DR.

RAM MANOHAR LOHIYA,

NATIONAL LAW UNIVERSITY,
LUCKNOW
2019-20

FINAL DRAFT –PROPERTY LAW

TOPIC- VESTED INTEREST

CLASS: B.A. LL.B (HONS), Vth SEMESTER

SUBMITTED TO: SUBMITTED BY:

Dr. MANISH SINGH VISHAL KUMAR ARYA

ASSTT. PROFESSOR ROLL NO-163

SECTION. B

ENROLLMENT NO. 170101163

 ACKNOWLEDGMENT

First of all, I would like to thank my teacher of the subject “Property Law”, Dr. Manish Singh,

for providing every bit of help and also showing the way in which to proceed and how to go

about the project. I would also like to thank my parents, friends and others who helped me

immensely at every step and gave every possible bit of help that I needed in preparing the project

and making it look presentable in a good way. I would also like to thank the library staff of

RMLNLU who provided me with books that I needed in making and preparing the project and

other pieces of information and help that was required. At last I would like to sincerely thank

God who gave me the much needed strength and power to go ahead with the project and make it

in a presentable way.

VISHAL KUMAR ARYA

 TABLE OF CONTENTS

1. INTRODUCTION
2. DEFINITION OF VESTED INTEREST
3. SITUATIONS OF VESTED INTEREST
▪ without specifying the time, when it is to take effect
▪ in terms specifying, that it is to take effect forthwith
▪ in terms specifying, that it is to take effect, on the happening of an event,
which must happen

4. CONDITIONS WHICH APPEARS NOT VESTED BUT ACTUALLY

VESTED

▪ postponement of enjoyment
▪ prior interest
▪ accumulation of the income
▪ conditional limitation

5. DISTINCTION BETWEEN VESTED AND CONTINGENT INTEREST

6. ANALOGOUS LAW

7. CONCLUSION

8. BIBLIOGRAPHY
 CASES REFERRED

1. Gosling v. Gosling (1859) Johns, 265

2. Lachhman v. Baldeo, 48 I.C. 396

3. Rewun Prasad v. Radha Beeby, (1846) 4 M.I.A. 137.

4. Rajesh Kanta Roy v. Shanti Devi

5.Uzoe v. Ma Mya May, (1930) 127 I.C. 170.

 INTRODUCTION

Vested interest is defined under section19 of transfer of property act and this section should be
distinguished from contingent interest as defined in sec.21. When an interest is vested the
transferee’s title is already prefect1. When the interest is contingent his title is yet imperfect, but
is capable of becoming prefect on the fulfilment of some condition implied.

For example, a gift to B, on the death of A’s father is a vested interest, but a gift to B on the
birth of A’ son is a contingent gift, as whether a son will be born to A or not is uncertain, but the
death of a human being is a certain event. If son was, born, it would become a vested interest.

It must be noted that an interest may be vested even though it does not give a right to
immediate possession.

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 that 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.

Vesting means granting a person an immediate right to present or future enjoyment of property 2.
In plain English, one has a right to a vested asset that cannot be taken away by any third party,
even though one may not yet possess the asset. When the right, to the present or future
possession of a legal estate can be transferred to any other party, it is termed a vested interest.

A vested interest is not defeated by the death of the transferee before he obtains
possession.

1
Dr. S. N. Shukla, The Transfer of Property Act, 28th Ed. , 2014, p. 54
2
Justice P.S.Narayana, The Transfer of Property Act, 2012, p.43.
 DEFINITION OF 'VESTED INTEREST'

SECTION 19 0F TPA, 1882 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
that it is to take effect forthwith or on happening of an event which must happen, such interest is
vested 3.

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.

3
The Transfer of Property Act, Bare Act, Professional book publishers, p. 7.
 SITUATIONS OF VESTED INTEREST

1. When no time specified as to when it will take effect. (Test- silence of documents or absence
of date of vesting of the rights).

2. If transferor specifically mention the date of vesting of interest/rights take effects.

3. It is to take effect upon happening of an event which must happen or bound to happen or
certain future event. For example- any future date, any person’s death, any age, or things are
bound to happen.

