CRITICAL ANALYSIS OF VESTED INTEREST

4.2- PR0PERTY LAW

Submitted by:

Chetan Verma
UID – UG-19-32

Academic Year (2020-2021)

Sec0nd Year, Semester IV

Submitted t0:

Pr0f. Shuvr0 Pr0sun Sarker

(Ass0ciate Pr0fess0r 0f Law)

May, 2021

MAHARASHTRA NATI0NAL LAW UNIVERSITY, NAGPUR

Table of Contents

Intr0ducti0n.....................................................................................................................................3

Anal0g0us Law and Sc0pe 0f the secti0n........................................................................................5

Vested in different f0rms:................................................................................................................6

Analysis 0f Secti0n 19 “Vested Interest”........................................................................................8

P0stp0nement 0f enj0yment............................................................................................................8

C0nditi0nal limitati0n......................................................................................................................9

Pri0r interest...................................................................................................................................10

C0nclusi0n.....................................................................................................................................11
Introduction

In “a transfer 0f pr0perty, an interest is created in fav0ur 0f a pers0n with0ut specifying the time
as t0 fr0m when it g0ing t0 have effect, 0r in terms specifying that it is t0 take effect f0rthwith 0r
0n the happening 0f an event which must happen (B0und t0 happen), such interest is vested,
unless a c0ntrary intenti0n appears fr0m the terms 0f the transfer.”

Vesting means yielding t0 a pers0n an immediate right t0 present 0r future enj0yment 0f

pr0perty. In simple w0rds, a pers0n has right 0ver the vested asset that in n0 case can be taken
away by the third party, and that pers0n may 0r may n0t even p0ssess the asset 0ver which he is
having a right. may n0t yet p0ssess the asset. When the right, t0 the present 0r future p0ssessi0n
0f a pr0perty can be transferred t0 any 0ther party, it is termed a vested interest. And it d 0esn’t
get effected by the death 0f the transferee bef0re he 0btains p0ssessi0n, hencef0rth he/she can
still retain 0ver the interest 0f pr0perty vested up0n. Any interest shall n0t be vested and als0 the
interest shall n0t merely be inferred fr0m a pr0visi0n whereby the enj0yment is theref0re
p0stp0ned, 0r where there is a pri0r interest 0f any 0ther pers0n in that pr0perty 0r reserved t0
any 0ther pers0n in that pr0perty, 0r whereby inc0me arising fr0m the pr0perty is accumulated
until the time 0f enj0yment arrives. There are three main characteristics 0f vested interest which
the research pr0ject will be essentially analysing which are:

 A vested interest d0esn’t depend up0n fulfilment 0f a c0nditi0n rather it creates an

immediate right in fav0ur 0f that pr0perty.
  A vested interest in n0t defeated by the death 0f the transferee bef0re 0btaining
p0ssessi0n, it will pass 0n t0 heirs 0f that pers0n.
 A vested interest is transferable as well as heritable.1

Vested interest is defined under secti0n 192 0f transfer 0f pr0perty act and this secti0n sh0uld be
distinguished fr0m c0ntingent interest as defined in Secti 0n 21, when an interest is vested the
transferee’s, title is prefect. when the interest is c 0ntingent it is capable 0f bec0ming perfect 0n
the fulfilment 0f the c0nditi0n implied. But still this title c0nferred w0uld be imperfect. Thus, a
gift t0 A 0n death 0f B creates a vested interest in A even during B's life time f 0r the c0nditi0n is
b0und t0 happen. But 0n the 0ther hand, a gift t0 A 0n the marriage 0f B d0esn’t create a vested
interest but a c0ntingent interest because B may ch00se t0 never marry, subsequent fulfilment 0f
this c0ntingency makes the c0ntingent interest t0 vested interest.

Als0, the vested interest in the pr0perty d0esn’t prerequisite immediate p0ssessi0n, it may still be
in subsistence. As given in the case P.K. Mohan Ram v. B.N. Ananthacharya3 Even th0ugh it
d0esn’t give a right t0 immediate p0ssessi0n but the interest in that case will be c 0nsidered t0 be
vested. Thus, 0n a transfer t0 A f0r title with remainder t0 B. B’s interest is vested because there
is n0thing but A's pri0r interest t0 stand between him and the actual enj 0yment 0f the pr0perty
transferred. An estate may be vested alth0ugh the fact may be such it never bec0me vested in
p0ssessi0n and s0 never give a right t0 the actual enj0yment 0f the land. Thus, 0n a transfer 0f A
f0r life with remainder t0 B life with interest never vest p0ssessi0n f0r there is still n0thing but
A's estate between B and the enj0yment 0f land.

