A comparative analysis of transfer of property in the interests of an unborn person with the law in England.

Abstract

Transfer of property in the interests of an unborn person can be executed via trusts or creating a prior interest in the favour of a living person who shall enjoy a life interest, provided that the transfer comprises of the whole and entire property’s remaining interest and not limited interest, as observed in Section 13 of the Act, else shall be deemed void.[1]

Furthermore, the unborn person has a vested interest in the property since the time of his birth, which he may not immediately be able to enjoy unless the transferor stipulates otherwise, as per Section 20 of the Act, and even in such circumstances the transferor can only stipulate the vesting of the interest till a period that shall not extend beyond perpetuity(lifetime of person with life interest and minority of unborn person), as per Section 14 of the Act.

In conclusion, Section 13,14, & 20 go hand-in-hand for giving effect to the transfer of property in favour of an unborn person in India. The Girjesh Datt reaffirms this conclusion and provides that if a prior interest is void, then the consequent interest would invalidly fail too.

Lastly, it is to be noted that till the person, in whose favour a life interest is created is alive, he would hold the possession of the property, and possession of the ultimate beneficiary (i.e. the previously unborn person) would be effective only once the prior interest ceases via the death of such living person i.e. the person who has interest in the property for life.

Moreover, after analysing the law in England, it can be concluded that even though the rule against perpetuity is applicable in both Indian and English laws, but the position of transfer of property in favour of unborn person in England differed with that in India.

 

Introduction:

Before diving into the chief elements of this paper, it is essential to understand how transfer of property has been defined under the governing legislation for the same in India i.e. Section 5 of the Transfer of Property Act, 1882; which provides that “transfer of property” means an act by which a living person conveys property, in present or in future, to one or more other living persons, or to himself and one or more than one living persons; and “to transfer property” is to perform such act.[2]

Therefore under the aegis of this section, a bare reading of the provisions would imply that when a property has to be conveyed or transferred, it must be between living persons (of course with the obvious exception of transfer of property by wills which shall only get executed after a party’s death); however yet another exception to Section 5 is the transfer of immovable property in favor of an unborn person facilitated under Section 13[3], Section 14[4], and Section 20[5] of the Act.

 

A comprehensive explanation of these provisions shall be made in the subsequent sections of this paper however it is crucial for the sake of clarity that it is understood beforehand that under the general aegis of the Transfer of Property Act, 1882, a direct transfer of property to an unborn person is not permissible, and hence a joint reading of Section 13,14, and 20 can facilitate the transfer, albeit not directly. Another vital detail for this topic is the meaning of an unborn person for the purpose of this Act, which is “a person who does not have any current existence but has a specific reference to one and who may be born in the future is considered to be an unborn child or person.”

 

Looking back into history of law, both in Hindu Law and English Law, a child in a mother’s womb is deemed as a person despite it not being a person in existence yet, and hence an unborn person could be a person that has been conceived and is in the womb but also those which have not been conceived yet. Notably, the admissibility of transfer of property for an unborn person’s benefit is not subject to the actual birth of the person, just the possibility of its birth can give effect to the transfer.[6]

Although, under Muslim Law, and initially in pure Hindu Law, any bequest or gift in favour of an unborn person was deemed void, however because the provisions of Transfer of Property Act, 1882 are now applicable to Hindus, this transfer has been held to be valid as per Section 13 of the Act but since Section 2 of the Act explicitly mentions  that “nothing shall be deemed to affect any rule of Mohammedan law”[7] therefore Muslims are not governed by the Section 13 of the Act and therefore such transfers for Muslims are still void.[8][9]

 

Body:

3.1 What are the essentials of transferring property to an unborn child under the provisions of Transfer of Property Act, 1882?

Essentially, Section 13 of the Transfer of Property Act, 1882 facilitates the transfer of immovable property by creating an interest in favour of an unborn person at the date of the transfer, but it is extremely pivotal to understand that Section 13 also demands for the creation of a prior interest before such transfer to an unborn person can be executed. As per the provisions of Section 13, for such transfer to take place it is essential that the interest that is getting created for the unborn person extends to the whole of the remaining interest of the person transferring the property. Hence, the mechanism of creating a trust in favour of some living person has to precede the transfer of property to an unborn person because the underlying terms of Section 13 are that between the date of transfer and the unborn person coming into existence, the property must vest in a living person since a direct transfer is not permissible.

