Vested interest, Contingent interest - (S.

13 - 24)

Ma Yait v The Official Assignee (1930)

- Plaintiff - eldest son
Defendants - trustees of settlement made by plaintiff’s father in 1908
- Defendants pleaded that they had an interest in the property under the deed. Contended that the transfer
in favor of son was invalid - in breach of clause (a) of S. 6 of TPA – spes successionis
Issue - whether the rights that were given to the eldest son, were a possibility of a like nature of an heir-
apparent succeeding to an estate?
Held -
- That turns upon the construction of the settlement.
- The father transferred to trustees a large amount of property, in trust, to allow the during his lifetime to
manage his property, and to have the sole benefit of the income both from the immovable and movable
property.
- After his death, 4 schedules were to operate as per which
- Properties in schedule I, II, III:
- Trustees, during the lifetime of the widow and until the youngest child turned 20, were to distribute
income as follows:
- 1000 rupees a month to the widow and remainder to be divided among the children
- After youngest child turned 20, property was to be sold and proceeds to be equally divided among
the children surviving at that time.
- Properties in schedule IV:
- Not to be distributed until the death of the youngest child and thereafter to be divided between the
children living at that time.
- Now, it is plain that the result of this disposition was to create - a vested interest in all the children in the
income of the property, secondly it created a contingent interest in all the children in the corpus (title) in
respect of all the property until, at any rate, the youngest child reached the age of twenty.
- When the youngest child reached the age of twenty, the children who were alive at that date obtained a
vested interest and a right to have the proceeds distributed among them as to the property in schedule I, II,
III.
- As to the property of schedule IV, all the children took a contingent interest until the death of the youngest
child, and, as soon as the youngest child died, the children then surviving, and, of course, their issue,
obtained a vested right to have the property distributed among them.
- That is a very plain and ordinary settlement, and it gives very plain and well-understood rights to all the
parties who benefit under the settlement: a vested right in the income, contingent rights in the corpus; and
it appears to their Lordships to be plain that the contingent interest which the children took, whether they
took it under the first, second and third schedules or under fourth schedule, was something quite different
from a mere possibility of a like nature of an heir-apparent succeeding to the estate, or the chance of a
relation obtaining a legacy. It is a well ascertained form of property. It certainly has been transferred in
this country for generations-in respect of which it is quite possible to raise money and to dispose of it any
way that the beneficiary chooses.
basically,
- Properties in schedule I, II, III: Contingent interest in the corpus of the properties until youngest reached
20 years of age; Vested interest in these properties and right to have proceeds distributed when he reached
20.
- Properties in schedule IV: vested interest in distribution after youngest child died, disposition created
interests and not spes successionis.

Rajes Kanta Roy v Santi Debi (1957)

- whether an interest is vested or not is to be gathered from a comprehensive review of the terms of the
document
- 2 important objectives of the trust: give property to his two sons and discharge of the debts
- Rule - where the enjoyment of property is postponed but present income is to be applied to the benefit of
donee, gift is vested and not contingent
- Distinguishing factor in this case: not entire income is available to the donee for their use but only a
portion thereof.
- One of the distinguishing features of contingency is that if the person dies before the contingency
disappears and vesting occurs, the heirs of such a person do not get the benefit of the gift
- In this case, the trust deed specifically provided that: In case of death of the manager of the trust (Rajes),
his surviving heirs would take his interest
- The net result of the provision is that whenever the alleged contingency of discharge of debt disappears,
the property would devolve on the heir of Rajes - widow or children.
- In view of these facts - Rajes has a vested interest in the property

