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INTRODUCTION
A transfer of property involves the transfer of interests. From the perspective of its
quantum, the interest may be partial or absolute. In terms of the time of accrual (when the
transferee actually receives the interest), the interest may be vested or contingent. Where
the interest transferred is vested, the transferee gets the interest immediately. In other
words, as soon as the transfer is complete, the interest accrues to the transferee with
immediate effect and the transferees title is complete.
Where the interest is contingent, the transferee gets the interest only upon the happening of
an uncertain future event specified in the transfer. In a transfer of property if the interest
transferred is contingent the title of the transferee is not complete unless the specified
event happens. Section 19 defines vested interest and Section 21 defines contingent
interest.
1.
VESTED INTEREST
Section 19 of Transfer of Property Act deals with vested interests it deals with situations
where interest is created in favour of a person without specifying the time when it is to take
effect, or in terms specifying that it is to take effect forthwith or on the happening of an event
which must happen, such in interest is vested, unless a contrary intention appears from the
terms of the transfer.
A vested interest is not defeated by the death of the transferee before he obtains
possession.
Illustration- In 1993, A makes a gift of his house in Delhi to his son B, and specifies that this
gift is to take effect in 1995. In this case, B will have a vested interest, because after 1993, the
year 1995 is inevitable (it is an event that must occur).
The interest created in favour of the transferee is said to be vested where(a) No time has been specified as to when it is to take effect, or
(b) It is specified that it shall take effect immediately, or
(c) It is to take effect upon the happening of an event which must happen.
Normally, when a property is transferred, the transferor simply effects it according to
procedure prescribed for the same. He may not mention the date as to when the interest shall
pass on to the transferee. In such cases, the intention of the transferor is that the transferee
shall get the interest forthwith. Such intention is presumed by law if the transferor does not
specify as to when the interest shall accrue to transferee. On the other hand, in order to be
more specific, the transferor may express his intention that intension shall accrue to transferee
with immediate effect. In both the cases the interest transferred is a vested interest. Where the
transferor provides that the transfer shall take effect upon the happening of an event of must
nature which is bound to occur in future, the interest of the transferee is a vested interest.
For Example, any future date or year, any particular age of the transferee or, death of any
person are future events of must nature. Where transfer of property is to take effect upon the
death of a person, the interest accrues to the transferee immediately.1
1 Dr. R.K. Sinha, The Transfer Of Property Act, 13th Edition, 2012, p 112.
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It may be noted that death is as certain as birth, therefore, where it is provided that the
property is transferred upon the death of a person the interest of the transferee is vested
because although death is a future event, it is certain.
There is no certainty as to when a person dies or whether or not a person survives upto a
particular age or year but, his death, as such, is certain. Similarly, any future date or future
year is also an event of must nature because they are bound to occur. Thus, in 1993, if a
person makes a gift for his property to take effect in 1995, the done gets a vested interest
because after 1993 the year 1995 is bound to come.
Illustration
A makes a gift of Rs. 10,000/- to B on the death of C. B has a vested interest in Rs. 10,000/even before C dies. But the money shall be paid to B only upon Cs death. If B dies before the
death of C the money shall be paid to Bs legal heirs.
Explanation- Explanation to Section 19 makes it clear that vested interest is not effected
by the fact that right of enjoyment has been postponed. The vested interest remains
unaffected also when the title is to pass on to another person on the happening of a particular
event in future.
The explanation provides that in the following situations, although it may appear that the
transferee has no vested interest, nevertheless the interest is vested.
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interest. And, since the interest conferred upon the two sons was made heritable,
their interest was vested.
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attaining the age of 21 years. It was held that the language of the trust-deed
suggested that vested interest was conferred to the sons.10
(c) A husband made settlement on his wife for her life and thereafter the sons
born to them were to take the property absolutely. The sons acquired vested
remainder (interest).11
2.
3.
