Gift Under Transfer of Property Act, 1882

Introduction:

A gift is an item that one person gives to another without any expectation of money or of any benefit in return. In the eyes of law, a gift is viewed as a gratuitous transfer with no mutual consideration. It is considered as ownership transfer of an existing property where the donor does not expect any compensation or consideration in monetary benefit. There are three prerequisites for an act to be considered as a transfer of gift: Delivery, which should be of moveable or immoveable property, there should be an intention to give that property and the donated property should be accepted by the person whom the property is donated.

The act of giving the gift should be voluntary and without any undue influence, coercion or any other compulsion then only the act is regarded as valid and legal. If the transfer of gift happens, under any influence or fraud, such a gift will be revoked.

Meaning of Gift

The gift is dealt under Section 122 of The Transfer of Property Act. The gift is defined in this section as“…the transfer of certain existing moveable or immoveable 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. Such acceptance must be made during the lifetime of the donor and while he is still capable of giving, if the donee dies before acceptance, the gift is void.”

Therefore, in the gift process, the transfer of an existing movable or immovable property takes place unilaterally, without consideration and voluntary, to another person. The person who’s transferring the property is called the donor and the person to whom the transfer is made is called the donee. The gift should be accepted by donee. Furthermore, as clear wording of enactment, the section can be applied only for the gift between living people that is inter vivos gift. It doesn’t apply on inheritance

Parties of a Gift

Primarily, in the court of law, there should be at least two parties for the transfer of a gift, which are-

Donor

The person who is transferring the ownership of the property is called a  Donor. The Donor must be legally competent to make the transfer, that is, he must have the authority as well as the capacity to make the gift. If the person is competent to make a contract then he is considered to have the ability to make a gift. Registered firms and institutions are regarded as juristic persons and they are also capable of making gifts. Aside from capacity, the donor should also have the right to make a gift. The right of the donor is established from his ownership rights on the property at the time of transfer. 

Donee 

The person who is receiving the ownership of property as a gift is referred to as Donee. The Donee need not be legally competent. A gift transferred to an insane person or a minor or a child existing in the mother’s womb is valid and can be given acceptance to by their legal guardians on their behalf. Nevertheless, the donee should be a legally determinable person. A donee can be two parties or more but gifts made to the general public are considered a void. 

Essential Elements for Gift 

Following are the essential for a valid gift:

1. Existence of Donor and Donee
2. Transfer of Ownership: There should be an ownership transfer of property by the donor to the donee for it to be regarded as a gift.
3. Existence of Property: It is crucial for the transfer of gift or creating right over property to have the said property in existence at the time of transfer.
4. Willingly and without consideration: Free consent is a major factor in making a gift, the donor should have a total right over his actions without any influence or pressure and there should be no consideration expected. There can be a moral benefit but no monetary benefit in the transfer of gift.  
5. Acceptance of gift: The act of transfer of gift is only valid when it is accepted by the person in whose favour it is made and such acceptance should be given during the lifetime of the donor. If the donee dies before giving the acceptance for the gift, it’s considered a void.

Types of Gifts

1. Void Gifts

There are some gifts which are considered void in the eyes of law. Those are:

• Gifts for an unlawful purpose, which is not lawful as per the law of land.[1]
• Gifts which are made with condition that is impossible to attain.[2]
• If the donee dies before giving the acceptance gift then it is considered as void.[3]
• If the donor of the gift is incompetent in law that is lunatic, minor or idiot then it is considered a void.[4]
• The gift of future property is considered void as it is solely a promise and promise is not legally binding. If the gift consists of both present as well as future property that is at the point of making the gift one property is in existence and the other is not then the whole gift is not considered a void. Just the part relating to the future property. Gift of future financial gain of a property before it had accumulated would be void.[5]
• If a property is gifted to more than one donee and one of them doesn’t accept the gift then the interest he would have taken up until then will become a void. Such interest reverts to the donor and not to the other donee. A gift created for two donees jointly right of survive ship is valid and if one of the done dies, the surviving one takes the whole.[6]

2. Onerous Gifts

The word ‘Onerous’ means burden. Thus onerous gifts are those which come with burden and obligation and the liabilities on the property transcend the benefits of the gift. Onerous gifts are liability and non-beneficial gifts.

