Gift under transfer of property act

Law
29-Dec-2022
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A gift is typically considered the willing transfer of ownership of a piece of property by the sender without payment or any acknowledgment of monetary value. It could be movable or immovable property, and the parties could be two alive people, or the transfer could happen only after the transferor's demise. Inter Vivos refers to transfers made between two live parties, while testamentary refers to transfers made after the transferor's death.

Only inter vivos transactions are referred to as gifts under this Act since testamentary transfers are not covered by Section 5 of the Transfer of Property Act.

If the essential components of the gift are not correctly carried out, the gift may be canceled or declared void by the law. Several provisions cover the gifts.

This article discusses all these rules, including the sorts of property that may be transferred, the methods for making such gifts, competent transferors, suspension and revocation of gifts, etc.

What may be considered a gift?

A gift is the transfer of an existing moveable or immovable property, according to Section 122 of the Transfer of Property Act. Such transfers must be freely given without receiving anything in return. The transferee is referred to as the donee, and the transferor is the donor. The donee must accept the gift.

According to this Section, a gift is the gratuitous transfer of ownership of an existing property. The transfer of both movable and immovable property is covered under the definition.

Parties involved in a gift transfer

The following are the parties involved in the process of gift transfer:

Donor

The donor must be capable, which means he must have the capacity and authority to make the gift. The donor is judged to have the capacity to make the gift if he can enter into a contract. This indicates that the donor must be of legal age and sound mind at the time of the gift. Juristic individuals are organizations registered as societies, businesses, or institutions. They are also capable of making contributions.

A minor's or insane person's gift is invalid. In addition to capacity, the donor must also have the legal right to give. Given that a gift involves a transfer of ownership, the donor's entitlement is established by his ownership stake in the asset at the transfer time.

Donee

To contract, the donee does not need to be competent. He could be any living individual on the day the gift is given. A gift given to someone insane, a minor, or even a child still inside the mother's womb is acceptable as long as a competent person accepts it lawfully on their behalf.

Legal entities such as businesses, institutions, or other juridical persons are regarded as competent donees, and gifts made to them are valid. However, the donee must be a person who can be located. The gift given to the public is invalid. The donee may include two or more people if that is discernible.

Important components

The following five characteristics a gift must possess to be considered legitimate:

Transfer of ownership

The property must be given to the transferee or done, by the transferor, or donor, who must give up all rights to it. Any rights and obligations about the property are also transferred when absolute interests are transferred.

A gift can only be made if the donor has the legal authority to transfer ownership of the relevant assets. By way of gift, only ownership may be transferred. The gift could, like other transfers, be made subject to additional requirements.

Existing property

Any property, whether mobile, immobile, tangible, or intangible, maybe the subject of a gift, but it must exist at the time of the gift and be as outlined in the Transfer of Property Act, Section 5.

Any gift of future property is regarded as invalid. The mere probability of inheriting property, the mere right to sue, and the gift of spes succession (expectation of succession) are likewise unlawful.

Transferring without consideration

A gift must be gratuitous, which means that ownership of the item cannot be transferred in exchange for cash or another form of gain. Consideration for a sale or exchange could include even the smallest quantity of unimportant goods or money the transferee gives in exchange for the transfer of a sizable asset. The term "consideration" has the same meaning as in Section 2(d) of the Indian Contract Act for this Section. The consideration is monetary or of a financial nature.

Mutual love and affection are not a monetary factor, hence any property transferred in exchange for love and affection is a gift because it was given without expecting anything in return. A gift is a transfer of property made in exchange for the donee's "services." But since liabilities result in financial obligations, a property donated in exchange for the donee taking on the donor's liability is not gratuitous and is not a gift.

Voluntary transfer with free consent:

The donor must make gifts voluntarily, meaning they must come from his own free choice and agreement. This is known as free consent, when a donor is completely free to contribute without coercion, fraud, or undue influence. The donor's will must be free and autonomous in carrying out the gift deed.

A donor's voluntary activity also implies that he or she executed the gift deed while fully aware of the facts and nature of the transaction. The onus of demonstrating that the gift was given voluntarily and with the donor's free permission rests with the donee.

Acceptance of gift

The donee must accept a gift. Even as a gift, the property cannot be transferred to a person without that person's agreement. The donee has the same right to reject the gift as with unfavorable property or burdensome gifts. A gift is considered onerous when its burden or liability surpasses its true market value. Thus, it is vital to accept the present. Such consent may be given expressly or inferred. It is possible to infer implied acceptance based on the donee's actions and the environment.

Acceptance of the gift occurs when the donee gets possession of the assets or the title deeds. Acceptance can be assumed when the right to collect rent is accepted when the property is leased. However, simple possession cannot be taken as proof of acceptance when the property is used jointly by the donor and donee. Even bare minimum proof that the donee has received the gift is adequate when the gift is not burdensome. If it can be proven that the donee was aware that the gift was being made in his favor, then the donee's simple silence serves as a sign of approval.

