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Rule against Perpetuity: Inception, Relation with Personal Laws and Latest Developments

Giving the briefest explanation of the rule against perpetuity would be to barely state that this concept is mentioned in Section 14 of the Transfer of Property Act (TPA), 1882. But this will do no justice to the concept from which this section emanates, the ideas that it propagates into the entire Transfer of Property Act, or how other sections of the same act influence this section and get influenced by it as well.

Through this paper the aim is to create a complete understanding of the entire concept of rule against perpetuity and not just confining it to Section 14 of the TPA, 1882. The paper then advances to understanding how Section 13 of the TPA, 1882 which is:
"Transfer for benefit of unborn person" is read with Section 14 and how Section 18 of TPA, 1882 which states:
"Transfer in Perpetuity for benefit of public", is an exception to the rule aginst perpetuity. There will be further indulgence into how Personal laws of Hindus and Muslims have adopted or contradicted the said rule and also how does the English Law perceives this rule in it's Common Law, along with an understanding of what recent development our Hon'ble Supreme Court has made with regards to this rule.

Introduction: Section 14 of the Transfer of Property Act, 1882

Section 14 of the Transfer of Property Act, 1882 states that,

Rule against perpetuity

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.

The section states that the property can only be transferred to and between living persons only and if the transferor wants to extend his rights of transferring the same property to an unborn person it can only be extended to one generation that too the interest can only be created till the final receiver attains the age of majority, that is 18 years in the present case.

As per Section 13 , after attaining Majority the property must in its entirety with all the rights that a property carries along with it shall be transferred to the final recipient, otherwise this transfer won't be considered a valid transfer. Now this beneficiary is the complete and sole owner of the transferred property and they have all the rights to sell the property, rent it, give it on mortgage, or any other possible use of the property.

It can be stated that the owner has transferring rights in a property and the right to create future interests as well but it arises within certain limits, it cannot be done infinitely, i.e. perpetually , which means to continue forever so this Section 14 of TPA, 1882 is a rule which goes against this perpetual nature of transferring property and this rule is only applicable to contracts with create an interest in property, doesn't apply to any personal contracts, which has been observed in Witham v. Vane (1883).

Following the same line of reasoning when Section 14 is read with Section 54 and Section 40 the covenant for pre-emption of property even if unlimited in time does not violate the rule against perpetuities since a mere contract for sale of immovable property does not create interest in immovable property, same was also observed in London and South Western Rly. Co. v. Goman.

Property can be transferred to several generations at once but with a condition that is that all the recipients shall be living at the moment the transfer was made, and this section only excuses or rather extends the transfer period to a maximum of 18 years after the death of the last living recipient, that is also if the unborn child had come into existence, was just not born yet but was conceived while the last recipient was alive. If the last recipient dies and no unborn successor comes into existence then the property goes out of the hands of that family and government takes over such property. The last unborn successor attains a vested interest in the property at birth itself and attains possession immediately on the termination of the last prior estate.

This concept emerges from the idea that how it is not a beneficial step for the financial market or the economy of a country that any property be kept out of the market, that is the circle of sale and purchase that too at a stretch for several generations or centuries. It would be detrimental for the entire economy if people were allowed to pass on their property to several generations, the intermediate recipients of the property only have a prior interest in the property and not absolute interest, as they do not have complete ownership rights over the same and cannot sell the property, take mortgage on it, etc., as they have to by obligation transfer the entire property to the next generation. They cannot make decisions which change the ownership status of the property, thus creating only a partial interest in the property.

Comparison between English, Hindu, and Islamic Law with regards to rule against perpetuity

English law permits transfer of property to as many people who are living at present and after that gross 21 years of additional period is granted, irrespective of the last receiver's minority. However in Transfer of Property Act, which governs transfer of property for Hindus, dictates that property can be transferred to as many living people the transferor wants but with regards to an unborn person who shall be the last successor in such a transfer he must attain complete interest in property at majority, otherwise the transfer would be void. Hence to conclude in Hindu law after the last living recipient, unborn receiver must come into existence and a maximum period of 18 years is granted for the final transfer of that agreement.

In Muslim law there are various takes on this rule, the two contradicting views on the topic are that it is not self-evident in Islamic law that family Waqfs should be perpetual, and for that reason some schools of thought do not make it incumbent upon a family Waqf to be perpetual and the other being that the common law can theoretically accommodate perpetual private trusts, and, in some jurisdictions, it has done so.

