vested interent and contingent interest

1. VESTED INTEREST &
CONTINGENT INTEREST

2. Section 19 : 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 the happening of an event which must happen, such interest is
vested, unless a contrary intention appears from the terms of the
transfer.

3. Characteristics of Vested Interest
 Vested Interest - No time is specified as to when it is to take
effect, or
- It is specified that it shall take effect
immediately, or
- It is to take effect upon the happening certain
event.
 Vested interest is not defeated by death. On the death of the
transferee, the interest is passed to the heir of such transferee.
 Vested interest is a transferable right as well as a heritable right.

4. Case Law
 Lachman v. Baldeo
 Rajesh Kanta Roy v. Smt. Shanti Debi (AIR
1957 SC 255).

5. Examples
VESTED INTEREST LIABLE TO BE DIVESTED
SUBSEQUENTLY
A gift a property X to B, with a condition that if he
remains unmarried till he attains the age of 35
years, the property will be forfeited. This creates a
vested interest in favour of B and he would be
divested of his interest if he remains unmarried on
attaining the age of 35 years.

6. EXAMPLE
 A transfers a property X to B and creates a life
interest in favour of C. Now, the property is to be
enjoyed by C till he’s alive and after his death
would go to B. Here the vested interest is created
at the time of the transfer but the enjoyment of
the property is postponed. B dies during the
lifetime of C. B’s heirs have claim over the property
X, as B had become the owner of the property.

7. Explanation of Sec. 19
 Postponement of enjoyment
 Prior interest
 Direction for the accumulation of income
 Conditional limitation

8. Sec. 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 appear from the
terms of the transfer, a vested interest,
although he may not be entitled to the
enjoyment thereof immediately on his birth.

9. Section 20-Essentials
 The transfer takes place,
 That transfer creates an interest in favour of an unborn person.
 He acquires a vested interest in that property upon his birth unless the terms
of the transfer provide with a different intention.
This section has to be r/w Section 14 of TPA.
Section 14 provides the time of vesting.

10. Section 21 : Contingent Interest
 Section 21- “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 shall not
happen, such person thereby acquires a contingent interest in the
property. Such interest becomes a vested interest, in the former
case, on the happening of the event, in the latter, when the
happening of the event becomes impossible.”

11.  CI- Interest which is created in favour of a person on a
condition of the happening of a specified uncertain event.
 The person having the contingent interest does not get the
possession of that property but has the expectancy to
receive it upon happening of that event.
 Example: A agrees to transfer the property ‘X’ to B on the
condition that he shall secure 90 % in his exams. This
condition is uncertain and the happening of the event or not
happening is in doubt and therefore B here acquires a
contingent interest in the property ‘X’. He shall get the
property only if he gets 90 % and when the condition is
fulfilled.

12. Characteristics of Contingent Interest
 This interest is entirely dependent upon the condition.
It only happens when the condition is fulfilled.
 Death of the transferee before getting the possession of
the property will result in the failure of contingent
interest and the property will remain with the
transferor.
 Contingent interest is a Transferable right, but whether
it is heritable or not, it depends upon the nature of
such any transfer and the condition.