Section 127 of The Transfer of Property Act also referred as TOPA deals with the onerous gift and is based on the maxim “qui sentit commodum, debetet et sentire onus”, which simply means the person who derives the benefit is also responsible to bear the burden. Thus, a person given a gift consisting of several properties, one of those being onerous then, he doesn’t have the liberty to accept the beneficial part and reject the burdensome part. He may reject or accept the whole gift with the onerous part. Although, an important element of this section is that the transaction of both onerous and beneficial properties must be single then only they have the obligation to accept or reject the gift in a joint manner.

Section 127 also lays down that if a minor is given an onerous gift and he accepts it, after retaining the legal age he has the right reject the gift and if he decides to be bound with such gift then he is bound to bear the burden of it.[7]

3. Donations mortis causa

It is a gift given by donor in contemplation of approaching death also called deathbed gift. Deathbed gifts are future gifts which pass onto the donee after the death of the donor. The gift can be a moveable or immoveable property and becomes valid only after the death of donor then only it qualifies as deathbed gift. Deathbed gifts are considered as an exception on their own in TOPA.

Universal Donee

A universal donee is a person who gets the ownership of all the properties in the possession of donor under a gift. Properties can be movable as well as immovable. Section 128 of TOPA states that the donee is responsible for all the debts of the donor due at the time of the gift and also include an equitable principle that one who gets certain benefits under a transaction must also bear the burden. However, if the liabilities and debts transcend the market value of the whole property, the universal donee is not responsible for the excess part of it. This provision is beneficial for creditors and provides them with a surety that they will be able to make the donor accountable for his liabilities.

Modes of making a Gift

Section 123 of the ToPA lay downs necessary formalities for the completion of transfer a gift. The gift is enforceable by law only when these formalities are fulfilled. There are various modes of transfer for various types of property which are discussed below:

Immoveable Property

With regards to gifts of immovable property, registration of the transfer is compulsory disregarding the value of the property. Registration of any document including gift-deed insinuate that the transaction is in writing, signed by the donor, attested by two witnesses and correctly stamped before the registration formalities are officially completed. In the case of Gomtibai v. Mattulal, the apex court held that if the written transaction executed by the donor, attestation by two competent people, registration of the instrument and acceptance thereof by the donee is absent, the gift of immovable property is insufficient.

It has been observed by courts that there is no mention for the compulsion of delivery of possession in case of immovable property. The same has been stated by the court in the case of Renikuntla Rajamma v. K. Sarwanamma that merely on the account of the fact that the donor holds on to the right to use the property during her lifetime didn’t affect the transfer of ownership of the property to the donee as the said gift was registered and accepted by donee.

Moveable Property

In the case of moveable property, the registry is optional; the transfer is complete by the delivery of possession. The only thing obligatory is the transfer of the title and possession to the donee, regardless of the valuation of the property. Section 123 of the Transfer of Property Act states that delivery can be made in the same manner as the commodity sales are made, i.e., in whichever way the parties agree to consider it as delivery.

Revocation of Gifts

A gift which has already been propositioned by the donor and has been accepted by the donee and registered by the authority cannot be revoked. However, there are certain conditions in which a gift deed can be revoked which are laid down in section 123 of ToPA, which we will discuss below-

1. By Mutual Agreement

When the donor and the donee mutually come to the conclusion to revoke the gift on consequent to an event happening that is independent from the will of the donor, then it can be laid down by the mutual agreement. It should consist of following essential-

• The conditions must be explicitly laid down.
• The condition should be a part of the same transaction, whether laid down in self- deed or in a separate document.
• The condition should be valid under the provisions of law given for conditional transfers. For instance, a condition totally forbidding the alienation of a property is void under Section 10 of TOPA.
• The condition should be mutually agreed by both the parties.

2. By Rescission of Contract

The gift is considered as a transfer, thus it is preceded by a contract for the transfer. This contract can be express or implied. If the foregoing contract is rescinded then there is no need of the upcoming transfer to occur. Thus, under Section 126 of TOPA, a gift can be abrogated on the same grounds on which its contract can be rescinded. For example, under Section 19 of the Indian Contract Act, a contract is voidable at the power of the party whose consent has been taken forcefully, by coercion, undue influence, misrepresentation, or fraud. Therefore, if a gift is made involuntarily, i.e., the consent of the donor is given because of misrepresentation, fraud, undue influence, or force, the gift can be rescinded by the donor.

