Know The Law | Distinction Between Gift/Settlement Deed & Will : Supreme Court Explains
The Supreme Court recently explained the distinction between the gift deed, settlement deed, and Will. 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...
The Supreme Court recently explained the distinction between the gift deed, settlement deed, and Will.
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, when a right in the property is to take effect only after the testator's death and is inherently revocable during the testator's lifetime, it qualifies as a Will.
“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.”, observed the bench comprising Justice J.B. Pardiwala and Justice R. Mahadevan.
The Court observed that while Gift, Settlement, and Will all involve the voluntary transfer of property, the legal effect depends on whether the transfer is immediate (gift/settlement) or Post-death (will). The Court stated that in the gift and settlement deed, the transfer of interests in the property takes place immediately during the maker's lifetime, whereas in Will the transfer would take place after the maker's death.
In other words, if the property rights are vested with the transferee with a condition that the actual delivery of possession takes place at a future date then such a transaction cannot be termed as Will, because the property rights were already vested with the donee/transferee.
"The element of voluntary disposition is common to all the three deeds. The element of gift is traceable to both “settlement” and “will”. As settled in law, the nomenclature of an instrument is immaterial and the nature of the document is to be derived from its contents. While so, a voluntary disposition can transfer the interest in praesenti and in future, in the same document. In such a case, the document would have the elements of both the settlement and will. Such document, then has to be registered and by operation of the doctrine of severability, becomes a composite document and has to be treated as both, a settlement and will and the respective rights will flow with regard to each disposition from the same document. It is pertinent to mention here that the reservation of life interest or any condition in the instrument, even if it postpones the physical delivery of possession to the donee/settlee, cannot be treated as a will, as the property had already been vested with the donee/settlee.", the court observed.
The Court referred to the case of Mathai Samuel v. Eapen Eapen (2012) 13 SCC 80 where the Court outlined the requirements for both a Will and a gift and held that the real and the only reliable test for the purpose of finding out whether the document constitutes a will or a gift is to find out as to what exactly is the disposition which the document has made, whether it has transferred any interest in praesenti in favour of the settlees or it intended to transfer interest in favour of the settlees only on the death of the settlors.
“We may point out that in the case of a will, the crucial circumstance is the existence of a provision disposing of or distributing the property of the testator to take effect on his death. On the other hand, in case of a gift, the provision becomes operative immediately and a transfer in praesenti is intended and comes into effect. A will is, therefore, revocable because no interest is intended to pass during the lifetime of the owner of the property. In the case of gift, it comes into operation immediately. The nomenclature given by the parties to the transaction in question, as we have already indicated, is not decisive. A will need not be necessarily registered. The mere registration of “will” will not render the document a settlement. In other words, the real and the only reliable test for the purpose of finding out whether the document constitutes a will or a gift is to find out as to what exactly is the disposition which the document has made, whether it has transferred any interest in praesenti in favour of the settlees or it intended to transfer interest in favour of the settlees only on the death of the settlors.”
"There must be a transfer of interest in praesenti for a gift or a settlement and in case of postponement of such transfer until the death of the testator, the document is to be treated as a will. The fact that a document is registered, cannot be the sole ground to discard the contents and to treat the document as a gift, just because the law does not require a will to be registered.", the Court added.
The Court was hearing the case where it had to interpret a document through which a right in the property was transferred to her daughter by the transferor out of love, care, and affection, who retained a life interest in the property. The property's possession was not vested with the daughter; however, the title rights were vested with her after she accepted the property papers and completed the registration process.
The Court had to interpret whether the document was a gift deed, settlement deed or a Will, to determine their revocability under the law.
The Court held that the gift made by the transferor to her daughter via a settlement deed met the essential requirements of both a gift and a settlement deed. Since the deed created an immediate interest in the daughter's favor and was accepted during the transferor's lifetime, it satisfied the conditions of a valid gift under Section 122 of the Transfer of Property Act, 1882 (TPA). Additionally, the creation of a life interest in the transferor's favor, along with the transfer of property out of love, care, and affection, fulfilled the criteria of a settlement deed.
The Court clarified that delivery of possession is not a sine qua non for validating a gift or settlement. It further held that possession of property documents by the transferee is sufficient to fulfill the requirement of acceptance under the Transfer of Property Act (TPA).
“for the document to be valid, it is sufficient if it is proved that the same was acted upon during the life time of the executant. In the present case, it is not in dispute that the plaintiff has registered the instrument. Such registration by the plaintiff is possible only if the document was handed over by Defendant No.1. The factum of acceptance can be derived from the conduct of the parties. This Court in the judgment in Daulat Singh (Supra) has held that the possession of the gift itself would amount to acceptance. The plaintiff, when the suit was filed, was in possession of the original title deed.”, the court observed.
Also From Judgment: Delivery Of Possession Not Essential To Validate Gift/Settlement; Gift Document Can't Be Unilaterally Cancelled By Donor : Supreme Court
Case Title: N.P. SASEENDRAN VERSUS N.P. PONNAMMA & ORS.
Citation : 2025 LiveLaw (SC) 345
