This Article analyses Section 14 of the Transfer of Property Act, which is about the Rule against perpetuity, the objective of the section and the exceptions.
Introduction
According to Section 14 of the Transfer of the Property Act,1882, there must be no transfer of property which is to take effect after the lifetime of one or more persons living at the date of such transfer and the minority who shall be in existence at the expiration of that period and to whom, if he attains the full age. In simple words, the transferor can not transfer the property forever through the same transaction. The transferor cannot tie up the property.
Section 14 covers two main concepts-
- Rule against perpetuity
- The rule against remoteness of vesting interest.
The objective of the Section
- The object of Section 14 is to see that the property is not tied up and to prevent the creation of perpetuity.
- Ensure the free and active circulation of property both for trade and commerce as well as for the betterment of the property.
- To retain their property in their own families from generation to generation would be a loss to society because it will be deprived of any benefit arising out of the property. Free and frequent circulation is important and the policy of the law is to prevent the creation of such perpetuity.
Essential conditions of Section 14
- There must be a transfer of property.
- Transfer of property must be in favour of an unborn person
- The interset created must take effect after the lifetime of one or more living persons at the date of such transfer and during the minority of the unborn person.
- The unborn person should be in existence at the time of expiration of interest of the living person
- The vesting of interest in the favour of the ultimate beneficiary may be postponed only up to the life of a living person plus a minority of the ultimate beneficiary and not beyond that.
What is perpetuity?
Perpetuity means continuous or unending transactions. It is tying up property for an indefinite period. Transfers involving generation after generation are known as creating perpetuity.
Section 14 is a rule against these unending transactions.
This rule is divided into two points:
- The transfer of property cannot operate to create an interest that is to take effect after the lifetime of one or more living person at the date of the transfer.
Illustration: A transfer property to B for life, then to B’s son for life, then to B’s son’s son for life, then to B’s son’s son’s son for life. Here neither B nor his sons and grandsons are living. So this transfer will be void as it is creating an unending transaction and making the property inalienable.
If by any mechanism any property is made inalienable it would be detrimental to the property.
- The vesting of absolute interest in favour of an Unborn person may be postponed till minority.
If by any mechanism any property is made inalienable it would be detrimental to the property.
- Earlier in Section 13, we discussed that life interest can be created in favour of living persons.
The moment an Unborn person is born he will take a vested interest in the property. But this section says that the rule of vesting property at birth can be changed by the transferor.
- The transferor can decide when the Unborn will acquire a vested interest in the property. But he can only postpone the vesting of absolute interest till minority. He cannot stipulate a time of vesting which goes beyond the period of perpetuity, i.e,
Life of last preceding(prior)interest plus minority of the ultimate beneficiary.
Illustration: A transfers property for life to B, and then to B’s first child when he attains the age of 18 years absolutely. B is living on the date of transfer but has no child.
In this case, when B’s first child would be born, the property would not vest in him until he attains the age of 18 years. If he dies without attaining the age of 18 years, it would revert back to the transferor or his heirs as the case may be.
What is Minority?
Minority, in India, terminates at the attainment of 18 years and the term minority in Section 14 is to be understood as only 18 years and not any other age, i.e, legal minority, where the age of minority is extended to 21 years. (Soundarajan v Natarajan)
How perpetuity may arise?
Perpetuity may arise in two ways-
- By taking away the power of alienation from transferee (condition has been made void under Section 10).
- By creating future remote interest ( prohibited under Section 14).
Perpetuity period
The perpetuity period consists of the lifetime of one or more persons, says A, B and C, all living at the date of transfer of property and the further period of minority of a person, say the eldest son of C, (who shall be in existence at the expiration of that period) to whom the interest is to belong.
In simple words, the perpetuity period is the life or lives in being and the further period of minority of a person.
There can be any number of transfers between living major persons, but if the ultimate transferee is a minor, the ultimate transfer to him should be the whole of the remaining interest.
Exceptions to the rule of perpetuity
Section 18 of the TPA provides exceptions where the rule against perpetuity does not apply-
Exceptions to the rule of perpetuity
Section 18 of the TPA provides exceptions where the rule against perpetuity does not apply-
- For the benefit of the public. In advancement of religion, knowledge, commerce, health, safety, or any other object beneficial to mankind.
- Personal agreements
- Charge creation
- Mortgages
- Lease
- Right of pre-emption
- Covenants of redemption
Rule against remoteness of vesting interest
Generally, there is no specific time limit or a specific number of years to decide what would amount to perpetuity. But Section 14 provides with it. Under Section 14 it is:
A lifetime of one or more living persons.
Generally, the title of property vests in an unborn person immediately after his birth but Section 20 states transferor can postpone it and the maximum time period according to Section 14 is up to the attainment of majority.
Illustration: A transfer property to B for life and then to B’s unborn son when he attains the age of 25 years. The transfer is void as the vesting time period is beyond the minority of the unborn child.
Benefits of Section 14 of the TPA
- This section ensures that the property does not remain in the same family for an unlimited timeline.
- It ensures that a person can utilize his property for his benefit in the true sense – Transfer/Sale/Gift, etc.
- This section aids in Industrialization
- This section helps the government to earn income in the form of property registrations, sale deeds, etc.
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