EQUITY, TRUST, MORTGAGE & SPECIFIC RELIEF ACT Part-2

Relation Between Equity and Common Law

Q. 3 (a). “The two streams have met and now run in the same channel but their water do not mix.” Discuss.

Or

Discuss the relationship as established by Judicature Acts, 1873 and 1875 between the system of Common Law and Equity.

Or

“Judicature Acts 1873 and 1875 made the fusion of administration instead of principles. There was confluence of two rivers and now they flow in one current, but there is no mixture of their water.” Examine the above statement.

Ans. The Judicature Acts (1873-1875). Before the passing of the Judicature, 1873, which came into force on 1st November, 1875 in England, there were two distinct systems of justice administered by the English Courts: –

(1) The Queen’s Bench, Common Pleas and Exchequer-Which acted according to the rules of Common Law.

(2) The Court of Chancery-Which acted on the principles of Equity.

       This double system of administration of justice gave rise to grave inconveniences.

        Common law courts did not recognize the rules or the decrees of equity and in many cases the Courts of equity did not, in effect, recognise the Common Law or its judgments. A controversy could not, therefore, be concluded by a single adjudication between the parties. A plaintiff, who had obtained a judgment in his favour in a Court of law might be prevented from enforcing it by an injunction granted by the Court of Chancery if in the opinion of the latter it would be inequitable. No Court had full power to grant all or any of the available reliefs. The parties, in most cases, were driven from one Court to another before they could obtain a final adjudication. For example, in matters falling within the auxiliary jurisdiction it was necessary to bring proceedings both in Common Law Courts and in Chancery to have the matter disposed of completely and finally.

         Fusion of Administration. The Judicature Act, 1873, abolished the separate Court of Common Law and Equity and conferred upon one and the same tribunals the jurisdiction which was uptil now exercised separately by them. The main object of the Judicature Act was to enable the parties to a suit to obtain in that suit, and without the necessity of resorting to another Court, all remedies to which they were entitled, so as to avoid multiplicity of actions.

            System introduced by Judicature Act. The Judicature Act amalgamated all the old Courts into one Supreme Court of Judicature possessing the jurisdiction formerly exercised by all the Courts collectively. The Supreme Court consisted of the High Court of Justice with the Court of Appeal above it. The High Court of Justice was divided into five divisions as follows:

(i) Chancery,

(ii) Queen’s Bench,

(iii) Common Pleas,

(iv) Exchequer, and

(v) Probate: Divorce and Admiralty.

         Since the passing of Judicature Acts, Law and Equity are administered together. It is, however, true that for the sake of convenience the High Court is split up into divisions and most of the equitable matter dealt with by the old Courts of Chancery are assigned to the Chancery Division and that the King’s Bench Division mostly deals with matters which formerly were decided by the Common Law Courts. But this separation is for convenience only and Section 2 of the Act clearly says that every judge to whatever division he might belong, has to administer both Law and Equity.

        Equity to prevail. Section 24 of the Act having thus fused the administration of Law and Equity, proceeded to provide in Section 25 for the prevalence of the Equity over the legal rule. It lays down that “where there is a conflict or variance between the rules of Equity and the rules of Common Law with reference to the same matter, rules of Equity are to prevail.

         No fusion of principles. The Act, however, retains the distinction between the legal rights and equitable rights, between legal and equitable remedies, and between legal and equitable defences. Thus, in matters coming within the old exclusive jurisdiction of Equity, the High Court decides the nature and extent of the rights solely by the legal principles and enforces them solely by equitable remedies and in matters coming within the old concurrent jurisdiction of equity, it decides the nature and extent of righti solely by legal principles and enforce them by equitable remedies only where the old Courts of law could have granted legal remedies. The object of the Act was, therefore, not to fuse the principles which govern legal rights and remedies, with those which govern equitable rights and remedies.

      Taking into consideration all the above changes introduced by the Judicature Acts, we will find that Snell has aptly observed that “what the Judicature Acts, have really done is to provide for the administration of Law and Equity in the same Courts, and for the recognition by these Courts of both legal and equitable rights, remedies, and defences, and for the submission to Law of Equity where they were previously in direct conflict It is a fusion of administration of Justice rather than of principles. Snell has apply said that the two streams, have justice met, and now run in the same channel but their waters do not mix.”

      That the Judicature Acts abolished the separate Courts of Common Law and Equity and conferred upon one and the same tribunal the jurisdiction which was hitherto been exercised separately by them The Court of Chancery, of Common Law, Court of Commor Pleas, Exchequer Courts and the Court of Probate, Divorce and Admiralty were amalgamated together and became the Supreme Court of Judicatur which now consists of two divisions-The High Court of Justice and the Court of Appeal above it. The High Court is divided into division and certain particular business is assigned to each division but this division is only for the convenient despatch of business and it may be changed without an Act of Parliament. Every Judge of the High Court in bound to recognise equitable rights and is entitled to grant equitable remedies.

        It must not, however, be supposed that the distinction between lega and equitable rights and remedies has also been abolished, for-“the fusion of Law and Equity is merely in administration, the principles of Equity remain as before”.

         Unified procedure. The Judicature Acts unified the procedure by introducing a Code of Civil Procedure, comprising the rules of the Supremi Court which assimilated the Common Law and Equity procedures combining the best features of both the old system. viz. the Common Lav and Equity.

         Multiplicity of proceedings avoided. The Acts provided that an Judge in whatever division he may be sitting, is bound to apply every rule applicable to the case before him whether of Common Law or of Equity an the parties to a suit may obtain all the remedies to which they are entitled without resorting to another Court. In the same way a judgment of the High Court given in an action in any division may be enforced by legal or equitable modes of execution which is in the circumstance reasonable and appropriate.

        Trust-No application of limitation. The Judicature Acts exempted the trust from the law of limitation. It provided that no claim of a cestui que trust against his trustee for any property shall be barred by any Statute of limitation.

       Injunction and receiver.-Sub-section (8) (a) of Section 25 of the Judicature Act of 1873 provides to grant an injunction or to appoint a receiver in certain cases by an interlocutory order by any division of the High Court.

       Equity to prevail. The most important rule has been provided in sub-section (11) of Section 25 of the Judicature Act, 1873, which lays down as follows:

       “Generally in all matters not hereinbefore particularly mentioned in which there is any conflict or variance between the rules of Equity and the rules of Common Law, which have reference to the same matter, the rules of Equity shall prevail.”

Judicature Acts

Q. 3 (b). What reforms were introduced by the Judicature Acts, 1873 and 1875 to abolish the dual system of Judicature in England and explain their effects also.

Or

Discuss fully the necessary changes made by the Judicature Acts, 1873 and 1875.

Ans. Reforms and necessary changes brought about by 1873 and 1875. Please see Q. 3(a) for answer to this part of the question.

         Effects of Judicature Acts 1873-1875.-According to Lord Watson, the main object of the Judicature Acts was to enable the parties to a suit to obtain in that suit and without the necessity of resorting to another Court, all remedies to which they are entitled in respect of any legal or equitable claim or defence properly advanced by them, so as to avoid multiplicity of legal proceedings.

        This statement leads to the conclusion that the main effect of the Judicature Act was to avoid to multiplicity of proceedings.

      It is sometimes said that the Judicature Acts fused law and equity into one harmonious whole. This is altogether inaccurate. The object of that Act was neither to fuse nor to confuse the principles which govern equitable rights and remedies with those which govern legal rights and remedies. The Act did not fuse together law and equity; it only fused together the Courts which administered law with the Courts which administered equity.

        Jessel M.R., in Salt v. Cooper, (1880) 16 Ch. D. 544], has very correctly remarked that “the main object of the Judicature Act, 1873 was to assimilate the transaction of equity business and Common Law business by different Courts of judicature. It has sometimes inaccurately been called ‘the fusion of law and equity’ but it was not any fusion or anything of kind, it was resting in one tribunal the administration of law and equity in every cause, action or dispute which should come before the tribunal. This was the meaning of the Act.”

       The two streams of jurisdiction, as very aptly remarked by Ashburner. has met and now run in the same channel, but their waters do not mix. The distinction between a legal and an equitable right or relief, as would be evident from the relevant maxims still subsists and continues to have a great practical importance.

        A legal claim can only be met by a legal defence or by some equity available to the defendant which, before the Judicature Act, would have moved a Court of equity to restrain the plaintiff at law either from proceeding with his action or from enforcing his jurisdiction. A legal claim is not, apart from the operation of a statute of limitations, determined merely by the lapse of time. On the other hand, equitable claims cannot be enforced against a legal title, which they have no ground in conscience to remove, they may be met by several defences which have no operation against a legal claim and they may be lost by mere inaction for a period of time varying in length with the nature of the claim. Similarly, the granting or efusing of legal remedies does not, as before, depend upon the discretion of the court and a legal claimant cannot be put on equitable terms. But the remedies given in equity continue to be in the discretion of the Court and are subject to equitable conditions on terms.

