The meaning of “transfer of property” is found in Section 5 of the Transfer of Property Act of 1882. It is defined as an act in which a living person transfers property to one or more people, or to himself and another person, and the term “transfer of property” refers to the act. Furthermore, this clause indicates that a living creature can be a corporation or a group of individuals, whether or not they are incorporated, however nothing in this paragraph modifies any existing Indian legislation. Thus, based on a cursory reading of this section, we can deduce that both individuals should be alive. However, there is an exception under Section 13 of the Transfer of Property Act of 1882, which specifies that property can be given to an unborn person.
FACTS OF THE CASE
- A transferred gift of her properties to B who was her nephew’s daughter for life. Then absolutely to B’s male descendants if she had any.
- In the absence of any male child of B, B’s daughter is without the power of alienation, and if B has no descendants male or female then to her (A’s) nephew – limited interest was created.
- B died issueless.
SECTION 13 OF TRANSFER OF PROPERTY ACT
“Where, on a transfer of property, an interest therein is created for the benefit of a person not in existence at the date of transfer, subject to a prior interest created by the same transfer, the interest created for the benefit of such person shall not take effect, unless it extends to the whole of the remaining interest of the transferor in the property.”
The general rule that a transfer can only be made between living people is given effect by Section 13. There can’t be a direct transfer to someone who doesn’t exist or hasn’t been born yet. This is why section 13 uses the phrase transfer “for the benefit of” rather than “to” an unborn person.
SECTION 14: RULE AGAINST PERPETUITY
“No transfer of property can operate to create an interest which is to take effect after the life-time of one or more persons living at the date of such transfer, and the minority of some person who shall be in existence at the expiration of that period, and to whom, if he attains full age, the interest created is to belong.”
Section 14 is, in essence, a continuation of Section 13. Property freedom is an important aspect of public policy. The term “perpetuity” refers to a restriction that keeps the property permanently out of reach of alienation authority. Section 14 bans property from being enslaved indefinitely since the law favours alienation over accumulation.
JUDGEMENT OF THE COURT
The Supreme Court made some important observations. As we know through the facts that B died without any child, therefore, C claimed the property. The court further held such a claim invalid. It held that where a transfer in favor of the person if void and subsequent transfer taking effect on the failure of such transfer would also be void.
To understand the concept of transfer to unborn person it is necessary to read Section 13 and Section 14 together as in practical application these provisions are applied hand in hand.
The property act does not allow direct transfer to the unborn child. To transfer property to an unborn child, the property must first be transferred to a living person and a prior life interest must be established. Between the dates on which the property is transmitted and the date on which the person to whom it will finally be transferred is born, the property must inevitably vest in someone. Also, the interest which is extended to the unborn person should include the remaining interest of the transferor. This condition makes it impossible to create a life interest in the unborn child and thus does not restrict the free disposition.
Creating successive interest is not prohibited. But there should not be limited interest transferred to an unborn child. Section 14 of the act prohibits the interest which vests in the unborn person after the death of the person in which the prior interest is created and the minority of the unborn person. Further, the unborn person should come into existence before the death of the intermediary holding the prior interest.
In this case, gift in favor of B was valid but gift made in favor of B’s daughter was void as limited interest was created and according to Section 13, interest created in favor of unborn person should be absolute interest. Further subsequent transfer to A’s nephew will also fail as per Section 16 (Transfer to take effect on failure of prior interest) of Transfer of Property Act, 1882.
- Transfer of Property Act, 1882
- Khushboo Garg, Transfer of Property for the benefit of Unborn Person, Legal Readings, https://legalreadings.com/tpa-unborn-child/
- Rule against Perpetuity and its Exceptions, SRD Law Notes, https://www.srdlawnotes.com/2016/05/rule-against-perpetuity.html
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