A gives a lakh of rupees to B, reserving to himself, with B's consent....Is such transfer valid?

Question: A gives a lakh of rupees to B, reserving to himself, with B's consent, the right to take back at pleasure Rs.10,000 out of the lakh. Is such transfer valid? [UPJS 1999]

Find the answer to the mains question of Property Law only on Legal Bites. [A gives a lakh of rupees to B, reserving to himself, with B's consent, the right to take back at pleasure Rs.10,000 out of the lakh. Is such transfer valid?]

Answer

In the given scenario, A transfers a sum of Rs.1,00,000 to B, but reserves the right, with B’s consent, to take back Rs.10,000 from that amount at his pleasure. The key question is whether such a transfer is valid under Indian law, specifically under the provisions of the Transfer of Property Act, 1882.

As per Section 126 of the Transfer of Property Act, a gift may be revoked if it is made subject to a condition agreed upon by both parties at the time of the gift, provided such a condition is not illegal, immoral, or opposed to public policy. However, the condition must be specific and enforceable. A condition that permits the donor to revoke a part of the gift at will, without any objective criteria or limitations, is considered arbitrary and uncertain. Such a condition defeats the very essence of a gift, which is meant to be a voluntary and unconditional transfer of ownership.

In the present case, although B has consented to A’s right to reclaim Rs.10,000 at his pleasure, the reservation is vague and dependent solely on A’s will. This kind of clause is repugnant to the nature of an absolute transfer and creates uncertainty in the ownership rights of the donee. The law does not recognize a gift where the donor retains the power to revoke it partially or wholly at his own discretion. Therefore, such a clause is void and unenforceable.

Judicial interpretations have consistently held that a donor cannot impose a condition that allows him to revoke a gift at pleasure. Once a gift is accepted and possession is transferred, the donor ceases to have any control over the property. A revocable clause, if not linked to a definite and legal condition, undermines the finality of the transfer and is legally invalid.

In K. Balakrishnan v. K. Kamalam & Ors. (AIR 2004 SC 1257), the Supreme Court held that a gift deed executed by a mother in favour of her minor children was valid and irrevocable. The Court ruled that under Sections 122 and 126 of the Transfer of Property Act, a gift once made and accepted—either expressly or impliedly—is binding and cannot be revoked at the donor’s will. It observed that even though the donor retained possession and management of the property (a school) during her lifetime, ownership had passed to the donees.

The donee’s acceptance was presumed as he was 16 years old and lived with the donor, and neither he nor his guardians repudiated the gift upon attaining majority. The Supreme Court set aside the High Court’s view that the gift was incomplete due to non-acceptance and restored the trial court’s judgment, reaffirming that a donor cannot revoke a completed and accepted gift at her discretion.

Hence, while the initial transfer of Rs.1,00,000 from A to B may appear valid, the reservation of the right to take back Rs.10,000 at A’s discretion is void. B becomes the absolute owner of the entire amount, and A cannot legally enforce his reserved right to reclaim any part of the transferred sum.