Vested interest and Contingent Interest

An Inquisition under Transfer of Property Act.

Saji Koduvath, Advocate, Kottayam

Read Also:

• Transfer of Property with Conditions & Contingent Interests
• Vested Remainder and Contingent Remainder
• Rule Against Perpetuity – Simplified

Relevant Provisions of TP Act in a Nutshell

Inquisition (TP Act)	Provision TP Act	Answer in Nutshell
Can a property be transferred with conditions?	Sec. 10	Yes.
What all conditions will be void?	Sec. 10 & 11	Sec. 10 – Conditions that are ‘absolutely restraining‘ disposal of (his) interest. Sec. 11 – Enjoyment ‘in a particular manner’.
What is ‘absolute restraint’?	Sec. 10	Absolutely restraining disposal of his interest.
What is the effect of ‘absolute restraint’?	Sec. 10	Condition, void.
What is the effect of ‘terms’ for enjoyment ‘in a particular manner’?	Sec. 11	Terms can be ignored.
What is Vested Interest?	Sec. 19	Interest is created ‘in praesenti‘.
What is Contingent Interest?	Sec. 21	Interest takes effect only on the happening of a specified uncertain event.
What is Vested Remainder ?	No provision in TP Act	Creation of future interests .
What is Contingent Remainder?	No provision in TP Act	Future interest created takes effect on termination of an estate.
What is preemption?	.…	Right of Substitution – to rub out vendee’s name and substitute the preemptor’s name.

Section 19 & 21, TP Act

Section 19 of Transfer of Properties Act reads as under:

• “19. Vested interest.- Where, on a transfer of property , an interest therein is created in favour of a person without specifying the time when it is to take effect, or in terms specifying it is to take effect forthwith or on the happening of an event which must happen, such 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.
• Explanation.- An intention that an interest shall not be vested is not to be inferred merely from a provision whereby the enjoyment thereof is postponed, or whereby a prior interest in the same property is given or reserved to some other person, or whereby income arising from the property is directed to be accumulated until the time of enjoyment arrives, or from a provision that if a particular event shall happen the interest shall pass to another person.”

Section 21 of Transfer of Properties Act reads as under:

• “21. Contingent interest.- Where, on a transfer of property, an interest therein is created in favour of a 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.”

Can a property be ‘transferred’ (successively) to one, and after his death (or on happening an event) to another?

Yes. It is clear from the following illustrations in the TP Act.

Sec.	Illustration
13. Transfer for benefit of unborn person	A transfers property of which he is the owner to B in trust for A and his intended wife successively for their lives, and, after the death of the survivor, for the eldest son of the intended marriage for life, and after his death for A’s second son. The interest so created for the benefit of the eldest son does not take effect, because it does not extend to the whole of A’s remaining interest in the property.
24. Transfer to such of certain persons as survive at some period not specified	A transfers property to B for life, and after his death to C and D, equally to be divided between them, or to the survivor of them. C dies during the life of B. D survives B. At B’s death the property passes to D.
27. Conditional transfer to one person coupled with transfer to another on failure of prior disposition	A transfers property to his wife; but, in case she should die in his life-time, transfer to B that which he had transferred to her. A and his wife perish together, under circumstances which make it impossible to prove that she died before him. The disposition in favour of B does not take effect.
126. When gift may be suspended or revoked.	A gives a field to B, reserving to himself, with B’s assent, the right to take back the field in case B and his descendants die before A. B dies without descendants in A’s lifetime. A may take back the field.

See Blog for detailed analysis: Transfer of Property with Conditions & Contingent Interests

Instances of ‘vested right‘ and that on ‘condition’

Usually (absolute) vested right is invested in the following two circumstances:

• Allow to enjoy property, absolutely, on attaining majority.
• Absolutely giving property to one, subject to a right to enjoy for life of another.

Section 119 and 120  of the Indian Succession Act speaks about vesting of legacy.

Section 119  of the Indian Succession Act reads as follows:

• “120. Date of vesting when legacy contingent upon specified uncertain event. – (1) A legacy bequeathed in case a specified uncertain event shall happen does not vest until that event happens.
• (2) A legacy bequeathed in case a specified uncertain event shall not happen does not vest until the happening of that event becomes impossible.

