A STUDY ON VESTED AND CONTINGENT INTEREST

5.6-Property Law

Submitted by

Mranal sharma

SM0117030

III Year, V Semester

National Law University and Judicial Academy, Assam

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 TABLE OF CONTENTS
TABLE OF CASES...................................................................................................................3
TABLE OF STATUTES............................................................................................................3
INTRODUCTION......................................................................................................................4
CONTINGENT INTEREST......................................................................................................6
VESTED INTEREST.................................................................................................................9
DISTINCTION BETWEEN CONTINGENT AND VESTED INTEREST............................12
CASE NOTES..........................................................................................................................13
CONCLUSION........................................................................................................................14
BIBLIOGRAPHY....................................................................................................................15

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 TABLE OF CASES
1) Bay berry apartments P. Ltd. V. Shobha, AIR 2007 SC 226
2) Ma Yait v. Official Assignee
3) Rajesh Kanta Roy vs ShrimatiSunita Debi AIR1957, S.C.255
4) Shashi kantha v. Promode Chandra,(1932) Cal. 600.

TABLE OF STATUTES
1. Civil Procedure Code, 1908
2. The Transfer Of Property Act, 1882 ,(4 Of 1882)

3. The Indian Successions Act, 1925

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 CHAPTER-1

INTRODUCTION
The Transfer of Property Act deals with two kinds of interest vested interest and contingent
interest. Vested interest is to be distinguished from contingent interest. When an interest is
vested, the transfer is complete but when the interest is contingent, the transfer depends upon
a condition precedent. When the condition is fulfilled the transfer takes effect and that the
interest becomes vested.

When the interest is contingent his title is yet imperfect, but is capable of becoming prefect
on the fulfilment of some condition implied. If it is an uncertain event, it is take effect. Thus,
A gift to C on death of B creates a vested interest in an even during B's life time for the
condition is bound to happen. But a gift to A on the marriage of B creates only a contingent
interest because B may never marry, but that contingent interest becomes vested if and when
B gets marries. In this research paper I have aimed to understand and draw a clearer picture
about the concepts of vested and contingent Interest provided in the Transfer of Property Act
1882 in addition to the various other provisions given in the Indian Succession Act 1995 in
regards to the above mentioned concepts.

Objective
1. To read in detail about vested and contingent interest

2. To read in detail about the various factors responsible for implementation of such
laws in our country.

3. To read in detail and analyse various Article of part III of the Constitution of India
relating to cultural and educational rights.

Scope
This research paper aims to study the position of cultural and educational rights as
fundamental rights in India.

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Literature Review
Sinha in his book1 has given a detailed view of both contingent and vested interest. The book
also presents a plethora of cases which are pertinent to the subject matter of contingent and
vested interests. The researcher gets a detailed understanding of section 21 from the book as
well as the section has been explained by breaking down the various important provisions
Apart from that the book also brings a clear demarcation of difference between contingent
and vested interest.
Shukla in his book2 presents a clear view of both the interests present in the transfer of
property act as well as explains all the important sections related to both these interests. The
book also presents the various conditions where such interests could be created. The book has
a detailed discussion on various difference related to such interests too. The book has given
several existing cases related to both the interest that present the various judicial
interpretations related to it.

Research Question
Q1. To understand the meaning and scope of various sections of the transfer of property Act
which relate contingent and interest?
Q2. To know what are the different conditions for an interest to be contingent or vested?
Q3. What are the legal provision in India regarding vested and contingent interest?
Q4. What is the difference between vested and contingent interest?

Research Methods applied to test the hypothesis/hypotheses

This Research is based on Doctrinal method of Research, Secondary Sources like Statues,
Cases, Article, and Newspaper Articles have been used.

1
DR. R.K SINHA, THE TRANSFER OF PROPERTY ACT, 2018, (19th Ed., Central Law Agency, Allahabad).
2
DR. S. N. SHUKLA, THE TRANSFER OF PROPERTY ACT, (28th Ed. , 2018,Allahabad Law Agency).

