Onerous Gifts under Transfer of Property Act

The concept of gifting is often perceived as straightforward – a transfer of ownership without consideration. However, the legal landscape surrounding gifts becomes more intricate when the gift is burdened by obligations, leading to what is known as onerous gifts.

An onerous gift involves the transfer of property with attached responsibilities or burdens, posing unique challenges and considerations for both donors and recipients.

In this article, we will explore onerous gifts, highlighting their importance in property law and the implications they carry for donors and recipients.

What is Onerous Gifts?

Onerous gifts refer to situations where a gift comprises multiple items, with some burdened by obligations and others not. According to legal principles, if a gift involves a single transfer of several items to the same recipient and some items are burdened while others are not, the recipient cannot selectively accept only the unburdened items. They must either accept all items fully or reject the entire gift.

However, if the gift consists of separate and independent transfers of several items to the same recipient, the recipient has the freedom to accept one item and refuse the others, even if the accepted item is beneficial and the others are burdened. This principle ensures that the recipient is not compelled to accept gifts that come with obligations they are unwilling or unable to fulfil.

It is important to note that if a person who is not legally competent to contract accepts a gift burdened by obligations, they are not initially bound by their acceptance. However, once they become competent and are aware of the obligations, retaining the property signifies their acceptance of the obligations associated with it.

This legal concept is based on the maxim “Quisntitcommodumsentiredebet et onnus,” which translates to “one who receives benefit must bear the burden also.” It underscores the principle that gifts should be accepted or rejected in their entirety based on their overall terms and conditions.

Onerous Gifts under Section 127 of the Transfer of Property Act

Section 127 of the Transfer of Property Act reads as:

“Where a gift is in the form of a single transfer to the same person of several things of which one is and the others are not, burdened by an obligation, the done can take nothing by the gift unless he accepts it fully.

Where a gift is in the form of two or more separate and independent transfers to the same person of several things, the done is at liberty to accept one of them and refuse the others, although the former may be beneficial and the latter onerous.

Onerous gift to disqualified person.– A done not competent to contract and accepting property burdened by any obligation is not bound by his acceptance. But if, after becoming competent to contract and being aware of the obligation, he retains the property given, he becomes so bound.

Illustrations

(a) A has shares in X, a prosperous joint stock company and also shares in Y, a joint stock company, in difficulties. Heavy calls are expected in respect of the shares in Y. A given B all his shares in joint stock companies. B refuses to accept the shares in Y. He cannot take the shares in X.

(b) A, having a lease for a term of years of a house at a rent which he and his representatives are bound to pay during the term and which is more than the house can be let for, given to B the lease and also, as a separate and independent transaction, a sum of money. B refuses to accept the lease. He does not by his refusal forfeit the money.”

Section 127, Para 1

The concept of onerous gifts revolves around the idea that if a gift involves a single transfer of several items to the same recipient and some items are burdened by obligations while others are not, the recipient must either accept all items fully or reject the entire gift.

Illustration (a) provided in the section exemplifies this principle. If, for instance, Raman is gifted shares in two joint-stock companies through the same transaction, he must either accept both sets of shares or reject them entirely. He cannot choose to accept the shares of one company while rejecting the shares of the other.

For this rule to apply, certain conditions must be met:

• The gift must be a single transfer.
• It must be made to the same person.
• It must involve several properties.
• One of the properties should be subject to a burden or obligation.

If these conditions are present, the recipient must accept the burden if they wish to accept the benefit. They cannot cherry-pick the beneficial items while rejecting the burdened ones. This ensures that the donor’s intent is honoured and the recipient cannot selectively accept the advantageous parts of the gift while avoiding the burdensome aspects.

If a recipient accepts an onerous gift, they are considered to have accepted the associated obligations, such as debts or liabilities attached to the properties. The recipient is then liable to fulfil these obligations to the extent of the gifted property in their possession.

Section 127 of the Transfer of Property Act, 1882, is similar to the doctrine of election under Section 35. It states that if an instrument provides some benefit while simultaneously divesting the beneficiary of other property, the beneficiary must surrender the latter to receive the benefit. The donee must choose to either accept the entire gift or reject it entirely; they cannot accept the beneficial part while rejecting the burdened part.

