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Interplay between Gift and Settlement 11.3. As we have already seen, the primary difference between the Gift and the Settlement is the existence of consideration in the settlement. Consideration is nothing but the quid pro quo, that each party to a contract is to perform or render a part of their obligation under the contract. In view of the fact that a gift is a voluntary disposition, it is essentially not an agreement and hence, the element of consideration is taken away from it. Settlement on the other hand is always coupled with consideration as it is mostly executed in favour of a family member. The gift or settlement of an immovable property has to be registered as per Section 17 of the Registration Act. The conditions regarding acceptance, reservation of life interest and restriction on revocation are applicable to both “gift and settlement”. The vesting of the right also takes place in praesenti in both the cases. Therefore, there is an element of gift in every settlement. At this juncture, it will be useful to refer to the recent judgment of this court in Ramachandra Reddy (dead) through LRs and others v. Ramulu Ammal through LRs11, in determining, what a “consideration” is or can be, qua a “settlement deed” in the following paragraphs:

18. We are in respectful agreement with the statement of law contained in the above passage in K. Balakrishnan case [(2004) 1 SCC 581] . There is indeed no provision in law that ownership in property cannot be gifted without transfer of possession of such property. As noticed earlier, Section 123 does not make the delivery of possession of the gifted property essential for validity of a gift. It is true that the attention of this Court does not appear to have been drawn to the earlier decision rendered in Naramadaben Maganlal Thakker [(1997) 2 SCC 255] where this Court had on a reading of the recital of the gift deed and the cancellation deed held that the gift was not complete. This Court had in that case found that the donee had not accepted the gift thereby making the gift incomplete. This Court further held that the donor cancelled the gift within a month of the gift and subsequently executed a will in favour of the appellant: on a proper construction of the deed and the deed cancelling the same this Court held that the gift in favour of the donee was conditional and that there was no acceptance of the same by the donee. The gift deed conferred a limited right upon the donee and was to become operative after the death of the donee. This is evident from the following passage from the said judgment: (Naramadaben Maganlal Thakker case[(1997) 2 SCC 255] , SCC p. 258, para 7) “7. It would thus be clear that the execution of a registered gift deed, acceptance of the gift and delivery of the property, together make the gift complete. Thereafter, the donor is divested of his title and the donee becomes the absolute owner of the property. The question is whether the gift in question had become complete under Section 123 of the TP Act? It is seen from the recitals of the gift deed that Motilal Gopalji gifted the property to the respondent. In other words, it was a conditional gift. There is no recital of acceptance nor is there any evidence in proof of acceptance. Similarly, he had specifically stated that the property would remain in his possession till he was alive. Thereafter, the gifted property would become his property and he was entitled to collect mesne profits in respect of the existing rooms throughout his life. The gift deed conferred only limited right upon the respondent donee. The gift was to become operative after the death of the donor and he was to be entitled to have the right to transfer the property absolutely by way of gift or he would be entitled to collect the mesne profits. It would thus be seen that the donor had executed a conditional gift deed and retained the possession and enjoyment of the property during his lifetime.” ……

6. Acceptance by or on behalf of the donee must be made during the lifetime of the donor and while he is still capable of giving.

7. It would thus be clear that the execution of a registered gift deed, acceptance of the gift and delivery of the property, together make the gift complete. Thereafter, the donor is divested of his title and the donee becomes the absolute owner of the property. The question is whether the gift in question had become complete under Section 123 of the TP Act? It is seen from the recitals of the gift deed that Motilal Gopalji gifted the property to the respondent. In other words, it was a conditional gift. There is no recital of acceptance nor is there any evidence in proof of acceptance. Similarly, he had specifically stated that the property would remain in his possession till he was alive. Thereafter, the gifted property would become his property and he was entitled to collect mesne profits in respect of the existing rooms throughout his life. The gift deed conferred only limited right upon the respondent- donee. The gift was to become operative after the death of the donor and he was to be entitled to have the right to transfer the property absolutely by way of gift or he would be entitled to collect the mesne profits. It would thus be seen that the donor had executed a conditional gift deed and retained the possession and enjoyment of the property during his lifetime. The (1997) 2 SCC 255 recitals in the cancellation deed is consistent with the recitals in the gift deed. He had expressly stated that the respondent had cheated him and he had not fulfilled the conditions subject to which there was an oral understanding between them. Consequently, he mentioned that the conditional gift given to him was cancelled. He also mentioned that the possession and enjoyment remained with him during his lifetime. He stated, “I have to execute immediately this deed of cancelling the conditional gift deed between us. Therefore I hereby cancel the conditional gift deed dated 15-5-1965 of Rs 9000 in words rupees nine thousand presented at Serial No. 2153 on 15-5-1965 in the Office of the Sub-Registrar, Baroda for registration. Therefore, the said conditional gift deed dated 15-5-1965 is hereby cancelled and becomes meaningless. The property under the conditional gift has not been and is not to be transferred in your name”. Thus he expressly made it clear that he did not hand over the possession to the respondent nor did the gift become complete during the lifetime of the donor. Thus the gift had become ineffective and inoperative. It was duly cancelled. The question then is whether the appellant would get the right to the property? It is not in dispute that after the cancellation deed dated 9-6-1965 came to be executed, duly putting an end to the conditional gift deed dated 15-5-1965, he executed his last Will on 17-5-1965 and died two days thereafter.”

15. A conditional gift with no recital of acceptance and no evidence in proof of acceptance, where possession remains with the donor as long as he is alive, does C.A. No. 2845-2845/2006 not become complete during lifetime of the donor. When a gift is incomplete and title remains with the donor the deed of gift might be cancelled. ..

18. … there is no provision in law that ownership in property cannot be gifted without transfer of possession of such property. However, the conditions precedent of a gift as defined in Section 122 of the Transfer of Property Act must be satisfied. A gift is transfer of property without consideration.