Transfer of property includes the transfer of interest. The interest may be absolute or partial if we see it from the point of view of quantity and if we consider interest from the point of view time the interest can vest or contingent. The interest is said to be vested when the transferee gets the property immediately but contingent interest is that interest in which the transferee gets the property after happening of the event mentioned in the transfer. Vested interest and contingent interest is defined under section 19 and 21 of the Transfer of Property Act, 1882 respectively.
This is defined under section 19 of the Transfer of Property Act, 1882 which states that the interest which is made in the favor of the transferee is said to vest when no time has been specified as to when it is to take effect or it is specified that it shall take effect immediately or it shall take place upon the happening of an event which must happen. For example, A makes a gift of his house to B. He executed the gift deed without mentioning the date of ownership to be transferred. The interest of B is a vested interest. The explanation provided under Section 19 states that in the following situation it may appear that transferee has not vested the interest but the interest is vested :
- Postponement of enjoyment: Postponement of property does not mean that the interest of the transferee is not vested which means possession of the property can be postponed for some time. For example, A has transferred his property to B but he’ll enjoy the possession after attaining the age of majority. However, if B dies before attaining the age of majority the property will in the possession of the B’s representatives or legal hires.
- Prior interest: When the interest is created in the same transfer, there is a postponement of the enjoyment of property. For example, A transfers his property to B for life than to C, In this, the property is vested to C but C will not enjoy the possession until and unless B dies After this C will immediately vest the interest.
- Conditional limitation: According to English law conditional limitation refers to when on the happening of an event the vested interest is passed from one person to another. This is concept is defined under section 28 of the Transfer of Property Act, 1882 which states conditional limitation does not prevent the vesting of the interest. It is implied that if the interest is already vested then it can also be divested and vested somewhere else. For Example, A transfers his property to B on the condition that he’ll not enjoy the property for 6 months from the date of transfer, if he takes the possession then the property will belong to C. In this case, the property is vested to B but if B fails to fulfill the condition then the property will be vested to C.
Section 20 states the vested interest to an unborn child. According to this section, a child will get possession once the child is born alive. The unborn child may not enjoy the vested property immediately after having interest vested.
This interest is defined under section 21, Transfer of Property Act, 1882 that states when the interest is created in the favor of a person which has to take effect after happening of an uncertain specific event if that event doesn’t take place then that person acquires the contingent interest in the property. Let’s take an example to understand this concept :
EXAMPLE: A makes a gift to B on the condition he needs to score 95% in exams then only the property will be vested. Therefore until and unless the condition is fulfilled the transfer of the property cannot be done and the interest of the transferee remains contingent. Contingency can be of two kinds i.e. Firstly, happening or not happening of the event is based upon the will or desire such as marriage, payment of the sum of money or execution of the deed and Secondly, where the event does not depend on will or desire such death of a person or certain period of time.
EXCEPTION TO SECTION 21: When there is a chance that the transferee will receive the ownership of the property and till the happening of an event if transferee receives any income arising out of the property then the interest is not contingent, it’s a vested interest. This exception is defined under Section 120 of the Indian Succession Act, 1925.
Section 22 states that the interest will be transferred to a group of people or of a class member who will attain a specific age. For example, A will transfer his from property to that child who will attain the age of 18. In this class is defined that A’s children will get the property but the member is not defined, hence the child who will attain the age of 18 first, the property will be transferred to that child.
Section 23 states that the transfer will take place only after happening of the event that is mentioned in the transfer involving contingent interest. Section 21 provides two conditions i.e. happening or non-happening of an event, This section lays down the happening of a specified uncertain event. For Example, A property is vested to A for life and then to B with the condition that B will only get the interest if he scores first division in his exams before the death of A If B scores first divisions in exams after the death of A then B will not enjoy the property.
Section 24 states that the property will be vested to that group or class of members who will live up to the specified date but the exact period is not specified. For Example, A transfers his property to B for life and after B’s death property will be vested to C and D equally or to the survivors, If C dies during the life of B then the whole property will be vested to D.
DIFFERENCE BETWEEN CONTINGENT AND VESTED INTEREST
|VESTED INTEREST||CONTINGENT INTEREST|
|1. When Accrues||Interest is vested immediately||Interest does not accrue until the specified uncertain happens or does not happen|
2. Nature of title
|Confers complete and perfect title||The title depends upon the event which may or may not happen|
|It’s transferable and the transferee will get a complete title||It’s transferable but it may be revoked if the condition is not fulfilled.|
|Inherited by the legal heirs.||Confer no title, therefore it’s not heritable.|
5. Attachment and sale in execution of property
|Capable of being attached and sold in execution of the decree||Not capable of being attached and sold in execution of the decree|
Transfer of Interest is one of the most important concepts of the Transfer of Property Act, 1882. There are many sections mentioned in the bare act related to vested and contingent interest. The main difference between both the interest is that in Vested interest there is no condition, the transfer will take immediate effect but in Contingent interest, there is a condition which needs to be fulfilled, if the condition is not fulfilled the transfer will not take place.
- Bare Act: Transfer of Property Act, 1882
- Transfer of Property Act, 1882 by Dr. R.K Sinha