Articles

Transfer For The Benefits Of Unborn Person

This article is written by Uddeshya Yadav, a student at Lovely Professional University, Punjab

INTRODUCTION 

The rule regarding the transfer of immovable property in favour of the person is defined under The Transfer of Property Act under Section 13. However it basically an exception, as under Section 5 of The Transfer of Property Act defines the term transfer of property which basically 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. As from the definition, we can clearly understand that the property should be transfer from one living person to another living person the person should be alive he should be not the dead person and the transferor, which mean that the person who makes the transfer of property can be human or juristic. The will or the court order cannot be included under this as the person who has made the transfer is not the living person he is dead now as the will is the legal declaration of the testator for carrying his property after his death. Property can be transferred by more than one living person and it can also be acquired by more than one living person. It is simple to understand it means that the transferor can be more than one and the same as in the case of transferee they can also be more than one. In general, the provision of the Transfer of Property Act, 1882 does not facilitate the transfer of property directly to an unborn child.

 The term unborn child means  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. Even though a child in a mother’s womb is simply not a person in existence, but has been treated as a person under both Hindu Law and English Law.

 It should also be remembered that the word ‘unborn’ not only applies to those who may have been conceived but not yet born, who is a child in the womb but also encompasses those that are not yet conceived. Whether or not they will be born is a possibility, but a transfer of property is admissible for their benefit.

TRANSFER TO UNBORN PERSON 

The property cannot be directly transferred to the unborn person as earlier stated. An unborn person as mentioned under this act means a person who is not in existence in the mother womb. A qualified transferee is a child in the womb of a mother or a child en ventre sa mere. The property which the transferor want to transfer can be transferred to the child in the womb. But if the transferor wants to transfer the property to the person who is not even in the mother womb then the property cannot be transferred because the person is unborn. The transferee should also be in existence at the date of transfer as the transfer of property take place between two living person. Legally speaking every transfer of property involves the transfer of interests. When a property is transferred the transferor divests himself of that interest and vest it immediately in the transferee. So, if a property is transferred directly to a person who is not in existence the interest so transferred shall be divested or be away from the transferor but it would have to remain in abeyance and wait for the transferee to come into existence, in whom it could vest. Such a situation would be against the very concept of interest. 

TRANSFER FOR BENEFIT OF UNBORN PERSON 

Section 13 of the Transfer of Property Act simply describes that the property can be transferred for the benefit of the unborn person two conditions are necessary to be fulfilled-

  1. Prior life interest must be created in favour of a person in existence at the date of transfer., and
  2. Absolute interest should be transferred in the favour of the unborn person.
  • PRIOR LIFE INTEREST 

Section 13 of the Transfer of Property Act, 1882 specifies that if on the date of the transfer, an interest therein is created for the benefit of an unborn person, a prior interest shall be created for the same transfer and the interest generated for the benefit of such person shall not take effect unless it extends to the whole of the remaining interest of the person transferring the property in the property to be transferred. Therefore, in order to transfer property on the date of the transfer for the benefit of an unborn child, it is imperative that the property must first be transferred on the date of the transfer by the trusts process in favour of any person living other than the inborn person. It can be said that in any living person the immovable property must vest between the date of the transfer and the coming into being of the unborn child because the property cannot be transferred directly in favour of an unborn person. In other words, it can be assumed that a prior interest must precede the interest of the unborn individual in all situations.

  • ABSOLUTE INTEREST

The second important condition is Absolute Interest and the unborn child should only be given absolute right and not limited or life interest. Transfer of property for the life of an unborn person is void and cannot take effect. Section 13 enacts that interest given to the unborn person must be the whole of the remaining interest of the transferor in the property. When a property is transferred in favour of an unborn, the transferor first gives a life interest to an existing person. After transferring this, he retains with him the remaining interest of the property. This remaining interest with the transferor must be given to the unborn so that after the termination of prior life interest, the unborn get the whole. i.e. absolute interest in the property.

In other words, the whole of remaining interest is the entire interest of the transferor less prior life interest carved out of the ownership. The transfer in the favour of the unborn and the prior life interest must exhaust the whole interest of the transferor in the property which is transferred by him. If there is any other limitation that derogates or cuts short the completeness of the grant in favour of the unborn, the transfer is void. Thus, life interest or other limited interest cannot be given to the unborn.   