       The Judicature Act has practically done away with the auxiliary jurisdiction and it is no longer necessary for a litigant to institute a suit in equity in order to obtain evidence which he wants to use in an action at law. It has further converted the exclusive into concurrent jurisdiction since every Court to which a suit may be brought is competent to grant all necessary relief, be it legal or equitable or both. “The Court is not now a Court of law or a Court of equity but it is a Court of complete jurisdiction.” [Pugh v Health, (1882) 7 APP Case 235, 237]. It is no longer necessary or possible for a judge to say a litigant “you are relying on a trust and this Court can take no notice of a trust,” or “This is a matter of pure common law and not within the cognizance of a Court of equity.”

Maxims of Equity

Q. 4 (a). Explain the maxim: Equity follows Law.

Ans. Maxim “Equity follows Law”. The maxim means that equity is not a body of jurisprudence acting contrary to law, but rather a supplement to law. The Court of Chancery never claimed to override the Courts of Common Law. Maitland, correctly observes that “Every jot and every title of the law was to be obeyed, but when all this had been done, something might yet be needful, something that Equity would require.” Story in elucidation of the above maxim explained that “where a rule either of the Common Law or the Statute Law, is direct, and governs the case with all its circumstances, or the particular point, a Court of Equity is as much bound by it as a Court of Law, and can, as little justify a departure from it.”

        This maxim is understood in the following two respects:-

(1) Equity adopts and follows the rule of law in all cases where applicable.

(2) Equity follows the analogies of Common Law.

1. Equity follows the rules of Law. As Story explains that where a rule, either of the Common Law or of Statute Law, is direct and governs the case with all its circumstances, or the particular point, a Court of Equity is as much bound by it as a Court of Law. Equity only interferes when some important circumstances are disregarded by the Common Law. Thus the rule of Common Law that, where a man died intestate, having sons and daughters; and possessed of a simple estate, the eldest son was entitled to the whole of the land. This was undoubtedly most unfair to the younger sons and the daughters, but Equity granted them no relief. But if “the eldest son had persuaded his father not to make a will and had promised to share the property with his brothers and sisters, Equity would have compelled him to fulfil his promise. It would have been against conscience to allow him to keep the benefit of the legal estate, which he only obtained by reason of his promise. So while recognising the legal rule and giving full effect to it. Equity enunciated the principle that this did not conclude the matter, the circumstance of the son’s promise must also be taken into consideration, and he must be held to be a trustee of the land for himself and his brothers and sisters.” [Stickland v. Idrige, (1404) 9 Nessy’s Reports. p. 519].

        Thus as regards, legal estates, rights, and interest, equity is strictly bound by the rules of law.

2. Equity follows the analogies of law. As regards equitable rights and interests, equity although not strictly speaking bound by the rules of law, yet acts in analogy thereto whenever analogy exists. Lord Hardwicke has observed in Hopkins v. Hopkins, that “It is the maxim of this Court that trust estates, which are the creatures of Equity, shall be governed by the same rules as legal estates in order to preserve the uniform rules of property.” Equitable estates are thus guided by the same rule of descent and the rules of construction of words to limitation as legal estates. For example, when a beneficiary of a trust dies, the trust property although an equitable property, it devolves on his legal representatives like the successors of the real (Legal) property on the basis of analogy of law.

Application of maxim-two-fold. The maxim had two applications according to the subject-matter, if the subject matter was-

(1) a legal estate, right or interest, or

(2) an equitable estate, right or interest.

        As regards a legal estate, right or interest, Equity is strictly bound by the rules of law and the Court of Chancery never blamed to override the Court of Common Law. Equity in these cases obeyed the law even if the legal rules in question were hard or unfair as is illustrated above by the rule of intestate succession.

       As regards equitable estate, right and interest, Equity follows the Law in the case of acting in analogy with legal rules in so far as analogy clearly exists, for example, if B was the beneficiary under a trust, his interest in the trust property was merely equitable and not recognised by the Common Law, but his interest in Equity was held to devolve according to the legal rule for the devolution of property. Similarly, in case of equitable claims which were analogous to legal claims. Equity, as a rule, applied the time bar under the Statutes of limitation. For example, an action brought by a beneficiary to receive trust money wrongly paid by the trustee to another beneficiary under a common mistake of fact was held to be in the nature of a Common Law action for money paid and received and an analogy of the statutory period of limitation of six years was applied. This shows that Equity required proceedings to be brought within the period prescribed for legal proceedings of a similar kind.

       The maxim that “Equity follows the law” has another meaning also. In dealing with its own equitable estates and rights Equity has adopted most of the legal rules. Equity follows the legal rules where they are consistent with justice, conscience and ethics.

       Limitations. The maxim applies in both the cases “legal estate” and “equitable estate” generally, but there are certain cases of exception to the general application of the maxim. In exceptional cases, where an exact legal rule was neither directly applicable nor capable of being extended on principles of analogy, Equity proceeded to administer justice on principles and rules of its own. It may also be noted that this maxim is subject to the maxim that “equity will not suffer a wrong to be without a remedy” and where there was a wrong, equity always extended its help to redress it and to enforce the right if it was capable of being judicially enforced.

       In India. The distinction between legal and equitable interests does not exist in India. In all actions, whether it relates to legal rights and interests, or to what are known in England as equitable rights and interests, If there be any statutory provision relating to the subject-matter, that must apply and equitable consideration will not be allowed to override the provision of the Statute. Thus in all actions, the court is to apply the law of limitation enacted in Indian Limitation Act, 1908, and the judge cannot, on equitable grounds, enlarge the time allowed by the law, postpone it’s operations or introduce exceptions not recognised by it. Similarly, in case of the law of registration, the Privy Council observed that “nor can Equity override a Statute and confer upon a person a right which the Statute enacts shall be conferred only by a registered instrument.”

Q. 4 (b). Explain the maxim: ‘Equality is Equity.’

Ans. The Maxim ‘Equality is Equity’. This maxim is expressed in another way, viz. Equity delighteth in equality. The notion of equity or impartiality lies in the very foundation of the acquitas as conceived by the Roman Jurists. This same idea was incorporated in the Equity Jurisprudence of English Law. While the Common Law looked at and protected the rights of a person as a separate and distinct individual, Equity rather regards and maintains, as far as possible, the rights of all who are connected by any common bond of interest and obligation. The rule of ordinary law may give one party an advantage over the other but a Court of Equity will, where it can, put the parties on equality. Equity proceeds on the principle that a right or liability should as far as possible be equalised among all interested.

      “The maxim that ‘equality is equity’ expresses in a general way the object both of law and equity namely to effect the distribution of property and losses proportionate to the several claims or to the several liabilities of the person concerned. For equality in this connection does not mean literal equality, but proportionate equality. This doctrine of equality, however. operated more effectually, in a Court of equity than a Court of law and was exemplified in many departments of equitable jurisprudence.”

        Application of the maxim. The maxim is of a very wide and general application. It may be illustrated by means of the following examples of this doctrine:-

(1) Contribution;

(2) Equity’s dislike for a joint tenancy;

(3) Rateable distribution of assets;

(4) Marshalling.

1. Equity’s dislike for a Contribution. Where a creditor has single claim against several persons, he has the option of realizing the debt from any one of them, and by the Common Law, the debtor who had thus been compelled to pay the debt in full had no remedy against his co-debtors. But in Equity he could claim contribution from the latter, so that the burden might press equally on all. Similar is the rule with the respect of co-sureties and co-contractors.

2. Equity’s dislike for a joint tenancy.-Equity leans against joint tenancy. At Law, on the death of a joint tenant, the whole estate belongs to the survivor and nothing to the representative of the deceased. Here, there is no equality, except perhaps, an equality of chance. Equity, therefore, held that the survivor is a trustee for the representative of the deceased in proportion to the sum advanced by him.

3. Rateable contribution of assets. If the assets of an insolvent debtor were found insufficient to clear off the amounts of debt claimed by various creditors, the Common Law allowed certain creditors to take priority over other and therefore, others who did not come in preferential list were left without a remedy against the debtor. Equity in such cases insisted on pro-rata or proportionate distribution of assets of the debtor by abolishing preferential treatment of certain creditors. All creditors were placed on an equal footing and were allowed to share the assets proportionately to the amount of their credit. Thus, at law, though some of them were left without a remedy, in Equity, there was no such injustice.

4. Marshalling. Suppose, there are two creditors of the same debtor and one creditor has a right to resort to two funds of the debtor, the other creditor has a right to resort to only one of them. The Court, acting on this maxim, shall so marshall the funds that both the creditors are paid as much, and as far as possible. Here equality consist, in fairness.

In India-Application of the maxim

        Contribution. In India provisions relating to contribution are contained in Sections 43, 69, 70 of the Contract Act and Section 82 of the Transfer of Property Act. The application of the rule of contribution is not confined within the statutory provisions, and it will be applied whenever justice, equity and good conscience call for its application. The rule of contribution between joint promises is laid down in Section 34 of the Contract Act.

      Joint tenancy. Section 42 of the Indian Contract Act applies the principle of tenancy in common and not of joint tenancy as regards the devolution of joint liabilities.

      Abatement of Legacies. In India the rule for the abatement of legacies is contained in Section 330 of the Indian Succession Act.

