LC 0702 Property Law and Easement : Module 08 Gift and Transfers of Actionable Claims (Sections 122 to 129 and 3, 130 to 137) :

 LC 0702 Property Law and Easement :  Module 08Gift and Transfers of Actionable Claims (Sections 122 to 129 and 3, 130 to 137) :

Actionable Claim- What it is and What does the Law say about it?

June 15, 2020

This article has been written by Pragya Rakshita, a student of the National University of Study and Research in Law, Ranchi.

Table of Contents

1. Introduction
2. What is Actionable Claim?
1. Unsecured Debt
1. Existent Debt
2. Accruing Debt
3. Conditional or Contingent Debt
2. Beneficial Interest in Movable Property
3. Instances of Actionable Claims
4. Claims not covered under Actionable Claim
1. Instances of Claims not recognized as Actionable Claims
5. Incapable Transferees of Actionable Claim
6. Actionable Claim is Movable Property
7. Conclusion
8. References

Introduction

The Transfer of Property Act was enacted in the year 1882 with the objective of codifying the laws relating to transfer of properties. This Act is not exhaustive in nature, as it does not cover all kinds of transfers, or all types of properties. The Transfer of Property Act, 1882 does not incorporate all the rules relating to the different modes of transfer, neither does it include the transfer of all properties. There are other Acts which codify the laws regarding different types of property such as the Sale of Goods Act, 1930.

This Act also does not deal with transfers by operation of law, which includes transfers in execution of a Court’s decree. [1] This Act only covers inter vivos transfers which are transfers between living persons by act of parties through express or implied contracts. Also, the Act mainly deals with transfer of immovable properties, but some of the provisions of the Act are also applicable to movable properties.

So, to know whether the Transfer of Property Act, 1882 will apply to a particular transaction or not, it is necessary to determine the mode of transfer as well as the type of property being transferred. One of the intangible properties that the Act deals with is actionable claim that is discussed further in detail.

What is Actionable Claim?

Actionable claim is defined in Section 3 of the Transfer of Property Act, which was included in the Act by the Amending Act II of 1990. Actionable claim is an intangible movable property, and its transfer is dealt with in Chapter VIII of the Act.

According to Section 3 of the Act, actionable claim means:

1. Claim to an unsecured debt
2. Beneficial interest in a movable property

These are both claims that are recognized in the Courts of law as affording relief. There are other types of claims also that afford relief and are actionable in the Courts of law, such as secured debts and tortuous suits like defamation or nuisance. But those are not categorized under the meaning of actionable claim. The term actionable claim only covers the above mentioned two types of claims.

Unsecured Debt

Unsecured debt refers to all monetary obligations of a certain amount, and that is not covered by any security in the form of mortgage, pledge or hypothecation. This is not just limited to the concept of loans forwarded by a creditor to a principal debtor. It extends to all kinds of monetary obligations, such as rent or payment on sale of property etc.

The three requirements for a transaction to qualify as unsecured debt are:

1. Monetary obligation
2. No security
3. Certainty of amount of money obligated

According to Sunrise Associates v. Govt. of NCT of Delhi [2], an actionable claim may be existent in praesenti, accruing, conditional or contingent. So, the three types of unsecured debt are:

1. Existent Debt
2. Accruing Debt
3. Conditional or Contingent Debt

Existent Debt

This is the kind of debt that has already become due, and is payable and enforceable in the present. For instance, if Mr. A sells a house to Mr. B in present, and the monetary consideration has to be paid then and there, then the consideration becomes payable right then, and this is existent debt.

Accruing Debt

If a monetary obligation is due in present, but becomes payable on a future date, then that is accruing debt. For example, if Mr. A is the employee of Mr. B and he gets his salary on the last day of every month, then his salary is accruing debt during that month, as it is due throughout the month, but it becomes payable only on the last day of the month. So, if Mr. B fails to pay the salary, then Mr. A can approach the Court to claim it only after the last date of the month, when it becomes payable.

Conditional or Contingent Debt

A debt is conditional or contingent if it becomes payable on the fulfillment of a condition or contingency.

It is called conditional debt when the stipulation is in control of the parties. For example, an agreement between A and B that A will pay Rs. 1000 if B buys C’s house, then this is a conditional debt. Here, Rs. 1000 becomes payable and B can claim it only after he fulfills the condition.

On the other hand, when the stipulation is beyond human control, then it is called a contingent debt. For instance, if A promises to pay a particular amount to B if C’s ship sinks, then since the sinking of the ship is beyond the control of the parties, so it is a contingent debt.

Beneficial Interest in Movable Property

If a person has the right to possess a movable property, then it is said that he has beneficial interest in that movable property. But if that property is not in his possession, then he has an actionable claim. So, the requirements to constitute this type of actionable claim are:

1. Movable property;
2. The movable property is not in the possession of the claimant;
3. The claimant has the right to possess that movable property.

For example, if A sells his car to B and B has completed his obligation, that is, B has forwarded the consideration from his side, then B has the right to possess the car; but if B is unable to acquire possession, then B can approach the Court to claim this possession.

