General Rules

of Transfer
Conditional Transfers, Restraints on
Alienation and Enjoyment.

This Photo by Unknown Author is licensed under CC BY-NC-ND

 Rules Outline
Rule 1: Sec.10 [Conditions Restraining Alienation] Transferee has absolute title and the transferor places
absolute restraint on alienation. Absolute restraint is void. Partial is not.
Rule 2: Section 11 para 1: [Restrictions Restraining Enjoyment]: Transferor makes an absolute transfer but
places stipulations (or tries to retain interest) as to the manner in which the property may be enjoyed.
Rule 3: Section 11 para 2: [Positive Covenants]: Directions to Transferee to do something relating to the
transferor’s beneficial enjoyment. Properties are similarly situated.
Rule 4: Section 40: [Negative Covenants]: enforcing a right to restrain the enjoyment.
• Gift; With Notice; Without Notice; Running with land .
Rule 5: Section 12: condition or limitation making any interest reserved or cease to exist on insolvency of the
transferee. [Next Lecture]
Rule 6: Section 31: Conditions superadded: Subject to rule 5 (Section 12): transfer of property an interest therein
may be created with the condition superadded that it shall cease to exist in case a specified uncertain event shall
happen, or in case a specified uncertain event shall not happen. [Next Lecture]

2
Conditional Transfers

Conditions Conditions Conditions

Conditions
Precedent [S. Subsequent Superadded
Collateral
26] [S. 29] [S. 31]

This Photo by Unknown Author is licensed under CC BY-SA-NC

 Sec.10: Conditions Restraining Alienation):
Where property is transferred subject to a condition or limitation

absolutely restraining the transferee or any person claiming under him from parting with or
disposing off his interest in the property,
the condition or limitation is void !!!
except in the case of a lease where the condition is for the benefit of the lessor or those claiming
under him:
Provided that property may be transferred to or for the benefit of a woman (not being Hindu,
Muhammedan or Buddhist), so that she shall not have power during her marriage to transfer or charge
the same or her beneficial interest therein. [See the doctrine of coverture]

4
PARTIAL vs ABSOLUTE RESTRAINT
➢How would one determine the nature of a restraint?
➢Test is of substance, not merely of form. After considering all
probabilities ask yourself: Does the effect of the condition deter people from
alienating the property?
➢eg. A → B, can sell to anyone – 90% of the consideration to be given to A’s son.
➢Partial in Form; ‘Absolute’ in substance.
➢Rationale: policy incentives for free circulation of property.

5
Illustration
Harshana, who is the owner of a house called Antilla, sells it for consideration of Rs.
500,000 to Bhaskar. In the transfer deed, Harshana puts a condition that Bhaskar would
not sell it to anyone but would keep the possession of the property to himself. Bhaskar
agrees to abide by this condition and pays consideration. After the title passes and the
property vests in Bhaskar, Bhaskar sells it to Karan. Harshana files a suit claiming
possession of the property on the ground that Bhaskar has committed a breach of a
condition of the contract, and therefore, the sale in favour of Karan is void.
1. Would Harshana succeed in the Court?
2. What kind of right does Harshana give Bhaskar?
1. Is it the right of enjoyment of property?
3. Is the restraint an absolute restraint?
4. Is the restraint imposed by Harshana valid?
Kinds of Restraints: Absolute
(invalid) or Partial (valid)?

• Would the situation be any different if, instead of a

transfer restraint, Harshana stipulates in the
agreement that 70% of the sale price which Bhaskar
agrees to will go to her?
• What if the conveyance deed stipulates that Bhaskar
cannot transfer Antilla for 5 years, and after 5 years,
Harshana will have the right to buy Antilla back for
750,000, and if Harshana is not capable to buy it then
Bhaskar can sell it to anyone?
• Harshana includes a clause in the deed which basically
states that Bhaskar can sell the property but only to
the family of Harshana. Is it valid?
• Harshana includes a provision which states that
Bhaskar can only sell the property to an education
institution or a religious denomination. Is it valid?
PARTIAL and ABSOLUTE
RESTRAINT

❖Restrictions Pertaining to Persons

• Can sell to anyone except the specified person vs
Can sell the property only to a stipulated person.
• Transferee to sell property only to a family member
– when valid?
• Right of pre-emption in favor of a person. Eg. To
transferor’s wife…
❖ Purpose Based Restrictions
• Transferee to sell the subject property only for a
particular purpose.

8
 Syed Mohammad Raza v. Abbas Bandi Bibi
(1932) 34 BOM LR 1048

Facts – Sughra Bibi v Afzal Husain → Compromise deed – Permanent Owner (‘Malik
Mustaqil’) - Restriction Against selling to Complete Stranger

Afzal’s first wife – Fatima (death, 1871); Afzal’s death – 1872 – childless

1914 – Transfer by Sughra Bibi → Syed Mohammad Raza

What restriction placed in the compromise decree was to be interpreted by the

Court?

Can the Court apply the Transfer of Property Act?

