Tpa.docx

1.) INTRODUCTION Perpetuity means continuous and unending transactions. It is tying up property for an indefinite period. Transfers involving generation after generation are known as creating perpetuities.1Perpetual transfers means the conveyance once made continues to regulate fate of that property always in perpetuity. The course once set continues. Owners of that property (subsequent) do not have liberty to re-direct the course of succession of that property. The terms creating such interests are Peedhi dar Peeedhi, Generation after Generation, naslan bad naslan. These are bad and cannot be so created.2 Section 14 of Transfer of Property Act, 1882 lays down the rule against perpetuity. This rule is founded on the general principle of policy guiding judges, that the liberty of alienation shall not be exercised to its own destruction and that all contrivances shall be void which tend to create a perpetuity or place property forever beyond the reach of the exercise of power of alienation.3Section 13 and 14 of the TOPA go hand in hand. Section 13 regulates procedure of creating interest in favour of unborn person, whereas section 14 provides a time limit until which the unborn transferee will get the interest so created. Where an interest is created in favour of an unborn person on a transfer of property, such interest in favour of the unborn person shall take effect only if it extends to the whole of the remaining interest of the transferor in the property, thereby making it impossible to confer an estate for life on an unborn person. Further, Section 14 of TOPA provides that where an interest is created for the benefit of an unborn person (in accordance with the provisions of section 13), such interest shall not take effect if the interest is to vest in such unborn person after the life time of one or more persons living on the date of the transfer (i.e. the person in whose favour the prior interest is created as required under section 13) and the minority of such unborn person. In other words, the interest created for the benefit of an unborn person shall take effect only if the interest is to vest in such unborn person before he attains the age of eighteen years.4

1.) Genesis of the rule:

Singh Avatar, “The Transfer of Property Act”, Universal law Publishing CO. PVT. LTD., Allahabad ,(2006), 62 2 Tripathi G.P, “The Transfer of Property Act”, Central law Publications, 11th ed, Allahabad, 128. 3 ,Mulla, “The Transfer of Property Act”, Lexis Nexis, Nagpur, 9 th ed., 172. 4 Prem Rajani, Aradhana Bhansali and Ruchit Parikh, “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 +PropertyFor+The+Benefit+Of, retrieved on 15-09-2015 at 3:38 P.M. 1

The rule against Perpetuity has its roots in early English common law, in a 1682 opinion crafted by Lord Nottingham- The Duke of Norfolk’s case. In this case, Henry (the 22nd Earl of Arundel), tried to create a shifting executory limitation in a way that one of his titles would pass to his eldest son (who was mentally deficient) and thereafter to his second son, and another title would pass to his second son and thereafter, to his fourth son. The estate plan also included provisions for shifting the titles many generations later, if certain conditions were to occur. It was held by the House of Lords that such a shifting condition could not exist indefinitely and that the tying up of property too long beyond the lives of people living at the time was wrong. 5

2.) Object of Rule against perpetuity: The object of the rule against perpetuity is to ensure free and active circulation of property both for the purposes of trade and commerce as well as for the betterment of the property itself. Frequent disposition of the property is in the interest of the society and also necessary for its more beneficial enjoyment. A transfer which renders property inalienable for an indefinite period is detrimental to the interest of its owners who are unable to dispose it of even in urgent needs or for any higher value. It is also a loss to the society because when property is tied up from one generation to another in family, the society as such would be deprived of any benefit out of it.6 Rule against perpetuity is, therefore based on broad principles of public policy. Stating the object of rule against perpetuity, JEKYLL M.R in Stanely v. Leigh7 has observed “A great mischief would arise to public from estates remaining forever or for a long time inalienable or in transferable from one hand to another, being a damp to industry and a prejudice to trade, to which may be added the inconvenient and distress that would be brought on families whose estates are so fettered.” In the absence of any rule prohibiting creation of perpetuities, there might come a time when almost all the properties of a country would have become static properties. This would cause great hardship in easy enforcement of law, detrimental to trade, commerce and intercourse and may also result in the destruction of the property itself.

