Law Related to Contingent Interest Under Property Law

Author: Vaishnavi Navghare.

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 involves fulfillment of certain specified or unspecified condition respectively, but there is difference in between two. The 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 which comes to the transferee by contingent interest, difference between contingent and vested interest, there characteristics and case laws of the same. The article ends with the critical analysis and conclusion to get the clear understanding of the concept.

CONTINGENT INTEREST 

The concept of the contingent interest is discussed in the section 21 which is as follows;

“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.”((Section 21 of The Transfer of Property Act 1882.))

According to the interpretation of the law it can seen that certain things are mandatory for the contingent interest to get transferred, that are;

1. The transferor to set the specified uncertain event that is the condition of the contract.
2. The fulfillment of the specified uncertain condition which depends upon the happening or not happening of the event.((Cheena Reddy v. Pajau kesamma AIR 1954 Hyd 185.)) only then the right will get vested.
3. The performance of the event is given in the Transfer of the property act in Section 26. which says that in order to get the interest in the property the fulfillment of the terms and conditions is compulsory.((Dinshaw Fardunji Mulla, The Transfer of Property Act, lexus nexus, 12th ed, p.75.))

Characteristic of contingent interest 

The contingent interest is totally depended upon the happening and non happening of the uncertain event and it will only happen when the condition is fulfilled. The death of the transferee will not transfer the property as condition specified will not get fulfilled. The property which comes by contingent interest is transferable and heritable but it depended upon the nature of such transfer and condition specifies in it.((Ibid.))

Example

‘X’ bequeathed his property to ‘Y’ but the condition he put in order to get the ownership of the property is, that ‘Y’ should marry to ‘Q’ who is ‘X’s daughter and that also at the age of 23. This situation is totally depended upon the happening and non happening of the uncertain event, that he may marry may not and that will specify his interest in the property. In the similar case if the ‘Y’ predecesed the ‘X’ then the contingent property will not be further transferred further.

According to this example we can understand that the condition is marrying ‘Q’ after attaining the age of 23, he may or may not marry ‘Q’ which is totally subjective, therefore happening or not happening of this specified uncertain event will decide his fate in the right over the property.

Section 120 of Indian Succession Act 1925

Section 120 of the Indian succession act 1925 talks about the same thing as in section 21 of Transfer of Property Act 1882.

Subclause (1) talks about the vesting of interest will only takes place when the specified uncertain event will happen otherwise not.

Subclause (2) talks about the vesting of the interest will only takes place when the specified uncertain event will not happen or its happening become impossible.((Section 120 of Indian Succession Act.))

Instances as per case laws

• According to the will the father bequest the property to the daughter for the lifetime, after her death to her lawful son or daughter. Condition for the son is to attainment of the age of 21 and for the daughter is till she get married. It was held that the interest of the son and the daughter was contingent interest based on happening or not happening of the specified uncertain event.((Ernest William Adams v. Gray (1925) 48 Mad LJ 707, 90 IC 5, AIR 1925 Mad 599.))
• Husband made a will in favour of wife and son. The condition is that if she died without adopting the son or if the adopted son died issue-less or himself died in the lifetime of the wife then the property will pass on to the sister’s son. The interest of the Nephew in the property is contingent based on the happening and non happening of the condition.((Bhupendra v. Amarendra (1915) ILR 43 Cal 432.))

Nature of contingent interest

1. Future possible interest

The contingent interest is always the future possible interest and not the present or past interest. It is based on the future happening and not happening of the event. And the right to get the title and the enjoyment of the property is also depended on the same.((Dr. R.K Sinha, Transfer of Property Act, central law agency, 20th ed, p.121-123.))

2. Not heritable

The contingent interest is not heritable when the person having contingent interest dies then his legal heir will not get anything and non even the contingent interest, they will only get the property where he have vested interest.((Ibid.))

If the person dies before the contingency disappear or before the vesting of the right then the legal heir of that person will not get anything or the benefit of the gift.((Shashi Kantha v. Promode Chandra (1932) Cal. 600.)) 

3. Transferable interest.

Contingent interest is a transferable interest, contingency interest is uncertain in nature if he right of the transferor is uncertain then the right of transferee is also uncertain. if the right of transferor is vested then the right of transferee is also vested.((Ibid.))

DIFFERENCE BETWEEN SPES-SUCCESSIONIS AND CONTINGENT INTEREST.

Both the terms include the mere expectancy or chance of getting the property but there is the minor difference between the two. In the spes-succesionis the chance of getting the property is more than in the contingent interest. In contingent interest it depends only on happening or not happening of the event but in spes-successionis the person can property as;

1. As a Heir apparent- if he survives the propositus or if he survives the propositus an during his life property is already transferred.
2. By the will vested in his interest.

Contingent interest is transferable but the spes-succesionis is not transferable. Spec successionis is neither a contingent interest nor the vested.((Samsuddin v Abdul Husien (1906)ILR 31 Bom 165.)) 