But if the movable property is already in the possession of the claimant, either actual or constructive, then he cannot claim possession. So, if in the previous example, A had given the car keys to B, then it can be said that B has constructive possession, and hence, B cannot approach the Court to claim possession.

Moreover, the right to possess of the Claimant must be a legal right, which is recognized by the law. For instance, if a person of unsound mind or a minor, A sells 100 bags of wheat (or any other movable property) to Mr. B, and Mr. B also forwards the consideration from his side, that is Mr. B fulfills his obligations, then also Mr. B cannot claim possession. This is so because Mr. B does not have a legal right to possess, as A does not have the capacity to contract, and the agreement between A and Mr. B is void ab initio. Now, since the right to possess of Mr. B is not recognized legally, so this is not covered under the heading of actionable claim.

Instances of Actionable Claims

Some examples of actionable claims are:

1. Claim for arrears of rent. [3]
2. Claim for money due under insurance policy. [4]
3. Claim for return of earnest money. [5]
4. Right to get back the purchase money when the sale is set aside. [6]
5. Right of a partner to sue for an account of the dissolved partnership firm. [7]
6. Right to claim benefit under a contract for the purchase of goods. [8]
7. Right to get the proceeds of a business. [9]

In all of these instances the amount for which the suits are filed are certain and definite. So, such claims are transferable under actionable claims. 

Claims not covered under Actionable Claim

Various types of claims are not covered under the head of actionable claim, and hence cannot be transferred under the Transfer of Property Act.

The right to claim damages, whether arising out of a tortuous or contractual liability are not actionable claims. [10] This right is not an unsecured debt, even though it is a monetary obligation because of two reasons. First of all, it is an uncertain amount of money, and second, it is not a part of the original transaction. Actionable claim under the category of unsecured debt only covers the amount in the original transaction. Hence, it covers the principal amount and the interest upon that principal, as these are of a certain amount. Whereas, damages is uncertain, and hence, does not come under actionable claim.

Moreover, in cases of tortious liability such as defamation, or nuisance, the damages is uncertain and personal or attached with immovable property, and hence cannot be transferred. For instance, if A defames B, then B has the right to sue A for defamation; this right is personal in nature as B has been defamed and so, only B can have the right to sue A. So, this right cannot be transferred and it is not an actionable claim. An instance of nuisance would be if person X’s neighbour, Y, let his drain pipes overflow into X’s lawn. Here, X has the right to sue for damages for the nuisance caused by Y because of virtue of ownership that X has over his lawn. Hence, X is the only person who has this right to sue and so, it is not a transferable actionable claim. But, if X sells his property to a third person, Z, then Z, along with the property, will also receive this right to sue Y for nuisance.

In the case of Jai Narayan v. Kishun Dutta [11], it was held that a claim for mesne profits is not an actionable claim, as mesne profits are unliquidated damages and it is not a claim to any beneficial interest in moveable property, not in the possession, either actual or constructive, of the claimant. Thus, it was a “mere right to sue” and not an actionable claim.

Rights such as copyright [12], patent or trademark are not actionable claims because they already vest in the person who has it. These have their own governing Acts and are not transferable as they are the intellectual property of the claimant, and any other person cannot be allowed to claim that.

Instances of Claims not recognized as Actionable Claims

There are certain types of rights and claims which are not recognized as actionable claims, and hence cannot be transferred. Some examples of this type of claims are:

1. Right to get damages under the law of torts or for the breach of a contract: Since these are uncertain amounts of money and hence, this cannot be transferred. [13]
2. Claim for mesne profits: This is also uncertain, and so cannot be allowed to be transferred. [14]
3. Copyright, patents and trademarks: These rights are personal in nature, as these are available to that particular person. [15]
4. Decree or judgment of debt: This cannot be transferred under actionable claim, as after the judgment has been pronounced, no action subsists that could be transferred. [16]

Incapable Transferees of Actionable Claim

Section 136 of the Transfer of Property Act, 1882 declares certain groups of people who cannot deal in the transfer of actionable claims. Section 136 states that-

“No judge, legal practitioner or officer connected with any Court of Justice shall buy or traffic in, or stipulate for, or agree to receive any share of, or interest in, any actionable claim, and no Court of Justice shall enforce, at his instance, or at the instance of any person claiming by or through him, any actionable claim so dealt with by him as aforesaid.”

This Section bars Judges, legal practitioners or officers of Court from receiving any share or interest in any actionable claim, and hence they cannot be the transferee in transfer of actionable claim. Section 6(h)(3) provides that any property cannot be transferred to a person who is legally disqualified from receiving that property, that is, transfer cannot be made to legally disqualified transferees, and Section 136 legally disqualifies these persons from being transferees of actionable claims and hence, actionable claims cannot be transferred to this class of people.

The reason behind this prohibition is to ensure impartiality of the judiciary. The Privy Council illustrated the importance of this prohibition in the case of Kerakoose v. Serle [17] by stating that- “It is of great importance that no officer of a Court of Justice should be even exposed to the suspicion that in the discharge of his official duties his conduct may be influenced by any personal consideration.”

