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LEGAL CHAT

The liabilities in accepting an `onerous gift'

N.C.S. RAGHAVAN
ARVIND RAGHAVAN

  • "Onerous gift" is subject to certain charges/obligations imposed on the donee by the donor.
  • The donee is at liberty to take one of the transfers which is beneficial to him and refuse the others which are onerous to him.
  • A court can order the Registrar to produce any original will for perusal.
  • Encumbrance certificate will not indicate the property being the subject matter of any will.
  • As per the Karnataka Land Reforms Act, 1961, the term "agricultural purposes" includes acquisition of farm implements and machinery.
  • If loan for purchasing implements is not repaid on time, the financial institution can enforce the mortgage created in its favour by the borrower in a legal manner.

    Matters relating to gift of property, registration of wills and land reforms are discussed here.

    Segment 1(basic legal concepts)

    Onerous gifts (Section 127 of the Transfer of Property Act 1882): "Onerous gift" is a gift made subject to certain charges/obligations imposed on the donee by the donor. The basic principle is that one has to accept the benefit of a transfer and the burden of the same. Hence, in an onerous gift, the donee should accept the burden imposed on the property gifted by the donor.

    Single transfer: Sometimes, a gift is made in a "single transfer" to the same person and it consists of several things out of which one is burdened with an obligation and others are not so burdened. Under the circumstances, the donee has to accept the gift fully with the obligation also and cannot take only that part which has no obligation.

    Independent transfers: When an onerous gift consists of two or more separate or independent transfers made by a donor to the donee of several things, the donee is at liberty to take one of the transfers which is beneficial to him and refuse the others which are onerous to him.

    When a donee under law is not qualified to accept the obligation, then, even when he accepts the gift with an obligation it does not bind him. For e.g., a minor cannot accept a gift himself and even when it is made it does not bind him.

    However, when a disqualification ceases, i.e., when the minor becomes a major and being aware of the burden of the obligation, if he retains the property, the obligation on the property is valid and binding on him and he cannot refuse the same.

    Universal donee (Section 128): Where the gift consists of the whole property of the donor, then the donee is known as an universal donee and he is personally bound by all the debts and liabilities due by the donor at the time of making the gift to the extent of the property comprised therein.

    The gift must be for the whole of the property of the donor and no property of the donor shall be excluded. Then only the donee in such a case becomes a universal donee.

    When any one of the properties of the donor is specifically excluded, then, the donee does not become a universal donee and hence may not be liable for all the debts and liabilities of the donor, which are not specifically charged on any property gifted.

    Segment 2 (personal laws)

    The powers of a court to compel the production of any will in the court (Section 46 of the Registration Act, 1908) are dealt with here.

    None of the powers of the registration authorities discussed earlier in respect of registration of wills has the effect of restricting the powers of the court to order the production of any will when such powers are granted to the court under the following enactments:

    Section 259 of the Indian Succession Act, 1865.

    or

    Section 81 of the Probate and Administration Act, 1881.

    Under the aforesaid enactments, the competent court has the powers and authority to make a suitable order on the Registrar compelling the production of any original will to the court.

    When such an order is passed by the court under Section 46 of the Registration Act, 1908, as amended by a suitable act in Karnataka, the Registrar shall follow the procedures mentioned below:

    The Registrar shall open the cover in which the original will is enclosed. Then, he shall make out a true copy of the will and then file the same duly in Book-III maintained by him/her. Once such a true copy is filed in Book- III, the Registrar can send the original will to the competent court for it to have the same filed under its jurisdiction for the purposes of legal matters pending before it in respect of the aforesaid enactments.

    As discussed earlier, a will is not a compulsorily registrable document under Section 17 of the Registration Act, 1908. Hence, even when a will is registered and placed under Book-III, there is no general universal notice regarding the same. Any encumbrance certificate applied for any property covered will not indicate and give any reference to the property being the subject matter of any will whatsoever.

    However, registration of a will by itself will have evidenciary value in courts in respect of the following matters including its genuineness:

    (1) The date, time and place relating to the making of the will.

    (2) The will being made without any fraud, coercion or undue influence and

    (3) All the wills prior to the registered will getting revoked.

    In view of the above legal presumptions in favour of a registered will, it is always useful and beneficial to have the will/s registered as above.

    Segment 3 (State laws)

    In Section 81(1)(b) of the Karnataka Land Reforms Act, 1961, the word "agricultural purposes" has been used. Its meaning has been clearly elaborated in the explanation to the section as under:

    "Agricultural purposes" includes making land fit for cultivation, cultivation of land, improvement of land, development of sources of irrigation, raising and harvesting of crops, horticulture, forestry, planting and farming, cattle breeding, animal husbandry, dairy farming, seed farming, pisciculture, apiculture, sericulture, piggery, poultry farming and such other activities as are generally carried on by agriculturists, dairy farmers, cattle breeders, poultry farmers and other categories of persons engaged in similar activities including marketing of agricultural products, their storage and transport and the acquisition of implements and machinery in connection with any such activity.

    It is to be noticed from the explanation that the term "agricultural purposes" includes almost all activities connected either directly or indirectly with agriculture. For example, even acquisition of implements and machinery to be used for agriculture has been included in the explanation. It means that even if a loan is taken from a financial institution for the purpose of purchasing implements and machinery related to agriculture and if such loan is not repaid by the borrower on time, the financial institution can enforce the mortgage created in its favour by the borrower in a legal and proper manner.

    2.Section 81(2) provides that all the institutions referred to in section 81(1)(b) acquiring land or interest therein shall dispose off the same within the prescribed period. Section 81(2) provides that pending such sale, the institution can grant on lease the land for a period of less than one year at a time. 3. Section 81(3) provides that any sale by the institution under the provisions of Section 81 shall be subject to the other provisions of the Karnataka Land Reforms Act, 1961.

    Case law

    In the case of Shankar Bhairu Bamane vs Syndicate Bank, Manipal, Nipani branch and others, 1998 (5) [Kar. LJ. 464; ILR 1998 Kar.3028], the court held that there is no bar on transfer of agricultural land to a bank which is a non-agriculturist. The bank in execution of a decree can bring a judgment on the land for auction sale. The court further held that after obtaining the permission of the court as required under Rule 72(2) of Order 21 of the Civil Procedure Code, the bank can bid for and buy agricultural land in an auction sale of the land. The court also observed that the bank is competent to take possession of the land, manage it or sell it in satisfaction or part satisfaction of its claim as permitted in Section 6 (1) (f) of the Banking Regulation Act, 1949.

    (N.C.S. Raghavan is a chartered accountant and Arvind Raghavan, an advocate).

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