Module 08

A. Gift (S.122-129)
A Gift is regarded as the transfer of ownership of a property where the sender willingly brings into effect
such transfer without any monetary compensation or consideration. It may be between two living
parties, or the transfer may take place only after the death of the transferor. When the transfer of parties
is between living people, it is called inter-vivos, and when it takes place after the death of the transferor,
it is known as testamentary.

Testamentary transfers do not fall within the scope of Section 5 of TOPA[1], and thus only inter vivos are
treated as gifts under the provisions of this Act. If the essential elements required for a transfer to be
treated as a gift are not implemented properly, it could be revoked or become void by law.

Section 122 of the Transfer Of Property Act defines a gift as the transfer of an existing movable or
immovable property made voluntarily and without consideration. The transferor is called the “donor”
and the transferee is known as the “donee”.

Parties to a gift under transfer of property act

 Donor: The person who is donating or transferring his property in return for no consideration is a
donor (transferor).

The donor must be a competent person, i.e., he must have the capacity as well as the right to
make the gift. If the donor has the capacity to enter into a contract, then he is deemed to have
the capacity of making a gift. This means that at the time of making the gift, the donor must be
at the age of majority and must have a sound mind.

Registered societies, firms, and institutions are competent to make gifts since they are regarded
as juristic persons. Besides capacity, the donor must also have the right to make the gift. The
right of the donor is determined by the ownership rights in the property at the time of the gift
transfer.

 Donee: The person for whom a donation or gift is made is a donee. In simple words, the receiver
of the gift is the donee (Transferee).

The donee does not need to be competent to contract. He just needs to be a person in existence
at the time of making the gift. A gift made to a minor or an insane person is also treated to be
valid subject to its acceptance by a competent person on his/her behalf. The donee must always
be an ascertained person. A gift made to the general public is void. The donee can be more than
one person as well.
Essential elements
The five essential elements of a valid gift are:

1. Transfer of ownership

The donor must divest of the absolute interest in the property which is the subject of the gift and vests it
in the donee. Transfer of absolute interest means the transfer of all rights and liabilities with respect to
the property. The donor must have the right to transfer the property. Nothing less than complete
ownership can be transferred by way of a gift. The gift can also be made subject to fulfillment of a
certain condition, as is the case in most transfers.

2. Existing property

The property which is the subject matter of the gift may be movable, immovable, tangible, or intangible
but it must have been in existence at the time of making the gift, and it must be transferable within the
meaning of Section 5 of the Transfer Of Property Act. The gift of any future property is deemed void.
[3] And a gift of spec succession (Expectation of succession) or mere chance of inheriting property or
mere right to sue, is also deemed void.

3. Transfer without consideration

A gift must be gratuitous i.e., it should have been transferred without any consideration. Any
consideration, however negligible, given in exchange for the ownership of the property, would transform
the gift into either a sale or barter. Consideration for the purpose of this requirement has the same
meaning as envisaged under Section 2(d) of the Indian Contract Act, 1872[4].

4. Voluntary transfer with free consent

The donor must have made the gift voluntarily, in the exercise of his free will and his consent should
have been free consent. Free consent refers to the situation when the donor has complete freedom to
make the gift without the involvement of any force, fraud, coercion, or undue influence. A voluntary
transaction on part of the donor means that he executed the gift deed with full knowledge of the nature
and circumstances of the transaction.

5. Acceptance of the gift

The donee must have communicated his acceptance of the gift. Property cannot be given without
consent, even if it is a gift. Such acceptance can be either expressed or implied. Implied acceptance can
be inferred from the donee’s conduct and the surrounding circumstances, eg., if the donee takes
possession of the property, that would be treated as an implied acceptance of the gift. Mere silence is
also sufficient to establish implied acceptance on part of the donee provided he was aware that a gift
was being made in his favor.