Q. 4 (c). Explain the maxim: Delay defeats Equity.

Ans. Maxim ‘Delay defeats Equity’. The maxim ‘Delay defeats Equity’ may also be expressed in another form Equity aids the vigilant and not the dormant’. This maxim means that while legal claims is not barred by any lapse of time shorter than the period prescribed by the statute of limitation, equitable claim, on the other hand, may in some cases be barred by the unreasonable delay of the plaintiff in secking the relief. The Court of Equity discourages the laches, i.e., unreasonable delay of a suit in asserting or conforming his right, holding that it would be unjust to allow a claim to be asserted after an undue lapse of time. The Court of Equity irrespective of the statute of limitation is not to give relief when the party seeking relief has delayed for a long time without attempting to enforce the right. Lord Caunden in Smith v. Clay has said-

        “A Court of Equity has always refused its aid to stale demands, where a party has slept upon his rights and acquiesced for a great length of time. Nothing can call forth this Court into activity but conscience good faith and reasonable diligence; when these are wanting, the Court is passive and does nothing.”

      Delay fatal to claim-Three conditions. Delay will be fatal to claim for equitable relief only under the following three conditions:-

(1) When it has resulted in the destruction or loss of evidence by which the claim might have been rebutted; or

(2) when it is evidenced of an agreement by the plaintiff to abandon a release of his right; or

(3) if the plaintiff has so acted as to induce the defendant to alter his position on the reasonable faith that he has released or abandoned his claim. But apart from such circumstances, delay will be immaterial.

     Excuses of delay. As there can be no abandonment of a right without full knowledge, legal capacity, and free, will. Ignorance or disability or undue influence will be satisfactory explanation of delay.

     Strahan’s observation. Strahan observes that “the doctrine of laches in court of Equity is not an arbitrary or technical doctrine where it would be practically unjust to give a remedy either because the party has, by his conduct, done that which might fairly be regarded as equivalent to a waiver of it, or where by his conduct or neglect he has thought perhaps not waiving that remedy, yet put the other party in a situation in which it would not be reasonable to place him if the remedy were afterwards to be asserted in either of these cases, lapse of time and delay are most material.”

      In India- Application of the maxim. The Indian Limitation Act has made provisions for all conceivable cases; and cases not specially provided for in the Act are governed by the Residuary Act. But this does not mean that laches are not defence at all in cases where statutory period of limitation is prescribed.

      Hanbury’s propositions. Dr. Hanbury resolves the attitude of Equity towards the Statute of limitation into the following three simple propositions:-

(i) In the case of purely equitable claims, Equity will grant or refuse equitable relief as it’s discretion without reference to any statute of limitation, unless an equitable claim has expressly been included in such a statute.

(ii) In the case of legal claim: or equitable claims which are closely analogous to legal claims, Equity will, as a rule, apply the period prescribed by the statute of limitation.

(iii) But if there has been fraud on the part of the defendant and the plaintiff did not discover the fraud, though there is no fault of his own, till the statutory period has elapsed, the Equity will consider that the period has not begun to run until the date of the discovery of fraud.

Q. 4 (d). Explain the Maxim: Equity acts in personam.

Ans. Maxim ‘Equity acts in personam’. This maxim describes the peculiar procedure to the enforcement of the decree of the Courts of Chancery. It had its origin in the principle that Equity is enforceable by a process of contempt. While the judgment of the Court of Common Law was enforced by the writs of execution by which the plaintiff was forcibly put in the possession of the property to which he was entitled, the Courts of Chancery or Equity did not interfere with the defendant’s property but merely made an order against the defendant personally, and if the defendant failed to comply with the order, the Courts of Chancery punished him for its disobedience by the imprisonment or committal for contempt.

      “This is the widest of all maxims. In a sense it comprises the th whole of Equity……….it cannot be too often emphasized that on this maxim is based the whole theory of trusts and of their equitable interests analogous of trust” (Dr. Hanbury).

      The maxim “Equity acts in personam means that the Court of Equity has jurisdiction to entertain certain suits respecting immovable property. though the property may be situated abroad if the relief sought can be obtained through the personal obedience of the defendant. Thus, for example the English Court may order-

(i) specific performance of contract relating to land outside its jurisdiction, provided the defendant is within the jurisdiction;

(ii) administration of a foreign estate, if executor or trustee is within its jurisdiction;

(iii) redemption or foreclosure of land situated in its jurisdiction.

        Application of the maxim. The Courts of Equity in England are Courts of conscience. In the exercise of this jurisdiction they have always been accustomed to compel the performance of contracts and trusts as to subjects which were not locally ratione domicilli within their jurisdiction. They have done so as to land in Scotland, in Ireland, in the colonies and in foreign countries.

       Thus, the following are the cases in which Courts of Equity exercise jurisdiction:-

(1) Cases of fraud. As where lands abroad have been acquired by the fraud of a party residing within the jurisdiction.

(2) Cases of trusts. As where a suit is filed against a person residing within jurisdiction to enforce an express trust affecting land outside jurisdiction.

(3) Cases of contract. Such as suits for specific performance or contracts for sale of land or foreclosure or redemption of mortgage.

       Limitation. The maxim is, however, subject to the following limitations:-

(a) The defendant himself must be within the jurisdiction or should be capable of being served with process outside the jurisdiction.

(b) The remedy sought in such cases must be an equitable remedy.

(c) The defendant should be subject to some obligation, arising from his own act, as Strahan puts it, “When the dispute is one of the conscience”.

        It follows from this rule that there must be some personal element in the case and Court will not interfere on the basis of the maxim if the case involved nothing more than a naked question of title to foreign land.

       In India-Application of the maxim: Section 16, C.P.C.-In India the jurisdiction of courts is governed and must be ascertained on the same principle as are applicable to English Courts of Equity, except so far as they may be at variance with legislative enactments.-[Kashinath v. Anant, (1990) 24 Bom 407].

      Dr. Banerji while dealing with the appointment of receivers on the strength of Section 16 and Section 16-A (now Section 19 of the Civil Procedure Code has said that “The Courts in India have but limited powers of making a decree ” in personam”. In India too the proviso to Section 16, has been stated by Mulla “to be an application, though in a highly qualified form of the maxim-Equity acts in personam”.

Q. 4 (e). Explain the maxim: Where Equities are equal, the law shall prevail.

Ans. Maxim-‘Where Equities are equal, the Law shall prevail’. This maxim together with the maxim where equities are equal, the first in time shall prevail constitutes the equitable doctrine relating to questions of priority among rival claimants to the same property. In case either of these maxims does not apply because equities are not equal, the guiding maxim is “where equities are unequal, he who has the equity, takes precedence. Questions of priority are common enough.

        Suppose A, having title to land, contrives by means of fraudulent concealment to get money from X, Y and Z on the security of the land and then disappears. The land is insufficient to pay all of them. X, Y and Z are not left to dispute among themselves as to the order in which they are to be paid.

      It was in resolving conflicts of such a nature that equity applied the principles contained in this maxim.

    If two persons have equally equitable claims upon the same subject- matter or in other words, if each is equally entitled to the protection and aid of the Court of Equity with respect to the protection and aid of the Court with respect to his equitable claim and one of them in addition to his equitable claim also obtains the legal claim in the subject-matter, then he who thus has the legal claim would prevail. The precedence of the legal claim might be worked out by the Court of Equity refusing to interfere at all and thereby leaving the parties to conduct their controversy in a Court of law where, of course, the legal claim alone should be recognised.

       In case, either of these maxims does not apply because “equities are not equal” the guiding maxim is “where equities are unequal, he who has the best equity takes precedence”.

     It is, however, essential to note that this maxim applies in case of a conflict between a legal and an equitable estate whereas the previous maxim, i.e. “where equities are equal the first in time takes precedence is applicable in cases where there is no legal estate in the field and the question is among the equitable estates only”.

        The law shall prevail. We will discuss here the principal clause of this maxim, viz. the law shall prevail. This part of the maxim means that the legal estate prevails over the equitable estate. In other words, the person in possession of the legal estate is entitled to priority over any person having merely an equitable estate in that property. This is so because of the maxim-Equity follows the law.

       Where the equities are equal. Now we turn to this part of the maxim, i.e. “where equities are equal”. This part qualifies the latter part of the maxim, i.e. the law shall prevail. It means, therefore, that the rule as enunciated above holds good only when equities are equal.

       Application of the maxim. One of the most frequent and important consequence and application of this principle is the doctrine that where a purchaser of property for a valuable consideration and without notice of a prior equitable claim in the same subject-matter, obtains the legal claims in addition to his equitable claim, he becomes entitled to a priority both in equity and at law. For example, suppose that a trustee who a trustee possesses the legal rights in the property conceals the trust, and represents himself as the legal and beneficial owner of the property and on that footing, sells and coveys to a bona fide purchaser for value who has no notice whatever of the trust this purchaser has an equal equity with the defrauded beneficiary and by reason of possession of the legal right prevails over him.

      In India, the doctrine of Election, Marshalling and Set-off are based on this maxim.

