Index
1. 2. 3. 4. 5. . ".
Int Introdu roduct ctio ion n Defini Definitio tion n of Ve Vested sted Interes Interestt Anal Analog ogou ouss law law Scop Scopee of the the sect sectio ion n Distincti Distinction on between between vested vested and contingent contingent interest interest Vested sted in in diff differe erent nt for!s for!s #n the the hap happen penin ing g of an eve event nt $ostpone!ent of en%o&!ent • 'onditional li!itation • Accu!ulation of inco!e • prior interest •
(.'ases ).'onclusion 1*.+ndnotes 11. ,ibliograph&
Introduction Vested Vested interest intere st
Vested Vested interest is defined under und er section1) of transfer of o f propert& act and this section should be distinguished fro! contingent interest as defined in sec.21. when an interest is vested the transferee-s title is alread& prefect. when the interest is contingent his title is &et i!perfect but is capable of beco!ing prefect on the fulfil!ent of so!e condition i!plied. If it is an uncertain event it is ta/e effect . 0hus a gift to A on death of , creates a vested interest in A even during ,s life ti!e for the condition is bound to happen. ,ut a gift to A on the !arriage of , creates onl& a contingent interest because , !a& never !arr& but that contingent interest beco!e vested if and when , gets !arries.
It !ust be noted that an interest !a& be vested even though it does not give a right to i!!ediate possession .0hus on a transfer to A for title with re!ainder to ,.,s interest is vested because there is nothing but As prior interest to stand between hi! and the actual en%o&!ent of the propert& transferred. An estate !a& be vested although the fact !a& be such it never beco!e vested in possession and so never give a right to the actual en%o&!ent of the land. 0hus on a transfer of A for life with re!ainder to , life with interest never vest possession for there is still nothing but As estate between , and the en%o&!ent of land. here on a transfer of propert& an interest therein is created in favour of a person without specif&ing the ti!e when it is to ta/e effect or in ter!s specif&ing that it is to ta/e effect forthwith or on the happening of an event which !ust happen such interest is vested unless a contrar& intention appears fro! the ter!s of the transfer. Vesting !eans granting a person an i!!ediate right to present or future en%o&!ent of propert&. In plain +nglish one has a right to a vested asset that cannot be ta/en awa& b& an& third part& even though one !a& not &et possess the asset. hen the right to the present or future possession of a legal estate can be transferred to an& other part& it is ter!ed a vested interest. A vested interest is not defeated b& the death of the transferee before he obtains possession. Definition of 'Vested Interest'
here on a transfer of propert& an interest therein is created in favour of a person without specif&ing the ti!e when it is to ta/e effect or in ter!s specif&ing that it is to ta/e effect forthwith or on happening of an event which !ust happen such interest is called vested interest. Explanation. An intention that an interest shall not be vested is not to be inferred !erel& fro! a provision whereb& the en%o&!ent thereof is postponed or whereb& a prior interest in the sa!e propert& is given or reserved to so!e other person or whereb& inco!e arising fro! the propert& is directed to be accu!ulated until the ti!e of en%o&!ent arrives or fro! a provision that if a particular event shall happen the interest shall pass to another person. 0his interest beco!ing vested interest in transfer of propert& Analogous law
Section 11) of Indian Succession Act1)25corresponds with section 1) of Indian transfer of propert& act and it runs as follows 11)where b& the ter! of a be6uest the legatee is not entitled to i!!ediate possession of the thing be6ueathed a right receive it at the proper ti!e shallunless a con trar& intention appear b& the will beco!e vested in the legatee on the testators death and in such case the legac& is fro! testators said to be vested interest.