3.) Rule against Perpetuity in its primary sense: The Duke of Norfolk’s case, 3 Ch. Cas. 1, 22 Eng. Rep. 931 (1682) Sinha, R.K, “The Transfer of Property Act” ,Central law Agency Allahabd, 14 th ed, 100 7 (1732) All E.R 917 at p. 918 : cited in Shah’s Principles of The Law of Transfer, ED. III, P44. 5 6

A perpetuity, in the primary sense of the word, is a disposition which makes property in alienable for an indefinite period. In this sense it is concerned with certain interests created in proesenti which are sought to be made inalienable for an indefinite period.8 Examples of such interest in proesenti which have been held to be void under the name of perpetuity or as tending to a perpetuity are gift to trustees for non-charitable indefinite objects or for noncharitable unincorporated institutions or societies which may last for an indefinite time.9 In the case of Leahy v. Attorney-General10 it was discussed that the gift is in truth to the present member of the society described by their society name so that they have the beneficial use of the property and can, if they please, alienate and put the proceeds in their own pocket, then there is a present gift to individuals which is good, but if the gift is intended for the goods not only of the present but of the future members so that the present members are in the position of trustees and have no right to appropriate the property or its proceeds for their personal benefit, then the gift is invalid. 4.) Modern Rule against perpetuity: In its modern sense, it is concerned with interest arising in futuro and not with interest arising in proesenti. “Subject to the exceptions to be presently mentioned, no contingent or executory interest in the property can be validly created, unless it must necessarily vest within the maximum period of one or more lives in being and 21 years afterwards.” It is this modern English rule which is with certain modifications, adopted by our section.11Property may be transferred to any number of persons who are living at the date of transfer. In this way, vesting of interest in favour of ultimate beneficiary may be postponed for any number of years. Thus property may be transferred to A for life then to B for life then to C for life and so on for several years and all these persons who hold the property successively for their lives would tie up the property for many years before it goes absolutely to the ultimate beneficiary. However, as required under section 13, such ultimate beneficiary must be borne before the termination of the last preceding interest. Accordingly there should not be any interval between the termination of preceding interest and its consequent vesting in the ultimate beneficiary; vesting of interest cannot be postponed even for a moment. By 8

Supranote 1, Pg.: 64 Supranote 2, Pg. 131 10 (1959) AC 457 11 Supranote 3, Pg.: 175 9

way of relaxing this strict rule of section 13 it is provided in section 14 that vesting of interest may be postponed but not beyond the life of preceding interest and minority of the ultimate beneficiary. Where property is made to vest within the period prescribed in this section, the transfer is valid. Any delay beyond this period would make the transfer void. Accordingly where a property is transferred to A for life and then to unborn person when he attains the age of 19 years, the transfer to U.B is void under section 14.12

5.) Rule against Perpetuity in Transfer of Property Act: (Section 14) “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.” 6.1) Essential Ingredients: 1.) There should be transfer of property. 2.) The Transfer is for the ultimate benefit of an unborn person who is given an absolute interest. 3.) The vested interest in favour of ultimate beneficiary is preceded by life or limited interests of living persons. 4.) The ultimate beneficiary must come into existence before the death of the last preceding living person. 5.) Vesting of interest in favour of ultimate beneficiary may be postponed only up to the life or lives of living persons plus minority of ultimate beneficiary; but not beyond that.13 6.2) Maximum remoteness of vesting: Under section 14, the maximum permissible remoteness of vesting is the life of the last preceding interest plus the minority of the ultimate beneficiary. For example, the owner of the property may transfer it to a living person, A, for life and after his death to B (a living person) for life or on before the death of B to his unborn son when he attains the age of 18 years (or 21 years when the minor is under supervision of the court.) In Soundarajrajan v. Natarajan14, the Privy Council held that since at the date of transfer it is not known whether or not a guardian would be appointed by Court for the minor 12

