Introduction

• Section 5 of the Transfer of Property Act, 1882 (TPA) provides that transfer of property must take place between living persons.

• The law relating to transfer for the benefit of unborn person is laid down in Section 13 of Transfer of Property Act, 1882.

Section 13 - Transfer of Property Act,1882

• 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 created 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.
  • Illustration - A transfers property of which he is the owner to B in trust for A and his intended wife successively for their lives, and, after the death of the survivor for the eldest son of the intended marriage for life, and after his death for A's second son. The interest so created for the benefit of the eldest son does not take effect, because it does not extend to the whole of A's remaining interest in the property.
    • In simpler terms it can be explained as - A transferred property to B in trust for A and A's intended wife, successively for their lives. After their deaths, it was to go to the eldest son of the intended marriage for life, and after his death, to A's second son. However, the interest for the benefit of the eldest son is invalid because it doesn't cover the entire remaining interest in the property.

Principle Underlying Section 13

• The underlying principle of Section 13 is that a person disposing of property to another shall not fetter the free disposition of that property in the hands of more than one generation.

Rules Underlying Section 13

• No Direct Transfer
  • Property cannot be transferred directly to an unborn person, but property can be transferred for the benefit of an unborn person, subject to following conditions:
    • Transfer for the unborn must be preceded by a life interest in favor of a person existing at the date of transfer.
    • Only absolute interest may be transferred in favor of an unborn person.
• Prior Life Interest
  • The transfer for the benefit of an unborn person must be preceded by a life interest in favour of person living person in existence at the date of the transfer. So that such a living person holds the property during his life and till the time the unborn would come in the existence. After the termination of this life interest the property would pass on ultimately to the unborn person who, by that time comes into existence.
  • A transfer his house to X for life and thereafter to the unborn son of A. The transfer of house in favour of unborn is valid. Here since unborn is not in existence at the date of the transfer, A could not transfer the house directly to him. So, A had to make a direct transfer of life interest in favour of X who is a living person at the date of the transfer. After the death of X, the interest of the house shall pass on the unborn who is the ultimate beneficiary.
• Absolute Interest
  • Only the absolute interest of the property may be transferred in favour of an unborn person. Limited or life interest cannot be given to an unborn person.
  • Section 13 enacts that interest given to the unborn person must be the whole of the remaining interest of the transferor in the property.
    • Illustration: A transfers his properties to X for life who is unmarried and then to the eldest child of X absolutely. The transfer in favour of eldest child of X is valid.

Legal Consequences

• The intermediary person living at the date of transfer is to be given only life interest. Giving the life interest means giving him a right for the enjoyment or possession. He has to preserve the property like a trustee. After the termination of life interest, the whole property or interest would be given to unborn person who came into existence.
• The unborn must come in existence before the death of the person holding the property for life. If the unborn person comes into existence after one month, the property would be reverted back to the transferor or his legal heirs.
  • This takes place because after the termination of life interest, it cannot remain in abeyance.

Leading Case Laws

• Girjesh Dutt v. Data din (1934)
  • Facts: A made a gift of her property to her nephew’s daughter B for life and then absolutely to B’s male descendants if she should have any, but in the absence of any male child of B, to B’s daughter without power of alienation and if B has no descendants male or female then to her nephew. B died issueless.
  • Judgment: The court held that the gift for life to B was valid because B was living person at the date of transfer but gift in favor of B’s daughter was void under Section 13 TPA because she was given only limited interest, she had not given absolute interest. Since this transfer was invalid, the subsequent transfer depending on it also failed.