A Gift With Conditions is Not a Gift in Perpetuity – Violation of Purpose Mandates Reversion: Andhra Pradesh High Court

A Donee Cannot Repurpose a Gifted Property – Breach of Condition Revokes Ownership - Andhra Pradesh High Court ruled that a conditional gift deed executed for a specific public purpose stands revoked if the donee fails to use the property as intended. The Court set aside the trial court’s decree and declared that the Gram Panchayat’s failure to utilize the land for a bus stand, as originally stipulated, meant the property must revert to the legal heirs of the donor.

Justice Venuthurumalli Gopala Krishna Rao, delivering the judgment, emphasized that a gift deed containing an express condition is not a gift in perpetuity. It is a contract governed by enforceable obligations, and if the donee fails to uphold them, the donor retains the right of reversion.

Observing the conduct of the Gram Panchayat, the Court held, "A donee cannot repurpose a property at its convenience. Where the gift is conditional, and the purpose is frustrated, the law does not allow the donee to retain possession."

Gifted Property Must Be Used for Its Intended Purpose – Breach of Conditions Justifies Cancellation

The dispute centered around a parcel of land gifted by Raja Velugoti Sarvanga Kumara Krishna Yachendra to the Gram Panchayat, Venkatagiri, in 1968, under a conditional gift deed stipulating that the land must be used exclusively for the construction of a bus stand. The gift deed further specified that if the property was not used for the stated purpose, ownership would revert to the donor or his legal heirs.

Despite these clear conditions, the Gram Panchayat attempted to construct a school on the site in 1986, in direct violation of the gift terms. The legal heirs of the donor opposed this move and successfully obtained an injunction, but the Gram Panchayat refused to restore the land for its original purpose. The plaintiffs issued multiple notices seeking compliance, which were ignored, prompting them to file a suit for cancellation of the gift deed and recovery of possession.

The trial court dismissed the suit, holding that it was barred by limitation under Article 59 of the Limitation Act, which provides a three-year period for cancellation of an instrument. The plaintiffs, however, argued that Article 66 of the Limitation Act, which allows twelve years for recovering possession when a condition is breached, applied to their case.

The High Court ruled in favor of the plaintiffs, holding that a conditional gift is not absolute and that failure to meet its conditions results in reversion to the donor’s heirs.

“A property gifted for a specific public purpose cannot be diverted at the whim of the donee. The donor’s intent, clearly enshrined in the deed, must be honored, failing which the gift stands revoked.”

"Limitation Begins from the Date of Breach, Not the Date of Gift – The Suit Was Filed Within Time"

The trial court applied Article 59 of the Limitation Act, holding that the suit was barred since it was filed more than three years after the execution of the gift deed. The High Court found this interpretation fundamentally flawed, clarifying that the limitation period did not begin from the date of the gift, but from the moment the condition was violated.

Citing Article 66 of the Limitation Act, which provides a twelve-year limitation period for suits to recover possession following a breach of condition, the Court held that the plaintiffs had filed their case well within the prescribed period.

“A donee cannot exploit limitation to justify a breach of trust. The right to reclaim possession arises the moment a gift condition is broken, and the law grants the donor’s heirs sufficient time to assert their claim.”

Rejecting the trial court’s approach, the High Court observed: “The right to reclaim possession accrues upon breach, not upon execution of the gift. The suit, filed in 1994 after the Gram Panchayat’s 1986 resolution to construct a school, is well within the twelve-year limitation period.”

The Court emphasized that where a gift is conditional and contingent upon fulfillment of a purpose, the time to challenge its misuse runs from the first act of deviation, not from the date of execution.

"Panchayat's Own Admissions Confirmed Breach – Possession Cannot Be Retained"

The Gram Panchayat defended its actions by claiming that a bus stand was initially built but later relocated, rendering the original purpose of the land redundant. The Court rejected this argument outright, stating that a donee does not have the right to unilaterally alter the terms of a conditional gift.

Observing the Gram Panchayat’s written resolutions, the Court found that:

• The Panchayat itself admitted to passing a resolution in 1986 to construct a school on the site.

• No bus stand infrastructure had been developed on the gifted land.

• The land had been encroached upon by private parties, and the Gram Panchayat took no steps to restore its intended use.

• The Advocate Commissioner’s report further confirmed that no bus stand was present and that the land had been misused.

“A donee that accepts a conditional gift must abide by the terms. The Gram Panchayat’s own records reveal a clear violation, leaving no room for it to justify continued possession.”

The Court further observed: "Public authorities must adhere to the commitments they make when accepting conditional gifts. They cannot claim perpetual rights when they have failed to meet the very conditions upon which possession was granted."

"Possession Must Be Restored – The Panchayat Cannot Retain What It Has No Right To"

Having established that the conditions of the gift were clearly violated, the Court ruled that possession of the land must be returned to the legal heirs of the donor. The judgment directed the Gram Panchayat and the municipal authorities to vacate the land within four months.

“A donee who has failed to fulfill its obligations cannot insist on indefinite possession. The law requires that the property be restored to the donor’s heirs, as their claim is both legal and equitable.”

The Court set aside the trial court’s decree, canceled the gift deed, and restored ownership to the plaintiffs. Declaring that the Gram Panchayat had no further right over the property, the Court warned that failure to comply within four months would allow the plaintiffs to enforce possession through legal means.

"A Gift Cannot Exist Without Its Conditions – Breach Leads to Inevitable Reversion"

The Andhra Pradesh High Court allowed the appeal, declaring the conditional gift deed void due to non-compliance and ordering the Gram Panchayat to hand over possession to the legal heirs of the donor. The ruling reaffirmed that public authorities must honor conditional gifts and cannot repurpose donated land without adhering to the conditions attached.

Justice Venuthurumalli Gopala Krishna Rao, concluding the judgment, stated: “A conditional gift does not confer an absolute right upon the donee. Where the terms of such a gift are violated, the donor or his heirs retain a vested right of reversion. The law does not recognize indefinite retention by a party that has breached its obligations.”

The Court granted the plaintiffs four months to reclaim possession and ruled that any failure by the Panchayat to vacate would entitle the plaintiffs to enforce possession through legal execution.

Date of decision : January 30, 2025