TPA Assignment - law of property PDF

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Table of Contents 1. INTRODUCTION...........................................................................................2 2. SECTION 14- RULE AGAINST PERPETUITY...........................................2 3. OBJECT OF RULE AGAINST PERPETUITY.............................................3 4. RULE AGAINST PERPETUITY UNDER SECTION 14..............................3  MAXIMUM REMOTENESS OF VESTING.....................................................................4  ULTIMATE BENEFICIARY IN MOTHER’S WOMB......................................................4  CONTINGENT INTEREST................................................................................................5

5. APPLICABILITY OF SECTION 14..............................................................6 6. EXCEPTION TO RULE AGAINST PERPETUITY......................................7 7. CONCLUSION...............................................................................................8

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INTRODUCTION SECTION 14: - RULE AGAINST PERPETUITY No transfer of property can operate to create an interest which is to take effect after the lifetime of one or more person living at the date of such transfer, and the minority of some person who shall be in existence at the expiration of that period, and to whom, if he attains full age, the interest created is to belong.1 TRANSFER IN PERPETUTITY:Perpetuity means indefinite period. Rule against perpetuity is the rule which is against a transfer making the property inalienable for an indefinite period or forever. Where a property is transferred in such a way that it becomes nontransferable in future for an indefinite period, the property is tied up forever. This disposition would be a transfer in perpetuity. In any disposition, perpetuity may arise in two ways: (a) by taking away from the transferee his power of alienation and, (b) by creating future remote interest. Section 10 makes provision that a condition restraining the transferee’s power of alienation is void. A disposition which tends to create future remote interest has been prohibited under section 14 which incorporate the ‘rule against perpetuity.’ However, a better name of the rule may be the rule against remoteness of vesting. OBJECT OF RULE AGAINST PERPETUITY: The object of the rule against perpetuity is to ensure free and active circulation of property both for purposes of trade and commerce as well as for the betterment of the property itself. Rule against perpetuity is, therefore, based also on broad principle of public policy. Stating the object of rule against perpetuity, JEKYLL M.R. in STANLEY V. LEIGH2 has observed that if the 1 Section 14, Transfer of Property Act,1882 2 (1732) ALL E.R. 917 at p. 918 : cited in shah’s PRINCIPLES OF THE LAW OF TRANSFER, Ed. III, P. 44.

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rule were otherwise then: “a great mischief would arise to the public from estate remaining for ever or for a long time inalienable or in transferable from one hand to another, being a damp to industry and a prejudice to trade, to which may be added the inconvenience and distress that would be brought on families whose estates are so fettered.” RULE AGAINST PERPETUITY UNDER SECTION 14: -

1. 2. 3. 4. 5.

Section 14 of the Transfer of Property Act provides that in a transfer of property, vesting of interest cannot be postponed beyond the life of last preceding interest in the living person (or persons) and the minority of the ultimate beneficiary. The essential elements of the rule against perpetuity as given in this section are as follows: There is a transfer of property The transfer is for the ultimate benefit of an unborn person who is given absolute interest The vesting of interest in favor of ultimate beneficiary is preceded by life or limited interest of living person The ultimate beneficiary must come into existence before the death of the last preceding living person Vesting of interest in favor of ultimate beneficiary may be postponed only up to the life or lives of living persons plus minority of ultimate beneficiary: but not beyond that

 MAXIMUM REMOTENESS OF VESTING: Under section 14, the maximum permissible remoteness of vesting is the life of the last preceding interest plus minority of the ultimate beneficiary. Accordingly, property may be transferred to A for life and then to B for life and then to the U.B. when he attains the age of majority. A & B hold property successively for their lives, therefore, the property is tied up their lives one after the other. After the death of B (the last preceding interest) although it should vest in the ultimate beneficiary U.B. immediately but, under this section the property may be allowed to vest in the U.B. when he attains the age of 3|Page

majority. In Saundara Rajan v. Nataranjan3 the Privy Council held that since at the date of the transfer it is not known whether or not a guardian would be appointed by court for the minor in future, for purposes of section 14 the normal period of minority would be eighteen years. So, the vesting may be postponed up to the life of the last person (B) holding property for his life and the minority (18 years) of the ultimate beneficiary.

 ULTIMATE BENEFICIARY IN MOTHER’S WOMB: Where the ultimate beneficiary is in the mother’s womb i.e. it is a child en ventre sa mere, the latest period up to which vesting may be postponed, (after the preceding interest) is the minority plus the period during which the child remains in mother’s womb. It may be noted that minority is counted from the date of worldly birth whereas for purposes of being a transferee, a child in mother’s womb is a competent person where the ultimate beneficiary is in mother’s womb when the last person dies, the property vests immediately in him while he is still in mother’s womb. Therefore, the exact period from which the minority begins to run is the date when ultimate beneficiary is conceived. Accordingly, the minority up to which the vesting is permitted to be postponed under this section would include the period during which the ultimate beneficiary remains in womb before he is born alive. The period during which a child remains in womb after being conceived is called gestation. The maximum limit fixed for postponing the vesting of interest is the life of lives in existence at the date of transfer plus the minority of ultimate beneficiary with the addition of the period of gestation provided gestation actually exists i.e. the ultimate beneficiary is actually in mother’s womb at the death of the last person. Where the ultimate beneficiary is already a born person the gestation period cannot be counted in addition to minority. However, in cases where gestation period is to be added, only normal period is to be added, only normal period of gestation (which is about nine months or 280 days) can be allowed to be added in the period of remoteness of vesting of interest. 3 A.I.R. 1925 P.C. 244

