• What is the best way to structure a Gift Deed to ensure consideration amount is paid in the future?

Background: There is a immovable property which was owed by A. A has passed away without any will thereby leaving his sons (B & C) as the joint owners of the property. 

Current scenario: B wants to buy C's stake in the property and a mutually agreement is reached. Now, B wants C to transfer the property by way of Gift deed. However, B wants the Gift Deed to be executed before the entire consideration amount is paid as the mutation process takes a few months. Is there any way for C to ensure that the consideration amount is paid by B after the Gift Deed has been executed and mutation process has been completed? The following are my thoughts:
1) Conditional gift deed - which can be cancelled/revoked if the consideration amount has not been paid?
2) Have a Gift Cancellation deed signed for safety?
3) Have an additional registered agreement?

Additional information: Property located at Salt Lake, Kolkata, West Bengal

Thank you.
Asked 4 years ago in Property Law
Religion: Hindu

First answer received in 10 minutes.

Lawyers are available now to answer your questions.

13 Answers

Firslty, yes there can be a gift deed for consideration depending upon the future payment with regard to any future event happening i.e., contingment clause.

Secondly, yes it also consists a clause to cancel the same if the clause doesn’t fulfill.

Sanjay Baniwal
Advocate, South Delhi
5464 Answers
13 Consultations

5.0 on 5.0

Dear Sir/Madam, Gift Deed executed by B in favour of C is impossible by way of paying sale consideration/consideration as per law, the law says that "Under section 122 of the Transfer of Property Act, 1882, you can transfer immovable property through a gift deed. Like a sale deed, a gift deed contains details of the property, the transferred and recipient. But instead of a sale consideration in a sale deed, a gift deed allows you to transfer ownership WITHOUT ANY EXCHANGE OF MONEY. Registering a gift deed with the sub-registrar is mandatory as per section 17 of the Registration Act, 1908, and as per section 123 of the Transfer of Property Act. If you don’t do this, the transfer will be invalid".

and also "Once a gift deed of an immovable property is executed in favour of any recipient, the donor does not have the right to revoke or cancel the deed at a later stage, unless there is a specific clause mentioned in the deed. Section 126 of the property transfer Act provides for a situation wherein a gift deed may be revoked by the donor. For instance, if the property was gifted so that the recipient can reside in it, upon death of the recipient, the property will get transferred back to the donor if he is alive, else to the heirs of the recipient. Such details, however, need to be specifically mentioned in the gift deed".

1. Gift deed cannot be cancelled/revoked without any valid reason. (there is no question arise consideration amount has been paid to B by C not at all).

2. Not arise.

3. Not necessary.

.... by Chandrashekhar Vithal Jadhav, Advocate & Law Consultant,

Ex-Principal District Government Pleader, Bangalore Urban & Rural Districts.

C. V. Jadhav
Advocate, Bangalore
545 Answers
18 Consultations

4.7 on 5.0

Sir for your safety and correct procedure a sale deed has to be executed as in gift deed under transfer of property act there cannot be any consideration invopved. So if there is consideration it is not gift it's sale.

So make an sales did with clause that in so and so time sale cosiderstion has to be paid.

1. No conditional gift deed possible.

2. You cannot make that registered after gift deed as title will effect title further it will be long litigation getting it cancelled and there can be adverse decision also. So it won't serve your purpose if no consideration amount is written.

3. Gift won't be valid with consideration .

So execute a sale deed both parties will be free from risk.

Shubham Jhajharia
Advocate, Ahmedabad
25516 Answers
179 Consultations

5.0 on 5.0

Gift deed is made without consideration. If consideration is mentioned in the gift deed it is not valid as such it is advisable to make a sale deed In favour of B. In case you want the interest of C to be secured better make a registered agreement in that regard that only part consideration is paid and remaining will be paid after the mutation is completed. This way interest of both parties will be secured.

