ALIGARH MUSLIM UNIVERSITY

MALAPPURAM CENTRE, KERALA

TRANSFER OF PROPERTY
PROJECT

Topic- Contingent Interest & Vested Interest and their

Distinction.

Submitted to Submitted by

Dr. Naseema P.K Kunjali Singh

Assistant Professor GK7931
Department of law 18BALLB34
Content TABLE TS Page No.
OF
Introduction 03

Contingent Interest 04

Conditions of Contingent Interest 05

Nature of Contingent Interest 07

Difference between Contingent 09

Interest and Spes Successionis

Vested Interest 10

Definition 10

Characterstics 12

Distinction between Contingent and 13

vested Interest

Conclusion 14

Bibliography 15
 INTRODUCTION
The Transfer of Property Act, 1882 deals with vested interest and contingent interest.
The concepts of vested interest and contingent interest are very important to understand as there
are many sections relating to these concepts.

The transfer of property involving Contingent interest takes effect only after the condition is
fulfilled, if the condition is not fulfilled then the transfer will not take effect. The conditions are
required to be fulfilled and they have to mandatorily synchronize with the preamble rules that talk
about justice, equity and good conscience, the three major principles of the natural law on which
this whole act is based upon.

When the interest is contingent his title is yet imperfect, but is capable of becoming prefect on the
fulfilment of some condition implied. If it is an uncertain event, it is take effect. Thus, A gift to C
on death of B creates a vested interest in an even during B's life time for the condition is bound to
happen. But a gift to A on the marriage of B creates only a contingent interest because B may
never marry, but that contingent interest becomes vested if and when B gets marries. In this
research paper I have aimed to understand and draw a clearer picture about the concepts of vested
and contingent Interest provided in the Transfer of Property Act 1882 in addition to the various
other provisions given in the Indian Succession Act 1995 in regards to the above mentioned
concepts.

CONTINGENT INTEREST
Section 21 of Transfer of Property act defines-

"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, 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
1
the happening of the event, in the latter, when the happening of the event becomes impossible"

There are exceptions to the same which are as follows:-

"Exception - Where, under a transfer of property a person becomes entitled to an interest, wherein
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 many be
necessary to be applied for his benefit, such interest is not contingent" 2

Illustration3
'X' bequeathed his property i.e. estate to 'Y' until he shall marry to 'Z'. 'Y's interest in bequeath is
contingent because it depends upon a condition precedent i.e. a marriage of 'Y' with 'Z'. An event
has no proprietary interest in the estate and cannot alienate it.

Breaking down the section

This section can be broken down as when a transfer of property is to be made only on the
happening of a specific uncertain event the person to whom the property is transferred is said to
have a contingent interest in the property. Key feature being happening of a specific uncertain
event. The specified uncertain event may be one which depends upon the will of the intended
transferee, e.g. Execution of a deed, or payment of a sum of a money. The performance of such
condition is subject to s.26.

However section 21 is not read alone but with other sections of the other statutes.

"Transfer Contingent on happening of specified uncertain events - Where on a transfer of property,

an interest therein is, to accrue to a specified person, if a specified uncertain event shall happen

1THE TRANSFER OF PROPERTY ACT,

1882 ,(4 OF 1882).
2
Ibid.
3
Contingent Interest, SRD LAW NOTES,(Oct.16,2019,3:00 AM).
https://www.srdlawnotes.com/2016/05/contingent-interest.html.
and no time is mentioned for the occurrence of that event, the interest fails unless such event
4
happens before all at the same time as the intermediate or precedent interest, seizes to exist

The aforementioned section i.e. section 23, enacts that contingent interest will fail to vest unless
the event in question happen at the same time or before as the prior interest seizes, i.e. an interest
out of a property will arise after the happening of the specific uncertain event or else it is not a
contingent interest.

The rule enacted in the aforementioned section is based on the principle that no property can
remain without an owner even for a moment.

Example- Thus, if there is a gift for life to A and then to B, in case B gets called to the Bar, the
gift to B fails unless he is called to the bar in the lifetime of A, or at the same time as A dies.

