When a property transfer is made out of love and affection, with the donor retaining a life interest, it qualifies as a settlement deed in the form of a gift, decreed the bench of Justices JB Pardiwala and R Mahadevan of the Supreme Court in a significant ruling. The court further clarified that once a donee accepts such a settlement deed, the donor cannot revoke it.

It also stated that reserving a life interest and postponing possession of delivery to the donee does not convert the document into a Will. Additionally, the court reaffirmed that delivery of possession is not a necessary requirement to validate a gift or settlement. Under Section 41 of the Transfer of Property Act, a donor who retains life interest remains only an ostensible owner.

Case Background

The bench heard a dispute regarding property ownership between a father and his children. The father had executed a registered settlement deed on June 26, 1985, in favour of his daughter (Respondent No.1) out of love and affection, while retaining a life interest and limited mortgage rights.

The deed granted the daughter the right to construct on the property and pay taxes, suggesting immediate ownership rights, though possession was to be taken after the father's death.

Later, the father unilaterally revoked the settlement deed and executed a sale deed in favour of his son (Appellant).

The daughter then filed a suit seeking recognition of her ownership rights, a declaration that the revocation and subsequent sale were null and void, and an injunction. The trial court and the first Appellate court ruled that the deed executed in 1985 functioned only as a Will and not a gift, dismissed the daughter’s suit by judgment dated 28.05.2001, thereby upholding the father’s right to revoke the transfer.

However, the High Court reversed these decisions, declaring the document to be a gift deed and invalidating the father’s revocation and subsequent sale. The son then appealed to the Supreme Court.

Legal Issue

The issue for determination before the Supreme Court was whether the father’s settlement deed to his daughter constituted a gift, a settlement, or a Will, as this would affect its revocability and the validity of the subsequent transactions.

The appellant’s counsel proffered that the main test to find out whether the document constitutes a Will or gift is to see whether the disposition of interest in the property is in praesenti in favour of the settlee or whether the disposition is to take effect on the death of the executant.

Counsel for Respondent No.1 argued otherwise submitting that the ownership of the property has been transferred voluntarily to Respondent No.1 (donee) without any consideration and the same was accepted by the donee during the lifetime of defendant No.1 (father) by presenting the deed for registration hence all the requirements in accordance with Section 122 of the Transfer of Property Act have been satisfied.

Supreme Court’s Decision

The court upheld the High Court's ruling, distinguishing between a gift, a settlement, and a Will. It noted that:

• A gift is a voluntary transfer without consideration that must be accepted during the donor’s lifetime. Possession is not necessary for its validity if acceptance has occurred.
• A settlement is a voluntary transfer made out of love and affection that immediately creates property rights while reserving a life interest for the transferor.
• A Will, in contrast, takes effect only after the testator’s death and remains revocable during their lifetime.

The court observed that ambiguity and doubt in the present case, have arisen due to three conflicting sentences , namely,

“In consideration of my love and affection towards you, the schedule below properties are herein conveyed to you, for your subsistence and for residence after constructing a house”,

“Now onwards, you have every right to make the necessary constructions in the scheduled property, pay taxes to the Government and obtain Purchase Certificate for the same” and

“ I hereby accord my consent for you to possess and enjoy the scheduled property along with the usufructuaries situated in it and reside therein by constructing a house after the lifetime of me and Janaki Amma with all freedom including the rights to transfer the same”.

Putting contents of the document as a whole in perspective the court noted,

“The contents of the document have to be read as a whole and understood, while keeping in mind the object and intent of the testator. What is not to be forgotten is that in case of a gift, it is a gratuitous grant by the owner to another person; in case of a settlement, the consideration is the mutual love, care, affection and satisfaction, independent and resulting out of the preceding factors; in case of a will, it is declaration of the intention of the testator in disposition of his property in a particular manner. Therefore, even when there is any ambiguity in understanding the nature of the documents from its contents, we are of the view that the subsequent conduct of the executant must also be considered to take a decision. It is possible that in a 30 single document, there could be multiple directions in different clauses though seemingly repugnant but in reality, it could only be ancillary or a qualification of the earlier clause. Therefore, the document must be harmoniously read to not only understand the true intent and purport, but also to give effect to each and every word and direction’’.

Since the settlement deed in question immediately vested ownership in the daughter while allowing the father to retain a life interest, the court ruled that it was a settlement deed in the form of a gift.

“Once the document is declared as “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 the document is categorized as a gift, in the absence of any clause or reservation to cancel, the executant has no right to cancel the same. The reasons for cancellation or revocation of gift have to be proved in a court of law. Therefore, according to us, the unilateral cancellation of the document is void and as a natural corollary, the sale deed dated 19.10.1993 executed by Defendant No.1 / father also, is invalid’’.

The court dismissed the argument that it was a Will, as the title had already transferred to the daughter. The deed’s reservation of life interest, income, and mortgage rights did not affect the absolute transfer of ownership.

Because the transfer had been accepted, registered, and acted upon, the Supreme Court emphasized that a gift, once executed and accepted, is irrevocable under Section 122 of the Transfer of Property Act, 1882. It ruled that the unilateral cancellation of the settlement deed was invalid, and the subsequent sale to the son had no legal standing.

Consequently, the Supreme Court dismissed the son’s appeal and affirmed the High Court’s decision, upholding the daughter's ownership of the property while declaring the father’s revocation and sale void.

Case Title : N.P. Saseendran vs. N.P. Ponnamma & Ors

Civil Appeal No. 4312 of 2025