Prenuptial Agreements in India: Asking the Taboo Questions – By Bijal Ajinkya and Virja Dange

Prenuptial Agreements in India: Asking the Taboo Questions – By Bijal Ajinkya and Virja Dange

In the last few decades, the dynamics of both,the modern and traditional Indian family set-up, has undergone a dramatic evolution. Somewhere in the whirlwind that has been the globalisation of India, a new age of estate planning was ushered–one that has beenfuelled by an increasinglyfinancially-savvy demographic, that is acutely aware of its social, political and legal rights, and is also pro-active in taking steps to ensure these rights are well protected.

Several culturally closeted subjectsnow being accepted, if not adopted -such as financial protection through the use of wills, family settlements, trust structures, prenuptial arrangements, etc.

This article aims to briefly highlight the use and legality of a prenuptial agreement (prenup) in India.

The Basics: What is a prenup?

Simply put, a prenupis a marital property agreement (executed prior to solemnisation of the marriage) thatgenerally outlines details of how the couple wishes to distribute assets and handle other related affairs in eventof a divorce.

A prenup can cover assets acquired prior to marriage, as well as future wealth and inheritance. Generally, a prenupmay state that each party shall retain their “separate property”, without any claim to the same from the other, in the event of divorce; and that only “joint property” shall be shared in a decided ratioor as set out in the agreement by the parties. Importantly, all assets of the parties should be disclosed. Failure to disclose all assets in the agreement would most likely nullify the agreement.

 What does and can a prenup contain?

A prenup does not have a fixed format and can be customised to address a couple’s requirements. However, parties cannot enter intoa prenup that is inherently unfairor unjust. Relevant factors such as number of dependents that need support, their special needs, lifestyle of parties, etc. must be adequately considered to ensure that the dependant spouse is not left with insufficient means and is unable to sustain the same standard of living after the marriage,as during the marriage.

 Is a prenup enforceable in India?

Despite their increasing popularity, prenups still have acomplex legal existence in India.

The Calcutta and Gujarat High Courts havewhile considering the enforceability of prenups, observed that although a couple has the legal right of divorce by consent, such provision of law was not introduced to encourage the parties to contemplate separation or divorce before or at the time of entering into marriage, and therefore did not give weightage to the prenups in those cases.

Conversely, a few years later,the Himachal Pradesh High Courtup-held the validity of a prenup in a separate case. Interestingly, most of the available judgments dealing with prenups in India date back several decades.Furthermore, while the Indian Divorce Act, 1869, empowers the High Court or District Court to inquire into the terms of a prenup (if any)whilegranting a divorce; the enforceability of the prenup still remainsat the discretion of the Court.The lack of recent judicial literaturefurther contributes to the ambiguity of the subject.

In summary, prenups are currently not-binding upon courts in India.

Should one consider a prenup?

It is of worth to note that in India, family laws are generally more female centric. In cases relating to alimony and maintenance, the trend has been a strong partiality towards women – with a focus on protecting the rights and security of the wife/mother, regardless of the financial situation of the husband/father. In fact, it was only ina 2017 case, thatthe Supreme Court held that 25% of the husband’s net salary would be “just and proper” payment of alimony, noting that the amount of permanent alimony awarded shouldnot only be befitting the status of the parties, but should alsotake into account the capacity of the spouse to pay maintenance.

The Supreme Court has even recognized the rights of partners in live-in relationships in India. It has been categorically held that the mere lack of solemnization of a ‘marriage’, does not disentitle a woman in such a relationship, from claiming maintenance for her or her child(ren), from her partner. In such a situation, having a prenup (or like agreement) in place, may just be the ideal solution to protect assets of both parties.

In an effort to not fall into the mire of alimony calculations which are ultimately based on the discretion of the Court, one may also consider a prenup as an early ‘hedging’ tool. Another popular tool is the ‘prenup-trust’ structure. High Net worth Families have spearheaded the use of a prenup-trust, wherein the assets contributed to a trust prior tomarriage should be shielded from any claim from the spouse – as such assets are legally ‘separated’ from the contributor prior to the marriage itself.

Although prenups are currently not binding in India, they do carry some persuasive value in the event of divorce and offer a good chance at providing some financial relief to both parties. Marriages are of course, made in heaven, but in the off-chance they are not – having a prenup in place never hurts!

The views of the author(s) in this article are personal and do not constitute legal / professional advice of Khaitan & Co. For any further queries or follow up please contact us at ergo@khaitanco.com