GLOCAL LAW SCHOOL

ASSIGNMENT

RULE AGAINST PERPETUITY

PROPERTY LAW

SUBMITTED TO SUBMITTED BY
ASIF BELAL SIR RAJAT CHOUDHARY
GU16R0042
BA.LLB(8TH )

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 RULE AGAINST PERPETUITY

Introduction:
Rule against perpetuity has been dealt under section 14 of Transfer of Property Act, 1882.
Perpetuity simply means “indefinite Period”, so this rule is against a transfer which makes a
property inalienable for an indefinite period or forever. This disposition would be a transfer in
perpetuity. In any disposition perpetuity may arise in 2 ways  
1. by taking away from the transferee his power of alienation
2. by creating future remote interest.
Section 10, makes provision that a condition restraining the transferee’s power of alienation is
void. A disposition which tends to create future remote interest has been prohibited under
Section 14 which incorporates the rule against perpetuity. However, a better name of the rule
may be the rule against remoteness of  vesting.

Object of Rule against Perpetuity:

The object of the rule against perpetuity is to ensure free and active circulation of property both
for purposes of trade and commerce as well as for the betterment of the property itself. A
transfer which renders property inalienable for an indefinite period is detrimental to the interests
of its owners who are unable to dispose it of even in urgent needs or for any higher value. 

Principle:

The rule against perpetuity is founded on the general principle of public policy. In absence of
any rule prohibiting creation of perpetuities, there might come a time when almost all the
properties in the country would become static. The present section, strictly speaking, deals only
with the modern rule against perpetuities.

Rule against perpetuity Under Section 14:

Section 14 of transfer of property Act provides that “No transfer of property can operate to create
an interest which is to take effect after the life-time of one or more persons living at the date of
such transfer, and the minority of some person who shall be in existence at the expiration of that
period, and to whom, if he attains full age, the interest created is to belong.”

Essential Conditions:

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The essential conditions of the rule against perpetuity as given in this section are as follows: 

1. There is a transfer of property.

2. The transfer is for the ultimate benefit of an unborn person who it given absolute interest.

3. The vesting of interest in favor of ultimate beneficiary is preceded by life or limited interests
of living person (s).

4. The ultimate beneficiary must come into existence before the death of the last preceding living
person.

5. Vesting of interest in favor of ultimate beneficiary may be postponed only up to the life or
lives of living persons plus minority of ultimate beneficiary; but not beyond that.

Extent of perpetuity:

A. Maximum remoteness of vesting:

Under Section 14, the maximum permissible remoteness of vesting is the life of the last
preceding interest plus minority of the ultimate beneficiary. Accordingly, property may be
transferred to A for life and then to B for life and then to the unborn when he attains the age of
majority.A and B hold property successively for their lives, therefore, the property is tied up for
their lives one after the other. After the death of B (the last preceding interest) although it should
vest in the ultimate beneficiary unborn immediately but, under this section the property may be
allowed to vest in the unborn when he attains the age of majority. Minority in India terminates at
the age of eighteen years or, when the minor is under supervision of Court, at the age as twenty-
one years.
But, in Saundara Rajan v. Natarajan the Privy Council held that since at the date of the
transfer it is not known whether or not a guardian would be appointed by Court for the minor in
future, for purposes of Section 14 the normal period of minority would be eighteen years. So, the
vesting may be postponed up to the life of the last person (B) holding property for his life and the
minority (18 years) of the ultimate beneficiary. 

B. Ultimate beneficiary in mother’s womb

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Where the ultimate beneficiary is in the mother’s womb i.e. it is a child en ventre sa mere, the
latest period up to which vesting may be postponed, (after the preceding interest) is the minority
plus the period during which the child remains in mother’s womb. It may be noted that minority
is counted from the date of worldly birth whereas for purposes of being a transferee, a child in
mother’s womb is a competent person. Where the ultimate beneficiary is in mother’s womb
when the last person dies, the property vests immediately in him while he is still in mother’s
womb. Therefore, the exact period from which the minority begins to run is the date when
ultimate beneficiary is conceived.
Accordingly, the minority up to which the vesting is permitted to be postponed under this section
would include the period during which the ultimate beneficiary remains in womb before he is
born alive. The period during which a child remains in womb after being conceived is called
gestation.
In India, the maximum possible remoteness of vesting would, therefore, be as under: 
Maximum permissible remoteness of vesting = life of the preceding interest + Period of
gestation of ultimate beneficiary + Minority of the ultimate beneficiary. 
For e.g. A fund is bequeathed to A for his life and after his death to B for his life, and after B’s
death to such of sons of B as shall first attain the age of 25 years. A and B survives the testator.
Here, the son of B who shall attain the age of 25 years may be a son born after the death of the
testator; such son may not attain 25 years until more than 18 years have elapsed from the death
of the longer lives of A and B and the vesting of interest may thus be delayed beyond the lives of
A and B and the majority of the sons of B. the bequest after B’s death is void.

