Transfer of Property Act, 1882

Actionable claim is defined in Section 3 of the Transfer of Property Act, 1882 which was included by the Amending Act II of 1990. It is an intangible movable property, and its transfer is discussed in Chapter VIII of the Act. It has been laid down in the following words:

“actionable claim means a claim to any debt, other than a debt secured by mortgage of immoveable property or by hypothecation or pledge of moveable property, or to any beneficial interest in moveable property not in the possession, either actual or constructive, of the claimant, which the Civil Courts recognise as affording grounds for relief, whether such debt or beneficial interest be existent, accuring, conditional or contingent”

Therefore, essentially an actionable claim may be:

• A claim to a debt which is unsecured, excluding that of mortgage, hypothecation or pledge of immovable property
• Beneficial interest in movable property

The reason debts secured by means of mortgage, pledge or hypothecation are not included within the purview of “actionable claims” is because they do not manifest as claims to property, but of property itself. All claims under a contract are also excluded, except claims to payment of a sum of money or debt or price. Similarly, a right to sue by virtue of it being non-transferable in isolation is not considered to be actionable claim.[1]  

However, the definition extends to include beneficial interests in movable property irrespective of whether they are existent, accruing, conditional or contingent.

Unsecured Debt

A debt may be succinctly defined as an obligation to pay a liquidated sum of money.[2] An unsecured debt refers to a monetary obligation which is not secured in any form by way of mortgage, pledge or hypothecation. Therefore, three conditions need to be fulfilled for a transaction to be qualified as unsecured debt: (1) Monetary obligation, (2) Lack of any security (3) Certainty of the money so obligated.

In Sunrise Associates v. Govt. of NCT of Delhi,[3] the Supreme Court held that a debt can be a present, future or accruing and conditional or contingent in nature. A present debt is one which exists and is due now. A future debt is one which is existent but accruing in the future. Present and future debts are attachable and considered actionable claims.[4] Contingent or conditional debts are those that become due on the fulfilment of some condition or contingency. The slight difference between contingent and conditional debts are the former is within human control while the latter isn’t. Examples of such debts are future rents,[5] letter of credit,[6] amount due under a policy of insurance[7] etc; these though unattachable, are also considered actionable claims.

Beneficial Interest in Movable Property

A person is said to have beneficial interest in a movable property if such person has the right to possess such property but the same is not in constructive or actual possession of such person.[8] Therefore, the essential ingredients are: (1) the property must be movable, (2) the property is not in possession of the claimant, and (3) the claimant has the legal right to possess such a property.

Examples of such interest in movable property include right to the recovery of insurance money after an assured person expires[9], right to recover back purchase money on invalidation of sale, [10] right to the proceeds of a business[11] or dividends of a share in a company[12] etc. All such interests figure within the purview of actionable claims and can be transferred.

Claims uncovered under Actionable Claims

• Right to claim damages– Such right to claim damages whether arising from tortuous liability or contractual liability are not considered actionable claims.[13] This is so mainly because of the uncertainty of the amount of money which may be deemed to be payable. Furthermore, given that this right is based out of a personal infringement or injury, the redressal of such injury cannot be transferred.
• Mesne profits– These money for possession of immovable property which is received by a tenant, who themselves do not have the permission to allow for possession of such property. In the case of Jai Narayan v. Kishun Dutta,[14] it was held that a claim for mesne profits is not an actionable claim as they are essentially unliquidated damages; they are not considered as any claim to beneficial interest in property or in possession of such a claimant. It is simply a right to sue.
• Decree or judgement of debt- Any decree or judgement of debt cannot be transferred under actionable claim.[15] This is so because once such a judgement has been pronounced, no action subsists which can be transferred.
• Intellectual Property- Intellectual properties such as patents, copyrights etc. do not operate as claims but are special rights which already vest in a person. They have exclusive governing legislations and cannot be transferred as actionable claims.