Secti0n 19 0f Transfer 0f Pr0perty Act, 1882 defines Vested Interest as, “Where, 0n a transfer 0f
pr0perty, an interest therein is created in fav0ur 0f a pers0n with0ut specifying the time when it
is t0 take effect, 0r in terms specifying that it is t0 take effect f0rthwith 0r 0n happening 0f an
event which must happen, such interest is called vested interest.” Als0 the distincti0n between
vested interest and C0ntingent interest has been clearly given in the case P.K. M 0han Ram v.
B.N. Ananthacharya where the supreme c0urt has reiterated the plain secti0ns 0f the act and
1
Elokasee v. Darponarain, 5 Cal. 59.
2
Section 19, Transfer of Property Act, “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….”.
3
P.K. Mohan Ram v. B.N. Ananthacharya (2010) 4 SCC 161.
says that vested interest arises when there is a present enj 0yment 0r present right f0r future
enj0yment. Whereas c0ntingent interest arises where the right t0 enj0yment is dependent up0n
the happening 0f a certain event which may 0r may n0t happen. And the c0ntingent interest
bec0mes a vested interest.

Research Methodology

The researcher has used the d0ctrinal 0r principle appr0ach f0r this research paper. As the
research paper is based 0n a judgement, the primary s0urces include s0me statutes and the
sec0ndary s0urce is a E-S0urce which is SCC 0nline.

Analogous Law and Scope of the section

Secti0n 119 0f Indian Successi0n Act, 1925, c0rresp0nds with secti0n 19 0f Indian Transfer 0f
Pr0perty Act, 1882. “where by the term 0f a bequest the legatee is n0t entitled t0 immediate
p0ssessi0n 0f the thing bequeathed , a right receive it at the pr 0per time shall, unless a c0ntrary
intenti0n appear by the will, bec0me vested in the legatee 0n the testat0r's death ,and in such case
the legacy is fr0m testat0r's said t0 be vested interest.”
Secti0ni 19i 0fi Transferi 0fi Pr0pertyi Act,i 1882i c0rresp0ndsi withi Secti0ni 119i 0fi Thei Successi0ni
Act.i Ai vestedi interesti isi ani immediatei right,i asi distinguishedi fr0mi ai righti whichi mayi c0mei int0i
existencei ini future.i Thei immediatei righti mayi bei righti 0fi presenti enj0ymenti 0fi righti 0fi futurei
enj0yment.i Ini Sashi Kantha v. Promod Chandara4i theiri l0rdshipi 0fi thei Calcuttai Highi c0urti
p0intedi 0uti thei distincti0ni betweeni ai vestedi interesti andi c0ntingenti interesti as:

“An estate or interest is vested, as distinguished from contingent, either when

enjoyment of it is presently conferred or when its enjoyment is postponed the time
of the enjoyment of the will certainly come to pass, in other words, an estate is
vested when the immediate right of present enjoyment or future enjoyment. An
interest is said to be contingent interest if enjoyment depend upon some event this
the difference between vested interest and contingent interest a person gets vested
4
Sashi Kantha v. Promod Chandara, AIR1932 Cal 600 (609):59 Cal 859(DB).
 interest when it is created in his favour (A)without specifying the time when it
take effect, or (B) in terms specifying that it is to take effect forthwith, or (C) in
terms specifying that it is to effect on the happening of an event which is must
happen.”

Such interest bec0mes a vested interest under these tw0 circumstances-

In case where 0n a transfer“0f pr0perty, an interest is created in fav 0ur 0f a pers0n t0 take effect
0nly 0n the happening 0f a specified uncertain event, then 0n the happening 0f the event. In case
where 0n a transfer 0f pr0perty an interest is created in fav 0ur 0f a pers0n t0 take effect 0nly 0n
the n0t happening 0f a specified uncertain event, then when the happening 0f the event bec0mes
imp0ssible. The n0t happening 0f the event sh0uld bec0me abs0lutely certain, bey0nd d0ubt.
Such an interest bec0mes a vested interest in the transferee.”

F0r example: Supp0se 0 is the 0wner 0f Black acre. C0nsider what happens when 0 transfers the
pr0perty “t0 A f0r life, then t0 B.” Pers0n A acquires p0ssessi0n 0f Black acre. Pers0n B d0es
n0t receive any right t0 p0ssess Black acre immediately; h0wever, 0nce pers0n A dies,
p0ssessi0n will fall t0 pers0n B (0r his estate, if he died bef0re pers0n A). Pers0n B has a future
interest in the pr0perty. In this example, the event triggering the transfer is pers0n A's death.”

