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Transfer in favour of an Unborn Person (Sec. 13)
Sec. 13 reads: “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.”
Sec. 5 of the T.P. The Act provides that “transfer of property” means an act by which a living person conveys property, in present or in future, to one or more other living persons...” Thus the general rule in the Act is transfer as between living persons (inter vivos). But there are certain sections in the Act which lay down certain rules regarding transfers for the benefit of an unborn person.
Analysis of Sec. 13
Section 13 of the Transfer of Property Act delineates specific rules regarding transfers involving unborn persons:
No Direct Transfer: A transfer cannot be made directly to an unborn person. Instead, such transfers must be facilitated through the mechanism of trusts. If a transfer were directly made to an unborn person, it would result in a period of abeyance of ownership from the date of transfer until the unborn person comes into existence. Section 13 emphasises the use of the phrase 'for the benefit of' rather than 'to' an unborn person.
Prior or Life Interest: In the absence of a trust, the estate must vest in a living person between the date of transfer and the birth of the unborn person. This implies that any interest intended for an unborn person must be preceded by a prior interest in favour of a living individual.
In practice, the individual intending to transfer property for the benefit of an unborn person must initially establish a life estate in favour of a living person (referred to as A). Subsequently, an absolute estate is created in favour of the unborn person. A would then hold possession of the property and enjoy it during their lifetime.
If the unborn person is born during A's lifetime, ownership of the property would immediately transfer to the born individual, who would gain possession of the property only upon the death of A.
If the unborn person is born during A’s lifetime, but later dies during A’s lifetime, A would enjoy the possession of the property till his death, and after that the property7 will go to the heirs of the unborn person.
Similarly, if an unborn person was never born and A dies, the property would revert back to the transferor, if he is alive or if he is dead, it would go to heirs of the transferor.
Absolute interest - In the context of transfers involving unborn persons, it is essential to note that only an absolute interest can be conferred upon them. Any attempt to grant a life-interest or limited interest to an unborn person is impermissible. Section 13 explicitly states that "the interest created for the benefit of such a person shall not take effect unless it extends to the whole of the remaining interest of the transferor in the property."
An illustration accompanying Section 13 serves to clarify this principle: A transfers property, of which he is the owner, to B in trust for A and his intended wife successively for their lives.
After the death of the survivor, the property is intended for the eldest son of the intended marriage for life, and subsequently for A’s second son.
However, the interest created for the benefit of the eldest son does not take effect because it does not encompass the entirety of A’s remaining interest in the property.
In this illustration, the benefit intended for the eldest unborn son is limited to a life-interest, rendering it ineffective. Furthermore, the absolute interest designated for A’s second son also fails to take effect due to its reliance on a void transfer.
Similarly, if the interest in favor of an unborn son could be invalidated by a contingency, as established in the case of Ardeshir v Dadabhoy (AIR 1945 Bom 395), it would not constitute a bequest of the entire interest and would be deemed void.
No limit to the number of successive interests in favour of living persons — As long as the individuals intended to receive the benefits are alive at the time of the transfer, there is no restriction on the number of successive life interests that can be established in their favor.
For instance, let's consider a scenario where A, B, C, and D are all living when a transfer is made by an individual. Initially, the transfer is in favor of A for life, followed by successive life interests for B, C, and D. Finally, the property is designated absolutely to A’s unborn child. In this situation, all the successive interests are deemed valid because the beneficiaries are all alive at the time of the transfer.
Upon A’s demise, possession would pass to B, and upon B’s passing, to C. Subsequently, upon C’s demise, possession would transfer to D, and upon D’s death, it would pass to A’s child, provided the child has been born by that time. If the child has not yet been born, the property would revert back to the transferor if they are still alive; otherwise, it would pass to their heirs.
Principle underlying Sec. 13 — The underlying principle of this rule is to prevent the restriction of the free disposition of property across multiple generations. It aims to ensure that the transferor does not impose limitations on the disposal of the property beyond one subsequent generation. Although distinct from the "rule against perpetuities," the outcome of both rules often aligns.
Essentially, the section dictates that there should never be a scenario where an unborn individual inherits property for life. This is because it introduces an inherent uncertainty, as illustrated in the example provided in Section 13, where A might never have a son. Additionally, there is the possibility that A may not have a second son, or that the second son may pass away before the eldest one.
A child in mother's womb — A child en ventre de sa mere, that is, a child in its mother's womb, is considered to be in existence for the purposes of property transfer. This also applies to a child adopted by the mother following her husband's demise. The term 'unborn' encompasses not only those who have been conceived but are yet to be born, such as a child in the womb, but also includes those who have not even been conceived. Whether these individuals will ultimately be born or not is uncertain, but property transfers can still be made for their benefit.
For instance, if A grants property to B for life, with the subsequent interest designated for his unborn son, subject to the condition that if the son changes his religion, the property will be forfeited, the condition concerning religious conversion restricts the estate.
Consequently, it fails to comply with Section 13, which mandates the transfer of the entire estate.
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