Transfer of Property to an Unborn Person

Written By: T. Eeshitha Rasamayi

Introduction:

The Transfer is defined under Section 5 [1] of the Transfer of Property Act, 1882. The section defines the Transfer of property as an act in which a living person conveys property, in the present or in the future, to one or more living persons, or himself and one or more than one living person, or himself and one or more than one living person. The living person can be a company, association, or body of individuals, whether incorporated or not. However, nothing mentioned here shall affect any law operational in India relating to the transfer of property to or by companies, associations, or bodies of individuals.

Thus, section 5 of the Transfer of Property Act helps us understand that the person must be from one living person to another. This implies that both persons must be living at the time of Transfer. Only such transfers are valid. However, this has an exception to this section by Section 13, which facilitates the transfer of immovable property in favor of an unborn person.

Meaning of unborn person in the Transfer of property act, 1882 a person who does not have any current existence but has a specific reference to one and who may be born in future is considered to be an unborn child or person. Even when the child is in the mother's womb is not a person in existence. English and Hindu law treat a child in the womb as a person. Here, it is noted that the term "unborn person" refers not only to those who have been perceived but are not born yet. There is a possibility that they will be born at all or not, but the Transfer of property is admissibility to be affected for their benefit. After understanding the meaning of the phrase "unborn person", now let us examine the concept under section 13 of the Transfer of Property Act.

Provisions under the Transfer of Property Act

Section 13 [2] of the act talks about the benefit of an unborn person. When Interest is created for the benefit of an unborn child at the date of the Transfer, a prior interest is to be made in respect of the same Transfer, and the Interest is created for the benefit of such person shall not take effect until unless it is extending to the whole of the remaining Interest of the person transferring the property in the property to be transferred.

There are two necessary conditions for transferring property:

● The property cannot be directly transferred to the unborn person, so a prior interest must be created in favor of a living person.

● The absolute Interest must be transferred in favor of the unborn child.

Essential elements of section 13

1. No Direct Transfer: the property cannot be transferred directly to an unborn person, but property can be transferred for the benefit of an unborn person. Section 13 of the Property Act provides that the Transfer should be for the benefit of the unborn child with the following conditions:

● Transfer for the unborn must be made in favor of a living person.

● There must be an absolute interest in the property in favor of the unborn child.

2. Prior Interest: the Transfer of benefit of an unborn person must be preceded by a life interest in favor of a living person at the time of Transfer. That living person holds the property during his lifetime and till the unborn child is born. After the termination of the life interest, the property will ultimately pass on to the unborn, who by the time comes into existence.

3. Absolute Interest: only the absolute Interest is created in favor of the unborn child. Limited Interest cannot be given to the unborn child. According to Section 13 of the Act, the Interest given to the unborn child wholly remains with the transferor of the property. After the termination of the life interest, the unborn child gets the absolute Interest.

Legal consequences:

● The intermediary person living at the date of Transfer is only given life interest. Life interest means giving the person the possession or right to enjoy the property. He has to preserve the property as a trustee. After the termination of life Interest, the whole property or Interest would be given to the unborn child who comes into existence.

● The unborn child must come into existence before the death of the person holding the property for life. If the unborn comes into existence after one month, the property will be reverting to the transferor or his legal heirs.

● After the termination of the life interest, the property cannot remain in abeyance.

Case laws:

● Girjesh Dutt vs Data, the Apex Court made essential observations. Facts of the case enumerate that "A" made a gift of her properties to "B", who was her nephew's daughter. The gift made by A was made for the life of B and then to B's daughter without the power of alienation, and if there was no heir of B, whether male or female, then to A's nephew. B died without having any children. Thus, considering the case's facts, the court held that the gift in favor of unborn daughters was invalid under Section 13 as the gift was a limited interest and also subject to the prior Interest in favor of B.

Applicability under Hindu and Muslim law: Under Hindu law, a gift or bequest in favor of an unborn was void. Now, after the Transfer of property act applies to Hindus, the Transfer in favor of the unborn is valid.

The section 2 [3] Transfer of property says that nothing shall be deemed to affect any rule of any Mohammedan law. So nothing in the Transfer of property act applies to Muslim section 13 is also not applicable. However, a gift in favor of non-existence has been held void under Muslim law.