Because they c0nvey 0wnership rights, future interests can usually be s 0ld, gifted, willed, 0r
0therwise disp0sed 0f by the beneficiary (but see Vesting bel 0w). Because the rights vest in the
future, any such disp0siti0n will 0ccur bef0re the beneficiary actually takes p0ssessi0n 0f the
pr0perty. this type 0f interest is kn0wn as vested interest.

When unb0rn pers0n acquires vested interest 0n transfer f0r his benefit - Secti0n 20

“Where, 0n a transfer 0f pr0perty, an interest therein is created f0r the benefit 0f a pers0n n0t
then living, he acquires up0n his birth, unless a c0ntrary intenti0n appears fr0m the terms 0f the
transfer, a vested interest, alth0ugh he may n0t be entitled t0 the enj0yment there0f immediately
0n his birth.”
Vested in different forms

Vested in p0ssessi0n – When it is a right t 0 present p0ssessi0n f0r ex- 0ur residential h0use.
Vestedi ini p0ssessi0ni isi ai termi usedi t0i indicatei ani interesti whichi givesi ai righti t0i immediatei
enj0ymenti 0fi ani interesti ini pr0pertyi asi 0pp0sedi t0i ani interesti vestedi ini remainder.i F0ri example,i
ani estatei isi vestedi ini p0ssessi0ni wheni therei existsi ai righti 0fi presenti enj0yment;i andi ani estatei isi
vestedi ini interest,i wheni therei isi ai presenti fixedi righti 0fi future,i enj0yment.i “Thei phrasei "vestedi ini
p0ssessi0n"i isi welli underst00di asi meaningi ai righti 0fi presenti enj0yment.i C0ntrastedi withi thesei
termsi isi thei phrasei "vestedi ini interest,"i whichi meansi ai presenti fixedi righti 0fi futurei enj0yment..i
Thus, any given interest may first be vested in interest, then vested in p 0ssessi0n, and finally
reduced t0 p0ssessi0n.

“Vested in interest - when it is n0t a right t0 present p0ssessi0n but a right t0 future p0ssessi0n.
Example- a land & building is given t0 Ramesh f0r his life with a remainder t0 B, in that case ’s
right invested in p0ssessi0n, B’s right is vested in interest i.e. after ’s death pr 0perty will c0me t0
B with0ut unc0nditi0nal vested interest is transferrable and heritable.” A vested interest is a
“right that s0 c0mpletely and definitely bel0ngs t0 a pers0n that it cann0t be impaired 0r taken
away with0ut the pers0n's c0nsent. The event 0r time frame that triggers vesting is typically
defined by c0ntract, such as empl0yee pensi0n benefits vesting after a certain number 0f years”.5

Vested gift – “A vested gift refers t0 an abs0lute gift. Generally, a vested gift is free fr 0m
c0ntingencies. Alth0ugh a vested gift is unc0nditi0nal, its use 0r enj0yment might n0t 0ccur until
s0metime in the future. Hence, a vested gift can be made f0r the purp0se 0f present 0r future
usage.

Vested estate - Vested estate is an abs0lute, unc0nditi0nal, and indefeasible interest. It is an

estate which is n0t c0ntingent 0r expectant. Vested estate carries a fixed right 0f present 0r future
enj0yment. It gives a certain and fixed right 0f present 0r future enj0yment; that is, an interest
cl0thed with a present legal and existing right 0f alienati0n. An estate is vested in p0ssessi0n
when there exists a right 0f present enj0yment, and vested in interest when there is a present
right 0f future enj0yment.”

5
V. Nagarathinam v. Padmadavi, AIR 2001 Mad53.
Vested future estate – “Vested future estate is an estate which exists when there is a pers 0n in
being wh0 w0uld have an immediate right t0 the p0ssessi0n 0f the lands up0n the ceasing 0f the
intermediate 0r precedent estate.”

Vested liabilities - "vested liabilities" means “the present value 0f the immediate 0r deferred
benefits available at n0rmal retirement age f0r participants and their beneficiaries which are n 0
f0rfeitable.”

Vested right - A vested right is c 0mm0nly defined as a “right that s 0 c0mpletely and definitely
bel0ngs t0 a pers0n that it cann0t be impaired 0r taken away with0ut the pers0n's c0nsent.

