Vested and Contingent Interest under TPA Page | 1

Analysis of Vested and

Contingent Interest under
Transfer of Property Act 1882

Aditi1, Sunidhi Wahi2, Aishwarya Raghuram3

1 rd
3 Year Law Student, NMIMS School of Law, Bengaluru
aditi.380@nmims.edu
2
3rd Year Law Student, NMIMS School of Law, Bengaluru
sunidhi.wahii102@nmims.edu.in
3
3rd Year Law Student, NMIMS School of Law, Bengaluru
aishwarya.raghuram158@nmims.edu.in

SAP ID- 181012019380, 2 81012019102, 381012019158

Submitted to- Dr Tanmeet Kaur Shahiwal

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Table of Contents
1.Introduction .......................................................................................................................... 3
2.Research Design .................................................................................................................... 4
3.Literature Review ................................................................................................................. 5
4. Analysis ................................................................................................................................. 7
5. Findings & Suggestions ..................................................................................................... 12
6. Conclusion .......................................................................................................................... 13
7. Bibliography ....................................................................................................................... 14

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Table of Cases

Name of Case Page no.

Lachman v. Baldeo 9
Pearey Lal v. Rameshwar Das 9
Sri Ram v. Abdul Rahim Khan 9
Leake v. Robinson 11

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1.Introduction
Transfer of interest follows from transfer of property, thus familiarity with the former will help
with the familiarity of the latter. Insolvency, sequestration, and sale are examples of legal
processes that result in the transfer of property with an action on the part of the parties. The
Transfer of Property Act of 1882 regulates the sale, exchange, gift, lease, and mortgage of real
estate (TPA).

The Transfer of Property Act of 1882 stipulates that a deed of transfer must include a Transferor
and a Transferee. A transferor is one who transfers property to another, while a transferee is
the recipient of such a transfer.

When transferring property, two types of interests must be considered: vested and contingent.
In addition, the Transfer of Property Act of 1888 defines vested interest (in Section 19) and
contingent interest (in Section 21).

Keywords- Vested Interest, Contingent Interest, Transfer of property Act

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2. RESEARCH DESIGN

Research methodology:

This paper employs a doctrinal methodology, and the sources utilized are documentary.
Therefore, the article is based on an analysis of both primary and secondary sources. This
comprises, among other things, statutes, textbooks, case law articles, journals, papers and
reports presented at seminars or workshops, Internet materials, and so forth. Generally, it is
used to examine the law as it is, to establish new conceptions, or to reinterpret current ones.

Problem statement:

Section 19 to section 24 of the Transfer of Property Act 1882 talks about two types of interests,
namely- Vested and Contingent. This particular paper attempts to provide a detailed analyses
of the same along with explaining about how the two differ from each other. Moreover, this
paper also incorporates exceptions given under vested and contingent interest.

Research question:

(i) What is Vested Interest, its characteristics and exceptions?

(ii) What is Contingent Interest, its characteristics and exceptions?
(iii) What are the similarities and differences between the two types of interests?

Research objective:

The goal of this study is to determine

(i) The characteristics of vested and contingent interests and;

(ii) The differences and similarities (if any) between the two interests

Literature Review: Two articles, two books and one paper have been reviewed on this topic.

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3.Literature Review
An article by Megha Mahesh titled “A disquisition on vested and contingent interest under
the transfer of Property Act, 1882”1 covers the two most significant categories of property
interests using historical legal precedents and examples. Through the Transfer of Property Act
of 1882, this article outlines the extent of Vested and Contingent interests in Sections 19
through 24, and contains a detailed commentary on the above-mentioned types of interests as
well as a number of historic decisions that aid in understanding the scope and operation of the
act. It also attempts to link the Indian Succession Act of 1925 with the topic in order to explain
specific exceptions, conditions, and the types of interests arising on properties when transferred
between parties in a transaction. Based on actual incidents and instances, this article guided us
through facts and circumstances of each transaction involving the transfer of property and its
legal ramifications and repercussions.

Similarly, “Vested and Contingent Remainders, A suggestion With Respect to Legal

Method”2, a paper by Laurence M. explains the basics of both the types of Interests in brief.
Not only that, it further tries to support the provision through examples and illustrations,
assisting us in writing and understanding about the same but with a slight diversion of the
conventional path and relating the same with legal methods. The jurisprudential aspect makes
one ponder upon the fact that not everything can be grouped into two sides, and that the grey
area can always be found, making even legal scholars perplexed. It further mentions how “it is
possible to make a clear and definite classification of remainders which is valid for all purposes
and which is useful in all cases; the truth is no such classification can be made”. Such complex
questions provided us insight into many such questions while writing this research paper.

