Creation of Interests

Section 13 & 14
Transfer of Property Act, 1882
• Section 13 provides:
Transfer for benefit of unborn person:-
Where, on a transfer of property, an interest
therein is created for the benefit of a person not
in existence at the date of transfer, subject to a
prior interest created by the same transfer, the
interest created for the benefit of such person
shall not take effect, unless it extends to the
whole of the remaining interests of the transferor
in the property.
 Transfer for the Benefit
of Unborn Persons
• T.P.Act deals only with the transfers
between/ among living persons, inter
vivos.
• However, there is an exception to the this
general rule of inter vivos as section 13
and 18 deals with the transfer in the
benefit of unborn persons also.
• The sections provide for creation of
interests in favour of child in womb
(section 13), child not even in womb
(section 14) and in favour of a class.
• As the general rule is that a transfer can
be affected only among living persons,
section 13 gives effect to the same in
implied way. Because the careful
examination of expression ‘transfer for
benefit of unborn person’ reveals that it is
applicable in transfer for benefit of unborn
persons. It is not transfer of any interests
in favour- the word is for benefit of unborn
persons.
• Even in such cases, the transfer is not in
favour, in fact it is transfer for the benefit
and it is indeed not a direct transfer to a
person who is not in existence or is
unborn. Here it is important to point out
that the word ‘unborn’ as used under the
Act does not carry the same sense as it
carries under Hindu Law and Law of Torts
in Britain. Under Transfer of Property Act,
it includes not only those who might have
been conceived and yet to born – child in
womb but also those who are not even
conceived.
• So whether they will born or not, it is the fact of
future and based upon the possibility, but the
Act permits to effectuate the transfer for the
benefit of unborn persons. As Section 13
provides:
Transfer for benefit of unborn person:-
• Where, on a transfer of property, an interest
therein is created for the benefit of a person not
in existence at the date of transfer, subject to a
prior interest created by the same transfer, the
interest created for the benefit of such person
shall not take effect, unless it extends to the
whole of the remaining interests of the transferor
in the property.
 Essentials
• Analysis of section reveals:
– Exception to inter vivos rule:
– Transferee of absolute interests is not in
existence.
– Unborn
– Absolute Transfer
– Prior Interests Compulsory, no direct transfer.
• A person who is not in existence can
neither be a transferee of property, not a
beneficiary under a trust until he comes
into existence. Therefore, there can be no
transfer of interest in the favour of a
person not in existence. The principle is
recognized through various Indian laws:
– Section 5 & 9 of Indian Trusts Act, 1882.
– Section 113 of Indian Succession Act, 1925.
 Valid Transfer
• A B (Life Interest)
C (Life Interest)
D (Life Interest)
S - unborn
(Absolute Interest)
 Void Transfer
• A B (Life Interest)
C (Life Interest)
D (Life Interest)
S – unborn (Life Interest)
The second figure is of limited interest in the property
for the benefit of an unborn person and would
therefore be void and incapable of taking effect in
law. After the death of D, here, the property would
revert back to A or his heirs as the case may be.
 Void Transfer
• A B (Life Interest)
C (Life Interest)
S1-unborn (Life Interest)
S2–unborn (Absolute Interest)
The second figure is of limited interest in the property for the benefit of an
unborn person and then absolute interest to another unborn and would
therefore be void and incapable of taking effect in law. After the death of D,
here, the property would revert back to A or his heirs as the case may be.
Even though the transfer for the benefit of S2 appears to be proper, as it is
dependent on a void transfer that cannot take effect in law; a transfer
subsequent to, or dependent on a void transfer can also not take effect.
 Girish Dutt v. Data Din, AIR
1934 Oudh 35
• A made a gift of her property to B for her life and then to her sons absolute. B
had no child on the date of execution of the gift. The deed further provided that in
case B had only daughters, then the property would go to such daughters but
only for their life. In case B had no child then after the death of B, the property
was to go absolutely to X.
• The deed on paper provided a life estate in favor of B’s unborn daughters: which
is contrary to the rule of Sec.13. However, B died without any child, and X
claimed the property under the gift deed. The court held that where a transfer in
favor of a person or his benefit is void under sec.13, any transfer contained in the
same deed and intended to take effect or upon failure of such prior transfer is
also void. In determining whether the transfer is in violation of sec.13, regard has
to be made with respect to the contents of the deed and not what happened
actually.
 Rule Against Perpetuity
• Section 14: No transfer of property can
operate to create an interest which is to
take effect after the life time of one or
more persons living at the date of such
transfer and the minority of some other
person who shall be in existence at the
expiration of that period, and to whom, if
he attains full age, the interest created is
to belong.
• As the general principle of law is to
promote free alienation and circulation of
property- alienatio rei prafertur juri
accrescendi (alienation is favoured by the
law rather than accumulation). The
transferability of property is general rule,
its non transferability an exception.
• Accordingly, section 14 deals with rule
against perpetuity.
• Perpetuity may arise in two ways- (a) By
taking away the power of alienation from
the transferor (b) By creating a remote
interest in the future property. A condition
restraining the transferee’s power of
alienation is void as per S.10 of the Act.
And a disposition to create a future remote
interest is prohibited under S.14 of the Act.
• Perpetuity, primarily means, disposition of
property in an inalienable way for an indefinite
period.
• Therefore, perpetuity means eternity or infinity or
in other words, indefinite period in relation to
transfer of property. It means the creation of
interest in present which will effectuate in future.
Though the word perpetuity has not been
defined under the Act, but it should be
understood, as per the provision of section 14 as
equivalent to the lifetime of one or more living
persons plus the age of minority- or say till the
attainment of eighteen years of an unborn
person.
Rationale Behind
Rule against Perpetuity
• The provision is based on the general
principle that the liberty or right of an
owner of the property to alienate or
transfer his property at his pleasure,
should not be so exercised that it is
detrimental to the property itself. It by any
arrangement, the property is made
inalienable, it would adversely affect the
value and importance of the property and
society too.
• The purpose of this rule is not to harass
the owner either in use of his property or
transfer or enjoyment. The only purpose is
to ensure that individual owner does not
tie up the property to someone or as such
to destroy its ordinary content of
transferability. The rule is an attempt to
strike a balance between interests of an
individual and social interest. Society is in
favour of transfers.
 Breaking down the section
• “No transfer of Property can operate to create an
interest which is to take effect AFTER–
• The lifetime of one or more persons living at the date of
such transfer( i.e. lifetime of the last prior interest
holder/s), and
• The minority of some person who shall be in existence
at the expiration of that period and to whom, if he attains
full age, the interest created is to belong.”( i.e. minority
of the ultimate beneficiary who must have been in
existence at the death of the last prior interest holder/s)
• So clearly S.14 provides that in a transfer of
property, vesting of interest cannot be
postponed beyond the life of the last prior
interest holder and the minority of the ultimate
beneficiary.
 Essential Ingredients
• There must be a transfer of property.
• The transfer should be to create an interest in favour of an
unborn person (i.e. ultimate beneficiary).
• The vesting of interest in favour of the unborn must be preceded
by life or limited interest of living person/s (i.e. prior interest
holder).
• The unborn person must be in existence (either in the mother’s
womb or born) at the expiration of the interest of the living
person/s.
• If all the above ingredients are present then the vesting of the
interest in favour of the ultimate beneficiary may be postponed
only up to the life or lives of living persons plus the minority of
the ultimate beneficiary but not beyond that.
 Minority
• Minority in India terminates at the age of 18 years or
when the minor is under supervision of Court at the
age of 21 years.
• But in Saundara Rajan v. Natarajan,A.I.R 1925 P.C.
244, the Privy Council held that since at the date of
the transfer it is not known whether or not a guardian
would be appointed by Court for the minor in future,
for purposes of S.14 the normal period of minority
would be 18 years. So, the vesting can be postponed
only up to the life of the prior interest holder and the
minority i.e. 18 years of the ultimate beneficiary.
 Period of Gestation
• The maximum limit fixed for postponing the vesting of interest
is the life or lives of the prior interest holder/s plus the minority
of the ultimate beneficiary. But when a child is in his mother’s
womb at the time of the expiration of the interest of the prior
interest holder and since for the purposes of being a transferee
a child in the mother’s womb is a competent person, the latest
period up to which the vesting may be postponed would be the
life of the prior interest holder/s plus the period of gestation
( i.e. the period during which a child remains in womb after
being conceived which is normally about 9 months or 280
days) plus minority of the ultimate beneficiary.
• The period of gestation shall not be counted in addition to
minority if the ultimate beneficiary is already a born person.
Example. If A (prior interest holder) dies then the ultimate
beneficiary i.e. X must already be in existence at that time either
in the mother’s womb or as a born child. If X is in mother’s
womb, say of 6 months then the maximum period up to which
vesting of period may be postponed would be life of A plus six
months ( period of gestation) plus 18 years ( minority of X)

