DR.

RAM MANOHAR LOHIYA NATIONAL LAW UNIVERSITY

LUCKNOW

2021-22

The Transfer of Property Act - I

FINAL DRAFT ON
VESTED INTERESTS

Submitted by – Submitted to –

Saurabh Yadav Dr. MANISH SINGH

B.A.LLB (Hon) Semester V Associate Professor (Law)

En. No. -190101131

 ACKNOWLEDGEMENT

I would like to extend my sincere thanks to

My teacher and my mentor Dr. MANISH SINGH for giving me this

wonderful opportunity to work on this project and for his able guidance
and advice,

Vice Chancellor, Prof. Subir Kr. Bhatnagar and Dean (Academics),

Professor C.M. Jariwala for their encouragement and Enthusiasm;

My seniors for sharing their valuable tips;

And my classmates for their constant support.

 Index

1. Introduction

2. Definition of Vested Interest

3. Analogous law

4. Scope of the section

5. Distinction between vested and contingent interest

6. Vested in different forms

7. On the happening of an event

● Postponement of enjoyment

● Conditional limitation

● Accumulation of income

● prior interest

8.Cases

9.Conclusion

10. Bibliography
Introduction
Vested interest
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 prefect 1. 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 A 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.

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.

An estate may be vested although the fact may be such it never become vested in possession
and so never give a right to the actual enjoyment of the land. Thus, on a transfer of A for life
with remainder to B life with interest never vest possession for there is still nothing but A's estate
between B and the enjoyment of land.

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 property2.
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.

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.
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 interest 3.

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

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:

"119,where by the term of a bequest the legatee is not entitled to immediate possession of the
thing bequeathed , a right receive it at the proper time shall, unless a contrary intention appear by
the will, become vested in the legatee on the testator's death ,and in such case the legacy is from
testator's said to be vested interest.

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

3
The Transfer of Property Act, Bare Act, Professional book publishers, p. 7.
Illustration:-
A bequeathed to B 100rupees, t 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.

Scope of the section

This section is corresponding to s.119of The Succession Act, 1925,give expression to the
English notion of the vested interest and make it the law of the land except in the case of
muhammadans law. A vested interest is a immediate right, as distinguished from the a right
which may come into existence in future. The immediate right may be right of present enjoyment
of right of future enjoyment. In Sashi kantha v. Promod Chandara 1 their lordship of the Calcutta
High court pointed out the distinction between a vested interest and contingent interest as
following:

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 interest 4.

a person get 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 these two 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.

4
Dr. Avtar Singh, Textbook on the Transfer of Property Act, Universal Law Publishing, 2009, p. 89.
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 transferee 5.

For example

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

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

noted

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

5
Dr. R.K. Sinha, The transfer of Property, 15th Ed. 2014, p. 56.
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.

In property law and real estate, a future interest is a legal right to property ownership that does
not include the right to present possession or enjoyment of the property. Future interests are
created on the formation of a defensible estate; that is, an estate with a condition or event
triggering transfer of possessory ownership. A common example is the landlord-tenant
relationship. The landlord may own a house, but has no general right to enter it while it is being
rented. The conditions triggering the transfer of possession, first to the tenant then back to the
landlord, are usually detailed in a lease.

Vested interest should be without any condition

Vested in different forms 6

(i)Vested in possession- When it is a right to present possession for ex- our residential house.
Vested in possession is a term used to indicate an interest which gives a right to immediate
enjoyment of an interest in property as opposed to an interest vested in remainder. For example,
an estate is vested in possession when there exists a right of present enjoyment; and an estate is
vested in interest, when there is a present fixed right of future, enjoyment. “The phrase "vested in
possession" is well understood as meaning a right of present enjoyment. Contrasted with these
terms is the phrase "vested in interest," which means a present fixed right of future enjoyment.
Thus any given interest may first be vested in interest, then vested in possession, and finally
reduced to possession.

(ii) Vested in interest – when it is not a right to present possession but a right to future
possession. Example- a land & building is given to Ramesh for his life with a remainder to B , in
that case ’s right invested in possession ,B’s right is vested in interest .i.e. after ’s death property
will come to B without any condition. A vested interest is transferrable and heritable. A vested
interest is a “right that so completely and definitely belongs to a person that it cannot be impaired
or taken away without the person's consent. The event or time frame that triggers vesting are
typically defined by contract, such as employee pension benefits vesting after a certain number
of years.

