A transfer of property involves the transfer of interests. In other words, the transfer of property is nothing but the transfer of interests in property. The transfer of property or interests is either (i) absolute or (ii) partial, depending upon the quantity of interests, or it may be (iii) vested or (iv) contingent, depending upon the time of the vesting of interest. In ‘sale’ all rights as to the property transfers (i.e. absolute transfer), whereas, in the mortgage, only limited rights, such as to enjoy the property or to keep it as security; therefore, it is the transfer of limited interests (i.e. partial transfer).

In this topic, we will discuss vested and contingent interests.

II. Vested Interest[2] (S. 19):-

Interest vests when the transferee gets interested related to that property as soon as the transfer is made. The transaction completes by vested interest. Thus, in point of time, as soon as the transaction takes place, no sooner the property vests in the transferee. However, in the contingent interest, the transferee gets the interest vested only upon the happening of an uncertain future event specified in the transaction. It is a conditional transfer, and the vesting of property depends upon happening of a future uncertain event. Thus, in contingent interest, the actual vesting of the property occurs subject to the condition’s fulfilment or failure. Thus, the vetting is conditional.

19 defines ‘vested interest’ as Where, on a 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) in terms specifying that it is to take effect forthwith, or

(iii) on the happening of an event which must happen,

Thus, a gift to A on the death of B creates a vested interest in A, even during B’s lifetime (because the death of B is certain). However, a gift to A on the marriage of B creates only a contingent interest (because B may or may not marry); however, that contingent interest becomes vested as soon as B marries.

Analysis of definition:-

(i) Without specifying time:-

The first part of the definition lays down that the interest vest 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.

Generally, the transferor simply effects the transfer; he may not mention the date when the interest shall pass on to the transferee. In such cases, the law presumes the parties’ intention to vest property immediately.

However, the proviso to the section provides that if the contrary intention as to vesting appears from the terms of the transaction, then the above presumption cannot be drawn.

Illustration

A makes a gift of his land to B. He simply executes the gift deed but does not specify any date on which the ownership is to be transferred. The law presumes that the property is vested in B.

(ii) Specifying vesting forthwith:-

The second part of the definition states that the interest vests where, on a transfer of property, an interest therein is created in favour of a person in terms specifying that it is to take effect forthwith.

Thus, there comes no question to interpret as to when property vests if it is specifically mentioned that the property is to vest forthwith.

(iii) On the happening of an event which must happen[3],:-

The third part of the definition states that an interest vest is where, on a transfer of a property, an interest therein is created in favour of a person upon the happening of an event that must happen.

This part lays down that even though the actual transfer may take place at a future time, but the future event is so certain that it’s happening is certain; therefore, right or interest vests in the transferee immediately even though the property is actually transferred in future. Thus, this part is an example in which property vests, but the enjoyment of it is postponed.

Illustration[4]

(i) A makes a gift of Rs. 1 lac to B on the death of C. Interest in Rs. 1lac vests in B immediately even before C’s death because the death of C is certain; however, the actual transfer of Rs. 1 lac takes place on C’s death. Even though B dies before C, Rs. 1 lac shall be paid to B’s legal heirs.

(ii) A bequeaths to B 100 rupees, to be paid upon his attaining the age of 18. On A’s death, the legacy becomes vested in interest in B even though the actual transfer of money is going to take place upon attaining the age of 18 years.

(iii) A fund is bequeathed to A for life, and after his death to B. on the testator’s death, the legacy to B becomes vested in interest in B.

(iv) A fund is bequeathed to A until B attains the age of 18 and then to B. The legacy of B is vested in interest from the testator’s death.

Thus, from the above examples, we may say that the vesting of interest becomes perfect in the transferred property even though the actual transfer takes place in future.

Explanation to S. 19 makes it clear that vested interest does not get affected by the fact that-

(i) right of enjoyment is postponed, or

(ii) prior interest in the property transferred 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 happens, the interest shall be passed on to another person.

This last clause needs some interpretation, which is provided in Sundar Bibi vs Rajendra Narain[5]

Facts:- In this case, there was a compromise. The terms of compromise provided that A should have an estate for life and that after his death, B was to be the full owner of the estate if he survives A; but if B did not survive A, the estate would pass to lineal male decedents of B.

Issue:- Has B acquired a vested interest?

Held:- The interest of B is vested; however, his interest is liable to be divested if he does not survive A.

This is called a ‘conditional limitation’ in English law.

III. Contingent Interest[6] (S. 21):-

Where, on a transfer of property, an interest therein is created in favour of a person to take effect only-

(i) on the happening of a specified uncertain event or

(ii) on the non-happening of a specified uncertain event,

-such person thereby acquires a contingent interest in the property.

If the transfer is subject to a condition, there is no transfer at all until the condition is fulfilled. The transfer takes effect when the condition is fulfilled, and the interest becomes vested.

Illustrations[7]

(i) A legacy is bequeathed to D in case A, B, and C shall all die under the age of 18; D has a contingent interest in the legacy until A, B, and C dies under 18 or one of them attains that age.

(ii) A sum of money is bequeathed to A “in case he shall attain the age of 18” or ‘when he shall attain the age of 18’. A’s interest in the legacy is contingent until the condition is fulfilled by his attaining that age.

(iii) An estate is bequeathed to A for life, and after his death, to B if B is then living; but if B shall not then be living to C. A, B, and C survive the testator, B and C each take a contingent interest in the state until the event which is to vest it in one or in the other has happened.

(iv) An estate is bequeathed as in the last case supposed. B dies in the lifetime of A and C. Upon the death of B, C acquires a vested right to obtain possession of the estate upon A’s death.

