Source:  Allahbad High Court 

Why in News? 

The Allahabad High Court recently ruled that oral gifts under Mohammedan Law, which are subsequently documented in writing but remain unregistered, are not subject to proceedings under Section 47-A of the Indian Stamp Act.  

• Justice Piyush Agrawal held in the case of Sahas Degree College Thru Secretary Nadeem Hasan v. State of U.P. Thru District Magistrate J.P. Nagar And Others.   

What was the Background of Sahas Degree College Thru Secretary Nadeem Hasan v. State of U.P. Thru District Magistrate J.P. Nagar And Others.? 

• Ale Hasan made an oral gift (hiba) of Bhumidhari land in Khata No. 76, Khasra Nos. 602/3 and 605/2, total area 1.250 Hectare, situated in Village Bilana, Tehsil Amroha, District J.P. Nagar, in favor of Sarvari Educational Society on 22nd December 2005. 
• The gift was accepted by Sarvari Educational Society, and possession of the land was handed over to the society. 
• A memorandum of the oral gift was drawn on the same date (22nd December 2005). 
• Subsequently, on 06th February 2006, Mohd. Aslam, acting as Manager of the Sarvari Educational Society, made an oral gift in favor of Sahas Degree College. 
• This gift was accepted by Sahas Degree College through its Secretary, Nadeem Hasan (son of Ale Hasan). 
• A memorandum in the form of "Yaddast" (written record) of this second gift was created on 28th February 2006. 
• Both gifts were made orally in accordance with Muslim Personal Law. 
• Proceedings were initiated under Section 47-A of the Indian Stamp Act based on an ex-parte report. 
• An order was passed determining a deficiency in stamp duty amounting to Rs. 11,25,000/- and imposing an equal amount as penalty. 
• The petitioners appealed against this order, but the appeal was rejected. 
• The petitioners contend that the gifts were noted in written memoranda only for record-keeping purposes ("yaddast") and were not required to be registered, therefore no stamp duty was payable on them. 
• The petitioners filed writ petitions challenging the orders passed under Section 47-A of the Indian Stamp Act and seeking to declare Section 2(14-A) of the Indian Stamp Act, 1882 (as inserted by U.P. Act No. 38 of 2001) unconstitutional, void, and ultra vires. 

What were the Court’s Observations? 

• The Allahabad High Court held that oral gifts under Mohammedan Law, which are reduced to writing on unregistered documents, cannot be subjected to proceedings under Section 47-A of the Indian Stamp Act,1899.  
• The court affirmed that Section 47-A of the Indian Stamp Act is applicable only when an instrument or document is presented for registration, and not otherwise. 
• The court observed that if the authorities believed stamp duty was required on the hiba/gift deed, proceedings under Section 33 of the Stamp Act should have been initiated instead of Section 47-A. 
• Relying on the Supreme Court's decision in Hafeeza Bibi & Ors. v. Shaikh Farid (Dead) by LRs. & Ors.,2011 the court reiterated that the three essentials of a gift under Mohammadan Law are declaration of gift, acceptance, and delivery of possession. 
• The court held that Section 129 of the Transfer of Property Act, 1882 preserves the rule of Mohammadan Law and excludes the applicability of Section 123 of the Transfer of Property Act to gifts of immovable property by Mohammadans. 
• The court concluded that the impugned orders could not be sustained in law and quashed them, directing the refund of any amounts deposited by the petitioners pursuant to the impugned orders within two months.

What is Gift under Muslim Law? 

• Hiba, or gift under Muslim law, is defined as an immediate transfer of property from one person to another without any consideration, where the recipient or someone on their behalf accepts the transfer. 
• The legal framework governing Hiba is derived from three primary sources in Islamic jurisprudence: the Quran, Hadith (recorded sayings and actions of Prophet Muhammad), and interpretations by various schools of Islamic thought. 
• The Islamic encouragement of gift-giving is rooted in a hadith attributed to Prophet Muhammad, which states: "Exchange gifts among yourselves so that love may increase." 
• The authoritative Islamic legal text "Kanz al Daquiq" provides a formal definition of Hiba that is recognized in Islamic jurisprudence. 