(iii) Vested gift-A vested gift refers to an absolute gift. Generally, a vested gift is free from
contingencies. Although a vested gift is unconditional, its use or enjoyment might not occur until
sometime in the future. Hence, a vested gift can be made for the purpose of present or future
usage.

(iv) Vested estate-Vested estate is an absolute, unconditional, and indefeasible interest. It is an

estate which is not contingent or expectant. Vested estate carry a fixed right of present or future
enjoyment. It gives a certain and fixed right of present or future enjoyment; that is, an interest
clothed with a present legal and existing right of alienation. An estate is vested in possession
when there exists a right of present enjoyment, and vested in interest when there is a present right
of future enjoyment.

6
Dr. R.K. Sinha, The transfer of Property, 21st Ed. 2021, p. 59.
(v)Vested future estate-Vested future estate is an estate which exists when there is a person in
being who would have an immediate right to the possession of the lands upon the ceasing of the
intermediate or precedent estate.

(vi)Vested liabilities -"vested liabilities" means “the present value of the immediate or deferred
benefits available at normal retirement age for participants and their beneficiaries which are no
forfeitable.

(vii)Vested right-A vested right is commonly defined as a “right that so completely and
definitely belongs to a person that it cannot be impaired or taken away without the person's
consent.

(viii) Vested interest by will-property given to window in lieu of her maintenance during her
life time and after her death surviving right ,if any ,was to vest in daughter , enactment of Hindu
succession act, 1956 deprived daughter of their legal right as widows interest enlarged into an
absolute estate ,no right vested in daughters will. 4

"Or in terms specifying that it is to take effect forthwith"

Where a transfer is made to A “when" or "if" he shall attain a particular age the word "when "or"
if" will, unaided by context show that A was given only contingent interest but the word may be
controlled by other expressions as to show that the grantor's intention is merely postpone the
enjoyment and not vesting itself 5.In such cases the interest will be vested not contingent. thus,
where X, by will directed the trustee to divide the estate 21 years after the testators’ death into
certain share and give one such share to his wife, and stated that such share should vest in her at
the date of his death, it was held by their Lordship of the privy council that she took a vested
estate though postponed for 21 yrs .

On the happening of an event

The interest is a vested interest where the operation of the transfer is made to depend upon some
specified certain event .the event must be clearly specified , explained and it must be certain to
happen. For example death of a person.
Postponement of enjoyment :

It has been that an interest may be vested though the enjoyment thereof is postponed. And the
explanation make it that from the mere provision for postponement of the enjoyment, it should
not be inferred that the interest is not vested. In other words, the mere fact that the transfer is not
entitled to the immediate enjoyment does not necessarily make the interest contingent one. Thus,
where a gift was made 'A' with a direction postponing the enjoyment of it, it was held that the
direction did not postpone the vesting. Where a Hindu widow made a gift of property to the deity
with the consent of the reversion under an agreement under which the revision enjoyed the
benefit of rent and income of the property during the lifetime of the widow, the property so
donated became vested in deity.

But though the provision for the postponement does not by itself prevent the vesting of property,
such a provision cannot be said to be valid under all circumstances. Such a provision will be
valid where

1. The right of enjoyment is given in the meanwhile to some other person, or

2. The transferee is under the majority and enjoyment is postponed until he attains majority.

The leading case on the point is Gosling vs Gosling where vice chancellor, Sir W.Page Wood
made the following observation:

The principle of this court has always been recognized the rights of all person who attain the age
of 21 to enter upon the absolute use and enjoyment of the property given to them by a will, not
withstanding any direction by the testator to the effect that they are not to enjoy until a later age
unless, during the interval the property is given for benefit of the another. If the property is once
theirs, its useless for the testator to attempt to impose any fetter upon their enjoyment of its full
as the attain 21. And upon the principal unless there is in the will or in some codicil to it, a clear
indication of an intention on the part of the testator, not only that has devisee are not too have the
enjoyment of the property he devised to them until the attain 25,but some person is to have that
,or unless the property is so clearly taken away from devisee up to time of attaining 25,as to
induce the court to the previous rents and profit ,there has been an intestacy the court does not
hesitate to strike out of the will any direction that the devisee shall not enjoy it in full until they
attain the age of 25 years.
Conditional limitation

The interest shall not be vested is not to be inferred from a provision that if a particular event
shall happen the interest shall pass to another person. Such type of a provision is called a
conditional limitation. a conditional limitation divests an estate which has become vested and
vests it in another person. Section 28 of transfer of property deals with conditional limitation.