Swarnarka Chowdhury
Advocate, Mysore
1878 Answers
5 Consultations

5.0 on 5.0

1) refuse to execute gift deed if money is not received by you at time of execution of gift deed

2) once gift deed is executed title passes on to donee

3) mutation is only for payment of property taxes

4) it does not confer title to property

5)best option is to execute sale deed

Ajay Sethi
Advocate, Mumbai
87938 Answers
6207 Consultations

5.0 on 5.0

1. A gift deed with conditions or with any consideration is invalid.

2. No, the gift deed cannot have any condition.

3. No such thing is valid in law.

A registered gift deed, to make it effective, should not have any conditions embedded to it.

T Kalaiselvan
Advocate, Vellore
78097 Answers
1543 Consultations

5.0 on 5.0

Hi

1) First and foremost, in case of a gift deed, there is NO sale consideration.

2) The entire transaction is based on love and affection and as such if there is any sale consideration (past/present/future) there is NO legal option at all to transfer the property through a gift deed. In a gift deed, the value of property is mentioned only to ascertain the extent of stamp duty and registration charges.

3) The present stamp duty is 0.5% of market value and present registration charges are 0.5% of market value(total 1% of market value of property for gift deed

4) In your case, it will also be construed that entire gift deed by itself is a sham document solely intended to cause loss of revenue , non disclosure of income(for sale consideration) etc and hence gift deed can be liable to treated as void document.

5) An alternative could be to enter in to a registered partition /settlement deed between B and C with a future date for sale consideration which is perfectly valid in eyes of law.

6) The present stamp duty is 0.5% of market value and present registration charges are 0.5% of market value(total 1% of market value of property for partition/Settlement deed which is the same as Gift Deed.

7) Since the stamp duty and Registration charges for both gift deed and partition/settlement deed are the same , it is suggested that both B and C can opt for execution of partition/settlement deed between them and based on partition/settlement agreement, mutation of properties (for purpose of paying municipal taxes, land cess etc). can be completed.

Hope this information is useful.

Rajgopalan Sripathi
Advocate, Hyderabad
2169 Answers
394 Consultations

5.0 on 5.0

Dear Sir,

Options for you are:

a) Hand advance dated cheque

b) Keep amount in FD for 6 months or so either in his name in joint names

c) Keep amount in the custody of common friend.

My answers are as follows:

1) Conditional gift deed - which can be cancelled/revoked

if the consideration amount has not been paid?

Ans: It cannot be revoked without consent of done

2) Have a Gift Cancellation deed signed for safety?

Ans: It has to be registered, it is not possible.

3) Have an additional registered agreement?

Ans: Conditional sale deed may be got executed but it is also complicated.

The Law of Gift is as follows:

=============================================================================

Gift Deed – once registred no cancellation

A gift is a money or house, shares, jewellery, etc. that is received without thought, or merely an asset acquired without making a payment against it and is a capital asset for the ‘Recipient.’ It can be as cash or movable property or immovable property.

If you might want to gift the property to any of your blood relatives, Gift deed can be used. In the case of immovable property, it is required to register the Gift Deed as per Section 17 of the Registration Act, 1908.

This kind of transfer is unavoidable. When you gift the assets like land, it belongs to the beneficiary or receiver of the gift and you cannot switch the transfer or even ask money related compensation.

It can be a cost effective method of transferring the ownership.

3. Relinquishment Deed or Release Deed

If there are multiple owners of assets, and if one of the co-owner needs to transfer his/her rights in the property to another co-owner then this can be possibly done through the execution of RELINQUISHMENT DEED.

The property transfer through Relinquishment deed can be for consideration or without consideration i.e. without any exchange of money. Like gift deed, this transfer is also unavoidable.

4. Partition Deed or Settlement Deed

Partition Deed is executed by the co-owners of the land when a court order or order of a local revenue authority has to be implemented.

In the case of Settlement Deed, however, the property is owned by a third person and is settled for individuals who do not have any past interest in the said property and the share of the heir is as per the desires of the settler.

Unlike WILL, Settlement is a non-testamentary report which becomes operative immediately. Will is a testamentary file, which becomes operative after the expiration of its owner. Also, WILL is revocable and can be modified by the testator, whereas Settlement deed is unalterable.