Section 120 of the Indian Succession Act reads as follows:

• “120. Date of vesting when legacy contingent upon specified uncertain event. – (1) A legacy bequeathed in case a specified uncertain event shall happen does not vest until that event happens.
• (2) A legacy bequeathed in case a specified uncertain event shall not happen does not vest until the happening of that event becomes impossible.
• (3) In either case, until the condition has been fulfilled, the interest of the legatee is called contingent.
• Exception. Where a fund is bequeathed to any person upon his attaining a particular age, and the will also gives to him absolutely the income to arise from the fund before he reaches that age, or directs the income, or so much of it as may be necessary, to be applied for his benefit, the bequest of the fund is not contingent.”

Even in cases of ‘Contingent interest’, Interest in praesenti may be created

In transfers with ‘contingent interest’, though the interest would take effect only after satisfying the condition, the transfer becomes effective immediately. Therefore, the interest created may be in praesenti with the condition; and on satisfying the condition, it becomes a vested interest.

In Arumugham Chettiar v. A. Vallinayagam Pillai, (1975) 2 MLJ 46, the point considered was whether ‘absolute’ rights had been given to Sivagnanathammal in the will so that subsequent direction in the will that the property will go to sons of Sivagnanathammal was repugnant and it could not at all be sustained. The Madras High Court held as under:

• “I have been taken through Exhibit A-2 the will dated 12th June, 1931 created by Thiruvengadathammal. It is clear from paragraph 6 of the will that the suit properties have been absolutely given to the sons of Sivagnanathammal with a right to Sivagnanathammal to enjoy for life only the income from the properties without in any way encumbering the same. Thus, it is clear that the argument advanced by T.R. Mani as though absolute right has been given to Sivagnanathammal and that the subsequent direction in the will is repugnant, cannot at all be sustained.”

The court observed that a vested right being created absolutely on Surianarayana Chettiar, it was not ‘expectancy of succession by survivorship or other merely contingent or possible right or interest‘.

LIFE INTEREST created in a Settl. Deed is Not Hit by S. 11  TP Act

Santha Bai v.  Anusuya Bai, ILR 2024-4 Ker 686; 2024 KLT(Online) 2537

Facts

• (Deceased) Padmavathy executed Ext.A1 Settlement deed.
• (Deceased) Krishna Prabhu and (deceased) Saraswathy Bhai are the children of Padmavathy.
• Plaintiffs are the wife and son of Krishna Prabhu.
• The defendants are the children of Saraswathy Bhai.
• Ext. A1 Settlement deed contained a clause that Saraswathy Bhai, her husband, and children will have the right to live therein during the lifetime of the said persons.
• The Trial Court and the First Appellate Court dismissed the suit holding that the defendants have a life interest in the plaint B schedule building as per Ext.A1.
• The questions of Law came in the High Court was whether ‘interest’ created in Ext.A1 settlement deed in favour of Saraswathy Bhai husband and children.

Plaintiffs/Appellants argued as under:

• If ‘interest’ is conferred in favour of Saraswathy Bhai and children,  it is repugnant to the interest created in favour of Krishna Prabhu. It is hit by S. 11 of the Transfer of Property Act.
• Ext. A1 gives absolute interest over the plaint A schedule property in favour of Krishna Prabhu. Therefore, the status of the defendants is that of licensees.
• Supreme Court in Kedar Lal Seal v. Hari Lal C, AIR 1952 SC 47, held that technicality shall not stand in the matter of pleading, and the substance of the thing is important if no prejudice is caused to the other side.

The defendants contended –

• The ownership over immovable property carries a bundle of rights. It is not necessary that the entire bundle of rights should be transferred to make it a vested interest.
• Creation of an interest in the immovable property amounts to a vested interest, under Section 19 of the Transfer of Property Act.
• A life interest was created in favour of the defendants. Supreme Court in Smt. Rukhamanibai v. Shivaram, AIR 1981 SC 1881, held that a life interest is a vested interest; and that the interest created in favour of the transferee is only a contingent interest (Section 21 of the Transfer of Properties Act).
• Life interest could not be termed as a license since the latter does not create any interest in the land, as revealed by Section 52 of the Easement Act. [Associated Hotels of India Ltd. v. R.N. Kapoor, AIR 1959 SC 1262, and ICICI v. State of Maharashtra, (1999) 5 SCC 708, relied on].
• The provision applicable is Section 24 of the Transfer of Property Act (Transfer to such of certain persons as survive at some period not specified.) Such right in favour of Saraswathy Bhai, her husband, and her children is not a license. On a bare reading of Ext.A1, it is clear that the right given is a life interest.
• The learned Counsel cited the decision of this Court in Joseph T.T. v. Valsamma Varghese, 2022 (3) KHC 443, and contended that even recital in the Settlement Deed to the effect that the settlor had retained the right of alienation with respect to a part of the property would not create a restriction repugnant to the interest created in favour of the settlee as provided under Section 11 with respect to the larger extent of property covered by the Deed.

