Concept of Gift under Transfer Of Property Act

Concept of Gift under Transfer Of Property Act

Introduction

This Article is written by Miss Divyakshi Jain, Semester X, B.B.A. LL.B. (IPR Hons.) at National Law University Jodhpur. The article explains the Concept of Gift under Transfer Of Property Act,

A Gift under Transfer of Property Act, 1882 (hereinafter “TOPA”) is regarded as the transfer of ownership where the sender willingly brings into effect such transfer without any monetary compensation or consideration. It may between two living parties, or the transfer may take place only after the death of the transferor. When the transfer of parties is between 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 within the scope of Section 5 of TOPA[1], and thus only inter vivos are treated as gifts under the provisions of this Act. If the essential elements required for a transfer to be treated as a gift are not implemented properly, it could be revoked or become void by law.

Section 122 of the Transfer Of Property Actdefines a gift as the transfer of an existing movable or immovable property.[2]Such transfers must be made voluntarily and without consideration. The transferor is called the “donor” and the transferee is known as the “donee”. The gift has to be accepted by the donee.

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Parties to a gift under transfer of property act

  • 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 enter into a contract, then he is deemed to have the capacity of making a gift. This means that at the time of making the gift, the donor must be at the age of majority and must have a sound mind. Registered societies, firms, and institutions are competent to make gifts since they are regarded as juristic persons. Besides capacity, the donor must also have the right to make the gift. The right of the donor is determined by the ownership rights in the property at the time of the gift transfer.
  • Donee: The donee does not need to be competent to contract. He just needs to be a person in existence at the time of making the gift. A gift made to a minor or an insane person is also treated to be valid subject to its acceptance by a competent person on his/her behalf. The donee must always be an ascertained person. A gift made to the general public is void. The donee can be more than one person as well.

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Essential elements of a Valid Gift

The five essential elements of a valid gift are:

1. Transfer of ownership

The donor must divest of the absolute interest in the property which is the subject of the gift and vests it in the donee. Transfer of absolute interest means the transfer of all rights and liabilities with respect to the property. The donor must have the right to transfer the property. Nothing less than complete ownership can be transferred by way of a gift. The gift can also be made subject to fulfillment of the certain condition, as is the case in most transfers.

2.Existing property

The property which is the subject matter of the gift may be movable, immovable, tangible, or intangible but it must have been in existence at the time of making the gift, and it must be transferable within the meaning of Section 5 of th Transfer Of Property Act. Gift of any future property is deemed void.[3] And a gift of spec succession (Expectation of succession) or mere chance of inheriting property or mere right to sue, is also deemed void.

3. Transfer without consideration

A gift must be gratuitous i.e., it should have been transferred without any consideration. Any consideration, however negligible, given in exchange of the ownership of the property, would transform the gift into either a sale or barter. Consideration for the purpose of this requirement has the same meaning as envisaged under Section 2(d) of the Indian Contract Act, 1872[4].

4. Voluntary transfer with free consent

The donor must have made the gift voluntarily, in the exercise of his free will and his consent should have been free consent. Free consent refers to the situation when the donor has complete freedom to make the gift without the involvement of any force, fraud, coercion or undue influence. Voluntary transaction on part of the donor means that he executed the gift deed with full knowledge of the nature and circumstances of the transaction.

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5. Acceptance of the gift

The donee must have communicated his acceptance of the gift. Property cannot be given without consent, even if it is a gift. Such acceptance can be either express or implied. Implied acceptance can be inferred from the donee’s conduct and the surrounding circumstances, eg., if the donee takes possession of the property, that would be treated as an implied acceptance of the gift. Mere silence is also sufficient to establish implied acceptance on part of the donee provided he was aware that a gift was being made in his favor.

Where the donee is incompetent to contract by virtue of being a minor or insane, the gift has to be accepted on his behalf by a competent person. The gift may be accepted by a guardian or a parent. In the case of a child, the minor, on attaining majority, has the right to reject the so-accepted gift.

