Vested Interest

Vested and
Contingent interest
PROF.(DR.) S.BALA
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.
A vested interest is not defeated by the death of the transferee before he
obtains possession.
Explanation.—An intention that an interest shall not be vested is not to be
inferred merely from a provision whereby the enjoyment thereof is postponed,
or whereby a prior interest in the same property is given or reserved to some
other person, or whereby income arising from the property is directed to be
accumulated until the time of enjoyment arrives, or from a provision that if a
particular event shall happen the interest shall pass to another person.
• Characteristics of Vested interest:
• It’s a present fixed interest.
• It’s transferable and inheritable.
• It cannot be attached and sold in execution
• Mere fact that the transferee did not obtain the possession of the property
before his death doesn’t defeat a vested interest
• 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 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.
A transfers property to B, saying the property is yours on
the death of C. At that moment only the property
becomes B’s, as death is a certain event.
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
21. Contingent interest.—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.
Exception.—Where, under a transfer of property, a person becomes
entitled to an interest therein upon attaining a particular age, and
the transferor also gives to him absolutely the income to arise from
such interest before he reaches that age, or directs the income or so
much thereof as may be necessary to be applied for his benefit, such
interest is not contingent.
Meaning of contingent interest: – When interest is created in favour of a person to whom
such property is transferred, and such interest depends upon the happening of a specified
uncertain event, it is called continent interest.
Contingent interest occurs: –
When interest is created in favour of a person to whom such property is transferred, and such
interest depends upon the happening of a specified uncertain event.
Therefore, the transfer of interest depends upon an uncertain event which may or may not
happen.
The contingent interest in the property can become Vested interest in the happening of that
event.
The right of enjoyment of ownership or possession in the property depends upon the
happening of that uncertain event that may or may not happen.
For Example: – ‘A’ agrees to transfer his house in favour of ‘B’ on the condition that ‘B’ should
marry his daughter ‘X’. Here, the property in favour of ‘B’ depends upon the marriage of ‘B’
and ‘X’. The condition mentioned by ‘A’ is uncertain because ‘B’ may or may not marry ‘X’. If ‘B’
marry ‘X’ then the interest in A’s house will be immediately transferred to ‘B’.
Section 124 in The Indian Succession Act, 1925
Bequest contingent upon specified uncertain event, no time being mentioned for its
occurrence.—Where a legacy is given if a specified uncertain event shall happen and no time
is mentioned in the will for the occurrence of that event, the legacy cannot take effect, unless
such event happens before the period when the fund bequeathed is payable or distributable.
Illustrations:- (i) A legacy is bequeathed to A, and, in case of his death, to B. If A survives the
testator, the legacy to B does not take effect.
(ii) A legacy is bequeathed to A, and in case of his death without children, to B. If A survives
the testator or dies in his lifetime leaving a child, the legacy to B does not take effect.
(iii) A legacy is bequeathed to A when and if he attains the age of 18, and, in case of his death,
to B. A attains the age of 18. The legacy to B does not take effect.
(iv) A legacy is bequeathed to A for life, and, after his death to B, and, “in case of B’s death
without children”, to C. The words “in case of B’s death without children” are to be
understood as meaning in case B dies without children during the lifetime of A.
Vested interest Contingent interest
Section 19 of the transfer of property Section 21 of the transfer of property
act defines vested interest. act defines contingent interest.
The certain condition which must take An uncertain condition which may or may
place. not happen.
Not entirely depends upon the condition. It depends upon the condition.
The right of ownership is created in There is a mere chance of having the

favour of transferee, as soon as the ownership right.
interest is vested.
Transferable and heritable rights. Transferable right but the heritable
interest depends upon nature.
22. Transfer to members of a class who attain a particular age.—Where, on a
transfer of property, an interest therein is created in favour 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.
23. Transfer contingent on happening of specified uncertain event.—Where,

on a transfer of property, an interest therein is to accrue to a specified
person if a specified uncertain event shall happen, and no time is mentioned
for the occurrence of that event, the interest fails unless such event happens
before, or at the same time as, the intermediate or precedent interest ceases
to exist.
A----gift to----B---to—C (15yrs on death of A)
B dies C (2yrs) ---transfer fail
24. Transfer to such of certain persons as survive at some
period not specified.—Where, on a transfer of property, an
interest therein is to accrue to such of certain persons as shall be
surviving at some period, but the exact period is not specified,
the interest shall go to such of them as shall be alive when the
intermediate or precedent interest ceases to exist, unless a
contrary intention appears from the terms of the transfer.
Illustration A transfers property to B for life, and after his death
to C and D, equally to be divided between them, or to the
survivor of them. C dies during the life of B. D survives B. At B's
death the property passes to D.
Section 125 in The Indian Succession Act, 1925
Bequest to such of certain persons as shall be surviving at some period not specified.—Where a bequest is
made to such of certain persons as shall be surviving at some period, but the exact period is not specified, the
legacy shall go to such of them as are alive at the time of payment or distribution, unless a contrary intention
appears by the will.
Illustrations:- (i) Property is bequeathed to A and B to be equally divided between them, or to the survivor of
them. If both A and B survive the testator, the legacy is equally divided between them. If A dies before the
testator, and B survives the testator, it goes to B.
(ii) Property is bequeathed to A for life, and, after his death, to B and C, to be equally divided between them,
or to the survivor of them. B dies during the life of A; C survives A. At A’s death the legacy goes to C.
(iii) Property is bequeathed to A for life, and after his death to B and C, or the survivor, with a direction that, if
B should not survive the testator, his children are to stand in his place. C dies during the life of the testator; B
survives the testator, but dies in the lifetime of A. The legacy goes to the representative of B.
Rajesh Kanta Roy v Shanti Debi AIR 1957 SC 255
a trust was created by A for the payment of debts and the surplus was to be used for the
benefit of A and his two sons. The trust was to come to an end with the total payment of
debts and the death of the settlor and then the property was to vest in the sons or to their
legal heirs as the case may be. The trust deed also provided that if any of the sons died
before the trust came to an end, his heirs would represent him and were to be entitled to the
benefits under the trust. The issue before the court was regarding the nature of interest
created in favour of the sons, whether it was vested or contingent.
S2 S3
(S1)--W
Here the widow of another son of A, (who had died before the creation of the trust)
wanted to execute the decree passed in her favour, against the interest that the sons
had in the trust property. The decree could be executed against these interests only if
the sons had a vested interest in it and not a contingent interest, as contingent interests
are not attachable.
The court held that the interest of the sons was a vested interest, as whether the sons
took a vested or a contingent interest would depend upon the intention of the settlor
which was to be gathered from the language of the trust.
The trust was to come to an end on the happening of two events viz.—(i) the discharge
of all debts specified in the schedules and (ii) the death of the settlor himself. Out of
these two events that were specified, death of the settlor was a certain event; but the
same could not be said about the discharge of debts. The court held that the interest of
the sons was a vested interest and therefore could be attached by the court

Vested Interest

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Vested Interest

Uploaded by

Copyright:

Available Formats

Vested and

20. When unborn person acquires vested interest on

The right of ownership is created in There is a mere chance of having the

23. Transfer contingent on happening of specified uncertain event.—Where,

You might also like