1
Megha Mahesh, “A disquisition on vested and contingent interest under the transfer of Property Act, 1882
2(3)Lex Research Hub Journal On Law and Multidisciplinary Issues 12 (2021)
2
Laurence M. Jones, “Vested and Contingent Remainders, A suggestion With Respect to Legal Method” 3
Maryland Law Review 2 (1943)

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“A Study on Vested and Contingent Interest”3 an article by Mranal Sharma fixates their
content heavily backed up by case laws and their explanations in order to provide a succinct
picture of the types of Interest in Transfer of Property Act 1882. Moreover, this paper
highlighted the important features of Vested and Contingent interests that helped us incorporate
essentials in our paper for the same.

Sinha4 in his book “The Transfer of Property Act” 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.
Shukla5 in his book 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.

3
Mranal Sharma, A Study on Vested and Contingent Interest (2019)(Unpublished LLB Research work, National
Law University Assam)
4
Dr. R.K Sinha, The Transfer Of Property Act, (Central Law Agency, Allahabad, 19th Ed., 2018)
5
Dr. S.N. Shukla, The Transfer Of Property Act, (Allahabad Law Agency, Allahabad, 28th Ed., 2018)

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4. Analysis
According to Section 19 of the Transfer of Property Act, 1882 (TPA), Vested Interest can
happen in one of two ways: either the transferee gains possession of the property right away or
the transferee acquires an interest in the property but does not currently possess it, deferring
the right to enjoyment to a later time.

4.1 What is Vested Interest?

A vested interest is a property interest that is transferred in a person's favour without a time
limit or other conditions being stated. Such an interest ought to be granted to the person based
on an inevitable event. Despite the delay in the transferee's entitlement to begin enjoying the
property, the transferee nonetheless has a continuing interest in it.

An unborn person's vested interests are addressed in Section 20 of the TPA. Only once the
child is born will he or she be granted an interest in the property. However, even after having
a stake in something, the unborn child may not be granted the right to enjoy it.

4.1.2 A vested interest has the following three major characteristics:

• The vested interest is independent of a hypothetical event that might or might not take
place. While the right to enjoy property may be postponed, it provides an immediate or
present right.
• Death does not invalidate vested interests; instead, the property is transmitted to the
transferee. Additionally, the interest is transferred to the transferee's heir upon death.
• A vested interest is a heritable and transferable right.

4.1.3 Conditions when the right to enjoy property may be postponed, but a person’s
interest remain vested:

• When a property's use (Enjoyment) is postponed or delayed.

• Once a prior interest in the property has been created.
• Income from real estate increases until the owner is granted permission to use the
property.

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4.1.4 Illustrations:

• A, the father of B, promises to give a piece of property to B upon his death. The stake
in the property held by B is contingent upon the inevitable demise of A. Therefore,
upon A's passing, B will acquire an ownership interest in the aforementioned property.

• C promises to give his property to D once she reaches the age of 25. D will acquire a
vested interest in C's property until she reaches the age of 25, at which point she will
take possession of the property. If D passes away when she is 24 years old, the interest
vested in her will be transferred to her rightful heirs, who will be entitled to the property
in the specified number of years.

• A minor with a guardian is only eligible for vested interest upon reaching the age of 18.
So, when E agrees to transfer property to F, who is a juvenile, he can instruct F's
guardian G to transfer the property to F at any age E chooses, but F does not acquire a
vested interest until she reaches the age of majority, which is 18 years old.

4.1.5 Case Laws:

In Lachman v. Baldeo6, a person transferred a deed of gift to another individual but stipulated
that the transferee would not obtain control of the property until the transferor's death. Even
though the Transferee's right to pleasure is deferred until a later period, he will have a vested
interest.

According to the rulings in Pearey Lal v. Rameshwar Das7, and Sri Ram v. Abdul Rahim Khan8,
a vested interest is not lost when the devisee passes away before he has possession, and his
representatives are entitled to its benefit (Inheritance).

6
Lachman v. Baldeo (1919) 21 OC 312
7
Pearey Lal Vs Rameshwar Das AIR 1918 Mad 294
8
Sri Ram Vs Abdul Rahim Khan, AIR 1946 1 M.L.J.275

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4.2 Contingent Interest

Contingent interest, which is governed by Articles 21–24 of the TPA is used to describe a type
of interest that is created upon the transfer of property but will only take effect if a certain
uncertain event occurs or does not occur.

In other words, when a transfer of property creates an interest for a person that takes effect only
if a specified uncertain event occurs or if the event does not occur, that person obtains a
contingent interest in the property. In the first situation, the interest depends on the event
happening; and vice versa in the second.

E.g. - A offers to transfer his home to B on the caveat that B weds his daughter 'X.' As a result,
such a property transfer in favour of B is conditional on B marrying A's daughter 'X.' B might
or might not marry 'X.' If B marries X, the interest in A's house is instantly transferred to B
upon the occurrence of the stipulated event.

4.2.1 Characteristics of Contingent Interest

1. The interest is contingent, so the transfer is done only when the condition is met.
2. If the transferee dies before getting the property, his interest fails, and the transferor
keeps the property.
3. A contingent interest is transferable, but whether it is heritable relies on the nature of
the transfer and the condition.

