Vested Interest

Vested interest is defined under section 19 of the Transfer of Property Act. When interest is vested, the transferee’s title is already perfect.[1]

It’s worth noting that an interest can be vested even if it doesn’t entitle the holder to possession immediately. Therefore, on a transfer to A for title with remainder to B, B’s interest is vested because there is nothing between him and the actual enjoyment of the property transferred except A’s prior interest.

Vesting means granting a person an immediate right to present or future enjoyment of property[2]. In other words, even if a person does not have immediate possession of the property, vested rights to it cannot be taken away by a third party. A vested interest exists when the right to the present or future possession of a legal estate can be transferred to another party. The death of the transferee before he obtains possession does not negate a vested interest.

A vested interest is not defeated even by the death of the transferee before he obtains possession.

Definition of ‘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 happening of an event which must happen, such interest is called vested interest.[3]

Explanation.— A provision that postpones enjoyment of an interest, or that gives or reserves a prior interest in the same property to another person, or that directs income derived from the property to be accumulated until the time of enjoyment arrives, does not imply that the interest will not be vested, or from a provision that if a particular event shall happen the interest shall pass to another person. This interest becoming vested interest in transfer of property.

Analogous law

According to Section 119 of Indian Succession Act[1]  relates to Section 19 of the Indian Transfer of Property Act:

Where by the terms of a bequest the legatee is not entitled to immediate possession of the thing bequeathed, a right to receive it at the proper time shall, unless a contrary intention appears by the Will, become vested in the legatee on the testator’s death, and shall pass to the legatee’s representatives if he dies before that time and without having received the legacy, and in such cases the legacy is from the testator’s death said to be vested in interest.

Explanation.-

An intention that a legacy to any person shall not become vested in interest in him is not to be inferred merely from a provision whereby the payment or possession of the thing bequeathed is postponed, or whereby a prior interest therein is bequeathed to some other person, or whereby the income arising from the fund bequeathed is directed to be accumulated until the time of payment arrives, or from a provision that, if a particular event shall happen, the legacy shall go over to another person.

Scope of this Section

This section corresponds to section 119 of the Act[2] which expresses the English concept of vested interest and makes it the law of the land, except in the case of Muhammadan law. A vested interest is an immediate right , as opposed to a right that may exist in the future. The immediate right may be a right to enjoyment in the present or a right to enjoyment in the future.

In the case Sashi kantha v. Promod Chandara[3] Calcutta High Court pointed out the distinction between a vested interest and a contingent interest 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 enjoyment will certainly come to pass; in other words, an estate or interest is vested when there is an immediate right of present enjoyment or a present right of future enjoyment. An estate or interest is contingent when [the right of enjoyment is to accrue, on an event which is dubious or uncertain.

[1] Section 119 in THE INDIAN SUCCESSION ACT, 1925 , Bare Act, Universal Law Publishing Co. Pvt. Ltd., New Delhi, 2010.

[2] Ibid.

[3] Sashi kantha v. Promod Chandara, AIR 1932 Cal 600.

[1] DR. S. N. SHUKLA, THE TRANSFER OF PROPERTY ACT, (28th Ed. , 2018,Allahabad Law Agency) p. 54.

[2] JUSTICE P.S.NARAYANA, THE TRANSFER OF PROPERTY ACT, (2012, Ed.,p.43.).

[3] Section 25  in The Transfer of Property Act, 1882, The Transfer of Property Act, 1882, Bare Act, Universal Law Publishing Co. Pvt. Ltd., New Delhi, 2010.

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