Actionable Claim is Movable Property

Actionable claim is an intangible movable property. This can be inferred from the interpretation of Section 2(7) of the Sale of Goods Act, 1930, which reads as follows-

“‘goods’ means every kind of moveable property other than actionable claims…”

Section 2(7) of the Sale of Goods Act, 1930 defines “goods”, wherein it states that goods include all kinds of movable property, except for actionable claims. This Section provides for an exception clause to exclude ‘actionable claims’ from the category of movable property. This exclusion would not have been required if the actionable claim was an immovable property. Hence, the interpretation of Section 2(7) of the Sale of Goods Act, 1930 shows that an actionable claim is a movable property.

Conclusion

Actionable claim is an intangible movable property, and it is transferable. It mainly refers to the types of claims that can be recovered through proceedings in Courts. Out of multiple such kinds of claims, the concept of actionable claim includes two types, which are claims on unsecured debt and beneficial interest in movable property. Such claims can be transferred to another person, but certain people are barred from becoming transferee of actionable claims. This bar has been imposed in order to maintain the integrity of Court proceedings. The concept of actionable claims is a highly important one that all law students must be clear with.

References

[1] Arvind Kumar v. Govt. of India, (2007) 5 SCC 745.

[2] AIR 2006 SC 1908.

[3] Daya Debi v. Chapla Debi, AIR 1960 Cal 378.

[4] Varjivan Das v. Magan Lal, AIR 1937 Bom 382; Sunrise Associates v. Govt. of NCT Delhi, AIR 2006 SC 1908.

[5] Lalchand v. Hussainio, (1927) 97 IC 257.

[6] Chinnappa Reddy v. Venkatramanappa, AIR 1942 Mad 209.

[7] Bharat Prasad v. Paras Singh, AIR 1967 All 15.

[8] Zaffar Mehar Ali v. Budge-Budge Jute Mills, (1907) 34 Cal 289; Shah Mulji v. Union of India, AIR 1957 Nag 31.

[9] Alkash Ali v. Nath Bank, AIR 1951 Assam 56.

[10] Moti Lal v. Radhey Lal, (1933) All 642; Inder v. Raghubir Singh, (1930) 5 Luck 547.

[11] AIR 1924 Pat 551.

[12] Savitri Devi v. Dwarka Prasad, (1939) ALJ 71.

[13] Moti Lal v. Radhey Lal, (1933) All 642; Inder v. Raghubir Singh, (1930) 5 Luck 547.

[14] Jai Narayan v. Kishun Dutta, AIR 1924 Pat 551.

[15] Savitri Devi v. Dwarka Prasad, (1939) ALJ 71.

[16] Govindarajulu v. Ranga Rao, AIR 1921 Mad 113.

[17] (1846) 3 MIA 329.

LC 0702 Property Law and Easement : Module 08 Gift and Transfers of Actionable Claims (Sections 122 to 129 and 3, 130 to 137) :

LC 0702 Property Law and Easement :  Module 08Gift and Transfers of Actionable Claims (Sections 122 to 129 and 3, 130 to 137) :  

Concept of gift under the Transfer of Property Act, 1882

August 26, 2020

This article is written by Ananya Garg, from Chanakya National Law University, and Bhuvan Malhotra, final year student at Jindal Global Law School. It discusses the legal provisions relating to ‘Gifts’ under Chapter VII of the Transfer of Property Act.

Table of Contents

1. Introduction
2. What may be referred to as a gift
1. Gift
1. Mt. Brij Devi v. Shiva Nanda Prasad & Ors (1939) : an analysis
2. Parties to a gift transfer
1. Donor
2. Donee
3. Essential elements
1. Transfer of ownership
2. Existing property
3. Transfer without consideration
4. Voluntary transfer with free consent
5. Acceptance of gift
3. Modes of making a gift
1. Immovable properties
2. Movable properties
3. Actionable claims
4. A gift of future property
5. A gift made to more than one donee
6. Provisions relating to onerous gifts
7. Universal donee
8. Suspension or revocation of gifts
1. Revocation by mutual agreement
2. Revocation by the rescission of the contract
3. Bonafide purchaser
9. Exceptions
1. Donations mortis causa
2. Muslim-gifts (Hiba)
10. Conclusion
11. References

Introduction

A Gift is generally regarded as a transfer of ownership of a property where the sender willingly brings into effect such transfer without any compensation or consideration in monetary value. It may be in the form of moveable or immoveable property and the parties may be two living persons or the transfer may take place only after the death of the transferor. When the transfer takes place between two living people it is called inter vivos, and when it takes place after the death of the transferor it is known as testamentary. Testamentary transfers do not fall under the scope of Section 5 of the Transfer of Property Act, and thus, only inter vivos transfers are referred to as gifts under this Act.

If the essential elements of the gift are not implemented properly it may become revoked or void by law. There are many provisions pertaining to the gifts. All such provisions, for example, types of property which may be gifted, modes of making such gift, competent transferor, suspension and revocation of gift, etc. are discussed in this article.

