Rules against Perpetuity under Transfer of Property Act, 1882

Written By Gautam Badlani

Introduction:

The rule against perpetuity was inherited from the common law. Perpetuity literally means something which lasts forever. In law (and particularly under the Transfer of Property Act), it means any such provision which makes the property non-transferable for an indefinite period. The rule against perpetuity means future interest which are certain to be transferred must be vested within a definite period of time. In simpler words, a property must not be made alienable for an indefinite period of time. The period within which the interest must be vested is known as the perpetuity period.

Section 5 and 13 Transfer of Property Act, 1882:

Section 5 of the Transfer of Property Act, 1882 (hereafter TPA) explains the concept of “transfer of property”.[1] Transfer of property means the conveyance of property by a person, in the present or future, to one or more living persons or to himself and one or more living persons. The act of conveying property in such a way is known as the transfer of property.

Section 13 of TPA, 1882 deals with the transfer or property to an unborn person. It provides that in order to transfer the benefit to an unborn person, prior interest needs to be created for an existing person in the same transfer and the interest created for such a person shall be ineffective “unless it extends to the whole of the remaining interest of the transferor in the property”[2]. In simpler words, the property can be transferred to an unborn person only through the indirect method of vesting the interest first on a living person and then transferring it in the favour of the unborn person when the unborn person comes into existence and attains majority.

Section 14 of Transfer of Property Act, 1882:

The condition of perpetuation can arise only in two conditions. Firstly, when the transferee is subjected to a limitation that deprives him of the power of alienation. However, Section 10[3] of the TPA declares all such provision which deprives the transferee of his power of alienation, as null and void. The second condition is that of remote interest. When remote interest is created by the transfer of property then it might lead to perpetuity.

Section 14[4] of the TPA deals with the rule against perpetuity and prohibits all such provision or deeds which create an indefinite future remote interest.Section 14 says that all such trust documents will be void which provides for postponement of the transfer of property after the life of the preceding interest holder and beyond the age of majority of the ultimate beneficiary. However, if the ultimate beneficiary is an unborn child

in the womb of the mother, then the postponement can be increased by the period of gestation.

 

Applicability and Maximum Remoteness:

The rule against perpetuity is applicable only when there is a transfer of property, of which the ultimate beneficiary is an unborn child still in the womb of the mother or a minor child, and when such a transfer is preceded by the interests of a living person. In such a scenario, the vesting of interests can be postponed only up to the life of the living beneficiary plus the number of years in which the minor child will attain majority.

The maximum remoteness of interest permitted under the TPA is the life of the preceding interest holder plus 18 years. i.e., the minority of the ultimate beneficiary.

 

Purpose:

The basic purpose of the rule against perpetuity is to prevent the holding of property interests for generations. It is due to this provision that a document transferring property interests to a person who is supposed to be born several generations later in the future is void in law. Thus, it prevents the retaining of property for generations within the same family. Keeping the property in circulation is necessary for the betterment of society and the economy. The rule against perpetuity ensures that the property is not tied up and is kept free for trade and commerce. People are discouraged from owning property if they are unable to dispose it at the time of need of money or are unable to sell it at a higher price at the time of the boom period. In the absence of this rule, all the properties might end up being tied up and the real estate market might crash.

 

Exceptions:

The rule against perpetuity does not apply to charities. Section 18 of TPA says that a transfer can be made in perpetuity provided it is done for some public good. Thus, donations made for the welfare of the general public do not come under the rule against perpetuity. The rule against perpetuity also does not apply to the lease contracts where the lease is renewed at periodic intervals.The primary reason for this exception is that there is no transfer of property under lease contracts.Similarly, the rule does not apply to any such contract where only a charge is created and no interest is transferred. Furthermore, this rule is not applicable in the case of temples where the head priest is appointed from a particular family generation after generation. In the case of Nafar Chandra Chatterjee v. Kailash Chandra Mondal[5], the pujaris were appointed from a particular family generation after generation. The Court held that such appointment does not come under rule the against perpetuity.

 

Difference between Indian Law and English Law:

The most significant difference between the English Law and the Indian law in the context of rule against perpetuity is that under the English Law, the maximum remoteness of interest that can be created is the life of the preceding interest holder plus 21 years, whereas under the Indian Law the maximum remoteness is the life of the preceding interest holder plus the minority (18 years) of the ultimate beneficiary.

 

Conclusion:

The rule against perpetuity is an essential feature of property transfers and it ensures that no property is indefinitely tied up. At the same time, the rule does not follow a rigid approach and grants reasonable exceptions to protect the interests of the property holders and the society at large.

 

[1]https://indiankanoon.org/doc/1272508/

[2]https://indiankanoon.org/doc/106689/

[3]https://indiankanoon.org/doc/576368/

[4]https://indiankanoon.org/doc/1878658/#:~:text=%E2%80%94No%20transfer%20of%20property%20can,the%20interest%20created%20is%20to

[5]https://www.casemine.com/judgement/in/56e0f1fc607dba38965fa345

 

Gautam Badlani,

Chanakya National Law University

 

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