VESTED AND CONTINGENT INTEREST: RULE OF ELECTION

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This article is written by Aastha Jha of Alliance University, an intern under Legal Vidhiya

ABSTRACT

The research article delves into the notions of vested and contingent interests, as well as the election rule. Vested interests are those that have already been obtained and cannot be revoked, whereas contingent interests may or may not exist in the future depending on specific conditions. The rule of election, which refers to the legal concept that forces a person to choose between two or more rights or interests that cannot be held concurrently, is also examined. The article includes examples and case studies to demonstrate how these principles might be applied in practise, as well as the obstacles and complications that may develop. It emphasises the significance of understanding vested and contingent interests, as well as the rule of election, in making educated property ownership and inheritance. Overall, the research article enhances the existing body of knowledge on property law and inheritance, and it gives useful insights for legal and financial experts, as well as individuals navigating difficult property ownership and inheritance concerns.

Keywords- vested, contingent, election rule, legal

INTRODUCTION

Property ownership and inheritance are complicated legal issues involving a variety of interests and rights. Vested interests and contingent interests are two of the most significant interests in property ownership and inheritance. Knowing the distinction between these two notions is critical for anybody in India dealing with property ownership and inheritance issues. Several laws and regulations control the idea of vested and contingent interests in India, including the Indian Contract Act, the Transfer of Property Act, and the Indian Succession Act. These laws govern the kind and scope of property rights and interests that persons can obtain, as well as the conditions under which such rights and interests can be exercised.

The notion of election is also important in Indian property ownership and inheritance law. This regulation compels a person to select one of two or more rights or interests that cannot be held concurrently. In circumstances where a person has several heirs or beneficiaries, and the distribution of assets is not apparent, the rule of election is particularly essential.

The goal of this research study is to look at vested and contingent interests, as well as the rule of election, in the context of Indian property ownership and inheritance law. The paper will look at the legal and financial ramifications of these principles, as well as present practical examples of how they might be used in real-world settings.

DEFENITION

Vested Interest is defined under Section 19 of the Transfer of Property Act of 1882.[1] It is an interest generated in favour of a person when no period is specified or a condition of the occurrence of a certain event.

For example, X promises to transfer his property to Y on him attaining the age of 21. Y will have vested interest in the property.

The death of the person who holds the interest has no effect on the interest because it will pass to the deceased’s legal heirs.

In the previous example, if B dies before reaching the age of 21, the interest vested in him will transfer to his legal heirs, who will be entitled to the property within the necessary time period.

KEY FEAUTRES

As previously noted, there are several key features of a vested interest that are explored in depth below:

1.Interest shall be vested: The clause’s major significance is that interest should be created in favour of a person when time is not specified or as a condition of the occurrence of a given event. A person must profess to transfer a specific property in order for an interest to be established. Property pleasure is delayed: When a person acquires an interest in property, he does not immediately have possession of it and so cannot enjoy it.

2.Right to enjoy property postponed: a person acquires an interest; he does not immediately take possession of that property and hence cannot enjoy it.

However, anyone who is not a major and has a guardian is only entitled to the vested interest after reaching the age of majority

For example, X agrees to pass the property ‘O’ to Y and instructs his guardian Z to do so when Y reaches the age of 22. When Y reaches the age of 18, he acquires a vested interest.

1.Vesting period: The interest vests immediately after the transfer is initiated. Nothing can prevent the interest from vesting in the person to whom the transfer is being made.

2.Contrary Intention: The transferor might indicate when the interest in the property shall be vested in the person receiving it.

3.Death of the transferee: If the transferee dies before receiving possession of the property, the interest vested in him now vests in his lawful heirs, who will receive possession of the property once the condition is met.

In Lachman v. Baldeo[2], a person transferred a deed of gift to another person but instructed him that he would not get control of the property until the transferor died. Even if his right to enjoyment is delayed, the transferee will have a vested interest.

CHARECTERISTIC

A vested interest provide a present right, even when enjoyment is deferred until the time period specified in the transfer. As the condition involves a particular occurrence, it is not fully dependent on the condition[3].
The transfer will remain valid even after the transferee’s death
Vested interests are transferable and inheritable rights.

An unborn child has a vested interest, according to Section 20 of the Transfer of Property Act of 1882. Once he is born, his interest in the land will become his. The unborn kid may not instantly be granted the right to use the property after acquiring a stake in it.

CONTINGENT RIGHTS

Section 21 of the Transfer of Property Act of 1882 [4]talks about Contingent Interest. It is a benefit generated for a person upon the occurrence of a predetermined uncertain event. nevertheless, if the event does not occur as expected because the condition is not met, the owner will not be given the asset. The transfer-related condition that is imposed determines whether there is any contingent interest.

For instance, A consents to give B the property “X” in exchange for 90% on his exams. As a result of this uncertain situation and the ambiguity around whether the event will occur or not, B here gets a contingent interest in the property “X”. Only if he receives 90% of the vote and when the requirement is met will he be given the property.

