SCHOOL OF LAW

2023-2024

SUBJECT: TRANSFER OF PROPERTY ACT ,1882

NAME OF THE TOPIC: VESTED AND CONTINGENT
INTEREST

SUBMITTED TO:
Ms POOJA JAIN MA’AM
ASSISTANT PROFESSOR
MODY UNIVERSITY
SUBMITTED BY:
DIVYA RAO
B.COM.LLB 5th year
190297
Contents
Concept of Vested Interest...............................................................................................................................................3
Characteristics of Vested Interest.....................................................................................................................................5
Vested Interest................................................................................................................................................................... 5
Concept of Contingent Interest.........................................................................................................................................6
Characteristics of Contingent Interest...............................................................................................................................6
Difference between Vested & Contingent Interest...........................................................................................................7
Creation of Contingent Interest.........................................................................................................................................9
Example of Contingent Interest...................................................................................................................................12
 Vested Interest and Contingent Interest

INTRODUCTION
Transfer of Property Act 1882 holds the important position in Indian legislation as it regulates the
transfer of property in India. It consists of the specific provision and conditions related to it, which
ultimately make the easy resolution of the property disputes. As per Transfer of property Act, a
property comes to the person either by vested interest or by contingent interest.

Both involve the fulfillment of certain specified or unspecified conditions respectively, but there is a
difference between the two. Section 21 of the Transfer of Property Act 1882 talks about the law
related to contingent interest, read along with the Indian Succession Act.

This article primarily focuses on the property that comes to the transferee by contingent interest,
the difference between contingent and vested interest, their characteristics, and case laws of the
same. The article ends with a critical analysis and conclusion to get a clear understanding of the
concept.

Concept of Vested Interest

Section 19 of the Transfer of Property Act, of 1882 states about Vested Interest.
It is an interest created in favor of a person where time is not specified or a
condition of the happening of a specified event. The person having the vested
interest does not get possession of that property but has the expectancy to
receive it upon the happening of a specified event.

For example, A promises to transfer his property to B at age 22. B will

have a vested interest in A property till the time he does not get possession of it.

The death of the person who has this interest will not have any effect on that
interest as after the deceased, the interest will vest in his legal heirs.

For example, in the above example, if B dies at the age of 21, then the interest
vested in B will pass on to the legal heirs of B and they will be entitled to the
property in the prescribed time period.

There are the important aspects of a vested interest as stated above, all these are
discussed in detail below:

1. Interest should be vested: This is the basic meaning of the provision

that lays down that interest should be created in favor of a person
where time is not specified or a condition of the happening of a
specified certain event. A person should profess to transfer a particular
property in order for this interest to be created.
2. Right to enjoy property is postponed: When interest is vested in a
person, he does not immediately get possession of that property and
hence cannot enjoy that property.

But any person who is not a major and has a guardian is only entitled to the
vested interest after he attains majority.

For example, X agrees to transfer the property 8O9 to Y and directs his guardian Z to give
him
the property when he attains the age of 22. Y gets vested interest once he attains the age of
18.

1. Time of vesting: The interest is vested right after the transfer is

initiated. Nothing can stop the interest from vesting in the person in
favor of whom the transfer is to be made.
2. Contrary Intention: The transferor can specify a particular time as to
when the interest will be vested in the person who will receive the
property.
3. Death of the transferee: If the transferee dies before getting the
property in his possession, the interest vested in him will now vest in
his legal heirs and they will get possession of that property once the
condition is fulfillment
In the case of Lachman v. Baldeo, a person transferred a deed of gift in favor of
another person but directed him that he would not get possession of that property
until the transferor himself died. The transferee will have a vested interest even
though his right of enjoyment is postponed.

Characteristics of Vested Interest

1) Vested interest creates a present right that is in effect immediately, although

the enjoyment is postponed to the time prescribed in the transfer. It does not
entirely depend on the condition as the condition involves a certain event.