========================================== Section 17 in The Registration Act, 1908

17. Documents of which registration is compulsory.—(l) The following documents shall be registered, if the property to which they relate is situate in a district in which, and if they have been executed on or after the date on which, Act No. XVI of 1864, or the Indian Registration Act, 1866, or the Indian Registration Act, 1871, or the Indian Registration Act, 1877, or this Act came or comes into force, namely:—

(a) instruments of gift of immovable property;

Section 126 in The Transfer of Property Act, 1882

126. When gift may be suspended or revoked.—The donor and donee may agree that on the happening of any specified event which does not depend on the will of the donor a gift shall be suspended or revoked; but a gift which the parties agree shall be revocable wholly or in part, at the mere will of the donor, is void wholly or in part, as the case may be. A gift may also be revoked in any of the cases (save want or failure of consideration) in which, if it were a contract, it might be rescinded. Save as aforesaid, a gift cannot be revoked. Nothing contained in this section shall be deemed to affect the rights of transferees for consideration without notice. Illustrations

(a) A gives a field to B, reserving to himself, with B’s assent, the right to take back the field in case B and his descendants die before A. B dies without descendants in A’s lifetime. A may take back the field.

(b) A gives a lakh of rupees to B, reserving to himself, with B’s assent, the right to take back at pleasure Rs. 10,000 out of the lakh. The gift holds goods as to Rs. 90,000, but is void as to Rs. 10,000, which continue to belong to A.

No Authority Can Cancel Registered Documents: SC [Read Judgment]

The Supreme Court in Satya Pal Anand vs. State of M.P, has held that once the document is registered, it is not open to any authority, under the Registration Act, 1908, to cancel the registration. In the instant case, an application was moved by a person before the Sub-Registrar (Registration) calling upon him to cancel the registration of extinguishment deed executed by the Society cancelling an allotment of plot. Aggrieved by rejection of his application, on the ground that Sub Registrar has no jurisdiction to cancel the registration of a registered document in question, he approached Inspector General (Registration), but in vain....

===========================================

Essential Elements Of Gift

The term gift denotes a voluntary transfer of real or personal property to another made without any particular cause and without consideration. The person who gives the gift is called donor and the one who receives the gift is called donee. A gift is generally made out of affection, respect, charity, or like impulses, and not from any moral or legal duty. Gifts enjoy tax exemption and a payment made without conditions and out of respect or charity or in anticipation of economic benefits is generally characterized as gift under tax law. A charity will normally issue a tax receipt for the gift amount and it can provide a tax receipt for gift- in -kind also.

A gift can be made during the donor’s lifetime (inter-vivos) or by will (testamentary). The two principal categories of gifts are inter vivos gifts and causa mortis gifts. An inter vivos gift is perfected and takes effect during the lifetime of the donor and donee and is irrevocable in nature. A gift causa mortis is one that is made in anticipation of imminent death. This type of gift takes effect upon the death of the donor from the expected disease or illness and may be revoked until the donor’s death. There is a third category called testamentary gift made by will. It operates to transfer ownership only subsequent to the death of the donor.

Essential elements of a gift include: capacity of the donor; intention of the donor to make the gift; completed delivery to or for the benefit of the donee; and acceptance of the gift by the donee. A gift can be made either in the form of cash or a gift-in-kind. A gift-in-kind means a gift of property other than cash and includes inventory, capital property, donations of real estate, stocks and bonds, and personal items. A donor can make a gift to a registered charity or other qualified donee. Services are not property and hence will not constitute the subject matter of gifts. Gift should be given voluntarily, of one’s free will and the donor who makes the gift should transfer the full ownership and possession to the donee. Generally a donor transfers property as a gift without expecting anything in return and donor cannot part with the gifted property in the name of a contract or court order.

The three elements which are essential to the making of a valid gift are delivery, donative intent, and acceptance by the donee. The delivery of a gift is complete when it is made directly to the donee. Delivery can also be made to a third party on behalf of the donee. The third person can be the donor’s agent, bailee, or trustee. In the case of delivery to a third party, delivery is deemed to be complete only when such person actually hands over the property to the donee.