9
 Syed Mohammad Raza v. Abbas Bandi Bibi
On the assumption that Sughra Bibi took under the terms of the document in question an
absolute estate subject only to this restriction, their Lordships think that the restriction was not
absolute, but partial; it forbids only alienation to strangers, leaving her free to make any
transfer she pleases within the ambit of the family.
But apart from this, it seems clear that after the passing of the Transfer of Property Act in 1882, a
partial restriction upon the power of disposition would not, in the case of a transfer inter vivos, be
regarded as repugnant; (see Section 10 of the Act). In view of the terms of this section, and in
the absence of any authority suggesting that before the Act a different principle was
applied by the Courts in India, their Lordships think that it would be impossible for them
to assert that such an agreement as they are now considering was contrary to justice,
equity and good conscience.”
In their Lordships' opinion Sughra Bibi had no power to transfer any part of the properties to the
appellants, and upon her death the respondent became entitled to the two-thirds share in the
properties which she claims.

10
 ➢Partition deed – property divided between the
parents and two sons – clause in partition deed
stipulated that upon the death of the parents,
their shares to devolve upon brothers in equal
proportion – clause two stipulated that
MUNISWAMY v everyone can “enjoy property in the manner
VENKATASWAMY they like” – clause three stipulated that
AIR 2001 Kant 246 everyone has to get the ‘khata’ mutated in their
name, taxes to be paid by them.
➢1977, Sale to respondent
➢Nature of the restraint?
➢Is the TP Act applicable here?

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 Application of Section 10 to Settlements and
other Deeds
In the light of the ratio laid down by Privy Council, this Court and other High
Courts, it becomes explicit that per se the provisions of Section 10 of the T.P. Act
would not apply to the partition and family settlement, since there is no transfer of
title contemplated in a partition. However, on the ground of sound public policy
any total restraint on the right of alienation in respect of immovable property
which prevents free circulation is to be held void, but, any partial restraints or
limitation would be valid and binding…The restrictions which are express would
render no difficulty. However, while implied restrictions if they are to be read into
the terms of the document should be so clear and unambiguous to suggest the one
and only inference in favour of the restrictive covenant set up or pleaded otherwise;
if stipulations are ambiguous, susceptible to contrary or alternative meaning,
it would not be permissible to read into the said stipulation by inference
restrictive covenant.
 • Zoroastrian Co-Op Housing Society – Bye-laws –
Qualifications to be a member – Must be a Parsi + Prior
approval of the Society - restriction under S 10?
• Father → Respondent 2 → Builder (Non-Parsi)
Zoroastrian Co- • Does the Transfer of Property Act apply to the instant
operative case?
Housing • Did the restriction on membership operate as an
absolute restraint?
Society Limited • The bye-laws provide that he should have the prior
Vs. District consent of the Society for transferring the property or
his membership to a person qualified to be a member of
Registrar & the Society. These are restrictions in the interests of the
Society and its members and consistent with the object
Ors. AIR 2005 with which the Society was formed. He cannot question
that restriction.
SC 2306 • Application to Inheritance vs Transfer; Freedom to
Profess Religion vs. Rights of Inheritance; Fraternity v.
Minority Rights; Right to equality vs. Contractual
Obligation.
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What did the Bye-Laws say?
The bye-laws provide that a) a Parsi; b) he should be a member;
c) he should have the prior consent of the Society for
transferring the property or his membership to a person
qualified to be a member of the Society. These are restrictions in
the interests of the Society and its members and consistent with
the object with which the Society was formed. He cannot
question that restriction.

14
Zoroastrian Co-operative Housing Society
Limited Vs. District Registrar & Ors.
Section 10 of the transfer of property act relieves a transferee of immoveable
property from an absolute restraint placed on his right to deal with the property
in his capacity as an owner thereof…For making such a condition invalid, the
restraint must be an absolute restraint. It must be a restraint imposed while the
property is being transferred to the transferee. Here, respondent No. 2 became
a member of the Society on the death of his father…there was really no
transfer of property to respondent no. 2. He inherited it with the
limitations thereon placed…Respondent No. 2 has the right to transfer the
property to a person who is qualified to be a member of the society as per
its bye-laws. At best, it is partial restraint on alienation. Such partial
restraints are valid if imposed in a family settlement, partition or
compromise of disputed claims…
So when a person accepts membership in a cooperative society by
submitting himself to the bye-laws and secures an allotment of a plot of
land or a building in terms of the bye-laws and places on himself a qualified
restriction in his right to transfer the property by stipulating that the same
would be transferred back to the society or with the prior consent of the
society to a person qualified to be a member of the society, it cannot be
held to be an absolute restraint on alienation offending Section 10 of
the transfer of property act. He has placed that restriction on himself in
the interests of the collective body, the society. He has voluntarily
submerged his rights in that of the society

15
 Rules Outline
Rule 1: Sec.10 [Conditions Restraining Alienation] Transferee has absolute title and the transferor places
absolute restraint on alienation. Absolute restraint is void. Partial is not.
Rule 2: Section 11 para 1: [Restrictions Restraining Enjoyment]: Transferor makes an absolute transfer but
places stipulations (or tries to retain interest) as to the manner in which the property may be enjoyed.
Rule 3: Section 11 para 2: [Positive Covenants]: Directions to Transferee to do something relating to the
transferor’s beneficial enjoyment. Properties are similarly situated.
Rule 4: Section 40: [Negative Covenants]: enforcing a right to restrain the enjoyment.
• Gift; With Notice; Without Notice; Running with land .
Rule 5: Section 12: condition or limitation making any interest reserved or cease to exist on insolvency of the
transferee. [Next Lecture]
Rule 6: Section 31: Conditions superadded: Subject to rule 5 (Section 12): transfer of property an interest therein
may be created with the condition superadded that it shall cease to exist in case a specified uncertain event shall
happen, or in case a specified uncertain event shall not happen. [Next Lecture]