 

Therefore, the essentials of transfer of property to an unborn person under Section 13 are:

  1. No Direct Transfer: a fundamental principle in transfer of property is that every property shall have an owner and it is by virtue of this very principle that a transfer of immovable property can be executed via a trust created with a living person because transfer of property to unborn person directly cannot be made since from the date of transfer to the (possible) coming-into-existence of the unborn person, the property cannot remain without an owner.
  2. Prior Interest: the law does not necessitate the creation of a trust but it does necessitate the vesting of the estate with a person in the duration between date of transfer and existence of unborn person and therefore before the transfer of property in interest of an unborn person, there mandatorily needs to be a preliminary prior interest in favour of a living person.
  3. Absolute Interest: The transferor must transfer the entire property absolutely to the unborn person that is to say that the transferor cannot beforehand govern the transfer of this property from the unborn person to another, and any interest that shall last only for the lifetime of the unborn person cannot be conferred on him by the transferor. Therefore transfer of absolute interest to an unborn person is permissible when it is not restricted to only the life estate. For instance, Ms. X owns a property. She transfers it to Y in trust for her and her husband successively for their lives. After the death of the survivor, it is to be transferred to the eldest son of the intended marriage for his life, and after his death, it is to be transferred to X’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 X’s remaining interest in the property. The interest in favour of the unborn person shall constitute all of the entire remaining interest in the estate; and the foundational principle behind Section 13 is that a transferor shall not obstruct the free disposition of the property by the transferee to more than one generation. The restrictions for transfer under Section 13 are applicable to the absolute interest of the unborn person only; not for creating successive life interests of living persons.[10]

3.2 Does an unborn child have life interest, absolute interest, or vested interest?

 

By analysing the language of Section 13, it can be understood that when it comes to an unborn person, the transferor must transfer whatever interest he held in the property to the transferee without keeping any interest for himself. A transferor cannot transfer a limited estate for the benefit of an unborn person and therefore no limited life interest can be created for the benefit of an unborn person because that shall be deemed void, only an absolute interest in favour of an unborn person is deemed valid.[11]

 

Rule of Perpetuity under Section 14: Under the section, perpetuity means the duration equal to the lifetime of the living person along with the minority (18 years, not 21 years) of the unborn person with an absolute interest in the property. Coming to Section 14 of Transfer of Property Act, 1882, it provides that: “No transfer of property can operate to create an interest which is to take effect after the lifetime 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.”

The cardinal rule etched in Section 14 is that a property should not have to face detriment at the hands of the owner’s right to transfer or alienate the property, therefore to avoid detriment to the property inalienability has to be avoided too by restricting the transferor from stipulating the vesting of interests beyond the perpetuity period, if he does so it shall be void.[12]

 

A joint reading of this section with Section 20 implies that for an unborn person, when it comes into existence, it acquires a vested interest in the property which he may not be able to enjoy at once since the possession of the property might be enjoyed by the life estate holder. ‘Unless a contrary intention shows’ (i.e. the transferor may stipulate the time when the beneficiary may have vested interest in the property), the unborn person has a vested interest in the property since the time of its birth.

The catch here is that the transferor cannot stipulate a time for the vesting of the interest in favour of the beneficiary that extends after perpetuity i.e. lifetime of living person+minority of unborn person. This joint reading of all sections simply means that an unborn person’s interest is effected only if it is vested before he attains 18 years of age i.e. during his minority, provided that the unborn person has come into existence on/before the passing away of living person who has a prior interest in the property under Section 13. Hence, Section 13, Section 14, and Section 20 are to be read together.[13]

 

“With respect to its enjoyment of the property, a child, on birth, can enjoy the property through its parents and guardians but vesting of property would take place either at the time of the birth or at any time subsequent to it, but before the attainment of eighteen years.” Therefore, to summarise, unborn children as the ultimate beneficiaries cannot have life interest (void as per S.13 because it won’t amount to transfer of absolute rights) and unborn persons who are beneficiaries under a trust can claim vested interest for their benefit at the time of their birth (as per S.20) only after the death of the life estate Holder and before such persons attain 18 years of age. (as per S.14). [14]

