'Consideration' Need Not Be Monetary: Supreme Court Upholds Settlement Deed Requiring Transferee To Care For Transferors & Do Charity

The Supreme Court upheld a property transfer based on a settlement deed requiring the transferee to care for the transferors and perform charitable work.

The bench comprising Justice CT Ravikumar and Justice Sanjay Karol rejected the argument that the consideration can only be in money. Instead, it justified the consideration of taking care of the transferor and doing charity work as a valid consideration for the transfer of the immovable property.

“What flows from the above-cited judgments as also provisions of law, is that 'consideration' need not always be in monetary terms. It can be in other forms as well. In the present case, it is seen that the transfer of property in favour of Govindammal was in recognition of the fact that she had been taking care of the transferors and would continue to do so while also using the same to carry out charitable work.”, the court observed upon referring to precedents.

Background

This appeal was filed against a judgment by the Madras High Court, which partially overturned concurrent findings of the Trial Court and First Appellate Court. The dispute pertains to dividing a coparcenary property among heirs and the validity of a settlement deed executed in 1963 in favor of Govindammal, granting her 2/3rd of the property. The deed required Govindammal to take care of the transferor and continue charity work.

The respondents argued that the settlement deed was nothing but a gift deed because it was without consideration as taking care of the transferor and doing social work would not qualify as consideration.

The appellants argued for upholding the findings of the lower courts, which recognized the settlement deed as valid. In contrast, the High Court treated it as a gift deed and modified the division of the property.

Issue

Whether the 1963 deed, which granted Govindammal 2/3rd of the property, was a "settlement deed" or a "gift deed."

Observation

Setting aside the High Court's decision, the judgment authored by Justice Karol observed that the 1963 deed was a settlement deed, not a gift deed.

According to the court, consideration need not always be monetary, and the deed that transferred the property to Govindammal in consideration of her care for the transferors and her promise to continue charitable work would qualify as valid consideration under the law.

“In that view of the matter, the High Court has erred in taking such a constricted view of 'consideration', especially taking note of the fact that this settlement was between the members of a family.”, the court said.

The judgment referred to the definition of 'consideration' in the Indian Contract Act, 1872.

The Court also said that the High Court in the second appeal erred in overturning the well-reasoned judgment of the trial court and first appellate court.

The court referred to the case Santosh Hazari v. Purushottam Tiwari (2001) where it was held that a substantial question of law, which is sine qua non for the maintainability of a second appeal, shall be so, if:-

“a) Not previously settled by law of land or a binding precedent.

b) Material bearing on the decision of case; and

(c) New point raised for the first time before the High Court is not a question involved in the case unless it goes to the root of the matter. Therefore, it will depend on facts of each case.”

The Court said that since none of the aspects referred to above appear was met in this case justifying the High Court's overturning of concurrent findings, thus Govindammal (now her LRs) is indeed entitled to a 2/3rd share in the property.

Accordingly, the appeal was allowed.

Appearance:

Mr. Ragenth Basant and Mr. S. Nagamuthu, Senior Advocates for the appellants.

Mr. V. Prabhakar, Senior Advocate for the respondents

Case Title: RAMACHANDRA REDDY (DEAD) THR. LRS. & ORS. VERSUS RAMULU AMMAL (DEAD) THR. LRS., CIVIL APPEAL NO. 3034 OF 2012

Citation : 2024 LiveLaw (SC) 895

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