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Vested Interest
Vested Interest
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.
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.
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