Q. 4 (f). Explain the maxim: Where the equities are equal the first in time will prevail.

Ans. Maxim ‘Where the equities are equal the first in time will prevail. This maxim means that where there is no estates in the field and the question is as among the equitable estate only, the rule is that the person whose equity attached to the property first will be entitled to priority over other. The time, meaning and effect of the maxim have often been misunderstood. The meaning may further be thus explained that in a contest between persons having only equitable claims, priority of time is the ground of preference last resorted to i.e. the Court of Equity will not prefer the one to the other on the mere ground of priority of time, unless and until it finds upon an examination of their relative merits, there is no other sufficient ground of preference between them or in other words, that these requisites are in all respects equal and that if the one has no other grounds a better equity than the other, priority of time is immaterial. In examining into the relative merits (i.e. equities of the parties having adverse equitable claims) the points to which the Courts must direct its attention are obviously these points the nature and condition of their respective equitable claims, circumstances and manner of their acquisition and the whole conduct of each party with respect thereto. In examining these points the Court must apply the test not of any technical rule but the same broad principles of right and justice which the Court of Equity applies universally in deciding upon contested rights.

        It follows from the explanation of this maxim that where several successive and conflicting claims upon the same subject matter are wholly equitable and neither is accompanied by the legal claim which is held by a third person and neither possesses any special feature or incident which would according to the settled doctrines of Equity give it a precedence over the other irrespective of the order of time………. under these circumstances the maxim applies and priority of claim is determined by priority of time.

        The test. lt is difficult to ascertain exactly the circumstances in which an earlier encumbrancer will be deprived of his priority over the latter encumbrancer.

       Maitland has expressed the view that mere negligence is sufficient for the postponement of merely equitable interest in property. Ashburner, on the other hand, maintains that so far as the decisions go, an equitable mortgage has only been postponed where he has been guilty of gross- negligence. Pomeroy observes that “whether the same requirement of gross-negligence applies to successive interests which are all purely equitable or whether mere negligence is sufficient to affect the priority must be regarded as still unsettled by decisions.

       Application of the maxim. The principle embodied in the maxim lies at the foundation of the important doctrines concerning priorities, notice and rights of purchase in good faith and for a valuable consideration, which so largely affects the administration of Equity jurisprudence.

In India-Application of the Maxim

        Section 48 of the Transfer of Property Act is based on this maxim. It provides that where a person proposes to create by transfer at different times rights in or over the same immovable property, and such rights cannot all exist together each latter created right shall be subject to the right previously created. For example, if A mortgages property first to B and then to C. B’s interest having been created first in point of time, B will have priority over C.

Q. 4 (g). Explain the maxim: He who comes to equity must come with clean hands.

Ans. Maxim ‘He who comes to equity, must come with clean hands’. This maxim is sometimes expressed in another form, as “He that hath committed inequity shall not have Equity.” It means that so far as the subject-matter of the litigation is concerned, the claim must not be tainted with illegality or fraud. The maxim guides and regulates the action of Equity Courts and their interposition.

       This maxim is much more efficient but restrictive in its operation. It assumes that the suitor by asking the aid of the court of Equity has himself been guilty of conduct in violation of the fundamental conceptions of Equity and therefore refuses to him all recognition and relief, with reference to the subject-matter or transaction in question, unless the suitor can show, that his conduct has been fair, equitable and just all along.

     It provides that whenever a party who seeks to set the judicial machinery in motion and to obtain some equitable remedy has violated conscience, good faith or other equitable principle, then the doors of the courts of Equity will be shut against him and the court will refuse to interfere on his behalf to acknowledge his rights or to award him any relief.

        The maxim is, thus based on conscience and good faith while the court of Equity would act on the conscience of the defendant and would force him to do right and justice. It would never, thus interfere on behalf of the plaintiff, whose own conduct in reference to the subject-matter of transaction has been marked by a want of good faith or had violated any of the principles of Equity or righteousness. While a court of Equity tries to promote and enforce justice, good faith, uprightness and fairness on the part of the defendant, it nonetheless stringently demands the same from the plaintiff.

       Application of the maxim. Dr Hanbury says that “the cases which are usually cited as illustrations of this maxim are those in which a suitor has come into a court with a preconceived plan of fraud in his mind.”

      The following examples may be given to illustrate the operation of this maxim in the administration of Equitable reliefs.

      In the case of Overton v. Banister, a minor girl fraudulently concealed her age and obtained from her trustees a sum of money to which she was entitled only on coming on age. Subsequently she instituted a suit against the trustee to compel them to pay over again the money which had been improperly paid by them to her during her minority. It was held that the girl couid not enforce payment over again for, although the receipt of a minor is ineffectual to discharge a debt, yet the girl, having misrepresented her age. could not set the invalidity of that receipt.

In India-Application of the Maxim

(i) Trust. The principle has been incorporated in Section 23 of the Indian Trusts Act which provides that the beneficiary cannot successfully sue the trustee to make good the loss to the trust property due to the breach of trust if the beneficiary has, by fraud, induced the trustee to commit a breach of trust or has concurred or acquiesced in the breach of trust without any coercion, undue influence, etc.

(ii) Specific performance. This equitable relief of specific performance will not be available if the plaintiff’s conduct in obtaining or acting under the contract is unconscientious and unfair.

       Section 22 of the Specific Relief Act says, that “Jurisdiction to decree specific performance is discretionary and the court is not bound to grant such relief merely because it is lawful to do so. Similarly. Section 25 of the Act denies specific performance of contract for the sale or letting of property to the vendor or lessor if he entered into the contract knowing that he had no title to the property. And Section 28 of the Act lays down that no specific performance of the contract can be enforced against the defendant if there has been any fraud or undue advantage or any other unfair practice by the plaintiff against the defendant with regard to that contract.

(iii) Injunction. On the same principle, the court of Equity will not grant any injunction to party in the continuance of a legal wrong even if the defendant is also guilty of legal wrong. Equity will not adjust differences between wrongdoers. Fraud, illegality, invasion of a copy right in works are the instances of immoral or libellous acts for the continuance, which the court will not grant injunction.

(iv) Relief of rescission or cancellation. There are equitable relief provided under Chapters IV and V of the Specific Relief Act and the conditions being fulfilled, the court would rescind a contract or cancel an instrument. But if there is anything unfair or inequitable on the part of the plaintiff, the relief will not be available to him.

     Limitation. This maxim does not apply to every unconscientious or inequitable conduct on the part of the plaintiff. It is confined to the misconduct in regard to the matter in litigation.

   Exceptions-There have been from the earliest times certain exceptions to the maxim wherein the requirement of clean hands has not been insisted upon. The exceptions are as under:

(1) Case of public policy. Where a transaction is against public policy, the plaintiff need not have clean hands. He can even then be released from obligation. The relief is not given for the sake of the parties but for the sake of the public.

(2) Repentance. If there is repentance on the part of the person who was intending to commit fraud, but did nothing to further the fraudulent design, the maxim as to clean hands, will not apply.

Q. 4 (h). Explain the maxim: He who seeks equity must do equity.

Ans. Maxim-He who seeks equity must do equity. The maxim expresses the governing principle that every action of the Court of Equity in determining rights and awarding remedies must be in accordance with good faith and conscience. The maxim means simply that if a litigant claims something by way of Equity, he must be ready and willing to grant to the other party, which belongs to that other party in Equity. Equitable remedies are at the discretion of the Court and so this court would before granting one, enquire whether the plaintiff himself would be prepared to act as a man of conscience towards the defendant. Therefore, if it appeared to the court that the defendant is entitled in respect of subject-matter of the suit to any equitable relief against the plaintiff, the court would grant the equitable relief sought by the plaintiff but only upon the terms of his giving the defendant his due. A Court of Equity would, therefore, not allow the plaintiff to say, “Give me the equitable relief that I seek, but I am not prepared to make any allowances for the claim or the right of the other party. Let him enforce it by a separate suit.”

        This maxim, in its broadest sense, may be regarded as the foundation of all Equity, but as a practical principle guiding the Equity courts in their administration of justice, the maxim is only used in a much narrower and more special meaning. It is a principle of more extensive application no doubt, but is only applied to certain particular cases.

Application of the Maxim

1. Wife’s Equity to a settlement. When, before the passing of the various Married Women’s Property Act in England a husband sought the aid of the Court of Chancery to obtain possession of property to which he was entitled on the basis of right of his wife, the court refused to assist him except on the condition that he made a fair settlement of the part of the property to his wife and children.

2. Unconscionable bargains. In setting aside such bargains the Court would see that the money borrowed is repaid with fair interest. Where a person asks for the return of the mortgaged securities, he is asking for an equitable relief and he must first pay back the money advanced.

3. The doctrine of mutuality in specific performance.-Equity will not decree specific performance of contract at the suit of one party. unless it decrees specific performance at the suit of the other party as well.