Findings

• The ownership over immovable property carries a bundle of rights. It is not necessary that the entire bundle of rights should be transferred to make it a vested interest.
• Creation of an interest in the immovable property amounts to a vested interest, under Section 19 of the Transfer of Property Act.
• A life interest was created in favour of the defendants. Supreme Court in Smt. Rukhamanibai v. Shivaram, AIR 1981 SC 1881, held that a life interest is a vested interest; and that the interest created in favour of the transferee is only a contingent interest (Section 21 of the Transfer of Properties Act).
• Life interest could not be termed as a license since the latter does not create any interest in the land, as revealed by Section 52 of the Easement Act. [Associated Hotels of India Ltd. v. R.N. Kapoor, AIR 1959 SC 1262, and ICICI v. State of Maharashtra, (1999) 5 SCC 708, relied on].

Section 11 of the Transfer of Property Act is not applicable when a life interest is created

The Kerala High Court pointed out as under:

• To attract Section 11 of the Transfer of Property Act, restriction repugnant to the absolute interest should be in the matter of enjoyment of the property.
• If there is such restriction, the transferee is entitled to absolutely enjoy the property as if there is no such direction.
• In the case on hand, there is no such direction with respect to the manner of enjoyment.
• The life interest created in favour of another person does not in any way affect the right of the transferee to enjoy the property on the extinction of the life interest. 

---

---

Read in this Cluster:

Civil Procedure Code

• No Adjudication If Power of Attorney is Sufficiently Stamped
• Notary Attested Power-of-Attorney Sufficient for Registration
• Permission when a Power of Attorney Holder Files Suit
• Law on Summons to Defendants and Witnesses
• Notice to Produce Documents in Civil Cases
• Production of Documents: Order 11, Rule 14 & Rule 12
• Sec. 91 CPC and Suits Against Wrongful Acts
• Remedies Under Sec. 92 CPC
• Mandatory Injunction – Law and Principles
• Interrogatories: When Court Allows, When Rejects?
• Decree in OI R8 CPC-Suit & Eo-Nomine Parties
• Pecuniary & Subject-Matter Jurisdiction of Civil Courts
• INJUNCTION is a ‘Possessory Remedy’ in Indian Law

Power of attorney

• No Adjudication If Power of Attorney is Sufficiently Stamped
• Notary Attested Power-of-Attorney Sufficient for Registration
• Permission when a Power of Attorney Holder Files Suit

Title, ownership and Possession

• Transfer of Property with Conditions & Contingent Interests
• POSSESSION is a Substantive Right in Indian Law
• Adverse Possession: An Evolving Concept
• Adverse Possession: Burden to Plead Sabotaged
• When ‘Possession Follows Title’; ‘Title Follows Possession’?
• Ultimate Ownership of All Property Vests in State; It is an Incident of Sovereignty.
• Preemption is a Very Weak Right; For, Property Right is a Constitutional & Human Right
• Transfer of Property with Conditions & Contingent Interests

Principles and Procedure

• Will – Probate and Letters of Administration
• Best Evidence Rule in Indian Law
• Declaration and Injunction
• Pleadings Should be Specific; Why?
• Does Alternate Remedy Bar Civil Suits and Writ Petitions?
• Void, Voidable, Ab Initio Void, and Sham Transactions
• Can Courts Award Interest on Equitable Grounds?
• Natural Justice – Not an Unruly Horse
• ‘Sound-mind’ and ‘Unsound-Mind’
• Can a Party to Suit Examine Opposite Party, as of Right?
• Forfeiture of Earnest Money and Reasonable Compensation
• Doctrine of ‘Right to be Forgotten’ in Indian Law
• Who has to fix Damages in Tort and Contract?
• Admission, Relevancy and Proof
• Relevancy, Admissibility and Proof of Documents
• Proof and Truth of Documents
• Production, Admissibility & Proof Of Documents
• Modes of Proof – Admission, Expert Evidence, Presumption etc.
• Marking Documents Without Objection – Do Contents Proved
• Substantive Documents, and Documents used for Refreshing Memory and Contradicting 
• Oral Evidence on Contents of Document, Irrelevant

