Source: Supreme Court 

Why in News?

The Supreme Court recently ruled on a case involving the validity of a gift deed and its attempted revocation, involving the Tamil Nadu Khadi and Village Industries Board. 

• SC ruled this in the case of N. Thajudeen v. Tamil Nadu Khadi And Village Industries Board. 

What is the Background of N. Thajudeen v. Tamil Nadu Khadi And Village Industries Board Case?  

• The case revolves around a property measuring 3,750 square feet located in Survey No. 16/1 in Kotlambakkam Panchayat, District Cuddalore.  
• The property was transferred through a registered gift deed executed on 5th March 1983.
• The donor gifted the property to the Tamil Nadu Khadi and Village Industries Board specifically for the purpose of manufacturing Khadi Lungi and Khadi Yarn.  
• The gift deed was absolute in nature and didn't contain any provisions for revocation. 
• The case went through multiple legal forums before reaching the Supreme Court.  
• Initially, the Trial Court dismissed the suit in 1994, primarily on the grounds that the gift deed was invalid as it was never accepted and acted upon.  
• Challenging this decision, the Tamil Nadu Khadi and Village Industries Board filed an appeal before the District Judge, who allowed it in 1997 and reversed the trial court's judgment.  
• The matter then moved to the High Court through a second appeal, which was dismissed on 11th January 2011.  
• Finally, the case reached the Supreme Court with a 207-day delay, which was condoned by the court. 

What were the Court’s Observations?  

• On Gift Deed Validity: 
  • The gift deed was absolute with no right reserved for revocation 
  • The deed explicitly stated the property was accepted by the respondent 
  • Evidence showed the respondent took possession and applied for mutation 
  • The plaintiff-respondent issued a memo and proceeded to raise construction 
• On Revocation Attempt: 
  • The attempted revocation on August 17, 1987, was held void ab initio. 
  • Non-utilization of property for intended purpose doesn't automatically enable revocation. 
  • No stipulation in gift deed allowed revocation for non-utilization. 
• On Limitation Period: 
  • The suit was not barred by limitation as claimed. 
  • For possessions based on title, the limitation period is 12 years. 
  • When declaration of title is combined with other relief, limitation is governed by the additional relief sought. 

What is Gift under Transfer of Property Act, 1882 (TPA)? 

About 

• A Gift is a unique legal concept representing a transfer of property ownership where the transferor (donor) willingly effects such transfer without any compensation or monetary consideration.  
• The transfer may involve moveable or immoveable property between living persons (inter vivos) or take effect after the donor's death (testamentary).  
• Under the TPA, only inter vivos transfers are considered gifts, covered under Sections 122-129.  
• This stands as an exception to Section 25 of the Indian Contract Act, 1872, which generally voids agreements without consideration. 

Parties in a Gift Transfer 

• Donor 
  • Legal age of majority 
  • Sound mental capacity 
  • If a juristic person (registered societies, firms, institutions), proper authority 
  • Complete ownership rights over the property A gift by a minor or insane person is void. 
• Donee 
  • Need not be competent to contract 
  • Must exist at the time of gift 
  • Can be insane, minor, or even unborn (in mother's womb) 
  • Must be ascertainable (gift to general public is void) 
  • Can include juristic persons 
  • May be multiple persons if ascertainable 

Essential Elements of Valid Gift 

• Transfer of Ownership 
  • Complete divestment of donor's rights 
  • Transfer of all rights and liabilities 
  • Donor must have ownership rights 
  • May include conditional transfers 
  • Must transfer absolute interest 
• Existing Property 
  • As per Section 124 of TPA, the gifted property must be in existence at the time of making the gift, although its conveyance may take place either in future or in present. 
  • Can be movable, immovable, tangible, or intangible 
  • Must be transferable under Section 6 
  • Future property gifts are void 
  • Excludes spes successionis and right to sue 
• Transfer Without Consideration 
  • Must be gratuitous 
  • Even minimal consideration makes it sale or exchange 
  • Love and affection not considered pecuniary consideration 
  • Services rendered qualify as gift 
  • Assumption of liabilities disqualifies as gift 
• Voluntary Transfer with Free Consent 
  • Donor must act of own free will 
  • Consent must be uncoerced 
  • Complete freedom in decision-making 
  • No external pressure or influence 
• Acceptance of Gift 
  • Express or implied acceptance required 
  • Implied through conduct or circumstances 
  • Possession or title deed acceptance 
  • For incompetent donees, acceptance by guardian/parent 
  • Right to reject onerous gifts 
  • Juristic persons need competent authority acceptance 

What is Law Related to Suspension or Revocation of Gifts? 

• As per Section 126 of TPA, a gift which under an agreement between the parties is revocable wholly or partially at the mere will of the donor is void wholly or partially as the case may be. It lays down two modes of revocation of gift which are as follows:  
  • Revocation by Mutual Agreement: 
    • If the donor and the donee have agreed that on the happening of a specified event (not depending upon the will of the donor), the gift should be revoked or suspended. 
  • Revocation by Recission as in the Case of Contractors: 
    • A gift will be revoked if it was not made with the free consent of the donor.  
    • A gift may also be revoked in any of the cases in which if it were a contract, it might be rescinded. As per Section 19 of Indian Contract Act, 1872, a contract may be rescinded in case of coercion, undue influence, fraud and misrepresentation.  
  • Provisions of Section 126 do not apply to an incomplete gift, such a gift can be revoked at any time.