PROJECT ON

The Rules Against Perpetuity

SUBMITTED BY- ADITYA VEER SINGH ROLL NO. 507 3RD SEMESTER (B.A.LLB HONS.)

SUBMITTED TO- Mr. B.R.N Sharma FACULTY FOR PROPERTY LAW

C HANAKYA N ATIONAL L AW U NIVERSITY P ATNA .

ACKNOWLEDGEMENT

The present project has been able to get its final shape with the support and help of people from various quarters. My sincere thanks go to all the members without whom the study could not have come to its present state. I am proud to acknowledge gratitude to the individuals during my study and without whom the study may not be completed. I have taken this opportunity to thank those who genuinely helped me. With immense pleasure, I express my deepest sense of gratitude to: MR.B.R.N Sharma , Faculty for PROPERTY LAW, Chanakya National Law University for help me in my project. I am also thankful to the whole Chanakya National Law University family that provided me all the material I required for the project. I have made every effort to acknowledge credits, but I apologies in advance for any omission that may have inadvertently taken place.

TABLE OF CONTENTS
Acknowledgement.... 02 Research Methodology.. 04

Chapter 1 INTRODUCTION... 05 Chapter 2 ORIGIN OF THE RULE.......08 Chapter 3 SECTION 14..10 Chapter 4 SCOPE AND APPLICABILITY...13 Chapter 5 EXCEPTION OF THE RULE. ..11 Chapter 6 CONCLUSION.15 Chapter-7 Bibliography25

RESEARCH METHODOLOGY

Scope and Limitations:

This project is based upon doctrinal method of research. This project has been done after a thorough research based upon intrinsic and extrinsic aspects of the project. The researcher has used primary source i.e. books and Internet.

Sources of Data:
The following secondary sources of data have been used in the project1. Books 2. Websites 3. Articles

Method of Writing:
The method of writing followed in the course of this research project is primarily analytical.

Mode of Citation:
The researcher has followed a uniform mode of citation throughout the course of this research paper.

INTRODUCTION
Under the transfer of property Act, the transfer of a property 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 other living persons; and "to transfer property" is to perform such act. The concept of property law is one that has been constantly developing for a very time. Property law is the area of law that governs the various forms of ownership in real property (land as distinct from personal or movable possessions) and in personal property, within the common legal system. In the civil law system, there is a division between movable and immovable property. Movable property roughly corresponds to personal property, while immovable property corresponds to real estate or real property, and the associated rights and obligations thereon. The concept, idea or philosophy of property underlies all property law. In some jurisdictions, historically all property was owned by the monarch and it devolved through tenure or ther feudal systems of loyalty and fealty. Though the Napoleonic code was among the first government acts of modern times to introduce the notion of absolute ownership into statute, protection of personal property rights was present in medieval Islamic law and jurisprudence, and in more feudalist forms in the common law courts of medieval and early modern England. The guiding principle of transfer of property is that a transfer must take place between two living person. The Transfer of Property Act, 1882 has laid down certain rules regarding transfers for the benefit of unborn persons. Interest may be created in favour of an unborn person but no transfer can be made directly to such a person. A transfer can be made through a trust or the ownership of the estate must be vested in some person between the period of transfer and coming into existence of the unborn person. An absolute interest in the property must be transferred to the unborn person. Such interest remains a vested interest, even though the unborn person may not be entitled to enjoy the property soon after his birth1.

http://www.lexuniverse.com/property-laws/india/Transfer-for-benefit-of-Unborn-Person.html

Generally speaking, property cannot be transferred nor an interest created therein in favour of a person not in existence. However, there are certain exceptions to this general principle. They are dealt with, in Section 13, 14 and Section 20 of the Transfer of Property Act, 1882.

