Vested and Contingent interest tpa 1 PDF

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HIMACHAL PRADESH NATIONAL LAW UNIVERSITY SHIMLA

(2020-21)

PROPERTY LAW

Submitted By: Abhijeet Singh Chauhan B.B.A LL.B (4th Sem.) 1120181910

Submitted To: Ms. Navditya Tanwar Kaundal Assistant Professor Law

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“Vested and Contingent interest under Transfer of Property Act.”

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ACKNOWLEDGEMENT

I express my sincere respect and gratitude to my subject teacher for giving me this opportunity to work on this topic and for valuable support and suggestions. Secondly, I would also like to thank my parents and friends who helped me a lot with the completion of this project.

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INDEX

1. INTRODUCTION

. . . . . . . . . . . . . . . . . . . . . Pg. 5

2. VESTED INTEREST

. . . . . . . . . . . . . . . . . . . . . .Pg. 5

3. CONTINGENT INTEREST

. . . . . . . . . . . . . . . . . . . . . .Pg. 7

4. DIFFERNCE BETWEEN VALID AND CONTINGENT INTEREST 5. CONCLUSION

. . . . . . . .Pg. 8 . … . . . .. . . Pg. 9

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ABSTRACT

The Transfer of property act in India, in general deals with the transfer of immovable property. The act although is not a complete code for the purpose of transfer of property. It is not applicable to all the transfers taking place and thus has a limited scope. Section 19 and 21 deal with the vested and contingent interests related to the transfer of the property, whereas section 22, 23 and 24 also help to define and clarify the scope of contingent interest. This paper discuses the scope, nature and characteristics of the vested and contingent interest under the transfer of property law in India.

INTRODUCTION

The Indian legislation, Transfer of Property Act1, provides the regulations related to the transfer of property. It provides provisions specific to the transfer, its constituents and the conditions affixed to it. The act came into force on July 1st, 1882. The main objective of the transfer of property act is to bring forth the rules and regulations related to the transfer of property between persons both living and after the death. The second objective of this law is to complement the code of contract law in matters related to the immovable property. The act although is drafted to address the majority of matters related to the property and its transfer but it has not to be read alone as it is not exhaustive like other acts. The provisions of this act are supplementary to the law of contract as it does not deal with the transfer of property alone, the act also deals with the contracts related to the transfer and succession of such property. Whenever there is a transfer of a property an interest concerned with that property is created in favour of the person transferring that property (or the transferee). Therefore, it has to be duly determined that whether the interest created is a vested or a contingent interest. This act mainly deals with two kinds of interests, namely vested interest and contingent interest. Vested interest stands distinguished from the contingent interest.

VESTED INTEREST

1 The Transfer of Property Act 1882

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Section 19 of the transfer of property act defines vested interest. According to it unless an intention contrary to the stated interest appears, the property is said to be vested interest given, the interest created is without the specification of time or with a specification of a happening of an event. Creation of a vested interest does not transfer the possession of the property but leads to the expectancy to receive the possession after the fulfilment of the condition(s). Death of the person holding an interest does not have any effect over the interest, as it simply passes on to the legal heirs of the deceased. For example, A person promises to transfer his property to his nephew after he attains the age of 22. The nephew of that person has now vested interest in his property but till he comes of the required age, the possession is not transferred. In the above-mentioned scenario, if suppose, the nephew of the person dies at the age of 21, the interest vested in his nephew will pass on to his legal heirs and they will be entitled to the property after the prescribed time period. There are some important aspects of the vested interest, these are,

1. The interest must be vested: The provision specifically lays down that there must be an interest created in favour of an individual. In such type of contract there is no specification of time or there exists a condition of happening of a certain event. Transfer of a particular property should be professed by a person in order for the interest to be created. In the case of Lachman v Baldeo2 A gift deed was transferred by a person to another on the condition that the possession will not be granted until the death of the transferor. Here the transferee has a vested interest even though the right of enjoyment is postponed.

2. Postponement of the Right to enjoy property: After the interest is vested in a person, that person does not instantly obtain the possession of the property. Thus, the person cannot enjoy it straightaway.

3. Person under guardianship: A minor who has a guardian can only be entitled to the vested interest after he attains an age of majority.

4. Insolvent person: Vested interest cannot exist for an insolvent person. In In Vijiaranga Naidu v. Ndrayanappa3 and Subbaraya Chettiar v. Papathi Ammal4 it was held that the insolvent is divested and cannot have vested interest in the property unless it is restored back by the administration to him.

2 Lachman Lal Pathak vs Baldeo Lall Thathwari 68 Ind Cas 944 3In Vijiaranga Naidu v. Ndrayanappa A.I.R. 1946 Mad. 371 4 Subbaraya Chettiar v. Papathi Ammal A.I.R. 1918 Mad. 294.

