Vested Interest (Section 19):

According to this section, where on transfer of a property an interest is created in the property in
favour of a person:

(i) without specifying the time when it is to take effect, or

(ii) in terms specifying that it is to take effect—
(a) forthwith, or
(b) on the happening of an event which must happen,

such an 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.

An intention that an interest shall not be vested is not to be inferred merely from a provision whereby:

(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.

A vested interest is an immediate right to a property. When a vested interest is created, the transfer of
property is complete. The immediate right may be either a right of present enjoyment or a right of
future enjoyment. As soon as the transfer is complete, the interest accrues to the transferee with
immediate effect, and the transferee's title is complete. In comparison, a vested interest, contingent
interest depends upon the happening of a specified uncertain event. Such a contingent transfer
becomes vested only on the happening of that uncertain event.

Where No Time is 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. For 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.

Where it is to Take Effect Forthwith:

The interest created in favour of the transferee is vested where it is specified that it is to take effect
forthwith, i.e., immediately, without delay. Where a deed contains such a declaration clearly, the deed
conveys vested interest alone.

On the Happening of an Event:

The interest is a vested interest where the operation of the transfer is made to depend upon some
specified certain event. The event must be clearly specified, explained, and it must be certain to
happen. For example, the death of a person is certain to happen, likewise sunset and sunrise are bound
to happen, etc.

Enjoyment Postponed: A condition postponing enjoyment does not prevent the interest from vesting
immediately, but it is itself void for repugnancy after the transferee has attained majority. Repugnancy
arises in such a situation where there is inconsistency between the two rules. An illustration may be
taken: where A transfers property to B in trust for C, and directs B to give possession of the property
to C when he attains the age of 25. C has a vested interest and is entitled to possession at the age of
18.

(b) Prior Interest: Similarly, it is not to be inferred that an interest shall not be vested merely by a
provision whereby a prior interest in the same property is given or reserved for some other person.
Where a prior interest is created, there is only postponement of enjoyment and not the vesting of
subsequent interest. For example, where A transfers property to B for life and then to C, here the
interest of C is vested interest, but only due to the prior interest created in favour of B, his right of
enjoyment is postponed till the life of B.

(c) Accumulation of Income: It is not to be inferred that the interest shall not be vested whereby
income arising from the property is directed to be accumulated until the time of enjoyment arrives.
However, the direction for accumulation of income must be within the limits sanctioned by Section
17. If the direction is for a period in excess of the period specified, it will be invalid for the period in
excess. Only the right of enjoyment is postponed but not the vesting.

(d) Conditional Limitation: The interest shall not be vested is not to be inferred from a provision
that if a particular event shall happen, the interest shall pass to another person. Such type of a
provision is known as a "conditional limitation." A conditional limitation divests an estate which has
become vested and vests it in another person.

Contrary Intention:
The grantor may specify the time of vesting as Section 5 provides that a transfer may not be only in
the present but also in the future. However, the time of vesting cannot be beyond the period allowed
by the rule against perpetuity.

Death of Transferee:
When an interest is vested, it becomes the property of the transferee, and he can transfer it even before
he has obtained possession (Section 6). A transfer of property even without possession is effective. If
the transferee dies, his interest vests in his legal representatives, whether or not he has obtained the
possession.

The Main Characteristics of Vested Interest May Be Summarized as Follows:

1. Vested interest does not depend upon the fulfilment of a condition. It creates a present and
immediate right. The enjoyment may be postponed to a future date.
2. A vested interest is transferable as well as heritable.
3. A vested interest is not defeated by the death of the transferee before obtaining
possession. The interest passes on to the heirs of the transferee.

__________________________________________________________________________

Vesting of Interest in Case of Unborn Person (Section 20)

According to this section, an interest created in favour of an unborn person vests as soon as he is born.
Although the possession may not be given to him immediately on his birth, it may be postponed, but
the interest is vested in him when he is born alive. There is no ban on the transfer of interest in favour
of an unborn person. Section 20 permits an interest being created for the benefit of an unborn person
who acquires interest upon his birth.

For example, where A settles his property on himself and his intended wife for their joint lives and
then to their eldest son of marriage, the son takes vested interest as soon as he is born. He is not
entitled to the possession during the lifetime of his parents. This section contemplates the normal
condition in which the unborn person is born alive. When an unborn person dies within the womb of
his mother and is not born alive, this section does not apply.

___________________________________________________________________________

Contingent Interest (Section 21)

An interest the vesting of which takes place after the fulfilment of some condition precedent, till the
condition is fulfilled remains contingent.
In a transfer of property, a person gets 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.

For example, where 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.

The main characteristics of a contingent interest may be summarized as follows:

(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 event, 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 is not "contingent interest" within the meaning of this section.

Cases:
(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 makes a gift in favour of 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 here.

Difference Between Vested and Contingent Interest

1. Definition

1. Vested Interest: Where, on transfer of property, an interest therein is created in favour of a

person—
(i) without specifying the time when it is to take effect, or
(ii) specifying that it is to take effect forthwith, or
(iii) on the happening of an event which must happen, such interest is vested.
2. Contingent Interest: Where, on transfer of property, an interest therein is created in favour
of a person—
(i) to take effect only on the happening of a specified uncertain event, or
(ii) if a specified uncertain event does not happen, such person acquires a contingent
interest in the property.

2. Fulfilment of Condition

1. Vested Interest: It creates an immediate right in the property, though the enjoyment may be
postponed to a future date. It does not depend upon the fulfilment of any condition.
2. Contingent Interest: It depends upon the fulfilment of the condition. If the condition is not
fulfilled, the interest fails.
3. Effect of Transferee's Death

1. Vested Interest: It is not defeated by the death of the transferee before he obtains possession.
2. Contingent Interest: It cannot take effect in the event of the transferee's death before the
fulfilment of the condition precedent.

4. Transferable or Heritable

1. Vested Interest: It is both transferable as well as heritable. If the transferee dies before actual
enjoyment, the interest passes on to his heirs.
2. Contingent Interest: It is transferable but not heritable. If the transferee of the property dies
before obtaining possession, the contingent interest fails and does not pass on to his heirs.

5. Present Right of Enjoyment

1. Vested Interest: In vested interest, there is a present immediate right even when its
enjoyment is postponed.
2. Contingent Interest: There is no present right in contingent interest. There is only a promise
to give a right which depends upon the fulfilment of a condition. If the condition is fulfilled,
the right is given; otherwise, not. Such promise is nullified by the failure of the condition.

Exception: 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."