Property Law

P.K. Mohan Ram v. B.N. Ananthachary

AIR 2010 SC 1725; (2010) 4 SCC 161

Facts

K. Perumal Iyer owned land and a house.
In 1969, he executed a registered instrument described as a settlement deed in favour of 16 relatives.
It declared that from the date of execution:
the settlor and beneficiaries would enjoy the property;
no encumbrance or alienation would be created.
During his lifetime, the settlor reserved the right to collect rent and use the remaining income after paying municipal taxes.
After his death:
the property was to be sold;
portions of the proceeds were to be used for religious and charitable purposes;
the balance was to be divided into 17 shares among the beneficiaries.
The instrument expressly stated that the settlor had no right to cancel it or alter its terms.
He nevertheless executed a revocation deed in 1970 and a Will in 1972 favouring particular respondents.
P.K. Mohan Ram sought partition of his one-seventeenth share.
The trial court and first appellate court treated the 1969 document as a settlement, but the High Court treated it as a Will.

Whether the 1969 instrument created rights immediately or only upon the settlor’s death.
Whether it was an irrevocable settlement deed or a revocable Will.
Whether postponement of sale, division and full enjoyment made the beneficiaries’ interests contingent.
Whether the settlor could revoke the instrument and execute a later Will.

The name or form of a document is not conclusive.
The court must examine:
the instrument as a whole;
its substance;
the expressed and implied intention;
whether a present interest is created;
whether revocation is permitted or prohibited.
A Will:
is ambulatory;
creates no present proprietary interest;
operates only after the testator’s death;
ordinarily remains revocable.
A settlement:
creates an interest in praesenti;
may reserve possession or income for the settlor;
may postpone full enjoyment without postponing vesting.
Under Section 19, a vested interest is not defeated merely because possession or enjoyment begins later.

The instrument expressly stated that the settlement operated “from this day onwards.”
It associated the beneficiaries with enjoyment of the property from the date of execution.
The settlor retained rental income for his maintenance, but did not retain an unrestricted power to dispose of the corpus.
His retained benefit was therefore compatible with a life interest or reserved enjoyment.
The directions requiring sale and division after death regulated:
when complete enjoyment would arise;
how the property would be converted into money;
how religious and charitable obligations would be discharged.
They did not necessarily postpone the creation of the beneficiaries’ interests.
ly, the settlor expressly renounced any right to cancel or alter the deed.
Such a prohibition was inconsistent with the normal character of a Will.
The provision that the shares of beneficiaries dying before the sale would accrue to the survivors was a condition affecting divestment or distribution.
It did not prove that no present right had been created.
Reading the deed as a whole, the beneficiaries acquired present rights to future enjoyment.
The High Court had placed excessive weight on the fact that final sale and distribution would occur after the settlor’s death.
Postponement of enjoyment was wrongly equated with postponement of vesting.