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5. Unborn child: According to the section 13 of the act, an interest for an unborn child (i.e. does not have an existence and also not considered as a living person) for the transfer of property can be created with the following prerequisites,   

Direct Transfer- The transfer cannot be direct, it has to be made through the mechanism of trust. Prior Interest- If there is no existence of trust mechanism, then the property is shifted from the prior interest created for a living person to the child. Absolute Interest- The transfer must be of the entire property in the favour of the unborn child. It must be absolute in interest. In the case of Girjesh Dutt v/s. Data din5, the court held that the transfer of limited interest for an unborn daughter stands void.

CONTINGENT INTEREST

The concept of contingent interest is stated in the section 21 of the transfer of property act. According to it when an interest is created in the favour of a person on the condition of the happening a a specific event, that is uncertain. The possession of the property is not granted immediately to the person holding the contingent interest but instead an expectancy is created to receive the property upon fulfilment of the condition or happening of that specific event. If the condition is not fulfilled or the event does not happen, then the person will not receive the property.

For example, A man agrees to transfer his property to his friend if in the future he has no legal heirs. Since the condition is uncertain and there exists doubt on the happening of the event, therefore his friend acquires a contingent interest in the property. He shall only get the property if there are no legal heirs. In Leake v, Robinson6, the court in its judgement held that whenever there is a condition involving a bequest that is to be disposed ‘at’, ‘upon’ or ‘after’ attaining a particular age then it can be stated that the transfer includes a contingent interest.

CHARACTERSTICS OF A CONTINGENT INTEREST

1. A contingent interest is entirely dependent upon the conditions stated. Transfer can only happen on the fulfilment of the condition(s).

5 Girjesh Dutt v. Datadin AIR 1934 Oudh 35 6 Leake v. Robinson (1817) 2 Meir. 363

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2. The contingent interest will fail and the property will remain with the transferor if the transferee dies before obtaining the possession.

3. Contingent interests are transferable rights. The interest can on be heritable depending upon the nature of the transfer and the condition(s).

4. Any bequest to a son, daughter or wife can be a contingent interest on the basis of the condition.

5. If a person having a contingent interest or expectancy in the rights of ownership of a property, for the time until the event happens, earns any kind of income which arise from that property then that interest doe not come under the contingent interest.

Section 22 of the act mentions the transfer of property to a group or members of a particular class with a contingent interest. According to it if, let’s say, there is a transfer of property to a group of 4 people, where the condition is that the property will be vested only to persons having attained the age of 22 years on a specific date. The persons having attained the required age will get an interest in the property while the others would not. Section 23 mentions about the transfer after happening of an event, which was also the condition involving the contingent interest. According to it , of on transfer of a property an interest is to be accrued to a specific person given that a there is a condition of happening of a specified uncertain event without any mention of time, that interest would fail if the intermediate or preceding interest ceases to exist. Section 24 of the act mentions about the transfer of property to a class of members or a group of persons, given the condition that they must be alive at a specific date. Since the event mentioned here is uncertain therefore it is also a contingent interest. The transfer will only happen for the persons qualifying the requisite criteria. Also, since the transfer is dependent on the fulfilment of the condition, the legal heirs of the deceased cannot claim an interest.

DIFFERENCE BETWEEN VESTED AND CONTINGENT INTEREST

To sum up, both vested and contingent interest have the following basic difference

No.

Ground of Difference

Vested Interest

Contingent Interest

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1.

Section

Provided in the Section 19

Provided in the Section 21

2.

Condition

Must be a specified certain event.

Involves a specified uncertain event.

3.

Dependency on the conditions

Fulfilment of the condition is necessary.

4.

Ownership

Since the condition is a certain event therefore not entirely dependent on the condition. Right to ownership is created after the interest is vested

5.

Death of transferee

6.

Nature

7.

Right of enjoyment

No effect on the interest, it will then vest on the legal heirs. Both transferable and heritable.

Guaranteed right of enjoyment after the transfer.

Bleak chances of having ownership right. Death before getting possession will lead to the interest becoming void. Transferable but the heritability depends upon the nature of transfer and the condition. There exists only mere expectancy of the right.

CONCLUSION

Vested interest and Contingent interest are the two types of interest dealt with in the Transfer of property act. It is important to understand the concept of vested and contingent interest especially if a transferor wants to transfer hi property through interest. It is also important for the transferee to know about his rights and exceptions related to the interest created. The transfer of property law has provided several sections related to these interests. It is important to understand the transfer involving the contingent interest will only take place after the fulfilment of the condition, otherwise not. The condition created, however should follow the legal principle of justice equity and good conscience. In simple words it should follow the principles of natural justice.

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1. The Transfer of Property Act, 1882

Books: 2. Mulla, The Transfer of Property Act. (2015) 3. Poonam Pradhan Saxena, Property Law. (2017)

Cases:

4. Lachman Lal Pathak vs Baldeo Lall Thathwari 68 Ind Cas 944 5. In Vijiaranga Naidu v. Ndrayanappa A.I.R. 1946 Mad. 371 6. Subbaraya Chettiar v. Papathi Ammal A.I.R. 1918 Mad. 294. 7. Girjesh Dutt v. Datadin AIR 1934 Oudh 35 8. Leake v. Robinson (1817) 2 Meir. 363

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