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Exceptions to the Rule against Perpetuities under TPA

Exceptions to the Rule against Perpetuities
Exceptions to the Rule against Perpetuities


Exceptions to Section 14 TPA

  1. Property settled upon individuals for memorable public services may be exempted from the operation of this rule.

2. Gifts to charities do not fall within the rule; thus, in case of a transfer for the benefit of the public in advancement of religion, knowledge, health, commerce, etc., the rule does not apply (Sec. 18). Perpetuity is not repugnant in cases of religious or charitable endowments or a wakf.

3. The rule against perpetuity applies when interest in property is created and has no application to personal contracts. A contract for sale of property’ does not of itself create any interest in such property (Sec. 54). Thus, a contract to pay money to a person, his heirs or legal representatives upon a future contingency, which may happen beyond the period prescribed would be perfectly valid.

4. Vested interests are not affected by the rule, for when an interest has once existed, it cannot be bed for remoteness.

In the case of Nafar Chandra v Kailash (1921) 25 CWN 201, the shebeats of a temple agreed to appoint the family of A as pujaris from generation to generation, providing for the expenses and remuneration of the office. The court deemed this agreement valid, stating it is not affected by the rule against perpetuity.

Furthermore, the rule does not apply to contracts for the perpetual renewal of leases. It also doesn't apply when only a charge is created, which doesn't constitute a transfer of any interest, such as when property is merely made security for the payment of money.

However, in the absence of a charge, the payment of income to a payee from generation to generation is void as it offends the rule against perpetuity. A covenant of redemption in a mortgage does not violate the rule.

Additionally, covenants for pre-emption regarding land, when unrestricted in terms of time, do not breach the rule against perpetuities.

Leading Case Law

In the legal case of RAM BARAN PRASAD v RAM MOHIT HAZRA [(1967) 1 SCR 293], the crucial question revolved around the enforceability of a covenant (agreement) between two brothers regarding the sale of jointly owned properties. The covenant stipulated that if one brother wished to sell his share, the other brother would have the first right to purchase it. 

The scenario unfolded when one brother sold his portion to a third party after the other brother declined to buy it. Subsequently, the second brother sold his share to another third party without offering it to his sibling.

When the latter transferee attempted to sell the property, the brother asserted his pre-emptive right, claiming that the clause was enforceable against subsequent buyers since they were aware of its existence.

The transferees, however, argued that the pre-emption clause violated the rule against perpetuity and was therefore invalid. The central legal query became whether the covenant was exempt from the rule against perpetuity and enforceable against subsequent buyers.

The trial court and subsequently the High Court ruled in favor of enforcing the pre-emption clause against subsequent transferees, noting that they had knowledge of its existence. They also concluded that the clause did not fall under the rule against perpetuity.

The Supreme Court concurred with this interpretation, emphasizing that contracts, unlike transfers of property, are not subject to the rule against perpetuity. They cited the provisions of the Specific Relief Act, 1963, affirming that contracts are enforceable against assignees/transferees.

In this case, the pre-emption clause, being a contractual agreement, was deemed binding on subsequent buyers.

Moreover, the Court elucidated that the rule against perpetuity pertains to property rights and does not extend to contracts. As per Section 14 in conjunction with Section 54 of the Transfer of Property Act, a contract for the sale of property does not automatically confer any interest in the property itself.

Thus, the Court held that the rule against perpetuity was inapplicable to the covenant of pre-emption, even though it lacked a specified time limit for its exercise.

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