Section 14 of the Transfer of Property Act enshrines the Rule Against Perpetuity (RAP), which prevents the creation of interests in property that are inalienable or uncertain for an indefinite period. The rule is grounded in public policy to ensure that property remains in active circulation for the benefit of trade, commerce, and society.
Key Principles of Section 14
Definition of Perpetuity:
Perpetuity refers to an indefinite or inalienable duration. Rule Against Perpetuity prevents the transfer of property in a manner that keeps it in abeyance beyond the permissible perpetuity period. This ensures that property does not remain tied up indefinitely.
Permissible Time Period:
Section 14 allows property to be transferred subject to:
• The lifetime of one or more living persons (referred to as life interest), and
• The minority of the ultimate beneficiary (up to the age of 18 years).
Thus, the maximum period of inalienability permitted by law is the lifetime of the intermediary interest-holder(s) plus the minority of the ultimate beneficiary.
Absolute Interest for the Ultimate Beneficiary:
• The ultimate beneficiary must receive an absolute interest in the property once the permissible period ends. If this requirement is violated, the condition is void.
• Example: Ajay transfers property to Bhairav for life and then to Chetan, an unborn child, upon turning 25 years. This condition is void as it delays vesting beyond Chetan’s minority (18 years). Instead, Chetan must receive the absolute interest at 18.
Successive Life Interests:
• Successive life interests are permitted for multiple living persons. However, the ultimate absolute interest must vest in a single individual who is born or will come into existence within the permissible period.
Vested Interest:
• Under Section 20, an unborn child receives a vested interest in property immediately upon birth, even if the right to enjoy the property is delayed until the prior interest-holder’s death.
Judicial Interpretation of Section 14
Ram Baran v. Ram Mohan (1967)
The Court held that the Rule Against Perpetuity applies only to property transfers and not to personal agreements. This judgment clarified that RAP’s application is restricted to property interests, thereby excluding contracts like personal service agreements.
Abdul Fateh Mohammad Ishak v. Russomoy Dhur Chowdhury
The transferor attempted to create a perpetual restriction on alienation of property through successive life interests. The Court invalidated the arrangement, stating that perpetuity would disrupt the free circulation of property. This case reaffirmed that Rule Against Perpetuity serves the public policy goal of keeping property in active circulation.
Jeevarathnammal v. Srinivasa Pillai
A transfer was made to a living person for life, followed by a condition that an unborn child would receive only a limited interest. The Court invalidated the transfer,
stating that Section 14 requires the ultimate beneficiary (unborn child) to receive an absolute interest. This case emphasizes that any condition limiting the interest of the unborn child renders the transfer void.
Maharaja of Burdwan v. Joges Chandra Deo Dhabal Deb
The transferor created multiple successive life interests with a restriction on alienation. The Court held that such an arrangement violated RAP, as it effectively kept the property inalienable beyond the permissible perpetuity period. This case highlights that Rule Against Perpetuity limits the number of successive life interests to ensure the property ultimately vests absolutely in a single beneficiary.
Leela Bai v. Rajaram
The property was transferred to a trust for a charitable purpose with no definite time limit. The Court ruled that RAP does not apply to public trusts, as they are exempt under Section 14. This case illustrates one of the key exceptions to Rule Against Perpetuity; charitable and public trusts.
R. Kempraj v. Burton Son & Co.
The transfer included a condition that vested the absolute interest in the unborn person immediately upon reaching the age of majority (18 years). The Court upheld the transfer as it complied with the Rule Against Perpetuity requirements. This case demonstrates how a transfer can be valid if it adheres to the RAP’s time limitations.
B.T. Patil & Sons v. State of Karnataka
The Supreme Court dealt with a situation involving restrictions on alienation that were contrary to RAP. The Court reiterated the principle that RAP facilitates the free circulation of property. This case emphasized the policy rationale behind Rule Against Perpetuity, which is to prevent long-term restrictions on property.
Exemptions to Section 14
Certain transactions are exempted from the Rule Against Perpetuity because they do not involve alienation or tying up of property indefinitely. These include:
Charges and Mortgages
Rule Against Perpetuity does not apply to security interests such as charges or mortgages, which involve a right to recover money rather than ownership.
Covenants Running with Land
Conditions attached to land that benefit neighbouring properties are exempt, as they ensure beneficial use rather than inalienability.
Public Trusts
Trusts created for charitable or public purposes are exempt because they serve public interest and are not tied to private ownership.
Personal Agreements
In this important case, the Supreme Court condemned industries that released harmful chemicals like Oleum and H acid, violating the right to a safe and healthy environment, which is part of the right to life. The Court stressed the importance of strictly following environmental laws and holding industries accountable to protect public health and ecosystems.
Conclusion
Section 14 prevents the indefinite tying up of property by balancing the interests of private ownership and public policy. By limiting inalienability to a lifetime interest and the minority of the ultimate beneficiary, the Rule Against Perpetuity ensures that property remains in active circulation. The exemptions and judicial clarifications provide further safeguards, ensuring fairness and preventing undue restrictions on the transfer of property.
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