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 CONTINGENT INTEREST: Under section 14, vesting of interest in favor of the ultimate beneficiary may be postponed up to his minority. In other words, the property does not vest in him until he attains the age of majority. What then is the nature of his interest during his minority? Between the period when last person dies and the majority of the ultimate beneficiary, the ultimate beneficiary has a contingent interest which becomes vested upon his attaining majority. Where the ultimate beneficiary is already born at the death of the last person but does not survive to attain majority e.g., dies at the age of fifteen years, the interest does not vest in him and therefore it reverts back to the transferor or his legal heir if the transferor is dead by that time. Regard of possible events not of actual events- In deciding question of remoteness of vesting, regard must be had to the possible events and not to actual events.4 Where at the time of transfer of property there is possibility or probability that in future it would be a transfer in perpetuity, the disposition shall be void even if at the time of actual vesting of interest there is no violation of rule against perpetuity.

In Ram Newaz v. Nankoo,5 it was held by the court that the transfer of two Bighas, of land to B was void under section 14. On actual facts the transfer operated well within the period allowed but, since it was possible that the transfer might have been postponed for 100 or 200 years until A’s last lineal descendent, the transfer of the land to B (purchaser) was void.

4 Pan Kuer v. Ram Narain, (1929) A.C. 353. 5 (1926) 92 I.C. 401

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APPLICABILITY OF SECTION 14: Rule Against Perpetuity Under Hindu and Muslim Law 1. The Transfer of Property Act was made applicable to Hindus by the Amending Act of 1929. 2. Now, the provisions of this Act including Section 14 are applicable to Hindus. But, even before this amendment, the rule against perpetuity was applicable to transfers made by Hindus by local enactments e.g. Hindu Disposition of Property Act, 1916 and Madras Act 1914. 3. However, apart from these statutory provisions, a transfer of property in perpetuity was held void under Hindu law except gifts for religious or charitable purposes.6 4. Although Chapter II of the Transfer of Property Act is not applicable to Muslims but a gift to remote and unborn generations was held void though exception has been made in case.7

EXCEPTION TO RULE AGAINST PERPETUITY: The Rule Against perpetuity is not applicable in the following cases: (a)Transfer for the Benefit of Public- Where a property is transferred for the benefit of public in the advancement of religion, knowledge, commerce, health, safety or any other object beneficial to mankind, the transfer is not void under the rule against perpetuity.8 This exemption is necessary because transfer of property for the benefit of public generally are made through the medium of religious or charitable trusts. 6 Sookhmoy Chunder v Manoharri Dassi , (1885) 11 Cal. 68. 7 Abdul Fata Mohamed v. Rasamaya, (1894) 22 Cal. 619. 8 Section 18, Transfer of property Act, 1882

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(b) Personal Agreement – Personal agreement which do not create any interest in property are exempted from the rule against perpetuity. Rule against perpetuity is applicable only to a transfer of property. If there is no transfer of property i.e. no transfer of interest, the rule cannot be applied. Contracts are personal agreement even though the contracts relate to rights and obligations in some property.9 Leading Case: Ram Baran Prasad v. Ram Mohit Hazra10 The Supreme Court, observed and held as follows: 1. The Court referred to the provisions of the Specific Relief Act, 1963 to state that a contract is enforceable by and against the transferees/assignees of the original parties. 2. Prima facie, the rights of the parties to a contract are assignable. Having regard to the contract and circumstances in the present case, it is clear at preemption clause must be construed as, binding upon the assignees. 3. The rule against perpetuity does not apply to contracts, which do not create rights of property. 4. The rule as formulated falls within the branch of the law of property and its true object is to restrain the creation of future conditional interests in property. 5. The Supreme Court, thus, held that rule against perpetuity cannot be applied to a covenant of pre-emption even though there is no time-limit within which the option has to be exercised.

9 Jagar Nath v. Chedi Dhobi, A.I.R. 1973 ALL. 307 10 (1967) 1 SCR 2931

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CONCLUSION Therefore S.14 provides a rule against perpetuity i.e. a rule against remoteness of vesting, in absence of which the society shall definitely suffer a loss because of the stagnation of the properties. It would cause great hardship in the easy enforcement of law which shall be detrimental to trade, commerce, intercourse and may also result into the destruction of the property itself. One cannot be deprived of his right of enjoyment in respect of the property as he like in his lifetime. The policy of the law has been to prevent property from being tied up forever. Perpetuity is an interest, which will not vest till a remote period. One cannot postpone the vesting of the property in the transferee beyond a certain limit. The period for which vesting may be lawfully postponed is called ‘perpetuity period’. Further, Section 14 of TOPA provides that where an interest is created for the benefit of an unborn person (in accordance with the provisions of section 13), such interest shall not take effect if the interest is to vest in such unborn person after the life time of one or more persons living on the date of the transfer (i.e. the person in whose favour the prior interest is created as required under section 13) and the minority of such unborn person. In other words, the interest created for the benefit of an unborn person shall take effect only if the interest is to vest in such unborn person before he attains the age of eighteen years. Its applicability under Hindu law and Muslim law were discussed and exception of rule against property which states about transfer for the benefit for the public and personal agreement. Further by leading case it was held that rule against perpetuity cannot be applied to a covenant of pre-emption even though there is no time-limit within which the option has to be exercised.

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