4. Election and mortgage. The maxim is also illustrated generally in the doctrines of election and mortgages. Thus, Equity would allow the mortgagor to redeem the property even after expiry of the contractual period, but only on conditions which are fair to the mortgagee

5. Compensation for the repairs and improvements. This maxim also underlies the rule which enjoys payment of compensation for repairs and improvements made by a person who holds the legal estate, when the property is sought to be recovered by person entitled in Equity. Halsbury says that “when a person in possession of property has under mistaken belief that he is entitled to it, expended money in permanent improvements, the true owner, if he has to assert his title in Equity, is required to do Equity, by repaying the money.”

6. Mortgages by deposit of title deeds. The maxim also underlies equitable doctrine of mortgage by depositing title deeds. If a man pledges his title-deeds, as a security for a loan, he must pay the amount before he wants to get back the deeds, though a mortgage of land could not be created without writing by reason of the Statute of Frauds.-Russel v. Russel, (1783) Bro CC 269).

In India-Application of The Maxim

(i) Contract Act, Sections 19-A, 64 and 65.-Section 19-A of the Indian Contract provides that “When consent to an agreement is caused by undue influence, the agreement is a contract voidable at the option of the party whose consent was caused.

        Any such contract may be set aside either absolutely or, if the party who was entitled to avoid it, has received any benefit thereunder upon such terms and conditions as the court may deem just.”

          Under Sections 64 and 65 of the Indian Contract Act, the party seeking to avoid a void or voidable contract is made to restore any benefit that he has received from the other party.

(ii) Specific Relief Act. Sections 38 and 41. Section 38 of the Specific Relief Act, provides that on adjudging the rescission of a contract the court may require the party to whom such relief is granted to make any compensation to the other party, which justice may require.

        Section 41 of the Specific Relief Act provides that on adjudging the cancellation of an instrument, the court may require the party to whom such relief is granted to make any compensation to the other party, which justice may require.

(iii) Transfer of Property Act, Sections 35 and 51.-Section 35 of the Transfer of Property Act, lays down that he who takes a benefit under an instrument must accept or reject the instrument as a whole. This is called “right of election”. Anybody can either accept a benefit or reject it under an instrument.

        Section 51 of the Transfer of Property Act provides that a transferee, who make improvement of any immovable property believing in good faith that he is absolutely entitled thereto and is subsequently evicted therefrom by a person having better title is entitled to compensation for the improvement made by him.

(iv) Indian Trusts Act, Sections 62 and 86. Section 62 of the Indian Trusts Act imposes the equitable condition on the beneficiary to repay the trustee the purchase-money with interest and other legitimate expenses when he seeks a declaration of trust or re-transfer of trust property wrongfully brought by the trustee.

      Section 86, similarly, imposes the equitable condition of repaying the consideration paid in transfer of property pursuant to a rescindable contract.

    Limitations. There are, however, two important limitations bearing the scope of this maxim. They are as under:

       First Limitation. In order that the maxim may apply, it is necessary that the Equity sought by, or granted to the defendant is with respect to the subject-matter of the suit or grows out of the controversy pending before the court. The maxim does not apply to the case, where the relief sought by the plaintiff and the equitable right of relief secured to or sought by the defendant belongs to or grows out of two entirely separate and distinct matters.

       Second Limitation. The maxim applies only where a party is appealing to the Court in order to obtain some equitable relief. It is not applicable when the plaintiff seeks to enforce purely legal rights even though through a court of Equity.

Q. 4 (i). Explain the maxim: Equity will not suffer a wrong to be without a remedy.

Ans. Maxim, ‘Equity will not suffer a wrong to be without a remedy’. The idea expressed in the maxim is this that no wrong should be allowed to go unredressed, if it is capable of being remedied by Courts of

     Justice. This maxim is a restricted derivation of a more comprehensive legal maxim ‘ubi jus ibi remedium ie where there is a right there is a remedy Rights and remedies co-exist and go together, as has been said in the case Ashby v. While. (1703) 2 Ld Raym 938).

        “When the law clothes a man with a right, he must have a means to vindicate and maintain it, and remedy if he is injured in the exercise and enjoyment of it, and indeed it is vain thing to imagine a right without a remedy, for want of right and want of remedy are reciprocal.”

      Origin of equitable jurisdiction. The equitable jurisdiction in England grew up from the deficiencies of the law and inadequacies of remedies provided by the Common Law. In the first place, many wrongs were left without a remedy. In the second place, the relief granted by the Common Law Courts was often most inadequate and in the third place, the procedure at the Common Law Courts was defective and unsatisfactory. This led to the establishment of the Court of Chancery for the redress of wrong that remained unredressed under the Common Law.

      The maxim covers entire equitable jurisdiction. This maxim is the source of the entire Equity jurisdiction………. exclusive, concurrent and auxiliary. The jurisdiction is exclusive where the right to be enforced is wholly equitable, e.g. a trust; concurrent, where equity contributes something to the legal doctrine, e.g. mistake of fraud; auxiliary. where equity lends its aid for the production of evidence which may be required in an action at law.

      Thus the maxim led the Chancellor to intervene in the administration of justice in order.

(1) to give a relief where the Common Law gave none;

(2) to give an adequate relief where the one available in Common Law Court was inadequate,

(3) to help the litigants by offering facilities in evidence and procedure which the Common Law Courts did not provide.

       Limitations. There are, however, certain limitations upon the generality of this maxim:

(1) The maxim does not apply where the right in question is a moral right and is not capable of being judicially enforced. The Court of Equity interferes when there is an invasion of equitable rights.

(2) The second limitation is that Equity does not interfere to remedy a ong where the right and the remedy both completely belong to the wrong domain of the law.

(3) This maxim does not apply where a party has destroyed or lost or waived his right to an Equitable remedy by his own act or omission.

       With these limitations the principle has been devolved into a vast range of equitable jurisdiction which gives –

(i) Legal remedies for the violation of the legal rights in a more certain, adequate and complete manner than the law can give.

(ii) Equitable remedies for the violation of legal rights which the law has no power to give,

(iii) Remedies either equitable or legal in their nature for the violation of the rights for which the law takes no cognizance.

Illustrations. (a) A cestui que trust was not recognized at law, but was considered in equity, the owner of the property. Therefore, equity granted remedy to the cestui que trust in case of a breach of trust by the trustee

(b) Another very good illustration is to be found in the appointment of a receiver by way of equitable execution.

        Rule embodied in Indian enactments. The Maxim Ubi jus thi remedium is incorporated in many Indian enactments. Thus the Indian Specific Relief Act provides equitable remedies by way of specific performance of contracts, notification of instruments, declaratory decrees, injunctions, etc. The Indian Trust Act provides for trusts. Section 9 of the Civil Procedure Code practically incorporates the maxim.

Q. 4 (j). Explain the maxim: Equity looks to the intent rather than to the form.

Ans. Maxim ‘Equity looks to the intent rather than to the form’. This maxim may be stated in another form as “Equity regards substance rather than form”. It means that equity regards the spirit rather than the letter of the law and that actual words of the contract are not so material as actual intention of the parties entering it. The maxim is of great practical importance. It affects to a great degree the entire system of Equity In fact, it is only by looking at the intent rather than form that Equity is able to treat as done which in good conscience ought to be done. Equity always attempts to get the substance of things and to ascertain, uphold and enforce rights and duties which spring from real relations of parties. It will never allow the mere appearance and external form to conceal the true purpose, objects and consequences of a transaction. This principle of looking after the intent and giving it effect was fully recognized and distinctly formulated at an early date. Lord Chancellor Maccles Field observed that “The true ground of relief against penalties should be drawn from the original intent of a case where a penalty is designed only to secure money and gives the party all that he expects or desired” Again, Lord Thurlow said that, “The rule is that where a penalty is inserted only to secure the enjoyment of an object, the enjoyment of that object is considered the principal intent of the deed and the penalty only as occasional.”

        In both the above cases the Court was dealing with penalties. But the principle stated therein is of universal application that Equity always seeks for the real intent under the cover of whatever form or appearance it may be and it gives effect to such intent unless prevented by some positive and mandatory rule of the law.

       The old Common Law paid great deference to matters of pure form and to rigid observance of all the stipulations of the agreements, performance to the very letter of a covenant or promise was the inflexible rule. Extreme importance was attached by it to seal. The momentous and most arbitrary results which flowed from these, makes the early Common Law rigid and almost barbarous

       The Equity Jurisprudence, on the other hand, differed widely in all these respects from the Common Law. From the very beginning it was distinguished by an entire absence of these arbitrary transactions. Thus, if a contract was under seal, the Common Law conclusively presumed the presence of consideration. Equity, however, always allowed a party to show that a contract was void for want of consideration, even though it was under seal.

Application of the Maxim

      The most common application of the maxim lie in the following:-

(1) Relief against penalties and forfeitures.

(2) Precatory Trusts,

(3) Mortgages.

(4) Statute of frauds.

(5) Effects of the seal.

1. Penalties and Forfeitures. The Common Law required, as stated above, a rigid performance of all stipulation to the very letter. When a contract provided for a penalty or forfeiture in case of a breach, the Common Law Court imposed that penalty or forfeiture, regardless of the actual damage sustained by the party in default. Equity, however, deemed the performance of the act, or the penalty or the forfeiture as merely accessory and therefore relieved the debtor from such penalty or forfeiture whenever the actual damages sustained by the creditor may be adequately compensated.

