Transfer for the Benefit of Unborn Person under Transfer of Property Act

The Transfer of Property Act, 1882 is a pivotal legislation in Indian law that governs the transfer of property between living persons. Section 5 of the Transfer of Property Act stipulates that such transfers must occur between living individuals. However, there are provisions within the act that address the transfer of property for the benefit of individuals who are not yet born. Transfer for the benefit of unborn person aspect of property law is primarily covered under Section 13 of the Transfer of Property Act.

Section 13 of the Transfer of Property Act, 1882

Section 13 of the Transfer of Property Act is important as it outlines the conditions under which property can be transferred for the benefit of an unborn person. The section states:

“Where, on a transfer of property, an interest therein is created for the benefit of a person not in existence at the date of the transfer, subject to a prior interest created by the same transfer, the interest created for the benefit of such person shall not take effect unless it extends to the whole of the remaining interest of the transferor in the property.”

Consider the scenario where A, the owner of a property, transfers it to B in trust. The terms of the trust stipulate that the property is to benefit A and his intended wife successively for their lifetimes. After the death of the survivor, the property is to benefit the eldest son of the intended marriage for his lifetime and subsequently pass to A’s second son. In this case, the interest created for the eldest son does not take effect because it does not encompass the entire remaining interest in the property.

In simpler terms: A transfers property to B in trust for A and A’s intended wife, successively for their lives. After their deaths, it was to go to the eldest son of the intended marriage for life and after his death, to A’s second son. However, the interest for the benefit of the eldest son is invalid because it does not cover the entire remaining interest in the property.

Principle Underlying Transfer for the Benefit of Unborn Person under Section 13

The primary principle behind Section 13 is to prevent the fettering of property disposition across multiple generations. This means a person disposing of property should not impose restrictions that would hinder the free disposition of that property in the hands of successive generations.

Rules Underlying Transfer for the Benefit of Unborn Person under Section 13

No Direct Transfer

A direct transfer of property to an unborn person is not permissible. However, property can be transferred for the benefit of an unborn person, subject to specific conditions:

1. Prior Life Interest: The transfer for the unborn must be preceded by a life interest in favor of a person existing at the date of the transfer.
2. Absolute Interest: Only an absolute interest (not a limited or life interest) may be transferred to an unborn person.

Prior Life Interest

For a transfer to an unborn person to be valid, it must be preceded by a life interest in favor of a person who is alive at the time of the transfer. This ensures that a living person holds the property during their lifetime until the unborn person comes into existence. After the termination of this life interest, the property then passes to the unborn person, who, by that time, must be in existence.

A transfers his house to X for life and thereafter to the unborn son of A. This transfer is valid. Since the unborn person is not in existence at the date of the transfer, A could not transfer the house directly to him. Instead, A makes a direct transfer of a life interest to X, who is alive at the date of the transfer. After X’s death, the interest in the house passes to the unborn person who is the ultimate beneficiary.

Absolute Interest

Only an absolute interest in the property may be transferred to an unborn person. Limited or life interests cannot be granted to an unborn person. Section 13 stipulates that the interest given to the unborn person must encompass the entirety of the remaining interest of the transferor in the property.

A transfers his property to X for life, who is unmarried and then absolutely to the eldest child of X. This transfer in favour of X’s eldest child is valid because the child receives the entire remaining interest of the transferor.

Legal Consequences of Transfer for the Benefit of Unborn Person under Section 13

When transferring property under Section 13:

• The intermediary person (who is alive at the date of transfer) is only given a life interest. This means they have the right to enjoy or possess the property but must preserve it like a trustee.
• Upon the termination of the life interest, the entire property or interest transfers to the unborn person who has come into existence.
• If the unborn person comes into existence after the termination of the life interest, the property reverts to the transferor or their legal heirs. This is because the property cannot remain in abeyance.

Leading Case Laws on Transfer for the Benefit of Unborn Person: Girjesh Dutt v. Data Din (1934)

Facts: In this case, A made a gift of her property to her nephew’s daughter B for life. The property was then to go absolutely to B’s male descendants, if she should have any. In the absence of any male child of B, the property was to go to B’s daughter without the power of alienation. If B had no descendants, male or female, the property was to revert to her nephew. B died without issue.

Judgement: The court held that the gift for life to B was valid because B was alive at the date of transfer. However, the gift in favor of B’s daughter was void under Section 13 of the Transfer of Property Act because B’s daughter was given only a limited interest, not an absolute interest. Since this transfer was invalid, the subsequent transfer depending on it also failed.

Conclusion

The Transfer of Property Act, 1882, through Section 13, ensures that property can be transferred for the benefit of an unborn person, provided specific conditions are met. This legal provision prevents the restriction of property disposition across multiple generations, ensuring that property remains freely transferable. The principles and rules laid out in Section 13, along with the interpretation provided by case law, provide a clear framework for such transfers, balancing the interests of the transferor, the intermediary holder and the unborn beneficiary.