CHAPTER I

THE ORIGIN AND DEVELOPMENT OF EQUITY

§ 1. The definition of Equity.

1 Equity literally means fairness. As a part of the English system of
jurisprudence, however, its definition presupposes a reference to history.
2. In England, the original law was the common law,—the law based
on the common custom of the country which was developed and ad-
ministered by the Common Law Courts. But in course of time the common
Jaw became a definite body of rules Which was not capable of growth in
various directions and even caused hardship and injustice in particular cases
owing to the inflexibility of its procedure and modes of redress.' Equity
originated in the hands of the Chancellor who sat in the Chancery, as the
'Keeper of the Kings conscience', to give relief in these cases of hardship,
by the application of the principles of morality or conscience. But equity
should not be identified with morality. A Court of Equity will not interfere on
points of morals except when they are mixed up with the administration of
civil rights in property. It cannot enforce the observance of obligations which
rest upon only moral grounds; there must be some wrong or injury to the
party complaining to the court.
3. Equity, thus, is—"that portion of natural justice which, though
of such a nature as to admit of being judicially enforced, was omitted
to be enforced by the Common Law Courts,—an omission which was
supplied by the Court of Chancery". (Sne/. But since the Judicature Acts
have amalgamated the two separate systems of Courts for the administration
of and Equily, into one,—to define Equity as a body of rules
administered by the Courts of Equity would, now, be unsatisfactory. Thus,
we are driven to say," Equity now is that body of rules administered by the
English Courts of Justice which, were it not for the operation of the Judicature
Acts, would be administered to only by those Courts which would bo known
as Courts of Equity." (Maitland). }/

§ 2. A short history of Equity Jurisdiction.

I. At the end of the 13th Century, we find three great Courts definitely
established: the Kings Bench, the Court of Common Pleas, and the
Exchequer. All of these administered the Common Law. The Exchequer
was, however, something more than a Court—it was also an administrative
1. See, further, under §3, post.

3
 4 EQUITY, TRUSTS, SPECIFIC RELIEF [CHAP. I

department of the Government with the Chancery as its secretarial office.

At the head of the Chancery stood the Chancellor, who was then not a
judge, but "the King's Secretary of State for all the Departments' Whatever
writing had to be done in the King's name was done under the Chancellor's
supervision. Thus, the writs whereby actions were begun in the courts of
law were issued from his office. The Chancellor was brought into a closer
contact with the administration of justice in another ray. Persons who could
not get relief in the Courts petitioned the King for redress, as a matter of
grace. These petitions were jxedto the Chancellor, and in course of
time they were direct to him.
II. in the 14th Century, the Chancery entertained petitions where the
petitioner has a moral right, which the common law Courts would not protect,
or were not competent to protect, due to the peculiar system of procedure
obtaining there. Thus, the Chancery undertook to enforce fiduciary obliga-
tions known as uses. By that time an ordinance was passed (1349), referring
all matters of grace to the Chancellor, and by the end of the 14th Century,
the Chancery became a permanent judicial tribunal having regular sittings.
Ill. In the 15th Century, uses became very popular and thus 'one great
field of substantive law fell into the hands of the Chancellor".
IV. Meanwhile, the Chancery had extended its jurisdiction considerably,
and its extent was popularly indicated by the words Fraud, Accident and
Breach of Confidence'. In the course of the 16th Century, equity developed
the rules by which it would administer justice :'irl the field thus assigned to
it. They are known as the rules of equity and good conscience'.
V. In the 17th Century, the Chancery had to struggle, for its life against
the Common Law Courts, until James I finally decided that the Chancery
could prevent men from going to Courts of Law, by injunction. From the
time of the Restoration, equity is recognised as a part of the law of the land.
VI. By the end of the 18th Century, equity became a definite system
and at last made its way into the textbooks. It was a century of great
Chancellors, with the last of whom, Lord Eldon, equity ceased to expand,
and the period of 'legislative interference' began.
,t'7'VII. At last came the Judicature Acts of 1873 and 1875 which abolished
the old Courts of Common Law and the Court of Chancery, and established
instead, a High Court of Justice, divided into five divisions. Since 1881 it
has only three divisions—the Chancery, the King's Bench, and Probate and
Admiralty Division. Each of the divisions has to administer both sets of
rules—of Law and Equity; and in matters where there is a conflict between
them, "the rules of equity shall prevail' (see §9, post).
To Sum up: Whatever may have been the origin of equity' as a
supplement to the laws of England, aimed at preventing hardship and
securing justice, it has now become a definite system of rules as exact
and binding as any other part of those laws.
 CHAP. 11 ORIGIN AND DEVELOPMENT 5