16
 Delhi Dayalbagh (HC)
The Zoroastrian Cooperative Housing Society Ltd. and Anr. case (supra) dealt with a society formed
by persons of Parsi community, admittedly a minority, which apparently did not claim the status of
minority when the Constituent Assembly was debating the Constitution - the fact noticed by the
Supreme Court in the said case. We are, in the present case, not concerned with such a minority
community or even a religious community. It is only a sect of the mainstream Hindu religion.…A
member may originally be a believer in the Radha Soami Sect, it is not necessary his children may be
so. Is their right of inheritance to be denied on account of their belief or non-belief! The answer of
the petitioner would be in the affirmative, but this would amount to depriving inheritance to heirs
according to statutory and traditional laws of succession as applicable. If this cannot be done, then
similarly, the right of the original member or the successor-in-interest, including an heir, cannot be
curtailed by restricting the right of transfer. We have already noticed that if the petitioner society
seeks to act as a property broker, i.e., to arrange to whom the property is sold or purchase the
property itself and indulge in property business, then such activities would be contrary to what
activities the petitioner society can pursue under its Bye-Laws, apart from being violative of
permissible activities under the said Act and the said Rules framed thereunder
 HOW DDCHS DISTINGUISHED ITSELF FROM ZCHS?
WHAT IS THE DIFFERENCE BETWEEN ZCHS & DDCHS

ZCHS DDCHS
• Religious Minority • Not a Religious Minority

• Object: create a community • Objective: provide houses to members

• Transmissibility: Personal Laws • Personal Laws: questions transmissiblity

• Leasehold • Absolute Freehold

• Subsuming of rights in group • Silent on this aspect

• Contract v. Constitutional Order • Constitutional order

• Silent • Material Resource

• Inheritance • Transfer
Sec.11 – Restrictions
repugnant to
interest created

Where, on a transfer of property, an interest therein is

created absolutely in favour of any person, but
the terms of the transfer direct that such interest shall
be applied or enjoyed by him in a particular
manner, he shall be entitled to receive and dispose of
such interest as if there were no such direction.
Where any such direction has been made in respect of
one piece of immoveable property for the purpose
of securing the beneficial enjoyment of another
piece of such property, nothing in this section shall
be deemed to affect any right which the transferor may
have to enforce such direction or any remedy which he
may have in respect of a breach thereof.

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This Photo by Unknown Author is licensed under CC BY-NC-ND
•NB: Covenants are binding promises or obligation
in a contract to take or refrainfrom an action, with
breach resulting in damages, while a condition is
acontingency or event that must occur to trigger
(or terminate) contractualobligations. Covenants
create duties; conditions create qualifications of
rights.
 Illustration
Jindal farms is depicted on the photo. Gauri, the owner,
transfers absolute title of Jindal Farms to you, for 50
crore. Gauri retains no interest in the property after the
sale.
1. Can Gauri stipulate that the flagpole can never be
demolished ?
This will be a restriction on enjoyment and can be
disregarded. [S. 11, para 1]
2. Gauri retains an interest in the faculty housing in
Jindal Farms. Can Gauri iterate that a fence needs to be
built?
Yes, if it is for the more beneficial enjoyment of
property. This will be a positive covenant. The
transferor is always the covenantee, because they
enjoy the benefits of the covenant, and the
transferee is always the covenanter. [S. 11 para 2].
Remedies on the breach of covenant? Specific
performance.
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 Subal Chandra v. Usha Bannerjee [2009
Calcutta High Court] Application of Section 11
In order to apply section 11 to a particular transaction, the first and
foremost condition must be creation of an absolute interest in favour
of a person. If such absolute interest is created in favour of a person,
no further restrictions can be imposed regarding the manner of user
or enjoyment of such property. For instance, if by a deed of transfer,
absolute right, title and interest are created in favour of a person, after
creation of such interest, the transferee cannot be restrained from
selling or transferring the property, nor can such transferee be directed
to use the property only for a particular purpose desired by the
transferor. If such a restriction is created, the same should be treated
to be void.…
Section 40
Where for the more beneficial
enjoyment of his own immoveable
property, a third person has
independently of any interest in the
immoveable property of another or
of any easement thereon, a right to
restrain the enjoyment in a particular
manner of the latter property, or
where a third person is entitled to the
benefit of an obligation out of contract
and annexed to the ownership of
immovable property, but not amounting
to an interest therein or easement
thereon, such right or obligation may
be enforced against a transferee with
notice thereof or a gratuitous
transferee of the property affected
thereby, but not against a transferee
for consideration and without notice
of the right or obligation, nor against
such property in his hands

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This Photo by Unknown Author is licensed under CC BY-SA
 TYPES OF NEGATIVE COVENANTS AND NEGATIVE
COVENANTS RUNNING WITH THE LAND
Negative Covenants Running with the Land

1. One may not demolish the Fence 1. At Law: sub-soil rights given under a
2. One may not build a window infront house to mine coal.
of the porch 2. At Equity: One of the two houses sold
with a common area garden with a
stipulation that one may not build on
the garden.
Illustration
Jai is selling a portion of the Jindal Farms to Bodhie.
Separately, Jai drafts a negative covenant. It says that the
common border fence separating Jai’s property from Vinay
and Bodhie’s should not be destroyed.
• The agreement constitutes a negative
covenant.
5 years later, Vinay has sold his property to Sai, Jai
has sold it to Lakshay, but Bodhie is there. Can Sai
enjoy the benefit of the negative covenant and
enforce it against Lakshay and Bodhie?
Yes: if there is notice of the covenant whether actual
or constructive.
Does it need specific assignment? No, this will be a
covenant which “runs with the land” and is for the
beneficial enjoyment of the property.