 

3.3 Case Law (India): Girivsh Dutt vs. Data Din[15]

The factual matrix of this case can be understood in the form of a certain A transferring her properties to her nephew’s daughter called B, before life and then absolutely to B’s male descendants, if B will bear any, however in absence of the same, to B’s daughter without power of alienation. In the case where B shall bear no descendants at all; be it male or female, then the property shall get transferred to A’s nephew. B died without having any descendants whatsoever. In light of these facts, the Court declared the transfer for life to B, who was a living person at the date on which the transfer was made, was a valid transfer.

However, the Court held that the transfer to be made in the favour of daughter of B was void and invalid as per Section 13 of the Transfer of Property Act, 1882 since this transfer was not giving B’s daughter absolute interest, rather only a limited interest. Having said that, the Court further mentioned that because the prior transfer (i.e. the transfer to B’s daughter) was void and invalid, hence the transfer that was subsequent to the prior transfer (i.e. the transfer to A’s nephew) is also ineffective because it is invalid and void.[16]

Also Read: Concept of Gift under Transfer Of Property Act

3.4 A Comparative Study of ‘Transfer of property in favour of an unborn person’ with England:

As has already been discussed above, in India, the law prescribes that the property transferred in the interest of the unborn person can only be executed validly if it extends to the whole of the interest in the properties provided that the transfer occurs indirectly by the creation of a prior interest for life in favour of a living person, and the unborn person shall enjoy only an absolute interest in the property otherwise the limited interest makes the transfer void.

However, in England, the law prescribes that a limited interest can be created in favour of an unborn child, albeit not subsequent to that. To illustrate this provision, it can be understood that if X creates a life interest in favour of his brother Y and upon Y’s death to Y’s unborn son UB1 for life, and subsequently to UB1’s son, i.e. Y’s unborn grandson, UB2 absolutely; then this transfer shall be deemed valid and effective as per the law in England. But this transfer would be deemed void as per the law in India under Section 13 of Transfer of Property Act, 1882 because the transfer in favour of the unborn son UB1 would be invalid since it is not granting absolute interest.[17]

In England, law prescribes that the transfer of property to an unborn person can be made only for the person’s lifetime subject to the rule of double possibilities which acts as a restriction, and was recognised in the case of Whitby v. Mitchell which will be discussed below. This rule provides that an unborn person should not be transferred with life interest since there could be two possible situations that could exist after doing so: first being the transferee i.e. the unborn person’s birth, second being the unborn person’s issues coming into existence.[18]

Therefore, subject to the Doctrine of Double Possibility; the transfer of property in favour of the first unborn person can be done for life, but to the next unborn person the transfer of property is absolute. For example, as long as the rule against perpetuity as laid down in Section 163 of the Act of 1925[19] is being complied to, X can transfer his property to UB1 with life interest and UB2 with absolute interest.[20]

In terms of similarity, the rule of perpetuity in Indian law is also noticeable in Section 163 of the Law of Property Act, 1925 i.e. the rule against perpetuities.

3.5 Case Law (England): Whitby v. Mitchell[21]

In Whitby v. Mitchell, the property was in effect successively for life limited to the husband, A and the wife, B, remaining to the eldest unborn daughter for life, then to the daughter’s children who may take birth in existence of A and B. Under the modern Rule against Perpetuities, this transfer to the daughter’s children was deemed acceptable however by complying to already established statements made in texts and other judicial precedents by judges, this transfer was held to be void.[22]

This case clarified that the rule against perpetuities, which makes void any executory interest in property which does not necessarily vest indefeasibly within a period of one or more lives in being and twenty-one years afterwards; and Kay, J., further commented on the rule saying that “You cannot limit an estate to an unborn person for life with remainder to the children of that unborn person, for that such remainder is bad.”‘[23]

Conclusion and Recommendations:

To conclude, it can be said that in light of the aforementioned sections, it is settled that transfer of immovable property in favour of unborn person can be executed via trusts or creating a prior interest in the favour of a living person who shall enjoy a life interest, provided that the transfer comprises of the whole and entire property’s remaining interest and not limited interest, as observed in Section 13 of the Act, else shall be deemed void.[24]

Furthermore, the unborn person has a vested interest in the property since the time of his birth, which he may not immediately be able to enjoy unless the transferor stipulates otherwise, as per Section 20 of the Act, and even in such circumstances the transferor can only stipulate the vesting of the interest till a period that shall not extend beyond perpetuity(lifetime of person with life interest and minority of unborn person), as per Section 14 of the Act.

