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Donor can stipulate conditions in a Gift Deed and resort to cancellation on non-compliance

Donor can stipulate conditions in a Gift Deed and resort to cancellation on non-compliance: The Clarification by the Supreme Court of India

An appeal was made to the Supreme Court raising a fundamental question as to the legality and nature of a gift deed wherein the donor reserves his right to possession and enjoyment of the property and the conveyance is subjected to the fulfillment of certain stipulated conditions present in the deed.

The two main issues raised before the court in the present appeal were[1]:
(i) whether a document styled as gift deed but admittedly executed for consideration, part of which has been paid and the balance promised to be paid, can be treated as formal document or instrument of gift, and
(ii) whether a document in terms whereof the executants of the document retained possession and reserved her right over the property being the subject matter of the document could be a deed of gift or whether such a document was a document in the nature of a will

The appellant in the present case is a widow, aged 74 years, who executed a gift deed in favor of the respondent (i.e. nephew of the appellant) in the expectation that he will take due care of the appellant and her husband and also for some pecuniary consideration. On a plain reading of the deed of gift it could be perceived that the deed will come in effect on the instance of the death of the appellant and her husband and not before.

The appellant in due course of time, in and around, 02.06.1999 executed a deed of cancellation thereby canceling the gift deed so made. To this effect, the respondent approached the court of learned Munsif Sasthamcotta praying to declare the cancellation deed as null and void and for his declaration of title over the suit property. To this the appellant filed another suit praying for a permanent injunction restraining the respondent from trespassing, committing waste or mischief in the suit property. Not going too much into the detailed timeline of the case, the present appeal is brought against the order dated 03.04.2017 of the High Court of Kerela at Ernakulam.

To understand what constitutes as a Gift, the Supreme Court in the case of Naramadaben Maganlal Thakker v. Pranivandas Maganlal Thakker and others, held “Gift means to transfer certain existing moveable or immoveable property voluntarily and without consideration by one person called the donor to another called the done and accepted by or on behalf of the donee”

The Supreme Court vide its judgment clarified that “A conditional gift with no recital of acceptance and no evidence in proof of acceptance, where possession remains with the donor as long as he is alive, does not become complete during the lifetime of the donor. When a gift is incomplete and title remains with the donor the deed of gift might be canceled”

The supreme court has with precision outlined that the conditions stipulated in the deed of a gift does not make the gift invalid and such gift shall be complete only upon fulfillment of the conditions, needless to say, that before such an instance the donor can cancel the deed of gift.

The position which is clarified in the instant case is with regard to the provisions effecting gift under the Transfer of Property Act, 1882 and not with regard to other personal laws on the subject.

For your ready reference, the definition of gift under section 122 of the Transfer of Property Act, 1882 is as under –
“Gift” is the transfer of certain existing movable or immovable property made voluntarily and without consideration, by one person, called the donor, to another, called the donee, and accepted by or on behalf of the donee.

The court to reach on the conclusion on the subject relied largely on the judgment of Reninkuntla Rajamma v. K. Sarwanamma[2], wherein it was held that the fact that the donor had reserved the right to enjoy the property during her lifetime did not affect the validity of the deed. The Court held that a gift made by registered instrument duly executed by or on behalf of the donor and attested by at least two witnesses is valid, if the same is accepted by or on behalf of the done. Such acceptance must, however, be made during the lifetime of the donor and while he is still capable of making an acceptance.

The court accepting this judgment was of the view that where a gift deed is executed subjected to certain conditions, the satisfaction of those conditions is of utmost importance and that conditions do not make the gift void neither does reserving the right to enjoy and possess the subject property by the donor.

The Supreme Court concluding the instant case held “We are in agreement with the decision of this Court in Reninkuntla Rajamma that there is no provision in law that ownership in property cannot be gifted without transfer of possession of such property. However, the conditions precedent of a gift as defined in section 122 of the Transfer of Property Act must be satisfied. A gift is transfer of property without consideration. Moreover, a conditional gift only becomes complete on compliance of the conditions in the deed”

The decision was given by a bench ofJustice Arun MishraandJustice Indira Banerjee in S. Sarojini Amma v. Velayudhan Pillai Sreekumar[3].

[1] CIVIL APPEAL NO. 10785 OF 2018
[2] (2014) 9 SCC 445
[3] CIVIL APPEAL NO. 10785 OF 2018

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