Vested “interest by will - Pr0perty given t0 wind0w in lieu 0f her maintenance during her life
time and after her death surviving right, if any, was t0 vest in daughter, enactment 0f Hindu
successi0n act, 1956 deprived daughter 0f their legal right as wid0ws interest enlarged int0 an
abs0lute estate, n0 right vested in daughters will.6”

Analysis of Section 19 “Vested Interest”

"0r in terms specifying that it is t0 take effect f0rthwith"

“Where“ai transferi isi madei t0i Ai “when"i 0ri "if"i hei shalli attaini ai particulari agei thei w0rdi "wheni
"0r"i if"i willi ,unaidedi byi c0ntexti sh0wi thati Ai wasi giveni 0nlyi c0ntingenti interesti buti thei w0rdi mayi
bei c0ntr0lledi byi 0theri expressi0nsi asi t0i sh0wi thati thei grant0r'si intenti0ni isi merelyi p0stp0nei thei
enj0ymenti i andi n0ti vestingi itself7.i Ini suchi casesi thei interesti willi i bei vestedi n0ti c0ntingenti .i thusi ,i
wherei X,i byi willi directedi thei trusteei t0i dividei thei estatei 21i yearsi afteri thei testat0rs’i deathi i int0i
certaini sharei andi givei 0nei suchi sharei t0i hisi wifei ,i andi statedi thati suchi sharei sh0uldi vesti ini heri ati
thei datei i 0fi hisi death,i iti wasi heldi byi theiri L0rdshipi 0fi thei privyi c0uncili thati shei t00ki ai vestedi
estatei th0ughi p0stp0nedi f0ri 21i yrs.””

6
Palchuri Hanumyamma v. Tadikamalla kotlingam, AIR2001 SC 3062.

7
Branstorm vs Wilikson, AIR 1957 SC 255 (263).
“0n the happening 0f an event”

“The interest is a vested interest where the 0perati0n 0f the transfer is made t0 depend up0n
s0me specified certain event. the event must be clearly specified, explained and it must be certain
t0 happen. F0r example: death 0f a pers0n.”

Postponement of enjoyment
It“has been that an interest may be vested th 0ugh the enj0yment there0f, is p0stp0ned. And the
explanati0n makes it that fr0m the mere pr0visi0n f0r p0stp0nement 0f the enj0yment, it sh0uld
n0t be inferred that the interest is n 0t vested. In 0ther w0rds, the mere fact that the transfer is n 0t
entitled t0 the immediate enj0yment d0es n0t necessarily make the interest c0ntingent 0ne. Thus,
where a gift was made 'A' with a directi 0n p0stp0ning the enj0yment 0f it, it was held that the
directi0n did n0t p0stp0ne the vesting. Where a Hindu wid0w made a gift 0f pr0perty t0 the deity
with the c0nsent 0f the reversi0n under an agreement under which the revisi 0n enj0yed the
benefit 0f rent and inc0me 0f the pr0perty during the lifetime 0f the wid0w, the pr0perty s0
d0nated became vested in deity.”

But th0ugh the pr0visi0n f0r the p0stp0nement d0es n0t by itself prevent the vesting 0f pr0perty,
such a pr0visi0n cann0t be said t0 be valid under all circumstances. Such a pr0visi0n will be
valid where

1. The right 0f enj0yment is given in the meanwhile t0 s0me 0ther pers0n, 0r

2. The transferee is under the maj0rity and enj0yment is p0stp0ned until he attains maj0rity.

The leading case 0n the p0int is Gosling v. Gosling8 where vice chancell0r, Sir Wage W00d
made the f0ll0wing 0bservati0n:

“The principle 0f this c0urt has always been rec0gnized the rights 0f all pers0n wh0 attain the
age 0f 21 t0 enter up0n the abs0lute use and enj0yment 0f the pr0perty given t0 them by a will,
n0t withstanding any directi0n by the testat0r t0 the effect that they are n0t t0 enj0y until a later
age unless, during the interval the pr 0perty is given f0r benefit 0f the an0ther. If the pr0perty is
0nce theirs, it’s useless f0r the testat0r t0 attempt t0 imp0se any fetter up0n their enj0yment 0f its
full as the attain 21. And up0n the principal unless there is in the will 0r in s0me c0dicil t0 it, a
8
Gosling v. Gosling (1859)70 E R 423 (426):1859 john 265.
clear indicati0n 0f an intenti0n 0n the part 0f the testat0r, n0t 0nly that has devisee are n0t t00
have the enj0yment 0f the pr0perty he devised t0 them until the attain 25,but s0me pers0n is t0
have that ,0r unless the pr0perty is s0 clearly taken away fr0m devisee up t0 time 0f attaining
25,as t0 induce the c0urt t0 the previ0us rents and pr0fit ,there has been an intestacy the c0urt
d0es n0t hesitate t0 strike 0ut 0f the will any directi0n that the devisee shall n0t enj0y it in full
until they attain the age 0f 25 years.”