Transfer of Actionable Claims

Section 130 of the Transfer of Property Act lays down how such actionable claims can be transferred as:

“Transfer of actionable claim—(1) The transfer of an actionable claim shall be effected only by the execution of an instrument in writing signed by the transferor or his duly authorised agent, shall be complete and effectual upon the execution of such instrument, and thereupon all the rights and remedies of the transferor, whether by way of damages or otherwise, shall vest in the transferee, whether such notice of the transfer as is hereinafter provided be given or not: Provided that every dealing with the debt or other actionable claim by the debtor or other person from or against whom the transferor would, but for such instrument of transfer as aforesaid, have been entitled to recover or enforce such debt or other actionable claim, shall (save where the debtor or other person is a party to the transfer or has received express notice thereof as hereinafter provided) be valid as against such transfer.”

Therefore, the essential elements of such a transfer are:

• The instrument of transfer must be in writing
• The transferor or a duly appointed agent must have signed such an instrument.
• Consideration may or may not be extended.
• Such a transfer will be complete and deemed effective only when it has been executed.

Written Instrument

The obligation of having a written instrument is an important but significant altercation of law.[16] However, in Bharat Nidhi Ltd v. Takhatmal[17], it was observed by the Supreme Court that a document can amount to equitable assignment independent of Section 130. Therefore, transfer for actionable claims, in certain circumstances may be recognised even if it is in violation of Section 130. However, if such a transfer is effected by virtue of Section 130, an oral transfer is invalid.[18]

Mode of Assignment

For the assignment to be effected, no rigid wording is necessary as long as the intention of such assignment is clear from the language used.[19] This intention should be extremely evident by the receipt which represents the transfer of claim.[20] In Hunsraj v. Nathoo, [21]  even an endorsement written on the back of a contract for the purchase of goods which stipulated that the purchaser sold his rights and interest in the contract was held to be a valid transfer of actionable claim.

Consideration

Act 20 of 1929 inserted the words “whether with or without consideration.” This was done to bring cases of gifts within its purview. The whole question of payment of consideration is exclusive to the assignor and assignee; non-payment of the consideration for an assignment is not ground to take advantage of by a debtor to invalidate transfers.[22]

Effective when Executed

The assignment or transfer of claims is effectual only from the date of the assignment. This is a deviation from the English Law where such assignment manifests from the date of notice, except in cases of equitable assignment.[23]

Without the notice of an assignment such assignment is invalid against the debtor.[24] A transfer involving a registered document can be the only exception to this principle.[25] The effect of such notice is the protection of the debtor’s dealings with the original creditor rather than perfecting the title to the assignee of a debt.[26]

Exceptions to Section 130

• Negotiable instruments such as checks, money orders etc, as well as financial market items such as stocks, shares and debentures.
• Marine insurance policies.
• Fire insurance policies.
• All cases falling under Section 38 of the Insurance Act, 1938.

[1] Abu Mahomed v S C Chunder, (1909) ILR 36 Cal 345

[2] Sabju Sahib v Noordin, (1899) ILR 22 Mad 139.

[3] Sunrise Associates v. Govt. of NCT of Delhi, AIR 2006 SC 1908

[4] Gorakhpur Steels and Metals Pvt Ltd v Presiding Officer, DRT, AIR 2017 All 224 

[5] Poothekka Nachiar v Annamalai Chetty, AIR 1926 Mad. 1173 

[6] Joseph Pyke & Sons (Liverpool) Ltd v Kedarnath, AIR 1959 Cal 328

[7] Varjivandas v Maganlal, (1937) 39 Bom LR 493 : AIR 1937 Bom 382

[8] mulla, Transfer of Property Act, 1882, 13^th ed.

[9] Somashekarrao v K S Mishra, AIR 1944 Ngp 185

[10] Chinnapareddi v Venkataramanappa, AIR 1942 Mad. 209

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

[12] Daya Bai v Ambalal, AIR 1981 SC 156

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

[16] Velayuthan v Pillaiyar Chetti, (1911) 9 Mad LT 102 

[17] Bharat Nidhi Ltd v Takhatmal, AIR 1969 SC 313 

[18] Raman Chetty v Nagarathana Naicker, (1912) 11 Mad LT 246

[19]  Mohanlal v Loan Co of Assam, AIR 1960 Assam 191 

[20] Simon Thomas v State Bank of Travancore, (1976) KLT 554.