A presumption that the executants are aware of what was stated in the deed and that it is accurate emerges when the deed of gift expressly stated that the property had been turned over to the donee and he had accepted it and the document is registered. The burden of proving the contrary would be on the donor rather than the donee when such a presumption is combined with the deed's declaration that the donee had been given possession of the property.

The gift must be received on the donee's behalf by a competent person if the donee cannot enter into a contract because they are minor or insane. A guardian may receive the gift on behalf of his ward, or a parent may do so on their child's behalf. When the kid reaches the majority, he or she may refuse the gift in this situation.

If the donee is a legal person, a competent representative of that legal person must accept the gift. If the gift is intended for a deity, the priest or temple manager may accept it on behalf of the deity.

According to Section 122, the acceptance must be made while the donor is still alive and can donate. Acceptance that follows the donor's demise or incapacitation is not acceptance. The gift is deemed to have been accepted and the gift is legitimate if it is made during the donor's lifetime but the donor passes away before the registration and other procedures are completed.

Methods for making a gift

Section 123 of the Transfer of Property Act covers the requirements necessary to complete a gift. Only if these procedures are followed is the gift legally enforceable. Depending on the property type, this Section outlines two ways to make a gift. Registration is required for the gift of real estate. If the item of property is mobile, delivery of possession may be used to transfer it.

Following is an overview of various property transfer modes:

Immovable Property

Regardless of the property's worth, the immovable property requires the transfer to be registered. Before the registration procedures are formally finished, the registration of a document, including a gift deed, signifies that the transaction is in writing, signed by the executant (giver), attested by two qualified parties, and duly stamped.

Gifts are not subject to partial performance, so all requirements must be met. When evicted, a donee who acquired ownership of the property by an unrecorded gift deed cannot defend his right to it. Regarding the registration prerequisite, keep in mind the following:

  • Immovable property gifts must be registered, although they are not halted while they are being registered. If all of the necessary components are present, a gift may be registered and legally enforceable even after the donor's passing.
  • The registration will not validate the contribution if missing one of the necessary components.
  • The courts have noted that there is no obligation for delivery of possession in the case of an immovable gift under the terms of Section 123 of the Transfer of Property Act.

Movable Property

Delivery of possession in the case of movable property could be the final step. In certain situations, registering is optional. Regardless of the property's value, delivery of possession as a method of gifting movable property is allowed. The type of item being delivered determines the method of delivery. The only requirement is that title and possession be transferred in the donee's favor. Anything that the parties agree to count as a delivery of the goods or that has the effect of transferring ownership of the property to the transferee may be regarded as a delivery.

Actionable claims

Section 3 of the Transfer of Property Act defines actionable claims. It could be the right to claim movables that the claimant does not own or unsecured financial obligations. Beneficial interests in moveable are actionable claims. They are, therefore, mobile intangible properties.

The Act's Section 130 regulates the transfer of actionable claims. A written document signed by the transferor or his lawfully authorized agent may be used to transfer actionable claims as a gift. It is not essential to register or deliver possession.

A gift of future assets

A gift of future property is a legal promise that cannot be enforced. Therefore, the gift of future property is invalid according to Section 124 of the Transfer of Property Act. If a gift is given that includes both present and future property, meaning that one of the properties exists at the time of the gift while the other does not, the entire gift is not regarded as invalid. Only the portion referring to the future property is regarded as invalid. Under Section 124, a gift of future revenue from a property before it has accumulated would likewise be invalid.

A gift is given to multiple donees

According to Section 125 of the Act, if a property is given to more than one donee and one of them refuses it, the gift is worthless to the extent of the interest that he would have taken. Such interest does not go to the other donee but returns to the transferor. It is legal to make a gift to two donees jointly with the right of survivorship; upon the death of one, the remaining donee inherits the entire gift.

Provisions for onerous gifts

Onerous gifts are those that are more of a liability than an asset. Onerous implies being burdened. As a result, a property is said to be burdensome when its responsibilities outweigh its benefits. It is referred to as an onerous or non-beneficial gift when such a property is given. Such gifts are subject to rejection by the donee.

According to Section 127, the recipient of a single gift that includes multiple properties, one of which is an onerous property, is not free to accept the other properties and reject the onerous portion. This rule is founded on the idea that "Qui sentit commodum sentire debit et onus"—which denotes that one who accepts the benefit of a transaction must also accept the load of it—means that the one who does so must bear both.

The donee is therefore required to choose when two properties, one burdensome and the other lucrative, are gifted to them in the same transaction. He can accept the gift and the burdensome property or completely reject it. He must accept the burdensome portion of the gift if he chooses to accept the advantageous portion. However, a single transfer is a crucial component of this Section.

Only after the burdensome and lucrative properties have been transferred in a single transaction do they demand a mutual acceptance or rejection of the duty.