III. Difference between ‘vested’ and ‘contingent’ interests:-

There are the following differences between vested and contingent interest, viz.

1. When does it accrue?

Vested interest accrues immediately upon transfer, whereas contingent interest does not accrue to the transferee until the specified uncertain event happens or does not happen.

2. Nature of title:-

A vested interest confers a complete and perfect title, whereas, in contingent interest, the title does not vest unless a specified uncertain event happens or does not happen.

3. Nature of interest:-

A vested interest confers a present right to property even if the enjoyment is postponed or suspended, whereas, in a contingent interest, the transferee takes an interest which may be defeated by the nonfulfillment of the condition.

4. Transferability:-

Both vested and contingent interests are transferable. However, in the transfer of vested interest, the transferee gets a complete title, whereas, in the transfer of contingent interest, the transferee gets interested subject to its defeat by the nonfulfillment of the condition.

5. Attachment or sale of interest:-

A vested interest may be attached or sold in the execution of a decree, whereas contingent interest cannot be so attached or sold.

6. Whether heritable?

Since the perfect interest vests in the transferee even though there is no enjoyment, the same is inheritable, whereas contingent interest is not heritable.

7. Converts into:-

The general rule is that ‘once interest vests, it does not then be divested’. However, ‘contingent interest’ converts into vested on fulfilment of a condition subject to which the transaction is made.

Note

1. Conditional transfer (S. 25):-

Property may be transferred absolutely or subject to a certain condition. When the property is transferred absolutely, without any condition, the transferee gets the property absolutely without any limitation. In contrast, when the property is transferred conditionally, the transferee gets the property subject to those conditions.

Such condition may be condition precedent or condition subsequent.

25 lays down the circumstances in which the transaction subject to condition fails, viz.

(i) If the fulfilment of the condition is impossible, or

(ii) is forbidden by law, or

(iii) is of such a nature that, if permitted, would defeat the provisions of any law, or

(iv) is forbidden (by law), or

(v) involves or implies injury to the person or property of another, or

(vi) the court regards it as immoral or opposed to public policy.

Illustrations

(a) A lets a farm to B on condition that he shall walk a hundred miles in an hour. The lease is void.

(b) A gives Rs. 500/- to B on condition that he shall marry A’s daughter C. At the date of the transfer, C was dead. The Transfer is void.

(d) A transfers Rs. 500 to his niece C if she deserts her husband. The transaction is void.

I. Condition Precedent[8] (S. 26):-

Where the terms of a transfer of property impose a condition to be fulfilled before a person can take an interest in the property, the condition is a condition precedent. In short, a condition precedent is a condition which precedes the transfer of property. In other words, the transfer depends on fulfilling a condition precedent.

Illustration

A makes a gift of his house to B if B marries C; the condition is a condition precedent. A gift in favour of B shall take effect only if B marries C; if he does not do so, the house cannot be transferred in his favour.

26 lays down that where the term of a transfer f property imposes a condition to be fulfilled before a person can take an interest in the property, the condition shall be deemed to have been fulfilled if it has been substantially complied with.

Illustration

(a) A transfers Rs. 5000/- to B on condition that he shall marry with the consent of C, D and E. E dies. B marries with the consent of C and D, and B is deemed to have fulfilled the condition.

(b) A transfers Rs. 5000 to B on condition that he shall marry with the consent of C, D and E. B marries without the consent of C, D and E but obtains their consent after the marriage. B has not fulfilled the condition.

II. Condition Subsequent[9] (S. 29):-

A ‘condition subsequent’ is that condition which is required to be fulfilled after the transfer of property has taken place.

Illustration

A transfers a farm to B on the condition that B shall not go to England within three years after the date of transfer; otherwise, his interest in the farm shall cease. B does not go to England within the period prescribed. His interest in the farm ceases.

As per S. 29, a subsequent condition should be performed strictly.

Illustrations

(a) A transfers Rs. 500 to B to be paid to him on his attaining majority or marrying, with a proviso that if B dies a minor or marries without the consent of C, the said sum of Rs. 500 shall go to D. B takes a vested interest in the money from the date of the transfer. Still, his enjoyment right is postponed until any of the conditions mentioned above is fulfilled. If B marries without C’s consent at 17 years, he is divested of his interest in Rs. 500, and the transfer to D takes effect. s

(b) A makes a gift to B with a proviso that if B marries without the consent of C, D and E, the property shall go to X. before the marriage of B E dies. B marries without the consent of C and D. Property shall not go to X because the subsequent condition, which divests the interest of B and vests it into X, has not been performed strictly.

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[1] निहित और आकस्मिक हित

[2] मिळकतीत अधिकार कायम/ निष्चित होने [हित निहित होणा|]

[3] निश्चित घटनेच्या घडन्यावर अवलंबुन [किसी निश्चित घटना के घटित होने पर जो अवश्य होना चाहिए|]

[4] These illustrations are taken from S. 119 of the Indian Succession Act, which is similar provision.

[5] AIR 1925 All 389

[6] मिळकतीत अधिकार कायम अथवा निष्चित होने हे करारत नमुद अटीच्या घडन्यावर अथवा न घडन्यावर अवलंबुन असत [आकस्मिक हित प्रासंगिक हितs-]

[7] These illustrations are taken from S. 120 of the Indian Succession Act, which is similar provision.

[8] करारा पुर्वि पुर्ण करनेची अट [करारपूर्व शर्त /पूर्व शर्त]

[9] करारा नंतर पुर्ण करनेची अट [बाद की शर्त [अनुगामी शर्त]