The power revocation lies with the donor and cannot be transferred, but the legal inheritor of the donor can appeal for revocation of such contract after the death of the donor. The right to withdraw the gift on the provisions mentioned above vanishes if the donor sanctions the gift expressly or by his conduct.

Bonafide Purchaser

The last paragraph of Section 126 of the Act states the protection of the rights of a bonafide purchaser. A bonafide purchaser is a person who has bought the gifted property with consideration and good intentions, without the prior knowledge that property is an object of a conditional gift then there is no clause to cater to for revocation of such gift can apply.

Gifts under Islamic Law

The concept of gift in Muslim law is unlike than the statutory provisions given under the TOPA it includes the following provisions-

1. A Hiba: It is an instant transfer, without any consideration, of ownership of some property or some right.  
2. An Ariat: It means giving some of the bounded interest to someone in regard to the use of some property or right.

Important Features of Hiba: Following are the eminent features of Hiba that have emerged after analyzing its definition and meaning:

• Hiba is the transfer by an act of the parties of property and not by law. This means that transfer of property undertaken by a court of law or any transfer of ownership under  Muslim inheritance law will not be deemed to be Hiba.
• In Hiba, a living Muslim willingly transfers the ownership of a property to another living individual. Therefore, it is a transfer inter vivos.
•  The donor transfers the property in absolute interest and the donee gets the full title with respect to the property given to him. The concept of Hiba under Islamic law is against restrictions or any partial rights in the gifted property.
• Hiba is effective with immediate result and denies the donor of his control over the property. In addition, the property must be in existence at the time of which gift is made. A gift made for a future property is considered as void.
• A Hiba is transferred without any expectation of consideration If any consideration is taken by the donor in return or exchange, such property is not considered a gift

Competency of the Donor: Capacity and Right  

Any male or female, married or unmarried Muslim, who has reached the age of majority that is 18 and is of sound mind, can be a competent donor. 

Capacity of the Donor to make a Hiba

Mental Capacity- A person is eligible to make a gift if he has the mental capacity to comprehend the legal implications of his actions. Although a gift made by a person with the unsound mind during lucid intervals is a valid gift. Moreover, the gift should be given free from any undue influence or coercion.

Financial Capacity– According to the Hanafi view, it is permissible to make a gift if a person is in insolvent circumstances. The Kazi, however, has the authority to declare any gift void if it is made in order to defraud the donor. The Indian courts are on the same page with Hanafi school to not deduce donor dishonest intention on the basis of his indebtedness or his humble financial conditions.

Therefore, every donor must have bona fide intentions in regards to the transfer of gift to the donee and if the gift is given with malafide intentions on the part of the donor, the gift will be considered valid.

Right of the Donor to make Hiba

The capacity to make a gift is solely not sufficient. The donor must have a right to make a Hiba as well. A donor has the right to gift of only those assets which he has the ownership of. If he is a tenant of a property then he is not permitted to gift that property as he doesn’t hold the ownership of that respective property. Such gifts are regarded as invalid.

Therefore, it is vital that the donor has ownership of the property which he plans to transfer as a gift.

Formalities of Hiba: The only three prerequisites under the Islamic law for the gift are the following-

1.         Declaration of the gift by the transferor

2.         Acceptance of the gift by transferee

3.         Delivery of possession of the gift by transferor.

Registration of the transfer is not required disregarding the value of the gift. For a gift to be regarded as Hiba the donor should necessarily be Muslim and the religion of donee is irrelevant. Muslim law is another expectation to the ToPA just like mortis causa.

Conclusion

To establish a transfer as a gift one must follow the provisions of the Transfer of Property Act. The Act defines the gift and the conditions for the transfer of such a gift. The gift is a transfer of moveable or immoveable property. The gift should be in ownership and possession of donor and should exist at the time of gift being made. The donor should be legally competent to make the transfer. The acceptance of a gift includes benefits as well as liabilities accompanied with the gift. A gift can be cancelled by mutual agreement on a condition by the transferor and transferee or by rescinding the contract preceded by a gift. The Donations mortis causa and hiba are the only special case of gifts under the provisions of the TOPA.

---

References:

[1] The Transfer of Property Act,1882, s. 6

[2] Ibid. 2

[3] The Transfer of Property Act,1882, s. 122

[4] The Transfer of Property Act,1882, s. 7

[5] The Transfer of Property Act,1882, s. 124

[6] The Transfer of Property Act,1882, s. 125

[7] K Balakrishnan v K Kamalam, AIR 2004 SC 1257