[21] Hunsraj v Nathoo, (1907) 9 Bom LR 838 

[22] Narain Food Products Ltd v Tikam Chand, AIR 1973 All 573

[23] Gorringe v Irwell, (1886) 34 ChD 128 (CA).

[24] Tata Iron & Steel Co Ltd v Baidyanath, AIR 1924 Pat. 118.

[25] Prem Chand v Onkar Dutt, AIR 1972 All 415

[26] Balthazar v Official Assignee, AIR 1938 Rang 426

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In all agreements involving the transfer of property, the transferor and the transferee need to mutually agree to the transfer for a decided consideration and terms. Further, such a transaction is said to be validly executed only when both parties have completed their obligations under the contract i.e. consideration has been paid or a promise to pay has been made from the transferee and the requisite interest has been transferred by the transferor.

Therefore, an agreement of transfer of property is a reciprocal arrangement imposing obligations as well as benefits on both parties to the agreement which is enforceable at the instance either party. Both parties are expected to carry out their obligations towards the other, in good faith. However, there are cases of fraud committed by the transferors which is where the Doctrine of Part Performance becomes useful. It is an equitable doctrine which is incorporated in Property Law, to prevent such deceitful transferors from taking advantage of transferees who have fulfilled their obligations under the contract.

This doctrine in India is the modified manifestation of the equity principle of part performance developed in England in the case of Elizabeth Maddison v. John Alderson[1] which aims to save the interest of the transferee against the transferors who do not fulfil their obligations.

Transfer Of Property Act, 1882

Section 53A of the TPA encapsulates the Doctrine of Part Performance: –

“Part performance. —Where any person contracts to transfer for consideration any immoveable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee has. in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract, then, notwithstanding that, or, where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed there for by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract: Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof.”

The doctrine essentially allows a transferee or any person under him to take possession or continue to hold possession of a property whose interest has been so transferred to him and for which the transferee has performed his obligation. It prevents the transferor or any person under him to eject such a transferee. Furthermore, it is settled that the Section does not provide protection to a party who was not willing to perform his part of the contract. For the operation of this right, a transferee must prove that he has or was honestly ready and willing to perform his part under the contract.[2]

Essential Elements

The Supreme Court in Vasanthi v. Venugopal[3] laid down the necessary ingredients to warrant the protection of Section 53A: –

• Pre-existence of a valid contract.
• Transferee must take possession of the property or continue to hold possession under the contract.
• Transferee has performed his part of the contractual obligations or is willing to perform it.

Existing contract

One of the most quintessential elements for the application of Section 53A is the existence of a contract. The Section as well as the doctrine is not applicable to gifts,[4] as they are not considered to figure within the purview of “contracts.”  Such a contract must be:

Valid contract- A contract must be valid on all fronts. This means that it must be enforceable by law under the Indian Contract Act, 1872. In the case of Ranchoddas v. Davaji,[5] the Supreme Court lays down that a valid contract must be for consideration, in writing and signed, the terms necessary to constitute the transfer can be ascertained with reasonable certainty. If the terms are ambiguous or confusing, then this Section cannot be applied.[6]

Written contract- For the application of Section 53A, the contract in question relating to the transfer of property must be in written form.[7] The protection under Section 53A is not available to a person who is in possession of property under an oral agreement of transfer.[8] The contract should not only be written but also executed i.e. signed by the transferor or any other person on his behalf.[9]

Transferee must take possession or continue to hold possession.