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 CHAPTER-2

CONTINGENT INTEREST

Section 21 of Transfer of Property act defines-

"Contingent Interest - Where on a transfer of property, an interest therein is created in

favour of a person to take effect only on the happening of a specified uncertain event, or if a
specified uncertain event, or if a specified uncertain event shall not happen, such person
thereby acquires a contingent interest in the property. Such interest becomes a vested
interest, in the former case, on the happening of the event, in the latter, when the happening
of the event becomes impossible" 3

There are exceptions to the same which are as follows:-

"Exception - Where, under a transfer of property a person becomes entitled to an interest,
wherein 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 or so
much thereof as many be necessary to be applied for his benefit, such interest is not
contingent"4

Illustration5-

'X' bequeathed his property i.e. estate to 'Y' until he shall marry to 'Z'.  'Y's interest in
bequeath is contingent because it depends upon a condition precedent i.e. a marriage of 'Y'
with 'Z'. An event has no proprietary interest in the estate and cannot alienate it. 

BREAKING DOWN THE SECTION-

This section can be broken down as when a transfer of property is to be made only on the
happening of a specific uncertain event the person to whom the property is transferred is said
to have a contingent interest in the property. Key feature being happening of a specific
uncertain event. The specified uncertain event may be one which depends upon the will of the

3
THE TRANSFER OF PROPERTY ACT, 1882 ,(4 OF 1882).
4
Ibid.
5
Contingent Interest, SRD LAW NOTES,(Oct.16,2019,3:00 AM).
https://www.srdlawnotes.com/2016/05/contingent-interest.html.

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intended transferee, e.g. Execution of a deed, or payment of a sum of a money. The
performance of such condition is subject to s.26.

However section 21 is not read alone but with other sections of the other statutes.

"Transfer Contingent on happening of specified uncertain events - Where on a transfer of

property, an interest therein is, to accrue to a specified person, if a specified uncertain event
shall happen and no time is mentioned for the occurrence of that event, the interest fails
unless such event happens before all at the same time as the intermediate or precedent
interest, seizes to exist 6

The aforementioned section i.e. section 23, enacts that contingent interest will fail to vest
unless the event in question happen at the same time or before as the prior interest seizes, i.e.
an interest out of a property will arise after the happening of the specific uncertain event or
else it is not a contingent interest.

The rule enacted in the aforementioned section is based on the principle that no property can
remain without an owner even for a moment.

Example-

Thus, if there is a gift for life to A and then to B, in case B gets called to the Bar, the gift to
B fails unless he is called to the bar in the lifetime of A, or at the same time as A dies.

The provisions also comply with other provisions of other statutes such as the Indian
Succession Act, the section corresponds to section 124 of the aforementioned act, according
to which if no period is specified a contingent bequest fails unless the event on which it is
contingent happens before the period of distribution.

Nature of contingent interest

a) Future possible interest-This implies that contingent interest is a possible interest which
could give rise to a future right in respect of property transfer.
It is neither present right nor a certain right. Since happening or not happening of the
event is uncertain, the interest dependent on it is uncertain7.
b) Not heritable- contingent interest is not heritable in nature i.e. after the death of the
person having contingent interest the interest is not passed to the heir.

6
THE TRANSFER OF PROPERTY ACT, 1882, Section 23.
7
Shashi Kantha v. Promode Chandra,(1932) Cal. 600(India).

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 c) Transferable interest- contingent interest is transfer able but the interest of the transferee
is imperfect since the interest of the transferor is also uncertain and imperfect interest.
d) Sale of inchoate contingent interest prior to vesting. – A father and 123 his son purported
to transfer certain property as owners when in fact the father had only life interest in it
and the son had an inchoate contingent interest which had not become vested, i.e. an
undivided share in the family property which was to vest on his father's death. The sale
was held to be in efficacious till partitioning of the property. 8

Difference between Contingent interest and Spes-successionis

Both of them are future possible interests and both have a chance or possibility to become
certain. The main difference is that the degree of possibility is lesser in contingent interest
than in spes-successionis. In case of contingent interest two possibilities are there i.e. either it
will happen or it will not happen (condition to which transfer is contingent) but in case of
spes-successionis there are a number of possibilities and factors like –

e.g. (i) the heir apparent survives the propositus (deceased person), (ii) even if he survives,
the propositus during his life has already transferred the property or, (iii) he has made a will
of that property, So, spes-successionis has been regarded as a naked or mere future possible
interest.

Hence, under Section 6 (a) of the transfer of property Act, spes-successionis is a non-
transferable interest. Contingent interest is not 'mere' possible future interest; it is simply
uncertain. Therefore, law has allowed the transfer of such interest. Subject tocontingency a
contingent interest is a transferable interest9.

