RULE AGAINST PERPETUITY

RULE AGAINST PERPETUITY under TPA, 1882

LAW EXPLAINED Transfer of Property
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“A Perpetuity, may be a thing odious in law , and destructive to the Commonwealth, it might put a stop to commerce, and stop the circulation of riches of the kingdom, and therefore not to be countenanced in equity “[1]

 Introduction

Putting restrictions on the transferability of property is highly against the socio-economic policy. Section 13 to section 18 of the TPA act provide rules for the creation of interest in the property. These Sections highlights the rules for the creation of future interest also. Creation of interest in favour of child in the womb is discussed under section 13, while on the other hand section 14 provides rules for the creation of interest for a child who is not even in the womb.

Perpetuity can be defined as a continuous transaction. Creating Perpetuity means transfer involving generation after generation. Perpetuity is an interest, which will not vest till a remote period. Beyond a certain limit, a person cannot postpone the vesting of property in the transferee. Such a period is known as the Perpetuity period. In such a period, vesting is lawfully postponed.

Basis of Rule against Perpetuity

The rule against Perpetuity is based on the general principle that the liberty of alienation shall not be exercised on its destruction. The rule against perpetuities limits the use and transfer of property. The Rule against Perpetuities is a restriction on the present holder’s power to create future interests in that property. This Rule applies to both real and personal property.

The rule against Perpetuity is also known as the rule against remoteness. It implies a prohibition on non-vesting of interest beyond a certain period which is unreasonable. All lives die within the period of one generation that’s why alienation can be prevented for only that generations.

Section 13: Transfer for the benefit of an Unborn person

Section 13 is an exception to the common scheme of ” transfer inter vivos only [2]” as laid down under the transfer of property Act 1882. Under this section, a person cannot transfer property in favour of anyone who is not into existence. Interest in favour of unborn person can be created only by creating prior interest in favour of a person who is alive. However this section does not provide any limit in creating successive interest. But such successive interest must be created in favour of the living person. An unborn child can be benefited only through indirect manner.

Section 14: Rule against Perpetuity

Rule Against Perpetuity under section 14 prevents the property from being tied up unnecessarily. This section just like Section 13 restricts future alienation of specific[3] transfers. Section 14 is corresponding to section 114 of the Indian Succession Act, 1925. To invoke section 14, there must a transfer for the benefit of an unborn person. No such transfer is allowed which is to take effect after a lifetime of one or more person who is/are living at the date of such transfer. Section 14 prohibits such kind of transfers for socio-economic interest. In R. Kempraj v. Burton Son & co. [4] It was said that ” Rule against Perpetuity is based on the principle that liberty of alienation shall not be exercised to its own destruction”[5]

Source:

[1] Lord Guildford

[2] Transfer of property made during a person’s lifetime.

[3] Transfers under section 10,11,12 and 13.

[4] AIR 1970 SC 1872 ; (1969) 2 SCC 594

[5] Justice Grover

This blog is written by Riddhi Chadha, Fairfield Institute of Management & Technology.

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