2. Precatory Trust.-Another example of the application of this maxim is to be found in what are known as precatory trust. A precatory trust is one which is created not by express and unequivocal words but by such words as “I hope, I desire’. ‘I hope and doubt not’, ‘I recommend etc. Though such trusts are expressed in an ambiguous language but Equity regarded it as a species of express trust and not of implied trust.

3. Mortgages. Another remarkable application of this maxim lies in equity of redemption-the equitable right and estate of the mortgagor in the mortgaged property after the legal title of the mortgagee had become absolute by non-performance of the condition. Lord Nottingham has observed that “In natural Justice and Equity the principal right of the mortgagee is to the money and his right to the land is only a security for the money”. The Court of Equity, therefore declared it to be against conscience that the mortgagee should retain as owner his own benefit which was intended as a mere security.

4. Statute of Frauds. On the basis of this maxim, Equity evolved two exceptions to the Statute of Frauds on the principle that Equity will not permit the Statute of Frauds to be made an engine of frauds or to cover fraud. The exceptions are as under-

(i) if the agreement was intended to be put into writing but was not put into writing owing to the fraud of the defendant he would not be allowed to set up the statute as a bar to the action;

(ii) whenever a contract of which the Court was accustomed to grant specific performance fell within the Statute of Frauds, part performance of the contract by the plaintiff would take it out of the Statute.

5. Effects of the seal.-In certain cases Equity treated the presence of seal as of low consequence and as producing no effect on the right and the duties of the parties.

In India-Application of the maxim

         Relief against penalties. Section 74 of the Contract Act, relieves debtors against penalties.

        Relief against forfeiture. Section 114 and Section 114-A of the Transfer of Property Act relieve the lessees of leases for non-payment of rent and certain other cases.

     Relief against clogs on redemption. Although it is open to the parties to enter into any reasonable agreement about redemption, a Court of Equity will not give effect to an agreement which either directly bars the mortgagor’s right to redeem forever, indefinitely or for an unreasonable period.

      Time not essence of contract in transaction regarding sale of land. In India the law regarding this point is contained in Section 55 of the Contract Act.

Q. 4 (k). Explain the maxim: Equity imputes an intention to fulfil an obligation.

Ans. Maxim, ‘Equity imputes an intention to fulfil an obligation’.- It means that where a person is under an obligation to do some act and he does some other act which is capable of being considered as a fulfilment of obligation, equity, relying on the principle that a man ought to be just before he is bountiful, raises a presumption that the latter act was meant as a discharge of the former. In the words of Snell, “It is right to put the most favourable construction on a man’s acts and to presume that he intends to be just before he affects to be generous” [Snell’s Principles of Equity, 24th Edn. p. 32).

      Application of the maxim. It is on this maxim that the “doctrine of performance”, “satisfaction”, “ademption” and “Relief” against the defective execution of a power of appointment are based.

        Performance. Where a person covenants for valuable consideration to purchase and settle lands upon certain trust, and subsequently purchases lands of the nature of those covenanted to be settled, but he retains such lands unsettled till his death, Equity will presume that such lands were purchased in performance of the covenants and are bound by it.

        Satisfaction-Satisfaction may be defined as the making of a donation with the intention that the donation should be taken to satisfy a prior claim or right of the donee himself. Where a father or any other person who stands in loco parentis covenants to make provisions for child and afterwards gives the child a legacy, or makes some other provisions during his lifetime, then the Courts of Equity regard the provisions or the legacy as satisfaction of the provision. (Called portion in Equity), covenanted to be made.

        Ademption. Ademption may be defined as the donation of a thing with the intention that it shall be taken as a substitution of a gift previously made by a will in favour of the donee. It means a transfer of property which, whether the donee wishes it or not operates in law as a complete pro tanto substitution for a gift previously made by the donor’s will and unrevoked at his death. Here the equity presumes that the latter gift was intended to cut out the legacy either completed or in part.

       Defective execution. The doctrine of relief against defective execution of power is also founded on the present maxim. The doctrine was thus stated in Tollet v. Tollet, “A defective execution will always be aided in Equity under the circumstances mentioned, it being the duty of every man to pay his debts, and a husband or father to provide for wife or child.”

In India-Application of the maxim

       Doctrine of Performance. Section 92 of the Indian Trusts Act given effect to the principles of the maxim. It lays down that where a person contracts to buy a property to be held on trust for certain beneficiaries and buys the property accordingly he must hold that property for the intended beneficiaries and in discharge of his obligation for the same.

Q. 4 (l). Explain the maxim Equity looks on that as done which ought to have been done.

Ans. Maxim, ‘Equity looks on that as done which ought to have been done’. This maxim has been expressed in various ways as “Equity regards that done which ought to be done’ or ‘Which ought to be done is considered to be done’ or ‘Equity regards and treats that as done which in good conscience ought to be done.

        Story and Snell have observed that the true meaning of the maxim is that the Equity will treat the subject-matter of a contract, as to consequences, and incidents in the same manner as if the final acts contemplated by parties have been executed exactly as they ought to have been as they might have been executed. The most frequent cases of the application of the rule are under agreements or contracts. This description is merely substituting one practical result of the principle in the place of the principle itself.

        Adam and Spencer have laid down that “What ought to be done is considered in Equity as done, and its meaning is that whenever the holder of the property is subject to an Equity in respect of it, the Court will, as between the parties to the Equity treat the subject-matter as if the Equity had been worked out and as impressed with the character which it would have then borne.’

         The maxim must not be taken in the wide and literal sense that Equity acts as a Code of conscience and makes a person do that which is right. The maxim only means that where a person has incurred an obligation to do something; then the Courts of Equity look on it as done and as producing the same substantial results as if the obligation had been actually performed.

       Application of the maxim. The most direct and indirect applications of this maxim, lie in the following equitable doctrines:-

(1) Of conversion,

(2) As to executory contracts, and

(3) Of part-performance.

1. Conversion. The agreement is considered as done not only at the time when, but also in the manner in which according to the tenor thereof, it ought to have been performed. Thus money, covenanted or devised, to be laid out in land, is treated as real estate in Equity from the moment when the transaction takes effect, and conversely.

2. Executory Contracts. With regard to an executory contract of lease of land, a person, who enters into possession of land under agreement for lease, which is specifically enforceable, is regarded as between himself and the other party as being in the same position as if the lease had been actually granted to him.

         Similarly, where there is an agreement for the sale of land, the ownership at law remains with the vendor. In Equity the purchaser is looked upon as the owner of the land, and the vendor who holds legal estate, holds it as trustee for the vendee, from the moment the agreement is made though the conveyance has not yet been made.

3. Part-performance The doctrine of part-performance has been explained under Section 53-A of the Transfer of Property Act, 1882. This principle is the result of this maxim In England under Section 4 of the Statute of Frauds it has been provided that no action on contract concerning land shall be brought, unless there is written memorandum of the terms of the contract signed by the party to be charged. But under the equitable doctrine of a part-performance, however, such contracts are allowed to be formed by oral evidence where one of the parties has done acts of part- performance

In India-Application of the maxim

         The following provisions under the Indian Law illustrate the principle of this maxim as under:

1. Section 40 of the Transfer of Property Act, 1882, the illustration to which is as follows:

        “A contracts to sell Sultanpur to B, while the contract is still in force he sells Sultanpur to C who has notice of the contract. B may enforce the contract against C to the same extent as against A.”

2. Illustrations (g) and (h) under Sections 3 of the Specific Relief Act, 1877, are exactly to the same effect as the above.

3. Section 53-A of the Transfer of Property Act, 1882, containing the doctrine of part-performance, is based on the same principle.

4. Section 91 of the Indian Trust Act, 1882, making the purchaser of a property with notice of pre-existing contract with rep regard to the same property, a constructive trustee for the person who has agreed to purchase, is also clearly an application of the equitable rule in question.

        Limitations. The maxim has, however, two limitations for the operation of the maxim which are as under:

(i) Firstly. Equity does not regard and treat as done what might be done or which could be done, but only which ought to be done.

(ii) Secondly, the maxim does not operate in favour of every person but only in favour of that person who holds the equitable right to have the acts performed as against the one upon whom the duty of such performance has devolved.

Performance, Satisfaction and Ademption

Q. 5 (a). Write short notes on the followings-

1. Doctrine of Performance

2. Doctrine of Satisfaction

3. Doctrine of Ademption

Ans. 1. Doctrine of Performance.- Pomeroy gives the following description of the doctrine of performance.

      “When a person has definitely bound himself to do a certain act, by which a particular kind of thing will be bestowed upon another in a specified manner, and instead thereof bestows the same kind of thing upon the obligee in a different manner, or else permits the same kind of thing to devolve upon the obligee in the course and by operation of law, so that what is thus done or permitted may amount to a complete or partial fulfilment of the existing obligation, then the party will be presumed to have done or permitted this with the intention of performing the very obligation, itself in whole or in part and the obligation will be thus wholly or partially performed, as the case may be.”