If an onerous present is given to a minor and that donee accepts it, he or she can reject the gift after they reach the legal drinking age. When he reaches the majority, he can accept or reject the gift; the donor cannot take it back until the donee rejects it.

Universal Donee

English law does not recognize the idea of a universal donee, but it does recognize the possibility of universal succession in the event of a person's demise or bankruptcy.

Hindu law recognizes this idea as "sanyasi," a way of life that involves giving up all material belongings in favor of spiritual existence.

A universal donee is a recipient of the entirety of the gift from the donor. Both movables and immovables are included in these properties.

According to Section 128 of the Code, the donee is responsible for all debts and obligations of the donor that were owed at the time of the gift. The equitable notion that one who receives some benefits from a transaction must also endure its burden is incorporated in this Section. However, the donee's obligations are constrained to the value of the gifts he has received.

The universal donee is not responsible for the surplus portion of the debt if the liabilities and obligations exceed the market value of the entire property. This clause safeguards the interests of the creditor and guarantees that, should the donor owe them money, they would be allowed to seize his assets.

Suspension or Revocation of Gifts

The legal requirements that must be followed in the case of a conditional gift are laid out in Section 126 of the Act. The provisions of Section 126 must be followed, and the donor may only make a gift subject to a few restrictions that could result in it being suspended or canceled. A gift may only be revoked for one of the two reasons outlined in this Section.

Revocation via mutual consent:

  • A gift that is subject to a condition agreed upon by both the donor and the donee will be suspended or canceled upon the occurrence of an event that is independent of the donor's desire. It must consist of the following essentials:
  • The requirement must be made explicit.
  • The requirement must be a component of the same transaction; it may be stated in the gift deed itself or in a different document that is also a component of the same transaction.
  • A gift's revocation requirements cannot be determined merely by the donor's will.
  • According to the legal guidelines established for conditional transfers, such a condition must be valid. For instance, Section 10 of the Transfer of Property Act declares that a condition that completely forbids the alienation of a property is invalid.
  • Both the donor and the donee must concur on the condition.
  • A gift that can be revoked at the donor's discretion is invalid, even if both parties agree to that condition.

Revocation through contract revocation

A contract for a transfer must come before a gift since it is a transfer. This agreement may be expressed or implied. There is no doubt that a future transfer will occur if the prior contract is voided. Therefore, a gift may be canceled by Section 126 on any grounds for which its contract may be revoked. For instance, Section 19 of the Indian Contract Act allows the party whose assent was coerced, coerced, unduly influenced, misrepresented, or fraudulent to dissolve the contract at their discretion. Therefore, a gift may be revoked by the giver if it was not given voluntarily, i.e., if the donor's permission was obtained through deceit, deception, undue influence, or coercion.

The donor retains the right to revoke the agreement; it cannot be transferred. However, following the donor's passing, the legal heirs of the donor may file a lawsuit to have the agreement revoked.

The statute of limitations for withdrawing a gift on the grounds of fraud, misrepresentation, etc. is three years from the day the plaintiff learns of the relevant facts (donor).

When the donor approves the donation, either explicitly or via his actions, the donor forfeits the ability to revoke the gift on the aforementioned grounds.

Learn more about cancelling a gift deed in India

Bonafide Purchaser

The right of a bona fide purchaser is protected by Section 126 of the Act's final paragraph. A bona fide purchaser is someone who paid for the provided property in a responsible and good faith manner.

No provision of revocation or suspension of such gift shall apply if the purchaser is not familiar with the condition linked to the asset that was the subject of a conditional gift.

Exceptions

The gifts listed in Section 129 of the Act are recognized as exceptions to the entirety of the Act's chapter on gifts. Which are:

Donations Mortis causa

These gifts are given when thinking about passing away.

Muslim gifts (Hiba) (Hiba)

The guidelines of Muslim Personal Law apply to these. The only requirements are the conveyance of possession, acceptance, and declaration. No registration is required, regardless of the gift's value. Muslims must register under Section 17 of the Indian Registration Act if they receive a gift of real estate valued at more than 100 rupees. Only the donor must be a Muslim for a gift to qualify as Hiba; the donee's faith is unimportant.

Conclusion

The Transfer of Property Act's guidelines must be followed for a transfer to qualify as a gift. This Act provides a detailed definition of both the gift itself and the conditions surrounding its transfer. The gift must be in the transferee's possession and ownership at the moment of the transfer because it constitutes a transfer of ownership rights. Any individual may be the transferee, but the transferor must be able to effect the transfer.

If the transferee cannot enter into a contract, another competent individual must approve the acceptance of the gift on their behalf. Future property gifts are invalid. Both partial acceptance of generous gifts and rejection of burdensome gifts are invalid.

Accepting a gift requires accepting both the benefits and the obligations that come along with it. Only mutual agreement on a condition between the donor and the donee or the cancellation of the contract relevant to the gift allows for the withdrawal of a gift. The only two types of contributions that do not adhere to the Transfer of Property Act's rules are Donations Mortis causa and Hiba.