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 TULK v MOXHAY
❑ 1808 - Tulk was the owner of Leicester Square and
several houses forming the square. He sold a plot of land
to Mr. Elms - of description "Leicester Square garden or
pleasure ground, with the equestrian statue then standing
in the centre thereof, and the iron railing and stone work
round the same," but retained an interest in the houses.
Leicester Square sold with a covenant.
❑The covenant: keeping & maintaining the garden as it is -
allowing Elms to charge a reasonable rent/fee for the
usage of the garden, not permitting any building on it.
Tenants of Leicester Square will have the privilege of
admission to use it.
❑Subsequent buyer – Moxhay - wanted to demolish the
garden and construct on it.
❑Moxhay was aware of the original conditions.
❑Tulk filed a bill for injunction

26
Judgement
Whether a party shall be permitted to use
the land in a manner inconsistent with the
contract entered into by his vendor, and
with notice of which he purchased is the
main question. Of course, the price would
be affected by the covenant, and nothing
could be more inequitable than that the
original purchaser should be able to sell the
property the next day for a greater price, in
consideration of the assignee being allowed
to escape from the liability which he had
himself undertaken.

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Hukmi Chand v. Jaipur
Ice and Oil Mills Co

Section 11 of the transfer of property act provides that

where, on a transfer of property, an interest therein is
created absolutely in favour of any person, but the
terms of the transfer direct that such interest shall be
applied or enjoyed by him in a particular manner,
he shall be entitled to receive and dispose of such
interest as if there were no such direction. However,
the second paragraph of this section makes an
exception to the general rule and recognises the
validity of such a direction [positive covenant], if it
has been made for the purpose of securing beneficial
enjoyment of other property belonging to the transferor.
Such a contract would be valid and enforceable as
between the parties [original Transferor and Transferee
only]…

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 Hukmi Chand v. Jaipur Ice and Oil Mills Co
…it can be said that the benefit of a negative restricted covenant with
regard to contracts concerning land may be assigned, and so third parties
may acquire such rights under a contract to which they were not privy. If
a person acquires interest in land from another, either by purchase
or lease or at the time of dissolution of the partnership, upon terms
which bind him to observe certain covenants respecting the land,
the assignee will take the rights and obligation of that person and as such
will be bound by the restrictive negative covenant…

29
 Illustration
Harshana is a Partner at AMSS, a law firm in A-1 Defence Colony, New Delhi
along with Kunal, Rishika and Joseph. In 2022, she decides to leave the firm. On
her exit, the firm agrees to give her Rs. 18 crore as her share of the capital; 15
crore as goodwill; and sell the next-door bungalow, A-2 for Rs. 7 crore. As per
her exit agreement, she shall not use the firm name, nor will the premises be A-2
to engage in legal practice. Additionally, she will not destroy the wall which
separates A1 and A2. In 2023, Harshana transfer’s the property to her brother
who enters into a partnership with Harshana’s husband and father, and starts a
law firm in A-2. AMSS goes to Court for an injunction, claiming that the terms
of the exit agreement have been breached. Is the covenant restricting use of A-2
valid?

30
 Rules Outline
Rule 1: Sec.10 [Conditions Restraining Alienation] Transferee has absolute title and the transferor places
absolute restraint on alienation. Absolute restraint is void. Partial is not.
Rule 2: Section 11 para 1: [Restrictions Restraining Enjoyment]: Transferor makes an absolute transfer but
places stipulations (or tries to retain interest) as to the manner in which the property may be enjoyed.
Rule 3: Section 11 para 2: [Positive Covenants]: Directions to Transferee to do something relating to the
transferor’s beneficial enjoyment. Properties are similarly situated.
Rule 4: Section 40: [Negative Covenants]: enforcing a right to restrain the enjoyment.
• Gift; With Notice; Without Notice; Running with land .
Rule 5: Section 12: condition or limitation making any interest reserved or cease to exist on insolvency of the
transferee. [Next Lecture]
Rule 6: Section 31: Conditions superadded: Subject to rule 5 (Section 12): transfer of property an interest therein
may be created with the condition superadded that it shall cease to exist in case a specified uncertain event shall
happen, or in case a specified uncertain event shall not happen. [Next Lecture]

31
 Secs.12 & 31
12. Condition making interest determinable on insolvency or attempted
alienation: Where property is transferred subject to a condition or limitation
making any interest therein, reserved or given to or for the benefit of any
person, to cease on his becoming insolvent or endeavouring to transfer or
dispose of the same, such condition or limitation is void…
31. Condition that transfer shall cease to have effect in case specified uncertain
event happens or does not happen. Subject to the provisions of section 12, on a
transfer of property an interest therein may be created with the condition
superadded that it shall cease to exist in case a specified uncertain event shall
happen, or in case a specified uncertain event shall not happen

32
 Omniplast
HSIIDC allotted land to Omniplast in Sonepat. There was a
stipulation on that letter of allotment, i.e., in the event the
holders of the allotted land want to create a charge or
mortgage on the freehold land, they would need the
permission of the HSIIDC. The petitioner wanted to
mortgage this industrial plot to raise money from the
IndusInd Bank.