Exceptions:
The provisions of Section 14 shall not apply in the following cases:-
1. Transfer for public benefit - Where property is transferred for the benefit of the people
in general, then it is not void under this rule. E.g. for the advancement of knowledge,
religion, health, commerce or anything beneficial to mankind.
In Nafar Chandra v Kailash, the shebiats of a temple agreed to appoint the family of A
as pujaris from generation to generation and make provisions for expenses and
remuneration of the office. The court held that such an agreement is valid and is not
affected by the rule against perpetuity.
2. Covenants of Redemption - This rule does not offend the covenants of redemption in
mortgage. Mortgages - because there is no creation of future interest.
3. Personal Agreements - Agreements that do not create any interest in the property are not
affected by this rule. This rule applies only to transfers where there is a transfer of
interest.

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 In Ram Baran Prasad v. Ram Mohit Hazra, the Supreme Court, observed and held as
follows: The Court referred to the provisions of the Specific Relief Act, 1963 to state that
a contract is enforceable by and against the transferees/assignees of the original parties.
Prima facie, the rights of the parties to a contract are assignable. Having regard to the
contract and circumstances in the present case, it is clear at pre-emption clause must be
construed as, binding upon the assignees. The rule against perpetuity does not apply to
contracts, which do not create rights of property. The rule as formulated falls within the
branch of the law of property and its true object is to restrain the creation of future
conditional interests in property. The Supreme Court, thus, held that rule against
perpetuity cannot be applied to a covenant of pre-emption even though there is no time-
limit within which the option has to be exercised.
4. Perpetual Lease - It is not applicable to the contracts of perpetual renewal of leases.
In R. Kempraj V M/S Burton Son 7& Co., a lease for 10 years provided for an option
to lessee (tenant) to renew the same for further 10 years as desired on the same terms.
The lessee, before the expiry of 10 years, wanted to renew lease, but the lesser did not
comply. The lessee filed a suit for the performance of covenant in lease for renewal. The
issue was whether a clause for renewal of lease can be regarded as creating an interest in
property, and thus hit by the rule against perpetuity and, thus, void.
The court observed that rule against perpetuity is founded on the principle that the liberty
of alienation shall not be exercised to its own destruction

Difference between English and Indian Law of perpetuity:

Under English law, vesting of interest may be postponed up to the life or lives of last person plus
a period of 21 years irrespective of the age of minority of ultimate beneficiary.

By an amendment, the rule in England has now been modified by Section 163 of the Law of
Property Act, 1925 which provides that a transfer shall not be void even if the vesting has been
postponed beyond 21 years but it shall take effect as if the age of 21 had been substituted for the
age specified in the instrument, (which may be any fixed period longer than 21 years).

In India, Section 14 provides that vesting can be postponed up to the life or lives of the last
person plus the minority of the ultimate beneficiary. Minority in India ends at the age of 18
years. After the existing life or lives, vesting cannot be postponed in India beyond 18 years in
any circumstance.

Conclusion:

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The rule against perpetuities limits the duration by imposing certain restrictions on the use,
enjoyment and transfer of property.  Nevertheless, the rule against perpetuity along with relevant
sections of TPA are complex and abstract in its application, especially when seen through the
eyes of the transferor.  Despite the best of intentions, the ultimate beneficiary or grantee may be
deprived of their interests through an inadvertent choice of words while drafting the pertinent
covenant. It shall not be an understatement that the majority of the so-called learned advocates
drafting such instruments are themselves incompetent to understand the subtilties of the law.