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TMI Blog1967 (8) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... he balance of the said income to the said Chanchalbai, the settlor, during her life until her death, and on the death of the settlor, leaving surviving her, her husband, the said Sheth Bhogilal Maganlal Shah, the trust property shall vest in him and the trustees shall pay out and hand over to him the said Sheth Bhogilal Maganlal Shah, the entire trust property, i.e., the corpus with all the accretions thereto to be used, enjoyed and disposed of by him, the said Sheth Bhogilal Maganlal Shah as he likes at his own sweet will. 2. If the said Sheth Bhogilal Maganlal Shah predeceases the settlor and her son Ramniklal Bhogilal Shah survives the said Bai Chanchalbai, the entire trust property shall on the death of the settlor vest in the said Ramniklal Bhogilal Shah and the trustees shall pay out and hand over to him the entire trust property, i.e., the corpus with all the accretions thereto to be used enjoyed and disposed of by him, the said Sheth Ramniklal Bhogilal Shah as he likes at his own sweet will. 3. In case neither the said Sheth Bhogilal Maganlal Shah nor the said Ramniklal Bhogilal Shah survives the said Bai Chanchalbai, but a lineal descendant or descendants of the said R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... true nature and character of the interest of the assessee in regard to the corpus, the Tribunal held that the interest was such as could not be sold and no price could be realised for it and the value of the interest was accordingly nil. The revenue thereupon applied for a reference and on the application the Tribunal drew up a statement of the case and referred the following question for the opinion of the court: " Whether, on the facts and in the circumstances of the case, did the assessee acquire any interest under the deed of settlement dated October 8, 1945, executed by his wife, Smt. Chanchalbai Bhogilal Shah, which could be considered on the relevant valuation dates, as an asset within the meaning of section 2(e) of the Wealth-tax Act ?" The question unfortunately is not happily worded and does not bring out the whole of the controversy between the parties. It takes into account only one aspect of the controversy, namely, whether the assessee had merely a spes successionis under the trust deed or he had an interest in the corpus which could be regarded as an "asset" within the meaning of section 2(e). It does not comprehend the further aspect, namely, that if the view ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s vesting, is very much different from a spes successionis. It is a form of property which is assignable or transferable and on which money can be raised unlike spes successionis which is non-transferable by reason of section 6(a) of the Transfer of Property Act. This distinction between the two legal concepts is clear and well-defined and does not need any authority to support it. But if any authority were needed, it is to to be found in the decision of the Privy Council in Ma Yait v. Official Assignee. In that case too the gift to the children was contingent on the youngest attaining the age of 20 and the argument was that the interest of the children being in the nature of spes successionis was not transferable and the assignment of such interest was therefore invalid. The Privy Council repelled this argument holding that the interest which the children took in the corpus was contingent interest which, ". . . 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......" The Privy Council observed that a contingent interest is, "...... a well ascertained form of prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... document". These two rules must be borne in mind in approaching the question of construction of the relevant clauses of the trust deed. Turning to the trust deed it is clear that the provision which effects the gift of the corpus to the assessee is clause 1. This clause gives the income of the corpus to the settlor for her life and then proceeds to say that, "on the death of the settlor, leaving surviving her, her husband, the said Sheth Bhogilal Maganlal Shah, the trust property, shall vest in him and the trustees shall pay and hand over to him the said Sheth Bhogilal Maganlal Shah, the entire trust property." There are two provisions made in this clause: one is in regard to the vesting of the trust property and the other is in regard to the distribution or handing over of the trust property. Both the vesting and the distribution are directed to take place at the same time, namely, on the happening of the event specified by the words "on the death of the settlor, leaving surviving her, her, husband, the said Sheth Bhogilal Maganlal Shah." Now this event, namely, the death of the settlor leaving her surviving the assessee is clearly an uncertain event. The death of the sett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rust property. Moreover, the language used by the settlor shows clearly and indubitably that he was aware of the distinction between vesting and distribution, for he has specifically referred to both the concepts and made provision in regard to both and it is, therefore, not possible to explain away the words "the trust property shall vest in him" by saying that they were intended merely to refer to distribution of the trust property. It is undoubtedly true, as pointed out by us above, that in construing a settlement of will, the court must always lean in favour of vesting but this rule does not apply where the condition precedent to the