What are the Essentials of a valid Gift?  

• Declaration by Donor: 
  • A person intending to gift or dispose of property must make a declaration. 
  • The declaration can be either oral or written according to Muslim Law. 
  • A written declaration is known as 'Hiba-Nama', but registration is not mandatory. 
  • The declaration must be express and unambiguous; implied declarations are not valid. 
  • The declaration must be made with free consent and bona fide intention. 
  • For a valid declaration, the following conditions must be met:  
    • It can be oral or written 
    • It must be express, not implied  
    • It must be made with free consent, without coercion, undue influence, fraud, mistake, or misrepresentation  
    • It must be made with bona fide intention, without malice 
  • The Andhra Pradesh High Court has ruled that a declaration of gift requires: 
    • A public statement by the donor, either in the presence of witnesses or otherwise  
    • Clear indication that the property is gifted to the donee  
    • Evidence that the donor has divested ownership by delivering possession to the donee  
    • Acceptance of the gift by the donee 
  • A unilateral declaration without a public statement is not sufficient to establish a valid gift. 
• Acceptance by the Donee: 
  • The donee must clearly express their willingness to accept the Hiba. 
  • Acceptance can be either express or implied. 
  • If the donee denies acceptance, the Hiba becomes void. 
  • A donor cannot force a Hiba upon an unwilling recipient. 
  • Any person capable of holding property can be a donee of a gift. 
  • There are no restrictions based on age, sex, or religion for accepting a Hiba. 
  • Transfers to non-Muslims are valid. 
  • The donee must be in existence at the time of the Hiba, as a living person. 
  • For minors, acceptance can be made with the consent of their legal guardian. 
  • Essential conditions for a valid acceptance by a donee include:  
    • Capability of holding the property 
    • No restrictions based on age, sex, creed, or religion 
    • Can be any legal or juristic person 
    • May include lunatics, minors, or guardians (on behalf of their wards) 
• Delivery of Possession:  
  • A Hiba is not valid unless possession is complete. 
  • Mere transfer of ownership is insufficient; delivery of possession is essential. 
  • The mode of delivery depends on the nature of the property gifted. 
  • Writing is not necessary for a valid gift inter vivos among Muslims, but delivery of possession is required. 
  • Possession can be delivered either actually or constructively. 
  • A donee is considered in possession when they obtain dominion rights over the property. 
  • Registration does not cure the defect of non-delivery of possession in a gift. 
  • Delivery of possession is not required in certain cases:  
    • Hiba from father to minor or lunatic person 
    • Hiba between husband and wife 
    • When donor and donee reside in the same house 
    • When donor and donee have a co-share in the property 
    • Cases of part delivery or incorporeal property 
    • When the donee is already in possession 

What are Requisites and Restrictions for Gift? 

• Competence of Donor:  
  • The donor must be of sound mind and not a minor.   
  • They must have the legal capacity to transfer the property.  
• Competence of Donee: 
  • The donee must be capable of holding and owning the property.   
  • Minors and persons of unsound mind can receive gifts through their guardians.  
• Property Must Exist:  
  • The subject matter of the gift must exist at the time of the Hiba, future properties cannot be given as a Hiba.  
• Lawful Object:  
  • The object of the gift must be lawful under Muslim law.   
  • Any property that is prohibited (haram) cannot be given as a gift.  

What are the Kinds of Gift under Muslim Law? 