3. The nature ofEuity and the foundation of Equity Jurisdiction.

1. The history traced above shows clearly that Equity was essentially an
addendum to the Common Law. It provided a distinct set-of rules: no doubt,
but those were not meant to supersede the Common Law. As Malt/and remarks,
"Equity had come not to destroy the law, but to fulfil It."2
2. Historically, the jurisdiction of equity may be traced to the following:
(a) Inflexible procedure in Common Law;
(b) Inadequacy or remedy at Common Law;
(C) Absence of relief in certain cases at Common Law, owing to
its defective procedure.2
3. As Malt/and observes, "Equity is not a self-sufficient system."
Equity presupposed the existence of common law at every point. It
accepted the common law rule on any question that might arise, but
added that something more was necessary, either because the common
law rule wA inadequate, or because it caused hardship. There was no
inherent conflict between the doctrines of Equity and Law, and save for
the temporary conflict between them during the period of the Common-
wealth, their practical working has also been harmonious. A brief analysis
of some of the equitable doctrines will show that
"the relation between Law and Equity is not that between two
conflicting systems; it is the relation between code and supplement,
between text and gloss".
4. The dependence of Equity on common law was so evident that "if the
common law had been abolished, equity must have disappeared also, for at every
point it presupposed a great body of common law". Equity was not, indeed, a
2. At common law, there were a fixed number of forms of actions and a suitor could
expect relief only if he could come in within any of these forms. Now, every such action
started by a writ, i.e.. a written document issued in the name of the King. The writ was
framed with reference to the particular facts of the case and the different forms of actions.
If no writ could be framed to meet the facts of his case, the plaintiff could get no remedy.
We have seen that these vri1s were issued from tha chancery. The inadequacy of remedy
was sought lobe removed by passing the Statute of Westminster 1, 1285—which empowered
the Chancery to issue new writs in consimili case. But this Statute proved unsuccessful for
two reasons: (:) The Common Law Judges had the last word in deciding the validity of the
adopted writs; but they were conservative and jealous of innovations. They were guided by
the already accepted principies of common law and would quash a writ if contrary to these
principles. (ii) The progress of society and civilisation necessitated the recognition of new
rights and remedies for which a more elastic system was required. This led to the introduction
of a separate jurisdiction for Equity. Lord Tr/bat summed up the relation between law and
equity nicely in Dudley v. Dudley, (1705) 94 E.R. 118, thus—Now equity is no part of the
law, but a moral virtue, which qualifies, moderates and reforms the vigour, hardness and
edge of the law, and is a universal truth; it does also assist the law where it is defective
and weak in the constitution and defends the law from crafty evasions, delusions and new
subtleties, invented and contrived to evade and delude the common law, whereby such as
have undoubted right are made remeditoss; and this is the office of equity, to support and
protect the common law from shifts and crafty Contrivances against the justice of the law.
Equity, therefore, does not destroy the law, nor create it, but assists it.'
6 EQUrTY, TRUSTS, SPECIRC RELIEF ICHAP. I

system at all, it was rather a collection of additional rules. That is why Lord
Talbot said that 'Equity does not destroy the law, nor create it, but assists Itfl.2
In another context, Malt/and has observed—
"Equity ;;ittout Common Law would have been a castle in the air, an
impossibility."
(a) Common Law did not recognise a trust, and regarded the trustee
as the owner of the land. Equity did not say that the cestui que trust was the
owner of land,—it said that the trustee was the owner of the land, but added
that he was bound to hold the land for the benefit 01 the cestui quo trust.
(b) Sim i larly, the equitable remedies like Specific Performance or
Injunction did not destroy the Common Law remedy of damages, but were
either additional or alternative. As Malt/and says,
"We ought not to think of law and equity as two. rival systems":—
"No, we ought to think of Equity as supplementary law, a sort of
appendix added to our code."
5. Equity is, thus, a collection of appendices. While some chapters of
law have been copiously glossed by it, others are quite free from equitable
gloss. Thus, equity keeps clear of the province of the Law of Crimes, and
large portions of the Law of Torts as well, e.g.,—assault, battery, malicious
prosecution.
6. The spheres in which equity has supplemented the law may be
enumerated as follows:
(1) The ICW of properly has profited most. Equity enabled people to
make trusts and settlements of property, and facilitated transactions with
realty by the equitable doctrines about mortgages.
(ii) Next in importance has been its influence on the law of contract.
The equitable doctriies of undue influence, part performance, the rules about
time and penalties, and the equitable remedies of specific performance,
injunction, cancellation or rectification of agreements profoundly enriched
this branch of the law.
Of the acheivements of equity, Maitland gives this illuminating summary—
"Equity has added to our legal system, together with a number of
detached doctrines, one novel and fertile institution, namely, the trust;
and three novel and fertile remedies, namely, the decree for specific
performance, the injunction and the judicial administration of assets."
The contribution of Equity in the matter of remedies has been
highlighted by Snel!, in these words:
Equiiy supplemented the limited range of legal remedies by
IL

providing a wide range of new remedies."

*" 'These equitable remedies will be fully discussed in subsequent
Chapters on Specific Perlormance, Injunction, Receiver, Recissiofl, Rec-
 CHAP. I) ORIGIN AND DEVELOPMENT 7