What may be referred to as a gift

Gift

Section 122 of Transfer of Property Act defines a gift as the transfer of an existing moveable or immovable property. Such transfers must be made voluntarily and without consideration. The transferor is known as the donor and the transferee is called the donee. The gift must be accepted by the donee. This Section defines a gift as a gratuitous transfer of ownership in some property that is already existing. The definition includes the transfer of both immovable and moveable property.

Mt. Brij Devi v. Shiva Nanda Prasad & Ors (1939) : an analysis

One of the few essentials of a Gift is, that in event of a transfer, there must be a transference of all the rights in the property by the donor to the donee; however, it is also permissible to make conditional gifts. Such a clause is governed by Section 126 of the Act.

To delve into the issue, we must refer to the first important pre-independence judgment of the Allahabad High Court, where the subject matter of dispute is the same as our concern. In the case of Mt. Brij Devi v. Shiva Nanda Prasad & Ors (1939) Brij Devi had claimed possession of a land which had formed the focus of a gift deed executed by her ancestors on 11th December 1914, in favor of one Jain Bulaqi Shankar. The gift deed was executed with some conditions attached to it which read as, “The material terms of the gift-deed are as follows: I have made a gift to Pt. Jain Bulaqi Shankar for construction of the temple of Bhaironji, and residence, and removing my possession from the property gifted, I have put the donee in proprietary possession and he will have the right to construct a temple and a quarter… The donee or his successors will have no right to transfer or mortgage it; if he does, the transfer will be invalid, and I and my successors will have a right to get the gift revoked.” As per the gift deed, Jain Bulaqi did not succeed in building the temple or a residential quarter for his own occupation, but subsequently he made a waqf of the property in favour of one Shiva Nanda Prasad in 1927, which means, he transferred the property which had been gifted to him by the plaintiffs’ ancestor. This action of the done was alleged to be in contravention of the conditions of the gift deed itself. They alleged that in circumstances of property being alienated, by virtue of the revocation clause mentioned in the gift deed, they were entitled to declare the transfer done to the defendant as invalid and further have the right to take back the possession of the land as per the gift deed. 

The defendants argued that the transfer made by way of gift deed, was an absolute transfer of the land to Jain Bulaqi, and that that transfer in the gift deed had been subject to a condition absolutely restraining the transferee and his successors from parting with or disposing of his interest in the property which is repugnant to the Transfer of Property Act itself. Section 10 of the Transfer of Property act states that, absolute restraint on the transferee by the transferor is void, that is, the condition restraining the alienation is void while the transfer of the property itself is valid. The defendants’ argument was essentially based on the foundation of Section 10 of TPA, they argued that such a restraint on the land was void and the contract must be allowed as if an unequivocal transfer of the land was made to the donee. 

Moreover, because the condition was void, the transfers in favor of Shiva Nanda Prasad were valid and could not be set aside, nor were the plaintiffs entitled to revoke the gift deed. The plaintiffs then took the defense of Section 126 of the Transfer of Property Act and contested that the transfer was not void as per the mentioned section. The section essentially means that the donor and donee can agree upon happening of certain conditions, when the condition is not fulfilled, the gift can be revoked. The plaintiffs argued that the right to revoke the gift was contingent upon the alienation by the donee of the land gifted and not upon the will of the donor.

The plaintiffs supported this claim by citing the case of Makund Prasad v. Rajrup Singh (1907), in which the court held that a gift of property made on the condition that the land would be liable to be taken back in the event of its Alienation, was valid and the power of revocation was not repugnant to the original transfer under Section 10.

The court in this case rightfully upheld the defendants claim and ruled that the gift deed cannot be revoked by the successors of the ancestor who had made the gift deed in favour of Jain Bulaqi as the transfer was uncosniable in the first place as it restricted the donee completely to alienate such property. This was the first major judgment which rightfully upheld the donee’s claim and rightfully interpreted the law relating to sections 10 and 126, however the thing to note in this judgment was the lower appellant court had ruled in favour of the plaintiffs and the high court had overturned the decision which is a usual trend which we see in cases relating to the issue of our paper. Even after such a judgment, we see cases relating to the same issue where the lower and high court’s decision is overturned in the Supreme Court. In the case of Sridhar vs N. Revanna (2000), which is a case of February, 2020, out of the many issues in the suit, the same issue, that is, whether a gift deed can be revoked by virtue of Section 126 if such property is alienated had been raised in the Supreme Court once again for which the court had to adjudicate the matter. In this case one Shri Muniswamappa, great grandfather of the plaintiffs and grandfather of defendant No.1, was the absolute owner of the suit schedule property who executed gift deeds in favour of the defendants with the same condition that the property should not be alienated and if such property was to be alienated, then the gift deed stands invalid. The defendants on the other hand had sold the property which they had received as a gift to which the plaintiffs’ alleged that such a transfer was invalid as the gift deed specifically stated that the mentioned property is not to be alienated and the plaintiffs demanded the property to be transferred to them back.