Facts:
- Ramani Kanta Roy had three sons - Rajes, Rabindra and Ramendra.
- One of the sons, Rabindra died childless leaving a widow, Santi Debi.
- After his death, father, Ramani bequeathed some of Rabindra’s properties.
- His wife, Santi Debi, filed a suit for a declaration that she was entitled to the property.
- However, Ramani, Rajes and Ramendra, filed a suit against Santi for a declaration that the marriage was
void as they fell under DOPR.
- While this suit was on, father, Ramani executed a trust deed of his properties with Rajes as the trustee.
- The conditions of the trust deed were such that
- (a)Specified lots were marked for each of the two sons
- (b) The income out of their respective property was to be used to discharge the debt of the father
and on the death of the father the trust would end and the properties would be allotted to the sons
as marked
- (c) Any surplus income remained was to go to the person to whose lot it belonged to
- (d) If any son died, before the trust was terminated, his interest was to devolve on his heirs.
- The suit b/w Santi and Rajes, Ramani and Ramendra was finally compromised on the terms that Santi
Debi would receive a monthly allowance of Rs. 475/- from the properties & on default of payment, Santi
Debi could realize it through Court.
- On default, she filed an application to realize the arrears of her allowance. Execution was asked for by
way of attachment and sale of immovable of Rajes and Ramendra they received under the Trust Deed.
- Rajes argued that the interest he derived in the properties of Ramani was contingent and thus, could not be
attached.
Order was passed by the Subordinate Judge in favor of Santi. Appeal by Rajes was dismissed by HC. Filed
for appeal before SC.
Held:
- the question is one of intention to be gathered from a comprehensive view of all the terms of a document
- here, deed of trust
- A Court has to approach the task of construction in such cases with a bias in favor of a vested interest
unless the intention to the contrary is definite and clear.
- The arrangements under the Trust deed taken together clearly indicate that what is postponed is not the
very vesting of the property in the lots themselves but that the enjoyment of the income thereof is
burdened with certain monthly payments and with the obligation to discharge debts therefrom notionally
pro rata, all of which taken together constitute application of the income for his benefit – this is what
explanation to S. 19 and Exception to S. 21 state – bias towards vested interest.
- While, therefore, the settlor does appear to have attached considerable importance to the liquidation of
debts, there is nothing to show that he was apprehensive that the debts would remain undischarged out of
 his properties and its income and that he contemplated the ultimate discharge of his debts to be such an
uncertain event as to drive him to make the accrual of the interest to his sons under the deed to depend
upon the event of the actual discharge of his debts.
- The Court held that the interest taken by the sons under the trust deed was vested and not a contingent
interest, therefore, attachable under a court’s decree.

Kokilambal and Ors. v N Raman (2005)

- Kokilambal executed settlement deeds with Varadan, her husband’s nephew with respect to two properties
- Varadan died as bachelor; after his death Kokilambal revoked the settlement deeds and executed new
settlement deeds in favour of her niece
- Varadan’s brother claimed that the settlement deeds executed after his brother’s death were null and void
and he was entitled to inherit the properties Kokilambal had given to Varadan.
- Court said that the terms of deed would decode the intention of the parties
“Varadan shall have the right to collect rent, pay taxes, etc.
Property can be enjoyed by both of them
Income to be equally divided between Varadan and Kokilambal
However, right of alienation did not belong solely to either of them. Property could only be alienated
jointly.
After her demise, house shall be enjoyed by Varadan absolutely”
- Trial court and HC held that Varadan had acquired a vested right in properties and his brother should
inherit them. Kokilambal could not have revoked the deeds after the death of Varadan.
- SC - Overruled or Agreed?

Rule against perpetuity - S. 14 (???????)

Scenario I: A transfers property to B for life and then to C when C attains majority (typically 18 years)
Scenario II: A transfers property to B for life and then to C when C attains the age of 25
—————————-

WEEK 7-8

When Rights Conflict - s. 38, 39, 41-43, 48-51

s. 41 - *Ostensible owner is the person who is though not the real owner but has all incidents and/or
characteristics as the real owner. Though he owns the property and all the property documents, papers and
records are on his name on a minute scrutiny it can be found that he has never the intention to own the
property. As per the wishes of the real owner, ostensible owner puts his name as an owner on the records of
the property although he has no intention to own the property. Property funded by the real owner- that person
who had the intention to buy the property.

*Benami Transaction - any transaction in which property is transferred to one person for consideration paid
by another person.

- Benami = Ostensible Ownership?

- Benami Transactions Act, 1988
- Benami Transactions (Prohibition) Amendment Bill, 2015 sought to change some provisions of the
aforementioned Act:
Sought to include following in a benami transaction:
(i) transaction made in a fictitious name;
 (ii) owner not aware of or denies knowledge of property;
(iii) person providing consideration of property is not traceable
- Excludes:
(i) HUF holding in name of a family member;
(ii) fiduciary capacity;
(iii) person holding in name of spouse or child and paid from person’s income

Transfer of property pending a suit - S. 52

Doctrine of lis pendens.
*Collusive - involving secret or unlawful cooperation aimed at deceiving or gaining an advantage over
others.
Scope of lis pendens -
- does not make the voluntary transfer void; it only makes it subservient to rights of parties to the decree
or suit
- Transferee becomes bound by the decree even if he is not party to the suit in the first place.