In the case of Leake v. Robinson[5], the court held that inference can be made when a transfer involves a contingent interest whenever a certain age is attained.

In Radha Prasad Singh v. Gajendra Prasad Singh: The Supreme Court of India ruled in this decision that a person with a contingent interest in a property can exercise the right to choose between two forms of enjoyment of the property. The Court ruled that the right to vote can be exercised only after the occurrence of the contingency.

In Suman Purohit v. Surendra Purohit -the Supreme Court of India ruled in this case that if a person has a vested interest in a property, he cannot exercise the right of election.

CHARACTERISTICS

This interest is fully depending on the circumstance. It is only available when the required condition is met.
In case of death of transferee before taking possession of the property, the contingent interest fails and the property reverts to the transferor.
A contingent right is a transferable its heritable depends on the form of the transfer and the condition.

Section 120 of the Indian Successions Act, 1925 lists down the exceptions for contingent interest.

Section 22 talks about the transfer of a contingent interest to a class of members.

Section 23 describes a transfer that occurs upon the occurrence of an event indicated in the contingent interest transfer. This section simply establishes one of the two branches of Section 21 that govern contingent interest. This Section describes what happens after the stated uncertain event occurs.

Section 24 refers to a transfer to a group or class of individuals who will get the property on the condition that they are present on the given day. Because the occurrence indicated above is uncertain, this is likewise a dependent interest. The transfer will only take place for those who meet the requirement of being alive on a specific day. The legal heirs of the deceased cannot claim an interest in that property since a transfer including a contingent interest is entirely dependent on the condition being met.

RULE OF ELECTION

The rule of election is a legal principle that is particularly applicable in circumstances where a person has various rights or interests in property that cannot be held simultaneously. This notion is necessary to guarantee that individuals make educated decisions and choose the most beneficial conclusion for their interests.

In the context of contingent and vested interests, the rule of election plays a vital role in determining the distribution of assets in circumstances when a person has several rights or interests. For example, if a person has a vested interest in a property and a contingent interest in another property, the rule of election forces them to choose between these two interests. They cannot hold both interests simultaneously.

Similarly, if a person is entitled to obtain a contingent interest in a property upon the occurrence of a particular event, such as the death of another individual, and they simultaneously have a vested interest in another property, they must choose between these two interests. People cannot have both interests at the same time. The rule of election is especially important when the transfer of assets is unclear, such as when a person has several heirs or beneficiaries. In such instances, the rule of election can help to ensure that the assets are distributed fairly and equitably, and that the deceased’s wishes are carried out.

It is important to highlight that the rule of election applies only to interests that cannot be held concurrently. If a person possesses several interests that can be held simultaneously, such as multiple vested interests in distinct properties, they are entitled to hold all of these interests simultaneously. The rule of election has important legal and financial implications in the context of property ownership and inheritance in India. When a person is obliged to choose between numerous rights or interests, they must carefully analyse the legal and financial repercussions of their decision.

When a person has several heirs or beneficiaries, the rule of election applies.For example, if a person has numerous heirs, each of whom has a contingent interest in distinct properties, the rule of election can help to ensure that the assets are distributed in a fair and equitable manner to all parties involved.

To summarise, the rule of election is an important principle in Indian property ownership and inheritance law because it helps to ensure that individuals make informed decisions and choose the best outcome for their interests. It is particularly crucial in circumstances where a person has numerous rights or interests in property that cannot be held simultaneously and might have major legal and financial repercussions.

CONCLUSION

In conclusion, in the topic of property ownership and inheritance law in India, the concepts of vested and contingent rights, as well as the rule of election, are critical. Vested interests refer to legal rights or claims that have been acquired and cannot be taken away, whereas contingent interests are depending on the occurrence of a certain event. The rule of election comes into play when a person has numerous interests that cannot be held concurrently, causing them to select one interest over the others.

The election rule is crucial because it helps to guarantee that individuals make informed decisions and choose the best conclusion for their interests. It is particularly essential in circumstances where the distribution of assets is not clear or when a person has several heirs or beneficiaries. It is important to emphasise, however, that the rule of election only applies to interests that cannot be held concurrently.

Overall, a comprehensive knowledge of vested and contingent interests, combined with the rule of election, is fundamental in the field of property ownership and inheritance law in India. It helps to ensure that assets are distributed fairly and equitably among heirs and beneficiaries, and that the wishes of the deceased are fulfilled.

REFERENCES

[1] Legislation: Transfer of Property Act of 1882, s. 19.

[2] Lachman v. Baldeo (1911) 9 ALJ 542.

[3] Book: Sarkar, S. C. (2014). Law of transfer of property in India. CCH.

[4] Legislation: Transfer of Property Act, 1882, s. 21.

[5] Leake v. Robinson (1823) 1 Turn. & R. 301, 36 E.R. 148.