ORIGIN OF THE RULE

The rule has its origin in the Duke of Norfolk's Case of 1682. That case concerned Henry, 22nd Earl of Arundel (later the Duke of Norfolk), who had tried to create a shifting executory limitation so that one of his titles would pass to his eldest son (who was mentally deficient) and then to his second son, and another title would pass to his second son, but then to his fourth son. The estate plan also included provisions for shifting the titles many generations later, if certain conditions should occur. When his second son, Henry, succeeded to one title, he did not want to pass the other to his younger brother, Charles. Charles sued to enforce his interest, and the court (in this instance the House of Lords) held that such a shifting condition could not exist indefinitely. The judges believed that tying up property too long beyond the lives of people living at the time was wrong, although the exact period was not determined until another case, Cadell v. Palmer, 150 years later. The rule against perpetuities is closely related to another doctrine in the common law of property, the rule against unreasonable restraints on alienation. Both stem from an underlying principle or reference in the common law against restraints on property rights. [12] However, while a violation of the rule against perpetuities is also a violation of the rule against unreasonable restraints on alienation, the reciprocal is not true. As one has stated, "The rule against perpetuities is an ancient, but still vital, rule of property law intended to enhance marketability of property interests by limiting remoteness of vesting."[14] For this reason, another court has declared that the provisions of the rule are predicated upon "public policy" and thus "constitute non-waivable, legal prohibitions.2

http://www.lawreform.ns.ca/Downloads/Final%20Report%20-%20Rule%20Against%20Perpetuities

Section 14, Transfer of Property Act

Section 14 of the Act reads as follows: 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. This Section is known as the rule against perpetuity. While under sec l3 of the Act, the transferor is not permitted to transfer anything less than his whole or entire interest in the property in favour of unborn persons with prior interest created in the same transfer, the rule against perpetuity [Sec.14] prohibits the creation of certain remote interest in the immovable property so as to last for one or more existing lives plus l8 years. However, the stipulation relating to renewal of lease is not regarded as transferring any right in the property and hence is not hit by sec.l4. Similarly, a contract for sale does not create any interest in favour of the prospective purchaser and does not come within the purview of sec.l4 while a covenant for resale or for redemption of a mortgage stands on a different footing. The object of rule of perpetuity is to restrain the creation of future conditional interest in property. The rule of perpetuity is concerned only with the rights of property and does not affect the making of contracts which do not create rights of property. The common law against perpetuities forbids some future interests (traditionally contingent remainders and executory interests) that may not vest within the time permitted; the rule "limit[s] the testator's power to earmark gifts for remote descendants".[1] In essence, the rule prevents a person from putting qualifications and criteria in his will that will continue to control or affect the distribution of assets long after he or she has died, a concept often referred to as control by the "dead hand" or "mortmain". Analysis of the Section there should be a transfer of property transfer to create an interest in favour of an unborn person interest created should take effect after the lifetime of one or more persons living at the date of such transfer and during the minority of the unborn person

the unborn person should be in existence at the expiration of the interest of the living person

The unborn person is the one in whose favour the interest is created. This vesting of interest in the favour of the ultimate beneficiary is preceded by life interest of one or more living persons. Life interest is always a limited interest. It is necessary that the ultimate beneficiary must come into existence before the death of the last preceding living person. The vestng of the interest in the ultimate beneficiary must be postponed only to the life or lives of the living persons and the minority of the ultimate beneficiary but not beyond that. One of the questions the come up is how much is the perpetuity period, which is the maximum period for which the property maybe rendered alienable. The maximum remoteness of vesting is the life of the last preceding interest plus the minority of the ultimate beneficiary. In Soundararajan v Natarajan, the Privy Council held that since at the date of the transfer it is not known whether or not a guardian would be appointed by the court for the minor in the future, in such a case for the purpose of Section 14 the normal period of minority would be 18 years. Therefore, the vesting maybe postponed up to the life of the last person holding property for his life and minority of 18 years of the ultimate beneficiary. However a problem arises when the unborn person does not come into existence when last interest has expired and he is still in the womb. In this event, the period of gestation has to be included as a period of grace in the perpetuity period. The period of gestation is that period for which the unborn person has to remain in the mothers womb. It is normally the period of 9months or 280 days. Therefore the total period for perpetuity i.e the period for ehich the vesting of the property can be postponed is1) When the unborn person has came into existence either at or before the expiry of the last prior interest his minority period, 2) Where the unborn person is in womb at the expiry of the last prior interest,the period of gestation an his minority. The cases of Ram Nawaz v Nandoo, Brijnath v S.M. Ananthmayi are also those that have been held in court to be a valid vesting of interest.3
3

