PGS NATIONAL COLLEGE OF LAW

TRANSFER OF PROPERTY ACT UNIT-1

Q1. Define immovable property. Who can transfer immovable property?

Ans In Section 3, the definition of immovable property is neither clear nor complete. It simply
says that immovable property excludes standing timber, growing crops or grass. It is not clear
as to what it includes. In any Act, if the meaning of any word is not given clearly, the meaning of
that word may be found in the General Clauses Act, 1897, if given there. According to Section 4
of the General Clauses Act, immovable property includes land, benefits to arise out of land and,
things attached to the earth. The definition of immovable property given in the General Clauses
Act is applicable to the Transfer of Property Act. But this definition is also not complete.
Moreover, the expression 'things attached to the earth' which is not defined in the General
Clauses Act has been defined separately in Section 3 of the Transfer of Property Act. Thus in
order to get a clear and complete meaning of 'immovable property, it is necessary to consider
the definitions given in Section 3 of the Transfer of Property Act as well as the definition given
in the General Clauses Act. On the basis of the definition given in both these Acts, the
expression 'immovable property' may now be defined properly in the following words.

Immovable property includes-

(1) Land,

(2) Benefits to arise out of land, and

(3) Things attached to the earth, i.e.

(i) things embedded in the earth,

(ii) things attached to what is so embedded in the earth,

(iii) things rooted in the earth except-

(a) standing timber,

(b) growing crops, or

(c) growing grass.

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TRANSFER OF PROPERTY ACT UNIT-1

COMPETENCY OF THE TRANSFEROR

Section 7 of the Transfer of Property Act provides for the competency of a transferor. Under
this section a person is competent to transfer a property if he is (1) competent to contract and
(2) entitled to transfer or is authorized to transfer if not his Own.

(1) Competent to Contract.-According to Section 11 of the Indian Contract Act, 1872, a person
is competent to contract if he is (i) of the age of majority (ii) of sound mind and (iii) is not
otherwise

disqualified from contracting by any law. A person who is competent to contract is competent
transfer a property.
(i) Age of majority. When the transfer is being made, the transferor must be an adult person
i.e. must have attained the age of majority. Under Section 3 of the Indian Majority Act 1875, a
person attains majority at the age of eighteen years. But, if a guardian has been appointed
under the Guardian & Wards Act, 1890, the minor attains majority at the age of twenty-one
years. A person who is below the age of eighteen years (or twenty-one years, as the case may
be), is a minor. Transfer of property by a minor is void and cannot be validated by his
subsequent ratification on attaining his age of majority.
(ii) Soundness of mind.-Transfer must possess a sound mind at the time of the transfer i.e. he
must not be of unsound mind. Unsoundness of mind is of two kinds, idiocy and lunacy. Idiocy is
incurable and permanent. Transfer of property by idiot or insane person is void. Lunacy is not
permanent and a lunatic may sometimes possesses a sound mind. Such period is called 'lucid
interval". Transfer of property by a lunatic during 'lucid interval' is valid. However, if a person
has been adjudged lunatic by a Court, he is incompetent to make transfer even during lucid
interval.
(iii) Not otherwise disqualified.-The transferor must be free from any legal disqualification.
Disqualification means legal inability. Minority and insanity are legal inabilities. But, besides
these, there might be other legal inabilities or disqualifications. Here, 'not otherwise legally
disqualified' means that the transferor should not be legally prohibited to transfer the property
by any other law to which he is subject. For example, a judgment debtor whose property is
being sold in execution of decree, is legally disqualified to transfer his own properties. Similarly,
where a person's properties are under the management of Court of Wards, he is legally
disqualified to transfer any interest in his property or create a charge over it.
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TRANSFER OF PROPERTY ACT UNIT-1

(2) Entitled to Transfer: Authority for Transfer.-The transferor must be entitled to transfer the
property concerned. He is entitled to transfer the property if he has title of the property or if he
has no such title, has got the authority to transfer it. No person is entitled to transfer any
interest which he himself does not have at the time of the transfer. If a person is transferring
absolute interest he must have ownership in the property. If he is transferring partial interest
the transferor should have partial interest in the property. For example, where a person makes
a sale or gift of a property he must have ownership (absolute interest) in the property. If a
person makes a sub-lease of certain property he must be lessee of that property. Without
having title or interest in the property, the transferor has no right to transfer it. But a person
who is not owner of a property may have right to transfer that property under an authority
given to him by the owner of such property. Thus, an agent who is authorized by the principal
to transfer certain property, has right to transfer that property.

