Supreme Court Clarifies Gift Deed Requirements: Sarojini Amma vs. Sreekumar (2018)

Date of the Judgment: 26 October 2018

Citation: (2018) INSC 943

Judges: Arun Mishra, J., Indira Banerjee, J.

Can a gift deed be valid if it requires the donee to provide something in return, or if the donor retains control over the property until their death? The Supreme Court of India recently addressed this critical question in a property dispute, clarifying the essential elements of a valid gift under Indian law. This case examines the fine line between a gift and other forms of property transfer, focusing on the requirements of voluntary transfer without consideration and the implications of conditional gifts. The judgment was delivered by a two-judge bench comprising Justice Arun Mishra and Justice Indira Banerjee, with the opinion authored by Justice Indira Banerjee.

Case Background

The appellant, S. Sarojini Amma, a 74-year-old childless widow, was involved in a property dispute with her nephew, Velayudhan Pillai Sreekumar, the respondent. In the expectation that the respondent would care for her and her husband, and also for some consideration, the appellant executed a document styled as a gift deed in favor of the respondent. This deed stipulated that the gift would only take effect after the death of the appellant and her husband. Subsequently, the appellant executed a cancellation deed to nullify the gift deed.

The respondent then filed a suit seeking a declaration that the cancellation deed was void and to affirm his right over the property. The appellant countered with a suit seeking an injunction to prevent the respondent from trespassing on the property.

Timeline:

Course of Proceedings

The learned Munsif, Sasthamcotta, initially decreed both suits in favor of the respondent. However, the Additional District Judge III, Kollam, reversed this decision, ruling in favor of the appellant. On further appeal, the High Court of Kerala at Ernakulam allowed the respondent’s appeal, setting aside the District Court’s judgment. This led to the appellant’s appeal to the Supreme Court.

Legal Framework

The Supreme Court examined the provisions of the Transfer of Property Act, 1882, specifically focusing on the definition and requirements of a valid gift. Key provisions include:

• Section 122: Defines “gift” 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.”
• Section 123: Specifies that a gift of immovable property must be effected by a registered instrument signed by the donor and attested by at least two witnesses.
• Section 124: States that a gift comprising both existing and future property is void as to the latter.
• Section 125: States that a gift to several of whom one does not accept is void as to the interest which he would have taken had he accepted.
• Section 126: Outlines when a gift may be suspended or revoked, noting that a gift revocable at the mere will of the donor is void.

The Court emphasized that a valid gift must be made voluntarily, without consideration, and accepted by the donee. The transfer of property must be immediate and absolute, with the donor divesting themselves of all ownership rights.

Arguments

Appellant’s Arguments:

• The appellant argued that the document, though styled as a gift deed, was intended to take effect only after her and her husband’s death.
• She contended that the document was not a valid gift as it was executed for consideration, and she retained possession and rights over the property.
• The appellant argued that the document was more in the nature of a will than a gift, given the conditions attached to it.

Respondent’s Arguments:

• The respondent argued that the document was a valid gift deed and that the cancellation deed was null and void.
• The respondent contended that the gift was accepted and therefore, the appellant could not revoke it.

The innovativeness of the appellant’s argument lies in the distinction drawn between a gift deed and a will, emphasizing that a gift must be immediate and without consideration, whereas the document in question was neither.

Issues Framed by the Supreme Court:

The Supreme Court framed the following issues for consideration:

1. Whether a document styled as a gift deed but admittedly executed for consideration can be treated as a formal document or instrument of gift.
2. Whether a gift deed reserving the right of the donor to keep possession and right of enjoyment and enforceable after the death of the executant is a gift or a will.

Treatment of the Issue by the Court:

Authorities

The Supreme Court considered the following authorities:

• Naramadaben Maganlal Thakker Vs. Pranivandas Maganlal Thakker and Others [(1997) 2 SCC 255]: The Supreme Court of India held that a gift is complete upon execution of a registered gift deed, acceptance of the gift, and delivery of the property, divesting the donor of title.
• Reninkuntla Rajamma Vs. K. Sarwanamma [(2014) 9 SCC 445]: The Supreme Court of India 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 donee. Such acceptance must, however, be made during the lifetime of the donor and while he is still capable of making an acceptance.
• Section 122 of the Transfer of Property Act, 1882: Defines a gift as a transfer of property made voluntarily and without consideration.
• Section 123 of the Transfer of Property Act, 1882: Specifies the requirements for a valid gift of immovable property, including registration and attestation.
• Section 126 of the Transfer of Property Act, 1882: Specifies the conditions under which a gift may be suspended or revoked.

Judgment

How each authority was viewed by the Court?

• The Court relied on Naramadaben Maganlal Thakker Vs. Pranivandas Maganlal Thakker and Others [(1997) 2 SCC 255]* to emphasize that a gift is complete upon the execution of a registered gift deed, acceptance, and delivery of the property.
• The Court referred to Reninkuntla Rajamma Vs. K. Sarwanamma [(2014) 9 SCC 445]* to clarify that while ownership can be gifted without transfer of possession, other conditions of a valid gift must be satisfied.
• The Court used Section 122 of the Transfer of Property Act, 1882 to highlight that a gift must be without consideration.
• The Court used Section 123 of the Transfer of Property Act, 1882 to specify the requirements for a valid gift of immovable property, including registration and attestation.
• The Court used Section 126 of the Transfer of Property Act, 1882 to specify the conditions under which a gift may be suspended or revoked.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following:

• The definition of a gift under Section 122 of the Transfer of Property Act, 1882, which requires a transfer without consideration.
• The condition in the deed that the gift would take effect after the death of the donor, which contradicted the requirement of an immediate transfer.
• The fact that the donor retained possession and rights over the property, indicating that the transfer was not absolute.

Logical Reasoning:

The Court emphasized that “a gift is transfer of property without consideration” and that “a conditional gift only becomes complete on compliance of the conditions in the deed.” The Court concluded that “there was no completed gift of the property in question by the appellant to the respondent and the appellant was within her right in cancelling the deed.”

Key Takeaways

• A document styled as a gift deed but executed for consideration is not a valid gift.
• A gift deed that reserves the donor’s rights and is to take effect after the donor’s death is not a valid gift; it may be considered a will.
• For a gift to be valid, it must be made voluntarily, without consideration, and accepted by the donee, with immediate and absolute transfer of property.
• The donor must divest themselves of all ownership rights for a gift to be complete.

Directions

No specific directions were given by the Supreme Court in this judgment.

Specific Amendments Analysis

There is no discussion of any specific amendments in the judgment.

Development of Law

The ratio decidendi of this case is that a document styled as a gift deed, but executed for consideration and with conditions that it would take effect after the death of the donor, is not a valid gift under the Transfer of Property Act, 1882. This judgment reinforces the essential elements of a valid gift, emphasizing the need for a voluntary transfer without consideration and the immediate and absolute transfer of property. There is no change in the previous position of the law.

Conclusion

The Supreme Court allowed the appeal, setting aside the High Court’s judgment. The Court held that the document in question was not a valid gift, as it was executed for consideration and was intended to take effect after the death of the donor. The Court clarified that a valid gift must be made voluntarily, without consideration, and accepted by the donee, with immediate and absolute transfer of property. This judgment reinforces the importance of adhering to the statutory requirements for a valid gift under the Transfer of Property Act, 1882.