The provisions also comply with other provisions of other statutes such as the Indian Succession
Act, the section corresponds to section 124 of the aforementioned act, according to which if no
period is specified a contingent bequest fails unless the event on which it is contingent happens
before the period of distribution.

Contingent Interest occurs on following conditons: –

1. When interest is created in favour of a person to whom such property is transferred, and
such interest depends upon the happening of a specified uncertain event.
2. Therefore, the transfer of interest depends upon an uncertain event which may or may
not happen.
3. The contingent interest in the property can become Vested interest in the happening of
that event.
4. The right of enjoyment of ownership or possession in the property depends upon the
happening of that uncertain event that may or may not happen.

4
THE TRANSFER OF PROPERTY ACT, 1882, Section 23.
Nature of Contingent Interest

a) Future possible interest-This implies that contingent interest is a possible interest which could
give rise to a future right in respect of property transfer.
It is neither present right nor a certain right. Since happening or not happening of the event is
uncertain, the interest dependent on it is uncertain 5.
b) Not heritable- contingent interest is not heritable in nature i.e. after the death of the person
having contingent interest the interest is not passed to the heir.
c) Transferable interest- contingent interest is transfer able but the interest of the transferee is
imperfect since the interest of the transferor is also uncertain and imperfect interest.
d) Sale of inchoate contingent interest prior to vesting. – A father and 123 his son purported to
transfer certain property as owners when in fact the father had only life interest in it and the
son had an inchoate contingent interest which had not become vested, i.e. an undivided share
in the family property which was to vest on his father's death. The sale was held to be in
efficacious till partitioning of the property. 6

In the case of Leake v. Robinson3, the court held that whenever a condition involves a legacy that
is to be transferred ‘at’ a particular age or ‘upon attaining’ a particular age or ‘after’ attaining this
particular age, then such a transfer can be considered as one which involves a contingent interest.

DIFFERENCE BETWEEN CONTINGENT INTEREST AND

SPES-SUCCESSIONIS
Both of them are future possible interests and both have a chance or possibility to become certain.
The main difference is that the degree of possibility is lesser in contingent interest than in spes-
successionis. In case of contingent interest two possibilities are there i.e. either it will happen or it
will not happen (condition to which transfer is contingent) but in case of spes-successionis there
are a number of possibilities and factors like –

5Shashi Kantha v. Promode Chandra,(1932) Cal. 600(India).

6Bay Berry Apartments P. Ltd. V. Shobha, AIR 2007 SC 226(India)
e.g. (i) the heir apparent survives the propositus (deceased person), (ii) even if he survives, the
propositus during his life has already transferred the property or, (iii) he has made a will of that
property, So, spes-successionis has been regarded as a naked or mere future possible interest.

Hence, under Section 6 (a) of the transfer of property Act, spes-successionis is a non-transferable
interest. Contingent interest is not 'mere' possible future interest; it is simply uncertain. Therefore,
law has allowed the transfer of such interest. Subject tocontingency a contingent interest is a
transferable interest7.

The same was iterated an clarified by the Privy Council in Ma Yait v. Official Assignee 8

“the contingent interest which the children took was somethingquite different from a mere
possibility of a like nature of an heir- apparent succeeding to the estate, or the chance of a relation
obtaining a legacy, and also something quite different from a mere right to sue. It is a well
ascertained form of property it certainly has been transferred in this country for generations-in
respect of which it is quite possible to raise money and disposed of it in any way the beneficiary
chooses."

VESTED INTEREST
Vested interest is defined under section19 of transfer of property act. When an interest is vested
the transferee’s title is already prefect9.

Section 19 of the Transfer of Property Act, 1882 states about Vested Interest. It is an interest which
is created in favour of a person where time is not specified or a condition of the happening of a
specified certain event. The person having the vested interest does not get the possession of that
property but has the expectancy to receive it upon happening of a specified certain event.