In conclusion, Section 127 governs onerous gifts, ensuring that recipients cannot selectively accept the benefits of a gift while rejecting its burdens and they must either accept or reject the entire gift as a whole.

Section 127, Para 2

This section addresses the scenario where a gift may consist of one or more properties transferred to the same person either at once or independently. In either case, some of the properties may be burdened by obligations.

The key question here is whether the recipient can accept the gift partially, accepting the unburdened items while rejecting the burdened ones. The answer hinges on whether the gift of multiple items is done through a single transfer or through separate transfers.

If the gift is made through a single transfer, the recipient must accept the entire gift as per the first paragraph. They cannot selectively accept only the unburdened items; it’s an all-or-nothing scenario. However, if the gift is made through separate and independent transfers, the recipient is free to accept the unburdened items and reject the burdened ones.

In cases where burdened and unburdened properties are transferred through separate and independent transfers, the principle that the entire intention of the donor should be given effect does not apply. This is clarified in the second paragraph of the section.

Illustration (b) provided in the section illustrates this concept well. If, for example, gifts are given independently of each other and do not form part of the same transaction, the recipient is not obligated to accept both gifts. They have the liberty to accept the unburdened gift and reject the burdened one, as they are independent transfers.

Onerous Gift to Disqualified Persons

The third paragraph addresses the scenario where an onerous gift is made to a person who is not legally competent to contract, such as a minor. Despite their lack of legal capacity, the gift of a burdened property to such a person is not postponed. The property vests in the minor immediately upon the gift, but their acceptance is not final. The minor has the right to repudiate the gift upon reaching the age of majority.

Upon attaining majority, the minor has the option to either accept or refuse the gift. The gift does not become binding on the minor unless they ratify the acceptance upon reaching the majority. If, upon reaching the majority, the minor retains the property with the knowledge of the burden, it is considered an implied acceptance of the gift and they become bound by the burden.

It is important to note that once the gift is accepted by the minor, it is complete against the donor and the donor cannot revoke the gift during the minority of the minor. The donor can only regain the property if the minor, upon reaching majority, chooses to reject the gift.

If the minor dies during their minority, the property passes to their legal heirs. The donor cannot revoke the gift on the grounds of incompleteness, as the gift is considered complete as soon as it is accepted and does not remain in abeyance until the minor reaches the age of majority.

Case Laws on Onerous Gift

In the case of Subramania Ayyar vs. Sitha Lakahmi, the court upheld the completeness of a gift made to a minor, even though the minor had passed away before reaching the age of majority. The court found that the gift was delivered to and accepted by the minor and while the deed of gift imposed an obligation on the minor, the law granted the minor the right to repudiate the gift upon attaining a majority. Since the minor had passed away before reaching the majority, the right to repudiate was no longer possible and thus, the gift was considered complete and binding.

In Panna Lal v. Fulmoni, the Calcutta High Court held that a condition in a deed of gift requiring the recipient to provide maintenance to dependents was valid and enforceable. The court ruled that such a condition was not repugnant to the interest created by the instrument and was therefore valid under the law. As a result, the recipient was obligated to fulfil the condition of providing maintenance to the dependents, as stipulated in the gift deed.

Can Minors Accept Onerous Gifts?

Regarding whether minors can accept onerous gifts, Section 127 of the Transfer of Property Act specifies that a person not competent to enter a contract, such as a minor, is not bound by any obligations attached to a gift they accept. However, if the minor retains the property after becoming competent and aware of the obligations, they become bound by those obligations.

This means that while a minor can accept an onerous gift, they are not legally obligated to fulfil any obligations attached to the gift until they reach the age of majority and choose to retain the property.

Conclusion

Onerous gifts are transfers of property that come with attached obligations or burdens. Unlike regular gifts, which are freely given without conditions, onerous gifts require the recipient to fulfil certain responsibilities. This concept is governed by legal principles that determine the rights and obligations of both the donor and the recipient in such transactions.