Conditional limitation
The interest shall n0t be vested is n0t t0 be inferred fr0m a pr0visi0n that if a particular event
shall happen the interest shall pass t0 an0ther pers0n. Such type 0f a pr0visi0n is called a
c0nditi0nal limitati0n. A c0nditi0nal limitati0n divests an estate which has bec 0me vested and
vests it in an0ther pers0n. Secti0n 28 0f transfer 0f pr0perty deals with c0nditi0nal limitati0n.

Sunder Bibi v. Rajendra Narain9- The terms 0f a c0mpr0mise pr0vided that L sh0uld have an
estatei f0ri lifei andi thati afteri hisi deathi t0i Ri wasi t0i bei thei fulli 0wneri 0fi thei estate,i ifi hei survivedi L.i
Ifi Ri didi n0ti survivei L,i thei estatei w0uldi passi t0i R’si lineali malei descendenti acc0rdingi t0i thei rulei 0fi
prim0geniture.i bef0rei thei deathi 0fi L.i Thei questi0ni ar0sei whetheri Ri hadi 0nlyi ai c0ntingenti interesti
0ri ai vestedi interesti whichi c0uldi bei attached.i ifi thei pr0visi0ni hadi beeni merelyi thisi thati thei estatei

w0uldi passi t0i R,i ifi hei survivedi Li andi estatei c0ntingenti 0ni hisi survivingi L.i Thei furtheri pr0visi0ni
0fi ai gifti 0veri t0i an0theri pers0ni wasi c0nditi0nali limitati0ni whichi hadi thei effecti 0fi vestingi thei

estatei R.i Thei c0urti gavei thei reas0ningi thati thei c0nditi0ni affectedi thei retenti0ni 0fi thei interesti andi
n0ti ini itsi acquisiti0n.i Theref0re,i Ri t00ki ai vestedi interesti liablei t0i bei divestedi ifi hei didi n0ti survivei
L.i Thisi ab0vei casei isi deali ini c0nditi0nali limitati0n..”

Accumulati0n 0f inc0me
It is“n0t t0 be in freed that the interest shall n 0t be vested whereby inc0me arising fr0m the
pr0perty is directed t0 accumulated until the time 0f enj0yment arrives. H0wever, the directi0n
f0r accumulati0n 0f inc0me must be within the limits sancti0ned by Secti0n 17. If the directi0n is
f0r a peri0d in excess 0f the peri0d specified, it will be invalid f0r the peri0d in the excess 0f the
peri0d specified, it will be invalid f0r the peri0d in excess. 0nly the right 0f enj0yment is
p0stp0ned 0nly but n0t the vesting.”

9
Sunder Bibi v. Rajendra Narain (1925)47 All 496:86IC 684: AIR1925All 389.
Prior interest
Merely because 0f the reas0n that the pr0visi0n whereby pri0r interest is created there is 0nly
p0stp0nement 0f the enj0yment and the n0t necessarily the vesting 0f subsequent interest, it
sh0uld n0t be inferred that an interest shall n0t be vested.

Conclusion
When a p0ssessi0n 0f the pr0perty is transferred it als0 inv0lves transfer 0f interest, and such
immediate transfer 0f interest is vested.

“When a pr0perty is transferred it inv0lves transfer 0f interest, if the interest transferred are is
transferred immediately it is vested interest. Fr0m the p0int 0f view 0f time 0f accruing (when
transferee get the interest the interest may be either vested 0r c0ntingent). In a vested interest as
s00n as transfer is c0mplete the interest accurse t0 transferee with immediate effect and the
transferee title is c0mplete. Vested interest sh0uld be with0ut any c0nditi0n. A transfer 0f
pr0perty, an interest therein is created in fav0ur 0f a pers0n with0ut specifying the time when it
is t0 take effect, 0r in terms specifying that it is t0 take effect f0rthwith 0r 0n the happening 0f an
event which must happen, such interest is vested, unless a c 0ntrary intenti0n appears fr0m the
terms 0f the transfer.”