The High Court in this case too decided that the condition of the gift deed was not fulfilled and thus ruled that the sale made by the donee was invalid and the property is to be returned, but the Supreme court in this too cited the ruling held in the case of Mt. Brij Devi v. Shiva Nanda Prasad & Ors (1939)  and overturned the High court’s decision and ruled that the gift deed cannot be revoked as at the very inception of the gift deed, the donee was completely restricted to alienate such property which is prohibited by Transfer of Property Act by virtue of section 10. 

For an issue that has been a settled law as per the 1939 judgment of the Allahabad High Court, it is important to analyze what is making the courts interpret such laws in different manners and why are the higher courts being time and again invoked to settle such disputes. Firstly we would look at the way Section 126 is drafted in the Transfer of Property Act and also the placement of such a section would be beneficial for an in-depth analysis. Section 126 reads as: “donor and donee may agree that on the happening of any specified event which does not depend on the will of the donor, a gift shall be suspended or revoked; but a gift which the parties agree shall be revocable wholly or in part, at the mere will of the donor, is void wholly or in part, as the case may be.” 

The section as it appears has a highly generic wording and allows the donor to make some condition while gifting it to the donee and if such condition is not fulfilled or abided by, the donor can revoke the gift deed not on the basis of his will but subject to the condition that remained unfulfilled or which has not been abided by. This section is type of a conditional clause as the gifts chapter starts from Section 122 of the Transfer of Property Act. Chapter 2 of the Act is a general chapter which puts some restrictions on the property while the gifts form a part of separate chapter, that is, ‘of Gifts’ in the Act. Moreover if we look at the illustrations present in the section, it appears that the law is silent upon such matters, that is, what if there is a complete restriction on the alienation of the property. The courts while adjudicating the matter look at the placement of these conditional clauses, where the presence of section 126, that is, the conditional clause is already present in the chapter, the courts tend to think that the gifts are to be governed only by the set conditions that have been made in the gift deed. Moreover, the courts also interpret that if such conditional clause is present in the chapter ‘of gifts’ hwere parties can make own conditions in the gift deed, there must be a legislative intent behind this structuring and the chapter ‘of gifts’ must be looked at aloof of other chapters, specifically Section 10 (to which our analysis is limited). The illustrations (Section 126), being silent on such conditions, also add to this mis-interpretation of the court. The first illustration provided in the section is contingent upon the death of B and his descendants but in the first place, the donee is not restricted from alienation of the property. 

The second illustration provided also does not talk about the alienation issue rather it clarifies that if an amount of 100 is gifted to someone by the donor and with both the donor and donee’s assent, they agree that Rs 10 can be asked back at any time, this shows that the actual gift was of Rs 90 only as the donee has to return back the Rs 10 to the donor back, that is, that amount of Rs 10 is inalienable. The second illustration is somewhat related to the issue at hand but because it is talking about a movable gift, that is, in cash, the courts tend to think that this may be applicable to only movable gifts as we cannot gift land in such a way. Thus, due to the absence of such clarity in the issue, the court thinks that the act is silent in the issue at hand and they tend to give different rationale and rule that the property which forms center of a gift deed can be revoked if the condition of alienation is not abided by the donee. 

This interpretation or perception of the courts is wrong as section 10 of the act is part of the chapter 2, that is, ‘of transfers of property by act of Parties’ which is a general section and must apply to all the chapters of the Act as it defines the ‘action’ of the parties per se which is void in the eyes of law. Needless to mention, Parties of any transaction are an essential element for a transaction to take place, thus a specific chapter has been created by the Act which gives some clarity of what all actions of the parties entering into the transaction are good or bad in law. If there was a legislative intent for a gift to be governed only by the conditions of the gift deed, that is, section 126 of the Transfer of Property Act and section 10 would not apple to such conditions, then such an exception would be specifically mentioned in the section 10 of the Act just like mortgage, which has been specifically excluded in the section 10 of the Act. Thus, reading into the issues where the act appears to be silent as section 126 and section 10 are a part of different chapters is the wrong approach that is often followed by the court which leads to wrong judgments time and again. The same logic of free market that is used to defend the creation of section 10 of the Act can also be extended to this issue as well. The main reason for which such a section, that is, section 10 was created was to not allow accumulation of the property. People in India hold a lot of sentimental value towers the land and property they own and subsequently the ancestors do not want their future generations to alienate such property.

To counter such problem, that is, a property does not start limiting to one family lineage; such a section was created and is still needed as exclusion of such a section would pull us back to the zamindari system as was prevalent in India as few years back. Moreover when a gift deed is revoked the government too is not benefitted from this transfer in terms of taxes. A gift deed in the first place when is executed, it does not attract any tax but there is a change in ownership as there is a change in title of the property and when such a gift deed will be revoked, there will be again a change in the title and ownership which would not attract any tax as the property which was owned by the donor at some time is being handed back to him by way of revocation, thus two transfers of title are made and the taxable amount is none on the property which is something not beneficial for a new democracy to progress. Moreover the legal maxim, “alienation rei praefertur juri accrescendi” meaning that Law favours Alienation instead of Accumulation can be extended to the issue at hand and by way of alienation of the gifted property, even the government could benefit from the amount of taxes that would be charged by way of transfer of such property to a third person. 

