Legality Of Pre-Nuptial Agreements In India

In India, marriage is understood as a traditional concept. The Hindu Marriage Act describes marriage as a sacrament. Because marriage has been considered as a sacrament, the Act casts a heavy burden on the spouse to legally seek divorce. The state, along with society and religion, deprecates divorce. However, gradually, the Indian society is progressing towards becoming modern. Divorces are not being viewed with disdain and now married people are unapologetically seeking alimony and maintenance.

Pre nuptial agreement, which is a framework to decide the amount and nature of alimony at the time of divorce, is entered into much before solemnisation of marriage itself. These types of agreements are prevalent in the United States and other western countries. The effect of such an agreement is that in case of a divorce the spouse is restricted from seeking a higher amount in court than what was agreed in the agreement. There is a lot of cacophony on whether such agreements would work in the Indian legal scenario.

BW Legal World talked to Bijal Ajinkya, Partner at Khaitan & Co.

Here is the excerpt from the conversation: -

1.       Do pre-nuptial agreements hold any legal validity in India?

Response: There is no express statute in India which governs pre-nuptial agreements. In effect, any agreement, and specially a pre-nuptial agreement, which passes the muster when examined through the lens of the Indian Contract Act 1872, personal laws, and the test of equity and reasonableness, could be considered as legally valid in India. However, for the state of Goa, the Portuguese Civil Code 1867 allows for pre-nuptial agreements to be entered into for the division of assets.

That being said, public policy has been a recurring and ostensibly the most prominent concern of Indian Courts in refusing to give effect to pre-nuptial agreements. The implementation of the public policy argument in invalidating pre-nuptial agreements has taken shape in, inter alia, two key ways,: (i) pre-nuptial agreements with clauses seeking to override rights and entitlements provided under personal laws and traditions have been struck down; and (ii) pre-nuptial agreements with clauses which are perceived by the courts as having the potential to encourage future separation of the married couple have also been interpreted as being against public policy.

2.       What is the future of pre-nuptial agreements, in the sense, will they be made legally valid in future?

Response: While there is a common misconception that pre-nuptial agreements anticipate a separation or divorce, in reality the objective of such agreements could well be to promote and encourage the marriage. Parties to the agreement can clearly set out that while they hope that the marriage will continue and endure for the rest of their joint lives, if their hopes are not fulfilled and the marriage breaks down, the pre-nuptial agreements, which clearly sets out the joint and separate assets of the parties, should govern and resolve any financial claims they may have against one another. While Indian courts have, in some cases, read down pre-nuptial agreements on account of public policy, what constitutes a contravention of public policy has always been evolving and up for debate. That which is presumed to be against public policy today might not necessarily be that way tomorrow.

Public policy, therefore, is nebulous and a victim of impermanence. Thus, as society's perspective on marriage evolve, recognizing individual autonomy and financial planning, pre-nuptial agreements could be seen less as undermining marriage and more as responsible foresight. This shift could lead to greater acceptance and enforcement of such agreements. As an example, if a provision is made to not provide for alimony to the spouse or to take a decision which is not in the best interest of the child through the marriage, such matters would be seen as opposed to public policy.

3.       What is the reason behind Indian courts not accepting pre-nuptial agreements?

Response: As discussed above, pre-nuptial agreements are typically understood to anticipate a separation or divorce by the Indian courts and are struck down due to reasons rooted in cultural, legal, and social perspectives. Having said that, in some instances, courts have even upheld such agreements, if the same are just, fair and reasonable. For instance, an agreement which stipulated that the couple would reside in a particular city after marriage was held to be valid in law and was not against public policy.

In effect, and considering the cultural significance, wherein marriage is traditionally seen as a sacred and lifelong union under certain personal laws (which implies a bond that transcends contractual obligations) – planning through a pre-nuptial agreement would largely depend on the manner in which courts interpret such agreements. Therefore, parties may also benefit from other mechanisms, such as the creation of family trusts, family arrangements, a tiered holding structure of family assets or a hybrid of these structures, in addition to pre-nuptial agreements to protect the family assets.

4.       Many couples are entering into pre-nuptial agreements. What is the use of such documents being made if there is no force of the law?

Response: Despite the lack of complete legal enforceability in India, many couples may still choose to enter into a pre-nuptial agreement or a memorandum of understanding, setting out their understanding in relation to separate assets (held before marriage) and future (ie during marriage) acquisition of joint assets, for several important reasons. Firstly, these agreements serve as a clear and mutual understanding between partners regarding financial arrangements and asset division, fostering transparency and trust. This process encourages open communication about finances, which can strengthen the relationship and help prevent future disputes. Secondly, and while such agreements may not be legally binding, they can still hold persuasive value in court. Judges may consider the documented intent and fairness of the agreement during divorce proceedings, potentially influencing their decisions.