GIFT UNDER INDIAN LAW
Gift of property in India is governed by The Transfer of Property Act, 1882 (“TOPA”). Section 122 defines “Gift” as 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. Chapter VII of the TOPA further lays down the law governing transfer of property by way of gift. Section 123 requires that transfer of immovable property by way of gift must be effected by a registered instrument signed by or on behalf of the donor, and attested by at least two witnesses. However, an exception is carved out in under Section 129 which inter alia clarifies that nothing in Chapter VII shall be deemed to affect any rule of Mahomedan law. Consequently, Section 129 excludes the rule of Mahomedan law from the purview of Section 123 hich mandates that the gift of immovable property must be effected by a registered instrument. Therefore, TOPA does not apply to gifts made by Muslims in India.
GIFT UNDER MUSLIM PERSONAL LAW
A gift or ‘Hiba’ is defined as “a transfer of property, made immediately, and without any exchange,” by one person to another, and accepted by or on behalf of the later, under Section 138 of The Principles of Mahomedan Law by Sir Dinshaw Fardunji Mulla, 20th Edition. While there are restrictions on testamentary succession under Mahomedan law, a Hiba inter vivos, can be made by Mahomedans of both sects i.e. Shias and Sunnis. The donor is required to be of sound mind and not a minor and such gift need not be in writing. The three essentials of a ‘Hiba’ i.e. gift under Mahomedan Law, which make the gift complete and irrevocable, as recognized by the Supreme Court of India in the landmark judgment of Hafeeza Bibi and Ors. v. Farid (Dead) by L.Rs. and Ors.1 , being:
- Declaration of the gift by the Donor;
- Acceptance of the gift by the Donee; and
- Delivery of possession.
To establish such declaration of gift by the Donor, it must be shown that the donor either in the presence of witnesses or otherwise made a public statement that he gifted the property in favour of the donee.2 Thus, the donor is permitted to orally gift property to donee, followed by delivery of the possession of property, which is required to be accepted by the donee. To establish validity of a gift, writing is not essential, and the Supreme Court of India has laid down that merely because the gift is reduced to writing by a Mahomedan instead of it having been made orally, such writing does not become a formal document or instrument of gift. It has been clarified by the Court that the view that when writing is simultaneous with making of the gift, it must be registered, is inappropriate and not in conformity with the rule of gift in Mahomedan Law. The Apex Court approved the view taken by the Calcutta High Court in the case of Nasib Ali v. Wajed Ali3 holding that a deed of gift by Mahomedan is not an instrument effecting, creating or making the gift but a mere piece of evidence. Such writing is not a document of title but a piece of evidence only4.
REGISTRATION AND STAMP DUTY RELATED CONCERNS
Section 17(1) of the Registration Act, 1908 provides an instrument of gift of immovable property requires registration irrespective of value of the property. Section 49 provides that non-registration of documents which are required to be registered will result in such documents (i) not having any effect on the immovable property comprised therein, (ii) confer any power to adopt or (iii) to be received in evidence of transaction affecting such property or conferring such power, unless it is registered. In the ratio of the Hafeeza Bibi5 judgment, the Supreme Court has approved the view of the Gauhati High Court regarding registration of such gift in Md. Hesabuddin and Ors. v. Md. Hesaruddin and Ors.6 , that a mere writing in the plain paper as aforesaid containing the declaration of gift cannot tantamount to a formal instrument of gift. Therefore, it cannot be held that because a declaration is contained in the paper, the latter must have been registered in order to render the gift valid. The Court has also cited the judgments of the Division Bench of Calcutta High Court in Nasib Ali v. Wajed Ali7 and V.R. Krishna Iyer, J. of Kerala High Court in Makku Rawther’s Children: Assan Ravther and Ors. v. Manahapara Charayil8 , to concur the finding that a deed of gift executed by a Mahomedan is not the instrument effecting, creating or making the gift but a mere piece of evidence. Under Section 17 of the Registration Act, 1908, an instrument of gift must be registered. However, document executed by does not transfer an immovable property from the donor to the donee. It only affords evidence of the fact that the donor has observed the formalities under the Mahomedan law in making the gift to the donee.