EXCEPTION TO THE CONTINGENT INTEREST

Section 120 of the Indian succession Act gives the exception to the contingent interest it says that if the transferor is giving the absolute right over the property to the transferee after attainment of the age, and along with it he is giving the absolute income arise from the fund or direct the absolute fund for his benefit then that fund is not contingent.((Dinshaw Fardunji Mulla, The Transfer of property act, lexus nexus, 12th ed, p.75-76.))

THE CONCEPT OF VESTED INTEREST 

The Section 19 of Transfer of property act defines vested interest as;

“Where, on a transfer of property, an interest therein is created in favor 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.”((Section 19 of The Transfer of Property Act 1882.))

Here the important point to note is that death of the person does not have any effect over the vested right, it will still be vested among the legal heirs.

Characteristics of vested interest 

The three main characteristics are;

1. The vested right gives the ownership over the property immediately yet the enjoyment is postponed as it depends entirely upon the happening of the condition as specified.

2. The death of transferee still conserves the vested right as the property get devolves upon the legal heir of the deceased.

From the above example i.e X’ is the father of the son ‘S’ and the property of the X will be vested in S when he will turn 21. The title of the property is now the transferred to the son but the enjoyment rights are postponed and it will reside with him only when he will fulfill the specified condition.

Here even if the transferee that is ‘S’ dies then also the property will be vested among his legal heirs i.e. his son and daughter. The person who has vested interest in the property can dispose off his property voluntarily.((Batwat singh v Joti Prasad (1918) ILR 40 All 692,47 IC 599.))

3. Vested interest is transferable as well as heritable.

4. If the transferee is a minor the property will be vested in him and he will get the property through his guardian after attainment of certain age as specified.((Gosavi Shivgar v Rivettacarnac (1888) ILR 13 Bom 463.))

5. The unborn child acquires the vested interest on the transfer for his benefit as soon as he/she born.((FM Devaru Ganapathi Bhat v Prabhakar Ganapathi Bhat (2004) 2 SCC 504.))

Example of vested interest

‘X’ is the father of the son ‘S’ and the property of the X will be vested in ‘S’ when the ‘X’ will die. The title of the property is now the transferred to the son but the enjoyment rights are postponed and it will reside with him only after the death of ‘X’ he will fulfill the specified condition.

DIFFERENCE BETWEEN THE CONTINGENT AND VESTED INTEREST 

According to the Condition for the implementation of law for the vested interest Specified certain event on which the property will be vested. Surety that the event will eventually happen. For the contingent interest Specified uncertain event and there is no surety that the event will happen. It is mere chance.

In the vested interest Ownership is transferred as soon as the interest is vested, yet the enjoyment is postponed. In the contingent interest Ownership right will come or not is mere a chance depending upon the happening or non happening of the event. The death of the transferee will not effect the vested rights as they will be transferred to the legal heirs of the deceased.

In the case of contingent interest the transfer of the property will not take place on the death of transferee as it is a failure of contingent interest. The property which comes by vested interest is capable of being sold or attached in the execution decree. The property which comes by contingent interest is not capable of being sold or attached in the execution decree.

In vested interest the enjoyment is postponed but the right is immediate and Title transfers immediately. In contingent. There is no present right but just right of expectancy and it is different from spec secession. Title depends upon the happening and non happening of the event.((Dr. R.K Sinha, Transfer of Property Act, central law agency, 20th ed, p.121-123.))

OTHER SECTION BASED ON CONTINGENT INTEREST

Section 22 of Transfer of Property Act 1882

“Where, on a transfer of property, an interest therein is created in favor of such members only of a class as shall attain a particular age, such interest does not vest in any member of the class who has not attained that age.”((Section 22 of The Transfer of Property Act 1882.))

This section is in reference to the contingent transferee and it says that person belonging to the particular class who will attain the certain specified age then only the property will be transferred to them otherwise it will go back to transferor.

Section 23 of Transfer of Property Act 1882

Section 21 talks about the contingent interest and this Section 23 talks about the contingent specified event on which only the property will be transferred, for example X is the transferor and he vested the life interest of B in the property so C will only get the property he fulfill the specified condition of the uncertain event before the death of B otherwise not. B has precedent interest and C have the intermediate interest in the property.((Section 23 of The Transfer of Property Act 1882.))

ANALYSIS

From the preamble of the transfer of the property act we can understand that it governs only the transfer by the act of the parties and not the transfer through the operation of the law. Vested and the contingent interest are the transfer by the act of the property through the gift. The vested interest transfer the ownership or title right from the execution from the gift deed and it gives the right of enjoyment of the property may come immediately or after the fulfillment of certain condition.

When it comes to contingent interest the title and the right of enjoyment both are transferred on the fulfillment of the specified uncertain event. From this we can analyze that the contingent interest is always at the risk side and the vested interest is more on the safer side.

The contingent interest is different from specs-secessionis and we observed that the specs-successionis confers more chances of getting rights. Also from the difference and the characteristics of the contingent and vested interest we can say that person having vested right in the property is safer rather than person who is having the contingent interest in the property.

CONCLUSION 

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

Today in contemporary world the vested interest is more preferred because people prefer to have only one or two children and property is vested in there name only. The concept of contingent is fading away with modern era and with the enactment of new laws.