RULE AGAINST PERPETUITY.pptxxxxxxxxxxxxxxxx

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1. RULE AGAINST
PERPETUITY

2. Rule Against Perpetuity
Section 14 provides that:
"Notransferofpropertycanoperatetocreateaninterest
whichistotakeeffectafterthelifetimeofoneormore
personslivingatthedateofsuchtransfer,andthe
minorityofsomepersonwhoshallbeinexistenceatthe
expirationofthatperiod,andtowhom,ifheattainsfull
age,theinterestcreatedistobelong."

3. Perpetuity may arise in two ways-
By taking away the power of alienation from
the transferor-Void u/s10
By creating a remote interest in the future
property-hit by section 14

4. Section 14: Essential Conditions
There must be a transfer of property.
The transfer should be to create an interest in
perpetuity or favour of an unborn person.
Interest created must take effect after the
lifetime of one or more persons living at the date
of such a transfer and during the minority of the
unborn person.
The unborn person must be in existence at the
expiration of the interest of the living persons.

5. Section 14: Essential Conditions
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.

6. Perpetuity Period
Life of one or more living persons, plus
Minority of an unborn person
Section 14 also requires that UP must come
into existence before the expiry of the life or
lives of the person(s) in whose favourthe prior
interest is created under section 13.

7. A transfers property for life to B, and then to B's first unborn child
without any specification as to the time of vesting of property. When
will the property vest in favour of unborn child. The transfer is
perfectly valid and the property would vest in his favour, the moment
he is born.
A transfer’s 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 the
transfer but has no child. In this case, when B's first child would be
born, the property would not vest in him till he attains the age of 18
years. What will happen if child dies before attaining the age of 18
years.it would revert back to the transferor or his heirs as the
case may be.
A transfers property for life to B, and then to B's first child when he
attains the age of 25 years. What is the nature of the transfer.The
transfer is void, as the vesting of the property is postponed
beyond the minority of B.

8. For example, A transfers his property in 1970
to B for life, then to C for life, then to D for life then to E for life and
then to B's such son UB who should first attain the age of 18 years.
B, C, D and E were all living on the date of the transfer. B dies in
1990, C in 1985, D in 1992 and E in 2002. B's son UB is born in
1980. On the death of B, in 1990, the possession of the property
would be taken by D as C died during B's lifetime. E will get the
property in 1992, on the death of D. UB attains the age of 18
years in 1998, so while the possession is still with E, the
property will vest (ownership) in UB in 1998, while he will get
the possession when the last life estate holder dies in 2002.

9. Transfer to a Class Section 15
“If, on a transfer of property, an interest
therein is created for the benefit of a class of
persons with regard to some of whom such
interest fails by reason of any of the rules
contained in sections 13 and 14, such
interest fails in regard to those persons only
and not in regard to the whole class.”

10. ILLUSTRATION
A transfers his property to his son S, for his life and then to his
grandsons, when they attain the age of 18 years and to his
daughters when they reach the age of 21 years. S had no child at
the time of the transfer. This transfer created a life interest in favour
of a living person (son), which is permissible in law, but with respect
to the children of son, who were not in existence at the time of
transfer, the transfer for the benefit of the unborn sons of S was valid
but for unborn daughters, it is void as violative of rule against
perpetuity.

11. Transfer to take effect on failure of
prior interest –Section 16
Section16ofPropertyActprovides-“Where,
byreasonofanyoftherulescontainedin
sections13and14,aninterestcreatedforthe
benefitofapersonorofaclassofpersonsfails
inregardtosuchpersonorthewholeofsuch
class,anyinterestcreatedinthesame
transactionandintendedtotakeeffectafteror
uponfailureofsuchpriorinterestalsofails.”

12. Prior interest fails/ is void ; subsequent
interest also fails.
Illustration:AsettleshispropertyintrustforBand
hisintendedwife,andthenoneldestsonforlife,and
thentotheeldestsonofsucholdestsonforhislife,
andthenonC,thePriorinterestinfavouroftheson
ofBfail.Inthefirstinstanceundersection13and
thereforetheconsequentinterestbothinfavourof
grandsonofBandinfavourofCalsofail.

13. For example, A transfers property to B for life and then to B's
sons on their attaining the age of 25 years. The deed further
provides, that if B dies without any son, the property would
vest absolutely in C. B and C were living on the date of the
execution of the transfer, but B had no child on the same day.
Here, the transfer for the benefit of B's unborn children was
void as it violated the rule against perpetuity. Thus the transfer
in favour of C that was intended to take effect upon failure of
this prior transfer, that is void would also fail and cannot take
effect.

14. In Girjish Dutt v Data Din, 79 A made a gift of her property to B for her life and then
to her sons absolutely. 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
favour of B's unborn daughters, which is contrary to the rule of section 13. However,
B died without any child, and X claimed the property under the gift deed. The court
held that where a transfer in favour of a person or for his benefit is void under section
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 section 13, regard has to be made with respect to the contents of the
deed and not to what happened actually. Here, as the transfer in favour of X was
to take effect on failure of the third transfer stipulated in the contract that was void,
the transfer in favour of X also became void. Hence, X's claim was defeated.

15. Direction for accumulation
Section 17 of Transfer of Property Act
1882
Section 17 separates the ownership of
property from the income arising out of the
property and a direction is imposed for
accumulation of such income.

16. A direction for the accumulation of income of
property amounts to limiting the beneficial
enjoyment of property. Such direction is void
as per section 11 of the Act but S.17 is an
exception.

17. PERIOD FOR ACCUMULATION
ARE GIVEN U/S 17-
(i)Life of the transferor or
(ii)Period of 18 years, whichever is longer.
Any condition beyond this period is invalid and
not operative.

18. Examples
A transfers his property to B in 1960 with a direction, that
the income coming out of this property be accumulated
for a period of 50 years. A dies in 1962. what is the
maximum period for which the income can be
accumulated.
A transfers a property to B in 1960, with a direction for
accumulation of income for a period of 20 years. A dies
in 1990, i.e., 30 years after the execution of the deed.
After his death, the direction for accumulation would
become void. This direction of accumulation would be
valid till which year.

19. Exceptions
Payment of the debts of the transferor
Provision of portions for children or remoter
issue of the transferor
Preservation or maintenance of the property
transferred

20. Readings
Conveying the Direction for Accumulation and Issues Involved In
Partial Accumulation, http://www.onlinejournal.in/IJIRV3I6/134.pdf
https://lawsisto.com/legalnewsread/NTI1Nw==/Scope-Of-The-
Doctrine-Of-Accumulation-Under-The-Transfer-Of-Property-Act-
1882
A Brief Write-Up On Transfer Of Property For The Benefit Of Unborn
Person And Rule Against Perpetuity,
https://www.mondaq.com/india/wills-intestacy-estate-
planning/366482/a-brief-write-up-on-transfer-of-property-for-the-
benefit-of-unborn-person-and-rule-against-perpetuity