4.2.2 Conditions of Contingent Interest

1. Interest - a contingent interest exists in a transfer if the transfer is dependent on a

condition being met before it can be completed.
2. Interest in wills – any bequest to a wife, son, or daughter can be considered a contingent
interest if the condition specifies that it is to be treated as such in the will.
3. Income [an exception] – a person who has a future interest in the ownership rights of a
particular property is entitled to any revenue derived from that property in the
meantime, up until the occurrence of the event. There is no element of contingency to
this property.

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4.2.3 Exceptions
The exceptions for contingent interest are set out in Section 120 of the Indian Successions Act
of 1925.

Section 22 deals with the transfer of a contingent interest to a group or class of members.

Section 23 describes a transfer that occurs upon the occurrence of an event indicated in the
contingent interest transfer. This section simply establishes one of the two branches of Section
21 that govern contingent interest. The two branches are event occurrence and event non-
occurrence.

Section 24 refers to a transfer to a group or class of individuals who will get the property on
the condition that they are present on the given day. The transfer will only take place for those
who meet the requirement of being alive on a specific day. The legal heirs of the deceased
cannot claim an interest in that property since a transfer including a contingent interest is
entirely dependent on the condition being met.

4.2.5 Case Law-

In the case of Leake v. Robinson9, the court stated that if a gift is intended to be conveyed upon
or after reaching a certain age, it might be inferred that the transfer is for a contingent interest.

9
Leake v. Robinson (1817) 2 Mer 363

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4.3 Similarity between vested and contingent interest

Both the types of interests do have their own set of difference but it would be essential to
mention the one similarity both share. That similarity would be that in both Vested and
Contingent interests, the property and interest is transferable.

4.4 Difference between vested and contingent interest

Difference between Vested Interest and Contingent Interest are as follows:

VESTED INTEREST CONTINGENT INTEREST

Vested Interest is mentioned in Section 19 of Contingent Interest is mentioned in Section
the Transfer of Property Act 21 of the Transfer of Property Act
It is an interest generated in favor of a person It is an interest established for someone
where time or a definite event is not based on a future unpredictable event. The
specified. The person with vested interest person with a contingent interest does not
doesn't own the property but expects to when own the property but expects to acquire it if
a certain event occurs a certain event occurs. If the event does not
occur, the person does not own the property
The condition involves a specified certain The condition involves a specified uncertain
event. A certain event means an event that event. There is a chance of the happening or
will eventually happen non-happening of that event
Condition involves an occurrence; therefore, Contingent interest depends on transfer
vested interest isn't wholly dependent on it. It conditions. The transferee only gets interest
creates an immediate right, but enjoyment is if the condition is met
delayed until the transfer date
Death of the person with this interest won't The property will stay with the transferor if
affect it, as it will pass to his lawful heirs the transferee dies before acquiring
possession
Vested interest is a transferable and heritable Contingent interest is a transferable right, but
right whether it is heritable depends on the nature
of the transfer and the condition
There exists a present, immediate right even There is no present enjoyment right, only an
if enjoyment is delayed expectation of such a right

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5. Findings & Suggestions-

The Transfer of Property Act of 1882 addresses two types of interests: vested interest and
contingent interest. The ideas are critical to comprehend because they are addressed in
numerous components of the TPA.

The primary difference between the two concepts is that the transfer of property containing
contingent interest takes effect only once the condition is met; if the condition is not met, the
transfer does not take effect; however, this is not a need for vested interest. Furthermore, while
it is noticeable that these notions can overlap and appear to have some similarities, they are
diverse enough to exist independently.

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6. Conclusion-

Transfer of Property Act of 1882 addresses both vested and contingent interests. There are
numerous parts that deal with the ideas of vested interest and contingent interest, therefore
familiarity with them is crucial. The most important aspect of understanding either idea is that
a transfer of property subject to a Contingent interest becomes effective only if the condition
is met and if a condition is not met in a transfer of property in vested interest, the transfer is not
void. This paper has attempted to shed light on the two ideas by exploring all their facets, so
that the provisions may be better grasped.

Each requirement must be met, and all circumstances must be consistent with the preamble's
standards about justice, equity, and good conscience, the three pillars of the natural law upon
which this entire act rests.

As a result, these ideas are crucial to comprehending and analyzing the transfer of property
under the Transfer of Property Act, as they shed light on the interest at stake for the parties and
their claim to the particular property.

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7. Bibliography

Books Referred

Dr. R.K.Sinha, The Transfer of Property Act, Central Law Agency (21th ed. 2021)

Articles Referred

1. Megha Mahesh, A Disquisition on Vested and Contingent Interest under the Transfer

of Property Act 1882, Lex Research Hub Journal

2. Laurence M., Vested and Contingent Reminders, A Suggestion with Respect to Legal

Methods, UMLL Journals

3. Mranal Sharma, A Study on Vested and Contingent Interest, Law Corner

Websites Referred

1. SCC Online, https://www.scconline.com/web-edition

2. HeinOnline, https://home.heinonline.org/content/

3. Manupatra, https://www.manupatrafast.com/

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