• Hiba-bil-iwaz (Gift with Exchange):  
  • This is a gift made with a return.   
  • In this gift, the donor gives something to the donee and, in return, receives something of approximately equal value.  
  • Such a gift must be registered, and an oral promise is not sufficient.  
• Hiba-ba-shart-ul-iwaz:  
  • This type of gift is made with a condition of receiving something in return, if the condition is not fulfilled, the gift may be revoked.  
  • Delivery of possession is necessary to make the gift valid.  
  • The gift becomes irrevocable on delivery by the donee of the iwaz(return) to the donor.  
• Areeat:  
  • An Areeat is not a transfer of ownership, but a temporary license to enjoy the profits so long as the grantor pleases.  
  • Upon the death of donee, the property will be reverted to the donor.  
• Sadaqah:  
  • A Sadaqah is a gift made with the object of acquiring religious merit.  
  • Once the gift of Sadaqah has been made and possession has been delivered, it becomes irrevocable.  
  • Sadaqah is not valid if it consists of an undivided share in property.  

What are the Methods of Transfer of Gift? 

About:

• The mode of possession transfer is contingent on the nature and circumstances of the property involved. Broadly, possession can be transferred through two methods: 
  • Actual Possession: For tangible movable property (e.g., coins, jewelry), actual possession requires physical transfer of the property from one party to another. For immovable property, mere documentation is insufficient; the donor must physically relinquish the property, and the donee must formally take possession. 
  • Constructive Possession: This method involves symbolic transfer when physical delivery is impractical. For incorporeal property, actions must indicate transfer, while for corporeal property, all rights or interests must be formally transferred. The donee must perform an act demonstrating the transfer of ownership. 

Completion of Delivery of Possession:

• For movable property, delivery of possession is deemed complete when the donee physically receives the property. For intangible or immovable property, two theories are applied: 
  • Benefit Theory: The gift is considered complete when the donee begins to enjoy the benefits of the gift. 
  • Interest Theory: The completion of the gift depends on the donor's intent. Judicial decisions are based on the specific facts and circumstances of each case. 

Revocation of Gift: 

• A gift may be revoked by the donor at any time before delivery of the possession.  
• A gift may be revoked even after delivery of possession except in the following cases:  
  • When the gift is made by a husband to his wife or by wife to her husband  
  • When the donee is related to the donor within the prohibited degrees  
  • When the donee is dead  
  • When the thing given has passed out of the donee’s possession by sale, gift or otherwise  
  • When the thing given is lost or destroyed   
  • When the thing given has increased in value, whatever be the cause of the increase   
  • When the thing given is so changed that it cannot be identified, as when wheat is converted into flour by grinding  
  • When the donor has received something in exchange(iwaz) for the gift.

What is Section 47-A of the Indian Stamp Act,1899?

• Section 47-A of the Indian Stamp Act deals with Instruments under-valued, how to be dealt with. 
• Referral to Collector: Upon registration of an instrument related to property transfer, if the Registering Officer suspects that the market value or consideration stated in the instrument is understated, he must refer the instrument to the Collector for valuation and determination of the proper duty payable. 
• Determination by Collector: The Collector, upon receiving such a reference, shall provide the parties with a reasonable opportunity to be heard and conduct an inquiry as per prescribed rules. The Collector will determine the accurate market value or consideration and the appropriate duty. Any deficiency in duty must be paid by the liable party. 
• Collector's Initiative: The Collector, either on his own accord or upon referral from the Inspector General of Registration or the District Registrar, may within three years of the instrument's registration, review the document to ensure the correctness of its market value or consideration. The Collector will follow the procedure outlined in sub-section (2) to determine any additional duty due. This provision does not apply to instruments registered before the commencement of the Indian Stamp (Himachal Pradesh Amendment) Act, 1988. 
• Non-production of Original Document: If the original document is not available or cannot be produced, the Collector may request a certified copy from the Registering Officer and proceed with the assessment as described in sub-section (3). 
• Appeal: Any person aggrieved by the Collector’s order under sub-sections (2) or (3) may appeal to the District Judge within thirty days from the date of the order. Appeals shall be handled in accordance with rules prescribed under this Act. 
• Market Value Definition: For the purposes of this section, the "market value" of property is the price the property would have fetched if sold in the open market on the date of execution of the instrument related to the property transfer, as estimated by the Collector or appellate authority.