India: A Brief Write-Up On Transfer Of Property For The Benefit Of Unborn Person And Rule Against Perpetuity

Last Updated: 28 October 2015
Article by Prem Rajani, Aradhana Bhansali and Ruchit Parikh

Introduction

The rule as regards the transfer of property for the benefit of unborn person and the rule against perpetuity (collectively, the "Rules"), which are mainly governed by sections 13 and 14, respectively, of the Transfer of Property Act, 1882 ("TOPA"), have, since decades, troubled lawyers of all ages across the country. These Rules are often described as one of the most complicated legal rules ever.

Where property is desired to be transferred/ bequeathed by any person, to more generations than one, it is imperative that these Rules are conformed to.

Origin

The origin of rule against perpetuity stems from the days of feudal England as far back as in 1682 from the case of Duke of Norfolk's, wherein, Henry (the 22nd Earl of Arundel), tried to create a shifting executory limitation in a way that one of his titles would pass to his eldest son (who was mentally deficient) and thereafter to his second son, and another title would pass to his second son and thereafter, to his fourth son. The estate plan also included provisions for shifting the titles many generations later, if certain conditions were to occur. It was held by the House of Lords that such a shifting condition could not exist indefinitely and that the tying up of property too long beyond the lives of people living at the time was wrong. The concept of trying to control the use and disposition of property beyond the grave was often referred to as control by the "dead hand". The rule against perpetuity, in England, was later codified in the form of the Perpetuities and Accumulations Act, 1964.

Illustrations

  • With a view to understand the Rules, let us first consider the following five illustrations:

i. A transfers his property to B (his unborn child).

ii. A transfers his property to B (his child) for life, thereafter to C (his unborn grandchild) for life and finally, to D (his unborn great grandchild) absolutely.

iii. A transfers his property to B (his child) for life and thereafter to C (his unborn grandchild) absolutely which property is to vest in C when he attains the age of twenty one years.

iv. A transfers his property to B (his child) for life, thereafter to C (his unborn grandchild) absolutely which property is to vest in C upon birth. However, C is unborn till the time of death of B.

v. A transfers his property to B (his child) for life, thereafter to C (his unborn grandchild) absolutely which property is to vest in C upon birth. C is born before the death of B.

  • From the aforesaid five (5) illustrations, only the transfer sought to be made in favour of the unborn person in illustration "v" will take effect. The transfers sought to be made in favour of the unborn person in the remaining illustrations will fail and not take effect. In order to understand the rationale behind the failure of such proposed transfer in favour of an unborn person, it is necessary to understand the relevant provisions with respect to the Rules.

Rule For Transfer Of Property For The Benefit Of Unborn Person

  • Section 13 of TOPA provides that:

    "Where, on a transfer of property, an interest therein is created for the benefit of a person not in existence at the date of the transfer, subject to a prior interest created by the same transfer, the interest created for the benefit of such person shall not take effect, unless it extends to the whole of the remaining interest of the transferor in the property."

Rule Against Perpetuity

  • Section 14 of TOPA 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."

Analysis Of Provisions

  • Section 13 and 14 of the TOPA go hand in hand, in as much as, section 13 and 14 are to be read together in order to understand the provisions governing the Rules.
  • The TOPA does not permit transfer of property directly in favour of an unborn person. Thus, in order to transfer a property for the benefit of a person unborn on the date of the transfer, it is imperative that the property must first be transferred in favour of some other person living on the date of transfer. In other words, the property must vest in some person between the date of the transfer and the coming into existence of the unborn person since property cannot be transferred directly in favour of an unborn person. In other words, the interest of the unborn person must, in every case, be preceded by a prior interest.
  • Further, where an interest is created in favour of an unborn person on a transfer of property, such interest in favour of the unborn person shall take effect only if it extends to the whole of the remaining interest of the transferor in the property, thereby making it impossible to confer an estate for life on an unborn person. In other words, the interest in favour of the unborn person shall constitute the entire remaining interest. The underlying principle in section 13 is that a person disposing of property to another shall not fetter the free disposition of that property in the hands of more than one generation.
  • Section 13 does not prohibit successive interests (limited by time or otherwise) being created in favour of several persons living at the time of the transfer. What is prohibited under section 13 is the grant of interest, limited by time or otherwise, to an unborn person.
  • Further, Section 14 of TOPA provides that where an interest is created for the benefit of an unborn person (in accordance with the provisions of section 13), such interest shall not take effect if the interest is to vest in such unborn person after the life time of one or more persons living on the date of the transfer (i.e. the person in whose favour the prior interest is created as required under section 13) and the minority of such unborn person. In other words, the interest created for the benefit of an unborn person shall take effect only if the interest is to vest in such unborn person before he attains the age of eighteen years.
  • Section 14 further provides that the unborn person, in whose favour the interest is created, must have come into existence on or before the expiry of the life or lives of the person(s) in whose favour the prior interest is created as required under section 13.

Other Relevant Provisions

  • Sections 113 and 114 of Indian Succession Act, 1925 ("ISA"): Sections 113 and 114 of the ISA are almost identical to sections 13 and 14, respectively, of TOPA. The main difference between the provisions under the ISA and the provisions under TOPA is that the former deals with bequests which take effect only on the death of the testator while the latter relate to transfer of property inter vivos. Section 13 of TOPA controls Section 113 of ISA and both of them are to be read together, as opined by the Apex Court in Raj Bajrang Bahadur Singh vs. Thakurain Bakhtraj Kuer (AIR 1953 Supreme Court 7). It was further observed by the Court that:

    "It is quite true that no interest could be created in favour of an unborn person but when the gift is made to a class or series of persons, some of whom are in existence and some are not, it does not fail in its entirety; it is valid with regard to the persons who are in existence at the time of the testator's death and is invalid as to the rest."

Rules Simplified

  • The effect of these Rules is that a transfer/ gift can be made to an unborn person subject to the following conditions: (i) that the transfer/ gift shall be of the whole of the remaining interest of the transferor/ testator in the thing transferred/ bequeathed and not of a limited interest; and (ii) that the vesting is not postponed beyond the life in being and the minority of the unborn person.
  • In simple terms, while section 13 of TOPA lays down the mechanism for transfer of property for the benefit of unborn person and "what property" is required to be ultimately transferred in favour of an unborn person in order to validate such transfer, section 14 of TOPA provides the "maximum period as to when" such property can be vested upon such unborn person.
  • Section 14 of TOPA supplements section 13 of TOPA and thus, it is pertinent to note that when an interest in any property is intended to be transferred in favour of an unborn person, sections 13 and 14 of TOPA are required to be read together and the provisions contained thereunder are required to be duly complied with, in order to give effect to the intended transfer in favour of such unborn person.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions