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RULE AGAINST PERPETUITY


Introduction

Section 14 of Transfer of Property Act, 1882 deals with the Rule against Perpetuity, also known as Rule against remoteness of vesting. Perpetuity means “indefinite period” which means this rule is against the transfer which makes a property inalienable for an indefinite period. Rule against perpetuity is the rule against the creation of a future remote interest.

Section 14 of TPA – “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.”


Section 14 clearly says that in a transfer of property, vesting of interest cannot be deferred on the far side the lifetime of the last previous interest holder and also the minority of the ultimate beneficiary. It makes a transfer of property inoperable wherever condition is arranged down for vesting of interest after the life of the last preceding interest holder’s and beyond the minority of the ultimate beneficiary.


In India, section 14 of TPA provides that vesting can be deferred up to life or lives of the last person plus the minority of the ultimate beneficiary. Minority in India ends at the age of 18 years. After the existing life or lives, vesting cannot be deferred in India beyond 18 years in any circumstances.


Under English Law, vesting of interest could also be deferred up to life or lives of last person plus a period of 21 years regardless of the age of minority of final beneficiary and a transfer shall not be void even though vesting has been deferred beyond 21 years however it shall go effect as if the age of 21 had been substituted for the requirement within the instrument, that may be any fixed period longer than 21 years.


How Perpetuity may arise?

In 2 ways Perpetuity may arise –

  • It may arise by taking away from the transferee his power of alienation (this condition has been void under section 10 of the Transfer of Property Act).

  • Secondly, it may arise by creating future remote interest (which has been prohibited under section 14 of the Transfer of Property Act).


Key Ingredients of Rule of Perpetuity –

  • There must be a transfer of property.

  • The transfer should be to create an interest in the favour of an unborn person.

  • The vesting of the interest in the favour of an unborn must be preceded by life or limited interest of living person i.e. there must be a prior interest holder.

  • The unborn person must be in existence at the expiration of the interest of the living person; either in mother’s womb or born).


Period of Perpetuity

The period of perpetuity starts from the date when transferor transfers the property, then it covers the lifetime of the last prior interest holder’s, then the gestation period of the unborn beneficiary, then 18 years. So, the perpetuity period is –

Starts from the date when transferor transfers the property + lifetime of the last prior interest holder’s + the gestation period of unborn beneficiary + 18 years (Age of majority of persons domiciled in India under section 13 of the Majority Act, 1875)

The period of gestation means the period during which the child remains in mother’s womb after being conceived i.e. normally 9 months or 280 days plus the minority of the ultimate beneficiary.

This period is called the perpetuity period and the vesting of the property in the transferee cannot be postponed beyond this period.


Minority in Rule of Perpetuity

Minority in India terminates at the age of 18 years or when the minor is under the supervision of court at the age of 21 years. But in the case of Saundara Rajan vs. Natarajan, AIR 1925 P.C. 244, the privy council held that since at the date of the transferor it is not known whether or not a guardian would be appointed by court for the minor in future, for purposes of section 14, the normal period of minority would be of 18 years. So, the vesting of the interest in the property can be postponed only up to the life of the previous interest holder and the minority i.e. 18 years of the beneficiary.


Exceptions to Rule of Perpetuity

  • Section 18 of Transfer of Property Act – Section 18 of TPA provides protection from rule against perpetuity when the transfer is in favor of public i.e. religion, knowledge, healthcare, safety or any other object beneficial to mankind. ​

In Nafar Chandra vs. Kailash, (1921) 25 CWN 201, the shebiats of a temaple agreed to appoint the family of pujaris from generation to generation and make provisions for expenses and remuneration of the office. The court held that this agreement is valid and not affected by the rule against perpetuity.


  • Personal Agreements – The rule of perpetuity does not apply to the personal agreements that do not create interest in property. ​


  • Contract of pre-emption – This rule does not applies to the contract where there is an option of purchasing a land by family members.


  • Vested Interests – This rule does not affect the vested interest as for this an interest has to be existed.


  • Renewal of lease agreements – This rule also does not affect the agreements of renewal of lease.

In R. Kempraj vs. M/S Burton son7&Co., (1970) 2 SCR 140, the court held that the rule of perpetuity does not apply to contracts for perpetual renewal of leases.


  • Covenant for redemption of property under mortgage. ​


  • Charge created over property, as this does not amount to transfer of interest.


In the leading case Ram Baran Prasad vs. Ram Mohit Hazra,(1967) 1 SCR 2931, the Supreme Court held that the Rule against the Perpetuity does not apply to contracts, which do not create rights of property.


References:

Transfer of Property Act, 1882

https://indiankanoon.org/doc/1950151/

https://indiankanoon.org/doc/706590/

https://indiankanoon.org/doc/1124195/



By Srishti Sharma

Course - B.A. LL.B (Hons.)

Year of Study – 4th Year

College - Gitarattan International Business School, GGSIPU, Delhi



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