Report No. 70

Chapter 107

Form, Validity and Effect of Gifts

Sections 123 to 128

107.1. Section 123.-

After the definition of gift in section 122, follow a few sections, concerned with the form, validity and effect of gifts. First, as to form, section 123 provides as follows:

"123. For the purpose of making a gift of immovable property, the transfer must be effected by a registered instrument signed by or on behalf of the donor, and attested by at least two witnesses.

For the purpose of making a gift of movable property, the transfer may be effected either by a registered instrument signed as aforesaid or by delivery.

Such delivery may be made in the same way as goods sold may be delivered."

107.2. Exclusion of actionable claims.-

Our first recommendation as to section 123 is to exclude actionable claims from the scope of this section.1 In support of this recommendation2 it is enough to state that gifts of actionable claims are, at least as regards their formalities, governed by section 130.

1. See section 130.

2. For draft, see para. 107.9, infra.

107.3. Second paragraph-movable property.-

Secondly, the second paragraph of the section requires that where movable property is not transferred by delivery of possession, then it is necessary that there must be a registered instrument for the purpose. In our opinion, the requirement of registration is unnecessary; an instrument in writing should be enough for making a gift of movable property. Parties may procure registration if they so choose.

But it should not be an obligatory formality in the case of movable property, and writing should suffice. It may be that registration ensures publicity, but in the case of movable property we do not think that this can be a conclusive consideration. Against any advantage that may be obtained by way of publicity must be counter-balanced the inconvenience resulting from a mandatory requirement of registration.

No doubt, there is an alternative mode, namely, delivery. But if the gift is in writing, registration should not be insisted on. It can perhaps be argued that the requirement of registration is intended to prevent coercion, but it can be stated, in reply, that a person who wants to over-power the will of the donor or to practise deception can compel or induce the donor to make a gift by delivery. It appears to us that the requirement of registration is unnecessary in the case of movable property. A written instrument should do.

In order to keep a safeguard for solemnity, attestation may be provided for by way of abundant caution. We recommend accordingly.1 Our recommendation to abolish the requirement of registration in case of gift of movable property is subject to reservation by Shri Sen-Varma.

1. This is subject to reservation by Shri Sen-Varma.

107.4. Postponement of registration.-

Thirdly, postponement of registration is immaterial to the validity of a gift. Where a gift has been effected by a registered instrument duly attested and the gift has been acted upon by the donee, the title legally passes to the donee and cannot be defeated by any intention of the donor to the contrary.1 Thus, in a case where the gift deed was deposited with the Registrar, but was taken away by attacking the Registrar, it was held that the gift was completed, and could not be superseded by a subsequent registered deed.2

We shall deal with this aspect under section 126, where we discuss the question of revocation after acceptance.

1. Bhagatrai v. Ghanshyamdas, AIR 1948 Nag 328.

2. Sobhanath v. Prithipal, AIR 1948 Oudh 223 (224); Narayanaswami, AIR 1954 Mad 215.

107.5. Expression relating to signature.-

Next, as to the expression "signed by or on behalf of the donor", some comments are required. The Act has used different expressions in different sections to indicate signature. Thus, in section 130, the words used are-"signed by the transferor or his duly authorised agent". In section 59, the expression used is "signed by the mortgagor". In sections 54 and 107, there is no reference to the signature of the transferor.

It has been observed by the Allahabad High Court1 that the words "on behalf of" have been loosely used in section 123, and must be construed on meaning only a signature by a person duly authorised by the donor. We agree, with respect, with this construction. We do not, however, recommend a change in the section on this point, because in our view the position is clear.

1. 1902 LIR 24 All 319 (325, 327) (Stanley, C.J.).

107.6. Joint account of husband and wife.-

Finally, we may now refer to an interesting subject which involves several branches of law-family law, trusts, transfer and banking. Controversies often arise as to whether there is a gift where the husband deposits money in bank under a joint account with his wife which is payable to either or survivor. No doubt there cannot be a gift unless there is an intention to make a gift. In that sense, it is legitimate to enquire whether the person who deposited the money intended really to make a gift, or whether he still wanted to retain control over the money.