Parties to a gift transfer

Donor

The donor must be a competent person, i.e., he must have the capacity as well as the right to make the gift. If the donor has the capacity to contract then he is deemed to have the capacity to make the gift. This implies that at the time of making a gift, the donor must be of the age of majority and must have a sound mind. Registered societies, firms, and institutions are referred to as juristic persons, and they are also competent to make gifts. Gift by a minor or insane person is void. Besides capacity, the donor must also have the right to make a gift. The right of the donor is determined by his ownership rights in the property at the time of the transfer because gift means the transfer of the ownership.

Donee

Donee does not need to be competent to contract. He may be any person in existence at the date of making the gift. A gift made to an insane person, or a minor, or even to a child existing in the mother’s womb is valid subject to its lawful acceptance by a competent person on his/her behalf. Juristic persons such as firms, institutions, or companies are deemed as competent donee and gift made to them is valid. However, the donee must be an ascertainable person. The gift made to the general public is void. If ascertainable, the donee may be two or more persons.

Essential elements

There are the following five essentials of a valid gift:

1. Transfer of ownership
2. Existing property
3. Transfer without consideration
4. Voluntary transfer with free consent
5. Acceptance of the gift

Transfer of ownership

The transferor, i.e., the donor must divest himself of absolute interest in the property and vest it in the transferee, i.e., the donee. Transfer of absolute interests implies the transfer of all the rights and liabilities in respect of the property. To be able to effect such a transfer, the donor must have the right to ownership of the said property. Nothing less than ownership may be transferred by way of gift. However, like other transfers, the gift may also be made subject to certain conditions.

Existing property

The property, which is the subject matter of the gift may be of any kind, movable, immovable, tangible, or intangible, but it must be in existence at the time of making a gift, and it must be transferable within the meaning of Section 5 of the Transfer of Property Act.

Gift of any kind of future property is deemed void. And the gift of spes successionis (expectation of succession) or mere chance of inheriting property or mere right to sue, is also void.

Transfer without consideration

A gift must be gratuitous, i.e., the ownership in the property must be transferred without any consideration. Even a negligible property or a very small sum of money given by the transferee in consideration for the transfer of a very big property would make the transaction either a sale or an exchange. Consideration, for the purpose of this section, shall have the same meaning as given in Section 2(d) of the Indian Contract Act. The consideration is pecuniary in nature, i.e., in monetary terms. Mutual love and affection is not pecuniary consideration and thus, property transferred in consideration of love and affection is a transfer without consideration and hence a gift. A transfer of property made in consideration for the ‘services’ rendered by the donee is a gift. But, a property transferred in consideration of donee undertaking the liability of the donor is not gratuitous, therefore, it is not a gift because liabilities evolve pecuniary obligations.

Voluntary transfer with free consent

The donor must make the gift voluntarily, i.e., in the exercise of his own free will and his consent as is a free consent. Free consent is when the donor has the complete freedom to make the gift without any force, fraud coercion, and undue influence. Donor’s will in executing the deed of the gift must be free and independent. Voluntary act on a donor’s part also means that he/she has executed the gift deed in full knowledge of the circumstances and nature of the transaction. The burden of proving that the gift was made voluntarily with the free consent of the donor lies on the donee.

Acceptance of gift

The donee must accept the gift. Property cannot be given to a person, even in gift, against his/her consent. The donee may refuse the gift as in cases of non-beneficial property or onerous gift. Onerous gifts are such where the burden or liability exceeds the actual market value of the subject matter. Thus, acceptance of the gift is necessary. Such acceptance may be either express or implied. Implied acceptance may be inferred from the conduct of the donee and the surrounding circumstances. When the donee takes possession of the property or of the title deeds, there is acceptance of the gift. Where the property is on lease, acceptance may be inferred upon the acceptance of the right to collect rents. However, when the property is jointly enjoyed by the donor and donee, mere possession cannot be treated as evidence of acceptance. When the gift is not onerous, even minimal  evidence is sufficient to prove that the gift has been accepted by donee. Mere silence of the donee is indicative of the acceptance provided it can be established that the donee had knowledge of the gift being made in his favour.

Where the deed of gift categorically stated that the property had been handed over to the donee and he had accepted the same and the document is registered, a presumption arises that the executants are aware of what was stated in the deed and also of its correctness. When such presumption is coupled with the recital in the deed that the donee had been put in possession of the property, the onus of disproving the presumption would be on the donor and not the donee.

Where the donee is incompetent to contract, e.g., minor or insane, the gift must be accepted on his behalf by a competent person. The gift may be accepted by a guardian on behalf of his ward or by a parent on behalf of their child. In such a case, the minor, on attaining majority, may reject the gift.