33
 Omniplast: Terms & Conditions
1. The plot/shed shall continue to belong to HSIIDC until and unless the full price of the plot/sheds
together with interest and other amount if any is due to the HSIIDC is paid by the allottee. Allottee shall
have no right to transfer the land and building standing thereon by way of sale or gift, mortgage, lease or
any other way without specific written approval from the transferor
2. That on payment of total price of the plot/shed, the HSIIDC would execute a deed of conveyance,
containing the terms and conditions in consonance with those contained in this agreement as well as
Industrial Policy and Estate Management Procedures, in favour of the allottee. The charges on registration
and stamp duty will be paid by the allottee
3. That the transferee shall have no right to transfer the land and building standing thereon by way of sale
or gift, lease, or any other way without specific written approval from the transferor. The Clause 12 of the
Conveyance deed is in terms of the Clause 13 of the Regular Letter of Allotment…Clause 12 of the
Conveyance deed states without specific written approval from the transferor. Both the said Clauses lay
stress on the fact that transfer cannot be affected without prior permission of HSIIDC.

34
 Omniplast: Judgement
“…the deed of conveyance had not created any absolute interest in favour of the allottee in respect of the plot
conveyed. For a transferee to deal with interest in the property transferred, ‘as if there were no such direction’
regarding the particular manner of enjoyment of the property, the instrument in favour of the transferee has
been created. This is clearly discernible from Section 11 of the TP Act. The section rests on the principle that any
condition which is repugnant to the interest created is void and when property is transferred absolutely, it must
be done with all its legal incidents. That apart, section 31 of the TP Act is enough to meet the aforesaid
contention… “on a transfer of property an interest therein may be created with the condition superadded that it
shall cease to exist in case a specified uncertain event shall happen, or in case a specified uncertain event shall
not happen.”
…Undoubtedly, once a conveyance deed has been executed, the terms and conditions therein are binding upon
the parties. The HSIIDC has not given up its interest unequivocally in the plot allotted to the petitioner as it is
subject to claim enhanced compensation and also charges against the said plot. Therefore, Section 31 of the
Transfer of Property Act comes into operation. HSIIDC has to safeguard its interest to ensure that the allottee/
transferee complies with the clauses of the allotment like raising of construction within specified time,
completion of the project for which the Industrial Plot was allotted…In the event of default by an allottee, the
corporation should have right to recover the amount from the secured creditor as well…In the absence of the
permission, the charge or interest of the Corporation against the plot allotted cannot be enforced. Thus, it cannot
be said that the said condition imposed by HSIIDC is illegal.

35
TRANSFER FOR THE BENEFIT OF
UNBORN PERSONS AND RULE
AGAINST PERPETUITY

SECTIONS 13-16 & 20 – RULES FOR CREATING FUTURE INTERESTS

TRANSFER FOR BENEFIT OF UNBORN1
PERSON - SEC.13
Where, on a transfer of property, an interest therein is created for the benefit of a person not
in existence at the date of the 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.
Illustration:
A transfers property of which he is the owner to B in trust for A and his intended wife
successively for their lives, and, after the death of the survivor, for the eldest son of the
intended marriage for life, and after his death for A’s second son. The interest so created for
the benefit of the eldest son does not take effect, because it does not extend to the whole
of A’s remaining interest in the property.
 TRANSFER FOR THE BENEFIT OF UNBORN
PERSON
• Prior interest:
Life Estate in favour of living person(s)
• Subsequent interest:
Absolute Estate in favour of an unborn person – ‘…unless it extends to the
whole of the remaining interest of the transferor in the property’
HYPOTHETICAL

In 1966, Mukesh and Nita create a trust whereby Mukesh creates a transfers the
ownership of his house Antilla in favour of their future children. At the time of
drawing up the deed, the children do not exist. The terms and conditions of the trust
stipulate that if either of them die, the life interest would vest in the survivor. After
their death, the life interest would devolve to Anant, and after his death, it will pass to
Akash. Is this a valid transfer?
Other things remaining the same, assume that if the trust was created which stipulated
that after the death of the survivor, the property would go to the eldest son and he will
have absolute interest in the property. Would that be valid?
LANGUAGE OF THE DEED AND SUBSEQUENT
CONDUCT
1. Mukesh made a gift of his property to Nita for her life and then to her sons absolutely.
Nita had no child on the date of execution of the gift. The deed provided that in case Nita
had only daughters, then the property would go to such daughters but only for their life. In
case Nita had no child then after the death of Nita, the property was to go absolutely to
Anil. Nita died without any child, and Anil claimed the property under the gift deed.
2. Mukesh created a life estate in favour of Nita, and an absolute interest in favour of the
unborn sons of Nita. Before the birth of the sons, Nita executed a relinquishment deed
with respect to her life interest in the property in favour of her father. Can the sons claim
the property?
LANGUAGE OF THE DEED AND SUBSEQUENT
CONDUCT
• The deed on paper provided a life estate in favour of Nita’s unborn daughters, which is
contrary to the rule of section 13. In determining whether the transfer is in violation of section 13,
regard has to be made with respect to the contents of the deed and not to what happened actually.
Here, as the transfer in favour of Anil was to take effect on failure of the third transfer stipulated in the
contract that was void, the transfer in favour of Anil also became void. Hence, Anil’s claim was defeated.
• With regard to the validity of the transfer in favour of the sons of Nita, the transfer in their favour was
valid and unaffected by the relinquishment deed executed by Nita, as its validity would be guided by the
terms of the original transfer deed and not by the subsequent events including this act of relinquishment.
When Nita relinquished his life interest in favour of her father, the absolute transfer in favour of her sons
was unaffected, as the validity was dependent on the terms of the original grant, and that could not be
altered by any other person.
SEC 13--REQUISITES