Where the donee is incompetent to contract by virtue of being a minor or insane, the gift has to be
accepted on his behalf by a competent person. The gift may be accepted by a guardian or a parent. In
the case of a child, the minor, on attaining majority, has the right to reject the so-accepted gift.
Where a donee is a juristic person, the gift must be accepted by a competent designated authority,
capable of representing such a legal person. A gift can also be made to a deity, and in such cases, it can
be accepted by its agent i.e., the priest manager of the temple where such gift has been made.

Section 122 provides that this acceptance needs to be made during the lifetime of the donor and when
he is still considered capable of gifting. If the gift is accepted during the life of the donor but the donor
dies before the registration and other formalities, the gift would still be deemed valid.

Modes of Transfer
S.123 prescribes modes of transfer of gifts of immovable and movable properties.

Immovable property

Gifting an immovable property should be made only by a registered instrument. This registered
instrument should be signed by the donor himself or by any person signing on behalf of the donor. At
Least two witnesses have to attest the instrument.

Movable property

Gifting of a movable property doesn’t have to be made through a registered instrument. Thus, it is
possible to make a gift of movable property with or without a registered instrument and through
delivery.

Suspension or Revocation of the Gift

1. Revocation by Mutual Agreement

Where the donor and the donee mutually agree that the gift shall be suspended or revoked upon the
happening of an event not dependent on the will of the donor, it is called a gift subject to a condition laid
down by the mutual agreement. It must consist of the following essentials:

 The condition must be expressly laid down

 The condition must be a part of the same transaction, it may be laid down either in the gift deed
itself or in a separate document being a part of the same transaction.

 The condition upon which a gift is to be revoked must not depend solely on the will of the donor.

 Such conditions must be valid under the provisions of law given for conditional transfers. Eg. a
condition totally prohibiting the alienation of a property is void under Section 10 of the Transfer
of Property Act[11].

 The condition must be mutually agreed upon by the donor and the donee.

 Gift revocable at the will of the donor is void even if such a condition is mutually agreed upon.
 Example: X gives a house to Y with the condition that he might take it back if Y or his
descendants die before X. and Y agrees to this condition. Y dies without any descendants. The
gift can go back to X. In the above example, the special event is the death of Y and his
descendants before X. This specified event is not under the control or will of the donor. Thus it is
a valid gift.

2. Revocation by the rescission of the contract

A gift is a transfer; it is thus preceded by a contract for such transfer. This contract may either be express
or implied. If the preceding contract is rescinded, then there is no question of the subsequent transfer to
take place. Thus, under Section 126, a gift can be revoked on any grounds on which its contract may be
rescinded. For example, Section 19 of the Indian Contract Act makes a contract voidable at the option of
the party whose consent has been obtained forcefully, by coercion, undue influence, misrepresentation,
or fraud.

Exceptions
Section 129 of the Act provides the gifts which are treated as exceptions to the whole chapter of gifts
under the Act.[13] These are:

 Donations mortis causa: These are gifts made in contemplation of death. For example,
Acceptance may not be the essential in this case or registration too.

 Muslim gifts (Hiba): These are governed by the rules of Muslim Personal Law. The only essential
requirements are declaration, acceptance, and delivery of possession. Registration is not
necessary irrespective of the value of the gift. In case of a gift of immovable property worth
more than Rupees 100, Registration under Section 17 of the Indian Registration Act is a must, as
it is applicable to Muslims as well.[14] For a gift to be Hiba only the donor is required to be
Muslim, the religion of the donee is irrelevant.

Onerous Gifts
Onerous gifts refer to those gifts which are a liability rather than an asset. Where the liabilities on the
property exceed the benefits accruing from such property is known as an onerous gift. When the gift of
such a property is made, it can be rejected by the donee.

