B.A.LL.B.(Hons.

) 5th Semester

Topic : “Contingent Interest can become vested interest but vice-versa is not
possible.” Discuss this statement with example.
A made a gift deed in favour of B but with direction that he will not get the
possession of property until transferor dies. Is this a vested interest or
contingent interest?

Subject : Indian Evidence Act

Submitted to : Dr. Niharika Singh
Submitted by : Gautam Shokaha
Roll number : 28
What is Vested Interest?
Section 19 of Transfer of Property Act 1882 lays down the meaning of vested interest. Vested
interest can take place in two stages. First when the transferee is in immediate and present
possession of the property and second when the transferee has acquired an interest in the
property but is not in the present possession of property that is the right to enjoyment is
postponed to a future date.
Vested interest is when an interest in a property is transferred in favour of a person without
specifying the time or a specific condition. Such interest must vest in the person on
happening of an event which is bound to happen. The interest in the property remains vested
in the transferee even though the right to enjoyment of the property is postponed. In other
words, interest is said to be vested when it depends on happening of a certain event
precedent.
Illustration
X, the father of Y agrees to transfer an ancestral property in favour of Y after his death. The
interest in the ancestral property in favour of Y is dependent on the condition of the death of
his father X, which is certain. Hence on the death of X, Y will have vested interest in the
ancestral property.

Characteristics of Vested Interest

The three main characteristics of vested interest is as follows-
1. Vested interest does not depend on an uncertain event. It depends on a certain event which
must happen. It creates a present or immediate right though the right to enjoyment is
postponed.
2. Vested interest is not defeated by death. On the death of the transferee, the interest is
passed to the heir of such transferee.
3. Vested interest is a transferable right as well as a heritable right.
Section 20 pertains to the acquisition of a vested interest in a property transferred to an
unborn child. When a transfer of property takes place in favour of an unborn child, the
interest in such a property vests in the unborn child at the time of the child’s birth. Such a
child maybe not be able to enjoy the property immediately but the interest in the property is
transferred immediately.

Under the following circumstances, the vested interest remains vested in the transferee even
though–
1. When the enjoyment of the property is postponed.
2. When a prior interest in the property is created.
3. Income arising from the property is accumulated till the right of enjoyment of the property.
4. When on the happening of a certain event interest passes on to another person.

Case Law
Sunder Bibi v. Rajendra [iv] The court held that A would hold the property till his death and
subsequently after his death the property would pass to B. The interest acquired by B in the
said property is a vested interest. B would acquire vested interest because the death of A is a
condition which is a certain event and is bound to take place.

What is Contingent Interest?

Section 21 of the Transfer of Property Act 1882, contingent interest is when interest is
created in a property in favour of a person to whom such property is transferred, such interest
is dependent on the happening of a specified uncertain event which may or may not take
place. Hence the transfer of an interest in a property is dependent on a contingent event. This
interest in the property can become vested interest in favour of the person to whom it is
transferred on the happening of the event or when the happening of the specified event fails
or becomes impossible. The creation of interest of the person’s right to enjoyment, possession
or ownership in the property is dependent on happening of a condition which may or may not
take place.[v]

Illustration
A agrees to transfer his house in favour of B on the condition that B should marry his
daughter ‘X’. Hence such a transfer of property in favour of B is dependent on the condition
of B marrying A’s daughter ‘X’. B may or may not get married to ‘X’. If B gets married to
X, the interest in A’s house gets transferred to B immediately on happening of the specified
event.

Exception
When a person who has a chance of becoming the owner of a specific property and before the
uncertain event takes place, if such a person receives any income arising from such a
property, this interest in the property is not a contingent interest. Hence such an interest is an
exception under section 21.

Characteristics of Contingent Interest

There are three main characteristics of contingent interest which are as follow-
1. The interest in a specific property transferred will be subject to a condition which is
uncertain i.e., it may or may not take place. Only on fulfilment of such a condition will the
contingent interest in the property become vested interest in the transferee.
2. If the transferee dies before acquiring the interest in the property, the contingent interest
will lapse and the transferor will remain the owner of the property.
3. The contingent interest can be transferred i.e. it is a transferable right. However, if the
contingent interest is heritable or not depends on the contingent event and nature of the
transaction.
Section 22 states that a contingent interest in a property is transferred to a group or class of
persons on the condition that persons who have attained a particular age on a specified date
will acquire an interest in the property. Such interest will only be transferred in favour of the
people who satisfy the required condition. [vii]
For example, an interest in a property is transferred in favour of a group of 10 people. Such a
transfer is dependent on the condition that only people who are above the age of 18years as
on the date of transfer will have vested interest in the property. Hence all people above the
age of 18 years will get an interest in the property and the others will not get an interest in the
property.

Section 23 states that when a transfer of an interest in a property is dependent on happening

of an uncertain event and the time within which such an event is to take place is not specified.
Such a contingent interest fails unless such an event takes place before or at the same time as
the intermediate or previous interest ceases to exist. [viii]
For example, a property is transferred to X for life as a gift and then to Y if, Y returns from
the U.S.A. Whether Y returns from the U.S.A. is a contingency as it may or may not happen
and no time is mentioned for his return. Hence if Y returns from the U.S.A. during X’s
lifetime then Y must get the property.

Section 24 lays down the transfer of an interest in a property to such persons who are alive at
the specified time. [ix]For example, X transfers property to Y for life and after his (Y) death
transfer to A, B, C equally between them. A dies during Y’s lifetime. On Y’s death, the
interest in the property shall pass to B and C equally.