Land Laws

• Ultimate Ownership of All Property Vests in State; It is an Incident of Sovereignty.
• Land Acquired Cannot be Returned – Even if it is Not Used for the Purpose Acquired
• ‘Mutation’ by Revenue Authorities will not Confer ‘Title’
• FERA, 1973 And Transfer of Immovable Property by a Foreigner
• Relevant provisions of Kerala Land Reforms Act in a Nutshell
• Government is the OWNER of (Leasehold) Plantation Lands in Kerala.

Evidence Act – General

• Expert Evidence and Appreciation of Evidence
• How to Contradict a Witness under Sec. 145, Evidence Act
• Rules on Burden of proof and Adverse Inference
• Best Evidence Rule in Indian Law
• Modes of Proof – Admission, Expert Evidence, Presumption etc.
• Significance of Scientific Evidence in Judicial Process
• Polygraphy, Narco Analysis and Brain Mapping Tests
• Sec. 65B
• Sections 65A & 65B, Evidence Act and Arjun Panditrao: in Nutshell
• Sec. 65B, Evidence Act: Arjun Paditrao Criticised.
• Sec. 65B Evidence Act Simplified
• ‘STATEMENTS’ alone can be proved by ‘CERTIFICATE’ u/s. 65B
• Sec. 65B,  Evidence Act: Certificate for Computer Output
• Certificate is Required Only for ‘Computer Output’; Not for ‘Electronic Records’: Arjun Panditrao Explored.
• Law on Documents
• Are RTI Documents Admissible in Evidence as a ‘Public Documents’?
• Oral Evidence on Contents of Document, Irrelevant
• Marking Documents Without Objection – Do Contents Stand Proved?
• Proof of Documents & Objections To Admissibility – How & When?
• Notary-Attested Documents: Presumption, Rebuttable
• Presumptions on Registered Documents & Collateral Purpose
• Notice to Produce Documents in Civil Cases
• Production of Documents: Order 11, Rule 14 & Rule 12
• Modes of Proof – Admission, Expert Evidence, Presumption etc.
• Presumptions on Documents and Truth of its Contents
• Proof and Truth of Documents
• Unstamped & Unregistered Documents and Collateral Purpose
• Marking Documents Without Objection – Do Contents Proved
• Production, Admissibility & Proof Of Documents
• Substantive Documents, and Documents used for Refreshing Memory and Contradicting 
• Visual and Audio Evidence (Including Photographs, Cassettes, Tape-recordings, Films, CCTV Footage, CDs, e-mails, Chips, Hard-discs, Pen-drives)
• Relevancy, Admissibility and Proof of Documents
• No Adjudication Needed If Power of Attorney is Sufficiently Stamped
• Can an Unregistered Sale Agreement be Used for Specific Performance

Contract Act

• ‘Sound-mind’ and ‘Unsound-Mind’ in Indian Civil Laws
• Forfeiture of Earnest Money and Reasonable Compensation
• Who has to fix Damages in Tort and Contract?
• Can an Unregistered Sale Agreement be Used for Specific Performance

Easement

• What is Easement?
• Does Right of Easement Allow to ‘Enjoy’ After Making a Construction?
• What is “period ending within two years next before the institution of the suit”?
• Is the Basis of Every Easement, Theoretically, a Grant
• Extent of Easement (Width of Way) in Easement of Necessity
• Can an Easement-Way be Altered by the Owner of the Land?
• Village Pathways and Right to Bury are not Easements.
• Custom & Customary Easements in Indian Law
• ‘Additional Burden Loses Lateral Support’ – Incorrect Proposition

Stamp Act

• Adjudication as to Proper Stamp under Stamp Act
• Unstamped & Unregistered Documents and Collateral Purpose

Will

• Will – Probate and Letters of Administration
• Executors of Will – Duties & their Removal

