Conflict over requirements for valid gift deed resolved

By Vivek Vashi and Aakriti Khetan, Bharucha & Partners
0
1158

Afull bench of the Supreme Court has clarified and authoritatively laid down the position of law with respect to the essential requirements to make a valid gift in terms of sections 122 and 123 of the Transfer of Property Act, 1882. The judgment came on 17 July in a case that pitted the legal representatives of the late Renikuntla Rajamma against K Sarwanamma.

Vivek Vashi
Vivek Vashi

Facts of the case

Rajamma executed a gift deed in favour of Sarwanamma in respect of property, reserving to herself, during her life, the right to enjoy the benefits arising from the property. Subsequently, around March 1986, Rajamma executed a revocation deed, revoking the gift deed on grounds that included fraud, misrepresentation and undue influence.

Sarwanamma responded by filing a suit for a declaration that the revocation deed was null and void.

Lower court proceedings

The suit was contested by Rajamma and the case went to trial. The trial court held that the gift was validly made and accepted by Sarwanamma and thus irrevocable in nature. The grounds of fraud, misrepresentation, etc., were not proved by Rajamma. The trial court also held that the fact that Rajamma had reserved the right to enjoy the suit property during her lifetime did not affect the validity of the gift deed.

Aggrieved by the court’s decision, Rajamma preferred a first appeal before the additional district judge. The judge affirmed the view taken by the trial court and further held that the gift deed was not a sham document and its purported cancellation was totally ineffective.

Rajamma subsequently preferred a second appeal before the high court, which was also dismissed. Again aggrieved, she then appealed to the Supreme Court.

Supreme Court hearing

It was submitted by both parties that the only question to be considered by the Supreme Court was whether a gift which reserved a life interest for the donor was invalid.

Counsel for Rajamma submitted that the donor had reserved to herself a life interest, and such reservation rendered the gift invalid, as a conditional gift was not envisaged by the Transfer of Property Act. According to the counsel, the gift failed to transfer title, possession and the right to deal with the property in absolute terms in favour of the donee and thus was not a gift in the eyes of law. The counsel also placed reliance on the Supreme Court’s decision in Naramadaben Maganlal Thakker v Pranjivandas Maganlal Thakkar and Ors (1996).

Aakriti Khetan
Aakriti Khetan

Counsel for Sarwanamma in his submissions relied on the decision of the Supreme Court in K Balakrishnan v K Kamalam & Ors (2003), in which the court held that: “There is no prohibition in law that ownership in a property cannot be gifted without its possession and right of enjoyment.” In that case, the court clearly laid down that it was open to the donor to transfer by gift the title and ownership in the property and at the same time reserve its possession and enjoyment to herself during her lifetime.

The counsel also relied on several judgments in support of his submission that the rule of Hindu law requiring the transfer of possession for a valid gift was superseded by section 123 of the act.

Court’s judgment

The Supreme Court analysed the provisions of sections 122 and 123 of the act and held that a conjoint reading of the two sections makes it clear that “transfer of possession” of the property covered by a registered instrument of gift executed by the donor and duly attested is not an essential condition for making a valid gift under the provisions of the act.

Pertinently, the court confirmed its decision in K Balakrishnan and distinguished its decision in Naramadaben, holding that the latter judgment rests on the facts of that case, in which the gift was conditional and there was no acceptance of the donee, by virtue of which it could not operate as a gift. The Naramadaben judgment cannot be read to be an authority for the proposition that delivery of possession is an essential requirement for making a valid gift.

The court further held that it is settled law that section 123 of the act supersedes the rules of Hindu law insofar as such rules required delivery of possession to the donee.

Significance of judgment

By this judgment, the Supreme Court has confirmed and clarified the essential requirements for making a valid gift and has conclusively laid down that delivery of possession is not an essential prerequisite.

Vivek Vashi is the mainstay of the litigation team at Bharucha & Partners, where Aakriti Khetan is an associate.

Bharucha_&_Partners_logo

Bharucha & Partners Advocates & Solicitors

Cecil Court, 4th Floor, MK Bhushan Road

Mumbai-400 039

India

Tel: +91-22 2289 9300

Fax: +91-22 2282 3900

E-mail: [email protected]