CONTINGENT INTEREST
Section 21 of Transfer of Property Act deals with Contingent interest, where on a
transfer of property, an interest therein is created in favour of person to take effect
only on the happening of a specified uncertain event, or if a specified uncertain
event shall not happen, such person thereby acquires a contingent interest in the
property. Such interest becomes a vested interest, in the former case, on the
happening of the event, in the latter, when the happening of the event becomes
impossible.
Contingent means uncertain future event. In a transfer of property where the vesting of
interest depends on any contingency i.e. uncertain future event, the interest is contingent. In a
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transfer of property where the vesting of estate is dependent upon an event that may or may
not happen the interest is contingent.12
A contingent interest is an interest which is created to take effect only when
(i)
some specified uncertain future event happens or
(ii)
specified uncertain event does not happen.
Where the creation of interest is made dependent on the happening or not happening of any
uncertain future event, it does not vest in the transferee immediately. It vests only upon the
happening or not happening, as the case may be, of that event.
For example, where A makes a gift to B provided X survives (i.e. lives upto) the age of 20
years, the interest of B is contingent.
Similarly, where A makes a gift to B provided X does not survive (i.e. dies
before) the age of 20 years, here too the interest of B is contingent. In both the
examples, the vesting of interest in favour of B depends on an event which is
uncertain. In the first, the vesting would take effect on the happening (i.e.
survival) of that event whereas in the second, it depends on not happening of
that event. The happening or not happening of an uncertain future event is the
condition precedent for vesting. Until the condition precedent is fulfilled, the
transfer does not take place and the interest of the transferee remains a
contingent interest. In other words, contingent interest becomes vested only
upon the fulfilment of the condition precedent i.e upon the happening of the
contingency.
Contingency or specified uncertain event may be of two kinds. First, where the happening or
not happening of the event depends upon the will and desire of the parties e.g. marriage,
payment of a sum of money or execution of a deed etc.
For example, A makes a gift to B provided C marries within one year of the
transfer, The interest of B until C marries is a contingent interest. Secondly,
where specified event does not depend on the will or desire of the parties e.g.
death of a person on or before a certain age. Thus, where A makes a transfer
of his property to B provided C dies at the age of 40 years, the interest of B is
contingent. It may be noted that death of a person is a certain event therefore
where property is transferred with a condition precedent of the death of any
person, the interest of the transferee is vested. But when and at what age does
a person die, is an uncertain event. Therefore, where a transfer is made with
words: when, provided or, if a person dies at a given age, or in a specified year
or, dies before or after the death of another person, the interest of the
transferee is contingent.
Exception- Exception to Section 21 provides that where a transferee is to get the interest at
a particular age but is entitled to get absolutely the income of that interest before attaining
that age, the interest given to him is a vested interest. It may be noted that where an interest is
created in favour of a person on attaining a particular age, his interest is contingent. But, if
the transferor gives to the transferee also an absolute right in the income arising out of that
interest (property) or, directs that so much of such income as is necessary for his benefit be
applied with immediate effect, the interest of the transferee is a vested interest.13
4.
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(b)Not heritable
A contingent interest is not a heritable interest. Where a person
having contingent interest dies (i.e. dies before vesting) his legal heirs do
not get anything, not even the contingent interest. After the death of
person his legal heirs are entitled to inherit only those properties in which
he had a vested interest at the time of his death.
In Rajesh Kanta Roy v. Smt. Shanti Devi14 the Supreme Court observed
thus:
In the case a contingent interest, one of the features is that if a person
dies before the contingency disappears and before the vesting occurs, the
heirs of such person do not get the benefit of the gift (transfer).
5.
14 Ibid at p 120.
15 Bay Berry Apartments P. Ltd. V. Shobha, AIR 2007 SC 226.
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Contingent interest and spes- successionis both re future possible interests. In both, there is
no present fixed right in respect of property and in both the cases there is a possibility or
chance that it may become a perfect title in future. But, in a contingent interest the degree of
this possibility is lesser as compared to spes-successionis.