vesting is expressed with reasonable clearness. Here we find that on a plain grammatical construction of the words used by the settlor it is clear that the vesting of the trust property in the assessee is subject to the condition precedent that the assessee must be alive at the date of the death of the settlor and the interest given to the assessee in the corpus is, therefore, a contingent interest and not a vested interest. This would clearly appear to be the correct position on a reading of clause 1 but as pointed out by the Supreme Court in Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Ramniklal is alive at the date of death of the settlor but a lineal descendant or descendants of Ramniklal survive the settlor. If at the date of the death of the settlor neither the assessee nor Ramniklal is alive but lineal descendants of Ramniklal are living, the trust property is to be divided amongst them in certain proportion. Reading clauses 1, 2 and 3 together, the scheme of the trust deed, therefore, clearly appears to be that the settlor should have the income of the trust property during her lifetime and on her death the trust property should vest in the assessee if he is then alive but if he dies during the lifetime of the settlor, the trust property should vest in Ramniklal and if Ramniklal is also not then alive, the trust property should go to the lineal descendants of Ramniklal provided again they are alive at the date of the death of the settlor. In each of the three clauses we find that the vesting of the trust property is made contingent on the donee being alive at the date of the death of the settlor. The point of time at which the vesting in each of the three clauses is contemplated to take place is the date of death of the settlor with a superadded contingen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounded and there are three very good reasons why we must reject it. Even in England where this rule is applied, it is merely a rule of construction founded on the principle of assumed intention of the settlor and it must, therefore, yield where the intention of the settlor is manifest from the words used in the trust deed. Like all rules of construction, the operation of this rule is presumptive and not peremptory and, therefore, where the words used by the settlor are clear and unambiguous, there can be, no scope for invoking the rule. The language and the context of the provision to be construed must never be lost sight of : to ignore the language and the context would be to make the intention of the settlor subordinate to the rule. The rule instead of subserving the cause of interpretation of the intention of the settlor would become the master of it. Being merely an aid to ascertain the intention of the settlor and the ultimate object being really to ascertain such intention, the rule should not be regarded as one of compulsory application and if the intention of the settlor is otherwise clear and manifest, effect should be given to such intention despite the rule. This was d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... England in order to remedy the mischief arising out of that rule need not be imported in this country. It is significant to note that in Phipps v. Ackers two rules of construction were laid down by the English court, namely, (i) that the gift of the income of the same fund, until the contingency happens, to the very person who will, on attaining a particular age, take the fund makes the gift of the fund, apparently contingent upon the attainment of that age, a vested interest, and (2) that a gift-over upon failure of a prior gift may have the effect of converting the prior gift apparently contingent upon attainment of a particular age into a vested interest subject to be divested on death before that age. Of these two rules the first has been adopted in India by the exception to section 21 of the Transfer of Property Act and the exception to section 120 of the Succession Act. But the second rule which is the rule relied upon on behalf of the revenue has not been adopted in any section of the Transfer of Property Act or the Indian Succession Act. Not only we do not find any sanction for this rule in any provision of the Transfer of Property Act or the Indian Succession Act but illu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , not entitled to rely on this rule of construction for the purpose of converting what is, to all intents and purposes, a contingent interest into a vested interest. But even if this rule were applicable in the construction of Indian settlements and wills, we do not think it helps the revenue to successfully contend that the interest in the corpus given to the assessee was a vested interest. There is no difficulty in the application of the rule where the prior gift is subject to one contingency and the gift-over is to take effect on the failure of that very contingency, e.g., when the gift is to A if or when he shall attain 21 and in case he dies before that age then to B. But difficulty arises where the gift-over does not fit in with the original gift, as where the original gift is subject to one contingency and the gift-over is to take effect on another contingency. Where such is the case the rule cannot have application. It is essential to the applicability of the rule that the contingency on which the gift-over is to take effect must be a contingency having relation to the interest under the prior gift. It is state in Halsbury Laws of England, third edition, volume 39, page 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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