        The above description simply means that performance signifies the doing of an act of a thing agreed to be done. When after an agreement an act is done, sufficiently alike in nature to that which is agreed to be done, equity presumes that the similar act is done in pursuance of the agreement, and regards it as performance of the act agreed to be done, either wholly or partially, as the case may be.

       Application of the doctrine of performance. The cases in which question of performance arises comes under the following two classes:

1. Where there is a covenant to purchase and settle lands and purchase is in fact made, and

2. Where there is a covenant to leave property to a person and he dies intestate, and a portion of his personal estate comes to such person under the statute of distributions.

2. Doctrine of Satisfaction. Satisfaction may be defined as the making of a donation with the intention that the donation should be taken to satisfy a prior claim or right of the donee himself. The doctrine of the satisfaction, like the doctrine of performance is based on the maxim “Equity imputes an intention to fulfil an obligation.”

         Thus A is indebted to B for a sum of Rs. 5,000, A executes a will and therein makes a provision for payment of Rs. 6,000 to B without mentioning anything about the debt itself, there will be the presumption that the legacy was meant to satisfy the debt done by A to B.

3. Doctrine of Ademption. Ademption means a transfer of property which, if the donee accepts it operates in Law as a complete or Protanto Substitution for a gift previously made by the donor’s will and unrevoked at his death.

       Lord Selborn explained it in Re Pollock v. Worath, (28 Ch. D. 552) as follows:-

      When a testator gives a legacy to a child, or to any other person towards whom he has taken himself personal obligations, and afterwards makes a gift or enters into a binding contract in his lifetime in favour of the same legatee, then unless there be distinction between the nature and conditions of the two gifts there is a presumption ‘prima facie that both gifts were made to fulfil the same natural or moral obligation of providing for the legatee, and consequently that the gift inter vivos is either wholly or in part a substitution, or an “ademption” of the legacy.

Guardians, Infants, Idiots and Lunatics

Q. 5 (b). “Equity exercised beneficial jurisdiction over infants, guardian, idiots and lunatics.” Justify the above statement.

Or

“Court of Chancery has shown beneficial jurisdiction on guardians, infants, idiots and lunatics”. Explain. In Indian law, discuss the different kinds of guardians on this subject.

Ans. Jurisdiction of Chancery Court over guardians, infants, idiots and lunatics. The Court of Equity in England from the earliest times exercised jurisdiction over Guardians and Infants. The jurisdiction has now been assigned to the Chancery Division of the Court of justice.

       The aim of guardianship is to shield person in need of protection on account of their infancy, idiocy, lunacy or other defects. The two main questions with regard to guardianship as a whole are: –

(1) The appointment and removal of a guardian by the Court.

(2) The rights, duties and liabilities of the guardian.

       The strict Common Law gave to the father the guardianship of his children until they reached to the age of discretion. The limit was fixed at 14 years in the case of boy and 16 in the case of girl. In England, the Chancery Division has now authority over the appointment and removal of guardian, the maintenance of infants and management and disposition of their property.

     The guardianship may be natural, testamentary or statutory. The father’s legal right of guardianship now continues till the infant attains the age of twenty one years. But the court has, however, full jurisdiction over infants whether the father is living or dead and if the court is satisfied that the children are not being properly treated or looked after it will interfere with a father’s guardianship, any person is entitled to apply to the court as next friend to the infant for the appointment or removal of a guardian.

       A person appointed by the father or mother by means of a deed or will to act as guardian after his or her death is known as the testamentary guardian. He is entitled to manage the infant’s property and to look after his personality.

         After the death of the father, the mother is the statutory guardian jointly with the testamentary guardian, if any.

      In India. The question of the ward’s need of protection is always governed by the personal law of the ward. The Hindu Law shall be applied when the ward is a Hindu and similarly, Mohammedan Law in case the ward is a Mohammedan. The Hindu and Mohammedan Law on guardianship has become considerably qualified by the Hindu Minority and Guardianship Act, 1956 and the Guardian-and Wards Act. 1872.

       The Indian Majority Act, 1875, fixed the age of majority at 18 years.

     The High Courts in India possess the power to appoint a guardian of the person and property of minors independently of the Guardian and Wards Act.

MORTGAGE

Q. 6 (a). Define Mortgage. What are its kinds?

Or

‘Mortgage is an equitable transfer’. What are the essentials of mortgage which justify this statement.

Ans. Definition of Mortgage. If A seeks to borrow money from B. B may advance the loan simply on A’s promise mise or or obligation to repay it or he may require some additional guarantee or security for the repayment of the loan. One of the ways through which the realization or recovery of the loan may be made more secure, is by the debtor conveying to the creditor some property with a promise that on repayment of the loan, the conveyance shall become void or the property shall be reconveyed. This is called a mortgage.

       The word ‘mortgage’ is a compound of the Norman-French mort, dead and gage, a pledge and originally, it denoted a pledge of land under which the creditor took the rents and profits for himself, so that it was dead or profitless to the debtor as opposed to a pledge under which the rents and profits went in reduction of the debt.

      The Common Law courts in England strictly construed and gave effect to the terms of a mortgage and enabled the mortgagee to become absolute owner of the mortgaged property after the stipulated period for redemption expired and the Courts of Equity intervened or interfered with in respect of such mortgage and instead of allowing the mortgagee to become the absolute owner, allowed the mortgagor to redeem the mortgaged property even after the expiry piry of the stipulated period for redemption. It is not certain when the Courts of equity for the first time commenced giving relief to the mortgagor, but the right of the mortgagor to be restored to his payment of the principal, interest and costs, seems to have been fully recognised in the reign of Charles 1. In course of time, mortgages fell almost entirely within the jurisdiction of Chancery and by Section 34 sub-section (3) of the Judicature Act, 1873, the redemption and foreclosure of mortgages were exclusively assigned to the Chancery Division of the High Court of Justice.

      Snell has defined mortgage as “the transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced or to be advanced by way of loan an existing or future debt or the performance of an agreement which may give rise to pecuniary liability”

       In the words of Fischer, “Mortgage is a security upon the property for the performance of an engagement”

      In India, the whole Law of mortgage is now contained in the Transfer of Property Act, 1882.

      Section 58(a) of the Transfer of Property Act, 1882 defines mortgage- “A mortgage is the transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability. If the amount of mortgage is rupees one hundred or more than that, it should be made by registered instrument. Mortgage of lesser value may be made by delivery of possession only.

       Elements of a mortgage. The essential characteristics of a mortgage are following:-

(a) There must be a transfer of an interest. The words ‘transfer of an interest implies that the mortgagee in a mortgage does not become owner of the property by virtue of a mortgage. The interest which passes to the mortgagee is not ownership. The ownership of the mortgagor is not extinguished by virtue of the transaction of mortgage.

(b) This transfer of interest must be in specific immovable property. The next essential element of a mortgage is that the immovable property must be clearly specified. The description of the property in the mortgage deed must be sufficient to identify the property.

(c) The transfer must be made for the purpose of securing the payment of a loan or for securing the performance of a contract.- The third requisite of a mortgage is that it must be supported by consideration. The consideration of a mortgage may be either-

(1) money advanced or to be advanced by way of loan,

(2) an existing or future debt; or

(3) performance of an engagement giving rise to a pecuniary liability.

      Kinds of Mortgages. The Transfer  of Property Act divides mortgages into six categories: –

(1) Simple Mortgage. Where without delivering the possession of the mortgaged property, the mortgagor binds himself personally to pay the mortgage money, and agrees expressly or impliedly, that in the event of his failing to pay according to his contract, the mortgagee shall have a right to cause the mortgaged property to be sold and the proceeds of sale to be applied so far as may be necessary, in payment of the mortgage money, the transaction is called “simple mortgage” (Section 58 (b) Transfer of Property Act). Thus, the outstanding feature of simple mortgage is that the mortgagor does not give possession of the property to the mortgagee. Mortgagor owns personal responsibility to pay the debt in stipulated time and gives this right to the mortgagee that he may sell the property and use the sale proceeds in repayment of his debt

The salient features of simple mortgage are:

1. In simple mortgage, the mortgagor binds himself to pay the mortgage money.

2. In this mortgage, the mortgagor agrees that in case of his failing to pay according to the contract, the mortgagee shall have a right to sell the property through Court.

3. There is no delivery of possession under this mortgage.

(2) Mortgage by conditional sale.-“Where the mortgagor ostensibly sells the mortgaged property –

        On condition that on default of payment of the mortgage money on a certain date the sale shall become absolute, or on condition that on such payment being made, the sale shall become void, or on condition that on such payment being made, the buyer shall transfer the property to the seller-

       The transaction is called a mortgage by conditional sale and the mortgagee is called mortgagee by conditional sale.

       Provided that no such transaction shall be deemed to be a mortgage. unless the condition is embodied in the document which effects or purports to effect the sale.” (Section 58 (c) of the Transfer of Property Act).