7
DR. R.K SINHA, THE TRANSFER OF PROPERTY ACT, 2018, (19th Ed., Central Law Agency, Allahabad).
8
Ma Yait v. Official Assignee, AIR 1930 PC 17(India).
9
DR. S. N. SHUKLA, THE TRANSFER OF PROPERTY ACT, (28th Ed. , 2018,Allahabad Law Agency) p. 54.
 It must be noted that an interest may be vested even though it does not give a right to immediate
possession .Thus , on a transfer to A for title with remainder to B.B's interest is vested because
there is nothing but A's prior interest to stand between him and the actual enjoyment of the property
transferred.

Vesting means granting a person an immediate right to present or future enjoyment of property10.
In other words a vested rights to a property cannot be taken away by any third party even if the
person does not have the immediate possession of the property. . When the right, to the present or
future possession of a legal estate can be transferred to any other party, it is termed a vested
interest.

A vested interest is not defeated 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 11.

Explanation.—An intention that an interest shall not be vested is not to be inferred merely from
a provision whereby the enjoyment thereof is postponed, or whereby a prior interest in the same
property is given or reserved to some other person, or whereby income arising from the property
is directed to be accumulated until the time of enjoyment arrives, 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

Date of vesting of legacy when payment or possession postponed.-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

10
JUSTICE P.S.NARAYANA, THE TRANSFER OF PROPERTY ACT, (2012, Ed.,p.43.).
11
THE TRANSFER OF PROPERTY ACT, BARE ACT, (Professional book publishers, p. 7).
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. 12

Example-A bequeathed to B 100rupees, to be paid to him at the death of C. On A's death the
legacy become vested in interest in b, and if he dies before C, his representative are entitled to the
legacy.

Characteristics of Vested Interest

1) Vested interest creates a present right that is in effect immediately, although the enjoyment is

postponed to the time prescribed in the transfer. It does not entirely depend on the condition as

the condition involves a certain event.

2) Death of transferee will not render the transfer invalid as the interest will pass on to his legal

heirs.

3) Vested interest is a Transferable and heritable right.

Section 20 of the Transfer of Property Act, 1882 states about vested interest to an unborn child.

The interest in the property will be vested in him once he is born. The unborn child may not get

12
THE INDIAN SUCCESSION ACT, 1925, (ACT No. 39 OF 1925).
the right of enjoyment of the property immediately after having vested interest.

A person attains a vested interest when it is created in his favour

(1) Without specifying the time when it take effect, or

(2) In terms specifying that it is to take effect forthwith, or

(3) In terms specifying that it is to effect on the happening of an event which is must happen.

Such interest becomes a vested interest under the following circumstances:

In case where on a transfer of property, an interest is created in favour of a person to take effect
only on the happening of a specified uncertain event, then on the happening of the event.

In case where on a transfer of property an interest is created in favour of a person to take effect
only on the not happening of a specified uncertain event, then when the happening of the event
becomes impossible. The not happening of the event should become absolutely certain, beyond
doubt. Such an interest becomes a vested interest in the transferee 13.

For example

Suppose O is the owner of Black acre. Consider what happens when O transfers the property "to
A for life, then to B." Person A acquires possession of Black acre. Person B does not receive any
right to possess Black acre immediately; however, once person A dies, possession will fall to
person B (or his estate, if he died before person A). Person B has a future interest in the property.
In this example, the event triggering the transfer is person A's death.

Because they convey ownership rights, future interests can usually be sold, gifted, willed, or
otherwise disposed of by the beneficiary (but see vesting below). Because the rights vest in the
future, any such disposition will occur before the beneficiary actually takes possession of the
property. This type of interest is known as vested interest .

13
DR. R.K. SINHA, THE TRANSFER OF PROPERTY, (15th Ed. 2014, Central Law Agency, p. 56).
DISTINCTION BETWEEN CONTINGENT AND VESTED
INTEREST
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 the enjoyment of the will certainly come to pass,
in other words, an estate is vested when the immediate right of present enjoyment or future enjoyment .An
interest is said to be contingent interest if enjoyment depend upon some event this the difference between
vested interest and contingent interest14

These points of distinction between vested and contingent interest need to be noted

