By Akash Rathi, Advocate, Partner at Lex Maven —

Offen courts come across interpretation relating to deeds, agreements and has to a certain the nature of transaction upon going through the language, terms and condition, conduct of parties etc.

Recently the Hon’ble Supreme Court in the matter of Ramachandra Reddy (Dead) Thr. LRS. & Ors. Versus Ramulu Ammal (Dead) Thr. LRS.  In Civil Appeal No. 3034/2012 had to deal with the interpretation of deed and was to decide whether such transaction was gift deed or settlement and the primary deciding factor was ‘Consideration’ as the gift deed does not require any consideration whereas settlement deed requires consideration.   

DEED IN DISPUTE

In the present case, the document was styled as a settlement deed whereby one of the coparcener i.e. C executed settlement deed in favour of daughter (D) of his brother B whereby his share in the suit property i.e. 1/3 was transferred to D. Later on son of brother A disputed the deed resulting into filing of suit of title in respect of 2/3 share by D.

Trial court degreed the suit which was affirmed in first appeal however High Court in the second appeal set aside the decree.     

GIFT

The Transfer of Property Act, 18823

defines ‘gift’ as: –

122. “Gift” defined.—“Gift” is the transfer of certain existing moveable or immoveable property made voluntarily and without consideration, by one person, called the donor, to another, called the donee, and accepted by or on behalf of the donee.

Acceptance when to be made.—Such acceptance must be made during the lifetime of the donor and while he is still capable of giving.

If the donee dies before acceptance, the gift is void.

SETTLEMENT

The term ‘settlement’ does not find a place in the TPA. It is defined under the

Indian Stamp Act, 1899. Section 2 (24) reads: –

Settlement.—“Settlement” means any non-testamentary disposition, in writing, of movable or immovable property made—

(a)     In consideration of marriage,

(b)     For the purpose of distributing property of the settlor among his family or those for whom he desires to provide, or for the purpose of providing for some person dependent on him, or

(c)      for any religious or charitable purpose;

‘disposition’ for reference, means a devise “intended to comprehend a mode by which property can pass, whether by act of parties or by an act of the law” and “includes transfer and charge of property”.

VIEW OF HIGH COURT

the High Court held that the deed executed was, in fact, a gift deed

The reasoning given by the High Court is: –

“20. From a conspectus, therefore, of the definitions contained in the dictionaries and the books regarding a gift or an adequate consideration, the inescapable conclusion that follows is that “consideration” means a reasonable equivalent or other valuable benefit passed on by the promisor to the promise or by the transferor to the transferee. Similarly, when the word “consideration” is qualified by the word adequate it makes consideration stronger so as to make it sufficient and valuable having regard to the facts, and circumstances of the case. It has also been seen from the discussions of the various authorities mentioned above that a gift is undoubtedly a transfer which does not contain any element of consideration in any shape or form. In fact, where there is any equivalent or benefit measured in terms of money in respect of a gift the transaction ceases to be a gift and acquires a different colour. … Love, affection, spiritual benefit and many other factors may enter in the intention of the donor to make a gift but these filial considerations cannot be called or held to be legal considerations as understood by law. It is manifest, therefore, that the passing of monetary consideration is completely foreign to the concept of a gift having regard to the nature, character and the circumstances under which such a transfer takes place.

21….In fact, the legislature has made its intention clear that gift is excluded by qualifying the word “consideration” by the adjective “adequate.” Assuming that love and affection, spiritual benefit or similar other factors may amount to consideration for the gift, the word “adequate” is wholly inapplicable to and inconsistent with the concept of a gift because it is impossible to measure love and affection, the sentiments or feelings of the donor by any standard yardstick or barometer. The words “adequate consideration” clearly postulate that consideration must be capable of being measured in terms of money value having regard to the market price of the property, the value that it may fetch if sold, the value of similar lands in the vicinity, so on and so forth. In the instant case, the legislature by using the word “adequate” to qualify the word “consideration” has completely ruled out and excluded gift from the ambit of clause (b) of the proviso. In these circumstances, therefore, the argument of Mr. Kacker that by not expressly excluding gift, clause(b) of the proviso includes gift cannot be accepted particularly in the face of the clear and unambiguous language used by clause (b) of the proviso in describing the nature of transaction as one for adequate consideration.”

The High Court while holding that the deed was gift deed considered the aspect of ‘adequate consideration’ and held that the aliment of adequate consideration was missing and transfer was effected out of love and affection for D.

SUPREME COURT HELD

The Hon’ble Supreme Court referred to provisions of Indian Contract Act, 1872 for definition of ‘consideration’.

The Hon’ble Supreme Court also referred judgment in CIT Vs. Ahmedabad Urban Development Authority (2023) 4 SCC 561 and Chidambara Iyer & Ors. Vs. P.S. Renga Iyer 1965 SCC OnLine SC 293 for meaning of the word ‘consideration’.   

Finally the Supreme Court held that ‘consideration’ need not always be in monetary terms. It can be in other forms as well. The Supreme Court referred the relevant extract of the deed which is as follows –

“…execute this Settlement deed that you are the only daughter of Bagi Reddi and that we do not have any wife or children or legal heirs and you happened to be the daughter of our elder brother Chenga Reddi and that since we do not have any wife or children and you happened to have looked after us very well till now and that herein after you will look after our food and shelter needs and in the belief that you would do all the charitable work.”  

The Supreme Court held that – The High Court has erred in taking constricted view of ‘consideration’ and there was adequate consideration to hold the deed to be settlement deed.  

CONCLUSION The word ‘Consideration’ does not always refer to monetary consideration and love, affection and care may also account for consideration in the settlement deed executed between members of the joint family.