Section 127 of the Act provides that if a single gift consists of several properties, one of which is onerous
gifts, is made to a person then that person does not have the liberty to reject one and accept the other.
This rule is based upon the principle “qui sentit commodum sentire debet et onus” which implies that
the one who accepts the benefit must also accept the associated burden. In case the onerous gift is
made to a minor and the donee accepts the gift, he still retains the right to repudiate the gift on
attaining the age of majority.
 Actionable Claims
Actionable Claim in general terms signifies a claim or a debt for which you can take an action, which
means there’s a claim and you can approach the court for the enforcement of the same. Here it signifies
a debt and the actionable claim holder can move to the court for the recovery of that debt.

Tangible or touchable movables such as chairs or bikes and many have physical existence and can be
possessed. Some movable property is an actionable claim. It is also a claim for unsecured debt and any
beneficial interest in the moveable property and the property is not in any kind of possession.

Like example- X is a person who needs a loan or money from Y. Then X takes loan 50,000/- from Y. And Y
does not take any security. It means X takes loan 50,000/- from Y without any security. So the debt or
claim given by Y is an actionable claim. And if the X failure on his part or not repay the money then Y can
approach the Court.

Definition

According to Section 3 of the TPA, an actionable claim means:

A claim to any debt that is not secured by any of the following:

 Mortgage of immovable property

 Pledge of movable property

 Mortgaging of movable or immovable property

 A beneficial interest in movable property that is not in the possession of the claimant, either
actually or constructively

An actionable claim is transferable under the Transfer of Property Act. The transfer of actionable claim is
given under chapter eight of the Transfer of Property Act. Chapter eight of the Transfer of Property Actis
the last chapter of the Transfer of Property Act and it covers section 130 to 137.

In brief, it can be said that an actionable claim means a claim to an unsecured debt or any interest in
movable property which is not in the possession of the claimant.

Secured, Unsecured Debts and Beneficial Interest

A Debt may be Secured or Unsecured. Where a debtor gives security of any immovable or movable
property to secure payment of debt, called Secured Debt.

Where no security has given for payment of debt, called unsecured debt. An Unsecured Debt is treated
as Actionable Claim.

1. Where a debt is already due and become payable is called “Existing Debt”

2. on the other hand, where a debt or sum of money is due at present but payable on a future date, it is
“Accruing Debt”; Where the claim for a sum of money exists but the payment depends upon the
fulfilment of any condition, the debt is known as “Conditional Debt”.
Beneficial interest refers to the right of an individual to possess a movable property. Hence, when an
individual has the right of possession of the movable property, it is considered that the individual enjoys
a beneficial interest in movable property. It converts into an actionable claim only when the individual
so entitled is not in possession of that movable property.

Some examples of actionable claim, these following claims are the actionable claim-:

1. Claim for arrear rent.

2. Claim for rent to fall due in future.

3. A choice offered to repurchase the property once again.

4. Book debts or claims

5. The right to claims maintenance.

6. Claim the benefit of the contract.

7. Deposit receipt.

The following claims are not the actionable claim-:

1. A claim which is decreed.

2. “Right to sue”, it is a right but it is not an actionable claim.

3. The claim for the main profits.

TRANSFER OF ACTIONABLE CLAIMS

Ss. 130 to 137 of Chapter VIII of the Transfer of Property Act, 1882 deal with the transfer of actionable
claims. This Chapter provides general principles that must be borne in mind while transferring actionable
claims.

S. 130: Transfer of Actionable Claim

This section states that an actionable claim can be transferred:

i) "with or without consideration

ii) by way of an instrument in writing duly signed by the transferor or his agent duly authorized in this
respect."

Thus, oral transfer of actionable claims is not permitted. However, its registration is not necessary, and
no separate instrument of transfer is to be effected.

Example: an endorsement of the promissory note transferring the actionable claim is sufficient.

When he puts his signature or thumb impression on the instrument, it executes the actionable claim. On
such transfer, the transferee of actionable claim gets all the transferor's rights, liabilities, and remedies.
The transferee can enforce it without the need to take the consent of the transferor or make him a party
to the suit thereto. He can sue in his own name.