Book No. 2: A Handbook on Constitutional Issues

• Judicial & Legislative Activism in India: Principles and Instances
• Can Legislature Overpower Court Decisions by an Enactment?
• Separation of Powers: Who Wins the Race – Legislature or Judiciary?
• Kesavananda Bharati Case: Never Ending Controversy
• Mullaperiyar Dam: Disputes and Adjudication of Legal Issues
• Article 370: Is There Little Chance for Supreme Court Interference
• Maratha Backward Community Reservation: SC Fixed Limit at 50%.
• Polygraphy, Narco Analysis and Brain Mapping Tests
• CAA Challenge: Divergent Views
• FERA, 1973 And Transfer of Immovable Property by a Foreigner
• Doctrine of ‘Right to be Forgotten’ in Indian Law
• Religious issues
• Secularism and Art. 25 & 26 of the Indian Constitution
• Secularism & Freedom of Religion in Indian Panorama
• ‘Ban on Muslim Women to Enter Mosques, Unconstitutional’
• No Reservation to Muslim and Christian SCs/STs (Dalits) Why?
• Parsi Women – Excommunication for Marrying Outside
• Knanaya Endogamy & Constitution of India
• Sabarimala Review Petitions & Reference to 9-Judge Bench
• SABARIMALA REVIEW and Conflict in Findings between Shirur Mutt Case & Durgah Committee Case
• Ayodhya Disputes: M. Siddiq case –Pragmatic Verdict

Book No. 3: Common Law of CLUBS and SOCIETIES in India

• General
  • General Features
  • Bye Laws Fundamental
  • Effect of Registration of Societies and Incorporation of Clubs
  • Societies and Branches
• Property & Trust
  • Vesting of Property in Societies and Clubs
  • Juristic Personality of Societies and Clubs
  • Incidents of Trust in Clubs and Societies
  • Legal Personality of Trustees and Office Bearers
• Suits
  • Suits By or Against Societies, Clubs and Companies
  • Court’s Jurisdiction to Interfere in the Internal Affairs
  • How to Sue Societies, Clubs and Companies
• Amendment and Dissolution
  • Amendment of Bye laws of Societies and Clubs
  • Dissolution of Societies and Clubs
• Rights and Management
  • Rights & Liabilities of Members of Clubs and Societies
  • Individual Membership Rights in Societies & Clubs
  • Management – Powers of General Body and Governing Body
  • Expulsion of Members & Removal of Office-Bearers
  • Law on Meetings: An Overview
• Election
  • Election & Challenge in Societies and Clubs
  • Court Interference in Election Process
• State Actions
  • State-Interference in Affairs of Societies & Clubs

Book No. 4: Common Law of TRUSTS in India

• General Principles
  • What is Trust in Indian Law?
  • Classification of Trusts
  • Public & Private Trusts in India.
  • Trust is ‘An Obligation’; Not a Legal Entity
  • Indian Law Does Not Accept Salmond, as to Dual Ownership
• Dedication and Vesting
  • Dedication of Property in Public Trusts
  • Vesting of Property in Trusts
  • Incidents of Trust in Clubs and Societies
• Trustees and Management
  • Trustees and Administration of Public Trusts
  • Alienation of Public Trust Property
  • Extinction, Discharge, Revocation, etc. of Public Trusts
• Breach of Trust
  • Breach of Trust and Removal of Trustees
• Suits by or against Trusts
  • Suits By or Against Trusts and Trustees
  • Remedies Under Sec. 92 CPC
• Law on Hindu Religious Endowments
  • Philosophy of Idol Worship
  • Is an Idol a Perpetual Minor?
  • Hindu Temples & Law of Trusts
  • Public & Private Trusts
  • Law of Mutts and Other Hindu Endowments
  • Shebaits & Mahants and Law of Trustees
• Temples, Gurudwaras, Churches and Mosques – General
  • Legal Personality of Temples, Gurudwaras, Churches and Mosques
• Constitutional Principles
  • Secularism and Art. 25 & 26 of the Indian Constitution
  • Secularism & Freedom of Religion in Indian Panorama
  • ‘Muslim Women: Ban to Enter Mosques, Is it Unconstitutional
  • Parsi Women Excommunication, Unconstitutional.
  • Knanaya Endogamy & Constitution of India
  • State & Court – Protectors of All Charities
• Ayodhya and Sabarimala Disputes
  • Ayodhya Disputes: M. Siddiq case – Pragmatic Verdict
  • Sabarimala Review Petitions & Reference to 9-Judge Bench
  • SABARIMALA REVIEW and Conflict in Findings between Shirur Mutt Case & Durgah Committee Case
• General
  • Public Trusts and (State) Endowments/Trusts Acts
  • Public Trusts and Indian Trusts Act – An Overview
  • Business by Charitable Trusts & Institutions