tification. While the common law remedy was primarily confined to

damages, for breach of contract, Equity invented these novel remedies
by virtue of which the aggrieved party might obtain a performance of the
contract by the other side, or enjoin the other party from committing a
breach of the contract or to have the contract rectified according to the real
intention of the parties: all such reliefs were not available at common law.
These remedies were called 'equitable' since they were founded on
some equitable principles, e.g., Equity acts on the conscience of the
parties or in personam; the equitable remedies were disôretionary, i.e.,
would be awarded by the Court, having regard to the conduct of the
parties.
7. According to Malt/and, the bond which kept together these various
disconnMed appendices under the head of equity was the jurisdictional
and procedural bond—that these matters were within the cognizance of the
Courts of Equity and not within the cognizance of the Courts of Common Law.
The conclusions reached above may be further illustrated with reference
to the three assumptions on which the authority of Equity was based.
§ 4. The assumptions on which the authority of Equity was based.
A Court of Equity exercised its jurisdiction, on the foundation of 'three
assumptions,' as follows:
(I) That equity was a matter of grace. Equity in granting relief was
exercising the King's prerogative to give, when he thought fit, relief to his
people outside the ordinary powers of law. While, therefore, a 'plaintiff' in a
Court of Law could claim the relief to which he was by law entitled as a
matter of right, a Court of Equity might refuse to grant relief to a 'petitioner'
or 'applicant whenever the Court thought proper to do so. Thus 'equitable
relief was ex debito justitiae". Secondly, a Court of Equity could interfere
only in individual cases of hardship, for the King could not by prerogative
lay down general principles of justice differing from the law.
(II) That equity was a matter of conscience. The primary notion of Equity
in granting relief was to keep persons from doing anything which would soil
their conscience—a notion due to the fact that the ear'ier Chancellors were
all ecclesiastics, and also to the assumption that the Court of Equity was
acting as tte Kings conscience. (a) While, therefore, the common law
principle was compensation, the equitable principle was restitution. Equity
merely insisted that the wrongdoer should not retain any profit arising through
his interference with other's right which it was contrary to conscience he
should retain, whether that was more or less than the damage sustained
by the injured party. (b) While the rule of law was that no action lies until
there was an actual wrongful act or omission, equity would interfere to
prevent an unlawful act being done where such act, if completed, must injure
the plaintiff. It was on these principles that the remedies by injunction and
8 EQUITY, TRUSTS, SPECIFIC RELIEF [CHAP. I

specific performance were based. (C) Thirdly, Equity would, in granting relief,
take into consideration whether the person applying for equity had himself
acted conscientiously in the matter. It would enquire into the personal
conduct of the plaintiff, according to the maxims,—(I) He who comes to
equity must come with clean hands: (ii) He who seeks equity must do equity;
(ii,) Delay defeats equity.
(Ill) That equity was enforceable by process of contempt. While a Court
of Law could enforce its judgment by process of execution against the
defendant's property, originally the only mode of enforcing a decree of the
Court of Chancery was by a process of contempt against the defendant's
person. The defendant was directed by the Court to purge his conscience
by doing what is right, and if he did not obey the order of the Court, he was
committed to prison for contempt. Equity acts in personam. It was by virtue
of this maxim, as we shall see, that the Court of Chancery could grant relief
in respect of property situated outside the jurisdiction of the Court, which
the Courts of Common Law could not.3
§ 5. Equity and Natural Justice.
1. Natural justice means principles of fairness which follow from natural
law which are antecedent to society. Some of them have been adopted in
common law or incorporated in statutes and only a fraction of the whole are
rules of equity!
2. Snell observes that, in a popular sense, 'Equity is practically equivalent
to natural justice or morality; yet it would be a mistake to suppose that the
principles of equity as administered in the Courts . . . are co-extensive with the
principles of natural justice". This observation is justified by the following:
(t) Natural justice is a vague expression and its principles are not fixed,
and some of its contents have a moral sanction andcannot be enforced by
any Court at all.
(ii) In so far as the Court of Equity acted on a person's conscience (see
p. 7, ante), it sought to enforce the legally enforceable principles of natural
justice (p. 3, ante), but only where common law did not give relief in such
cases.
(iii) On the other hand, as Blackstone demonstrated, every injustice at
common law could riot be remeded by equity, because in exercising equity
jurisdiction, too, the Courts in England had acted according to certain
principles which had been historically evolved, and, later, these principles,
too, were crystallised.
(iv) Hence, it is not correct to say that common law did not apply the
principles of natural justice at all or that equity applied all the principles of
natural justice. The true view, as has already been shown, is to regard equity
a: For a fuller discussion of the present topic, read Chapter III on "The Maxims of
Equity'.
 ORIGIN AND DEVELOPMENT
9
CHAP. II

as an appendage to the common law, in certain spheres, such as trusts,

mortgages, equitable remedies, and that some of the principles enforced by
a Court of Equity in these spheres were shaped by the rules of natural
justice.
§ 5A. Equity jurisdiction in India.
Court for administering equity.
1. In India, there was never any separate
The greater part of the law to be applied by the Court has been codified.
But in the absence of specific law or usage in any matter,
the Court has to
act according to the principles of 'equity, justice and good conscience '.4
Every Court thus combines law and equity jurisdictions.
2. But all the rules of English equity are not applicable in India. The
expression 'equity and good conscience' has been interpreted to mean rules.
of English law (equity), so far as they are applicable to Indian society and
circumstances. Thus, many rules of English equity have either not been
followed in India or imported only in a modified form in view of the special
circumstances of this country.
For example—
(1) It is now well-established that in India there is no such thing as equitable
title. "The law of India, speaking broadly, knows nothing of the distinction
between legal and equitable property in the sense in which that was understood
when equity was administered by the Court of Chancery in England 5 .' Title to
immovable property can be transferred only in the manner provided for in the
Transfer of Property Act read with the Indian Registration Act.6
(2) The distinction betweenthe legal and equitable rights and interests does
Transfer of Property Act. Thus, the right
not exist since the passing of .
of redemption of a mortgagor is-not an equitable right in India, but a legal
right conferred by statute. The Indian mortgagor retains a legal interest
before and after the expiry of the date of payment, and a transferee from
him byway of sale or mortgage gets a legal interest For For the same reason,
there is no privily of estate or of contract between the mortgagee of a
leasehold and its lessor even though the former enters into possession, and
[(1819) 1 B. & B. 238] does not
the English rule in Williams v. Bosanquet
apply.8 Further, in India, the rights of redemption and subrogation are not
• equitable forms of reliCt to be given on such terms as the Court considers
the Transfer
equitable, but are rights conferred and defined by statute, viz.,
Bengal. Agra & Assam CivI Courts Act. 1887, also Watson v. Ramohand,
4. CI. s. 37(2), Born. 551 P.C.; Mehrbafl V.
(1890) 18 Cal. 10 P.C.; WàgIieIa v. Masluddifl, (1887) 11
Maithana, A.I.R. 1930 P.C. 142. 41 P.C.
5. Webb v. Macpherson, (1903) 8 C.W.N.
6. Probodh v. Dantmara iea Co. Ltd., (1940) 45 C.W.N. 132 P.C. (See Oh. XVIII.
post). C.W.N. 281 P.C. (See Ch. XIV, post).
7. Ramkinka( V. Satyacharafl, (1938) 43 (1940) 45 C.W.N. 644 P.0
8. Jajadamba Loan Co. V. Shibaprasad,
 10 EQUITY, TRUSTS. SPECIFIC RELIEF (CHAP. I