Other instances where a person is authorised to transfer property not his own are the manager
of a joint Hindu Family in the case of legal necessity, a guardian of any minor appointed under
the Guardian & Wards Act, an executor or administrator having authority to transfer the
property of a deceased under the Indian Succession Act. It may be noted that in these cases,
the transferor's right of disposal has been defined and limited by the personal laws or the
statutory Laws.

Q2 Explain vested interest and distinguish it with contingent interest.

Ans VESTED INTERESTS

In a transfer of property, there is transfer of interests. From the point of view of the quantum
(quantity) the interest may be either absolute or partial From the point of view of the time of
accruing (i.e. when transferee gets the interest) the interest may either be vested or
contingent. In a transfer of property, when the interest transferred is vested, the transferee
gets that interest immediately. In other words, as soon as the transfer is complete, the interest
accrues to the transferee with immediate effect and the transferee's 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.
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TRANSFER OF PROPERTY ACT UNIT-1

According to Sec.19 In a transfer of property the interest created in favour of the transferee is
vested where

(a) no time has been specified as to when it shall 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
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 interest shall accrue to transferee with immediate
effect. In both the cases the interest transferred is a vested interest.

Explanation - Explanation to Section 19 makes it clear that vested interest is not affected 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.

Nature of Vested Interest

(a) Present fixed right.-Vested interest is a present fixed right to property. In a transfer of
property where a vested interest is created in favour of the transferee, the transferee
gets a present fixed right to property.

(b) Transferable and heritable interest.-Vested interest is transferable and heritable.

Being a present fixed right and also since the title of the transferee is complete, a vested
interest is divisible and transferable interest.

Time of vesting of interest.-On a transfer of property, ordinarily the interest created in favour
of the transferee vests immediately. Section 19 provides that the interest created is vested
when no time of its vesting is specified or it is to vest immediately or where though enjoyment
is postponed but it is intended to vest with immediate effect. However, the transferor may
specify particular time of vesting of the interest.
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TRANSFER OF PROPERTY ACT UNIT-1

Contingent Interest

Contingency 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
transfer of property where the vesting of estate is dependent upon an event that may or may
not happen the interest is contigent. 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.

Nature of Contingent interest

(a) Future possible interest.-Contingent interest is a future possible interest. In a transfer of

property where the transferee's interest is contingent, he has only a future possible right in
respect of property transferred to him. It is neither a present right nor a certain right. Since the
happening or not happening of the event, is uncertain, the interest dependent on it is also
uncertain]

(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 Devi 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)."

(b) Transferable interest.-Contingent interest is a transferable interest. However, since a

contingent interest is itself, an uncertain interest in the property and transferor's own
title is not perfect, the transferee too gets an imperfect title.
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TRANSFER OF PROPERTY ACT UNIT-1

Distinction between Vested and Contingent Interest

(1) When accrues?.-On a transfer of property, a vested interest accrues immediately to the
transferee. A contingent interest does not accrue to the transferee until the specified uncertain
event happens or does not happen.

(2) Nature of the title.-A vested interest confers complete and perfect title. In contingent
interest the title is dependent on uncertain future event which may or may not occur; the title
is therefore imperfect. Vested interest is owned absolutely, whereas, contingent interest is
owned conditionally.

(3) Transferee's right in property.-In a vested interest the transferee has present fixed right in
property. In contingent interest the transferee has merely a future possible right in the
property. A vested interest confers a present right to property even if the enjoyment is
postponed or suspended whereas in a contingent interest all the rights of property, including
the enjoyment, are dependent on an event which may or may not occur.

(4) Transferability.-Vested and contingent interests both are transferable. But, in a vested
interest the transferee gets complete title whereas, in contingent interest the transferee takes
an interest which may be defeated by non-fulfilment of condition precedent or non-happening
of the event.