Supreme General Films Exchange v Maharaja Sir Brijnath (1975)

- 1948 - Lease Agreement Letter
1954 - Suit filed to attach Theatre and recover mortgage
1956 - Lease renewed
1960 - Decree that recover dues by sale of theatre
- Was the lease signed in 1956 void and hit by the bar in Sec 52 or did it fall outside scope of Sec 52?
Was the lease executed in 1956 in purported satisfaction of antecedent claims of 1948 or did it provide
new rights?
Facts:
- Owner of cinema theatre (Bhatia) took loan from former Maharaja (of Rs. 2,50,000/-) – he kept cotton
bale as security, Security was insufficient so cinema theatre was mortgaged in the favor of the Maharaja.
- Maharaja filed a suit to recover the money and a compromise deed was agreed b/w the 2 to sell the
theatre.
- Meanwhile, Central Bank of India, another creditor of the owner filed a suit for attachment.
- The Supreme General Films Co. was a lessee of the cinema.
- The original lease was drawn in 1940 expired in 1946 but the company continued as a tenant.
- The company filed a suit in 1954 for specific Performance of the agreement to lease – compromise deed
entered & a fresh lease in1956 in favor of the Co.
Issue: The lease of 1956 was void as it was struck by S. 52 of the Transfer of Property Act and s. 64 of the
CPC.
Held:
- SC – The lease-deed of 1956 purported to confer upon the defendant-appellant new rights.
- Indeed, there are good grounds for suspecting that the compromise in the suit for specific performance
was adopted as a device to get round legal difficulties in the execution of the lease of 1956 in favor of the
Co.
- We are unable to accept the argument, that the lease was merely an enforcement of an antecedent or pre-
existing right.
- We think that it purported to create entirely new rights pendente lite.
- It was, therefore, struck by the doctrine of lis-pendens, as explained by this Court in Jayaram Mudaliar
v. Ayyaswami, embodied in Section 52 of TPA.

Guruswamy Nadir v P Lakshmi (Dead) Through LRs (2008)

- contract sell a house property was signed. Rs 5,000 was paid and remaining Rs 25,000 were to be paid by
31.7.1974
- The remaining amount was not paid and the owner sold and handed possession to the appellant on
5.5.1975
- First buyer filed a suit for specific performance on 3.5.1975
- Second sale was definitely after filing of the suit in question
- Principle of lis pendens will govern and second sale cannot have an overriding effect over the first sale.

Jayaram Mudaliar v Ayyaswamy (1973)

- Mudaliar purchased lands under sale and in auction on 7-7-1958 and 15-7-1960 respectively
- Both Mudaliar and the seller of lands were defendants in a partition suit filed on 23-6-1958 filed by
Ayyaswamy
- Ayyaswamy contended that the sale of lands - part of joint property - was struck by the doctrine of lis
pendens under Sec 52 of TPA.
- Seller contended that both the sales were outside the purview of Sec 52 since they were for discharge of
pre-existing liabilities of the HUF of which he was the karta
- The court dismissed the argument since - seller sold land to son-in- law, for invaluable consideration and
had admitted at other place that the lands so sold were not joint property
- Also, the sale was voluntary not because of a mortgage decree of a court to sell and repay the loan
- Only land not subject to lis pendens was one for improvement of which loan was taken
- Thus, only part of loan was treated as part of joint liability and could be said to have been taken by the
joint family.

Facts:
- Jayaram bought leasehold property from Munniswami for Rs. 10,500/- under sale deed and certain other
properties by auction to enable Munniswami to pay off his debt.
- Brother of Munniswami - action against the sale stating it was under lis pendens as a suit for partition was
filed.
- Jayaram claimed sales were outside the purview of the doctrine of lis pendens (partition suit) they were
for the discharge of pre-existing liabilities of the Hindu joint family of which Munisami was the karta -
had to be met out of the properties which were the subject matter of the partition suit.
- It was urged that where properties are liable to be sold for payment of such debts as have to be discharged
by the whole family, only those properties would be available for partition in the pending suit which are
left after taking away the properties sold for meeting the pre-existing liabilities of the joint family.
- Munniswami stated that he had acquired the property by his own funds and they were not joint property,
so Ayyaswami had no share.
- Ayyaswami pleaded – joint property - transfers as fraudulent and not for a legal necessity + lis pendens
Issue: Involuntary sale excluded from lis pendens - S. 52 does not apply to transferors who alienate property
on behalf of the whole of the Hindu Family – those properties should be outside the purview of suit of
partition.
Held:
- The suggestion made on behalf of the appellant, that attachment of some schedule 'B' property before
judgment in the purchaser's mortgage suit could remove it from the ambit of Lis pendens, is quite
unacceptable.
- alienation by a Karta is for a legal necessity and it binds the whole of the family.
- If the alienation is not proper then only will the properties of Munniswami be attached alone.
- TC and Appellate Court had held that the property was joint property. It is a general rule which seems
to have been recognized in all regular systems of jurisprudence, that during the pendence of an action, of
which the object is to vest the property or obtain the possession of real estate, a purchaser shall be held
 to take that estate as it stands in the person of the seller, and to be bound by the claims which shall
ultimately be pronounced.
- Lis pendens literally means a pending suit; and the doctrine of lis pendens has been defined as the
jurisdiction, power, or control which a court acquires over property involved in suit, pending the
continuance of the action, and until final judgment therein.
- The purpose of Section 52 of the Transfer of Property Act is not to defeat any just and equitable claim but
only to subject them to the authority of the Court which is dealing with the property to which claims are
put forward – Appeal dismissed

Fraudulent Transfer (s. 53)

(?????????)

