Introduction

• The word ‘perpetuity’ means indefinite period.
• The rule against perpetuity, also known as the rule against remoteness of vesting, means that a property cannot be transferred in such a manner that it becomes inalienable for an indefinite period.
• This disposition would be a transfer in perpetuity. Any disposition in perpetuity may arise in two ways:
  • By taking away from the transferee his power of alienation,
  • By creating future remote interest.
• The rule is provided under the Legislative enactment of the Transfer of Property Act, 1882 (TPA).

Section 14 of TPA

• No transfer of property can operate to create an interest which is to take effect after the life time of one or more persons living at the date of such transfer, and the minority of some person who shall be in existence at the expiration of that period, and to whom, if he attains full age, the interest created is to belong.

Object of Rule Against Perpetuity

• The object of the rule against perpetuity is to ensure that there is a free and active circulation of the property which is primarily essential for two reasons:
  • Firstly, for promotion of trade and commerce in the country.
  • Secondly, for the betterment of the property itself.
• A person who has been given absolute rights in the property must also be permitted to alienate the property. Thus, the rule against perpetuity is also based on the principles of public policy and equity.

Essential Elements

The essential elements of the rule against perpetuity as given in this Section may be stated as under:

1. There is a transfer of property.
2. The transfer is for the ultimate benefit of an unborn person who is given absolute interest.
3. The vesting of interest in favour of ultimate beneficiary is preceded by life or limited interests of living person(s).
4. The ultimate beneficiary must come into existence before the death of the last preceding living person.
5. Vesting of interest in favour of ultimate beneficiary may be postponed only up to the life or lives of living persons plus minority of ultimate beneficiary; but not beyond that.

Minority

• According to Section 3 of The Majority Act, 1875 every person domiciled in India shall attain the age of majority on his completing the age of eighteen years and not before.
• Illustration:
  • X transfers property to Y for a lifetime and then transfers to Y’s unborn son when he attains the age of 27 years. The said transfer becomes void because it exceeds the time period of perpetuity i.e., minority of the unborn.

Case Law

• Soundara Rajan v. C.M. Natarajan (1925): In this case, the Privy Council held that, if at the time of transfer it is not known that whether the court will appoint a guardian for minor or not, then Section 14 of TPA is enforced, according to which the normal period of the minority is 18 years, thus the transfer can be postponed up to the lifetime of the ultimate beneficiary.

Period of Gestation:

• The maximum time limit for the postponement of transfer of interest is the lifetime of natural interest holders and the minority of the ultimate beneficiary.
• A child in the mother’s womb is also capable of becoming a transferee.
  • The period of gestation is the period during which a child remains in the womb of mother i.e., the period of 9 months or 280 days (about 9 months) after conceiving the baby.
• The period of gestation is not counted in the addition of a minority.

Case Law

• Abdul Fata Mahomed v. Rasamaya (1891): In this case the Privy council held that a gift to an unborn person is forbidden by Mohammedan law except in the case of Waqf.

Exceptions

• Section 18 of TPA provides that when a property is transferred for public benefit i.e., for the advancement of knowledge, health, religion, or any other benefits to mankind then the said transfer is not void as per the Rule against perpetuity.
• This rule is not applied in case when property purchased or held by a corporation.
• Once the transfer of interest takes place, it cannot be bad for remoteness.
• Those Agreements which do not create any interest in the property are not affected by this rule.

Case Law

• Rambaran v. Ram Mohit (1966): In this case the SC held that the rule of Perpetuity does not apply to personal agreements i.e., agreements that do not create any interest in the property.
  • This rule does not apply to mortgages because there is no creation of future interest.
  • This rule does not apply to contracts of the Perpetual lease.

Conclusion

The Rule against perpetuity provides that the liberty of transfer of possession of the property shall not be exercised in its own destruction. It provides a certain limit for alienation that can be the life of the interest holder and the minority of the ultimate beneficiary. This rule helps society in the active circulation of property.