of Property Act, available only upon terms stated thereui. 9 Again, a mortgage
by deposit of title-deeds is as good a form of mortgage as any other, and
does not create a mere agreement giving rise to an equitable interest, as
in England.10
(3) By the law of India, there can be only one owner of a property.
When property is vested in a trustee, the owner of the property is the trustee
and the Indian beneficiary cannot be said to have an equitable ownership.
His right is, in a proper case, to call upon the trustee to convey to him [see
post]. For the same reason, it has been held that, in India, the cestui que
trust cannot maintain as owner a suit for possession against a trespasser,
the ownership being vested in the trustee.5
(4) Similarly, the doctrine of 'advancement' has been held to be
inapplicable as the nature of benami transactions is quite different from
conditions obtaining in England [see post].
(5) The English equitable doctrine of part performance, similarly, has
been adopted (now by statute) only in part in S. 53A of the Transfer of
Property Act in view of the nature and effect of the pre-existing statute law
as to transfer which is different from the English Statute of Frauds. Noi does
the doctrine in Walsh v. Lonsdale [(1882) 21 Ch. D. 243] apply [see post].
(6) Again, in India there is no room for the application of the English
equitable doctrine that 'a contract for sale of real property makes the
purchaser the owner in equity of the estate". S. 54 of the Transfer of Property
Act expressly enacts that a 'contract for the sale of immovable property
does not of itself create any interest in or charge on the property" [see post].
(7) The charge which the vendor has, for his unpaid purchase money
under s. 55(4)(b) of the Transfer of Property Act, differs in its origin and
nature from the vendors lien i n English Equity [see past].
(C) In England, in the absence of a statutory law of limitation, equitable
relief like specific performance is refused by a Court of Equity on the ground
of laches or delay. But, in India, mere delay is no ground for refusing specific
performance, for Art. 54 of the Limitation Act, 1963, provides a period of
limitation of three years (from the dale fixed for performance or, if no such
date is fixed from the date when the plaintiff has notice that performance
is refused).1
(9) The equitable presumptions of satisfaction and ademption are not
applicable to India, and under ss. 177-79 of the Indian Succession Act, 1925,
the gifts are construed according to the express words used in the will.
(10) Again, though in India the same Court administers both law and
equity and there is no distinction between legal and equitable rights as such,
yet the origin of the various rights and remedies as in England is not
overlooked and equitable defences are of no avail tj ..tatutory rights. 12 Thus,
9. Ramc1and v. Prab/,u (1942) 47 C.W.N. 1 P.C.
10. im perial Bank v. U. Rai, (1923) Rang. 637 P.C.
11. Satyanarayana v. Yollogi, A.I.R. 1965 S.C. 1405 (1409).
12. Ram Sicgh Y. Ramehand, (1923) 40 C.L.J. 276 (P.C.).
 CHAP. U ORIGIN AND DEVELOPMENT 11