2) The death of the transferee will not render the transfer invalid as the interest
will pass on to his legal heirs.

3) Vested interest is a Transferable and heritable right.

Section 20 of the Transfer of Property Act, 1882 states about vested interest to
an unborn child. The interest in the property will be vested in him once he is
born. The unborn child may not get the right of enjoy of the property
immediately after having a vested interest.

Vested Interest
Sections 19 & 20 of (TPA)directly deal with a vested interest. Under
section 19, it is created on registration of transfer deed/instrument of
registration. The same specifies the name(s) of the
person/company/association in whose favor it is created, along with terms
and conditions, and the next important thing is when does it come into
effect. There are three possibilities, (a) does not specify the time that it is
to take effect, (b) states that it is to take effect forthwith (c) or comes
into effect on happening of a specific event that must happen.

Salient features of vested interest: –

1. Vested interest creates an immediate right and is not subject to

any condition.
2. It is both transferrable and heritable right.
3. Even if transferee dies before actual possession or enjoyment, it
passes on to his heirs.
4. Enjoyment can be postponed to a future date.
 5. Income derived from the property can be accumulated until the
time of enjoyment arrives.
6. It is not defeated by the death of the transferee before he obtains
actual possession.
7. Interest is not defeated even if prior interest in the same property
is given to some other person.

8. Similarly, under (TISA) which is applicable to intestate and

testamentary succession, vested interest is defined under section
119.
9. Succinctly, stating that vested interest shall accrue on testator’s
death to the named legatee.
10. Possession can be postponed depending upon the instructions
contained in the will.
11. And if the legatee dies before possession the interest shall pass
on to his representative.
When on the transfer of property interest is created for a person
not then living, it is a vested interest, and it comes into operation on his
birth.

Provided there is no prior interest restricting this transfer.

Enjoyment of property shall be inferred from the terms of the transfer.

And on becoming a major he shall enjoy all rights.

Concept of Contingent Interest

Section 21 of the Transfer of Property Act, 1882 states about Contingent

Interest. It is an interest which is created in favour of a person on a condition of
the happening of a specified uncertain event. The person with the contingent
interest does not get the possession of that property but has the expectancy to
receive it upon that event but will not receive the property if the event does not
happen as the condition is not fulfilled. Contingent interest is entirely dependent
on the condition imposed on the transfer.
For example, A agrees to transfer the property 8X9 to B on the condition that he shall secure 90
% in his exams. This condition is uncertain and the happening of the event or
not happening is in doubt therefore B here acquires a contingent interest in the
property 8X9. He shall get the property only if he gets 90 % and when the
condition is fulfilled.

In the case of Leake v. Robinson, the court held that whenever a condition
involves a bequest that is to be given 8at9 a particular age or 8 upon attaining9 a
particular age or 8 after9 attaining this particular age, then it can be derived that
the transfer involves a contingent interest.

Characteristics of Contingent Interest

1. A) This interest is entirely dependent upon the condition. It only

happens when the condition is fulfilled.
2. B) The death of the transferee before getting possession of the
property will result in the failure of continent interest and the property
will remain with the transferor.
3. C) Contingent interest is a Transferable right, but whether it is
heritable or not, it depends upon the nature of such any transfer and
the condition.
 There are some important aspects surrounding contingent interest which are
explained in detail below:

1. Interest: In a transfer if a condition is such that the transfer will take

effect only upon the fulfilment of that condition and till that time, the
interest is contingent.
2. Contingent Interest exists in wills: Any bequest to a wife, son or
daughter can be a contingent interest if the condition provides so.
3. Exception: When a person who has an expectancy in the rights of
ownership of a particular property, and he for the time being till the
happening of the event, gets any sort of income that arises from that
property. This interest in the property does not come under the aspect
of contingent interest.

Section 120 of the Indian Successions Act, 1925 lays down the exceptions for
contingent interest.