• Create a life interest in favor of a living person – Prior interest

• Transferee gets the right to possess and to use the property as he sees fit
• Unborn person must come into existence before the death of last life estate
holder
• The unborn person gets the rights immediately upon birth* (see S 20), But
possession after the death of the person having the life interest.
 F. DADABHOY VS. BAI TEHMINA

“By the settlement Bai Tehmina settled a sum of Rs. 47,000, upon trusts in favour of herself,
for life, and after her decease and subject to a power of appointment, exercisable by will or
codicil only, amongst her issue born during her lifetime; in trust for all her children who
being sons, "shall attain the age of 18 or being daughters shall attain that age or marry
under that age in equal shares.” [This arrangement was voided by the lower court by
reason of Section 13. Section 13 must be read in conjunction with Section 20.]
F. DADABHOY VS. BAI TEHMINA

The Indian Succession Act, 1865 was the first Act, which curtailed the right of
the other communities to dispose of property by will to unborn persons, by
modifying the English Law: but so far as the transfer of property inter vivos was
concerned, English Law continued to be applied to the other communities, until
the passing of the Transfer of Property Act in 1882…Hindu Private law, which
prohibited any disposition in favour of an unborn person was amended so as to
bring into operation the two groups of sections concerning dispositions in favour of unborn
persons contained in the Indian Succession Act, 1865 and the Transfer of Property Act, 1882
 F. DADABHOY VS. BAI TEHMINA

In my opinion, the parenthetical exception contained in Section 20, "unless a contrary intention appears from the terms of the
transfer," only emphasises what is not expressly stated in Section 13, viz. what is given to the unborn person need not necessarily
vest in him at his birth, and shows that the word "extends" in Section 13 is confined to the subject-matter of the transfer and not
to its vesting, whilst the illustration to Section 13 makes it clear that the trust, for trust there must be in the case of benefits
conferred on persons not in existence, must create a beneficial interest which is absolute in quality. …If all these elements, are to
be present in the case of a transfer inter vivos, which speaks from the moment of its execution, it will mean that there never could
be a transfer of property in favour of the unborn, after a prior life interest, at all… In my judgment this is not the effect of Sections
13 and 20. Read together, and giving the words their current meaning apart from such technical considerations as are only
appropriate in English law, these sections show that in Section 13 the word "extends", contained in the expression "extends to the
whole of the remaining interest of the transferor in the property", is directed to the extent of the subject matter, and to the
absolute nature of the estate conferred and not to the certainty of its vesting. …The result is that the trusts in favour of unborn
persons extend to the whole of the property and provide for the absolute disposal of that property, and in my judgment their
failure by virtue of there never being any qualified object to take, which will is ascertainable within the limits prescribed by Section
14, does not render these trusts incapable of taking effect.
 F. DADABHOY VS. BAI TEHMINA: RULE AGAINST
DOUBLE POSSIBILITIES.

Sopher v. Administrator General of Bengal. Double possibilities were created. The children were
the beneficiares of a trust and in order for them to be entitled to the money, they had to attain
the age of 18 and they had to survive their respective fathers. IF THE BEQUEST IS CAPABLE
OF BEING DEFEATED BY EITHER CONTINGENCY, THEN THE BEQUEST DOES NOT
include to the whole of the remaining interest of the transferor. The Bombay HC in Framroze
held that Sopher’s case cannot be applicable to transfer inter vivos because Section 13 provides
that “unless it extends to the whole of the remaining life interest of the transferor.”

— Once the interests has been vested in an unborn child, it cannot be defeated.
 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.
 DECONSTRUCTING SECTION 14

• Can there be more than one potential transferee?

▪ Transferees must be living persons?
• What about the ultimate beneficiary?
▪ Must he be living as of the date of first transfer?
▪ Until when can the vesting in his favor be delayed?
 RULE AGAINST PERPETUITY

Consider
“By the settlement Bai Tehmina settled a sum of 47,000…upon trusts in favour of herself,
for life and after her decease in trust for all her children born during her lifetime who being
sons, “shall attain the age of 18 or being daughters shall attain that age of marry under that age
in equal shares”
Mukesh bequeaths a fund to Sachin for his life, and after Sachin’s death to Arjun for his life,
with a direction that it shall be divided amongst such of Arjun’s children as shall attain the
age of 18 but that if no child of Arjun shall attain that age, the fund shall go to Anil. Are the
bequests valid?
 RULE AGAINST PERPETUITY

Consider
Harry transfers property for life to Albus Severus, and then to Albus Severus’s first unborn child
without any specification as to the time of vesting of property.
Harry transfers property for life to Albus, and then to Albus’s first child when he attains the age of
18 years absolutely. Albus is living on the date of the transfer but has no child.
Harry transfers property for life to Albus, and then to Albus’s first child when he attains the age of
25 years.
Harry transfers property for life to Albus, and then to Albus’s first child when he attains the age of
10 years.
 F. DADABHOY VS. BAI TEHMINA

