VESTED INTEREST

Transfer of Property Act, 1882

TANMOY MUKHERJEE INSTITUTE OF JURIDICAL SCIENCE

Dr. Tanmoy Mukherjee

[Advocate]

 

 

VESTED INTEREST - The Transfer of Property Act, 1882

Tanmoy Mukherjee

    [Advocate]

Meaning-

- When a person has fixed right of present or future possession of property he is said to have "Vested Interest" in the property. An estate is said to be vested in possession, when it gives a present right to the immediate possession of property.

-Where an interest is created in favor of a person, by transfer of property without specifying time or term, when it is to take place/effect, or on the happening of an event, which is certain. Where a transfer of property creates an interest in favor of a person without specification as to when it happens, but happening is certain. Such interest is called vested interest.

-In case of Vested Interest, a person on transfer of property gets an interest over a thing/object/property in future on happening f an event. Within what time/term it happens is uncertain. But happening of the event is certain. A person dies is certain, when dies is uncertain.

Example-

'A' transfers his land to 'B' for life and then to 'C'. Here, 'C' has vested interest. His (C's) interest depends upon the happening of an event i.e. the death of 'B', which is certain.

Definition (Section 19)-

 Section 19 of the Transfer of Property Act defines 'Vested Interest'. It runs as follows:

Where, on a transfer of property, an interest therein is created in favor 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 the happening of an event which must happen, such interest is vested, unless a contrary intention appears from the terms of the transfer.

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

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 where 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 Section and the corresponding Section 119 of the Succession Act, 1925, deal with the question under what circumstances a person obtains a vested interest or immediate right on a transfer of property. It provides that unless a contrary intention appears from the terms of the transfer, a person gets a vested interest when it is created in his favor-

(1) Without specifying the time when it is to take effect; or

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

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

-The person having vested interest has proprietary interest, but the right of enjoyment is subject to happening of a future event, which is certain. When an interest is vested, it becomes the property of the transferee and is transferable by him (transferee) under Section 6 even before obtaining the possession.

Illustrations:

(1) A donates to B Rs.500 to be paid to him at the death of C. B acquires in Rs.500 a vested interest although he will be entitled to the possession thereof on the death of C only which is a certain event.

(2) A makes a gift of his house to B for life and after his death to C. Both B and C acquire vested interest in the house, the difference being that B's interest is both vested in interest and in possession and C's interest is vested in interest only.

(3) A plot of land is transferred to A, B and C in equal shares with a direction that it will be handed over to them on their becoming major. But if they die as minor the property shall go to E. A, B and C acquire a vested interest (vested in interest only) even during their minorities and will be entitled to possession of on their becoming major.

Vested Interest is Heritable-

-Where a transfer of property confers vested interest with an immediate right to possession and enjoyment of the property, such vested interest is not defeated (lost) by the death of the transferee (even before getting possession of the property).

-When an interest is vested it becomes the property of the transferee and is under Section 6, transferable by him even before he has obtained possession; for a transfer of property not in possession is effective. If the transferee dies, his interest vests in his representatives whether or not he has obtained possession.

Reference Case-

Unborn person acquires Vested Interest (Section 20)-

Section 20 deals with when unborn person acquires vested interest on transfer for his benefit. It runs as follows:

-Where, on a transfer of property, an interest therein is created for the benefit of a person not then living, he acquires upon his birth, unless a contrary intention appears from the terms of the transfer, a vested interest, although he may not be entitled to the enjoyment thereof immediately on his birth.

-According to Section 20 of the Act, an unborn person acquires vested interest in property transferred to him. But he/she is not entitled to the enjoyment immediately after the birth. An unborn person is one, who is not in existence i.e. a child in mother's womb.