Marine and fire insurance and S. 38 of the Insurance Act, 1938 are exempted from the application of this
provision. This is attributable to the fact that mere assignment of these insurance policies does not
amount to entitling the transferee of the ownership of the subject matter insured.

S. 131: Notice to be in writing, signed

The notice is not necessary to ensure perfection of the transferee's title of actionable claim. However,
the dealings of the debtor with the creditor are protected until the former receives the notice of such an
assignment in observance of the conditions enumerate under S.131 of the Act. It states that:

i) "The notice of transfer of the actionable claim has to be made in writing.

ii) It must be signed by the transferor or his agent authorized on his behalf.

iii) However, if the transferor refuses to sign it, then, in that case, it must be signed by the transferee of
actionable claim or his duly authorized agent."

The Hon'ble Apex Court has clarified that S. 131 of the Act does not prescribe any time limit for the
service of notice. It must be within a reasonable period of time and unconditional. 18

S. 132: Liability of Transferee of Actionable Claim

The principle behind this section is that the transferee gets no better title than the transferor. Thus, the
transferee takes all the equities and also the liabilities of the transferor to which the latter was subject at
the time of such assignment.

Example: Ms. A assigns a debt to Mr. B due to her by Mr. C. This transfer to Mr. B was in discharge of debt
owned by Ms. A to him. Now, Mr. C files a suit against Mr. B for debt due to Ms. A by Mr. B. Here, Mr. B is
rightly entitled to set off the debt due to Mr. C by Mr. A, even when Mr. B was not aware of such debt at
the time of assignment of actionable claim.

S. 133: Warranty of Solvency of Debtor

In the case of assignment of a debt, the transferee runs the risk of losing the claim when the debtor
becomes insolvent. Therefore, as a precaution, the transferor of the actionable claim warrants the
solvency of the debtor at the date of assignment. But this is subject to contract to the contrary. Further,
it is limited only to the amount or value of the consideration for which it is transferred.

S. 134: Mortgaged Debt

Since an actionable claim is a property, its transfer by way of a mortgage is possible. When one debt is
transferred to cover another debt, whether existent debt or future debt, it is referred to as a transfer of
actionable claim by way of a mortgage. This section provides the below-mentioned preposition under
which the amount so realized could be appropriated:

i) "the debt received by the transferor or recovered by the transferee is to be applied in payment of the
cost of such recovery.
ii) it is to be applied towards satisfaction of the amount secured by the transfer.

iii) if any residue remains after the above-mentioned payments, the remainder is to be given to the
transferor."19

S. 135: Assignment of Rights under Policy of Insurance against Fire

This provision was inserted by the Amendment Act of 1944. It states that the assignee of fire insurance
policy in whom the property of the subject matter of policy is absolutely vested at the date of
assignment, it would have the effect of transferring and vesting in him all the rights to sue just as if the
insurance policy was entered into by him.

S. 136: Incapacity of Officers Connected with Courts of Justice

The persons mentioned under this section are not legally qualified to make transfers of actionable
claims. The object behind this disqualification of "Judges, legal practitioners and officers connected with
Courts of Justice" is to ensure that the judiciary remains impartial. The observation of the Privy Council is
relevant in this regard: "It is of great importance that no officer of a Court of Justice should be even
exposed to the suspicion that in the discharge of his official duties, his conduct may be influenced by any
personal consideration."20

S. 137: Saving of Negotiable Instruments

Furthermore, this Chapter is not applicable to negotiable instruments and other instruments mentioned
thereunder. This is because they are governed by other laws and statutes.

Example: Negotiable instruments are governed under S. 137 of the Negotiable Instruments Act, 1881. 21

Therefore, for a valid transfer of actionable claim, transferor and transferee both must be qualified and
competent to effectuate such transfer. The property so transferred should be transferrable within the
provisions of S. 6 of the Act.22

RIGHTS AND DUTIES OF THE PARTIES INVOLVED

The parties involved in the transfer of actionable claims under the Transfer of Property Act, 1881, are
granted several rights and obligations. The interests of both the transferor and the transferee are
safeguarded by these rights and obligations.