The Section applies to all transferees who, in accordance to the contract of transfer, have taken possession of the property or continue to remain in possession as part performance to the contract. In such cases, the transferor shall be debarred from enforcing any right in respect for the property. [10]

There is a significant difference between the probative value of entering into possession for the first time and continuing possession. For claiming the benefit of part performance of a contract where the property was in possession prior to the contract, the transferee needs to show something independent of the mere retention of property as evidence of part performance to seek the protection of Section 53A.[11] A tenant cannot claim the benefit of part performance by a simple plea of retention of property, without doing anything in furtherance of the contract to escape eviction as that would result in misuse of the Doctrine. [12] Similarly, the retention by a mortgagee in possession,[13] after the expiry of the original lease or mortgage or advancement of money for the purchase of stamps[14] is not an act of part performance. However, in a case where the tenant remains in possession after the expiry of an old lease by paying a reduced rent, it is a requisite act of part performance for the renewal of the lease at a reduced rent.[15]

Willingness of the Transferee to perform his part of the contract.

This ingredient is well established and derived from English law based on the maxim, “He who seeks equity must do equity.” In the case of Walsh v. Lonsdale,[16] a person in possession of property in pursuance to a lease, when failed to perform a condition precedent to such agreement of lease, was not allowed to raise equity.

In India, the same principle has been partially embodied in the Section 53A. This section confers no rights on a party who was unwilling to perform his part of the contract.[17] Any transferee intending to claim protection under the doctrine of part performance, must prove that he was honestly ready and willing to perform his part under the contract in question.[18]

Such willingness must also be absolute and unconditional.[19] such protection is contingent on continuous willingness on the part of the transferee to perform his part of the contract.[20] If such willingness is not continuous but exist with conditions, it transforms into an offer and cannot be considered to warrant this section. For example, when the vendee company is willing to pay an amount on the condition that the plaintiff clears his income tax arrears, there is no complete willingness but on conditional or partial willingness.

Doctrine of Part Performance- Sword or Shield?

The nature of right that embodies the Doctrine of Part Performance is only as a shield or protection. As held by the Privy Council[21] and further upheld by the Supreme Court,[22] that this right, though statutory in nature, is not a positive right, but negative in the sense that it is used as a defence only by the transferee against the transferor. While it protects the right of possession over property of the transferor, it does not enrich him/her with entitlement. The section does not create a title in the defendant[23] but imposes a statutory ban on transfer of such disputed property.[24] Neither can the transferee maintain a suit against a third party to the contract for the enforcement of a bar as against the transferor.[25]

It has been rightly been held as a “weapon of defence, but not attack.”[26]

[1] Elizabeth Maddison V/s John Alderson, (1883) 8 App. Cases 467.

[2] Jacob Private Ltd v. Thomas Jacob, AIR 1995 Ker. 249.

[3] Vasanthi v. Venugopal AIR 2017 SC 1569.

[4] Hari Pada v Elokeshi Devi, AIR 1940 Cal 254 

[5] Ranchoddas v. Davaji, AIR 1977 SC 1517.

[6] Hamida v. Humer and Ors. AIR 1992 All. 346

[7] Thampikunju v Vachi Yesudasan, 2014 (2) KLJ 79 

[8] V.R. Sudhakara Rao v. T.V. Kameswari, Mahadeva v Tanabai, AIR 2004 Bom 378 

[9] Berendra Huttaya v Gauri Channaya, AIR 1948 Mad. 546

[10] Shashi Kapila v R P Ashwin, (2002) AIR 2002 SC 101

[11] Nanjegowda v Gangamma, AIR 2011 SC 3774

[12] Girija Shankar v Sheela Devi, AIR 2013 CHG. 30 

[13] Pannalal v Labhchand, AIR 1955 Madh Bh 49.

[14] Govindrao Mahadik v Devi Sahay, AIR 1982 SC 989.

[15] Satyaniranjan Chakravarty v Habibur Sobhan, AIR 1933 Cal 393

[16] Walsh v Lonsdale, [1982] 21 ChD 9

[17] A Lewis v M T Ramamurthy, AIR 2008 SC 493

[18] Lakshmi v Karuppathathaal, AIR 2011 Mad. 192 

[19] Chinnaraj v Sheik Davood Nachair, AIR 2003 Mad. 89

[20] Mohan Lal v Mira Abdul Gaffar, AIR 1996 SC 910 

[21] Prabodh Kumar Das v. Dantamara Tea Co. Ltd, AIR 1940 PC 1.