The same was iterated an clarified by the Privy Council in Ma Yait v. Official Assignee10

“the contingent interest which the children took was somethingquite different from a mere
possibility of a like nature of an heir- apparent succeeding to the estate, or the chance of a
relation obtaining a legacy, and also something quite different from a mere right to sue. It is
a well ascertained form of property it certainly has been transferred in this country for
generations-in respect of which it is quite possible to raise money and disposed of it in any
way the beneficiary chooses."

CHAPTER- 3
8
Bay Berry Apartments P. Ltd. V. Shobha, AIR 2007 SC 226(India)
9
DR. R.K SINHA, THE TRANSFER OF PROPERTY ACT, 2018, (19th Ed., Central Law Agency, Allahabad).
10
Ma Yait v. Official Assignee, AIR 1930 PC 17(India).

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 VESTED INTEREST
Vested interest is defined under section19 of transfer of property act. When an interest is
vested the transferee’s title is already prefect11.

It must be noted that an interest may be vested even though it does not give a right to
immediate possession .Thus , on a transfer to A for title with remainder to B.B's interest is
vested because there is nothing but A's prior interest to stand between him and the actual
enjoyment of the property transferred.

Vesting means granting a person an immediate right to present or future enjoyment of

property12. In other words a vested rights to a property cannot be taken away by any third
party even if the person does not have the immediate possession of the property. . 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.

Definition of 'Vested Interest'

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 called vested
interest13.

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. This
interest becoming vested interest in transfer of property

Legal provisions relating to vested interest other than transfer of property Act

Section 119 of Indian Succession Act, 1925

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

11
DR. S. N. SHUKLA, THE TRANSFER OF PROPERTY ACT, (28th Ed. , 2018,Allahabad Law Agency) p. 54.
12
JUSTICE P.S.NARAYANA, THE TRANSFER OF PROPERTY ACT, (2012, Ed.,p.43.).
13
THE TRANSFER OF PROPERTY ACT, BARE ACT, (Professional book publishers, p. 7).

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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. 14

Example-A bequeathed to B 100rupees, to be paid to him at the death of C. On A's death the
legacy become vested in interest in b, and if he dies before C, his representative are entitled
to the legacy.

A person attains a vested interest when it is created in his favour

(1) Without specifying the time when it take effect, or

(2) In terms specifying that it is to take effect forthwith, or

(3) In terms specifying that it is to effect on the happening of an event which is must happen.

Such interest becomes a vested interest under the following circumstances:

In case where on a transfer of property, an interest is created in favour of a person to take

effect only on the happening of a specified uncertain event, then on the happening of the
event.

In case where on a transfer of property an interest is created in favour of a person to take

effect only on the not happening of a specified uncertain event, then when the happening of
the event becomes impossible. The not happening of the event should become absolutely
certain, beyond doubt. Such an interest becomes a vested interest in the transferee15.

For example

14
THE INDIAN SUCCESSION ACT, 1925, (ACT No. 39 OF 1925).
15
DR. R.K. SINHA, THE TRANSFER OF PROPERTY , (15th Ed. 2014, Central Law Agency, p. 56).

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Suppose O is the owner of Black acre. Consider what happens when O transfers the property
"to A for life, then to B." Person A acquires possession of Black acre. Person B does not
receive any right to possess Black acre immediately; however, once person A dies,
possession will fall to person B (or his estate, if he died before person A). Person B has a
future interest in the property. In this example, the event triggering the transfer is person A's
death.

Because they convey ownership rights, future interests can usually be sold, gifted, willed, or
otherwise disposed of by the beneficiary (but see vesting below). Because the rights vest in
the future, any such disposition will occur before the beneficiary actually takes possession of
the property. This type of interest is known as vested interest

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 CHAPTER-3

DISTINCTION BETWEEN CONTINGENT AND VESTED INTEREST

An estate or interest is vested, as distinguished from contingent, either when enjoyment of it
is presently conferred or when its enjoyment is postponed the time of the enjoyment of the
will certainly come to pass, in other words, an estate is vested when the immediate right of
present enjoyment or future enjoyment .An interest is said to be contingent interest if
enjoyment depend upon some event this the difference between vested interest and contingent
interest16

These points of distinction between vested and contingent interest need to be noted