For this purpose, it is even permissible to consider the applicability of various doctrine, such as the English doctrine of advancement,1 the provisions of the Indian Trusts Act relating to resulting trusts, the Indian practice of Benami transactions, and the like. Such enquiry, however, can only be for the purpose of ascertaining the intention of the alleged donor to vest the alleged donee with a beneficial interest in the money. It does not conclude the matter when one comes to consider the validity of the gift from the formal point of view.2

1. As to advancement, see-

(a) Shambhoonath v. Pushkarnath, AIR 1945 PC 10;

(b) Buram Ditta v. Ram Ditta, AIR 1928 PC 172;

(c) Mujitabi Begum v. Mehbub Rehman, AIR 1959 MP 359 (364), paras. 29 & 30.

2. See para. 107.7, infra.

107.7. Formal aspect.-

In the undermentioned case,1 a deposit was made in a bank by the husband in the joint names of himself and his wife in the following terms-"Mr. and Mrs. Hope, payable to either or survivor". It was held that there was no gift of the money by the husband to the wife as there was no delivery of the money by the husband to the wife within the meaning of section 123.2 It was held that the English law, which presumed a gift by the husband to the wife in such a case defeasible on the death of the wife in the lifetime of the husband, was not applicable in India.

In a Bombay case,3 there was a deposit of money in joint names of husband and wife. Deposit was payable to wife only after the husband's death. It was held that the deposit did not operate as a gift to the wife,4 as there was no such delivery as was required to make a valid gift, and as the doctrine of advancement was not applicable in India.

1. Paul v. Nathaniel, AIR 1931 All 596 (597).

2. Cowdry v. Imp. Bank of India, AIR 1956 Mad 56 (58).

3. Keshavlal v. Bai Dahi, AIR 1943 Born 7 (9).

4. Cf. Krushandas v. Bhagwandas, AIR 1976 Born 153.

107.8. Nature of bank deposit.-

It should, however, be noted that fixed deposit in a bank is not a property in possession. It is a "debt" and, as such, an actionable claim. Hence a gift of such deposit is not a gift of movable property in possession, but a gift of an actionable claim. The handing over of a fixed deposit receipt, therefore, is not enough to pass title to the deposit in terms of section 130. The gift must comply with the requirements of section 130 which deals with the transfer of actionable claims.1 We have already recommended2 that actionable claims should be expressly excluded from section 123.

1. Rajeshwari v. Mohan Bikram, AIR 1945 All 409 (411).

2. Para. 107.2, supra.

107.9. Recommendation to revise section 123, second paragraph.-

In the light of what we have stated above, we recommend that section 123, second paragraph, should be revised as follows:

"for the purpose of making a gift of movable property, the transfer may be effected either by an instrument in writing signed as aforesaid and attested by at least two witnesses or by delivery."1

Besides this, the following Exception should be inserted below section 123:

"Exception.-Nothing in this section applies to the transfer of an actionable claim."

1. This is subject to reservation by Shri Sen-Varma.

107.10. Section 123(A) (New)-Unregistered donee.-

Before proceeding to the next section, it is necessary to refer to the need for inserting a new section on the subject of incomplete gifts. While discussing section 53A (part performance), we have also discussed the desirability of intorducing1 a provision for the protection of donees who are in possession under an unregistered deed as gift. The relevant provision on the subject, as already recommended in that discussion, could be inserted in the Chapter on Gifts. The section could be suitably numbered as section 123A and worded thus-(This is subject to reservation by Shri Dhavan and Shri Sen-Varma):2

"123A. Notwithstanding anything contained in section 123, where any person agrees without consideration to transfer any immovable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty:

and the transferee has, in part performance of the agreement, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession under the agreement;

then, notwithstanding that the agreement though required to be registered, has not been registered, or, where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefor by section 123 or by any other law for the time being in force, the transferor or any person claiming under him, shall be debarred from enforcing or maintaining against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continues in possession other than a right expressly provided by the terms of the agreement:

Provided that nothing in this section shall affect the right of a transferee for consideration who has no notice of the agreement or of the part performance thereof

Explanation 1.-For the purposes of this section, it is immaterial whether the transferee or a person claiming under him is a plaintiff or a defendant.

Explanation 2.-A person who obtains or continues in possession, but is dispossessed otherwise than in due course of law, is entitled to the benefit of this section.

Explanation 3.-Where property is sold by auction in execution of a decree of a Court, an auction purchaser is a person who claims under the decree holder for the purposes of this section."

1. See discussion as to section 53A, Chapter 49, supra.

2. Section 123A is subject to reservation by Shri Dhavan and Shri Sen-Verma.

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