Where the donee is a juristic person, the gift must be accepted by a competent authority representing such legal person. Where the gift is made to a deity, it may be accepted by its agent, i.e., the priest or manager of the temple.

Section 122 provides that the acceptance must be made during the lifetime of the donor and while he is still capable of giving. The acceptance that comes after the death or incompetence of the donor is no acceptance. If the gift is accepted during the life of the donor but the donor dies before the registration and other formalities, the gift is deemed to have been accepted and the gift is valid.

Modes of making a gift

Section 123 of the Transfer of Property Act deals with the formalities necessary for the completion of a gift. The gift is enforceable by law only when these formalities are observed. This Section lays down two modes for effecting a gift depending upon the nature of the property. For the gift of immovable property, registration is necessary. In case the property is movable, it may be transferred by the delivery of possession. Mode of transfer of various types of properties are discussed below:

Immovable properties

In the case of immovable property, registration of the transfer is necessary irrespective of the value of the property. Registration of a document including gift-deed implies that the transaction is in writing, signed by the executant (donor), attested by two competent persons and duly stamped before the registration formalities are officially completed. In the case of Gomtibai v. Mattulal, it was held by the Supreme Court that in the absence of written instrument executed by the donor, attestation by two witnesses, registration of the instrument and acceptance thereof by the donee, the gift of immovable property is incomplete.

The doctrine of part performance is not applicable to gifts, therefore all the conditions must be complied with. A donee who takes possession of the land under unregistered gift-deed cannot defend his possession on being evicted. The following must be kept in mind regarding the requirement of registration:

• Registration of the gift of immovable property is must, however, the gift is not suspended till registration. A gift may be registered and made enforceable by law even after the death of the donor, provided that the essential elements of the gift are all present.
• In case the essential elements of a valid gift are not present, the registration shall not validate the gift.

It has been observed by the courts that under the provisions of the Transfer of Property Act, Section 123, there is no requirement for delivery of possession in case of an immovable gift. The same has been held in the case of Renikuntla Rajamma v. K. Sarwanamma that the mere fact that the donor retained the right to use the property during her lifetime did not affect the transfer of ownership of the property from herself to the donee as the gift was registered and accepted by the donee.

Movable properties

In the case of movable properties, it may be completed by the delivery of possession. Registration in such cases is optional. The gift of a movable property effected by delivery of possession is valid, irrespective of the valuation of the property. The mode of delivering the property depends upon the nature of the property. The only things necessary are the transfer of the title and possession in favour of the donee. Anything which the parties agree to consider as delivery may be done to deliver the goods or which has the effect of putting the property in the possession of the transferee may be considered as a delivery.

Actionable claims

Actionable claims are defined under Section 3 of the Transfer of Property Act. It may be unsecured money debts or right to claim movables not in possession of the claimant. Actionable claims are beneficial interests in movable. They are thus intangible movable properties. Transfer of actionable claims comes under the purview of Section 130 of the Act. Actionable claims may be transferred as gift by an instrument in writing signed by the transferor or his duly authorised agent. Registration and delivery of possession are not necessary.

A gift of future property

Gift of future property is merely a promise which is unenforceable by law. Thus, Section 124 of the Transfer of Property Act renders the gift of future property void. If a gift is made which consists of both present as well as future property, i.e., one of the properties is in existence at the time of making the gift and the other is not, the whole gift is not considered void. Only the part relating to the future property is considered void. Gift of future income of a property before it had accrued would also be void under Section 124.

A gift made to more than one donee

Section 125 of the Act says that in case a property is gifted to more than one donee, one of whom does not accept it, the gift, to the extent of the interest which he would have taken becomes void. Such interest reverts to the transferor and does not go to the other donee.

A gift made to two donees jointly with the right of survivorship is valid, and upon the death of one, the surviving donee takes the whole.

Provisions relating to onerous gifts

Onerous gifts refer to the gifts which are a liability rather than an asset. The word ‘onerous’ means burdened. Thus, where the liabilities on a property exceed the benefits of such property it is known as an onerous property. When the gift of such a property is made it is known as an onerous gift, i.e., a non-beneficial gift. The donee has the right to reject such gifts.

Section 127 provides that if a single gift consisting several properties, one of which is an onerous property, is made to a person then that person does not have the liberty to reject the onerous part and accept the other property. This rule is based upon the principle of “qui sentit commodum sentire debet et onus” which implies that the one who accepts the benefit of a transaction must also accept the burden of it. Thus, when two properties, one onerous and other prosperous, are given in gift to a donee in the same transaction, the donee is put under the duty to elect. He may accept the gift together with the onerous property or reject it totally. If he elects to accept the beneficial part of the gift, he is bound to accept the other which is burdensome. However, an essential element of this Section is a single transfer. Both the onerous and prosperous properties must be transferred in one single transaction only then they require the obligation to be accepted or rejected in a joint manner.

In case the onerous gift is made to a minor and such donee accepts the gift, he retains the right to repudiate the gift on attaining the age of majority. He may accept or reject the gift on attaining majority and the donor cannot reclaim the gift unless the donee rejects it on becoming a major.

