Transfer of Property Act, 1882 | Chapter VII - Of Gifts

Section 127 - Onerous Gifts under the Transfer of Property Act, 1882

Section 127 explains when a person receiving a gift must also accept its accompanying burden. It distinguishes one indivisible gift from separate, independent gifts and protects a donee who is not competent to contract.

Complete text of Section 127 - Onerous gifts

127. 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 donee 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 donee 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 donee 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 gives 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, gives 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 this refusal forfeit the money.

Meaning of an onerous gift

An onerous gift is a gift carrying a legal or financial obligation or liability along with the benefit conferred. For example, a transfer may include shares on which calls are payable or a lease with continuing rent liabilities. The mere fact that a gift has an economic burden does not automatically make it invalid. Section 127 determines whether the donee may separate the advantageous portion from the burdensome portion.

One single transfer: acceptance of the whole gift

Where several things are given to the same donee in one single transfer, and some are subject to obligations while others are not, the donee cannot select only the beneficial items. Acceptance must extend to the entire gift. Illustration (a) shows this principle: the donee cannot keep profitable shares while rejecting the loss-making shares within the same gift.

Separate and independent transfers: choice to accept or reject

Where the donor makes two or more separate and independent transfers, the donee may accept one and refuse another. Illustration (b) describes a lease that carries burdensome rent obligations and an independent gift of money: refusing the lease does not cause forfeiture of the money. The actual nature of the instruments and transaction, not merely their labels, matters when deciding whether transfers are truly separate.

Gifts to a person not competent to contract

Under the special rule for an onerous gift to a disqualified person, a donee who lacks contractual capacity is not bound by acceptance of a property carrying obligations. However, after becoming competent to contract, if the donee knows of the obligation and nevertheless retains the property, the donee becomes bound. This rule is particularly important where a minor receives property carrying a liability; mere initial acceptance during incapacity is not enough to impose that obligation.

Section 122 defines a gift as a voluntary transfer of existing movable or immovable property without consideration, accepted by or on behalf of the donee. Section 123 prescribes how gifts are effected, including registration and attestation for immovable property. Section 126 governs suspension and revocation of gifts. Section 128 separately addresses a universal donee who receives the donor's whole property, subject to statutory liability limits. Section 129 saves certain donations mortis causa and rules of Muhammadan law.

Practical points before accepting a gift

Identify whether the property carries loans, unpaid calls, lease obligations or other burdens.
Read the gift deed and related documents to determine whether there is one composite transfer or several genuinely independent transfers.
Verify the donor's title, the donee's acceptance, and compliance with the applicable formalities under Section 123.
Where the donee lacked capacity when the gift was accepted, examine whether the donee later retained the property with knowledge of the obligation after becoming competent.

Frequently asked questions

Can a donee accept only the valuable part of an onerous gift?

Not if it forms part of a single transfer covered by the first paragraph of Section 127. The entire gift must be accepted to take any part of it.

Can a donee refuse a burdensome gift but accept another gift from the same donor?

Yes, where the gifts are separate and independent transfers, as stated in the second paragraph.

Is a minor automatically bound by the burden of an onerous gift?

No. The special rule protects a donee not competent to contract, subject to the consequences of knowingly retaining the property after becoming competent.

Official legal resources

For the statutory text and legislative updates, consult the India Code portal (search for the Transfer of Property Act, 1882, Act 4 of 1882) and the Legislative Department, Government of India. The application of Section 127 depends on the actual transaction and any applicable special law.

This article provides general information on Section 127; legal consequences in individual transactions depend on the documents and facts.