Report No. 70
This is not a new concept, since, in England, section 163 of the law of Property Act, 1925 made a similar provision.1 The present law in England is more complicated and differently worded, but it will not be feasible to adopt it. The proposed provision is not likely to cause litigation. Of course, the contingency of age is not reduced if, under the amendment already recommended,2 the gift is saved even with the age given in the document. The first proposition is applied first, and then the second proposition is applied if necessary.
1. See Gilpin (in re:), (1953) 2 WLR 746 (749) (Chancery).
2. Proposition 1, supra.
22.63. Textual comment on Proposition 2.-
A few explanatory comments on proposition 2 are appropriate. The words referring to any person attaining or failing to attain majority may be explained. A common type of gift is the following: A trust to pay the income to A for life, and then to pay the principal to such children of A as reach 25, but if none reach 25, then to B. Under the amendment, the age contingency is cut down as regards both the remainder to A's children and as regards the alternative remainder to B.
In other words, the use of the expression "any person" in proposition 2 will ensure that whether the interest is of the person who has to reach the age limit or interest of any other persons, the new provision operates. The words "as to all persons subject to the same age contingency" may be explained. Where there is a gift to those members of a class who reach 25, and this is reduced to majority under the amendment, the reduction applies to all other members of the class, even though some of them were living at the testator's death.
However, this part of the amendment must be applied in the light of the other amendment1 which declares that no gift shall be invalidated or modified if it would have been valid before enactment of this amendment. There can be cases in which an age contingency in excess of majority would be valid as to some parts of a disposition and invalid as to other parts; in such cases the age contingency is reduced only as to those parts of the disposition which would otherwise be void.
1. Proposition 3, Infra
22.64. Proposition 3.-
The next proposition to be inserted will save the validity of, and operation of, limitations which are valid under the present law. The third proposition, then, is:
Propositions 1 and 2 shall not be construed as invalidating or modifying the terms of any limitation which would have been valid under section 14 apart from those propositions.
Propositions 1 and 2 are intended to validate certain gifts that would be invalid by reason of certain hardships arising from the present law. If, however, a gift is valid under the present law, then propositions 1 and 2 are not called into operation.
As regards the mention of the word "modify", it may be stated that Proposition 2, if it becomes operative, "modifies" a gift by altering the age contingency to the age of majority. This modification is, however, not intended to take effect as to any interest which would have been valid in the absence of this proposition. This is desirable by way of abundant caution.
22.65. Proposition 4.-
To avoid retrospective effect being given to the changes suggested in propositions 1 and 2-which are the principal substantive amendments-the following proposition is suggested:
Propositions 1 to 3 shall apply to-
(a) transfers taking effect on or after the date on which those propositions become operative.
(b) appointments made after that date in exercise of a power of appointment, including appointments made by an instrument under a power created before that date.
By way of explanation of paragraph (b), it may be stated that when a power has been created before the amended law becomes operative, and the appointment is made after that date, the new law is intended to apply to the interests created by the exercise of that power.
It may be convenient to draw attention to some salient features of the law.
(1) The Test.-Under the common law Rule the validity of an interest depends upon whether it vests in time. Under some laws in the U.S.A., the basic test of validity depends upon whether the absolute power of alienation is suspended for too long.1-2 "The absolute power of alienation is suspended, when there are no persons in being by whom an absolute fee in possession can be conveyed. Every future estate shall be void in its creation, which shall suspend the absolute power of alienation, by any limitation or condition whatever, for a longer period than" the specified time (which varies from state to state).
(2) The Period.-Under the common law rule, the period of perpetuities is "lives in being plus twenty-one years". At present in India, it is lives in being plus minority. Under the New York statute, it is "two lives in being". States in the U.S.A. that have followed the general form of the New York statute have, more often than not, adopted a more ample statutory period. But the two-life period is onerously restrictive.
The type of corrective legislation that is now being recommended leaves the present provision unchanged as to (1) the test, which continues to be "vesting", and (2) the period, which, in its basic form, continues to be "lives in being plus minority". It seeks, however, to apply the Rule more rationally and to eliminate certain exceptions and extensions.
1. e.g. N.Y. Real Property Law, section 42.