[22] Technicians Studio Pvt Ltd v Leela Ghosh, (1977) 4 SCC 324 

[23] Rajpal v Harswaroop, AIR 2011 Del 203 

[24] Ram Gopal v Custodian, AIR 1966 SC 1438

[25] Patel Natwarlal Rupji v Kondh Group Kheti Vishayak, AIR 1996 SC 1088 

[26] Chetak Construction Ltd v Om Prakash, AIR 2003 MP 145 

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Introduction

The Transfer of Property Act of 1882 is the overarching legislation which governs the transfer of property, both movable and immovable. Chapter II of the Act, from Sections 5 to 37 apply generally to movable and immovable properties. The rest of the Act focuses on transactions between only immovable property, detailing various procedures, methods, approval of transfers etc.

The Act governs only those transactions which result from the mutual conduct of the parties. It doesn’t cover transfers via inheritance, insolvency or forfeiture.

The Act defines a transfer as an “act by which a living person conveys property, in present or in future, to one or more living person or to himself and one or more other living persons”[1] “Transferor” refers to the one who transfers the property while the person who receives such property is called the “transferee.” A “living person” has been meant to include within its purview not only individuals but juristic persons such as a company or association or body of individuals[2], whether incorporated or not, without affecting any law made specifically for transfer of property within these groups.[3] Competency is the next important essential for a valid transfer. The Act provides that a person can transfer property only if he is competent to contract and has a valid title to the property or authority to transfer.[4] Competency to contract manifests with a person who is of majority in age, has a sound mind and is not otherwise disqualified under any law.[5]

Types of Transfer

The Act governs five types of transfers:

• Sale
• Mortgage
• Lease
• Exchange
• Gift

Sale

Section 54 of the Transfer of Property Act defines sale as “is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised.”

A transfer of ownership refers to the transfer of all rights and interests in the properties which are possessed by the transferor to the transferee with free consent.[6] Furthermore, the subject matter of a sale must always be immovable property which is identifiable. This means the identity of the property must be undisputed.[7] All sale of movable property is under the purview of the Sale of Goods Act, 1930.[8]

Price here only refers to the consideration of money[9], not of other things in value. Any other type of consideration would characterise that transaction as an exchange.[10] The words “price paid or promised or part-paid and part-promised” indicate the importance of price as an ingredient in the transaction of a sale. It lays down that the payment of the whole price is not necessary for the execution of valid sale deed i.e. part payment is also recognized for a sale to be complete.[11]

As stipulated in the Transfer of Property Act, the two recognized mode of transfer is- (1) Registered instrument, the process of which is mentioned in the Registration Act, 1908; and (2) Delivery of possession. No other way is legally recognized. [12]Any transfer that takes place by operation of law such as a judgment or order of the court are beyond the scope of Section 52.

Mortgage

Section 58 of the TPA defines mortgage as “the transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability.”

There are various kinds of mortgages available where the basic element is the transfer of some partial interest of the transferor as opposed to the transfer of all interests in cases of sale.[13] However what changes with different mortgages is the nature of this interest. In cases of simple mortgage, the power of sale is transferred. In an usufructuary mortgage, the right of possession and enjoyment of the property is transferred.[14] A conditional mortgage, the right of ownership subject to a condition is transferred.

Another important element of a mortgage is that the right of interest created in the property can be attached to the right to recover the debt.[15] When such a debt is completely paid, the property can revert back to the actual owner.

The main purpose behind such a transaction is to secure a debt. This way if the mortgager forfeits on his debt, the interest so transferred can be used by the mortgagee to recover such debt.

Lease

Section 105 of the TPA defines lease as “is a transfer of a right to enjoy immovable property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms.”

