file_1704271552_0007730_PLSESSION10.pptx

vested interent and contingent interest

1. VESTED INTEREST & CONTINGENT INTEREST

2. Section 19 : 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 the happening of an event which must happen, such interest is vested, unless a contrary intention appears from the terms of the transfer.

3. Characteristics of Vested Interest Vested Interest - No time is specified as to when it is to take effect, or - It is specified that it shall take effect immediately, or - It is to take effect upon the happening certain event. Vested interest is not defeated by death. On the death of the transferee, the interest is passed to the heir of such transferee. Vested interest is a transferable right as well as a heritable right.

4. Case Law Lachman v. Baldeo Rajesh Kanta Roy v. Smt. Shanti Debi ( AIR 1957 SC 255).

5. Examples VESTED INTEREST LIABLE TO BE DIVESTED SUBSEQUENTLY A gift a property X to B, with a condition that if he remains unmarried till he attains the age of 35 years, the property will be forfeited. This creates a vested interest in favour of B and he would be divested of his interest if he remains unmarried on attaining the age of 35 years.

6. EXAMPLE A transfers a property X to B and creates a life interest in favour of C. Now, the property is to be enjoyed by C till he’s alive and after his death would go to B. Here the vested interest is created at the time of the transfer but the enjoyment of the property is postponed. B dies during the lifetime of C. B’s heirs have claim over the property X, as B had become the owner of the property.

7. Explanation of Sec. 19  Postponement of enjoyment Prior interest Direction for the accumulation of income Conditional limitation

8. Sec. 20 : When unborn person acquires vested interest on transfer for his benefit Where, on a transfer of property, an interest therein is created for the benefit of a person not then living, he acquires upon his birth, unless a contrary intention appear from the terms of the transfer, a vested interest, although he may not be entitled to the enjoyment thereof immediately on his birth.

9. Section 20-Essentials The transfer takes place, That transfer creates an interest in favour of an unborn person. He acquires a vested interest in that property upon his birth unless the terms of the transfer provide with a different intention. This section has to be r/w Section 14 of TPA. Section 14 provides the time of vesting.

10. Section 21 : Contingent Interest Section 21- “ Where, on a transfer of 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 . Such interest becomes a vested interest, in the former case, on the happening of the event, in the latter, when the happening of the event becomes impossible.”

11. CI- Interest which is created in favour of a person on a condition of the happening of a specified uncertain event. The person having the contingent interest does not get the possession of that property but has the expectancy to receive it upon happening of that event. Example: A agrees to transfer the property ‘X’ 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 and therefore B here acquires a contingent interest in the property ‘X’. He shall get the property only if he gets 90 % and when the condition is fulfilled.

12. Characteristics of Contingent Interest This interest is entirely dependent upon the condition. It only happens when the condition is fulfilled. Death of the transferee before getting the possession of the property will result in the failure of contingent interest and the property will remain with the transferor. 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.