The question of whether stamp duty is payable on such a document recording the gift, in the above context, is complex. Recently, this question was dealt with by the High Court of Allahabad in the January, 2023 judgment of Star Paper Mills Ltd. Vs. Anisa Begum & Ors9 , wherein the defendant made an application asking the trial court to impound the document filed by a third party claiming the suit property, being a memorandum of oral gift, meant to serve as a record of the antecedent Hiba. The objection preferred by the defendant was that the document was unregistered and insufficiently stamped and is required to be impounded under Section 33 of the Indian Stamp Act, 1899 and the amended definition of an instrument of gift under Section 2 (14-A) applicable to the State of U.P. under U.P. Amendment Act No. 38 of 2001. The trial judge by an impugned order rejected the application, following which revision was instituted by the defendant before the High Court. The issue before that High Court was whether the document is required to be taxed to stamp duty orit can be received in evidence, without any stampduty being paid thereon, or even if insufficiently stamped? The memorandum of oral gift was made after enforcement of the U.P. AmendmentAct No. 38 of 2001, which is as follows:
2. In section 2 of the Indian Stamp Act, 1899, hereinafter referred to as the principal Act –
(a) for sub-section (14), the following sub-section shall be substituted, namely:-
“(14) ‘Instrument’ – ‘Instrument’ includes every document and record created or maintained in or by an electronic storage and retrieval device or media by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or recorded,”
(b) after sub-section (14), the following subsection shall be inserted, namely:-
“(14-A) ‘Instrument of Gift’ – ‘Instrument of Gift’ includes an instrument whether by way of declaration or otherwise, for making or accepting an oral gift.”
The Court took the view that as Section 2 (14- A) of the U.P. State Amendment has defined an instrument of gift, which the Indian Stamp Act, 1899 does not. The Court noted that the definition of an instrument of gift in Section 2 (14-A) is an inclusive definition and expressly says that it includes an instrument of gift whether by way of declaration or otherwise, for making or accepting an oral gift. The express words employed by the Amendment extend the sweep of the Act to cover not only those instruments of gift that by themselves convey the property donated, but also include declarations of gifts made or accepted orally. Consequently, the Court held that this being the substantive law relating to disposition by gift and given the terms of the UP State Amendment under Section 2 (14-A) of the Indian Stamp Act of 1899, there is not the slightest doubt that after enforcement of the State Amendment, a memorandum of oral gift recording an antecedent transaction of Hiba, howsoever described and in whatever kind of words couched, is taxable to stamp duty as an instrument of gift. Consequently, the revision petition was allowed.
Bearing in mind the above ruling in Anisa Begum’s10 matter, the effect of Section 2 (la) of the Maharashtra Stamp Act, 1958 which defines ‘instrument of gift’ would be similar. The definition is as follows:
“(la) ‘Instrument of Gift’ – Instrument of gift includes, where the gift is of any movable or immovable property but has not been made in writing, any instrument recording whether by way of declaration or otherwise the making or acceptance of such oral gift”.
Consequently, the Maharashtra Stamp Act, 1958 makes it clear that any instrument by way of declaration or otherwise recording making or acceptance of an oral gift will also be taxable to stamp duty and that stamp duty would be attracted on a declaration of oral gift which is made in writing. In terms of Article 34 of Schedule 1 of the Maharashtra Stamp Act, 1958, stamp duty on gift, is the same duty as is leviable on a conveyance under clause (a), (b), or (c), as the case may be, of Article 25, on the market value of the property which is the subject matter of the gift.
OUR RECOMMENDATION
For effectively making a valid gift under Mahomedan law, we recommend that adeclaration of the gift by the donor should bemade in the presence of witness(s). The donor,donee and the witness(s) may jointly executebefore the notary, a Declaration of Oral Gift orHiba, to declare and put it on record that at thespecified time and place, in the presence of thewitness(s):
a. The donor in pursuance of his intention to gift, has made an oral gift or hiba of the property in favour of the donee;
b. The donee has accepted such gift from a donor;
c. The donor has handed over possession of the property to the donee; and
d. The donor has handed over possession of original title documents of the property to Donee.
It is advised that the Parties should make payment of applicable stamp duty on gift as per the relevant stamp act of the State, on such Declaration of Oral Gift or Hiba, to avoid impounding for non-payment of stamp duty as was the case in Anisa Begum’s11 matter. Registration of such Declaration of Oral Gift or Hiba is not needed.
DISCLAIMER
This material has been published by Dhaval Vussonji and Associates, Advocates and Solicitors and is subject to the copyright of Dhaval Vussonji and Associates. The update is not intended to be a form of solicitation or advertising. The material herein contained is a general discussion on the manner in which the Act and the Rules are worded. The examples contained herein should not be used in real life situations and do not constitute any advise given by Dhaval Vussonji and Associates. You are advised to take specific legal advise on the manner of application of the Act and the Rules to you. The provisions of the Act and the Rules discussed herein are subject to interpretation by Courts and concerned authorities and may be amended by the appropriate government. Dhaval Vussonji and Associates is NOT a firm of accountants and does not claim any expertise in advise on accounting principles. Dhaval Vussonji & Associates will not be responsible for any reliance placed on the material contained herein.