Essentially it is a transfer of right of enjoyment of an immovable property to someone who so accepts in return for prior payment or periodic flow of valuable consideration. The person who transfers such a right is called the lessor and the person. The price already paid is called the premium and the periodic payment of consideration is called rent.

In contracts of leases, the nature of relationship between the lessor and lessee imply the right of possession of land to lie with the lessee.[16] Such lessee/tenant is entitled to remain in possession of the property till the lease is lawfully terminated as long as the rent is being paid timely.[17]

The contract also allows for a lessee to further sub-let the leased property in return for rent. While the term sub-let is not exactly defined within the TPA but the definition of “lease” can be adopted for it. The fact that the lessor is itself a lessee to another person and therefore does not have the complete interest of the property does not invalidate or change the transfer between the lessee and sub-lessee.[18]

Exchange

Section 118 of the TPA defines exchange as “When two persons mutually transfer the ownership of one thing for the ownership of another neither thing or both things being money only, the transaction is called an “exchange.” Further it also states, “A transfer of property in completion of an exchange can be made only in manner provided for the transfer of such property by sale”

In general parlance, the word “exchange” refers to give or transfer for an equivalent[19] In law, an exchange is effected in the same way as a sale.[20] This means that the exchange of goods are subject to the manner laid down in Section 54 of the TPA with regards to the registration or delivery of possession.[21] Therefore, for an exchange to be valid, there must be physical delivery of the property to the parties and such parties to the exchange are vested with the same rights and duties as between a seller and a buyer.[22]

An exchange is a barter of goods, therefore either property to be exchanged cannot be money as it would simply denote a sale.[23]

Gift

Section 122 of the TPA deals with gift and defines it 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.”

Gift, essentially is the transfer of existing property in the favour of another person without any consideration or expectation of the same. The words “during the lifetime of the donor” shows that gift, as envisioned by the TPA deal with inter vivos gift i.e. a gift between people who are alive.

The main tenets that make a gift valid is that it is voluntarily made by the transferor, made without consideration or apprehension of the same and it is accepted by the donor within his lifetime. Conditional gifts are also permitted as long as the condition is not prohibited by law.

In cases of gifts, the maxim “qui sentit commodum, debetet et sentire onus” is of prominence which lays the principle for onerous gifts. Onerous gifts are those within which subsists a burden or obligation. The maxim as well as Section 127 of the TPA lay down that a gift can be accepted in its entirety, and not to the exclusion of the obligation.

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

[2] Hindustan Lever v State of Maharashtra, (2004) 9 SCC 438, Shriomani Gurudwara Prabandhak Committee, Amritsar v. Som Nath Dass and Ors. (2000) 4 SCC 146.

[3] Ibid.

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

[5] Section 11, The Indian Contract Act, 1872.

[6] Iqbal Singh v State of Haryana, (2011) 3 RCR (Civil) 365 

[7] Ram Jiwan Rai v Deoki Nandan Rai, AIR 2005 Pat. 23 

[8] Sahebram Surajmal v Purushottamlal, (1950) ILR Nag 355

[9] Ramlal v Phagua, (2006) AIR 2006 SC 623 

[10] State of Madras v Gannon Dunkerley and Co (Madras) Ltd, AIR 1958 SC 560

[11] Vidhyadhar v Manikrao, (1999) AIR 1999 SC 1441

[12] Narayan Swami v Lakshmi, (1939) 48 Mad LW 959

[13] Raja Shiba Prasad Singh, AIR 1941 PC 36 

[14] Prahlad v Maganlal, (1952) AIR 1952 Bom 454 

[15] Rajkumari Kaushalya Devi v Bawa Pritam Singh, [1960] 3 SCR 570

[16] Saddashiv Shyama Sawant v Anita Anant Sawant, AIR 2010 SC (Supp) 798

[17] Jaswantsinh Mathurasinh v Ahmedabad Municipal Corpn, (1992) 1 SCC 5, p 12 (Supp).

