Delivery Of Possession Not Essential To Validate Gift/Settlement; Gift Document Can't Be Unilaterally Cancelled By Donor : Supreme Court

The Supreme Court held that when a property transfer involves considerations such as love and affection while the donor retains a life interest, it qualifies as a settlement deed in the form of a gift. The Court further clarified that once the donee accepts the gift through the settlement deed, the donor cannot unilaterally revoke it.

The Court held that mere reservation of life interest of the donor and the postponement of the delivery of the possession to the donee would not make the document a Will.

The Court referred to the settled law that delivery of possession is not sine qua non to validate a gift or settlement. Upon the retention of the life interest, the donor will continue only as an ostensible owner of the property as per Section 41 of the Transfer of Property Act.

"...delivery of possession is only one of the methods to prove acceptance and not the sole method. The receipt of the original document by the plaintiff and registration of the same, would amount to acceptance of the gift and the transaction satisfies the requirement of Section 122 of the Transfer of Property Act, 1882," the Court observed.

The Case

The bench comprising Justice JB Pardiwala and Justice R Mahadevan heard the case where the suit property was vested with Respondent No.1 (daughter) by her father via a registered settlement deed dated 26.06.1985 out of consideration of love and affection, with the father retaining a life interest and limited mortgage rights.

The settlement deed stated that the daughter was permitted to construct the property and pay taxes, indicating immediate rights, and allowed her to possess the property after the parent's death.

A dispute occurred when a cancellation deed was executed by Respondent No.1's father revoking the gift to his daughter-Respondent No.1. The father instead executed a sale deed in favor of his son-Appellant.

Thereafter, the Respondent No.1-Daughter filed a suit for a declaration of right, title, and interest over the suit schedule property and also for a declaration that the cancellation deed and sale deed dated 19.10.1993 executed by the father in favour of the Appellant was null and void and for consequential injunction.

The Trial Court & First Appellate Court held the settlement deed document to be a will, dismissing the daughter's suit challenging the father's 1993 cancellation and sale of the property to the son (appellant).

However, the High Court reversed the trial court and first appellate court decisions, declaring the document a gift deed and invalidating the cancellation and sale.

Challenging the High Court's decision, the Appellant-Son appealed to the Supreme Court.

Issue

The question before the Supreme Court was whether the settlement deed executed by the father in her daughter's favor constituted a gift deed, settlement, or will, which would determine its revocability and the validity of subsequent transactions.

Decision

Affirming the High Court's decision, the judgment authored by Justice Mahadevan explained the distinction between the gift deed, settlement deed, and Will before deciding the validity of the father's unilateral revocation of the settlement deed executed in her daughter's favour.

The Court said that a gift is a voluntary transfer made without consideration, requiring acceptance during the donor's lifetime. Moreover, registration is mandatory for immovable property, but having possession is not mandatory to qualify as a gift when the donee accepts the gift.

Further, when a voluntary transfer is made out of love, care, and affection, which immediately creates rights in the property while reserving a life interest for the transferor, qualifies as a settlement.

Moreover, a Will takes effect only after the testator's death and is inherently revocable during the tesator's life time.

The Court said that when a document exhibits the nature of a gift and settlement (as in the present case) then it would be considered as a composite document, requiring a harmonious reading to give effect to each and every word and direction in the document.

“The contents of the document have to be read as a whole and understood, while keeping in mind the object and intent of the testator. What is not to be forgotten is that in case of a gift, it is a gratuitous grant by the owner to another person; in case of a settlement, the consideration is the mutual love, care, affection and satisfaction, independent and resulting out of the preceding factors; in case of a will, it is declaration of the intention of the testator in disposition of his property in a particular manner. Therefore, even when there is any ambiguity in understanding the nature of the documents from its contents, we are of the view that the subsequent conduct of the executant must also be considered to take a decision. It is possible that in a single document, there could be multiple directions in different clauses though seemingly repugnant but in reality, it could only be ancillary or a qualification of the earlier clause. Therefore, the document must be harmoniously read to not only understand the true intent and purport, but also to give effect to each and every word and direction.”, the court observed.

Upon perusing the deed, the Court rejected the Appellant's argument that the deed was a Will, instead held that it was a settlement deed in the form of a gift deed because it created an immediate interest in favour of the Respondent No.1, though a life interest was retained in favor of the Respondent No.1's father.

The Court held that the deed did not qualify as a Will, as it took into effect once Respondent No.1 was vested with the property's title. It further clarified that the reservation of a life interest, retention of income, and limited mortgage rights in favor of Respondent No.1 did not negate the absolute transfer of ownership.

Since the title was vested in Respondent No.1, the original gift documents were accepted, and the deed was duly registered, the transfer remained valid and irrevocable.

Once a gift has been acted upon, the same cannot be revoked unilaterally or canceled by the Registry Department

The Court termed the unilateral cancellation of the settlement deed and subsequent sale deed in favor of the Appellant to be unjustified, because as per Section 122 of the Transfer Of Property Act, 1992 (“TPA”) once the gift was accepted by the donee than it becomes irrevocable solely at the discretion of the donor, and cannot be canceled by the registry officials.

“The receipt of the original document by the plaintiff and registration of the same, would amount to acceptance of the gift and the transaction satisfies the requirement of Section 122 of the Transfer of Property Act, 1882. The creation of life interest with rights to enjoy the income from the property is a plausible and justifiable reason for the plaintiff not to reside in the premises. Once the document is declared as “gift”, Defendant No.1 had no right to cancel the same unilaterally and the Sub Registrar had no right to register the cancellation deed. Once the document is categorized as a gift, in the absence of any clause or reservation to cancel, the executant has no right to cancel the same. The reasons for cancellation or revocation of gift have to be proved in a court of law. Therefore, according to us, the unilateral cancellation of the document is void and as a natural corollary, the sale deed dated 19.10.1993 executed by Defendant No.1 / father also, is invalid.”, the court observed.

In terms of the aforesaid, the Court dismissed the Appeal, and upheld the High Court's decision which held that the 1985 document was a settlement, transferring ownership immediately in the Respondent No.1's favour. The Court held the daughter's acceptance was valid, rendering the father's cancellation and subsequent sale to the son void.

Case Title: N.P. SASEENDRAN VERSUS N.P. PONNAMMA & ORS..

Citation : 2025 LiveLaw (SC) 345

Click here to read/download the judgment

Appearances:

For Petitioner(s) Mr. V. Chitambaresh, Sr. Adv. Mr. Karthik S.d., AOR Mr. C. Govind Venugopal, Adv.

For Respondent(s) Mr. P.V. Dinesh, Sr. Adv. Mr. Zulfiker Ali P. S, AOR Ms. Anna Oommen, Adv.