Supranote 6, pg: 101 Ibid, pg: 100 14 A.IR. 1925 P.C ,244. 13

in future, for purposes of section 14 the normal period of minority would be 18 years. So, the vesting may be postponed up to the life of the last person and the minority of 18 years of the ultimate beneficiary.15 6.3) Ultimate beneficiary in mother’s womb: Where the ultimate beneficiary is in the mother’s womb i.e. it is a child en ventre sa mere, the latest period up to which vesting may be postponed, (after the preceding interest) is the minority plus the period during which the child remains in mother’s womb. It may be noted that minority is counted from the date of worldly birth whereas for purposes of being a transferee, a child in mother’s womb is a competent person. Where the ultimate beneficiary is in mother’s womb when the last person dies, the property vests immediately in him while he is still in mother’s womb. Accordingly, the minority up to which the vesting is permitted to be postponed under this section would include the period during which the ultimate beneficiary remains in womb before he is born alive. 16 6.4) Section 14 uses the term shall be in existence. These words means born. A child in womb is considered to be a person in existence for some purposes but he is not so eligible for getting property under section 14. On birth the child ordinarily gets vested interest. It matters not as to when the actual possession falls on him. It may be postponed till he becomes a major. A child coming in womb after expiry of prior or last of the prior estates if there are many, is not a person in existence.17 Example: Transfer to A for life, then to his son who is not born at the date of transfer. A dies on 18-3-2010. Son comes in mother’s womb on 17-03-2010. Is he qualified to take property? If one is prepared to interpret the words “shall be in existence” to include a person in womb, A’s son would be qualified. If it is interpreted to mean those born, A’s son is not qualified. The correct approach is to interpret the words to include those that are born. If so, the perpetuity would be extended during the ultimate transferee does not become major. On birth he/she gets a vested interest.The rule against perpetuities, however does not require that the vesting shall take place at the birth of the ultimate beneficiary. What it does require is that the vesting cannot be delayed in any case beyond his minority. 6.5) Gestation Period: The period during which a child remains in womb after being conceived is called gestation. If the Ultimate beneficiary comes into existence (say in 15

Supranote 12 , pg: 101 Ibid, pg 101 17 Supranote 9, pg: 139. 16

mother’s womb) prior to cessation of prior estate, gestation period would not be added in permissible perpetuity limit. However if a transferee is a person who comes in womb after this child in womb survives, lives and dies and ultimate transferee now comes in womb, English law may permit 21 years even thereafter too but not so by Indian law. Gestation is a grace to a person not in existence. It is given only once in India after the end of last prior estate ( not 2nd gestation) but 21 years in English law may be two grace periods. One in the beginning, the other in the end.18 6.6) Minority: ‘Minority’ means till the ultimate beneficiary celebrates 18th birthday. This benefit would be only for the one who is born on or before the end of prior estate or last of prior estates. A person coming in womb after expiry of prior estate or last prior estate is not eligible to get property directly or indirectly. He would not get in any case. Minority in India terminates at the age of 18 years as given in Indian Majority Act. In a Privy Council case 19, the bequest was to the testator’s daughters for their lives with remainder to their children at the age of 21 years. The bequest to the children was to be void under Section 114 and 115 of Indian Succession Act. An attempt however, was made to support the bequest on the ground that if guardians were appointed by the Court under the Guardians and Wards Act, they would under the act attain majority at the age of 21, but the contention failed because at the testator’s death it was not certain that any of the children would have guardian appointed.20 Therefore the total period of perpetuity i.e, the period for which the vesting of property can be postponed is given below:(1) Where the unborn person has come into existence either at or before the expiry of the last prior interest plus his minority interest. (2) Where the unborn person is in womb at the expiry of the last prior interest, the period of gestation plus minority.21 For example, A transfers certain propertied to B for life and then to C for life and then to an unborn person when he attains the age of majority. B and C are living at the date of transfer and unborn, the ultimate beneficiary is not in existence even in mother’s womb. The last prior life interest is with C. When C dies, the contemplated unborn must be in existence either as a born child or unborn in mother’s womb. The maximum period up to which vesting of 18

Ibid, pg:139 Soundara Rajan v. Rasamaya (1925) 48 Mad. 906. 20 Abdul Fata Mohammed v. Rasamaya (1884) 23 Cal. 619. 21 Supranote 8, pg: 64 19

property in unborn can be postponed would be, in case of born child, life of C plus till the child attains the age of majority, and in case of a child in mother’s womb, life of C plus period of gestation plus period of majority.22

6.) Contingent Interest: The Vesting of interest on favour of the ultimate beneficiary, may be postponed till his minority, i.e., till he becomes a major. Therefore, between the periods the last person having prior life interest dies and the unborn, who is ultimate beneficiary attains the age of majority, the ultimate beneficiary has only contingent interest which becomes vested in him when he attains the age of majority.23 Where the ultimate beneficiary is already born at the death of the last preceding interest but does not survive to attain majority, e.g., dies at the age of 15 years, the interest does not vest in him but reverts back to the transferor or his legal heir if he is dead at that time.24

7.) Regards of Possible events not of actual events: In deciding questions of remoteness, regard must be had to be possible and not to actual events.25Where at the time of transfer of property there is possibility or probability that in future it would be a transfer in perpetuity, the disposition shall be void even if at the time of actual vesting of interest there is no violation of rule against perpetuity.26 For example: In Ram Newaz case27, ; R had a share in a village which he sold to the defendant reserving two bighas of land to himself under the following condition: “Two bighas of land which I have excluded from sale shall remain in my possession for life, and after my death in the possession of my lineal descendants……I and my lineal descendants have no right to transfer the land excluded…… if none of my lineal descendants be alive then land shall be the own property of the vendee.” This was a transfer to take effect on the date of vendor’s last lineal descendent R had only one son who was alive at the date of transfer, but who died childless. On actual facts, the transfer operated within the period allowed, but as it was possible that the transfer might have been postponed for 100 or 200 years until the vendor’s line was extinct, the reservation of the two bighas was not valid. 22

Ibid, pg: 64 Supranote 21, Pg:66 24 Supranote 12, pg: 103 25 Ram Newaz v. Nankoo (1926) 92 IC 401. 26 Supranote 24, pg: 103 27 (1926) 92 IC 401. 23

8.) Analogous to Section 114 of Indian Succession Act: Section 14 of T.P Act corresponds to Section 114 of the Indian Succession Act, 1925, Rule against perpetuity applies to will and transfer inter vivos in same way. Perpetual transfer is void whether it is in will or any transfer otherwise. In Section 14 the transfer cannot operate to create an interest perpetually. No transfer can create perpetuity. In Section 114 of Succession Act, the bequest is not valid if it creates perpetuity and as such delays the vesting perpetually.28 “No bequest is valid whereby the vesting of the thing bequeathed may be delayed beyond the life-time of one or more persons living at the testator's death 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 thing bequeathed is to belong." In Veerattalingam v. Ramesh29, A executed a Will giving the Possession of her property to her sons without any power of alienation, and after that, a life interest was created in favour of her son’s sons, who were also alive at the time of executing the bequest. The testament further provided that after the death of such grandson, the property was to vest in the great – grandson (who were unborn on the date of execution of the will) absolutely. The apex court held that the bequest was not hit by the rule against perpetuity as successive life interests could be created in favour of any number of living persons, and both sons and grandsons in whose favour the life interest was created were living on the date the bequest was created.

9.) Exceptions to the Rule against Perpetuity: a.) Transfers for the benefit of public: Where a property is transferred for the benefit of public in the advancement of religion, knowledge, commerce, health, safety or any other object beneficial to mankind, the transfer is not void under the rule against perpetuity.30This exemption is necessary because transfers of property for the benefit of public generally are made through the medium of religious or charitable trusts. In the trusts, the property settled is tied up for an indefinite of perpetuity period so that its income may be utilized for ever for the object for which trust is created.

28

Saxena, Poonam, “Property Law”, “Lexis Nexis Butterworths Wadhwa”, Nagpur, 2 nd Ed., 123. (1991) 1 SCC 489. 30 Section 18 , Transfer of Property Act, 1882. 29

Application of the rule against perpetuity on trusts would render every trust void and it would be impossible to create any trust for the benefit of public.31 b.) Personal Agreements: Personal agreements which do not create any interest in property are exempted from the rule against perpetuities. Rule against perpetuity is only applicable to transfer of property. If there is no transfer of property i.e no transfer of interest, the rule cannot be applied. Contracts are personal agreements even though contracts relate to rights and obligation in some property. In Ram Baran v. Ram Mohit 32

the Supreme Court held that a mere contract for sale of an immovable property does

not create any interest in immovable property and, therefore the rule cannot apply to such contracts e.g. it cannot apply to a covenant of pre-emption.. Similarly where the Shebatis of a temple, under an agreement, appointed a pujaris out of a particular family to perform religious services in the temple, the agreement was valid because the Court held that being a personal Agreement, it was not hit by rule against perpetuity.33

10.)

Applicability of this Rule:

11.1) Hindu law: Since the amendment of section 2 this section applied directly to Hindus. It was applied by the Hindu Disposition of Property Act 1916, and similar provisions were contained in Madras Act I of 1914 and an Act 8 of 1921. The amendment made to those Acts by Act of 21 of 1929 make transfers by Hindus to unborn persons subject to the limitations contained in Chapter II of this Act and bequests by Hindus to unborn persons subject to the rules contained in ss 113, 114, 115 and 116 of the Indian Succession Act 1925. But irrespective of the statute, a perpetuity is repugnant to Hindu law except in the case of religious and charitable endowments. 11.2) Mahomedan law:

31

Supranote 24, pg: 104 A.I.R 1967 S.C. 744 33 Supranote 29, pg:104 32

With reference to Mahomedan law, the Privy Council held in Abul Fata Mahomed v. Rasamaya34 that a gift to remote and unborn generations is forbidden by Mahomedan law except in the case of a wakf, and that a wakf is invalid if the gift is illusory. But the law has since been altered by the Mussalman Wakf Validating Act 6 of 1913, under which a wakf is valid even if the gift to charity is unsubstantial and illusory, provided there is an ultimate gift to charity. 11.3) Agreement of Sale and Rule against Perpetuity: In London & S.W. Railway v. Gomm35, the plaintiff Railway Co. no longer required a piece of land for the purpose of the railway and by a deed of 1865 conveyed the land to G absolutely. G covenanted that he and his heirs would at any time, thereafter, whenever the land was required by the railway and after six months’ notice reconvey the land to railways for 100 pounds. In 1879, the defendant Gomm purchased the land from G’s heir with notice of covenant. In 1880 the Plaintiff Railway gave notice to Gomm to reconvey the land and on his refusal sued for specific performance of the covenant. Kay, J., held, that the covenant did not create an estate or interest in land and was therefore, not affected by the rule against perpetuity and decreed the suit. This was reversed in appeal and Jessel, M.R., said that there was no real distinction between a “contract of purchase” and an “option of purchase” and an option for purchase created an equitable interest which if unlimited in duration, was void for remoteness as against an assignee of land. An agreement for purchase of lands create in English law an equitable interest in land and, therefore so far as specific performance is concerned, it is subject to the rule against perpetuity. Before the Transfer of Property Act a contract of sale of land was treated as creating an equitable interest in land, for Indian cases followed the English law. Accordingly, in a case decided in 1875 a covenant for pre-emption unlimited in point of time and occurring in a deed of partition was held to offend the rule against perpetuity. But there has been a change in the legal position since the passing of Transfer of Property Act. Section 54 of the Transfer of Property Act enacts that an agreement for the sale of land does not of itself create an interest in land. Since this enactment, there has been considerable conflict of decisions as to the application of rule against perpetuity to such agreements. Some cases treat that an agreement as personal agreement, and therefore, they are not affected by 34 35

(1894) 22 Cal 619, 22 IA 76; (1882) 20 Ch. D. 562.