For instance where a property is transferred subject to some specified
uncertain future event, there are only two possibilities namely, either the event
happens or the event happens or the event does not happen. But spessuccessionis or mere chance of heir apparent is dependent on several
possibilities e.g.
(i) the heir apparent survives the propositus (deceased person),
(ii)
even if he survives, the propositus during his life has already
transferred the property or,
(iii)
he has made a will of that property.
So, spes-successionis has been regarded as a naked or mere future possible
interest. Therefore, under Section 6 (a) of this Act, spes-successionis is a nontransferable interest. Contingent interest is not mere possible future interest;
it is simply uncertain. Therefore, law has allowed the transfer of such interest.
Subject to contingency a contingent interest is a transferrable interest.
Pointing out the difference between a contingent interest and spessuccessionis in Ma Yait v. Official Assignee16 the Privy Council made
following observations:
...... the contingent interest which the children took was
something quite different from a mere possibility of a like nature of an heirapparent succeeding to the estate, or the chance of a relation obtaining a
legacy, and also something quite different from a mere right to sue. It is a well
ascertained form of property is certainly has been transferred in this country
for generations- in respect of which it is quite possible to raise money and
disposed of it in any way the beneficiary chooses.
6.
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7.
Section 22 deals with transfer to a contingent class. Where the transferee constitutes a
class but who are to be included in this class is not certain, the transferee is a contingent class.
For example, where a transfer is made to such of the children of A who shall attain the age of
18 years, the transfer is in favour of a known class of person i.e the children of A. But, it is
not certain as to who among the children of A shall survive to attain the age of 18 years.
Therefore, the transfer is in favour of an uncertain or contingent class.
Section 22 provides that where an interest is created in favour of only such member of
a class who shall attain a given age, such interest does not vest in any member of the class
who does not attain that age. In the above example, no child of A who has not attained 18
years may get any interest because until he attains the prescribed age (here18 years) he is
uncertain transferee.
However, where the class of transferee is certain and known but vesting of interest in
favour of this class is uncertain, this section is not applicable. Thus, where a gift is made to
17 S.N Shukla, The Transfer of Property Act, 29th edition, 2015, p 83.
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the children of A provided an uncertain event happens, the transfer is to a certain class of
transferee but vesting of interest is uncertain or contingent. Section 22 does not apply to such
situations.
Exception to Section 21 not applicable
The exception to Section 21 is applicable only in cases where a property is
given to a person on attaining a particular age; it has no relation to any other contingency e.g.
on his surviving a specified person etc. Where a person made a will of his property to such of
his grandsons as survived him and attained the age of 18 years, and gave also the income of
property till they attain the age of 18 years, the Privy Council held that the interest of the
grandsons was not vested under the exception to Section 21.18
Illustration
A fund is bequeathed to such of the children of A as shall attain the age of 18, with a
direction that, while any child of A shall be under the age of 18, the income of the share, to
which it may be presumed he will be eventually entitled, shall be applied to his maintenance
and education. No child of A who is under the age of 18 has a vested interest in bequest.19
8.
9.
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Illustration
A transfers his property to B for life and then to C and D equally or, to the survivor.
C dies during the life of B whereas D survives B. Here, D is to take the whole
property after the death of B.
21 G.C. Bharuka, Mulla:The Transfer of Property Act, 10th ed., (Lexis Nexis, Butterworths,
Wadhwa,2012). p 165.
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Bibliography
BOOKS
S.N Shukla, The Transfer of Property Act, Allahabad Law Agency, Haryana 29th
edition, 2015, pages 77-85.
2. Dr. R.K. Sinha, The Transfer Of Property Act, Central Law Agency, Allahabad, 13th
Edition, 2012, pages 111-121.
3. Dr. Ashok K. Jain, Property Law, Ascent Publications, Delhi, 3rd edition, reprint 2016,
pages 158-163.
1.
OTHER
Bare Act, The Transfer of Property Act, 1882, Universal Law Publications, 2015.