Illustrations:

  1. A transfers his properties to X for life who is unmarried and then to the eldest child of X absolutely. The transfer in favour of the eldest child of X is valid.
  1. A transfers his properties to X for his life and thereafter to U. B for life X is a living person at the date of the transfer. U.B is not in existence at the date of transfer. Here the transfer of life interest in favour of X is valid. But, transfer of life interest in favour of U.B is void because although the transfer in favour of U.B is preceded by a life interest to X but U.B himself has not been given an absolute interest. The result is therefore that X shall hold the property during his life but after his death, it shall not pass on the U.B but shall revert to A or if A is dead by that time to legal heirs.

LEGAL CONSEQUENCES OF TRANSFER FOR BENEFIT OF UNBORN PERSON

Transfer in favour of unborn person has the following legal consequences:

  1. Only life interest shall be granted to the intermediary person residing at the transfer date. During his lifetime on behalf of the unborn, he has to protect the property like a trustee. If this living person has an absolute interest, he may be entitled to have it disposed of by someone. If he maintains it, the property shall go to his lawful heir after his death, and not to the unborn for whose ultimate benefit the disposition has been made.
  1. The unborn must come into existence before the death of the person holding property for life. If the unborn comes into existence say, after one month after the death of the last living person (i.e. after the termination of the preceding interest), the property is to revert to the transferor or his heirs. This is obvious because, after the termination of the life interest, it cannot remain in abeyance and cannot wait even for a moment for the next person to come into existence. 

In the case of Sridhar v. N.Revanna the donor transferred property by way of a gift in favour of his grandson. The property thereafter was to be vested in the male children of the grandson. The court held that the gift deed could be said to have created life interest in favour of his unborn sons. The condition in the gift deed restraining alienation was void. Alienation of the property by the donee after the birth of his sons was improper. These sons were allowed to recover the sale consideration received by their father from the purchaser.

PRE-REQUISITE FOR A VALID TRANSFER OF PROPERTY TO AN UNBORN PERSON 

The procedure for the same as follows:

1. Any person who intends or wishes to transfer the property for the benefit of an unborn person should first make a life estate in favour of a living person and after this, an absolute estate in favour of the unborn person.

2. Till the time, in whose favour the life estate created is alive, would hold the possession of the property, and enjoyment of the property.

3. If the person who was unborn during the time of the creation of life estate, is born, the title of the property gets immediately transferred to the person born but he’ll get the possession only on the death of the life estate holder.

WHEN A UNBORN PERSON ACQUIRES VESTED INTEREST

The provisions of section 20 of the Transfer of Property Act, 1882 mention the concept that in what circumstances unborn person acquires a vested interest. An unborn person may not be able to enjoy possession of the property as soon as he is born but he may, however, acquire a vested interest in the property since his birth. Where on a transfer of immovable property interest is created for the benefit of an unborn person, he acquires upon his birth, a vested interest, although he may not be entitled to the enjoyment thereof immediately on his birth. The mentioned provision however may be waived off if the terms of the agreement mention a contrary clause.

The section lays down that an interest created for the benefit of an unborn person vest in that unborn person as soon as he is born. Such interest remains vested interest even though he may not be entitled to the enjoyment thereof immediately on his birth.

For example, if “A” transfers an estate to trustees for the benefit of A’s unborn son with a direction to accumulate the income of such estate for a period of ten years from the date of the birth of A’s son and then to hand over the funds to him. A’s unborn son acquires a vested interest upon his birth, although he is not entitled to take and enjoy the income of the property for a period of ten years.

CASE LAWS 

In Girish Dutt V Data Din, A made a gift of her property to B for her life and then to her sons absolute. B had no child on the date of execution of the gift. The deed further provided that in case B had only daughters, then the property would go to such daughters but only for their life. In case B had no child than after the death of B, the property was to go absolutely to X.

The deed on the paper provided a life estate in favour of B’s unborn daughters: which is contrary to the rule of Sec.13. However, B died without any child, and X claimed the property under the gift deed. The court held that where a transfer in favour of a person or his benefit is void under Sec.13, any transfer contained in the same deed and intended to take effect or upon failure of such prior transfer is also void. In determining whether the transfer is in violation of Sec.13, regard has to be made with respect to the contents of the deed and not what happened actually. Here as the transfer stipulated in the void contract, the transfer in favour of X also became void. Hence, X’s claim was defeated.

