What You Must Disclose About Net Worth in a Divorce

Full and Frank Disclosure Is the Standard Indian Courts Apply

People come to this subject looking for protection and find an obligation instead. The standard is full and frank disclosure:

In practice the duty is usually treated as continuing after the affidavit is filed: a party who sells a flat, receives a bonus or takes a new loan while the case is pending would be expected to put that on record too.

One comparison is worth making early.

Assets Both Spouses Are Expected to Put on Record

The obligation applies to both sides, which surprises the party who assumed the schedule was only for the higher earner. A court reading one position is reading half a case.

Whether an asset is available for division is a question of law, and it belongs to counsel. Whether it is disclosed is not a question at all. An inherited share often needs proving a claim to inherited assets before it can be dealt with, and that paper is itself disclosable.

Income, Perquisites and Business Interests in the Affidavit

Income is the thinnest part of most schedules, because the figure people carry in their heads is take-home pay. The affidavit asks for gross income, and then for everything an employer provides that never arrives as cash.

Perquisites are the usual gap:

• A company car, with or without a driver
• Accommodation or a rent-free flat
• School fees paid directly
• Club membership and medical cover
• Stock options, vested and unvested
• The annual bonus and monthly reimbursements

Many of these can appear in Form 16 or in the Annual Information Statement, which makes them checkable rather than arguable.

Proprietors and partners draw no salary. The relevant figures are drawings, the share of profit, interest on capital, and any rent the business pays for premises owned personally.

Irregular receipts are disclosed with the basis of the estimate: agricultural income, rent received partly in cash, commission, seasonal trade.

Consequences of Concealing or Understating Assets

A court is not obliged to accept a schedule at face value. Where the disclosed position does not explain the life being led, a court can draw its own conclusions and proceed on what it finds the position to be. That is the practical risk: the figure the court works from stops being the party's own.

Procedural consequences. Under Rajnesh v. Neha, the respondent has a maximum of four weeks to file the reply with the affidavit, and no more than two opportunities are given to file it.

An order made on an incomplete disclosure may be open to challenge when a later disclosure shows what was left out.

Criminal exposure. A false statement on oath is an offence in its own right.

The exposure is real without being automatic.

The damage is rarely confined to the concealed item. A party caught understating one account argues every remaining issue from behind, before the same judge reading the same file.

Legitimate Planning Against Concealment: Where the Line Falls

Pre-marital agreements come up in almost every conversation. Whatever its status, such an agreement does not remove the duty to disclose.

Ordinary transactions do not become suspicious because a marriage is failing. A loan repaid on schedule, a business expense paid, an asset sold at market value with the money reaching a disclosed bank account: each is explained by its own record. Each is still disclosed, with the date and the amount stated.

The transfers that fail are the ones with nothing behind them, typically a transfer without payment to a relative once a dispute was foreseeable.

Where an asset stands in a relative's name with no funding trail at all, the benami law described above is engaged.

So the line does not run between careful and careless structuring. It runs between what is disclosed and what is hidden. Transfers made shortly before proceedings are disclosed with their date and consideration, because concealment is treated far more seriously than the transfer itself. What a court may ultimately divide is a legal question for counsel, not an accountant.

Working With Your Counsel and a CA on the Disclosure

Two professionals, two jobs:

What a chartered accountant can independently support is specific:

1. 1Valuing an unlisted shareholding
2. 2Reconstructing a partner's capital account
3. 3Reading Form 26AS and the Annual Information Statement against declared income
4. 4Putting the whole position on one page as a single view of the position at a stated date

Where the other side's disclosure looks incomplete, rebuilding a trail from records is a separate exercise with its own limits.

The accountant's involvement does not reduce the party's obligation. The party remains responsible for full disclosure; the accountant verifies what is disclosed against evidence. Figures a client will not substantiate are not certified, which is what makes the document worth filing. How the schedule is drafted follows from that.