2. There are other statutory sections that prescribe other restrictions, but section 42 can be considered basic.
22.67. Presumption of fertility.-
A few words about the aspect of fertility are required to explain why no amendment is suggested on that point. Proposition 1 will, to a large extent, take care of those cases where the argument is made that at the time of the transfer taking effect the question arises whether there is a chance, however small, that art event could occur in future which may tie up the property for a time longer than the period of perpetuities. The amendment in proposition 1 will enable the Court to have regard to facts as they exist at the date of termination of the life estate or life in being.
If, therefore, the question is whether a woman can have a child and the answer sought is in the affirmative in order to vest a gift and that event (birth) has happened by the time of termination of the life interest, the question of fertility or infertility becomes academic. Where, however, the question is whether looking from the point of view even of the date of termination of the life interest, a woman may be regarded as potentially fertile, there are two competing alternatives:-
(i) will the question be determined on the basis of the rigid English rule of common law?, or
(ii) will the question be determined, like any question of fact, on the normal rules of presumption and other evidentiary rules?
Alternative (i) is the approach adopted in England where, at common law, there was a rigid position taken whereunder a woman was regarded as fertile at any age. The position had to be modified by statute-The Perpetuities and Accumulations Act, 1964-to which we have already referred.
According to the second alternative, the matter is not determined by any unrealistic rule as at common law. It is legitimate to have regard to the common course of natural events-in fact, section 114 of the Evidence Act expressly so provides. If that is the correct legal position, no statutory reform is needed on this point.
The further provision in England creating a presumption of fertility and a presumption of infertility (sterility) is not inserted in the propositions which we are recommending, partly because it would unnecessarily complicate the text of the amendments and partly because of our assumption that the common law presumption applicable only in the field of law of perpetuities, (that a woman can have a child at any age), is not likely to be followed in India, particularly because our codified law of evidence, in section 114 of the Evidence Act, empowers the court to draw inferences that are permissible having regard to the common course of natural events, human conduct and the like.
There being no conclusive presumption in the codified law the matter is likely to be determined on common sense principles.
22.68. Options and re-entry.-
Elsewhere, we find-(a) a provision exempting from the Rule commercial options to purchase and placing upon such options any time limitations which a study of the realities of commercial dealings in land may show to be desirable; (b) a provision from the Rule rights of entry for condition broken and possibilities of reverter but declaring that such interests shall become void after a specified period of years or at such earlier date as the condition ceases to have any utility. These are not considered necessary having regard to the judicial decisions confining the rule of interests proper in property.
By way of clarification, it may be stated that the proposed amendments are confined to the provision in section 14, and are not intended to affect rules of law other than those concerned with remoteness of vesting as enacted in section 14.
22.70. Gifts to unborn persons.-
For example, the proposition that a gift in Hindu Law cannot be made to an unborn person is, as we have stated above, well established.1 In a Bombay case,2 the will contained a provision for the future children of the testator's daughter. She had no children at her death. The provision was void. This rule of Hindu law-and indeed, of general Indian law3-is not intended to be disturbed by section 14. In fact, it postulates the existence of that rule, and provides or rather assumes that the ultimate beneficiary may not be in existence at the time of the transfer.
But is the demand of the section that besides the requirement imposed by section 13 to the effect that the whole of the remaining interest of the transferor in the thing transferred should be covered,4 it is also necessary that the ultimate beneficiary should be in existence at the expiration of the period earlier mentioned and it is also necessary that the thing transferred must belong to him not later than the attainment of majority. There are then three postulates and one prohibition in the section as follows:-
(i) Vesting may be delayed;
(ii) The first stage of permissible delay is represented by the lifetime of one or more persons in existence at the time of the transfer-it is not necessary that they must themselves be beneficiaries under the transfer;
(iii) The second permissible stage of delay is the minority of some person to whom if he attains full age the thing transferred is to belong;
(iv) That person must, however, be in existence at the expiration of the earlier periods.
1. Rai Bishan Chand v. Asmodia Koer, ILR 6 All 560 (PC).
2. Bai Manu Bai v. Dosa Morarji, ILR 21 Bom 709 (PC) on appeal from ILR 15 Bom 443.
3. Compare section 112, Indian Succession Act, 1925.
4. Section 13 will however be deleted.
22.71. Thus, there are two types of periods which may be conveniently described as the right time period and the minority period. Between the two, there must not be any interval, and in any case the vesting should not be delayed beyond the end of minority period. Thus, while section 14 is not concerned with commencement initially and allows an interval between the transfer and the vesting, the intervals are represented by two periods which must be continuous and which must be at the specified time. In this sense, the journey of the interest and its ultimate destination are both regulated in point of time.