the right to repayment of money paid under mistake or coercion is a statutory

right in India under s. 72 of the Indian Contract Act, and the right cannot
be defeated by an equitable defence.13
3. On the other hand, in enacting many statutes, the Indian Legislature
has substantially adopted the English rules of equity, and in interpreting 14 those
statutes, a reference to the English principles and cases becomes useful,
unless, of course, there are any Indian pronouncements to the contrary. The
Indian Trusts Act and the Specific Relief Act are instances on the point.
Thus, as regards the Specific Relief Act, Banerjee in his Tagore Law
Lectures observes, 'The Specific Relief Act is admittedly based on
doctrines of equity jurisprudence which were originally developed in
England. The guidance afforded by the decisions of the foreign Courts
in interpreting and applying the provisions of the Indian Act is, therefore,
of peculiarly valuable character.' And so did the Privy Council observe
in Ardeshir v. Flora Sassoon 14 -'Lt will be useful, in the interpretation of the
re!evnt sections, to have in mind what the English system on which the
Act is based was in its origin and in its fullness at the date of codification."
Again in matters where the Act is silent or the Act does not apply, the
English principles may be resorted to in so far as they are consonant
with the principles of 'justice, equity and good consicence'.15
But in matters which are dealt with by the Act, the provisions of the
Act will prevail in case of any divergence between the provisions of the
Act and the principles of English equity. Thus--
(a) When the title of the person agreeing to sell or lease is defective,
s.12 of the Specific Reiet Act, 1963, provides that only in one case will
specific performance with abatement or compensation be granted, viz.,
where the part of the agreement which must be left unperformed bears only
a small proportion to the whole in value. The complicated rules of English
law relating to the subject are thus avoided.
(b) The rule embodied in s. 12(3)(ii) of the Specific Relief Act, 1963,
also differs from the English rule. Where the deficiency is so serious that
the Court wit! not allow the vendor to claim specific performance, in India,
the purchaser will not be entitled to specific performance, in respect of the
property as is capable of being conveyed, unless he gives up his claim to
compensation for the deficiency.
(C) Since in this country, it is possible to have all the remedies for
breach of an agreement in one Court, s. 24 of the AI provides that if a suit,'
for specific performance is dismissed, no Suit for compensation for breact
of that agreement shall lie.
1'1 Konbaya La/ v. National Bark c( /r.dia, (1030) 40 C.L.J.1 (P.C.).
14. Ardvohi, v Flora Sas.won, A.I.R. 1028 P.C. 208.
15 Akshyali'ngam v. Avayarnba!a. A.I.R. 1933 Mad. 386; Kis/torochand v. &daJ.n
E.S.C., AIR. 1944 All. 66 (77); Namdo v. Narmadabai. A.I.R. 1953 S.C. 228; Murarilal V.
Dovkaran. AIR, 1365 S.C. 225; Ga;ehi/alv. Joti, ALP., 1953 SC. 1; ValCamav. Sjva(hanu,
A I.R. 1979 S.C. 1937 (paras. 29, 31k.
 CHAPTER II

EQUITY AND ITS RELATION TO LAW

§ 6. Blackstone's view of Equity Jurisprudence.

1. Blackstone in his Commentaries on the Law of England (writing in
1765) states that the so-called equity of the Court of Chancery was in reality
law and that the so-called law of the three old Courts was in a sense equity.
In other words, Blacksione's view is that Equity and Common Law are not
two opposing systems, and that there is little to distinguish them except
their historical origin and modes of procedure.
2. He shows this by examining the current views which drew a line
between them, setting one in opposition to the other:—
(1) It is said that 'it is the business of a Court of Equity to abate the
rigour of Common Law'. But equity never claimed such a general power,—
this being evident from the fact that it did not interfere with many Common
Law rules which involved great hardship, e.g.,-
(a) When the debtor devised away his real estate, the bond creditors
could not follow the estate in the hands of the devisee. (b) The heir was
not liable for the simple-contract debts of the deceased. (c) The father could
not immediately succeed to the real estate of the son.
(2) Secondly, it is said that 'a Court of Equity determines according to
the spirit of the rules and not according to the strictness of the letter'. But
in fact both equity and law equally profess to interpret statutes according
to the true intent of the legislature.
(3) Thirdly, it is said that 'fraud, accident and trust are the proper and
peculiar objects of a Court of Equity'. But frauds and accidents are equally
cognizable by Courts of Law, and though trusts are not recognised by them,
still they take notice of bailments, which are in the nature of trusts. [As to
bailment, Maitland differs. See post.]
(4) Lastly, it is said that 'a Court of Equity is not bound by precedents'.
But this holds good no more.1
1. It is no toner true to say that "the standard of equity Is as variable as the
measure of the Chancellor's fool'. The scope of precedents in equity was best explained
in Bond V. Hopkins (1 S & L. 428), thus "There are certain principles, on which Courts of
Equity act, which are very welt-settled. The cases which occur are various but they are
decided on fixed prin-ciples. The Courts of Equity have, in this respect, no more discretionary
power than the Courts of Common Law. They docidu new cases as they arise by the
principles on which former cases have been decided, and may thus enlarge the operaton
of those principles, but the principles are as fixed and certain as the principles on which
the Courts of Common Law proceed.
12
 CHAP. III RELATION TO LAW 13

