The Transfer of Property Act which came into force on 1st July 1882, is major Indian legislation, which regulates the transfer of property in the country. The act in section 5 defines the phrase transfer of property. It defines it as an act which conveys property in present or in the future, by a living person to another living person, or to himself and one or more than one living person. The act includes in the definition of living persons, a company or association or body of individuals, whether incorporated or not.
It can be understood by reading section 5 that property can be transferred between one living person and another living person i.e transfer is inter vivos. But the act has created an exception to this provision; section 13 of the act talks about the transfer of property in favour of an unborn child. This article analyses this exception in detail and its relation with other provisions.
Section 13 – Transfer for benefit of unborn person. (Verbatim)
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.
Illustration – A transfers property of which he is the owner to B in trust for A and his intended wife successively for their lives, and, after the death of the survivor, for the eldest son of the intended marriage for life, and after his death for A’s second son. The interest so created for the benefit of the eldest son does not take effect because it does not extend to the whole of A’s remaining interest in the property.
The general rule is that the property disposed of by a person to another shall not fetter the free disposition of it, in the hands of one or more generations. As said by section 5, both the parties involved in the transfer of property must be living, it creates an exception inter vivos to section 13. It regulates the transfer of property to the unborn (indirectly) from who is already born. But the property can be transferred only if that unborn is in its mother’s womb.
According to the maxim nasciturus pro jam natohabetur, a child in the womb is regarded as a legal fiction, as already born for some purposes. For the purpose of transfer of property, an unborn person is treated as a person capable of having rights.
A Prior Life Interest
Generally, the transfer of property is the transfer of interest in the property to a living person. But according to section 13 of the transfer of property act, the property can be transferred to an unborn child, provided that the child is in existence in its mother’s womb at the time the transfer is made. Keeping the general rule in mind, Section 13 does not transfer the property directly to the unborn person. The rule is that the property must be transferred for a life interest to a living person at the time of transfer; otherwise, the transfer of interest will remain in abeyance until the person in whose favour the transfer is made, is born.
The person to whom the prior life interest is transferred is considered a trustee of the property. If an absolute interest is created in the favour of such intermediary, then heirs of such person, if the person retains the property and does not dispose it, would get the property after the death of the intermediary.
In the case of Mohamed Shah vs Official Trustee of Bengal, 190936 CAL 431 it was held by the court that the prior interest is not rendered void when the subsequent interest is void. It is neither extinguished nor enlarged.
No life interest to the unborn person
According to sec 13, the transfer of property must create the transfer of interest for a lifetime of the transferee and then an absolute transfer to the unborn child. Any transfer, which creates a life estate, in the favour of the unborn child, is void. The unborn person shall get the remaining interest of the transferor. Further, the property transferred to the transferee is transferred immediately, but transfer only restricted to the title, to the child born, but the child born would get the possession of the property only after the death of the holder.
The transfer made in favour of the unborn person should be made to a living person before. The transfer of life interest could be made to one or more persons before finally transferring it to the unborn person absolutely.
If the person in whose favour the transfer is made is not born before the death of the intermediary, then the property would revert back to the transferor and then to his heirs. The time between the birth of the unborn person and the death of the intermediary would matter less in such a case. If the property is not reverted back to the transferor, it would remain in abeyance and would be in contradiction to the objectives of the property act.
Section 14- Rule against perpetuity
No transfer of property can operate to create an interest which is to take effect after the life-time of one or more persons living at the date of such transfer, and the minority of some person who shall be in existence at the expiration of that period, and to whom, if he attains full age, the interest created is to belong.
There cannot be a creation of the perpetual life succession of a property. After the last life interests, the property must eventually rest in someone and cannot be perpetually delayed. If the property is transferred in the favour of the unborn person, the unborn person should be in existence before the death of the last intermediary (section 13).
The rule of perpetuity states that if there is a transfer of property the vesting time should not be beyond the life period of one or more persons and the minority of the person in whose interests the property is transferred. If the vesting period is beyond the mentioned time then the bequest is void.
Section 20- When unborn person acquires vested interest on transfer for his benefit
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.
The provision mentions the circumstances under which vested interest is acquired by the unborn person. The unborn person does not get possession of the property which is transferred for his benefit, as soon as he is born, but he does acquire a vested interest in the property upon his birth. Such interest remains vested even though he is not entitled to the enjoyment. This provision can be waived off if something contrary is mentioned in the contract.
If an estate is transferred for the benefit of an unborn child and a period is mentioned in the contract according to which, such unborn child, after his birth, is entitled to enjoyment then also the child would acquire the vested interest in the property upon his birth.
To understand the concept of transfer to unborn person it is necessary to read sec 13 and sec 14 together as in practical application these provisions are applied hand in hand.
The property act does not allow direct transfer to the unborn child. In order to transfer property to unborn child, it is necessary to transfer the property to a living person before and create a prior life interest. The property necessarily must vest in someone between the dates on which it is transferred to the date on which the person to whom it will be ultimately transferred, is born. Also, the interest which is extended to the unborn person should include the remaining interest of the transferor. This condition makes it impossible to create a life interest in the unborn child and thus does not restrict the free disposition.
Creating successive interest is not prohibited. But there should not be limited interest transferred to an unborn child. Section 14 of the act prohibits the interest which vests in the unborn person after the death of the person in which the prior interest is created and the minority of the unborn person. Further, the unborn person should come into existence before the death of the intermediary holding the prior interest.
In GirishDutt v. Data Din AIR 1934 Oudh 35, A made a gift of her property to B for her life and then to her sons absolutely. On the date of execution, B had no child. According to the deed if b had only daughters and no male child then the property would go to such daughters, but only for their life. And if B had no child then the property would absolutely go to C. This deed was held invalid by the court as it was creating life interest in the favour of B’s unborn. In the facts of the case, B died without any child and C claimed the property. The court further held such a claim invalid. It held that where a transfer in favour of the person if void and subsequent transfer taking effect on the failure of such transfer would also be void.
The property act allows the transfer of the property in favour of the unborn person, provided that a prior interest is created in a living person. This prior interest shall be for life whereas the interest in the unborn person shall be absolute. Further, the interest in favour of unborn person is created only when it is in its mother’s womb. And the unborn person would be vested with its interest upon his birth.
Transfer in favour of unborn person is a welcomed provision. Its major fallacy, that is restriction of disposition, is removed by its subsequent section by the rule against the remoteness of vesting; thus protecting the society from suffering the stagnation of property and its eventual effect, which can be detrimental to trade and commerce. These provisions, thus, ensure free and active circulation of the property for the betterment of the society.
- Transfer of Property Act, 1882
- Dr. G.P. Tripathi, Transfer of Property Act, Central law Publications
- Prem Rajani, Aradhana Bhansali, A Brief Write-Up On Transfer Of Property For The Benefit Of Unborn Person And Rule Against Perpetuity, available at: http://www.mondaq.com/india/x/366482/wills+intestacy+estate+planning/A+Brief+WriteUp+On+Transfer+Of+Property+For+The+Benefit+Of
- Shivani Gupta, Transfer of Property to an Unborn Child, available at: https://www.lawctopus.com/academike/transfer-property-unborn/
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