Section 19 and the corresponding section 119 of the succession act, 1925, deals with the
question under what circumstances a person obtains a vested interest or immediate right on a
transfer of property. It provides that unless a contrary intention appears from the terms of the
transfer, a person gets a vested interest when it is created in his favour-

1. without specifying the time, when it is to take effect;

If a property is transferred by A to B and the deed of transfer does not mention, the exact time
from which the transfer shall come into effect, it is normal construction of law, that in such a
case, the transferee gets vested interest.

For example, A sells his house to B. B gets the vested interest from the day of sale. He gets
rights at once though possession may not be given to him immediately.

2. in terms specifying, that it is to take effect forthwith;

The second situation giving birth to vested interest consists in those cases when the deed of
transfer mentions clearly that the transfer is to take effect at once and forthwith. With such a
thing being clearly mentioned, the deed conveys vested interest alone.
3. in terms specifying, that it is to take effect, on the happening of an event, which must
happen;

The third situation of vested interest occurs in those cases when the operation of the transfer is
made be clearly explained and legibly fixed and its occurrence should only a matter of time. It
should be of a nature as to “must happen”. Interest that is dependent upon such event is classed
as a vested one.

For example, transfer to B if A dies, or at sunset or sunrise. There are events which are both (i)
specified (ii) and certain. Therefore, transfer to B creates vested interest.
CONDITIONS WHICH APPEAR NOT VESTED BUT ACTUALLY VESTED

(A). Postponement of enjoyment of rights (vesting happens immediately but the enjoyment of
rights postpone.

(B). prior interests- creation of prior interest. Like interests created for unborn person.

(C). direction for accumulation.

(D). conditional limitation. It is the English law concept, which authenticated in India under
section 28 of Transfer of Property Act, 1882.

A. POSTPONEMENT OF ENJOYMENT- a condition postponing enjoyment cannot prevent

the interest vesting immediately; but it is itself for repugnancy after the transferee has attained
majority.

For example- A transfer property to B in trust for C, and directs B to give possession of the
property to C when he attains the age of 25.C has a vested interest and is entitled to possession at
the age of 18.

In the leading case of Gosling4, vice- chancellor wood said: “the practice of this court has
always been to recognise the right of all persons who attains the age of 21 to enter upon the
absolute use and enjoyment of the property given to them by Will, notwithstanding any direction
by the testator to the effect that they are not to enjoy it until a later age unless, during the
interval, the property is given for the benefit of another.”

In India, the similar rule has been accepted except that there is no limit numerically fixed as
above. The period up to which the enjoyment of a vested interest may be postponed is matter of
fact for the parties to decide.

4
Gosling v. Gosling, (1859), 265 : Re, Johnston, (1894) 9 Ch. 204.
For example- A execute a deed of gift in favour of B, but directed that B was not to take
possession of a portion of property until after the deaths of A and A’s wife. B has a vested
interest, enjoyment only being postponed.5

B. PRIOR INTEREST- A prior interest does not postpone the vesting of the subsequent
interest. Section 13 provides a specific example of such rule. A fund is given to A for life, and
after his death to B. On the testator’s death, the legacy to B becomes vested in B. The expression
“after his death” refers to the time when the gift becomes reduced to possession, and not to the
time when the interest vests.

In Rewun Prasad’s case6, the testator gave his wife a life estate and after her death one share of
his estate to his bother B and the other share to his son C and D. B and C dies during the lifetime
of the widow, but as their shares were vested, and as C and D took as tenants-in-common, C’s
widow was entitled to succeed to C’s share.

For example- Property is settled is trust to A for life with a direction to the trustees to pay A
rs.2,000 a year out of the rents and profits and to apply the balance to the discharge of a
mortgage; and after A’s death to convey the land to B. Although, B may not survive A, yet B’s
interest is vested in A’s lifetime.7

In Rajesh Kanta Roy v. Shanti Devi,8 (1957) a question arose, as to whether the interest which
developed upon two minor sons under a settlement made by father was vested or contingent. The
settlement provided in substance that the sons would obtain an absolute interest upon the death
of the father and after discharging the debts of the father. The observed that the settler clearly
contemplated that there would be, as in fact, there was, a surplus after the payment of the debts
and held that there can be no doubt about the rule that where the enjoyment of the property is
postponed but the present income thereof is to be applied for the benefit of the donee, the gift is
vested and not contingent. This rule operates normally where the entire income is applied for the
benefit of the donee.