3. Blackstone sums up—Both law and equity are now equally artificial
systems, founded on the same principles of justice and mode of their
proceedings: the one being originally derived from the feudal customs, the
other from the Roman formularies, introduced by the clerical Chancellors.
4. Maitland supports Blackstone's view by saying that though Black-
stone overrates the importance of Roman influence, we cannot, in general
terms distinguish the two systems except by a historical explanation. We
ought not to think of common law and equity as two rival systems. Equity
is not a single, self-sufficient system like Common Law, which it supplements.
It is a collection of appendices between which there is no close connection.
,_;K/ 3 6A. Story's classification of Equity Jurisdiction.
1. It has been customary to classify the jurisdiction of equity in relation
to that of law, after the scheme set up by Story,—that equity is (a) exclusive,
(b) concurrent, and (C) auxiliary.
(a) The exclusive jurisdiction comprised matters where there was no
relief at common law,—equitable rights were enforced by equitable
remedies, e.g., trusts. The Court of Chancery had a cognizance of such
matters exclusive of the Court of Law. In matters within the exclusive
jurisdiction, the nature and extent of the rights given depended excILiSively
on equitable principles, and they could be enforced only by equitable
remedies.2
(b) The concurrent jurisdiction comprised cases in which the common
law remedy was inadequate. Here legal rights were enforced by equitable
remedy, e.g., specific perlormance of contracts. In these cases, the suitor
had a choice between the remedies granted by the two Courts. But the
equitable remedies were granted only on proof of violation of legal rights.
The existence of the right and whether it has been infringed were ascertained
2. The importance of the distinction between the exclusive and other jurisdiction of
equity is illustrated by the House of Lords decision in Nocton v. Ashburton ( 1914) A.C. 932.
where a mortgagee sued his solicitor for fraud, alleging that the solicitor had by improper
advice induced him to release a part of his security, whereby the security had become
insufficient. Now, at common law, as explained in Derry v. Peek, a fraudulent intention of
the person making the representation must be proved in order to maintain the action; but
such fraudulent intention could not be proved in this case. But it was held that there had
been negligence, and a breach of duty imposed on the solicitor by the confidential relationship
in which he stood to the client. So, it was a fraud in equity, which was within the exclusive
jurisdiction of equity. Where one person who is under a fiduciary duly to take care makes
a misrepresentation to the person to whom he owes that duty, with the intention that that
person shall act on it, then whether he does so because he has a wicked mind or because
of more negligence he is guilty of fraud in equity, though not at common law; and so the
defendant was liable. When fraud is referred to in the wider sense used in the Chancery in
describing cases which are within its exclusive jurisdiction, it is a mistake to suppose that
an actual intention to cheat must always be proved. A man may misconceive the extent of
the obligation which a Court of Equity imposed on him. His fault is that he has violated,
however innocently because of his ignorance, an obligation which he must be taken by the
Court to have known, and his conduct has in that sense always been called fraudulent, even
in such a case.
 14 EQUITY, TRUSTS, SPECIFIC RELIEF [CHAP. II

upon legal principles, and then equitable principles were applied to ascertain
on what condition an equitable remedy would be granted. Within this sphere,
before an equitable remedy could be given, it had to be shown that the right
had been or was about to be violated in such a way as would compel a Court
of Law to grant the legal remedy, if the complainant had applied for it.3
(C) The auxiliary jurisdiction was where Common Law litigants required
the aid of equity in the assertion of legal rights. No cases were tried here.
Equity intervened merely to supply the defects of the legal process so as
to enable the Courts of Law to give effectively the legal remedies. Thus,
the plaintiff in an action at law went to the Chancery in order that he might
obtain discovery of the documents on which his opponent will rely.
2. According to Malt/and, such a classification is inaccurate in two
respects,—(,) firstly, it presupposes a logical Scheme; but equity does not
deal with such a single connected system that may be subjected to
classification. "Equity is a collection of appendices between which there
is no very close connection." (ii) Secondly, such classification is no longer
useful. It presupposes that there is one set of Courts administering law,
another set administering equity. But, as we have seen, the Judicature Acts
have abolished the independent system of Courts: and since then every
Division of the High Court is capable of administering what rules are
applicable to the case that is before it, whether they be rules of common
law or rules of equity. Thus, the auxiliary jurisdiction exists no more; all such
aid can be Obtained in the King's Bench Division itself. Again, though the
business assigned to the present Chancery Division is practically the same
as that 'ormerly done by the Court of Chancery in its exclusive jurisdiction,
it has been expressly provided by the Judicature Acts that each division
shall have jurisdiction of the other divisions in addition to its own.
3. It must not, however, be supposed that the distinction between legal
and equitable rights and remedies has also been abolished, for, "the fusion
of law and equity is merely in administration; the principles of equLty
remain as before". In the words of Snell, "the two streams have met, and
now run in the same channel, but their waters do not mix". Thus, in matters
coming within the old exclusive jurisdiction of Equity, the High Court decides
the nature and extent of the rights solely by equitable 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 rights
solely by legal principles and enforces them by equitable remedies Only where
the old Courts of Law would have granted legal remedies. The object of the
3. Thus, the right to ancient light' was a legal right which was enforced by the
equitable remedy of injunction. Now, at common law, an action for damages for interference
with such right could not be maintained for any interference which was not so grave as to
amount to a nuisance. Now, in Coils v. Home and Colonial Stores Ltd., ( 1904) A.C. 179, it
was held that as the obstruction complained of did not amount to a 'nuisance', the plaintiff
could not obtain an injunction in equity, as he could not recover damages at common law.
 CHAP. ll RELATION TO LAW 15

Act was neither to fuse nor to confuse the principLL, .,1ch govern equitable
rights and remedies, with those which govern legal rights and remedies.
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."4
The nature of the fusion was also nicely expressed by Jessel, M.R.,
in Salt v. Cooper [(1880)16 Ch. D. 544] thus—
'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 been sometimes inaccurately called the fusion of law and equity': but it was
not any fusion or anything of the kind; it was vesting in one tribunal the administration
of law and equity in every cause, action, or dispute which should come before the
tribunal. That was the meaning of the Act. Then as to that very small number of cases
in which there is an actual conflict, it was decided that the rules of equity should
prevail. That was to be the mode of administering the combined jurisdiction."
The fusion of Law and Equity—Effects of the Judicature Acts of
" 1873 and 1875.
(I) We have already seen ( p. 4, ante) that the Judicature Acts abolished
the separate Courts of Criminal Law and Equity and conferred upon one
and the same tribunal the jurisdiction which hitherto had been exercised
separately by them. Though the High Court was divided into divisions, and
certain particular business was assigned to each division, the distribution of
work between them isonly a matter of convenience, and may be changed
without an Act of Parliament.
(/,) Multiplicity of proceedings was avoided. Any 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 and the parties to a
suit may obtain in that suit all the remedies to which they are entitled, without
resorting to another Court. Again, a judgment of the High Court given in an
action in any division may be enforced by any legal or equitable mode of
execution which is in the circumstances appropriate.
(ii,) The Acts unified procedure. They introduced a whole code of civil
procedure, comprising the rules of the Supreme Court which assimilated the
Common Law and Equity procedures, combining the best features of both.
(!t) As to substantive law, the Judicature Act of 1873 made a few
changes by S. 25, e.g.,-
(1) No claim of a cestui quo trust against his trustee for any property
held on an express trust shall be barred by any statute of limitations.
(2) A legal assignment of debts and choses in action may be made
subject to certain requirements.
(3) The rules as to stipulations in contracts, which would not be held
by equity to be of the essence of the contracts, are to prevail in all cases.
4. Ind. Cooper & Co. v. Emmerson. (1887) 12 A.C. 300.
 16 EQUITY, TRUSTS, SPECIFIC RELIEF [CHAP. II