In my opinion, the parenthetical exception contained in Section 20, "unless a contrary intention appears
from the terms of the transfer," only emphasises what is not expressly stated in Section 13, viz. what is
given to the unborn person need not necessarily vest in him at his birth, and shows that the word
"extends" in Section 13 is confined to the subject-matter of the transfer and not to its vesting, whilst the
illustration to Section 13 makes it clear that the trust, for trust there must be in the case of benefits
conferred on persons not in existence, must create a beneficial interest which is absolute in
quality… In my judgment this is not the effect of Sections 13 and 20. Read together, and giving the words
their current meaning apart from such technical considerations as are only appropriate in English law, these
sections show that in Section 13 the word "extends", contained in the expression "extends to the whole of
the remaining interest of the transferor in the property", is directed to the extent of the subject
matter, and to the absolute nature of the estate conferred and not to the certainty of its
vesting. …
RECAP: PROPERTY INTEREST

• Property as “bundle of rights” or a “bundle of sticks.” The Right to Possess; The Right to Use;
The Right to Manage; The Right to the Income; The Right to Capital ; The Right to
Security; The power of Transmissibility; The Absence of Term; The prohibition of Harmful
use; Liability of Execution; Residuary Character….
• Harshana borrows the Divyansh’s pen. What kind of property rights does Harshana
enjoy? What kind of property rights does Divyansh enjoy?
• When does Harshana begin to enjoy the right to use the pen?
SECTION 15
Transfer to class some of whom come under Sections 13 and 14.—If, on a transfer of property, an interest
therein is created for the benefit of a class of persons with regard to some of whom such interest fails by reason
of any of the rules contained in sections 13 and 14, such interest fails 1[in regard to those persons only and not
in regard to the whole class].
Examples:
A property is transferred to Gabbar for his life and after his death to Samba for his life with a direction that after
Samba’s death it shall be divided amongst such of Samba’s sons as shall attain the age of 18 and to such of
Samba’s daughters as shall attain the age of 25. Samba has no children at the time of the transfer. As per Section
15, what is the effect of this deed?
A property is given to Mahesh, a bachelor, for life and thereafter to all his children, when the last child attains
majority.
SECTION 16

16. Transfer to take effect on failure of prior interest.—Where, by reason of any of the rules contained in
sections 13 and 14, an interest created for the benefit of a person or of a class of persons fails in regard to such
person or the whole of such class, any interest created in the same transaction and intended to take effect after
or upon failure of such prior interest also fails.
Example:
A transfer is made to X for life and then to Y for life and then to such of Y’s children as shall pass Standard XII.
If no child passes Standard XII, then to Y’s sister Z. No child passes class XII. Does Z have a valid claim?
A transfers property to B for life and then to B’s sons on their attaining the age of 25 years. The deed further
provides, that if B dies without any son, the property would vest absolutely in C. B and C were living on the date
of the execution of the transfer, but B had no child on the same day.
Can C make a claim if B dies childless?
 Section 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.
Section 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.

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 Vested Interest Contingent Interest

The condition involves a specified certain The condition involves a specified

event. uncertain event. There is a chance of the
Condition A certain event means an event that will happening or non-happening of that
eventually happen. particular event.

This right is created as soon as the interest is There is mere chance to be having the
Right of Ownership
vested. ownership rights.

Death of the person who is having this Death of the transferee before getting the
interest will not have any effect over that possession of the property will result in
Death of transferee
interest as after the deceased, the interest will the failure of contingent interest and the
vest in his legal heirs. property will remain with the transferor.
Contingent interest is a Transferable
Vested interest is a Transferable and right, but whether it is heritable or not,
Transferable and heritable
heritable right. it depends upon the nature of such
transfer and the condition.

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ILLUSTRATIONS: VESTED INTEREST
▪ A transfers a property to B on a condition that he will get the possession of the property after the
death of C.
▪ A transfers a farm to B on a condition that he will be able to enjoy the farm once he attains the
age of majority.
▪ Dhiru transfers property to Anant to be used by Anant on his 25th birthday. The event of Anant
achieving the age of 25 is a certainty in the natural course of things. Anant obtains a vested
interest in the property immediately and will enjoy the property upon turning 25.
▪ Lalit promises to transfer property to Mohan upon Mohan getting married to Neeta. Until such
time as Mohan actually marries Neeta, the interest in favour of Mohan is a contingent interest
because the transfer of property is dependent on the happening of a future uncertain event. Once
Mohan marries Neeta, Mohan will then have a vested interest in the property. [CONTINGENT]

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ILLUSTRATIONS: CONTINGENT INTEREST
▪ A transfers a property to B on a condition that he will get the possession of the property, if C dies before the age
of 40 years.
▪ A transfers a farm to B on a condition that the transfer shall take effect only, if he attains the age of majority.
▪ Property is given by RD to Ratan until Noel attains the age of 18. Ratan’s interest is vested, and Noel’s interest is
contingent.
▪ RD gives property to Ratan, but if he marries, to Noel. Ratan’s interest is vested and Noel’s interest is contingent.
▪ RD gives property to Ratan for life and then to Noel, but with the stipulation that Noel should not enjoy the
income till he is 18, Noel gets a vested interest. HOWEVER, If RD gives property to Ratan for life and then to
Noel when Noel reaches a certain age, Noel gets a contingent interest.
▪ RD gives property to Ratan for life and then to his unborn son, the unborn son gets vested interest the moment he
is born. HOWEVER, RD gives property to Ratan for life and then to his unborn son on attaining the age of 18,
the unborn son gets contingent interest the moment he is born.
▪ If RD gives the Property to Ratan for life with a stipulation that it his unborn son shall enjoy the income from the
property after he attains the age of 18, it is a vested interest.