Universal donee

The concept of universal donee is not recognised under English law, although universal succession, according to English law is  possible in the event of the death or bankruptcy of a person. Hindu law recognises this concept in the form of ‘sanyasi’, a way of life where people renounce all their worldly possessions and take up spiritual life. A universal donee is a person who gets all the properties of the donor under a gift. Such properties include movables as well as immovables. Section 128 lays down in this regard that the donee is liable for all the debts and liabilities of the donor due at the time of the gift. This section incorporates an equitable principle that one who gets certain benefits under a transaction must also bear the burden therein. However, the donee’s liabilities are limited to the extent of the property received by him as a gift. If the liabilities and debts exceed the market value of the whole property, the universal donee is not liable for the excess part of it. This provision protects the interests of the creditor and makes sure that they are able to chase the property of the donor if he owes them.

Suspension or revocation of gifts

Section 126 of the Act provides the legal provisions which must be followed in case of a conditional gift. The donor may make a gift subject to certain conditions of it being suspended or revoked and these conditions must adhere to the provisions of Section 126. This Section lays down two modes of revocation of gifts and a gift may only be revoked on these grounds.

Revocation by mutual agreement

Where the donor and the donee mutually agree that the gift shall be suspended or revoked upon the happening of an event not dependent on the will of the donor, it is called a gift subject to a condition laid down by mutual agreement. It must consist of the following essentials:

• The condition must be expressly laid down
• The condition must be a part of the same transaction, it may be laid down either in the gift-deed itself or in a separate document being a part of the same transaction.
• The condition upon which a gift is to be revoked must not depend solely on the will of the donor.
• Such condition must be valid under the provisions of law given for conditional transfers. For eg. a condition totally prohibiting the alienation of a property is void under Section 10 of the Transfer of Property Act.
• The condition must be mutually agreed upon by the donor and the donee.
• Gift revocable at the will of the donor is void even if such condition is mutually agreed upon.

Revocation by the rescission of the contract

Gift is a transfer, it is thus preceded by a contract for such transfer. This contract may either be express or implied. If the preceding contract is rescinded then there is no question of the subsequent transfer to take place. Thus, under Section 126, a gift can be revoked  on any grounds on which its contract may be rescinded. For example, Section 19 of the Indian Contract Act makes a contract voidable at the option of the party whose consent has been obtained forcefully, by coercion, undue influence, misrepresentation, or fraud. Thus, if a gift is not made voluntarily, i.e., the consent of the donor is obtained by fraud, misrepresentation, undue influence, or force, the gift may be rescinded by the donor.

The option of such revocation lies with the donor and cannot be transferred, but the legal heirs of the donor may sue for revocation of such contract after the death of the donor.

The limitation for revoking a gift on the grounds of fraud, misrepresentation, etc, is three years from the date on which such facts come to the knowledge of the plaintiff (donor).

The right to revoke the gift on the abovementioned grounds is lost when the donor ratifies the gift either expressly or by his conduct.

Bonafide purchaser

The last paragraph of Section 126 of the Act protects the right of a bonafide purchaser. A bonafide purchaser is a person who has purchased the gifted property in good faith and with consideration. When such a purchaser is unfamiliar with the condition attached to the property which was a subject of a conditional gift then no provision of revocation or suspension of such gift shall apply.

Exceptions

Section 129 of the Act provides the gifts which are treated as exceptions to the whole chapter of gifts under the Act. These are:

• Donations mortis causa

These are gifts made in contemplation of death.

• Muslim-gifts (Hiba)

These are governed by the rules of Muslim Personal Law. The only essential requirements are declaration, acceptance and delivery of possession. Registration is not necessary irrespective of the value of the gift. In case of a gift of immovable property worth more than Rupees 100, Registration under Section 17 of the Indian Registration Act is must, as it is applicable to Muslims as well. For a gift to be Hiba only the donor is required to be Muslim, the religion of the donee is irrelevant.

Conclusion

To constitute a transfer as a gift it must follow the provisions of the Transfer of Property Act. This Act extensively defines the gift itself and the circumstances of the transfer of such a gift. The gift, being a transfer of the ownership rights, must be in possession and ownership of the transferee and must be existing at the time of making the transfer. The transferor must be competent to make such transfer but the transferee may be any person. In case the transferee is incompetent to contract, the acceptance of gift must be ratified by a competent person on his/her behalf. Gift of future property is void. Partial acceptance of prosperous gifts and rejection of onerous gifts is not valid either. The acceptance of a gift entails the acceptance of the benefits as well as the liabilities coupled with such a gift. A gift may be revoked only by a mutual agreement on a condition by the donor and the donee, or by rescinding the contract pertaining to such gift. The Donations mortis causa and Hiba are the only two kinds of gifts which do not follow the provisions of the Transfer of Property Act.

References

• ipleaders.in/concept-of-gift
• lawyersnjurists.com/article/discuss-the-concept-of-gift
• latestlaws.com/articles/all-about-lease-and-gift