(v) 01 far greater moment, however, was the general rule laid down in
sub-section (11) of S. 25, viz., [hat—
Generally, in all matters not hereinbefore particularly mentioned in which there
is any confict 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.'
Does this section provide that there should no longer remain any
distinction between the principles of law and equity? It speaks of a conflict.
But we have shown that in its origin equity served as a supplement to
common law rather than as its rival (see p. 6, ante). Was the relation
altered by the Judicature Acts? Let us deal with it separately.
§ 8. The present relation of Law and Equity.
We need not repeat that before the Judicature Acts the relation was
normally not one of conflict (see pp. 5, 6, ante). Was there any conflict
after the Acts,—and how did S. 25(11) of the Act of 1873 deal with it?
Mail/and demonstrates this by referring to the cases decided since the
Act was passed. (i) The great majority of cases show that what was
apparently a conflict was no conflict at all; (ii) but there were a few rare
cases in which the joint operation of law and equity produced so capricious
a result that they might be regarded as at variance with each other.
Iris in regard to these few cases of divergent rules at law and in equity
that s. 25(11) of the Judicature Act Could have any operation, resulting in
the predominance of the rules in equity. That is why Snell says that "it has
not often been necessary to resort to this general enactment." As an instance
of such variance, Malt/and mentions the case of Walsh v. Lonsda/e, 5 relating
to 'equitable lease', which may be of interest in India:
By a written agreement L agreed to let to W cotton mill for 7 years at a rent
which was to be payable in advance if demanded. W entered and occupied the
mill, and for some time paid the rent, but not in advance. Then L demanded a
year's rent in advance, and this demand not being complied with, he distrained.
W then brought this action against L claiming damages for an unlawful distraint.5
This was a mere agreement for a lease.
(I) Before the Judicature Acts, the position of the parties in law and
equity would be this:
(a) At law, an agreement for lease did not operte as a lease. But the
fact of paying rent showed that Wwas holding the land of L as tenant from
year to year. Therefore, L had no power to distrain for rent in advance from
a tenant from year to year.
(b) Eguity would enforce specific performance of the agreement for
lease, and would compel L to perform his contract by accepting a Tease in
accordance with the agreement.
(II) It was held that, since the Judicature Act had effected a fusion
between the rules of equity and law, a person holding land under. an
5. Walsh v. Lo,7sdale, (1882) 21 Ch D. 9 (14).
CHAP. III RELATION rro LAW 17

agreement of lease of which specific performance would be granted, held

under the same terms as if a valid lease had been made according to law.
The judgment is instructive—"There are not two estates as there were
formerly, one estate at common law, by reason of the payment of reit from
year to year, and one estate in equity under the agreement. There is only
one Court, and the rules of equity prevail in it The tenant holds under an
agreement for a lease. He holds, therefore, under the same terms in equity
as if a lease had been granted, it being given by specific performance. That
being so, he cannot complain of the exercise by the landlord of the same
rights as the landlord would have had if a lease had, been granted, e.g.. the
right of distress, merely because the parchment has not been signed ad
sealed."5 In short, if A agrees to let land to B on lease, and B goes into
possession, and the agreement is one of which specific performance would
be granted, A and B have the same rights as between themselves and are
subject to the same liabilities, as if a lease under seal had been already
made on the terms of the agreement.
This decision seems to imply that since the Judicature Act an agreement
for a lease is in all respects as good as a lease. But that this is not so
would appear from the following limitations of the Rule in Walsh v.
Lonsdale, as explained in later cases:
The Judicature Act has not abolished the difference between a lease
and an agreement for a lease. An equitable right is not equivalent to a
legal right. An agreement for a lease is not enforceable against a purchaser
for value without notice.6
(a) The equitable right does not affect the rights of third parties, though
as between the contracting parties, an agreement for a lease may be as good
as a lease, just as an agreement for sale of land may serve as a completed
sale as between the contracting parties; and (b) the rule applies only where
there is a contract to transfer a legal title, and an act has to be justified or 7,8 an
action maintained by force of the legal title to which such contract relates.
It is thus clear that the net effect of the Judicature Acts is not to
create two courts—a court of law and a court of equity. 9 " It is now one
Court which is a Court of complete jurisdiction, legal and equitable, and,
in case of any possible conflict, the rules of equity will prevail in it.5
At the same time, there is no fusion of the principles (Snell) adhered to
by the two systems of law and equity; though the same Court otters a
complete decision of the dispute before it, in granting equitable relief, such
as injunction, the Court has to apply the peculiar characteristics of that
remedy in equity, while in granting damages, it must apply the rules of
common law—in the absence of any statutory provisions to the contrary.
6. Swain v. Ayres, (1888) 21 O.B.D. 289.
7. Manchester Brewery V. Coombes, (1901) 2 Ch. 608.
8. As to the applicability of the rule in Walsh v. Lonsdale in India, see under Ch Ill,
maxim (VIII), post; also Ch. XVI, post.
9. Pugh v. Heath, (1882) 7 App. Cas. 235 (237).
 CHAPTER III