Sunder Bibi v. Rajendra Narain 7-

The terms of a compromise provided that L should have an estate for life and that after his
death to R was to be the full owner of the estate, if he survived L. If R did not survive L ,the
estate would pass to R’s lineal male descendent according to the rule of primogeniture . before
the death of L. the question arose whether R had only a contingent interest or a vested interest
which could be attached .if the provision had been merely this that the estate would pass to R, if
he survived L and estate contingent on his surviving L. The further provision of a gift over to
another person was conditional limitation which had the effect of vesting the estate R. The court
gave the reasoning that the condition affected the retention of the interest and not in its
acquisition .Therefore; R took a vested interest liable to be divested if he did not survive L. This
above case is deal in conditional limitation.

Accumulation of income

It is not to be in freed that the interest shall not be vested whereby income arising from the
property is directed to accumulate until the time of enjoyment arrives. However, the direction for
accumulation of income must be within the limits sanctioned by section17. If the direction is for
a period in excess of the period specified, it will be invalid for the period in the excess of the
period specified, it will be invalid for the period in excess. Only the right of enjoyment is
postponed only but not the vesting.

Prior interest

7
AIR 1925 All 389.
Similarly, it is not to be inferred that an interest shall not be vested merely by the provision
whereby prior interest is created there is only postponement of the enjoyment and not the vesting
of subsequent interest .

Interest vests in his legal representatives whether obtained possession

Rajesh Kanta Roy v. Smt. Shanti Debi.8

This case deal with the principle to decide the question whether interest taken by
beneficiaries under trust is contingent or vested.

Facts

One Ramani kanta Roy executed a registered trust deed in respect of his properties. The eldest
son Rajesh kanta Roy was appointed the sole trustee to hold the properties under trust subject to
certain power and obligations. After the execution of said deed, Ramani Kanta died. Clause 12 of
the deed was the main provision under which Rajesh kanta and his brother Ramendra Kanta Roy
got any interest in the properties .This clause showed that Lots I to IV of the properties
ultimately went to Rajesh and Lot V alone went to Ramendra .But the interest with either of
them was to get the properties allotted to each was expressed to be one which each would get
after termination of the trust. It was only after happening of two events

(i) The discharge of all the debts specified in the schedules

(ii) The death of the settler himself that the trust was to come to an end and it was on the
trust coming to an end that the sons were to get the properties allotted to them.

Judgement –

It was observed that the entire scheme of the trust deed was:

1) Specified lots were earmarked for each of the two sons

2) The present income out of those lots were to be applied for the discharge of the debts after
payment of specified sums there form by the way of monthly payment of the two sons and
presumably such application was notionally pro rata

8
AIR 1957 SC 255.
 3) Any surpluses which remain from out of the income of each of the lots were to go to the
very person whom the corpus of the lot itself was belong on the termination of the trust
4) In the event of any of the two sons dying before the termination of the trust, his interest in
the monthly payment out of the income was to devolve on his heirs. This arrangement
clearly show that what is postponed was not were vesting of the property in the lot
themselves but that the enjoyment of the income of the income thereof was burden with
certain monthly payments of which taken together constituted application of the income for
the benefit of the two sons .
Therefore the interest taken by the Rajesh and Ramendra under the trust deed was vested not
contingent. It nothing but short of spes succession ,and the interest of the life estate holder
in the property during his life time was vested interest.
Conclusion

When a property is transferred it involves transfer of interest, if the interest transferred are is
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. Transfer of property by S.N.shukla

2. The transfer of property by Dr.Avtar Singh
3. Vested interest - Wikipedia, the free encyclopaedia
en.wikipedia.org/wiki/Vested interest
4. www.investopedia.com/terms/v/vestedinterest.asp
5. www.vakilno1.com
6. indiankanoon.org/search/?form Input=%22vested%20interest%22
7. A.I.R Commentaries vol.1 by Manohar & Chitaley
8. Transfer of property by Dr.R.K. Sinha