provides a concessional rate of stamp duty @ 2% in case of a gift to any lineal ascendant/descendant of the donor. Again the term ‘lineal ascendant/descendant’ has not been defined. It is submitted that reliance may be placed on the decision of the Andhra Pradesh High Court explained above for concessional duty in case of a gift to/by an adopted child.
The definition of the term ‘immediate relative’ in the SEBI (Issue of Capital & Disclosure Requirement) Regulations and the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 state that the term includes the child of a person. However, it does not expressly state whether an adopted child is included. It is submitted that in the light of the above discussion, an adopted child should also be treated as an immediate relative of a person.
How can a CA help?
Normally, an Auditor/CA is not directly involved with succession issues. Nevertheless, he can provide a lot of value -added services to his clients if he is aware of the law in this respect. Disputes on inheritance impact the operations of a corporation even in case of listed companies, especially, where an adopted child is to become the successor to the business/properties. A CA can be of great assistance to his clients in cases of such family feuds and on succession planning.
