The Introduction: The Supreme Court in a judgment in the case of NP Saseendran vs NP Ponnamma (2025 INSC 388) delivered on 24th March 2025 clarified, inter alia, the subtle distinction in the property laws in India, more particularly as regards Settlement Deeds, Gift Deeds and Will. It puts to rest some hitherto vague and generally misunderstood legal position among them. The decision covers documents involving gratuitous transfers of property in India where there is no consideration present as normally required by Indian law. This is a landmark judgment of the apex court that also clearly delineated the subtle distinctions among Settlement Deeds, Gift Deeds and Will.
Background of the Case: The dispute revolved around a property within a family. In 1985, the father executed a registered Settlement Deed in favour of his daughter Ponnamma transferring the ownership of the property. The father, however, later changed his mind later and executed a deed of cancellation of this document and sold the property to his son Saseendran in 1993. The daughter challenged these actions, asserting that the original deed was a valid gift deed that could not be revoked unilaterally by the father.
The Contentions: The Plaintiff (daughter) claimed that the 1985 deed was a valid, accepted, and registered gift creating immediate rights in her favour. She argued further that as per the Transfer of Property Act, a gift cannot be unilaterally revoked even by the doner. The Defendant (Son) argued that the Deed was in the nature of a Will and not a gift which could be revoked by the father during his lifetime. The trial court and first appellate court dismissed the daughter’s suit, accepting the view that the deed was not a valid gift. The Kerala High Court, on Regular Second Appeal, reversed these findings, holding the settlement deed to be a valid gift deed and declaring the subsequent cancellation and sale as void. The matter thus reached the Supreme Court eventually.
Analysis by the Supreme Court: The Court examined the recitals of the 1985 deed and found that it created an immediate interest in favour of the daughter, even though the father retained certain rights (life interest to enjoy the income and the power to mortgage to a limited extent). The Court held that the mere retention of a life interest by the donor does not convert the transaction into a Will. If possession was not immediately handed over due to a valid reservation of life interest, that did not affect the validity or acceptance of the gift, provided the donee accepted the deed and it was duly registered. Delivery of possession is only one method to prove acceptance, not the sole criterion. The receipt and registration of the original document by the donee amounts to acceptance, fulfilling the requirement of Section 122 of the Transfer of Property Act, 1882.
Supreme Court’s Findings and Interpretations: The Supreme Court in its judgment meticulously distinguished between a Gift, a Settlement Deed and a Will while examining the 1985 family settlement as follows:
- Gift Deed: A “Gift” under Section 122 of the Transfer of Property Act, 1882, requires an immediate and unconditional transfer of ownership from donor to donee and the transfer must be accepted by the donee. The Supreme Court observed that if the language of the document creates present and immediate rights in favour of the recipient even if the donor reserves the right to enjoy the income (life interest) during his lifetime, the document retains the character of a Gift Deed. The crucial test is whether the transfer is indeed irrevocable and intended to operate immediately upon execution. In this case, the 1985 Deed immediately transferred title to the daughter even while retaining the income from the property for himself during his lifetime. Hence it satisfies the essential features of a Gift.
- Settlement Deed: The Court pointed out that settlement deeds are often executed out of mutual affection and for family arrangements. Like gifts, they aim to transfer ownership in praesenti (right now), but may also spell out terms for enjoyment, management or further distribution. The Court remarked that the difference between a settlement and a gift is often blurred, but the core principle remains the transfer of present entitlements rather than those taking effect after the settlor’s death. In this case the “settlement” was deemed a gift because it satisfied the conditions of immediate transfer, despite the reservation of enjoyment rights by and for the settler.
- Will: A Will, as defined under Section 2(h) of the Indian Succession Act, is a testamentary instrument, meaning thereby that it only takes effect after the death of the person executing it. The testator retains the right to cancel or change the Will at any time during his lifetime. No right vests in the beneficiary during the testator’s lifetime. In this case, the Court found that the Deed was not testamentary (was not a Will), because the property interest vested immediately in the daughter and was only subject to the father’s life interest in income generated therefrom.
The Apex Court’s Observations: During the hearing of the case the Court made some important observations. The dominant intention and language of the document determine its character. The reservation of life interest alone does not convert an otherwise valid gift or settlement into a Will. Since the 1985 deed created present rights in the daughter and was accepted/registered, it was not a Will and consequently could not be unilaterally revoked by the father. A Gift Deed takes effect immediately, granting the donee present rights, while a Will only takes effect after the testator’s death and can be revoked at any time during the testator’s lifetime. Once a gift deed is validly executed, accepted and registered, it becomes irrevocable except in circumstances specified under Section 126 of the Transfer of Property Act. The donor cannot unilaterally cancel a validly executed and accepted gift deed, nor can the authorities register such a cancellation without court-order.
The Judgment of the Court: The Supreme Court dismissed Saseendran’s appeal, upholding in the process the High Court’s decision. The Court confirmed that the 1985 settlement deed was a valid gift and the purported cancellation by the father and the subsequent sale to the son were void and as a result, the daughter’s title to the property stood established.
Quotable Quotes from the Judgment: “…once the document is declared as a ‘gift’, Defendant No.1 had no right to cancel the same unilaterally and the Sub Registrar had no right to register the cancellation deed… Once a gift has been acted upon, the same cannot be unilaterally cancelled and that delivery of possession is only one of the methods to prove acceptance, not the sole method…” This judgment thus reaffirms that a gift deed creates immediate and irrevocable rights once accepted and registered and that mere reservation of a life interest does not convert such a document into a Will, ensuring certainty and clarity in property transactions within families.
The Takeaways: The Supreme Court held that the document in question was a valid, irrevocable gift and not a Will nor simply a settlement not taking effect immediately. This clear legal differentiation upheld the daughter’s title, setting a precedent for classifying familial property transfers under Indian law.