Explanation: 7
An intention that a legac& to an& person shall pass not beco!e vested interest in hi! not to be inferred !erel& fro! the provision whereb& the pa&!ent or possession of the be6ueathed is postponed or whereb& a prior interest therein is be6ueathed to so!e other person or to so!e other person or whereb& the inco!e arising fro! the fund be6ueathed is directed to accu!ulated until the ti!e of pa&!ent arrives or fro! a provision that if a particular event shall happen the legac& shall go over to other. illustration:-
A be6ueathed to , 1**rupees t be paid to hi! at the death of '. #n As death the legac& beco!e vested in interest in b and if he dies before ' his representative are entitled to the legac&. Scope of the section
0his section is corresponding to s.11)of 0he Succession Act1)25give e8pression to the +nglish notion of the vested interest and !a/e it the law of the land e8cept in the case of !uha!!adans law. A vested interest is a i!!ediate right as distinguished fro! the a right which !a& co!e into e8istence in future. 0he i!!ediate right !a& be right of present en%o&!ent of right of future en%o&!ent. In Sashi /antha v. pro!od chandara1 their lordship of the 'alcutta 9igh court pointed out the distinction between a vested interest and contingent interest as following An estate or interest is vested as distinguished fro! contingent either when en%o&!ent of it is presentl& conferred or when its en%o&!ent is postponed the ti!e of the en%o&!ent of the will certainl& co!e to pass in other words an estate is vested when the i!!ediate right of present en%o&!ent or future en%o&!ent .An interest is said to be contingent interest if en%o&!ent depend upon so!e event this the difference between v ested interest and contingent interest. a person get vested interest when it is created in his favor :1; without specif&ing the ti!e when it ta/e effect or :2;in ter!s specif&ing that it is to ta/e effect forthwith or :3; in ter!s specif&ing that it is to effect on the happening of an event which is !ust happen. Such interest becomes a ested interest under these two circumstances
In case where on a transfer of propert& an interest is created in favor of a person to ta/e effect onl& on the happening of a specified uncertain event then on the happening of the event. In case where on a transfer of propert& an interest is created in favor of a person to ta/e effect onl& on the not happening of a specified uncertain event then when the happening of the event
beco!es i!possible. 0he not happening of the event should beco!e absolutel& certain be&ond doubt. Such an interest beco!es a vested interest in the transferee. !or example
Suppose # is the owner of ,lac/acre. 'onsider what happens when # transfers the propert& to A for life then to ,. $erson A ac6uires possession of ,lac/acre. $erson , does not receive an& right to possess ,lac/acre i!!ediatel&< however once person A dies possession will fall to person , :or his estate if he died before person A;. $erson , has a future interest in the propert&. In this e8a!ple the event triggering the transfer is person As death. ,ecause the& conve& ownership rights future interests can usuall& be sold gifted willed or otherwise disposed of b& the beneficiar& :but see Vesting below;. ,ecause the rights vest in the future an& such disposition will occur before the be neficiar& actuall& ta/es possession of the propert&. this t&pe of interest is /nown as vested interest
"hese points of distinction between ested and contingent interest need to be noted
A contingent interest is inalienable. #n the other hand vested interest is heritable and transferable. A contingent interest depends solel& upon the fulfil!ent of a condition so that in case of non7 fulfil!ent of the condition the interest !a& fall thorough. #n the other hand a vested interest does not depend upon the fulfil!ent of an& conditions and ta/es effect fro! the date of the transfer of propert&.2 In case of a contingent interest there is no present right. 9owever there is a pro!ise for giving one and is altogether dependent upon the fulfill!ent of the condition. As against this in case of a vested interest there is a present and i!!ediate right. #nl& its use is postponed. In case of a contingent interest the transferee ta/es an interest of a contingent nature which !a& be defeated b& reason of non7fulfill!ent of the precedent conditions. 0his is not the case in case of a vested interest. It is to be noted that where under a transfer of propert& a person beco!es entitled to an interest in the propert& upon attaining a particular age and the transferor also gives to hi! absolutel& the inco!e to arise fro! such interest before he reaches that age or directs the inco!e to be applied for his benefit then such interest is vested interest. In propert& law and real estate a future interest is a legal right to propert& ownership that does not include the right to present possession or en%o &!ent of the propert&. =uture interests are created on the for!ation of a defensible estate< that is an estate with a condition or event triggering transfer of possessor& ownership. A co!!on e8a!ple is the landlord7tenant
relationship. 0he landlord !a& own a house bu t has no general right to enter it while it is being rented. 0he conditions triggering the transfer of possession first to the tenant then bac/ to the landlord are usuall& detailed in a lease. Vested interest should be without an& condition
Vested in different forms
:i;Vested in possession 7 when it is a right to present possession for e87 our residential house. Vested in possession is a ter! used to indicate an interest which gives a right to i!!ediate en%o&!ent of an interest in propert& as opposed to an interest vested in re!ainder. =or e8a!ple an estate is vested in possession when there e8ists a right of present en%o&!ent< and an estate is vested in interest when there is a present fi8ed right of future en%o&!ent. >0he phrase vested in possession is well understood as !eaning a right of present en%o&!ent. 'ontrasted with these ter!s is the phrase vested in interest which !eans a present fi8ed right of future en%o&!ent. 0hus an& given interest !a& first be vested in interest then vested in possession and finall& reduced to possession. :ii; Vested in interest ? when it is not a right to present possession but a right to future possession. +8a!ple7 a land @ building is given to a!esh for his life with a re!ainder to , in that case -s right invested in possession ,-s right is vested in interest .i.e. after -s death propert& will co!e to , without an&condition.A vested interest is transferrable and heritable.A vested interest is a >right that so co!pletel& and definitel& belongs to a person that it cannot be i!paired or ta/en awa& without the persons consent. 0he event or ti!e fra!e that triggers vesting is t&picall& defined b& contract such as e!plo&ee pension benefits vesting after a certain nu!ber of &ears.3 :iii; ested gift7A vested gift refers to an absolute gift. Benerall& a vested gift is free fro! contingencies. Although a vested gift is unconditional its use or en%o&!ent !ight not occur until so!eti!e in the future. 9ence a vested gift can be !ade for the purpose of present or future usage. :iv;ested estate7Vested estate is an absolute unconditional and indefeasible interest. It is an estate which is not contingent or e8pectant. Vested estate carr& a fi8ed right of present or future en%o&!ent. It gives a certain and fi8ed right of present or future en%o&!ent< that is an interest clothed with a present legal and e8isting right of alienation. An estate is vested in possession when there e8ists a right of present en%o&!ent and vested in interest when there is a present right of future en%o&!ent.
:v;ested future estate 7Vested future estate is an estate which e8ists when there is a person in being who would have an i!!ediate right to the possession of the lands upon the ceasing of the inter!ediate or precedent estate. :vi;ested liabilities 7vested liabilities !eans >the present value of the i!!ediate or deferred benefits available at nor!al retire!ent age for participants and their beneficiaries which are no forfeitable. :vii;ested right 7A vested right is co!!onl& defined as a >right that so co!pletel& and definitel& belongs to a person that it cannot be i!paired or ta/en awa& without the persons consent. :viii; ested interest b# will 7propert& given to window in lieu of her !aintenance during her life ti!e and after her death surviving right if an& was to vest in daughter enact!ent of 9indu succession act 1)5 deprived daughter of their legal right as widows interest enlarged into an absolute estate no right vested in daughters will.4
$%r in terms specif#ing that it is to ta&e effect forthwith$
where a transfer is !ade to A >when or if he shall attain a particular age the word when or if will unaided b& conte8t show that A was given onl& contingent interest but the word !a& be controlled b& other e8pressions as to show that the grantors intention is !erel& postpone the en%o&!ent and not vesting itself 5.In such cases the interest will be vested not contingent . thus where C b& will directed the trustee to divide the estate 21 &ears after the testators- death into certain share and give one such share to his wife and stated that such share should vest in her at the date of his death it was held b& their ordship of the priv& council that she too/ a vested estate though postponed for 21 &rs .
%n the happening of an eent
0he interest is a vested interest where the operation o f the transfer is !ade to depend upon so!e specified certain event .the event !ust be clearl& specified e8plained and it !ust be certain to happen. =or e8a!ple death of a person.
ostponement of en(o#ment :
It has been that an interest !a& be vested though the en%o&!ent thereof is postponed. And the e8planation !a/e it that fro! the !ere provision for postpone!ent of the en%o&!ent it should not be inferred that the interest is not vested. In other words the !ere fact that the transfer is not entitled to the i!!ediate en%o&!ent does not necessaril& !a/e the interest contingent one. 0hus where a gift was !ade A with a direction postponing the en%o&!ent of it it was held that the direction did not postpone the vesting. here a 9indu widow !ade a gift of propert& to the deit& with the consent of the reversion under an agree!ent under which the revision en%o&ed the benefit of rent and inco!e of the propert& during the lifeti!e of the widow the propert& so donated beca!e vested in deit&. ,ut though the provision for the postpone!ent does not b& itself prevent the vesting of propert& such a provision cannot be said to be valid under all circu!stances. Such a provision will be valid where 1. 0he right of en%o&!ent is given in the !eanwhile to so!e other person or 2. 0he transferee is under the !a%orit& and en%o &!ent is postponed until he attains !a%orit&. 0he leading case on the point is Bosling vs Bosling where vice chancellor Sir .$age ood !ade the following observation 0he principle of this court has alwa&s been recogniEed the rights of all person who attain the age of 21 to enter upon the absolute use and en%o&!ent of the propert& given to the! b& a will not withstanding an& direction b& the testator to the effect that the& are not to en%o& until a later age unless during the interval the propert& is given for benefit of the another. If the propert& is once theirs its useless for the testator to atte!pt to i!pose an& fetter upon their en%o&!ent of its full as the attain 21. And upon the principal unless there is in the will or in so!e codicil to it a clear indication of an intention on the part of the testator not onl& that has devisee are not too have the en%o&!ent of the propert& he devised to the! until the attain 25but so!e person is to have that or unless the propert& is so clearl& ta/en awa& fro! devisee up to ti!e of attaining 25as to induce the court to the previous rents and profit there has been an intestac& the court does not hesitate to stri/e out of the will an& direction that the devisee shall not en%o& it in full until the& attain the age of 25 &ears.
)onditional limitation
0he interest shall not be vested is not to be inferred fro! a provision that if a particular event shall happen the interest shall pass to another person. Such t&pe of a provision is called a conditional li!itation.a conditional li!itation divests an estate which has beco!e vested and vests it in another person. Section 2( of transfer of propert& deals with conditional li!itation. Sunder *ibi . +a(endra ,arain "7
0he ter!s of a co!pro!ise provided that should have an estate for life and that after his death to was to be the full owner of the estate if he survived . If did not survive the estate would pass to -s lineal !ale descendent according to the rule of pri!ogeniture . before the death of .the 6uestion arose whether had onl& a contingent interest or a vested interest which could be attached .if the provision had been !erel& this that the estate would pass to if he survived and estate contingent on his surviving . 0he further provision of a gift over to another person was conditional li!itation which had the effect of vesting the estate . 0he court gave the reasoning that the condition affected the retention of the interest and not in its ac6uisition .0herefore too/ a vested interest liable to be divested if he did not survive . 0his above case is deal in conditional li!itation. Accumulation of income
It is not to be in freed that the interest shall not be vested whereb& inco !e arising fro! the propert& is directed to accu!ulated until the ti!e of en%o&!ent arrives. 9owever the direction for accu!ulation of inco!e !ust be within the li!its sanctioned b& section1". If the direction is for a period in e8cess of the period specified it will be invalid for the pe riod in the e8cess of the period specified it will be invalid for the period in e8cess. #nl& the right of en%o&!ent is postponed onl& but not the vesting.
prior interest
Si!ilarl& it is not to be inferred that an interest shall not b e vested !erel& b& the provision whereb& prior interest is created there is onl& postpone!ent of the en%o&!ent and not the vesting of subse6uent interest . Interest ests in his legal representaties whether obtained possession +a(es anta +o# . smt. Shanti Debi. (
0his case deal with the principle to decide the 6uestion whether interest ta/en b& beneficiaries under trust is contingent or vested.