Section 22 states about the transfer to a group or class of members with a

contingent interest. For example, there is a transfer to a group of 5 people, and
the condition is that the property will be vested in persons who attain the age of
40 years on this particular date. The persons who have attained this age will get
an interest in the property and people who have not, will not get an interest in
that property.

Section 23 states about a transfer that happens after happening of an event that
was mentioned in the transfer involving contingent interest. This provision
simply lays down one of the two branches of Section 21 that laws down about
contingent interest. The two branches are happening of an event and non-
happening of an event. This Section states about what happens after the
happening of the specified uncertain event.

Section 24 states about a transfer to a group or class of members who will get
the property on a condition that they shall be living at the specified date. This is
also a contingent interest as the event mentioned here is an uncertain event. The
transfer will only take place for those people who satisfy the condition of
surviving at a particular date. The legal heirs of the deceased cannot claim an
interest in that property as a transfer involving a contingent interest solely
depends upon the fulfilment of the condition.

Difference between Vested & Contingent Interest

Sign Ground of
Vested Interest Contingent interest
numb Difference
er
 Vested interest is provided Contingent interest is provided
1. Section in Section 19 of the Transfer in Section 21 of the Transfer of
of Property Act, 1882. Property Act, 1882.

2. Definition It is an interest which is It is an interest which is created

created in favour of a person in favour of a person on a
where time is not specified condition of the happening of a
or a condition of the specified uncertain
 happening of a specified event. The person having the
certain event. The person contingent interest does not get
having the vested interest the possession of that property
does not get the possession but has the expectancy to receive
of that property but has the it upon the happening of that
expectancy to receive it event but will not receive the
upon happening of a property if the event does not
specified certain event. happen as the condition is not
fulfilled.
The condition involves a The condition involves a
specified certain event. A specified uncertain event.
3. Condition
certain event means an event There is a chance of the
that will eventually happen. happening or non-happening of
that particular event.
Vested Interest does not
entirely depend on the Contingent interest is entirely
Fulfillment condition as the condition dependent on the condition
4. involves a certain event. It imposed on the transfer. Interest
of conditions creates a present right that is is only transferred to the
in effect immediately, transferee on the fulfillment of
although the enjoyment is the condition imposed.
postponed to the time
prescribed in the transfer.
Right of This right is created as soon There is a mere chance to have
5.
Ownership as the interest is vested. ownership rights.

The death of the person who Death of the transferee before

has this interest will not getting possession of the
Death of
6. have any effect on that property will result in the
transferee
interest as after the deceased, failure of continent interest and
the interest will vest in his the property will remain with the
legal heirs. transferor.
Contingent interest is a
Transferable Vested interest is a Transferable right, but whether
7.
and heritable? Transferable and heritable it is heritable or not, it depends
right. upon the nature of such any
transfer and the condition.
The present There is present, immediate There is no present right of
8. right even when its enjoyment, there is a mere
right of
enjoyment is postponed. expectancy of having such a
enjoyment.
right.
X professes to transfer the X professes to transfer the
9. Examples property 8O9 to Y on the
property 8O9 to Y when he
attains the age of 20. There condition that he shall construct
a well in his property. If he
is a vested constructs, Y shall get
contingent
Whereas contingent interest is directly governed by sections 21
– 24 of (TPA). Whereby, on the transfer of property an interest
is created that is to take effect only if a specified uncertain
event takes place or the specified uncertain event does not
take place, such interest shall qualify it to be called contingent
interest.

Analogous section 120 of (TISA) explains contingent interest.

That a legacy bequeathed shall not come into operation unless
a specified uncertain event happens, or if the specified
uncertain event is not to happen then until it becomes
impossible. Such an interest is called contingent interest.

Salient features of Contingent Interest: –

1. Contingent interest is acquired on the happening of a

specified uncertain event or on it becoming impossible if
that is the required contingency.
2. If the specified uncertain event does not happen or
becomes impossible then contingent interest fails and
the property reverts to the transferor.
3. Does not create a present right, but a promise of right if
the condition of contingency matures, otherwise fails.
4. It cannot take effect if the transferee dies before the
condition is met.
5. It is transferable but not heritable.
6. Incapable of descending to heirs.

