- The word ‘perpetuity’ means indefinite period.
- The rule against perpetuity, also known as the rule against remoteness of vesting, means that a property cannot be transferred in such a manner that it becomes inalienable for an indefinite period.
- This disposition would be a transfer in perpetuity. Any disposition in perpetuity may arise in two ways:
- By taking away from the transferee his power of alienation,
- By creating future remote interest.
- The rule is provided under the Legislative enactment of the Transfer of Property Act, 1882 (TPA).
The rule against perpetuity is a legal principle that governs the transfer of property in India. It is enshrined in Section 14 of the Transfer of Property Act, 1882. The rule restricts the transfer of property by way of a contingent interest or a future interest that is not certain to vest within a prescribed period. The main purpose of this rule is to prevent the creation of property rights that may continue indefinitely in the future.“Perpetuity as defined by the Merriam Webster Dictionary is “the state of being perpetual” i.e., “to hold something for an unlimited period of time.” Therefore, it can be inferred that perpetuity under property law is holding a property for an unlimited period of time, thereby, making it inalienable or untransferable; that being the case, the Rule Against Perpetuity is the law that prohibits the transfer of property from generation to generation and restrains the property from becoming inalienable.
The Rule against Perpetuities was established in the famous case of the Duke of Norfolk where Henry Howard, 22nd Earl of Arundel who wanted to establish his inheritance. He intended to institute executory limitation so that his title would be inherited by his firstborn son who was not mentally stable and then to his second son.
He also wanted to pass the other title to his fourth son and intended to pass titles to grandchildren who were not conceived yet. Henry’s second son who inherited one of the titles refused to pass it on to his younger brother who resorted to the House of the Lords to enforce his interest.
The House of the Lords held that it is unjust to hold the property perpetually. However, the time period for vesting the interest in a property was laid down only in Thelluson v Woodfard case after 150 years. This rule is applied only when the interest in the land is created by deed or by will.
Definition of the Rule Against Perpetuity
Rule against perpetuity is a legal principle that limits the transfer of property by way of a contingent or future interest. The rule provides that no interest in property shall be created that is not certain to vest within a period of life in being and twenty-one years thereafter.
The court held that a trust for a religious purpose was not void under the rule against perpetuity. The trust was created to maintain a temple and provide for the performance of religious ceremonies, and the court held that the trust was not subject to the rule because it was for a charitable purpose.
The rule against perpetuity is based on the common law principle that property should not be tied up in perpetuity. The rule applies to all transfers of property, including gifts, sales, leases, mortgages, and bequests. It is intended to prevent the creation of future interests that are too remote and uncertain to be enforced.
The rule operates by imposing a time limit on the vesting of contingent or future interests. The time limit is generally the life of a person in being at the time the interest is created plus twenty-one years. If the interest is not certain to vest within this period, it is void.
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.
Applicability of Section 14
- The transfer should create an interest in property, moveable or immovable and therefore transfers that do not create an interest in property is excluded from the purview of this section.
- The Rule against Perpetuity comes into effect only when the interest in the property is transferred and it takes effect after the lifetime of the last interest holder and during the minority of the unborn person.
- The transfer should create an absolute interest in favour of the unborn child who is deemed to be the ultimate beneficiary.
- The ultimate beneficiary should exist at the time of expiration of the interest of the living person.
- Postponing such vesting of interest can only be done for a period including the life or lives of the person who had been provided with the life estate as well as the minority of the ultimate beneficiary
Period of Perpetuity under Section 14 of TPA
According to Section 14 of the Transfer of Property Act, the maximum permissible remoteness of the maximum time which a property can be transferred, begins from the date from which the property is transferred and is extended to the lifetime of the previous interest holder plus the gestation and minority period of the beneficiary.
That being the case, property is transferred to A until the end of his life and then to B, following which the property shall be transferred to the unborn child after he attains the age of eighteen. The property is not tied up forever but is transferred successively and is tied up until the end of their lives.
Although, the interest in the property has to be transferred immediately to the unborn child, as per this section it is transferred only after the child attains majority.
Under this Section, the transfer of the property has to take place during the lifetime of the last interest holder and the conception of the beneficiary, and the failure to do so within the specified time period will result in the failure of transfer.
The maximum period up to which the transfer of interest can be postponed is the gestation period plus the age of minority. When the child or the beneficiary is conceived, the interest is created following which the interest is vested in the child according to Section 20 of the Transfer of Property Act until the age of majority is attained. On becoming a major, the person receives an absolute interest in the property and is allowed to enjoy, possess and alienate the property.
Period of Gestation
As mentioned earlier, the maximum time period during which the interest of the property can be transferred is the lifetime of the last interest holder plus the period of minority of the beneficiary. In the case, a child is conceived while the property is being transferred an interest is created since the child in the mother’s womb is eligible to claim interest in the property.
Period of Minority
A person ceases to be a minor after attaining the age of eighteen years according to the Majority Act, 1875. In the case where the age of minority shall be twenty years when assigned with a guardian by the Court. In Saundara Rajan v Natarajan, the Privy Council adjudged that a person shall be considered to be a minor up to the age of eighteen years under Section 14 of the Transfer of Property Act. According to the provisions of Section 13 of the Act, when an interest in the property is transferred to an unborn child, the gestation period is added to the total time before transfer. For that reason, the period is extended to the lifetime of the persons with life interest and eighteen years until the child attains maturity.
Exceptions under Section 14 of TPA
Transfer to charities or for public benefit- Section 18 of the Transfer of Property Act, 1882 provides protection against the rule against perpetuity in certain cases wherein the transfer has been made for the benefit of the public, for purposes of “advancement of religion, knowledge, commerce, health, safety or any other object beneficial to mankind.”
Covenants of Redemption-Padmanbha v. Sitarama– in this case, it was established that the rule against perpetuity shall be exercised or applied only in cases where new, future interest in the property is to be exercised after the mentioned time period. Mortgage cases are beyond the scope of the Rule against perpetuity as there is no conditional future interest to be formulated as the exercise of the equity of redemption is considered as current interest.
Covenant of Pre-emption- It is provided in Section 54 of the Transfer of Property Act, 1882 that an agreement for the sale of the land does not, separately create an interest in land. It was further established by the Supreme Court that since any agreement for sale does not imply the creation of interest in the property, any such agreements/contracts do not violate the rule against perpetuity under Section 14 of the TPA,1882.
Personal Agreements- Since personal agreements do not lead to creation of interest in the property, these do not come under the purview of Section 14 of the TPA, 1882.
Contracts for perpetual renewal of leases-Contracts for perpetual renewal of leases is also not hit by the rule against perpetuity.
Case Law
- Soundara Rajan v. C.M. Natarajan (1925): In this case, the Privy Council held that, if at the time of transfer it is not known that whether the court will appoint a guardian for minor or not, then Section 14 of TPA is enforced, according to which the normal period of the minority is 18 years, thus the transfer can be postponed up to the lifetime of the ultimate beneficiary.
