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A deed executed as gift deed but subject to conditions is incomplete and can be cancelled before the conditions are fulfilled, the Supreme Court has clarified.
The decision was rendered by a Bench of Justices Arun Mishra and Indira Banerjee in an appeal against a judgment of the High court of Kerala.
The short question involved in the appeal was whether a document styled as gift deed but admittedly executed for consideration, part of which has been paid and the balance promised to be paid, can be treated as formal document or instrument of gift.
Another related question was 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.
The appellant was a childless widow aged 74 years whose husband expired in 2015. The respondent was the nephew of the appellant. In the expectation that the respondent will look after the appellant and her husband and also for some consideration, the appellant executed a purported gift deed in favour of the respondent. The gift deed clearly stated that the gift would take effect after the death of the appellant and her husband.
In 1999, the appellant executed a deed of cancellation thereby cancelling the gift deed. After about eight months, the respondent filed a Suit in the Court of Munsif, Sasthamcotta for a declaration that the cancellation deed executed by the appellant is null and void and also for a declaration of his right over the suit property which was the subject matter of the purported deed of gift.
The Munsif held against the appellant and an appeal was filed by the appellant before District Court, Kollam. The District Court ruled in favour of the appellant, and the respondent, therefore, moved the Kerala High Court. The High Court set aside the decision of the District Court and held in favour of the respondent prompting the appellant to move the Supreme Court.
On behalf of the appellant, it was contended that the document styled as gift deed was to come into effect only after the death of the appellant and her husband. The question was whether a document as per which the executant of the document retained possession and reserved her right over the property which was the subject matter of the document, could be a deed of gift or whether such a document was a document in the nature of a will.
The Court noted the exposition of law with regard to gifts in various judgments.
In Naramadaben Maganlal Thakker v. Pranivandas Maganlal Thakker and Others, it was held that gift means to transfer certain existing moveable or immoveable property voluntarily and without consideration by one person called the donor to another called the donee and accepted by or on behalf of the done.
A conditional gift with no recital of acceptance and no evidence in proof of acceptance, where possession remains with the donor as long as he is alive, does not become complete during the lifetime of the donor. When a gift is incomplete and title remains with the donor, the deed of gift might be cancelled, the Court noted.
The Court also placed reliance on Reninkuntla Rajamma v. K. Sarwanamma. In that case, a Hindu woman executed a registered gift deed of immovable property reserving to herself the right to retain possession and to receive rent of the property during her lifetime. The gift was accepted by the donee but later revoked.
The Supreme Court had held in that case that the fact that the donor had reserved the right to enjoy the property during her lifetime did not affect the validity of the deed. The Court had also held that a gift made by a 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/ she is still capable of making an acceptance.
The Court accepted the ratio of the said judgment holding that a gift is a transfer of property without consideration and a conditional gift only becomes complete on the compliance with the conditions in the deed.
“We are in agreement with the decision of this Court in Reninkuntla Rajamma (supra) that there is no provision in law that ownership in property cannot be gifted without transfer of possession of such property. However, the conditions precedent of a gift as defined in Section 122 of the Transfer of Property Act must be satisfied. A gift is transfer of property without consideration. Moreover, a conditional gift only becomes complete on compliance of the conditions in the deed.”
In the instant case, the Court noted that the deed of transfer was executed for consideration and was, in any case, conditional subject to the condition that the donee would look after the petitioner and her husband. Further, it was also subject to the condition that the gift would take effect after the death of the donor.
Thus, the Court held 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.
It, therefore, set aside the judgment of the High Court.
Read the judgment below.