Rights of the Transferor: The party transferring the actionable claim, or the transferor, is entitled to
money or recompense in exchange for the transfer. Depending on the specifics of the actionable claim,
the transferor may also have the right to hold the movable property or to seek to have the claim
enforced against the debtor.

Duties of the Transferor: The transferor has a responsibility to inform the transferee of any important
information or flaws pertaining to the actionable claim. Transparency and fairness in the transfer
procedure are guaranteed by this responsibility of disclosure.
Rights of the Transferee: The rights and advantages related to the actionable claim are transferred to the
transferee, or the party who receives the actionable claim. This includes all applicable rights to payment,
possession, and enforcement of the claim against the debtor.

Duties of the Transferee: The transferee is responsible for carrying out the duties and obligations
connected to the transferred actionable claim. This includes making all required payments, abiding by all
conditions of any contracts, and behaving in good faith towards the transferor.

REMEDIES IN CASE OF BREACH In the event of a breach of the transfer of actionable claims, there are
legal remedies available to the aggrieved party. These remedies aim to provide compensation or restore
the party to their rightful position.

Damages: The harmed party has the right to pursue damages, which entails requesting monetary
compensation for any losses sustained as a result of the violation. Normally, the awarded damages
would be equal to the loss incurred as a result of the breach.

Specific Performance: In some circumstances, the court may impose a requirement that the party who
violated the transfer fulfil its duties by specific performance. Usually, where monetary compensation is
not sufficient to undo the harm, this remedy is provided.

Revocation: Revocation enables the person that was injured to revoke the transfer of the actionable
claim resulting from the breach. This remedy aims to annul the transfer and put the parties back in their
pre-contractual positions.

Injunction: An injunction may be requested to stop a breach from happening again or to compel one
party to carry out or refrain from doing something. When it comes to actionable claims, an injunction
may be requested to stop the transferor from giving the identical claim to a different party or to stop the
transferee from using the claim in any other way.

CASE LAWS

Satyam Computer Services Ltd. v. Upaid Systems Ltd. [2008] EWHC 31: In this decision, the Supreme
Court of India ruled that even though a contract expressly forbids such assignment, it is nonetheless
permissible to assign an actionable claim based on a breach of that contract. The court emphasised that,
barring clear statutory prohibition, the Transfer of Property Act permits the transfer of actionable claims.

Bank of India v. Arthur Anderson & Co. (2019): The Bombay High Court decided that a consultancy
agreement's actionable claim might be transferred by endorsing and delivering the relevant documents.
The court explained that even if actionable claims relating to contractual commitments are not expressly
designated as negotiable, the Transfer of Property Act nonetheless enables their transfer.

The law surrounding actionable claims has been significantly impacted by recent court judgements,
which have clarified and expanded the parameters of such claims' transferability and enforceability.
These rulings have strengthened the idea that actionable claims can be transferred, excluding situations
in which doing so is specifically banned by law or agreement.

The decisions have also shown how crucial it is to take into account the specific requirements of the
Transfer of Property Act when determining whether actionable claims can be transferred. Courts have
acknowledged the necessity of striking a balance between the parties' legitimate interests and the
flexibility to transfer claims. Additionally, the rulings have offered helpful advice on the transfer of
actionable claims in particular situations, like contract breaches or consulting agreements. They have
emphasised that a variety of actionable claims, including those resulting from contractual
responsibilities, are covered by the Transfer of Property Act.

CONCLUSION

Finally, under the Transfer of Property Act of 1881, actionable claims are crucial in property exchanges.
They stand for rights over obligations or moveable property, and they can be exchanged via
endorsement, negotiation, or assignment. For people and enterprises involved in real estate,