Transfer of possession not essential under a gift: SC

A Large Bench of the Supreme Court of India clarified that the ‘transfer of possession’ of immovable property under a gift is not an essential prerequisite under Transfer of Property Act (“Act”) and does not affect the validity of a gift.

“A conjoint reading of Sections 122 and 123 of the Act makes it abundantly clear that “transfer of possession” of the property covered by the registered instrument of the gift duly signed by the donor and attested as required is not a sine qua non for the making of a valid gift under the provisions of Transfer of Property Act, 1882”, the Court ruled and added that retention of possession of the gifted property for enjoyment by the donor during her life time and the right to receive the rents of the property does not in any way affected the validity of the gift.

The Court further said that the matter can be viewed from yet another angle. Section 123 of the T.P. Act is in two parts. The first part deals with gifts of immovable property while the second part deals with gifts of movable property. Insofar as the gifts of immovable property are concerned, Section 123 makes transfer by a registered instrument mandatory. In contradiction to that requirement, the second part of Section 123 dealing with gifts of movable property and simply requires that gift of movable property may be affected either by a registered instrument signed as aforesaid or “by delivery”. So the transfer in the case of immovable property no doubt requires a registered instrument but the provision does not make delivery of possession of the immovable property gifted as an additional requirement for the gift to be valid and effective.

“If the intention of the legislature was to make delivery of possession of the property gifted also as a condition precedent for a valid gift, the provision could and indeed would have specifically said so. Absence of any such requirement can only lead us to the conclusion that delivery of possession is not an essential prerequisite for the making of a valid gift in the case of immovable property”, the Court observed.

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