My late husband had mutual fund investments under Hindu Undivided Family (HUF). I have a son and daughter, who are minors. While some mutual funds have agreed that I can be the karta and are willing to let me liquidate investments, but two are saying I can’t be a karta. Can you explain?
The word karta refers to the eldest male coparcener of a HUF. Post the 2005 amendment to the Hindu Succession Act, 1956, wherein equal coparcenary rights were granted to both sons and daughters of a coparcener, the eldest coparcener of an HUF can be regarded as the karta.
However, only a coparcener can become the karta. A wife of a coparcener or karta is only a member (who has limited rights and no ownership of the underlying property at birth), and does not qualify to become a coparcener.
There are certain judicial precedents. Kolkata high court in 1959 held that where the male members are minors, their expected guardian is their mother, who can represent the HUF for assessment and recovery of tax. The Nagpur bench of the Income Tax Tribunal in 1948 held that a widow was capable of becoming the karta of the HUF which consists of herself along with her two minor sons. In CIT vs Seth Govindram Sugar Mills [1966 AIR 24], the Supreme Court held that a widow cannot be regarded as the karta of her husband’s HUF. However, she can manage the HUF assets and can represent the same for tax assessment, if the coparceners are minors until the eldest coparcener attains majority. Hence, the widow of a karta can manage the properties of her husband’s HUF if all the other coparceners are still minors. But courts have distinguished between a manager and a karta.
Applying these precedents, in your case, you would be allowed to manage the assets of your husband’s HUF until the eldest coparcener, son or daughter, attains the age of majority.
While you may undertake certain necessary actions on behalf of the HUF, you cannot be regarded as the karta. This will also depend upon the internal policies being adopted by the said mutual funds. Until a clearer verdict is passed by SC on this issue, there remains a certain amount of ambiguity. You may consider providing the mutual fund an indemnity letter stating that you would release them of any liability which may arise in the future due to your liquidating the said fund. This should allow you the flexibility to deal with the investments, while protecting the fund houses legally.
Rishabh Shroff is partner, Cyril Amarchand Mangaldas. Queries and views at email@example.com