Another case related to this concept is Raja Bajrang Bahadur Singh v. Thakurdin Bhakhtrey Kuer. In the instant case the Apex Court had observed that no interest can be created in favour of an unborn person but when the gift is made to a class or series of persons, some of whom are in existence and some are nonexistent, it does not fail completely, it is valid with respect to the persons who exist at the time of testator’s death and is invalid with respect to the rest.

In the case of Sopher v Administrator General of Bengal, a testator directed that his property was to be divided after the death of his wife into as many parts as there shall be children of his, living at his death or who shall have pre-deceased leaving issue living at his death. The income of each share was to be paid to each child for life and thereafter to the grandchildren until they attained the age of 18 when alone the grandchildren were to be absolutely entitled to the property. The bequest to the grandchildren was held to be void by Privy Council as it was hit by Sec.113 of the Indian Succession Act which corresponds to Sec.13 of the Transfer of Property Act. 

Their Lordships of the Privy Council observed that: ” If under a bequest in the circumstances mentioned in Sec.113, there was a possibility of the interest given to the beneficiary being defeated either by a contingency or by a clause of defeasance, the beneficiary under the later bequest did not receive the interest bequeathed in the same unfettered form as that in which the testator held it and that the bequest to him did not, therefore, comprise the whole of the remaining interest of testator in the thing bequeathed.

Ardeshir’s Case

In Ardeshir V Dada Bhoy’s case, D was a settler who made a settlement. According to the terms of the settlement, D was to get during life, one-third each was to go to his sons A and R. After D’s death, the trust property was to be divided into two equal parts. The net income of each property was to be given to A and R for life and after their death to the sons of each absolutely. If A and R were each to pre-deceased D without male issue, the trust was to determine and the trust property was to the settler absolutely. The settler then took power to revoke or vary the settlement in whole or in part for his own benefit. It was held that R’s son who was not born either at the date of settlement or his death did not take any vested interest and the gift to him was invalid. A’s son who was alive at these dates did not also take a vested interest.

Applicability of Sopher and Ardeshir rulings in India

The decision in Sopher’s case and Ardeshir’s case were applied by Bombay High Court in Framroz Dadabhoy v Tahmina, in this case, bai Tahmina settled a certain sum upon trust in favour of herself for life and after her death and subject to the power of appointment by codicil or Will among her issues born during her lifetime in trust for all her children who being sons shall attain the age of 18 or being daughters shall attain that age or marry under that age being daughter’s, in equal sums. It was held by their Lordships that the decision in the Sopher’s case could not be applied to the trusts of a settlement which were transfer inter-vivos. It was held that the words ‘extend to the whole of remaining interest of the transferor in the property’ in Sec.13 of the Transfer of Property Act were directed to the extent of the subject matter and to the absolute nature of the estate conferred and not to the certainty of vesting.

HINDU LAW AND MUSLIM LAW

Under pure Hindu law, a gift or bequest in favour of the unborn was void. But now the Transfer of Property Act applies to the Hindus, so the transfer of properties in favour of an unborn person is valid if it fulfils the conditions provided in Section 13. 

In Muslim law a gift in favour of a person not in existence is void, and Section 2 of the Transfer of Property Act provides that nothing shall be deemed to affect any rule of Mohammedan Law. So, Section 13 of the Transfer of Property Act, 1882 is not applicable to transfers made by Muslims.

ENGLISH LAW

The English law relating to transfer in favour of unborn persons is now governed by the rule against perpetuities as laid down in section 163 of the Law of Property Act, 1925. Before this Act, the property could be transferred in favour of the unborn subject to rule against double possibilities. Under this rule, the property could be transferred for life in favour of the first unborn person but to next unborn absolutely. If life estates were granted to two successive unborn person the transfer in favour of only the second unborn was void because it violated the rule against double possibilities. Thus under this rule, A could transfer properties to U.B 1 for life and then to U.B 2 absolutely. Now the transfers in favours of U.B 1 and U.B 2 are valid only if there is no violation of the rule against perpetuity as laid down in section 163 of the Act of 1925. 

CONCLUSION 

The transfer in the case of an unborn child cannot be carried out directly but can be carried out indirectly by the trusts’ machinery. In other words, the interest of the unborn person in possession of that particular immovable property shall constitute the entire interest. The legitimacy of a transfer for an unborn individual, it is significant that the entire of rest of the interest of the individual moving the property ought to be passed on to the unborn person. Besides, when the transfer of property comes into activity, the vested interest is likewise moved to the unborn person. The transfer to the unborn can be done only in the manner as is mentioned in the section.

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