(5) Attachment & sale in execution of decreed.-A vested interest is capable of being attached
or sold in execution of a decree whereas, a contingent interest cannot be sold in execution of
any decree. A merely contingent or possible interest is not liable to attachment and sale in
execution of a decree.

(6) Heritability.-A vested interest is property of the transferee, therefore, it may be inherited by
his heirs even though he could not obtain possession at the time of his death. A contingent
interest confers no title, therefore, it is not heritable.
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TRANSFER OF PROPERTY ACT UNIT-1

Q3. What is the Rule against Perpetuity? Is there any exception to this rule?
Ans RULE AGAINST PERPETUITY

Transfer in Perpetuity.-Perpetuity means indefinite period. Rule against perpetuity is the rule which is
against a transfer making the property inalienable for an indefinite period or for ever. Where a property
is transferred in such a way that it becomes non-transferable in future for an indefinite period, the
property is tied up for ever. This disposition would be a transfer in perpetuity. In any disposition,
perpetuity may arise in two ways: (a) by taking away from the transferee his power of alienation and, (b)
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. Frequent disposition of property is in the interest of the society and also necessary
for its more beneficial enjoyment. 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. It is also a loss to society because when property is tied up from one generation to
another in one family, the society as such would be deprived of any benefit out of it. Free and frequent
disposal ensures wholesome circulation of properties in society. Rule against perpetuity is, therefore,
based also on broad principles of public policy.

Stating the object of rule against perpetuity, Jekyll M.R. in Stanley v. Leigh 31 has observed that if the
rule were otherwise then:

"a great mischief would arise to the public from estates remaining for ever or for a long time
inalienable or in transferable from one hand to another, being a damp to industry and a prejudice to
trade, to which may be added the inconvenience and distress that would be brought on families whose
estates are so fettered."

Rule against Perpetuity under Section 14

Section 14 of the Transfer of Property Act provides that in a transfer of property, vesting of interest
cannot be postponed beyond the life of last preceding interest in the living person (or persons) and the
minority of the ultimate beneficiary. The essential elements of the rule against perpetuity as given in
this section may be stated as under:
1. There is a transfer of property.
2. The transfer is for the ultimate benefit of an unborn person who is given absolute interest.
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TRANSFER OF PROPERTY ACT UNIT-1

3. The vesting of interest in favour 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 favour 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.
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
Ultimate beneficiary in mother's womb.-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.

Exceptions to the Rule against Perpetuity.-The rule against perpetuity is not applicable in the following
cases:

(a) Transfer for the benefit of public.-Where a property is transferred for the benefit of public in the
advancement of religion, knowledge, commerce, health, safety or any other object beneficial to
mankind, the transfer is not void under the rule against perpetuity.38 This exemption is necessary
because transfers of property for the benefit of public generally are made through the medium of
religious or charitable trusts.

b) Personal agreement.-Personal agreements which do not create any interest in property are
exempted from the rule against perpetuity. Rule against perpetuity is applicable only to a transfer of
property. If there is no transfer of property i.e. no transfer of interest, the rule cannot be applied.
Contracts are personal agreements even though the contracts relate to rights and obligations in some
property. 40 In Ram Baran v. Ram Mohit4¹ the Supreme Court has held that a mere contract for sale of
an immovable property does not create any interest in immovable property and, therefore, the rule
cannot apply to such contracts e.g. it cannot apply to a covenant of pre-emption.

Rule Against Perpetuity Under Hindu & Muslim Law -

(a)Hindu law Transfer of Property Act was made applicable also to Hindus by the Amending Act of
1929. Now, the provisions of this Act including Section 14 are applicable to Hindus. But, even before this
amendment, the rule against perpetuity was applicable to transfers made by Hindus by local enactments
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TRANSFER OF PROPERTY ACT UNIT-1

e.g. Hindu Disposition of Property Act, 1916 and Madras Act 1914. However, apart from these statutory
provisions, a transfer of property in perpetuity was held void under Hindu law except gifts for religious
or charitable purposes.

(b) Muslim Law Although Chapter II of the Transfer of Property Act is not applicable to Muslims but a
gift to remote and unborn generations was held void although aception has been made in case of wakfs.

Difference between English and Indian Law of perpetuity.-Under English law, vesting of interest may be
postponed upto 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 then 21
years).

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