Therefore, when contingency succeeds depending upon the

implied conditions, either on it happening or becomes
impossible the contingent interest gets converted to a vested
interest, and shall accordingly operate for example right to
transfer, inherit, succession etc. However, if the contingency
fails then the property reverts to the transferor absolutely, and
laws applicable as when it stood in his hands shall come into
force. Like vested interest; enjoyment and possession of the
property in question shall have no bearing upon the success or
failure of contingent interest.

Creation of Contingent Interest

The crux of the contingent interest is ‘specified uncertain
event’. So, on the day of creation of this interest, in favor of
the ultimate beneficiary, there are a lot of possibilities which
the transferor does not know about such as: –

1. Actual beneficiary shall come into existence or not.

2. Actual beneficiary is born or not.
3. If beneficiary shall survive to a particular age or live to
become a major or not.
4. When the specified uncertain event will happen.
5. Will the beneficiary be surviving at a particular period?
6. Time of transferor’s own death etc.
Therefore, to deal with such instances section 13 and 14 of
the TPA comes in to play. Namely, section 13 allows the
transferor to create interest during his lifetime in favor of the
ultimate beneficiary by using an intermediary who holds the
precedent interest until the specified uncertain event occurs.
The conditions necessary for this to succeed are as follows. For
simple understanding let us call the title
holder(transferor), intended beneficiary(transferee), and
the person holding precedent interest(intermediary).

1. The transferor should create interest in favor of the

intermediary during his lifetime.
 2. When contingent interest is created in favor of a
person, not in existence. A child in the womb is a
person in existence, therefore; for a contingency to
succeed minimally intermediary and child in womb both
should exist, and the precedent interest has not ceased.
3. When contingent interest is passed in favor of persons
more than one, subject to them attaining a particular
age, it shall operate independently in favor of those of
that age and intermediary are alive at the same time,
and the precedent interest has not ceased.
4. While creating contingent interest, in favor of some
specified person, the transferor does not mention the
time of its occurrence. Then the contingency shall fail if
the precedent interest ceases in the hands of the
intermediary for some reason or he expires before
interest is transferred to the specified person.
5. Similarly, when the transferor does not specify the
exact period when contingency interest shall benefit
persons surviving an unknown period. Interest shall
accrue to only those alive at the same time as an
intermediary, or before the precedent interest ceases to
exist, whichever occurs earlier.
6. Lastly, the intermediary cannot transfer the interest to
the transferee after he becomes a major when there is
no other condition.

Example of Contingent Interest

Let us take the case of, ‘Transfer for benefit of unborn

person’ section 13 of (TPA) & section 113 of (TISA), ‘Bequest
to a person not in existence at testator’s death subject to prior
bequest’. Since coming into existence of a person is an
uncertain event; hence the transfer of property in his favor
shall constitute contingent interest. As the ultimate beneficiary
is not in existence on the day of the transfer of property,
section 5 of (TPA) mandates the transfer of property only
between living persons. Therefore, employing provisions of
section 13 / 113transferor / testator during his lifetime creates
prior interest in a person living then which could be life interest
or less depending upon the construction of the
conveyance. Now for this interest to pass on to the person not
in existence three conditions have to be met viz. he/she has to
come into existence during the lifetime of predecessor holding
his interest, the interest passed to ultimate beneficiary should
be unfettered i.e. whole of the remaining interest of the
transferor / testator in the property, and lastly the conveyance
should not contain any clause allowing it to be made voidable
or revocable. As narrated earlier limitation with respect to
enjoyment or possession of the property shall not defeat the
contingency.