A delivery may be actual, implied, or symbolic, and requires some affirmative act to take place. For instance, A wishes to gift a cow to his daughter B. The actual delivery takes place when A hires a person to bring the cow to B’s farm. A symbolic delivery of a car, for instance can occur when the donor hands over the key of the car to the donee. Delivery is complete only when the donor surrenders control of the property. For example, an individual who expresses the desire to make a gift of a car to another but continues to drive the car whenever he or she wishes has not surrendered control of the car.

If the donor and donee reside in the same house, the gift need not be removed from the house and can be kept in the same house. States do not require too many formalities to establish delivery and if it is proved that the donor relinquished all claim to the gift and recognized the donee’s right to exercise control over it, courts consider it as an adequate indication of a transfer by gift. In the case of a gift to an infant or an insane person who does not have legal capacity to accept delivery, such delivery can be made to an individual who will hold it for such infant or insane person.

If the donee is out of the country at the time of making the gift, delivery can be made to someone else who agrees to accept the property for the donee. However, if the individual accepting delivery is employed by the donor, it is presumed that the donor has not rendered control of the property and that delivery has not actually been made. “The individual accepting delivery must be holding the property for the donee and not for the donor.”

The second ingredient of a valid gift is donative intent, which is inferred from the “donor’s words, the surrounding circumstances, the relationship of the parties, the size of the gift in relation to the amount of the donor’s property as a whole, and the behavior of the donor towards the property subsequent to the purported gift.”

The intent must be present at the time the gift is made and is different from a mere expectation. For example, if one person promises to give a house to an artist “someday,” the promise is unenforceable because there is no intent to make an effective gift at the time of the promise.

The third element for a valid gift is acceptance. Acceptance means that the donee unconditionally agrees to take the gift. It is necessary for the donee to agree at the same time the delivery is made. The gift can, however, be revoked at any time prior to acceptance.

Kishan Dutt Kalaskar
Advocate, Bangalore
6050 Answers
381 Consultations

4.8 on 5.0

1. Mutation does not create title and hence not much importance should be given to he issue of mutation. Do not execute or register any sale deed unless and until you get most part of the payment.

2. Gift deed once registered can not be cancelled unless a suit is filed in court which would take many years.

3. No additional agreement would protect you.

So in other words go for registration only when you received either 100% or at least 80% of the payment.

Devajyoti Barman
Advocate, Kolkata
22515 Answers
402 Consultations

5.0 on 5.0

1. There is no such thing as a conditional gift deed. A gift deed once made is irrevocable.

2. If the brother is ready to pay consideration then why enter a gift deed in first place?

3. Simply execute a release deed for consideration between you two

4. It is not that the consideration has to be paid in full at the time of signing and registration of the deed. It can also be paid later on as agreed between the parties to the deed and in the event of default to so pay, the transaction will reverse and the property goes back to the releasor.

Yusuf Rampurawala
Advocate, Mumbai
6882 Answers
79 Consultations

5.0 on 5.0

It is settled law that a gift cannot be made in lieu of consideration. If there is consideration in the Transfer of Property by way of gift then it shall be treated as a sale under section 54 of the Transfer of Property Act.Therefore you cannot make any provision in the gift deed about payment of any consideration even future consideration.

You can insert a clause in the gift deed that the gift will take place in future date or the gift will take place immediately after the mutation. Thereafter that gift deed will be revocable before  expiration of that date or the gift will be cancelled automatically upon non mutation.

Shivendra Pratap Singh
Advocate, Lucknow
5127 Answers
78 Consultations

4.9 on 5.0

Hello,

There is no consideration in case of gift deed.

C will have to sell the property to B.

Note that there is no consideration involved in a gift deed, gift deed means transfer of a property as gift without any consideration.

Regards

Anilesh Tewari
Advocate, New Delhi
17940 Answers
377 Consultations

5.0 on 5.0

Dear Cleint,

Gift Deed executed in exchange of consideration is void. Go for Release deed, Only option.

Clause of revocation is valid in release deed for default of payment on certain date/time.

Yogendra Singh Rajawat
Advocate, Jaipur
21481 Answers
31 Consultations

4.4 on 5.0

Ask a Lawyer

Get legal answers from lawyers in 1 hour. It's quick, easy, and anonymous!
  Ask a lawyer