[18] Mineral Development Ltd v UOI, AIR 1960 SC 1373 

[19] Ram Badan v Kunwar, AIR 1938 All 229

[20] Ram Kristo v Dhankisto, AIR 1969 SC 204

[21] Debi Prasad v Jaldhar Chaube, (1945) All LJ 537 

[22] Mohammadin v Asibun Nissa, AIR 2005 Jhar. 1

[23] CIT v Motor & General Stores Pvt Ltd, AIR 1968 SC 200 

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Introduction

The Transfer of Property Act, 1882 governs 5 different types of transactions within the meaning of a “transfer”, namely sale, mortgage, lease, exchange and gift. In general, a gift is an item which is willingly given to someone without any payment or thing in return. In law, gift is considered a gratuitous transfer, i.e. one for which there is no mutual consideration.

Gift is dealt with under Section 122 of the Transfer of Property Act. It 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. 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 process of gift, an existing property is transferred in favour of another person unilaterally without any consideration. Furthermore, as evident from the wording of the legislation, the Section is applicable to only inter vivos gift i.e. a gift between living persons. It doesn’t deal with inheritance or gifts mortis causa.

Essential Elements

• Transfer of existing movable or immovable property
• Voluntary transfer and without consideration
• Existence of donor and done
• Valid acceptance by or on behalf of the done

Transfer of property

For a valid gift, there must be transfer of property including movable or immovable property. The person transferring the interest is called the “donor” while the one accepting it is called the “donee.” A bequest under a will not be considered a transfer.[1] However, conditional transfers/gifts are permitted as long as such conditions are not repugnant to any of the provisions of the Act.

A deed of relinquishment will be considered a gift. For example, relinquishment of share by a tenant-in-common is favour of other amounts to a gift. [2] or a dan[3] (religious charity) would all be considered gifts and governed by the TPA.

Property must be in existence.

Section 124 deals with gifts of future property. It lays down that “ A gift comprising of both existing and future property is void as to the latter.”

This means the property to be gifted must be in existence at the time of making the gift, even if its transfer may be effected in the present of the future. Therefore, a gift of future property is void.[4] The main reasoning behind it is that a gift of future property is merely a promise, and any promise unsupported by consideration is invalid as a contract.[5]

Voluntary Transfer without Consideration

The whole purpose of a gift is gratuitous transfer. The word “voluntarily” denotes unfettered will. This voluntary nature as well as the lack of consideration or its contemplation is the key aspect of a gift.

For a gift deed to be valid, the intention of the executer must be clear with evidence supporting it.[6] It must be shown that during the physical act of signing the deed, there was a coinciding animus or mental act (i.e. the intention to execute the gift).[7] Furthermore, the principles present in the Indian Contract Act, 1872 relating to free consent apply in the consideration of voluntary nature of the gift. [8] Parties pleading fraud, undue influence or coercion carry the burden of proving that there was no free consent rather than the donee who accepts the gift. External factors such as old age[9], intimacy[10] etc do not allow for assumption of undue influence.

The word “consideration” is applied in the same sense as in the Indian Contract Act, 1872 and therefore excludes natural love and affection. Any transfer which has been made in exchange for a consideration of spiritual and moral benefit or love and affection, therefore is a gift.[11]

Valid Acceptance.

For a gift transfer to be complete, it must be accepted by the donee or on behalf of him/her. The words “on behalf” allows for gifts to be made for people who may not be able to convey acceptance or who are not competent to contract. Therefore, a minor[12] as well as a unborn child can be a donee, with another person accepting it on his behalf.

Furthermore, acceptance may be express or inferred.[13] Such inference may be derived from the donee’s possession of the property as well as oral evidence to show that the gift had been acted upon.[14] At times, silence may also be taken to indicate acceptance, as long as it is settled that the done knew of the gift.

Method of Transfer

According to Section 123 of the TPA, “For the purpose of making a gift of immoveable property, the transfer must be effected by a registered instrument signed by or on behalf of the donor, and attested by at least two witnesses. For the purpose of making a gift of moveable property, the transfer may be effected either by a registered instrument signed as aforesaid or by delivery.”