Maximum Possible Remoteness of Vesting

In India, the maximum permissible possible remoteness of
vesting is –
Life of the preceding interest + Period of gestation of ultimate
beneficiary (only when the child is not born) + minority of the
ultimate beneficiary
Maximum Possible Remoteness
• A B (Life Interest)
S - unborn
(Absolute Interest to be gained on his
turning major)

Maximum delay

A transfers property to B for lifetime and then

absolutely to S, who is not in existence on date of
such transfer, on his turning 18. Now, when B dies
S’s Mother is pregnant with him. The property will be
vested after the gestation period and his minority
 Examples
• A transfer his property for life to B, and
then to B’s first child when he attains the
age of 18 years absolutely. B is living on
the date of transfer but has not child. So
the child should take birth before the
extinction of B’s life interest.
• In case, the Child is not born, the property
would be revert back to the transferor and
disposed of in accordance with law.
 Exceptions
• Transfer for public benefit. Where property is transferred for the benefit of
the people in general, then it is not void under this rule. e.g. for the
advancement of knowledge, religion, health, commerce or anything
beneficial to mankind. (Section 18)
• Covenants of Redemption. This rule does not offend the covenants of
redemption in the mortgage.
• Personal Agreements. Agreements that do not create any interest in the
property are not affected by this rule. This rule applies only to transfers
where there is transfer of interest. Nafar Chand v. Kailash Chand – In this
case A appointed B as a priest and allowed him and his family to perform
rituals. Court held it to be a personal agreement and not against the rule
against perpetuity.
• Perpetual Lease. It is not applicable to the contracts of perpetual renewal
of leases.