1) Transferee's right in property.-In a vested interest the transferee as present fixed right in
property. In contingent interest the transferee has merely a future possible right in the
property. In vest interest even though the enjoyment is postponed a person still has a present
right however in case of a contingent interest there is no present right.
2) Transferability.-Vested and contingent interests both aretransferable. However in vested
interest the transferee gets the complete title but in case of contingent claim to title may be
defeated if there is non-happening of the event. Contingent interest is inalienable in nature.
3) Attachment and sale in execution of decree.-A vested interest iscapable of being attached
or sold in execution of a decree whereas, a contingentinterest cannot be sold in execution of
any decree. A merely contingent or possibleinterest is not liable to attachment and sale in
execution of a decree.15
4) Heritability- Vested interest isheritable but contingent is not heritable because vested interest
is property of the transferee and he has been conferred a title by the virtue of interest being
vested but there is no such title in case of contingent interest.
5) When accrues- on transfer of a property in case of vested interest the transferee accrues
immediately but in case of contingent interest it all depends on the happening of the uncertain
specific event.

14
Dr.Avtar Singh, Textbook on the Transfer of Property Act, Universal Law Publishing, 2009, p. 89.
15
Section 60(1) (m) Civil Procedure Code,1908.
 6) Vested interest should be without any condition while contingent interest is solely based on
the contingency of happening of the specific uncertain even

CASE NOTES

1) Rajesh Kanta Roy vs Shrimati Sunita Debi16–

Fact -
One RamaniKanta Roy executed a registered trust deed in respect of his properties. The eldest son
Rajesh was appointed the sole Trustee to hold the properties under the trust subject to certain
power and obligation. After his death his two son Rajesh and Ramendra got interest in the property.
There was a clause in the trust deed that both of them was to get interest in the properties allotted
to each other happening of the two events -
1) Discharge of all the debts specified in the schedule and death of the settler himself.
2) The trust was to come to an end on the death of settler and the son were to get properties allotted
to them thereafter.

Issue before the court was whether the interest created by the trust were vested or
contingent?
The Supreme Court held that the interest taken by the two brothers under the trust deed was vested
and not contingent because it was certain event. A contingent interest depend solely upon the
fulfilment of the condition. In contingent interest there is no present right, there is a promise to
give right upon the fulfilment of a condition. A contingent Interest is inalienable and not
transferable.

2) Sundar Bibi vs Rajendra Narayan17

Facts-

16
Rajesh Kanta Roy vs Shrimati Sunita Debi ,AIR1957, S.C.255(India).
17 Sundar Bibi vs Rajendra Narayan, AIR1925 All.389(India).
In this appeal Mt. Sundar Bibi who obtained a decree against the respondent, RajendarNarain
Singh.

CONCLUSION
This assignment discusses and focuses on the concept of the Contingent Interest and vested Interest
what they are and what are the concept of transfer of contingent on happening of certain
unspecified events. Contingent Interest is basically an interest which is given to us by some third
party on the happening of a specified uncertain event which in many cases is death and until and
unless the event occurs, the person to whom the transfer of property has to be made is not entitled
to recover that property or is not entitled to any benefit arising from that piece of property before
the happening of such specified uncertain events. We have also compared these concepts with the
Spes-Successionis and Vested interest and shown how they are different from each other. In
conclusion the most important thing to take a note of is that everything is that the transfer of
property under the Contingent interest happens only when the condition is fulfilled, and case that
the condition is not fulfilled then the transfer is not valid.

The conditions are required to be fulfilled in case of contingent interest, however when talking
about the concept of vested interest we observed that it is not based on fulfilment of any such event
and that vested interest confers an immediate vested right. At the end we have also discussed
certain case laws in brief as to make the understanding of the concept a little easier and much more
specific in its approachthe cases help us see the clear distinction between the two similar yet very
different type of interest that may be conferred by the act of transferring a property under the ambit
of Transfer of property Act 1982.

BIBLIOGRAPHY

Books
• Dr. R.K Sinha, THE TRANSFER OF PROPERTY ACT, 2018, Central Law Agency,
 • Allahabad.
• Dr.Avtar Singh, Textbook on the Transfer of Property Act, Universal Law Publishing,
2009.
• Dr. S. N. Shukla, The Transfer of Property Act, 28thEd, 2014.

Articles
• Contingent Interest, SRD LAW NOTES