(3) Usufructuary Mortgage. “When the mortgagor delivers possession or expressly or by implication binds himself to deliver possession of the mortgaged property to the mortgagee, and authorises him to retain such payment until payment of the mortgage money, and to receive the rents and profits accruing from the property, or any part of such rents and profits and to appropriate the same in lieu of interest or in the payment of mortgage money or partly in lieu of interest and partly in the payment of the mortgage money, the transaction is called an usufructuary mortgage and the mortgagee a usufructuary mortgagee” (Section 58 (d) of the Transfer of Property Act).

        Characteristics of Usufructuary mortgage (a) The mortgagee is to retain possession until the repayment of the mortgage-money and to receive rents and profits.

(b) no time limit is fixed for the mortgage money becoming due or being paid

(c) the mortgagee cannot sue for foreclosure,

(d) there is no personal liability on the mortgagor to repay.

(4) English Mortgage.-“Where the mortgagor binds himself to repay the mortgage-money on a certain date and transfers the mortgaged property absolutely to the mortgagee, but subject to a proviso that he will re-transfer it to the mortgagor upon payment of the mortgage-money as agreed, the transaction is called an English Mortgage” (Section 58 (e) Transfer of Property Act).

(5) Mortgage by deposit of Title deeds.-“Where a person in any of the following towns, namely, the towns of Calcutta, Madras and Bombay and in any other town which the State Government concerned may be notification in the Official Gazette, specify in this behalf, delivers to a creditor or his agent documents of title to immovable property, with intent to create a security thereon, the transaction is called mortgage by deposit of title deeds (Section 58 (f) of Transfer of Property Act).

(6) Anomalous Mortgage. “A mortgage which is not a simple mortgage, a mortgage by conditional sale, an usufructuary mortgage, an English mortgage or a mortgage by deposit of title deeds within the meaning of this section is called an anomalous mortgage.” (Section 58 (g) of Transfer of Property Act).

Q. 6 (b). What is Subrogation and who are entitled to avail this right?

Or

What do you understand by subrogation? Who can claim this right? Discuss.

Ans. Subrogation. The term ‘Subrogation’ which means substitution, was derived into jurisprudence of equity from the Roman Law.

       In India, the doctrine of Subrogation has been adopted through Section 69 of the Indian Contract Act, 1872 and Section 92 of the Transfer of Property Act, 1882.

      Section 69 of the Indian Contract Act.-“A person who is interested in payment of money which another is bound by law to pay, and who therefore pays it is entitled to be reimbursed by the other.”

     Section 92 of the Transfer of Property Act.-Provides that any one (except the mortgagor) entitled to redeem the mortgaged property and any co-mortgagor shall, on redeeming property subject to the mortgage have, so far as regards redemption, foreclosure or sale of such property, the same rights as the mortgagee whose mortgage he redeems, may have against the mortgagor or any other mortgagee.

       For instance. X mortgages his property first to A and then to B C purchases the equity of redemption and pays off A the first mortgagee Ci subrogated to the rights of A and in an action by B to enforce his mortgage C can use the prior mortgage in favour of A as a shield.

        Who can claim subrogation. The person desiring the legal subrogation under Section 92 of the Transfer of Property Act must prove-

(a) that he had pre-existing interest or charge on the property.

(b) that he redeemed the same in full, and

(c) that he paid the amounts from his own pocket for the protection of his interest.

         Conventional subrogation has been dealt with in Section 92 (3) of the Transfer of Property Act, which lays down that if a person advances money to a mortgagor for redemption of a mortgage, the lender shall be subrogated to the rights of the mortgagee whose mortgage has been redeemed only if the mortgagor has agreed by a registered instrument that he shall be so subrogated.

          This section does not cover the case of mortgagee paying upon his own earlier mortgage but it has been held that the doctrine of subrogation is an equitable doctrine founded on principles of natural justice and is by no means confined to Section 92 of the Transfer of Property Act and is wide enough to govern such a case. [T. Chelamma v. T.K.P. Parrmaswaran, AIR 1971 Ker 3]

        Section 92 Transfer of Property Act also provides for subrogation by act of parties and it is permissible for a person to acquire the right of subrogation by agreement. But in order to have such a claim to subrogation. This Section requires that there should be a registered instrument to thai effect.

Q. 7 (a). Explain the followings:

1. Equity or right of redemption

2. Once a Mortgage always a Mortgage

3. Clog on Equity of Redemption

Ans. (1) Equity or right of redemption.-In England-A Common Law a mortgage was strictly an ‘estate upon condition-the estate being forfeited upon the condition being broken. A mortgage was effected for the purpose of securing the debtor or subject to the condition that if the money was not repaid within the prescribed period, the land belonged absolutely to lender and the borrower lost all his rights to recover it.

       Equity considered itself unfair that the borrower should lose his land entirely, if he failed to pay within the date fixed for payment. It therefore. declared it to be against the conscience of the mortgagee to retain that property as owner which was intended as a mere security and held that even after the day fixed for payment ie, after the mortgagor had lost his legal right to redeem, he had an equitable right to redeem his estate on payment within a reasonable time of the principal, interest and costs. This right of the mortgagor to redeem even after he is in default is known as the mortgagor’s Equity of redemption.

         Thus an equity of redemption is a right not given by the term of the agreement between the parties to it, but contrary to them, to have back securities given by a borrower to a lender on payment of principal and interest at a day after that appointed for payment when by the terms of the agreement between the parties, the security were to be absolute property of the creditor. [Salt v. Marquess of Northamption, (1892) AC 1].

       The principle. The principle on which the equitable right of redemption is based is from the standpoint of the original intention of the parties, according to the maxim “Equity looks to the intent rather than to the form. This doctrine is represented by the maxim ‘once a mortgage always a mortgage, which simply means that a transaction could not, at one time, be a mortgage, and at another time cease to be so, by having any stipulation in the mortgage-deed which is calculated to prevent redemption.

        In India. Since the passing of the Transfer of Property Act, the distinction between legal and equitable rights and interests does not exist The Indian mortgagor, however, retains a similar right of redemption or reconveyance of the land, until foreclosure or sale and a right to transfer such right by way of sale or second mortgage. Mulla correctly observes that “The mortgagor in Indian Law is the owner who has parted with some right of ownership and the right to redemption is a right which he exercises by virtue of his residuary ownership”.

         Section 60 of the Transfer of Property Act recognizes and provides for the right of the mortgagor to redeem “at any time after the principal money has become due…….subject of course to the law of limitation. The right conferred by this section is called “a right to redeem” and a suit to enforce it, is called a suit for redemption.

(2) Once a mortgage always a mortgage. The phrase ‘once a mortgage always a mortgage has been taken from the case of Howard v Harris, (1983) 1 Vern 33. This is another expression used for “the doctrine of clog on the equity of redemption.” Redemption is the very essence of a mortgage, so any provision inserted in the agreement restricting or preventing redemption amounting to clog on the equity of redemption is unenforceable. It means that by means of the same deed, two things cannot be effected, he, it is not possible to mortgage a property and also absolutely transfer the same through the same mortgage deed.

     The Supreme Court has observed in Gangadharv Shanker Lal, Alg 1958 SC 770, that the right of redemption cannot be taken away by any kind of agreement whatsoever. Again this view was supported by the Aper Court in Parichhan v. Akshaibar, AIR 1997 SC 456.

        Illustration X mortgaged his land to Y and the instrument of mortglige contained a stipulation that if the principal is not paid off within 5 fears from the date of the mortgage, the land shall become the property of the mortgagee, and the right to redeem will be extinguished. It was held that the mortgagor can redeem the property by paying off the principal and interest though the stipulated time for payment has been allowed to pass since the Equity does not allow the clogging of the right of redemption.

        Thus, we find that an estate could not at one time be a mortgage and a another time cease to be so by one and the same deed. Once a mortgage always a mortgage.

(3) Clog on equity of redemption. It means preventing the mortgagor from exercising his right of redemption relating to the property mortgaged.

        It may be noted that the mortgagor has a right of redemption in respect of his mortgaged property. There can be no clog on his right of redemption The mortgagor can redeem his mortgaged at any suitable time and place from the mortgagee.

     Any stipulation or provision in the mortgage deed which has the effec of fettering the equity of redemption or which prevents the mortgagor from getting back his property, on repayment, from any obligation, has been declared by equity to be void and unenforceable as being contrary to the nature of a mortgage.

         Thus in Howard v. Harris. | (1983) 1, Vern 33], where the mortgage deed contained the provision that only the mortgagor and his male ho might redeem, it was held that an assignee of the mortgagor might als redeem. The right redeemed, thus, cannot be restricted to only some of the representatives of the mortgagor or to the mortgagor personally.

        The leading case on the subject is that of Krelinger v. New Patagonia Meat Co. [(1914) AC 25) In this case the doctrine of “clogging the equit was extended so that a stipulation in a mortgage for any collateral advantag to the mortgagee, besides the payment of his principal, interest, and cos was regarded by the Court as necessarily bad, in so far as it extended beyon the period of redemption.

         It lays down that there is no rule in Equity which prevents a mortgager from stipulation for any collateral advantage to endure beyond redemptio provided, such advantage is not: –

(a) unfair and unconscionable, or

(b) in the nature of a penalty clogging the equity of redemption, or

(c) otherwise inconsistent with or repugnant to the right to redeem.