http://indiankanoon.org/doc/1878658/

Rule against perpetuity in its primary sense:

Perpetuity or as tending to perpetuity are classified as follows:
1. Estates and interests limited in proesenti with an unauthorized mode of devolution, for

example an estate of inheritance, not known to the common law; an unbarrable entail; an estate in which uccessive heirs take life estates only; the attempted entail of a chattel made prior to 1926. 2. Interest held on perpetual non-charitable trust, where no person or persons, can take any be Examples of such rules interest in proesenti which have been held void under the name of s nefit, example trusts to keep in repair a tom not part of the fabric of a church. 3. Gifts to trustees for non charitable indefinite objects or for non charitable unincorporated institutions or societies which may last for an indefinite time. As regards the first class, it will suffice to say that even under the Hindu Law no estate can be created which is unknown to Hindu Law. The principle on which the second class is put has been applied in India in Administrator General v. Hushes. The cases from the third class require consideration. An Indian Case on the point is found in MAE Halfhyde v. CA Saldanha.The life estate so created in favour of the wife does not offend the rule the rule .against perpetuity as incorporated in section 14.

Modern Rule against perpetuity:

The modern rue against perpetuities is thus enunciated by Jarman:25
Subject to the exceptions to be presently mentioned, no contingent or executory interest in 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.* So long as the transferees are living persons,

any number of successive estates can be created. However, if the ultimate beneficiary is someone not in existence at the date of the transfer, section 13 requires that the whole residue

of the estate shall be transferred to him. If he is born before the termination of the last prior estate, he takes a vested interest at birth and possession immediately on the last prior 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. The result of the rule against perpetuity is that the minority of the ultimate beneficiary is the latest period at which an estate can be made to vest.

Justification of the rule:

The most convincing modern explanation of the functions of the Rule against perpetuities is the so-called Dead Hand Rationale. According to this doctrine, the Rule is necessary in order to strike a balance between on the one hand the freedom of the present generation and, on the other, that of future generations to deal as they wish with the property in which they have interests. If a settler or testator had total liberty to dispose of his property among future beneficiaries, the recipients, being fettered by his wishes, would never enjoy that same freedom in their turn. The liberty to make fresh rearrangements of assets is necessary not only in order to be rid of irksome conditions attached by earlier donors to the enjoyment of income but also in order to be able to maneuver in the light of new tax laws, changes in the nature of the property and in the personal circumstances of the beneficiaries, unforeseeable by the best intentioned and most perspicacious of donors. If the property is taken away from the free and active circulation for the purposes ofcommerce and improvement, it will fall to decay and the property becomes inalienable (nontransferable). Therefore, to save the property from decay, non use, being looked up, this rule is enacted in the larger interest and on public policy. Other arguments have been advanced in the past to justify the rule against perpetuities. In particular, it has sometimes been suggested that it is necessary to ensure that property is freely alienable. However, this explanation will not bear scrutiny. The rule against perpetuities did nothing to restrict those mechanisms that were evolved to frustrate the disposal of property during the time that it was held in trust or in a settlement. Those devices were in fact overridden by a series of statutory reforms which promoted the freedom to alienate.