1) Transferee's right in property.-In a vested interest the transferee as present fixed right in
property. In contingent interest the transferee has merely a future possible right in the
property. In vest interest even though the enjoyment is postponed a person still has a
present right however in case of a contingent interest there is no present right.
2) Transferability.-Vested and contingent interests both aretransferable. However in vested
interest the transferee gets the complete title but in case of contingent claim to title may
be defeated if there is non-happening of the event. Contingent interest is inalienable in
nature.
3) Attachment and sale in execution of decree.-A vested interest iscapable of being attached
or sold in execution of a decree whereas, a contingentinterest cannot be sold in execution
of any decree. A merely contingent or possibleinterest is not liable to attachment and sale
in execution of a decree.17
4) Heritability- Vested interest isheritable but contingent is not heritable because vested
interest is property of the transferee and he has been conferred a title by the virtue of
interest being vested but there is no such title in case of contingent interest.
5) When accrues- on transfer of a property in case of vested interest the transferee accrues
immediately but in case of contingent interest it all depends on the happening of the
uncertain specific event.
6) Vested interest should be without any condition while contingent interest is solely based
on the contingency of happening of the specific uncertain even

CHAPTER-4
16
Dr.Avtar Singh, Textbook on the Transfer of Property Act, Universal Law Publishing, 2009, p. 89.

17
Section 60(1) (m) Civil Procedure Code,1908.

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 CASE NOTES

1) Rajesh Kanta Roy vs Shrimati Sunita Debi18–

Fact - 
One RamaniKanta Roy executed a registered trust deed in respect of his properties. The
eldest son Rajesh was appointed the sole Trustee to hold the properties under the trust subject
to certain power and obligation. After his death his two son Rajesh and Ramendra got interest
in the property. There was a clause in the trust deed that both of them was to get interest in
the properties allotted to each other happening of the two events -
1) Discharge of all the debts specified in the schedule and death of the settler himself.
2)  The trust was to come to an end on the death of settler and the son were to get properties
allotted to them thereafter.

Issue before the court was whether the interest created by the trust were vested or
contingent?
The Supreme Court held that the interest taken by the two brothers under the trust deed was
vested and not contingent because it was certain event. A contingent interest depend solely
upon the fulfilment of the condition. In contingent interest there is no present right, there is a
promise to give right upon the fulfilment of a condition. A contingent Interest is inalienable
and not transferable.

1) Sundar Bibi vs Rajendra Narayan19

Facts-
In this appeal Mt. Sundar Bibi who obtained a decree against the respondent, RajendarNarain
Singh.

18
Rajesh Kanta Roy vs Shrimati Sunita Debi ,AIR1957, S.C.255(India).
19
Sundar Bibi vs Rajendra Narayan, AIR1925 All.389(India).

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 CHAPTER-5

CONCLUSION
This Research paper discusses and focuses on the concept of the Contingent Interest and
vested Interest what they are and what are the concept of transfer of contingent on happening
of certain unspecified events. Contingent Interest is basically an interest which is given to us
by some third party on the happening of a specified uncertain event which in many cases is
death and until and unless the event occurs, the person to whom the transfer of property has
to be made is not entitled to recover that property or is not entitled to any benefit arising from
that piece of property before the happening of such specified uncertain events. We have also
compared these concepts with the Spes-Successionis and Vested interest and shown how they
are different from each other. In conclusion the most important thing to take a note of is that
everything is that the transfer of property under the Contingent interest happens only when
the condition is fulfilled, and case that the condition is not fulfilled then the transfer is not
valid.

The conditions are required to be fulfilled in case of contingent interest, however when
talking about the concept of vested interest we observed that it is not based on fulfilment of
any such event and that vested interest confers an immediate vested right. At the end we have
also discussed certain case laws in brief as to make the understanding of the concept a little
easier and much more specific in its approachthe cases help us see the clear distinction
between the two similar yet very different type of interest that may be conferred by the act of
transferring a property under the ambit of Transfer of property Act 1982.

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 BIBLIOGRAPHY

Books
 Dr. R.K Sinha, THE TRANSFER OF PROPERTY ACT, 2018, Central Law Agency,
 Allahabad.
 Dr.Avtar Singh, Textbook on the Transfer of Property Act, Universal Law Publishing,
2009.
 Dr. S. N. Shukla, The Transfer of Property Act, 28thEd, 2014.

Articles
 Contingent Interest, SRD LAW NOTES

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