3 Final 19 & 21
3 Final 19 & 21
3 Final 19 & 21
I. Introduction:
Section 19 & 21 of Transfer of Property Act expounds the terms Vested or
Contingent Interest in relation to transfer of property. Transfer of Property involves
transfer of interests. But important is - what is the time of accruing interest i.e. when
does the transferee gets the interest. The answer is that, the interest may either be
vested or contingent.
Vested Interest: 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 (gets added) to the transferee with immediate effect and the transferee’s title is
complete.
Contingent Interest: Where the interest is contingent, the transferee gets the interest
only upon the happening of an uncertain future event specified in the transfer. In such a
transfer the title of the transferee is not complete unless the specified event happens.
Section 19 defines Vested Interest and Section 21 defines Contingent Interest.
3. Analysis of Section:
According to the section, where there is transfer of a property, the interest in the
property is vested i.e. created in favour of a person, where -
(i) no time is specified as to the when it is to take effect, or
(ii) it is specified that it is shall take effect forthwith (immediately), or
(iii)it is specified that it is shall take effect on the happening of an event which must
happen.
(iv)A vested interest is not defeated by the death of the transferee before he obtains
possession.
Explanation provides clarification that -
An intention that - interest is not vested should not to be inferred merely from a
provision where:
(i) the enjoyment of the property is postponed, or
(ii) a prior interest in the same property is given or reserved to some other person, or
(iii)income arising from the property is directed to be accumulated until the time of
enjoyment arrives, or
(iv)if a particular event shall happen the interest shall pass to another person.
4. Essential Conditions:
This section says that an interest is vested in a person under the following
conditions:
1) Where no time mentioned:
A person gets a vested interest in a transfer of property where the terms do not
specify the time when it is to take effect.
Example: A person sells his house to another person. The purchaser gets the vested
interest from the day of sale though the possession may not be given to him
immediately.
2. Analysis:
The vesting of an interest which takes place after the fulfillment of some
condition precedent, till the condition is fulfilled remains contingent. In a transfer of
property a person get a contingent interest in the property when:
(i) the specified uncertain event happens, the happening of which was a condition for
vesting of interest, or
(ii) the specified uncertain event does not happen, the non-happening of which was a
condition for vesting of interest and the event has become impossible to happen.
In the case of a contingent interest, the interest becomes vested only when
either of the condition is fulfilled.
Example: A makes a gift to B provided X survives the age of 25 years, the interest of B is
contingent. Where A makes a gift to B provided X does not survive the age of 25 years,
the interest of B again is contingent.
4. Characteristics:
The main characteristics of a contingent interest may be summarizes as following:
(i) The contingent interest is a transferable interest.
(ii) It is not heritable. On the death of a person having contingent interest, his interest
does not pass to his legal heirs, The legal heirs of such a transferee do not get any
interest,
(iii)Death is not an uncertain events but survival at the death of another is an uncertain
event.
(iv)The chance of an heir - apparent to succeed to a person as heir or similar possibilities
of a like nature are not ‘contingent interest’ within the meaning of this section.
Illustrations:
(1) A transfers his farm of Sultanpur Khurd to B if B shall convey his own farm of
Sultanpur Buzurg to C. Interest of B in the farm Sultanpur Khurd is contingent. It may
become vested if B conveys his farm Sultanpur Buzurg to C.
(2) A grant provided that on the death of the last surviving widow of the late Raja of
Tanjore, his daughter or failing her the next heir (if any) should inherit the property.
The Privy Council held that until the death of the last surviving widow, the interest
created in favour of the daughter was only contingent on her surviving the last
widow.
(3) A makes a gift in favour his sons with a condition that if any of them dies leaving no
male issue, his share will be taken by the others, and not by the widow or daughter
of the deceased son. The gift creates a contingent interest here2.
5. Exceptions –
If a transfer deed provides that a person becomes entitled to an interest
- upon attaining a particular age and the transferor also gives to him absolutely the
income to arise from such interest before he attains that age or
- directs the income or so much of it as may be necessary to be applied for his
benefit,
such interest is not contingent interest.
This exception is based on the principle that, “where the principal is given at a
distant epoch, and the whole income is given in the meantime, the court leaning in
favour of vesting has said that the whole thing is given but if there occurs an interval or
gap, which separates the gift of interest from the principal, it is not vested.”
Example: A husband gives certain properties to his wife J, for her lifetime under a
Takshimnama, the deed providing that the "properties shall devolve upon my nephew B
or his legal heir, as absolute owner, generation after generation remain in possession...
of all the properties... in the possession of my wife, J, which he will get on her death." B
sells the properties and dies during the lifetime of J. The reversioner brings the suit for
possession of the properties. It was held that the B’s interest was contingent and came
to an end on his death during the lifetime of J.
IV. Conclusion: