Transfer of Property to an Unborn Person- All You Need to Know

Introduction:

The main provisions governing the transfer of properties to an unborn person are prescribed in Sections 13, 14, and 18 of the Transfer of Property Act. The Indian Law does recognise an unborn child as a legal person for various purposes. The benefits can, however, be realized only after the child comes into existence. The Act does not define the term “unborn child”. However, in a literal sense, it can be understood that an unborn child means a person inside the womb at any stage of development or in simpler terms a child yet to be born. Section 13 of TOPA (subject to other provisions concerning the transfer of property) makes it possible for a person bequest his legacy on a person who is yet to come into existence.

As per Section 13 of Transfer of Property Act, 1882, transfer for benefit of unborn person. —

• 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.

Rule Against Perpetuity

Another important provision determining the terms of transfer in favour of an unborn child is The Rule against perpetuity. The Rule against perpetuity has been embodied in Section 14 of the Transfer of Property Act. This Rule restrains a person from creating a future interest in a property for an indefinite period, therefore, rendering the property inalienable. The essence of the rule is to prevent the property from being tied up to a single generation for eternity and safeguards the ability of future generations to freely buy or sell properties.

Section 13 supplements section 14 of TOPA, thus it is important that both the provision must be read in conjunction.

Origin

The origin of the Rule of Perpetuities could be traced back to the time of feudal England as an outcome of an important judgement pronounced by the House of Lords in the case of Duke of Norfolk’s Case. In this case, the grantor tried to create a shifting executory limitation so that some of his property would pass to his eldest son, while other properties would pass to his second son. The estate plan had a provision of shifting the property many generations later if certain conditions should occur. When the eldest son died, the property was passed to the second son who did not want to pass the property to the fourth son. In deciding the case, the judges held that tying up property too long beyond the lives of people living at the time was wrong. However, the exact period was determined 150 years later in the case of Cadell V. Palmer[i]

Analysis of Section 13 and 14 of The Transfer of Property Act

• The vesting may be postponed only up to the life or lives of the living persons in favour of whom the prior interest(the actual identified person) has been created plus the age of minor who is the ultimate beneficiary, and no further. In the landmark case of Raj Bajrang Bahadur Singh v/s, Thakurain Bhakraj Kuer, (1953) SCR 232, the Supreme Court observed that “It is quite true that no interest could be created in favour of an unborn person but when the gift is made to a class or series of persons, some of whom are in existence and some are not, it does not fail in its entirety; it is valid with regard to the persons who are in existence at the time of the testator’s death and is invalid as to the rest.”

• The interest by an unborn shall vest on the child immediately on his birth unless there appears a contrary intention in the terms of transfer. Section 20 of the act states that where on the transfer of property, an interest therein is created for the benefit of a person not then living, he acquires upon his birth, a vested interest although he may not be entitled to the enjoyment thereof immediately on his birth.

• The subject property must extend to the whole of the remaining interest. Section 13 of TOPA states “………the interest created for the benefit of such person shall not take effect unless it extends to the whole of the remaining interest of the transferor in the property” The expression ‘whole of the remaining interest’ signifies that the transfer made in the favour of an unborn must be absolute and unconditional. In other words, the person in whose favour a prior interest has been created cannot retain with himself any part of the subject property and such property must be transferred to the unborn in its entirety. A Prominent landmark judgement which has aided the juries in deciding matters where the underlying question is that of validity on the transfer of property subject to limited interest to an unborn is involved in the case of Girish Dutt V/s Duttadin.

1. Facts: In this case, ‘A’ transferred property to ‘B’, her nephew, for life and thereafter the property was to be devolved to his male descendant  (Absolute interest) if any, and in the absence of the above the property would devolve to B’s daughter but bearing a limited interest. The deed also provided that in case B died issueless the property would absolutely go to ‘X’. B died issueless and X made a claim upon the subject property.
2. The courts held that here a transfer in favour of a person or his benefit is void under sec.13, any transfer contained in the same deed and intended to take effect or upon failure of such prior transfer is also void.
3. There is no limit as to a number of prior interests that can be created before the property finally devolves to the minor.

History of the Legislation

Prior to the enactment of TOPA, a gift in favour of a person not in existence was void under both Hindu and Muslim Law. However, after a series of amendments, the rules were brought into conformity with section 13 of TOPA. [ii]

As per the Mohammadian Law, a gift in favour of an unborn till date stands void.

Section 113 and 114 Indian Succession Act provide provisions identical to Section 13 and 14 of Transfer of Property Ac which permit bequest of property in favour of an unborn child. The main difference between the two provisions is that while the former deals with bequeathing of an estate, whereas the latter deals with transaction inter vivos.

Rule Against Perpetuity under Indian Law and English law

Speaking of Rule against perpetuity, the Indian Law essentially differs from the English Law in terms of the maximum permissible limit of postponement and other conditions which would otherwise render the transfer void.

The first major difference the two law is that the maximum period of postponement of vesting of interest as prescribed under the Indian Law is the life or lives of the last person in whose favour last prior interest has been created plus the minority of the ultimate beneficiary. Whereas the corresponding provision in the English Law provides that the property would vest in the minor only after attainment of the age of 21 years regardless of the age of the minor.

Secondly, in case of English law, the unborn person must come into existence within 21 years of cessation of prior interest, whereas, the Indian Law requires the unborn child to come into life during the existence of such last person in order for the transfer to be valid.  

International Scenario

Legislations across Goble have either implemented the rule with modifications or have adopted a clearly different approach. For example in some states in the US follow “wait-and-see approach” whereby the validity of a suspect future interest is determined on the basis of facts as they now exist at the end of the measuring life where some states, while other states have adopted the Uniform Statutory Rule Against Perpetuities (or some variant of it) which extends the waiting period typically to 90 years after the creation of the interests.

In the year 1964, United kingdom enacted a new statue called The Perpetuities and Accumulations Act 1964 which codifies the ‘wait and see’ doctrine. Australia also follows the UK approach to perpetuities with statutory modifications.[iii]

Conclusion

Transfer to an unborn person and the Rule against Perpetuity is perceived as one of the most difficult subjects encountered not just by the law students but also by practising lawyers. Besides, the majority of the population is ignorant of the laws governing the transfer of property in general. Because of this, legatees often face problems such as disputes relating to title, heavy litigation costs, the instrument of transfer being rendered partly or wholly void. Thus, the need of the hour is that institutions at various level must engage in activities such as imparting legal awareness relating to various aspects of the transfer of properties so as to aid people in Estate planning more efficiently.

---

[i] Wikimedia Foundation. (2020, August 11). Rule against perpetuities. Wikipedia. https://en.wikipedia.org/wiki/Rule_against_perpetuities.

[ii]        Admin. (2019, February 21). Transfer of Property to an Unborn Child. https://www.lawctopus.com/academike/transfer-property-unborn/.

[iii] Wikimedia Foundation. (2020, August 11). Rule against perpetuities. Wikipedia. https://en.wikipedia.org/wiki/Rule_against_perpetuities.