Abdul Shukoor v Arji Papa Rao (1963)

- partnership firm was under debt of around 2.5 lakhs and had assets including goodwill of worth 2.9 lakhs
- It was agreed that one of the partners (Abdul Shukoor) would leave the partnership and take with him one
property in Vaniyambadi valued at Rs 20,000/- while the suit tannery which was estimated as of the same
value was to become the sole property of the 4th partner.
- Soon after this deed of dissolution the 4th partner entered into an agreement with the plaintiff for the sale
to him of the suit property for a sum of Rs. 19,000/- and later executed the deed of sale in 1949. On the
execution of the sale deed the plaintiff entered into possession and he claimed to have effected
improvements to the property.
- One of the creditors Arji Papa Rao-filed for the recovery of a sum of Rs. 12,950/- against the firm and its
partners and obtained a decree with interest and costs.
- Soon after filing the plaint he obtained an order for attachment of the suit property.
- The purchaser of the property argued that he was a bona fide purchaser of property and the property so
bought could not be subject to attachment. He contended he had paid full value and was in possession and
had rights to enjoy the property.

Issue:
- that the sale was a sham, a pretended Sale without any consideration and not intended to pass any title to
the plaintiff
and in the alternative that even if it were a real transaction supported by consideration and intended to pass
title to the plaintiff, still the same was, having regard to the circumstances, a fraud upon the creditors and
therefore voidable at his instance
- Basically - whether the plaintiff was a transferee in good faith?

- SC decided on basis of fact and circumstances:

- First, the deed was registered in Madras and not Vaniyambadi where property was located.The intent,
perhaps, was to keep the alienation secret from the creditors
- Second, partnership firm was under severe financial distress. Pressure from creditors immediately prior
to the impugned sale. Court said there could only be 2 purposes for sale - to pay creditors or vendors
own use. No stipulation anywhere that money was to be used to pay creditors
- Third, even if entire property of firm was not sold out; part of it was sold to delay the creditors.
- plaintiff and the 4th defendant were both members of the same community.
the plaintiff might have been chosen because of his willingness to take the sale without any searching
enquiry as to the circumstances necessitating it and because there would be less publicity in the
transaction being put through between them-such as for instance inspection of the property or enquiries
in the locality as regards value etc., which would take place if the sale was to be to a total stranger
which would attract the attention of the firm's creditors.
- NOT a purchase in good faith
• Where fraud on the part of the transferor is established [s. 53(1) being satisfied], burden of proof on
transferee to prove he fell within the exception and in order to succeed he must establish that he was not a
party to the design of the transferor and that he did not share the intention with which the transfer had been
effected but that he took the sale honestly believing that the transfer was in the ordinary and normal course
of business.
• When once the conclusion is reached that the transfer was effected with the intent on the part of the
transferor to convert the property into cash so as to defeat or delay his creditors, there cannot be any doubt
on the evidence on record that the plaintiff shared that intent. For this purpose the following circumstances
may be pointed out (1) plaintiff, vendor - same community, must obviously have known each other having
been in trade for several years in several places in common and must therefore have been well acquainted
with the financial and business affairs of each other.
• enquiries that the plaintiff made before he took the transfer - led evidence to show that he consulted his
lawyers about the title-of the vendor; but any attempt at an enquiry of the 4th defendantas to why he was
effecting the sale of the only immovable property of the firm which was allotted to him under the-deed of
dissolution is absent.
• It stands to reason that the plaintiff must be fixed with notice of the design in pursuance of which the
transfer was effected. If the object of a transferor who is heavily indebted was to convert his immovable
property into cash for keeping it away from his creditors and knowing it the transferor helped him to
achieve that purpose it has naturally to be held that he shared that intention and was himself a party to the
fraud.
• Even when the plaintiff was fixed with notice that the firm's business had been running at a loss and had
accumulated debts, as disclosed by the recitals in the deed of dissolution, which was placed in his hands,
the purchaser did not insist that the consideration which he was paying should be utilized for the discharge
of at least some of the debts.
• We are satisfied that the Plaintiff was not a transferee in good faith and that the transfer itself was a scheme
by the transferor with the knowledge and concurrence of the transferee to put the property out of the reach
of the creditors.

Part Performance (S. 53-A)