!acts
#ne a!ani /anta o& e8ecuted a registered trust deed in respect of his properties. 0he eldest son a%es /anta o& was appointed the sole trustee to hold the properties under trust sub%ect to certain power and obligations. After the e8ecution of said deed a!ani Fanta died. clause 12 of the deed was the !ain provision under which a%es /anta and his brother a!endra Fanta o& got an& interest in the properties .0his clause showed that ots I to IV of the properties ultiti!atel& went to a%es and ot V alone went to a!endra .,ut the interest with either of the! was to get the properties allotted to ea ch was e8pressed to be one which each would get after ter!ination of the trust . it was onl& after happening of two events :i; :ii;
0he discharge of all the debts specified in the schedules 0he death of the settler hi!self that the trust was to co!e to an end and it was on the trust co!ing to an end that the sons were to get the properties allotted to the!.
udgement ?
It was observed that the entire sche!e of the trust deed was 1; Specified lots were ear!ar/ed for each of the two sons 2; 0he present inco!e out of those lots were to be applied for the discharge of the debts after pa&!ent of specified su!s there for! b& the wa& of !onthl& pa&!ent of the two sons and presu!abl& such application was notionall& pro rata 3; An& surpluses which re!ain fro! out of the inco!e of each of the lots were to go to the ver& person who! the corpus of the lot itself was belong on the ter!ination of the trust 4; In the event of an& of the two sons d&ing before the ter!ination of the trust his interest in the !onthl& pa&!ent out of the inco!e was to devolve on his heirs. 0his arrange!ent clearl& show that what is postponed was not were vesting of the propert& in the lot the!selves but that the en%o&!ent of the inco!e of the inco!e thereof was burden with certain !onthl& pa&!ents of which ta/en together constituted application of the inco!e for the benefit of the two sons . 0herefore the interest ta/en b& the a%es and a!endra under the trust deed was vested not contingent. It nothing but short of spes succession and the interest of the life estate holder in the propert& during his life ti!e was vested interest.
)onclusion
hen a propert& is transferred it involves transfer of interest if the interest transferred are is transferred i!!ediatel& it is vested interest. =ro! the point of view of ti!e of accruing:when transferee get the interest the interest !a& be either vested or contingent;.In a vested interest as soon as transfer is co!plete the interest accurse to transferee with i!!ediate effect and the transferee title is co!plete. Vested interest should be without an& condition. A transfer of propert& an interest therein is created in favour of a person without specif&ing the ti!e when it is to ta/e effect or in ter!s specif&ing that it is to ta/e effect forthwith or on the happening of an event which !ust happen such interest is vested unless a contrar& intention appears fro! the ter!s of the transfer.
E,D,%"ES
1.Sashi /antha v. pro!od chandara AI1)32 'al ** :*);5) 'al (5):D,; 2.Gsha subba rao v. ,.H.vishveshwaraiah and other1)):3;'...4(2 3.VHagarathina! v. $ad!adavi AI 2**1 Jad53 4.$alchuri 9anu!&a!!a v. 0adi/a!alla /otlinga!AI2**1 S' 3*2 5.,ranstor! vs ili/son AI 1)5" S' 255 :23; .Bosling v. Bosling :1(5);"* + 423 :42;1(5) %ohn 25 "; Sunder ,ibi v. a%endra Harain :1)25;4" All 4)(I' (4AI1)25All 3() (; a%es Fanta o& v. s!t. Shanti Debi.A.I..1)5" S.'.255.
*ibliograph#
/. "ransfer of propert# b# S.,.shu&la 0. "he transfer of propert# b# Dr.Atar Singh 1. Vested interest - 2i&ipedia3 the free enc#clopaedia en.wi&ipedia.org4wi&i4Vested interest 5. www.inestopedia.com4terms44estedinterest .asp 6. www. a&ilno/.com 7. indian&anoon.org4search48form Input900ested0;interest00 <. A.I.+ )ommentaries ol./ b# =anohar > )hitale# ?. "ransfer of propert# b# Dr.+.. Sinha