5
Lachhman v. Baldeo, 48 I.C. 396.
6
Rewan Prasad v. Radha Beeby, (1846) 4 M.L.A. 137.
7
Uzoe v. Ma Mya May, (1930) 127 I.C. 170.
8
(1957) S.C.R. 77.
C. ACCUMULATION OF THE INCOME- A direction for accumulation of income if in
excess of the period sanctioned by section 17 is invalid for the excess. Within the limits
sanctioned by the section, it is a provision for the postponement of enjoyment, and as such it
does not postpone the vesting interest.

D. CONDITIONAL LIMITATION- A provision that if a particular event shall happen, the

interest shall pass to another person is what is called in English law a conditional limitation. A
conditional limitation divests an estate which has vested and vests it in another person. A
conditional subsequent divests an estate which has vested and revests in the grantor. Section 28
deal with conditional limitations.

For example- A Gift his house to B with a condition that B takes possession of house within 6
months if he fails to take possession A transfers the possession of house to H.

Here, B’s vested right is within 6 months.

 DISTINCTION BETWEEN VESTED AND CONTINGENT INTEREST

A contingent interest is inalienable. On the other hand, vested interest is heritable and
transferable.

A contingent interest depends solely upon the fulfilment of a condition, so that in case of non-
fulfilment of the condition, the interest may fall thorough. On the other hand, a vested interest
does not depend upon the fulfilment of any conditions and takes effect from the date of the
transfer of property.

In case of a contingent interest there is no present right. However, there is a promise for giving
one and is altogether dependent upon the fulfilment of the condition. As against this, in case of a
vested interest, there is a present and immediate right. Only its use is postponed. In case of a
contingent interest, the transferee takes an interest of a contingent nature, which may be defeated
by reason of non-fulfilment of the precedent conditions. This is not the case in case of a vested
interest.

It is to be noted that where, under a transfer of property, a person becomes entitled to an interest
in the property upon attaining a particular age and the transferor also gives to him absolutely the
income to arise from such interest before he reaches that age, or directs the income to be applied
for his benefit, then such interest is vested interest.
 ANALOGOUS LAW

Section 119 of Indian Succession Act, 1925, corresponds with section 19 of Indian transfer of
property act and it run's as follows:

Section 119 in the Indian Succession Act, 1925

119. Date of vesting of legacy when payment or possession postponed.—Where by the terms of
a bequest the legatee is not entitled to immediate possession of the thing bequeathed, a right to
receive it at the proper time shall, unless a contrary intention appears by the Will, become vested
in the legatee on the testator’s death, and shall pass to the legatee’s representatives if he dies
before that time and without having received the legacy, and in such cases the legacy is from the
testator’s death said to be vested in interest.

Explanation.—An intention that a legacy to any person shall not become vested in interest in
him is not to be inferred merely from a provision whereby the payment or possession of the thing
bequeathed is postponed, or whereby a prior interest therein is bequeathed to some other person,
or whereby the income arising from the fund bequeathed is directed to be accumulated until the
time of payment arrives, or from a provision that, if a particular event shall happen, the legacy
shall go over to another person.

Illustration:-

A bequeaths to B 100 rupees, to be paid to him at the death of C. On A’s death the legacy
becomes vested in interest in B, and if he dies before C, his representatives are entitled to the
legacy.
 CONCLUSION

When a property is transferred it involves transfer of interest, if the interest transferred

immediately it is vested interest. From the point of view of time of accruing(when transferee get

the interest the interest may be either vested or contingent).In a vested interest as soon as transfer

is complete the interest accurse to transferee with immediate effect and the transferee title is

complete. Vested interest should be without any condition. 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 that 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.
 BIBLIOGRAPHY

1. Tripathi, G.P, The Transfer of Property Act, 9th edn, central law publications.

2. Pradhan, Poonam, Property Law, 2nd edn, lexis nexis.

3. Shukla, S.N, Transfer of Property Act, 14th edn, central law agency.

4. Sinha, R.K, The Transfer of Property Act, 16th edn, central law agency.