In conclusion, Section 13,14, & 20 go hand-in-hand for giving effect to transfer of property in favour of an unborn person in India.

The Girjesh Datt reaffirms this conclusion and provides that if a prior interest is void, then the consequent interest would invalidly fail too. Lastly, it is to be noted that till the person, in whose favour a life interest is created is alive, he would hold the possession of the property, and possession of the ultimate beneficiary (i.e. the previously unborn person) would be effective only once the prior interest ceases via the death of such living person i.e. the person who has interest in the property for life.

Moreover, after analysing the law in England, it can be concluded that even though the rule against perpetuity is applicable in both Indian and English laws, but the position of transfer of property in favour of unborn person in England differed with that in India because the law in England prescribed that a limited interest can be created in favour of an unborn child, whereas absolute interest is an essential for the transfer of property in favour of unborn person in India.

 

This article is written by Miss. Virali Joisher, a third year, B.A. LL.B. Hons. student at Kirit P. Mehta School of Law, NMIMS Mumbai

References:

[1] Diva Rai, Transfer To Unborn Person : All you need to know, Blog IP Leaders (October 21, 2019) https://blog.ipleaders.in/transfer-to-unborn-person/

[2] S.5, Transfer of Property Act, 1882.

[3] S. 13, Transfer of Property Act, 1882.

[4] S. 14, Transfer of Property Act, 1882.

[5] S. 20, Transfer of Property Act, 1882.

[6] Dr. Ravi Kant Gupta, Faculty of Juridical Sciences, Rama University (September 27, 2021) https://www.ramauniversity.ac.in/online-study-material/law/llb/isemester/lawofproperty/lecture-7.pdf

[7] S. 2, Transfer of Property Act, 1882.

[8] Abdul Cadur v. Turner, (1884) 9 Bom. 158.

[9] Urwashi Ahuja, Transfer for Benefit of Unborn Person, Law Times Journal (July 7, 2019)

https://lawtimesjournal.in/transfer-for-benefit-of-unborn-person/#_edn6

[10] Supra 5.

[11] Poonam Pradhan Saxena, Property Law, 47.57. (3rd edn. LexisNexis, 2017)

[12] Ibid.

[13] Legal Services India, Rule against perpetuity and its exceptions: A sine qua non of Property transfer, Legal Services India (July 1, 2018, 04:47 IST)

http://www.legalservicesindia.com/law/article/1030/8/Rule-against-perpetuity-and-its-exceptions-A-sine-qua-non-of-Property-transfer

[14] Supra 10.

[15] Girivsh Dutt v. Data Din AIR 1934 Oudh 35.

[16] Supra 8.

[17] Supra 10.

[18] Supra 5.

[19] S. 163, Law of Property Act, 1925.

[20] Supra 8.

[21] Whitby v. Mitchell(1890) 41 Ch. D. 85.

[22] Charles Sweet,The Rule in Whitby vs. Mitchell,Columbia Law Review (March 1912) https://www.jstor.org/stable/pdf/1110781.pdf

[23] Charles E. Cullen, Leslie H. Fisher, The Modern Rule Against Perpetuities and Legal Contingent

Remainders in Missouri, Washington University Law Review (December 1936)

https://openscholarship.wustl.edu/cgi/viewcontent.cgi?referer=https://www.google.com/&httpsredir=1&article=4330&context=law_lawreview

[24] Diva Rai, Transfer To Unborn Person : All you need to know, Blog IP Leaders (October 21, 2019) https://blog.ipleaders.in/transfer-to-unborn-person/

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