In order to understand the concept, important relevant

excerpts from case titled N. Radhakrishna Naidu And Ors.
vs S. Govindaswami Naidu And Anr are reproduced under:
–

Section 113 of the Indian Succession Act deals with the quantum of
interest that may be bequeathed in favor of unborn persons. By
enacting Section 113 of the Succession Act legislature disapproved of
any attempt to put limitations upon the estate to be given to persons
unborn at the time when the will comes into operation. As observed
by their Lordships of the Privy Council in Sopher v. Administrator
General, Bengal (1944) 46 Bom. L.R. 865 at 868: 71 I.A. 39 :(1944) 2
M.L.J. 20 (P.C), Section 113 as framed ‘raises or may raise questions
of very great difficulty’. The difficulty in the interpretation of the
section is caused by the clause ‘the later bequest shall be void unless
it comprises the whole of the remaining interest of the testator in the
thing bequeathed’. The expression ‘the later bequest’ is obviously
used with reference to the bequest in favor of unborn persons. That
bequest in order to be valid must comprise the whole of the remaining
interest of the testator in the thing bequeathed. The expression
‘remaining interest’ means the entire interest of the testator, less the
interest carved out by the prior bequest. In other words, the bequest in
favour of unborn persons and the prior bequest between them must
exhaust the entire interest of the testator in the thing bequeathed. The
section cannot and does not mean that unless the interest bequeathed
to an unborn person is in all manner as exhaustive as the interest of
the owner of the thing bequeathed, that interest is void. A vested
interest granted under a will in favour of an unborn person, possession
of which is deferred till the happening of a certain event, is not void
by reason of the provisions of Section 113. What that section means
is, that where a prior interest is given and a later bequest is provided
in favour of an unborn person in the something, the completeness of
the estate in favour of the unborn person can be limited only to the
extent to which a prior valid bequest can limit it. If there are any other
limitations which derogate from the completeness of the estate
granted in the thing bequeathed, the bequest in favour of an unborn
person is void. If the bequest in favour of an unborn person after a
prior valid bequest is dependent upon a contingency, the bequest may
also be regarded as void. Similarly, any limitation or a condition of
defeasance which derogates from the completeness of the estate in
favour of an unborn person so as to reduce it to a life estate, or to an
estate defeasible on the happening of a contingency renders such
estate void. The expression ‘ remaining interest’ therefore connotes an
interest that is as complete as an interest which the testator had in the
thing bequeathed such interest not being fettered or limited except by
and to the extent of the prior estate; but where a vested interest is
given in the thing bequeathed in. favor of an unborn person, the
vested interest will not be avoided merely by reason of imposition of
limitations which restrict enjoyment.”

that if under a bequest in the circumstances mentioned in Section

113, there is a possibility of the interest given to a beneficiary being
defeated either by a contingency or by a clause of defeasance, the
beneficiary under the later bequest does not receive the interest
bequeathed in the same unfettered form as that in which the testator held
it, and that the bequest to him does not, therefore, comprise the whole of
the remaining interest of the testator in the thing bequeathed. That is the
conclusion at which their Lordships have arrived on the words of the
section read in conjunction with the other sections relating to void gifts”

(a) where an interest which is to vest on the birth of a devisee, who at

the date of the death of the testator is unborn, is granted, subsequent
limitations which merely defer enjoyment are not void by reason of the
provisions of Section 113;
(b) whereby reason of a contingency the estate devised in favour of an
unborn person subject to a previous bequest may not take effect the
bequest is void, as it does not comprise the whole of the remaining
interest of the testator in the thing bequeathed

(c) where an estate which is to vest in an unborn person subject to a prior

bequest is made subject to a condition of defeasance, the bequest is void
for the same reason.

CONCLUSION
Property disputes are happening in every house starting from
the ancient era and it didn’t even lose their importance in the
contemporary world. The vested as well the contingent interest
are two very important concepts and everyone should know the
basic meaning and should have a layman's understanding
related to the same. By analyzing this concept we can say that a
person who has a vested interest in the property is a lot safer
than a person who has a contingent interest as he may or may
not get the property.