Where a donee is a juristic person, the gift must be accepted by a competent designated authority, capable of representing such a legal person. A gift can also be made to a deity, and in such cases, it can be accepted by its agent i.e., the priest manager of the temple where such gift has been made.

Section 122 provides that this acceptance needs to be made during the lifetime of the donor and when he is still considered capable of gifting. If the gift is accepted during the life of the donor but the donor dies before the registration and other formalities, the gift would still be deemed valid.

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Modes of making a gift under Transfer Of Property Act

Section 123 of the Transfer Of Property Act[5] deals with the formalities required for the completion of a gift. The gift is only enforceable by law when these formalities are complied with. This Section lays down two modes for effecting a gift depending upon the nature of the property. For a gift of immovable property, registration is necessary. In the case of movable property, it may be transferred by delivery of possession.

Registration, as required for the gift of immovable property, implies that the transaction is in writing, duly signed by the donor, attested by two competent persons, and stamped before the registration formalities were completed. The doctrine of part performance is not applicable to gifts, so all the conditions must be complied with. However, there is no requirement for delivery of possession in case of an immovable gift.

In the case of movable property, the gift might be completed by the delivery of possession. Registration in such cases is optional. The mode of delivery depends on the nature of the property. The only things necessary are the transfer of title and possession in favor of the donee. Anything which performs the function of putting the property in the possession of the donee would be treated as an effective delivery.

Actionable claims are defined under Section 3[6]. These are unsecured money debts or rights to claim movables in case of default on part of the claimant. Transfer of actionable claims comes within the purview of Section 130 of the Act.[7] Actionable claims mat be transferred as gifts by an instrument in writing signed by the donor or his authorized agent. Registration or delivery is not necessary.

Section 125 of the Act[8] says that where the property was gifted to more than one donee, one of whom does not accept the gift, the extent of interest which he would have taken would transfer back to the transferor and does not go to the other donee. A gift made to two donees jointly is valid.

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Onerous Gifts

Onerous gifts refer to those gifts which are a liability rather than an asset. Where the liabilities on the property exceed the benefits accruing from such property is known as an onerous property. When the gift of such a property is made, it is known as an onerous gift and can be rejected by the donee.

Section 127 of the Act[9] provides that if a single gift consists of several properties, one of which is onerous, is made to a person then that person does not have the liberty to reject one and accept the other. This rule is based upon the principle “qui sentit commodum sentire debet et onus” which implies that the one who accepts the benefit must also accept the associated burden. In case the onerous gift is made to a minor and the donee accepts the gift, he still retains the right to repudiate the gift on attaining the age of majority.

Suspension or Revocation of the Gift

Section 126 of the Act[10] provides the legal provisions which have to be followed in the case of conditional gifts. The Section lays down the mode of revocation of gifts. There are two modes of revocation:

  • 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 the 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 conditions must be valid under the provisions of law given for conditional transfers. Eg. a condition totally prohibiting the alienation of a property is void under Section 10 of the Transfer of Property Act[11].
  • 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 a condition is mutually agreed upon.
  • Revocation by the rescission of the contract

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A 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.[12]

Exceptions

Section 129 of the Act provides the gifts which are treated as exceptions to the whole chapter of gifts under the Act.[13] 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 a must, as it is applicable to Muslims as well.[14] 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.

 

 

 

 

 

[1] Transfer of Property Act, 1882 Section 5.

[2] Transfer of Property Act, 1882 Section 122.

[3] Transfer of Property Act, 1882 Section 124.

[4] Indian Contract Act, 1872 Section 2(d).

[5] Transfer of Property Act, 1882 Section 123.

[6] Transfer of Property Act, 1882 Section 3(c).

[7] Transfer of Property Act, 1882 Section 130.

[8] Transfer of Property Act, 1882 Section 125.

[9] Transfer of Property Act, 1882 Section 127.

[10] Transfer of Property Act, 1882 Section 126.

[11] Transfer of Property Act, 1882 Section 10.

[12] Indian Contract Act, 1872 Section 19.

[13] Transfer of Property Act, 1882 Section 129.

[14] Indian Registration Act, 1908 Section 17.

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