Three out of the four schools of thought in Islamic law declare that as a condition for its validity, a Waqf must be perpetual. These three schools are Hanafi, Shafi, and Hanbali Schools of thought. For the Ḥanafi school, it can be observed from, Ibn Alhumām, Fatḥ Alqadir; 'Abdullah Almūṣili, Alikhtiar Litaʿlil Almukhtār. For the Shāfiʿi school, one can refer to Aḥmad Ibn Ḥajar Alhaytami, Tuḥfat Almuḥtāj Sharḥ Alminhāj, Mohammad Alramli, and Nihāyat Almuḥtāj Sharḥ Alminhāj for the same. For the Ḥanbali school, it is concluded from Manṣūr Albahūti, Kashāf Alqināʿ ʿan Matn Alʾiqnāʿ; ʿAli Almirdāwi, and Alʾinṣāf fi Maʾrifat Alrājiḥ min Alkhilāf. For the Māliki School of thought, the default position is still that a Waqf is (but does not have to be) perpetual, except it allows a Wāqif to opt out of this default position and create a temporary Waqf, Maliki school's position can be inferred from Moḥammad Alḥaṭāb, Mawahib Aljalil Sharḥ Mukhtaṣar Khalil.

Exceptions to the Rule against Perpetuity

Broadly there are two exceptions to the rule against perpetuities, one being mentioned very explicitly in the Section 18 of the Transfer of Property Act, 1882 itself:

"Transfer in perpetuity for benefit of public.�The restrictions in sections 14, 16 and 17 shall not apply in the case of a transfer of property for the benefit of the public in the advancement of religion, knowledge, commerce, health, safety or any other object beneficial to mankind."

All the transfers mentioned in Section 18 are allowed beyond the period mentioned in Section 14, however this transfer should also have occurred "inter-vivos", that is between the living, then only its valid.

However there is no such similar relaxation given for the rule against perpetuities in the Indian Succession Act, in addition Section 118 of the Succession Act, 1925 which states that:

"Bequest to religious or charitable uses.�No man having a nephew or niece or any nearer relative shall have power to bequeath any property to religious or charitable uses, except by a Will executed not less than twelve months before his death, and deposited within six months from its execution in some place provided by law for the safe custody of the Wills of living persons: 1[Provided that nothing in this section shall apply to a Parsi.]"

This section rather imposes restriction on charitable or religious bequest by a person who has near relations. However, The Court in exercise of its jurisdiction and to remedy the violation of fundamental rights, declared this section as invalid and unconstitutional in John Vallamattom v. Union of India.

The second exception is personal contracts which may revolve around the subject matter of property but do not create any interest in immovable property, they also do not and cannot offend the rule against perpetuities, the same has been held in Borland's Trustee V. Steel Brothers & Co., Limited.

The above situation has been well explained by a case law, In Nafar Chandra v. Kailash, where it was held that when the shebaits of a temple agree to appoint the family of C, generations to generations to perform the services of the temple and make provisions for the expense and remuneration of the office. The agreement is valid and not hit by the rule against perpetuity.

Recent development in the concept of rule against perpetuities
  1. Controller of Estate Duty, Calcutta, West Bengal v. Usha Kumar:
    In 1979, Supreme Court made a landmark judgement with respect to Section 14 and Section 18 of the Transfer of Property Act, 1882. Section 14 which deals with rule against perpetuities and Section 18 which deals with the exceptions of this rule, in this case the court observed that, there was only a partial dedication under the deed for religious purposes.

    Otherwise the deed dealt with private retention of the property and had a secular character and was only subject to a charge for religious purposes. In the present circumstances, the rule of perpetuity is applicable and renders the transfer ineffective in respect to the the provision for the benefit of the trustees and other heirs and relatives of the author of the trust.

    However, the Court held not the entire agreement to be void instead it announced that if the dedication is partial only such part which is hit by the rule against perpetuities or the rule against accumulations reverts to the executant of the document or his heirs was held to be void, which was directed to be utilized by the members of the family of the author and that the other half of the properties covered by the trust corresponding to one-half of the total income which had to be spent on religious purposes should be considered as not passing on the death of the deceased since the religious endowment made in that regard would not fail. The appeal was therefore, partly allowed.

Rule against perpetuity prevents property from being tied up in the hands of a particular family only. It is based on the idea that Government wants the property to be free flowing in the market and if generations are receiving property in continuation of the same deed then they cannot sell it that is they do not have access to all the rights vested in that property. The rule against perpetuity applies to all types of transfers be it gifts, sales, leases, mortgages, bequests, etc.

Any transfer that violates the rule is declared void, and in such a situation the property reverts back to the transferor or his or her legal heirs, if there are no legal heirs then the property goes to the government. However, if a transfer is made for the benefit of the public then the rule doesn't apply that is, then there is no limitation on the perpetuity of the transfer.

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