rule against perpetuity; while others continue to apply the English rule or treat the agreement as personal but void under Section 23 of the Indian Contract Act as “being of such a nature that if permitted it would defeat the provisions of law” as enacted in this section. The Privy Council considered this point in Basdeo Rai’s case36 . The proprietor of a hill agreed in 1872 with a society of Jains in compromise of a litigation, that if the society required a site on the hill for erection of a temple, he and his heirs would grant the same free of cost. In a suit for the enforcement of the covenant it was observed: “If the case was to be regarded in another light- namely agreement to grant in future whatever land might be selected as a site for a temple, as the only interest created would be one to take effect by entry at a later date and as the date is uncertain the provision is obviously bad as offending the rule against perpetuities, for the interest would not then vest in praesenti; but would vest at the expiration of an indefinite time which might extend beyond the expiration of the proper period.” Ordinarily a contract for sale does not create any interest in favour of the prospective purchaser. Any contract thereof which embodies a right of pre-emption, is nothing more than a contingent contract for sale which becomes enforceable when the party to the contract intends to dispose of certain property. It does not create any estate in favour of party to whom the property is to be offered for sale in future. Such a contract thus does not come within the purview of section 14 of the Act. This section comes into play only when if there has been a transfer of interest in property. The creation of charge is not a transfer of interest in property. In Raja Rajeswara Dorai v. Sundara Pondiyasami Tevar37, it was held that the creation of an annuity in perpetuity with a charge on property would not offend section 14 of Transfer of Property Act. There the suit was to enforce a covenant to pay an annuity in perpetuity as the other charge on property. Their Lordships held that since there was no transfer of interest in any immovable property, Section 14 of the act would not be applicable. 11.4) Pre-emption and Rule against perpetuity:

36 37

I.L.R. 46 ALL. 333. 49 I.C. 704.

In Ram Baran Prasad v. Ram Mohit Hazra38, the Court considered whether covenant of preemption contained in an arbitration award violates the rule against perpetuity and whether the same is binding on assignees or successor-in-interest of the original contracting parties. The factual matrix of that case was that two brothers, Tulshidas Chatterjee and Kishorilal Chatterjee owned certain properties in the suburbs of Calcutta. In 1938, Kishorilal sued for partition of the properties. The matter was referred to arbitration. The arbitrators gave award, which was made rule of the court. Under the award, two of the four blocks into which the properties were divided by the arbitrators were allotted to Tulshidas and the remaining two blocks to Kishorilal. In the award there was a clause to the following effect: "We further find and report with the consent of and approval of the parties that any party in case of disposing or transferring any portion of his share, shall offer preference to the other party that is each party shall have the right of pre-emption between each other." After the arbitration award became rule of the court, Tulshidas sold some of the portion of his properties to Nagendra Nath Ghosh. This was done after Kishorilal refused to pre-empt the same. Later on, Kishorilal sold his two blocks to Rati Raman Mukherjee and others. The Mukherjees sold the property to the plaintiff-respondents. Nagendra Nath also sold the property to defendant No.1. Thereupon, the plaintiffs filed suit for pre-empting the transaction between Nagendra Nath Ghosh and defendant No.1. The trial Court held that the covenant of pre-emption was not hit by the rule against perpetuities and was enforceable against the assignees of the original parties to the contract. Accordingly, a decree was granted to the plaintiffs. The defendants took the matter in appeal to the Calcutta High Court which was dismissed. Before this Court, it was argued that the covenant for pre- emption was merely a personal covenant between the contracting parties and was not binding against successors-in-interest or the assignees of the original parties to the contract. The Court then considered whether covenant of pre-emption offends the rule against perpetuities and is, therefore, void and not enforceable. After noticing the definition of "perpetuity" given by Lewis, the Court held that the rule against perpetuity concerns rights of property only and does not affect the making of contracts which do not create interest in property. The Court then referred to Sections 14 and 54 of the Transfer of Property Act and observed as under:

38

A.I.R 1967 S.C. 744

"The rule against perpetuity which applies to equitable estates in English law cannot be applied to a covenant of pre-emption because Section 40 of the statute does not make the covenant enforceable against the assignee on the footing that it creates an interest in the land. “The Court further held that the covenant of pre-emption was not violative of the rule against perpetuity and could not be declared as void. The same view was reiterated in Shivji v. Raghunath39, the Court found that the restriction contained against alienation of the property was not absolute and held that the same was not violative of the rule against perpetuity, the Court held, when a contract has been executed in which no interest in praesenti has been created, the rule of perpetuity has no application. As a result, the agreement is in the nature of a pre-emptive right created in favour of the co-owner. Therefore, it is enforceable as and when an attempt is made by the co- owner to alienate the land to third parties." 11.5) Mortgage: and Rule against perpetuity In Padmanabhan Ayyar v. Sita Ram Ayyar,40 it was held that the rule against perpetuities applies only to the cases where there was a new interest in immovable property contemplated to be created after the expiry of the time prescribed by the rule and that in the case of a mortgage, there was no such future interest in property contemplated to be created because it was of the very essence of the mortgage that the equity of redemption was a present interest in the property in exercise of which alone the property was sought to be redeemed. House of Lords is also of the view that the rule against perpetuities had no application to mortgages. 11.6) Covenant in leases: In a Contract for lease, clause which provides for perpetual renewal of leases is not hit by this section. In Kempraj v. M/s Barton & Co.,41 the Supreme Court of India held that a lease with a covenant for renewal does not offend the rule against perpetuity. The reason is this, that the clause for renewal of lease cannot be treated as a transfer. Where the conract for lease contained a clause providing that the lessor shall have right to terminate the lease at any time, the Court held that the contract is not hit by this section. 11.7.) Rule Applicable to both Movable and Immovable Property: 39

(1997) 10 SCC 106 .I.C. 158. 41 A.I.R. 1970 S.C. 1873. 40

Rule against Perpetuity is applicable to both movable and immovable property. Thus, a gift of property or of a fund to the living son, and after him to his unborn sons, when they attain the age of 21 years would be hit by rule against perpetuity and would be void.42

12.) Perpetuity under English law: Section 163 of Property Act, 1925 lays down the rule against perpetuity in English law. The law is; “life or lives in being plus 21 years after cessation of prior estate.” The transfer made operative after 21 years shall not be void or ineffective. The period said in deed shall be read as substituted by 21 years. It shall become effective immediately 21 years after irrespective of the period given in deed. 43 12.1) Difference between Indian and English law: (a) The Perpetuity period is different. Under English law, the perpetuity period is a life or any number of lives when the instrument under which the interest arises takes effect, plus a term of 21 years. Under Indian law, it is the life or lives in being at the time of grant plus the period of minority of the beneficiary taking under the grant. (b) Under English rule the additional period of 21 years allowed after lives in being is a term in gross without reference to the infancy of the person. Under the Indian Statues the term is the period of minority of the person to whom if he attains full age the interest created is so to belong. (c) The period of gestation, where it actually exists may be added to the perpetuity period as above defined. In English law it admits of addition at both ends of perpetuity period. But in Indian law it may be added only at its commencement. (d) The Law of property Act,1925 by Section 163 has validated certain remote gifts by allowing the substitution of the age of 21years when the gift is to fail for remoteness on the ground that the ascertainment of the beneficiary or the class of an exceeding 21 years. There is no corresponding provision under the Indian law.44

13.) Latest Case law K. Naina Mohamed vs A.M. Vasudevan Chettiar45 Decided on 7 July, 2010

42

Anand Rao Vinayak v. Administrator- General of Bombay, (1896) ILR 20 Bom 450. Supranote 9, pg: 141 44 Ibid, pg 142 45 Civil Appeal No. 8365 of 2002 43