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 TEST
The test is:
An interest is vested if it vests in the transferee immediately or on the happening of an event
which is bound to happen. Such an estate does not cease to be a vested interest merely because
1. The enjoyment is postponed,
2. A prior interest is given to another
3. The income accruing from it is directed to be accumulated until the time of enjoyment arrives.
4. Where the interest would pass to another on the happening of an event.

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HYPOTHETICAL: RAJES KANTA ROY V.
SANTI DEBI
Mohan had 3 sons, Rohan, Lohan and Sohan. Lohan is died 10 years back and his widow survives.
Mohan executes a registered trust deed in favour of Rohan and Sohan. Rohan was appointed as the
sole trustee to hold the property under trust. After the execution of the trust, Mohan died. Clause 1
in the trust deed stipulated that property A&B would go to Rohan, and property C&D would go to
Sohan. Clause 2 provided that property interest would go to either of them only after all the debts
of Mohan had been discharged as specified in Clause 3. The income from property A,B, C, D were
to be applied for the discharge of the debts and any remaining amount would be given as income to
the two sons. In the event of death of either son, the property would devolve to their heirs. 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
The widow of Lohan held a decree in her favour and against the interest held by Rohan and Sohan
in the trust property. The decree could only be executed if the Rohan and Sohan had vested interest
in the property and not contingent interest.

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61 DIFFERENCE BETWEEN VESTED INTEREST &
CONTINGENT INTEREST KOKILAMBAL V. N. RAMAN

Facts: The settlement deeds created by Koiklambal in favour of the deceased Varadan…
clearly says that since Kokilaambal had no son, and her husband Konicka Mudaliyar during
his life time has bestowed his love and affection on Varadan, the son of his elder sister, and
therefore, out of love and affection, she has settled that the income derived from
the properties, i.e., Door No. 43, Kakkaran Basin Road, shall be enjoyed by
herself and Varadan absolutely…The appellant No. 1 further settled that she
would not alienate the property but both of them reserve the right to alienate
the property jointly. Therefore, this settlement in no uncertain terms lays down
that the properties in question will vest absolutely after the death of the
appellant No. 1…”
62 DIFFERENCE BETWEEN VESTED INTEREST &
CONTINGENT INTEREST KOKILAMBAL V. N. RAMAN

Settlement is one of the recognised modes of transfer of moveable and immoveable

properties… The Courts have accepted such mode as legal and valid mode of transfer of
properties. Courts have emphasised that in order to find out the correct intent of the settlor,
the settlement deed has to be read as a whole and draw their interference of its content.
Therefore, it has always been emphasised that the terms of the settlement should be closely
examined and the intention of the settlor should be given effect to. Sometimes there is
absolute vesting and sometimes there is contingent vesting as contemplated in
Sections 19 and 21 of the transfer of property act 1882. In order to ascertain the
true intention of the settlor one has to closely scrutinise the settlement deed,
whether the intention of the settlor was to divest the property in his life time or to
divest the property contingently on the happening of certain event.
63 DIFFERENCE BETWEEN VESTED INTEREST &
CONTINGENT INTEREST KOKILAMBAL V. N. RAMAN

“These settlement deeds, in our opinion, clearly make out that Varadan was not made absolute
owner of the property during the life time of the settlor, Kokilambal…The settlor,
Kokilambal had not completely divested her right in favour of the deceased Varadan
but it was contingent one that it would vest after her death. Therefore, the
intention of the settlor was very clear that the settlement was to come into effect
after the death of settlor, Koiklambal…On account of the death of Varadan ,
Kokilambal who was the settlor remained the sole owner of the suit property
because settlement deed had come to an end on account of the death of settled,
Varadan. Therefore, she had the right to execute fresh deed of settlement in favour
of appellant Nos. 2 & 3. Thus, we do not find that subsequent settlement made by
the appellant No. 1 in favour of Appellant Nos. 2 and 3 suffers from any illegality…
 Ma Yait v The Official Assignee (1930) 32 BOMLR 125
The manner in which the trust is to come into operation after the death of the settler was, the property
to be comprised in three schedules. The trustees, during the life of the widow and until the youngest
child attained the age of twenty, were to distribute the income in the manner provided, namely, that they
were to pay 1,000 rupees a month to the widow, and to divide the remainder amongst the children,
including the eldest son. After the youngest child attained the age of twenty, property was to be sold,
and the proceeds were to be divided in equal shares between the children then surviving. There was a
slight alteration in the trust in relation to the property comprised in the fourth schedule, because in that
case the property was not to be distributed until the death of the youngest child, and it was to be
divided then amongst the children living at that date. Now, it is plain that the result of this disposition
was to create first of all, a vested interest in all the children in the income of the property. Secondly, it
created a contingent interest in all the children in respect of all the property until, the youngest child
reached the age of twenty. When the youngest child reached the age of twenty, the children who were
alive at that date obtained a vested interest and a right to have the proceeds distributed among them as
to the property discussed under first, second and third schedules. As to the property of the fourth
schedule, all the children took a vested interest until the death of the youngest child, and, as soon as the
youngest child died, the children then surviving, gets the property distributed among them.

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