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Ergo Update

27-May-2020

A single-judge bench of the Hon’ble High Court of Delhi, comprising Hon’ble Mr Justice Navin Chawla, vide judgment dated 20 May 2020 in the matters of Tripta Kaushik v Sub Registrar VI-A, Delhi & Anr and Ramesh Sharma v Government of N.C.T. of Delhi & Ors., dealt with the distinction between a relinquishment deed and a gift deed. The Court laid down an elaborate test to determine whether an instrument is construed to be a release deed or a gift deed and held that if the relinquishment by the co-owner is only in favour of one of the co-owners and not all the co-owners, that document will be a gift deed and not a relinquishment deed.

BRIEF FACTS AND ARGUMENTS

The Delhi High Court dealt with two writ petitions simultaneously, as both petitions concerned similar questions of law.

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In the first writ petition, the subject property was acquired by the petitioner and her son vide a conveyance deed executed in the year 2000 by the Delhi Development Authority. The son of the petitioner released his rights in the subject property in favour of the petitioner vide a relinquishment deed. The petitioner challenged the order passed by the Sub Registrar VI A, Delhi impounding the relinquishment deed executed by petitioner’s son in favour of the petitioner treating it to be a gift deed under Article 33 of Schedule IA of the Indian Stamp Act, 1899 (Act). The Sub Registrar VI A, Delhi also held the release deed to be insufficiently stamped.

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In the second writ petition, the petitioner contended that the subject property was purchased by the parents of the petitioner and accordingly the father of the petitioner bequeathed his share in favour of the petitioner by way of a registered “will” in the year 2001. The father of the petitioner passed away in 2003 leaving behind his wife, the petitioner and five daughters as his Class I heirs. The sisters vide five (5) separate relinquishment deeds, relinquished their share in the subject property in favour of the petitioner in the year 2012 on two separate dates. When the deeds were presented for registration they were impounded, and an assessment was made of payment of insufficient stamp duty, alongwith imposition of a penalty of Rs. 1,00,000/-. Aggrieved by the same, the petitioner preferred the present writ petition.

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The second petitioner also contended that the petitioner had inherited half the share in the subject property by way of a “will” on the death of his father and therefore the relinquishment deed shall be considered as a part of the family settlement and therefore, stamp duty cannot be charged on the same.

ISSUE FOR CONSIDERATION BEFORE THE DELHI HIGH COURT

What are the factors which distinguish a gift deed from a deed of relinquishment?

JUDGMENT

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The Delhi High Court considered various judgments of the Hon’ble Supreme Court and several High Courts and laid down the test to determine whether an instrument can be considered a release/relinquishment deed. The test was summarised as:

 

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The actual character of the transaction intended by the executants is the decisive factor in determining whether the document is a release/gift deed and not the nomenclature or the language of the document;

 

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Determination of the nature of the document is not a pure question of law;

 

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Mere use of the words like “consideration” and “transfer” would not affect the true character of the transaction; in case the co-owner is renouncing its share in favour of another co-owner;

 

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Release deeds intend the relinquishment of the right of the co-owner;

 

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Co-owners can be through both inheritance and purchase;

 

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If the relinquishment is in favour of one of the co-owners and not against all, the document would then a gift deed and not a release deed.

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In view of the above, the Court held that the first writ petition succeeded as the relinquishment deed had been executed by a co-owner in favour of the only other co-owner. The Court thus directed the respondent in the first writ petition to register the relinquishment deed in favour of the petitioner.

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However, in the second writ petition, the Court held that since the sisters relinquished their respective shares in favour of the petitioner only and not the mother (who was also a co-owner), the same would have to be construed as a gift deed and not a release deed. The Court also dismissed the contention of the petitioner with respect to the stamp duty, as the relinquishment deed does not make any reference to the “will” of the petitioner’s father or to any family settlement. The Court further set aside the penalty imposed and held that since the relinquishment deeds have been executed by the sisters in favour of the petitioner, there is no intention on the part of the petitioner to evade the stamp duty.

COMMENT

By way of the present judgment, the Delhi High Court has laid down a consolidated test which makes it convenient for the general public to gauge the difference between a gift deed and a relinquishment deed. The Court has also given a holistic view and held that the nomenclature of a document does not decide the nature of the document, the intention of the executing parties does. More importantly, the Delhi High Court has considered various judgments passed by the Hon’ble Supreme Court and various other High Courts, thereby synthesizing the law laid down in a catena of judgments. This judgment shall be the first resort for anyone who is looking to execute a relinquishment deed, as opposed to a gift deed, since the latter attracts higher stamp duty under the Act.

-       Ajay Bhargava (Partner), Aseem Chaturvedi (Partner) and Raddhika Khanna (Associate)

For any queries please contact: editors@khaitanco.com

Ajay Bhargava (partners) , Aseem Chaturvedi (partners)

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