The suit property belonged to one Smt. Ramakkal Ammal wife of Pattabiraman of Uraiyur of Tiruchirapalli. She executed registered Will dated 22.9.1951 in respect of her properties and created life interest in favour of her two sisters, namely, Savithiri Ammal and Rukmani Ammal with a stipulation that after their death their male heirs will acquire absolute right in `A' and `B' properties respectively subject to the rider that they shall not sell the property to strangers. Clauses 4, 10 and 11 of the Will and details of `A' and `B' properties. Savithiri Ammal died in February 1979. After about two years, one of her three sons, namely, A.M. Krishnamurthy filed a suit for partition of his share in `A' property. He impleaded Rukmani Ammal as one of the defendants. The suit was disposed of in terms of the compromise arrived at between the parties, which envisaged that the plaintiff therein and his brothers will divide `A' property among themselves and `B' property will be the absolute property of Smt. Rukmani Ammal and her descendants. Soon after disposal of the Suit, Rukmani Ammal and her son, A.B.M. Ramanathan Chettiar executed registered sale deed dated 9.12.1982 in favour of the appellant in respect of the suit property. Respondent Nos.1 and 2 challenged the same in another suit. They pleaded that in view of the restriction embodied in clause 11 of the Will, Rukmani Ammal and her son could not have sold the property to a stranger. They prayed that the sale deed be declared void and defendants in the suit be directed to execute sale deed in their favour. Rukmani Ammal and her son contested the suit by asserting that the Will executed by Ramakkal Ammal did not obligate them to sell the property to the plaintiffs; that clause 11 of the Will was liable to be treated as void because the same was against the rule against perpetuity and the law of alienation. In a separate written statement filed by him, appellant - K. Naina Mohamed pleaded that the Will did not provide for joint possession and enjoyment of the properties by two sisters and that clause 11 of the Will cannot be relied upon by the plaintiffs for claiming pre-emption. He also questioned the legality of the restriction contained in clause 11 of the Will on alienation of the property to the strangers by asserting that the said clause violated the rule against perpetuity The trial Court negatived the appellant's challenge to the Will by observing that being a purchaser from one of the legatees, he does not have the locus to question legality of the Will. The trial Court held that clause 11 is valid and binding on the legatees and it does not violate the rule against perpetuity. The trial Court further held that K. Naina Mohamed had

purchased the property with notice of the clause relating to pre-emption and as such he is bound by the same. Rukmani Ammal and her son did not challenge the judgment and decree of the trial Court but the appellant did so by filing an appeal. The lower appellate Court agreed with the trial Court that the appellant before it was not entitled to challenge the Will but opined that the restriction contained in clause 11 of the Will was void and not binding on Rukmani Ammal and her son. Judgement: It was held that by executing Will dated 22.9.1951, Smt. Ramakkal Ammal created life interest in favour of her two sisters with a stipulation that after their death, their male heirs will acquire absolute right in `A' and `B' properties respectively subject to the condition that if either of them want to sell the property then they shall have to sell it to other sharers only as per the prevailing market value and not to strangers. The restriction contained in clause 11 was not absolute inasmuch as alienation was permitted among male heirs of the two sisters. The object of incorporating this restriction was to ensure that the property does not go out of the families of the two sisters. The male heirs of Savithri Ammal and Rukmani Ammal did not question the conditional conferment upon them of title of the properties. Therefore, the appellant who purchased `B' property in violation of the aforesaid condition cannot be heard to say that the restriction contained in clause 11 of the Will should be treated as void because it violates the rule against perpetuity.

Conclusion: The effect of these Rules is that a transfer/ gift can be made to an unborn person subject to the following conditions: (i)

That the transfer/ gift shall be of the whole of the remaining interest of the transferor/ testator in the thing transferred/ bequeathed and not of a limited interest; and

(ii)

That the vesting is not postponed beyond the life in being and the minority of the unborn person.

In simple terms, while section 13 of TOPA lays down the mechanism for transfer of property for the benefit of unborn person and "what property" is required to be ultimately transferred

in favour of an unborn person in order to validate such transfer, section 14 of TOPA provides the "maximum period as to when" such property can be vested upon such unborn person. Section 14 of TOPA supplements section 13 of TOPA and thus, it is pertinent to note that when an interest in any property is intended to be transferred in favour of an unborn person, sections 13 and 14 of TOPA are required to be read together and the provisions contained thereunder are required to be duly complied with, in order to give effect to the intended transfer in favour of such unborn person.

LAW OF PROPERTY

Right against Perpetuity

Submitted to

Submitted by

Dr Rajinder Kaur

Nimrat Brar B.A.LL.B(Hons) Sem VII Section A 300/14

ACKNOWLEDGEMENT I take the prerogative to express my heartfelt gratitude to my guide Dr. Sabina Salim, UILS department, Panjab University, Chandigarh, for her diligent guidance all through the course of my project. It is her fruitful teaching which has given me a comprehensive understanding of the topic. She has truly been a source of inspiration to me. I would also like to thank my friends, who have been very helpful in providing me useful information, wherever needed for the completion of my project. I also extend my thankfulness to my parents for their precious moral support. I’m grateful for all their help and valuable advice which has made the successful completion of my project possible. Nimrat Brar Roll no. 300/14