Therefore, while for the transfer of movable property, a registered instrument is not necessary, for transfer of immovable property, it is mandatory without consideration for the value of the property. Mere delivery of possession does not confer possession in case of immovable property as laid down in Wing Commander R.N. Dawar v. Shri Ganga.[15]

Onerous Gifts

Usually gifts are unilateral and such a transfer is said to be complete as soon as there is valid acceptance by the donee. Onerous gifts are those which are accompanied with a burden or obligation. It is derivative of the maxim qui sentit commodum, debetet et sentire onus which means he who derives a benefit ought also to bear a burden.

Section 127 of the Act governs onerous gifts and embodies the above maxim. It lays down that “where a gift is in the form of a single transfer to the same person of several things of which one is, and the others are not, burdened by an obligation, the done can take nothing by the gift unless he accepts it fully.”

This means to say that either a person must accept the whole gift along with whatever obligation attached to it, or decline the gift in its entirety. A person cannot partially accept only the gifts which are beneficial while refusing the ones which place a burden on him.

Further Section 127 also lays down that “a donee not competent to contract and accepting property burdened by any obligation is not bound by his acceptance. But if, after becoming competent to contract and being aware of the obligation, he retains the property given, he becomes so bound.”

Section 127 is interpreted to refer to minor done by the Supreme Court. It lays down that in cases where an onerous gift is accepted by a minor, subsequent to his attaining majority, if he assents to be bound by such a gift, he will be bound by the obligation attached to it.[16]

Revocation of Gifts

A gift which has already been executed by the donor, accepted by the donee and registered by the registering authority if need be, usually cannot be revoked. However, there are certain conditions in which a gift deed can be revoked if certain mandatory requirements are met.[17] These conditions are laid down in Section 126 of the Transfer of Property Act: –

“The 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.

A gift may also be revoked in any of the cases (save want or failure of consideration) in which, if it were a contract, it might be rescinded.

Save as aforesaid, a gift cannot be revoked.”

Therefore, the only cases where revocation is possible is when the parties have mutually agreed for suspension of gift[18] or when the gift deed is executed in the absence of free consent due operation of fraud or undue influence.[19]

Revocation in the first case, depends on the mutual agreement between the doner and the donee on a condition subsequent which would be grounds for cancellation of the gift. Such a condition must be made at the time of making the gift and not after the gift has become absolute. Once a gift has become absolute, the only other method of cancellation of such gift is if the doner can prove before a court of law that such a gift was made without free consent.

[1] N Ramaiah v Nagaraj, AIR 2001 Kant. 395 

[2] State of Uttar Pradesh v Shanti, AIR 1979 All 305)

[3] Debi Sharan v Nanlal Chaubey, AIR 1929 Pat. 591

[4] Brindabini Behari v Oudh Behari, AIR 1947 All 179 .

[5] Section 25, Indian Contract Act, 1872

[6] Vathsala Manickavasagam v N Ganesan, (2013) 9 SCC 152

[7] R Kuppayye v Raja Gounder, AIR 2004 SC 1248 

[8] Subhas Chandra v Ganga Prosad, AIR 1967 SC 878 

[9] Roshan Lal v Kartar Chand, AIR 2002 HP 131

[10] Subhash Chandra Das Mushib v Ganga Prosad Das Mushib, AIR 1967 SC 878

[11] Tulsidas Kilachand v CIT, AIR 1961 SC 1023

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

[13] Shakuntla Devi v Amar Devi, AIR, 1985 HP 109, p 111.

[14] Gauranga Sahu v Maguni Dev, AIR 1991 Ori. 151, p 155.

[15] Wing Commander R.N. Dawar v. Shri Ganga, AIR 1993 Del 19

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

[17] Kamalakanta Mohapatra v Pratap Chandra Mohapatra, AIR 2010 Ori. 13 

[18] Garagaboyina Radhakrishna v District Registrar, Vishakhapatnam, AIR 2012 AP 190

[19] Balai Chandra Parui v Durga Bala Dasi, AIR 2004 Cal 276

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