Indian Succession Act

Section 13 is similar to section 113 [4] of the Indian Succession Act. The difference is that the two sections relate to transfer inter Vivos, while the latter deals with the bequest, which only takes effect on the testator's death. Section 13 controls section 113. Therefore both these sections should be read together.

Conclusion:

The Transfer of property can be executed for unborn persons. Though the Transfer cannot be operated directly, it can be executed indirectly by the machinery of trusts. In other words, the Interest in favor of the unborn person shall constitute the entire Interest in that particular immovable property. The underlying fundamental principle enshrined under section 13 of the Transfer of Property Act is that a person disposing of property to another person shall not create hurdles for the free disposition of that property in the hands of one or more generations.

Thus, for the validity of a transfer in favor of an unborn person, it is crucial that the whole of the remaining Interest of the person transferring the property should be conveyed to the unborn person. Moreover, as soon as the Transfer of property comes into operation, the vested Interest is also transferred to the unborn person. The Transfer of immovable property to unborn persons can thus take effect only according to the provisions discussed above. Else, the Transfer will be declared void.

FOOTNOTES:

1. Section 5. “Transfer of property” defined.—In the following sections “transfer of property” means an act by which a living person conveys property, in present or future, to one or more other living persons, or to himself, 1[or to himself] and one or more other living persons; and “to transfer property” is to perform such act. 1[In this section “living person” includes a company or association or body of individuals, whether incorporated or not, but nothing herein contained shall affect any law for the time being in force relating to transfer of property to or by companies, associations or bodies of individuals.]

2. Section 13. Transfer for the benefit of an unborn person 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 made 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.

3. Section 2: Repeal of Acts-Saving of certain enactments, incidents, rights, liabilities, etc. In the territories to which this Act extends for the time being the enactments specified in the Schedule hereto annexed shall be repealed to the extent therein mentioned. But nothing herein contained shall be deemed to affect- (a) the provisions of any enactment not hereby expressly repealed; (b) any terms or incidents of any contract or constitution of property that are consistent with the provisions of this Act, and are allowed by the law for the time being in force; (c) any right or liability arising out of a legal relation constituted before this Act comes into force or any relief in respect of any such right or liability; or (d) save as provided by section 57 and Chapter IV of this Act, any transfer by operation of law or by, or in the execution of, a decree or order of a court of competent jurisdiction, and nothing in the Second Chapter of this Act shall be deemed to affect any rule of Mohammedan Law.

4. Section 113. The bequest to a person not in existence at the testator’s death subject to prior bequest.—Where a bequest is made to a person not in existence at the time of the testator’s death, subject to a prior bequest contained in the Will, the later bequest shall be void, unless it comprises the whole of the remaining interest of the testator in the thing bequeathed. Illustrations: (i) Property is bequeathed to A for his life, and after his death to his eldest son for life, and after the death of the latter to his eldest son. At the time of the testator’s death, A has no son. Here the bequest to A’s eldest son is a bequest to a person not in existence at the testator’s death. It is not a bequest of the whole interest that remains to the testator. The bequest to A’s eldest son for his life is void. (ii) A fund is bequeathed to A for his life, and after his death to his daughters. A survives the testator. A has daughters some of whom were not in existence at the testator’s death. The bequest to A’s daughters comprises the whole interest that remains to the testator in the thing bequeathed. The bequest to A’s daughters is valid. (iii) A fund is bequeathed to A for his life, and after his death to his daughters, with a direction that, if any of them marries under the age of eighteen, her portion shall be settled so that it may belong to herself for life and may be divisible among her children after her death. A has no daughters living at the time of the testator’s death but has daughters born afterward who survive him. Here the direction for a settlement has the effect in the case of each daughter who marries under eighteen of substituting for the absolute bequest to her merely for her life; that is to say, a bequest to a person not in existence at the time of the testator’s death of something less than the whole interest that remains to the testator in the thing bequeathed. The direction to settle the fund is void. (iv) A bequeaths a sum of money to B for life and directs that upon the death of B the fund shall be settled upon his daughters, so that the portion of each daughter may belong to herself for life, and may be divided among her children after death. B has no daughter living at the time of the testator’s death. In this case, the only bequest to the daughters of B is contained in the direction to settle the fund, and this direction amounts to a bequest to persons not yet born, of a life interest in the fund, that is to say, of something less than the whole interest that remains to the testator in the thing bequeathed. The direction to settle the fund upon the daughters of B is void.