SCOPE AND APPLICABILITY

The Section is a branch of law of property and not of the law of contract. The opening words of section 14 of the Act prohibit the creation of an interest which is to take effect after the lifetime of one or more persons living at the date of such transfer. If a contract does not create any interest in favour of an individual or any party, such a contract does not come within the purview of Section 14. 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 the 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.29Like mentioned earlier, section 14 comes into play only when Section 14 can come into play only if there has been a transfer of interest in the property. The creation of a charge is not a transfer of interest in the property.30
Mahmud Ali Majumdar v. Brikodar Nath, AIR 1960 Assam 178. Kurunjilikattil Appu alias Raman v. Mary, AIR 1965 Ker 27. 49 I.C. 704 ILR (1948) 1 Cal 492 AIR 1958 MP 246

In Raja Rajeswara Dorai v. Sundara Pondiyasami Tevar31, it was held that the creation of an annuity in perpetuity with a charge on property would not offend Section 14 of the Transfer of Property Act. There the suit was to enforce a covenant to pay an annuity in perpetuity as the 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.
In Bhupati Bhusha Trivedi v. Birendra Moahn Singh Chauthari32 it was held: The test to determine whether the rule against perpetuity as embodied in the Section 14 applies or not is whether the covenant creates or seeks to transfer an interest in land. That the rule applies to his right to property or any future limitation of such right and where, as in the present case, the covenant does not seek to create or limit any such right, the rule has no application. To the same effect is the decision in Matlub Hasan v. Mst. Kalawati33.In the case of an agreement for sale entered into prior to the passing of the Act, it was the accepted doctrine in India that the agreement created an interest in the land itself in the favour of the purchaser, and following this

doctrine the view was that a covenant for pre-emption, contained in a deed of partition which was unlimited in point of time, was not enforceable in law. But there has been a change in this proposition and the current proposition is:

1. A contract for sale does not create any interest in the land but is annexed to the ownership of the land.

2. The obligation can be enforced against a gratuitous transferee from the vendor aor a transferee from value with notice.

An agreement to sell immovable property does not itself create any interest in or charge on such property. Therefore a bare agreement to sell immovable property in future on demand by a party to the agreement would not infringe the rule against perpetuities. In Ram Newaz v. Nankoo it was held by the Court that the transfer of two bighas of land to a person was void under Section 14.4

Transfer Of Property Law,second edition.

EXCEPTION TO THE RULE

This rule has no application: 1. To personal contract ,although there is some connection with a reference to the land.

2. To a revocable license to enter and build up windows in default of the owner of the building doing so, for it does not give the adjoining owner any interest in land. If it did such an interest would be void for perpetuity. 3. To transfer for benefit of the public. 4. To a covenant giving a mortgage a right of pre-emption. 5. To equity of redemption which is a present interest in a property in exercise of which the property is sought to be redeemed. 6. To a restrictive covenant or contract not being a limitation of property. 7. To general powers. 8. To an agreement to sell or to recover a land. 9. To an easement acquired by the virtue of easement. 10. To covenant which run with tha land because they are son annexed to the land so as to crete something in the nature of an interest in the land.5 local custom known as customary

Transfer Of property law,R.K Sinha,13 edition.

th

CONCLUSION
The object of the rule against perpetuity is the rule which is against a transfer making the property inalienable for an indefinite period or for ever. Where a property is transferred in such a way that it becomes non-transferable in future for an indefinite period, the property is tied up for ever. So, in the absence of any rule prohibiting creation of perpetuites, there might come a time when almost all the properties of a country would have become static properties. This would cause great hardship in the easy enforcement of law, determinal to trade, commerce and intercourse and may also result into the destruction of property itself. The social consequences of creating perpetutity wouls, therefore, be devasting.

BIBLIOGRAPHY

Books:
1) Dr. Avtar Singh, The Transfer of Property Act, Second Edition, Universal Law Publishing Co, 2) Dr. R.K. Sinha, The Transfer Of Property Act,13th edition, Central Law Agency.

Websites:
1) http://www.legalserviceindia.com 2) http://www.netlawman.co.in 3) http://www.scribd.com 4) www.pdfsearchengine.org