When a property is transferred, the interest of the transferee can be of two types depending on when the interest accrues vested interest and contingent interest. These types of interests are defined under Section 19 and Section 21 of the Transfer of Property Act, of 1882.
Vested Interest (Section 19)
A vested interest is a present and fixed right to the property that accrues to the transferee immediately upon the transfer. Under Section 19, the key features of vested interest are:
- Immediate Effect – The interest is created and accrues immediately after the transfer, giving the transferee a complete and fixed right.
- Perfect Title – The transferee’s title becomes perfect and complete as soon as the transfer takes place.
- Transferable and Heritable – A vested interest can be transferred to another person and is heritable in case of the transferee’s death.
- Subject to Sale or Attachment – It can be attached and sold in the execution of a court decree.
Contingent Interest (Section 21)
A contingent interest, defined under Section 21, arises when the vesting of interest depends on the occurrence or non-occurrence of an uncertain future event. In such cases:
- Uncertain Future Event – The interest takes effect only if a specified event happens or does not happen in the future.
- Dependent on Conditions – The interest remains conditional and uncertain until the occurrence or non-occurrence of the event.
When Contingent Interest Becomes Vested Interest
In the following situations, a contingent interest converts into a vested interest:
- On Occurrence of the Specified Event – If the interest depends on the happening of an uncertain future event and the event occurs, the interest becomes vested.
- When Event Becomes Impossible – If the interest is dependent on the non-occurrence of a specified event and that event becomes impossible, the interest vests.
Exception under Section 21
An exception under Section 21 states that if a transferee is entitled to receive the income of the interest before attaining a particular age and is also entitled to the interest absolutely upon reaching that age, the interest is treated as a vested interest.
Nature of Contingent Interest
- Future and Uncertain – It is a future possible interest and does not create an immediate right.
- Not Heritable – A contingent interest cannot be inherited if the transferee dies before the interest vests.
- Transferable but Imperfect – Though transferable, the transferee acquires an imperfect title.
- Cannot be Attached or Sold – It cannot be attached or brought to sale in the execution of a decree.
Comparison Between Vested and Contingent Interest
|
Vested Interest |
Contingent Interest |
|
Accrues immediately on transfer |
Accrues only on occurrence/non-occurrence of future event |
|
Confers perfect title |
Confers imperfect title |
|
Transferable and heritable |
Transferable but not heritable |
|
Can be attached and sold |
Cannot be attached or sold |
Judicial Interpretation
In cases like Usha Subbarao vs. B.E. Vishveswariah and Ors., the court clarified that when a property is transferred without any conditions, the transferee immediately gets a vested interest in the property. This vested interest cannot be revoked by the transferor unless the transfer is legally invalid.
Similarly, in the case of Lachman Lal Pathak v. Baldeo Lal Thathwari, the court emphasized that even if the transferee is not in possession of the property, their vested right remains intact. The transferee can still claim legal ownership by using appropriate legal remedies. These cases highlight that vested interests provide the transferee with a secure and enforceable right over the property.
Concluding Remark
In conclusion, vested interest provides a certain and immediate right to the transferee, while contingent interest offers a future and uncertain right that depends on the occurrence or non-occurrence of a specified event.
