RULE AGAINST PERPETUITY (SECTION 14)- TPA 1882

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RULE AGAINST PERPETUITY (SECTION 14


No transfer of property can operate to create an interest which is to take effect after the lifetime of one or more persons living at the date of such transfer, and the minority of some person shall be in existence at the expiration of that period, and to whom, if he attains full age, the interest created is to belong.

Transfer in Perpetuity

Rule against perpetuity is the rule which is against a transfer making them inalienable for an indefinite period or forever. Where a property is transferred in such a way that it becomes non-transferable in future for an indefinite period, the property is tied up forever. This disposition would be a transfer in perpetuity.

In any disposition perpetuity may arise in 2 ways 

1.   by taking away from the transferee his power of alienation.

2.  by creating future remote interest.

Section 10, makes provision that a condition restraining the transferee’s power of alienation is void. A disposition which tends to create future remote interest has been prohibited under Section 14 which incorporates the rule against perpetuity.

 However, a better name of the rule may be the rule against remoteness of vesting. Section 10, makes provision that a condition restraining the transferee’s power of alienation is void. A disposition which tends to create future remote interest has been prohibited under Section 14 which incorporates the rule against perpetuity.

However, a better name of the rule may be the rule against remoteness of vesting.

Meaning of Perpetuity

A perpetuity, in the primary sense of the word, is a disposition which makes property inalienable (incapable of being transferred) for an indefinite period.

Principle

The rule against perpetuity is founded on the general principle of public policy. In absence of any rule prohibiting creation of perpetuities, there might come a time when almost all the properties in the country would become static.

 

The present section, strictly speaking, deals only with the modern rule against perpetuities.

Essential Conditions

The essential conditions of the rule against perpetuity as given in this section are as follows:

1. There is a transfer of property.

2. The transfer is for the ultimate benefit of an unborn person who it given absolute interest.

3. The vesting of interest in favor of ultimate beneficiary is preceded by life or limited interests of living person (s).

4. The ultimate beneficiary must come into existence before the death of the last preceding living person.

5. Vesting of interest in favor of ultimate beneficiary may be postponed only up to the life or lives of living persons plus minority of ultimate beneficiary; but not beyond that.

 

Extent of perpetuity

1. Under Section 14, the maximum permissible remoteness of vesting is the life of the last preceding interest plus minority of the ultimate beneficiary.

2. Accordingly, property may be transferred to A for life and then to B for life and then to the unborn when he attains the age of majority.

3. A and B hold property successively for their lives, therefore, the property is tied up for their lives one after the other.

4. After the death of B (the last preceding interest) although it should vest in the ultimate beneficiary unborn immediately but, under this section the property may be allowed to vest in the unborn when he attains the age of majority.

5. Minority in India terminates at the age of eighteen years or, when the minor is under supervision of Court, at the age as twenty-one years.

6. But, in Saundara Rajan v. Natarajan the Privy Council held that since at the date of the transfer it is not known whether or not a guardian would be appointed by Court for the minor in future, for purposes of Section 14 the normal period of minority would be eighteen years.

7. So, the vesting may be postponed up to the life of the last person (B) holding property for his life and the minority (18 years) of the ultimate beneficiary.


Ultimate beneficiary in mother’s womb

1. Where the ultimate beneficiary is in the mother’s womb i.e. it is a child en ventre sa mere, the latest period up to which vesting may be postponed, (after the preceding interest) is the minority plus the period during which the child remains in mother’s womb.

2. It may be noted that minority is counted from the date of worldly birth whereas for purposes of being a transferee, a child in mother’s womb is a competent person.

3. Where the ultimate beneficiary is in mother’s womb when the last person dies, the property vests immediately in him while he is still in mother’s womb. Therefore, the exact period from which the minority begins to run is the date when ultimate beneficiary is conceived.

4. Accordingly, the minority up to which the vesting is permitted to be postponed under this section would include the period during which the ultimate beneficiary remains in womb before he is born alive. The period during which a child remains in womb after being conceived is called gestation.

5. In India, the maximum possible remoteness of vesting would, therefore, be as under:

Maximum permissible remoteness of vesting = life of the preceding interest + Period of gestation of ultimate beneficiary + Minority of the ultimate beneficiary.

 

Exceptions to the Rule against Perpetuities

1. Vested Interests are not affected by the rule, for when an interest has once existed, it cannot be bed for remoteness.

2. Gift to charities do not fall within the rule; thus, in case of a transfer for the benefit of the public in advancement of religion, knowledge; health, commerce, etc., the rule does not apply (Sec. 18).

3. Property settled upon individuals for memorable public services may be exempted from the operation of this rule.

4. The rule against perpetuity applies when interest in property is created and has no application to personal contracts. A contract for sale of property does not of itself create any interest in such property (Sec. 54).

Leading Case: Ram Baran Prasad v. Ram Mohit Hazra

The Supreme Court, observed and held as follows:

1. The Court referred to the provisions of the Specific Relief Act, 1963 to state that a contract is enforceable by and against the transferees/assignees of the original parties.

2. Prima facie, the rights of the parties to a contract are assignable. Having regard to the contract and circumstances in the present case, it is clear at pre-emption clause must be construed as, binding upon the assignees.

3. The rule against perpetuity does not apply to contracts, which do not create rights of property.

4. The rule as formulated falls within the branch of the law of property and its true object is to restrain the creation of future conditional interests in property.

5. The Supreme Court, thus, held that rule against perpetuity cannot be applied to a covenant of pre-emption even though there is no time-limit within which the option has to be exercised.

 

Illustrations

1. A’s property is transferred to B for life and after his death, to such son of B as shall first attain the age of 25 years, B having no son on the date of transfer. Here, the life-estate in favor of B is perfectly valid ,but the interest created in favor of B’s son is void, as the vesting of the interest is intended to be postponed beyond the minority of an unborn Person.

2. Property is transferred to A for life, then to B for life, and to such of B’s son as shall first attain the age of 17 years/ or the 18 years. The transfer is valid.

3. Property is transferred to A for life, then to B for life, and then to such of B’s son as shall first attain the age of 18 years and one day. The transfer is void

4. Property is transferred to B for life, and then to B’ s first child when be attains the age of 10 years. The transfer is valid, and the property would vest in his favor on his attaining the age of 10 years.


Transfer Of Property For The Benefit Of Unborn Person(Section 13)

RESTRICTION REPUGNANT TO INTEREST CREATED (SECTION 11)

BRIEF NOTES ON SECTION 10,11&12 OF TRANSFER OF PROPERTY ACT,1882

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