Distinction between Contingent interest and Vested interest:

1. Time of accrual – The vested interest accrues immediately to the transferee whereas
contingent interest accrues to the transferee when specific uncertain event happens or does
not happen.
2. Nature of the title – The vested interest confers fixed and perfect title whereas contingent
interest accrues, imperfect and incomplete title which depends upon the happening or non-
happening of uncertain future event. The vested interest is owned absolutely whereas
contingent interest is owned conditionally.
3. Transferee’s right in property – Transferee’s right in the transferred property is vested,
heritable and transferable. The transferee has fixed and present right. In contingent interest
transferee has imperfect and uncertain future rights which is non heritable but is transferable.
4. Vested interest is capable of being attached and sold in execution of a decree but in
contingent interest it is not possible.
 Contingent interest can become vested interest but vice-versa is
not possible:
Where, on a transfer of a 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 shall not happen, such person thereby acquires a
contingent interest in the property.
However, such contingent interest becomes a vested interest, in the former case,
on the happening of the event (specified uncertain), in the latter case, when the
happening of event becomes impossible.
It is well known that if a transfer is dependent upon the happening of an event
that is bound to happen, the transferee takes a vested interest in the property.
“Vested interest means that the transfer is complete, even though possession
might not have been delivered.” The ownership is with the transferee, and if he
dies, he is empowered to transfer the property to his heirs. In contingent interest,
the transfer is not complete and is dependent on a condition precedent the
happening and fulfilment of which is not certain. It would be converted into a
vested interest only when the condition happens. If the transfer is dependent on
the happening of an uncertain event, it remains contingent till the happening of
that event. but on its happening, it becomes a vested interest.
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’s son is a contingent gift, as whether a son or daughter
will born to A is uncertain, but the death of a human being is certain event. If a
son was born it would become a vested interest.
For instance, a trust is created, and the trustees are directed to pay to A, a
specific amount from the trust property. and the balance amount is to be utilised
for the discharge of a mortgage debt. On A’s death, the property is to be given
to B. B, with the creation of the trust, takes a vested interest in the property, as
he is to get the property on A’s death. Death is a certainty, and irrespective of
whether B survives A, a vested interest is created in his favour.
In Usha Subbarao v. BN Vishveswaraiah, the Apex Court had observed:
An interest is said to be a vested interest when there is immediate right of
present enjoyment or a present right for future enjoyment. An interest said to be
contingent if the right of enjoyment is made dependent upon some event or
condition which may or may not happen. On the happening of the event or
condition a contingent interest becomes a vested interest…. Although the
question whether the interest created is a vested of contingent interest is
dependent upon the intention to be gathered from a comprehensive view of all
the terms of the document creating the interest, the court while construing the
document has to approach the task of construction in such cases with a bias in
favour of vested interest unless the intention to the contrary is definite and clear.
Since, in contingent interest vesting of right in transferee is dependent upon the
happening or non-happening of an uncertain future event the transferee will be
conferred with the right in the property only upon the event taking place or upon
its happening become impossible. But in vested interest an immediate right is
created in favour of transferee as it ultimately depends upon a certain event
which is bound to take place in future.
For example: A agrees to transfer his property to B with a direction that he has
to marry A’s daughter.
In this case B will have contingent interest in the property but if he marries A’s
daughter then his contingent interest will transform into vested interest in the
said property.
Example to show a vested interest cannot be contingent: A agrees to transfer his
property to B, after B completes age of 20 years.
In this B will have vested interest in the property as his attaining the age of 20
years is certain event and not an uncertain one in any case. There is no
contingency in its happening or not happening.
A vested interest creates an immediate right in transferee as it depends upon a
certain event even though the right to possession is postponed but a contingent
interest becomes vested upon the happening or non-happening of specified
uncertain future event
Hence, a contingent interest can become vested interest upon the
happening or non-happening of specified uncertain event but a vested
interest can never become a contingent interest as its foundations are based
upon a certain event which is bound to happen in future without any
ambiguity or uncertainty.
Question: A made a gift deed in favour of B but with a direction that he
will not get the possession of property until transferer (A) dies.
Is this vested interest or contingent interest?
Answer: In this case the direction imposed by A is that B will not get the
possession of the said property until A dies.
It is well known that “death” is something inevitable and it can not be avoided
in any case. The death of a person is a certain and not an uncertain event. It is an
event which in the case of every person is bound to happen.
Therefore, this is a case of Vested Interest as:
Vested interest doesn’t depend upon the happening of an uncertain event. It has
to be a certain event only, in this case also A’s death is certain event which will
occur in future without any uncertainty or ambiguity. Therefore, B have a
vested interest in the said property.
Vested Interest creates an immediate right over the transferee, even though the
right to enjoyment can be postponed. Here in the given case also B has a vested
interest immediately when the transfer was made but the right of enjoyment is
postponed till the life of A. A’s death is a future event of ‘must’ nature.
Accordingly, although a prior life interest intervenes yet, B gets immediate
vested interest.
Section 19 of Transfer of Property Act 1882 defines vested interest as:
“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.”
Characteristics of Vested Interest:
The three main characteristics of vested interest is as follows-
1. Vested interest does not depend on an uncertain event. It depends on a certain
event which must happen. It creates a present or immediate right though the
right to enjoyment is postponed.
2. Vested interest is not defeated by death. On the death of the transferee, the
interest is passed to the heir of such transferee.
3. Vested interest is a transferable right as well as a heritable right.