THE MAXIMS OF EQUITY

The maxims.
The maxims of equity embody the general principles on which the
Court Of Chancery exercised its jurisdiction. These originated from the
three fundamental assumptions already referred to (pp. 7-8, ante). As will
be evident from the following pages, one or other of these maxims
underlies every doctrine of equity.
The maxims are
I. Equity will not suffer a wrong to be without a remedy.
Il. Equity follows the law.
III. He who seeks equity must do equity.
IV. He who comes to equity must come with clean hands.
V. Delay defeats equity.
VI. Equality is equity.
VII. Equity looks to the intent rather than to the form.
VIII. Equity looks on that as done which ought to have been done.
IX. Equity imputes an intention to fulfil obligation.
X. Equity acts in personam.
XI. Where the equities are equal, the first in time shall prevail.
XII. Where there is equal equity, the law shall prevail.
(I) Equity will not suffer a wrong to be without a remedy (Ubijus
fbi remedium).
The idea expressed in this maxim—that no wrong should be allowed
to go unredressed if it is capable of being remedied by Courts of
Justice—really underlies the whole jurisdiction of equity. Inasmuch as the
procedure at Common Law was highly technical and artificial, it would
sometimes happen that a person having a legal right could not yet enforce
it or redress its infringement in the Common Law Courts. The Court of
Chancery came into being with a view to aid the enforcement of such
rights (pp. 3-5, ante). It must not, however, be supposed that every moral
wrong was redressed by the Court of Chancer . The maxim must be
taken as referring to rights which are capable o - eing judicially enforced,
but were not enforced at Common Law owing to some technical defect.

18
 CHAP. 1111 MAXIMS OF EQUITY 19

Again, equity only interfered where there was no relief, or no adequate

relief at common law. Thuc,-
(i) It was on this maxim that equity interfered to enforce uses and
trusts. Where A conveyed land to B, to hold to the use of C (before the
Statutes of Uses), C had no remedy at law if B claimed to keep the benefit
of the land to himself. Equity interfered in favour of C because such an
abuse of confidence was a wrong,--capable of being judicially redressed.
(ii) Again, if a successful plaintiff could not have legal execution against
the property of the judgment-debtor because his interest in the property was
equitable only, the Court of Chancery gave equitable relief in the nature
of execution by (a) the appointment of a receiver, supplemented, if
necessary, by (b) an injunction restraining the debtor from dealing with the
property. [Cf. 0. 39-40, C.P. Code].
(iii) Snell traces to this maxim the auxiliary jurisdiction of equity—
where equity lends its aid for the production of evidence which might be
required in an action at law, but which could not be produced because of
its defective machinery. Such equitable aid was by means of interrogatories,
discovery, inspection and the like. [CI. 0. 11-13, C.P. Code].
(II) Equity follows the law (Aequitas sequitur legem).
(A) England.

This maxim had two applications according as the subject-matter was a

legal right or estate, or, an equitable interest—the creation of equity itself:
(i) As regards legal estates, rights and interests,—equity is strictly
bound by the rules of law.
The Court of Chancery never claimed to override the Courts of Common
Law. As Story explains, "where a rule either of the common or the statute
law, is direct, and governs the case with all its circumstances, or the
particular point, a Court Qf Equity is as much bound by it as a Court of
Law, and can as little justify a departure from it". Thus, where a period
of limitation is prescribed by a statute, a Court of Equity cannot entertain
a suit after the expiry of that period, notwithstanding any hardship—unless
the statute of limitation provides for an extension of time in such
circumstances.
But though equity does not interfere with a man's legal rights, it does
not allow an unconscientious use to be made of legal rights. For, 'Equity
acts on the conscience".
As we shall see, the doctrines of notice and trust are founded on this maxim.
(ii) As regards equitable rights and interests—equity, though not,
strictly speaking, bound by the rules of law, yet acts on analogy thereto
whenever an analogy exists. Lord Hardwicke observed in Hopkins v.
Hopkins, [(1739) 1 Atk. 581],—'lt is the maxim of this Court that trust estates,
20 EQUITY, TRUSTS, SPECIFIC RELIEF [CHAP. III

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." Thus,—
(a) As regards the quantity of interest, there may be the same estates
in equity as at law. Thus, in England, prior to the Law of Property Act, 1925,
the same interests were possible at law as well as in equity, e.g., fee simple,
fee tail.
(b) And these equitable estates have the same incidents as if they were
legal. Thus, as regards deaths prior to 1926, the rules of descent, such as
primogeniture, applied to equitable interests equally as to legal estates.
Again, as regards instruments coming into operation before 1926, rules of
construction, such as the 7 i/c in Shelleys case (now abolished by the L.P.A.,
1925) applied to equitable estates. But though it acted upon analogy with
legal rules, the rule in Shelley's case has never been applied to executory
trusts where its application would defeat the intention of the settlor.
(C) Again, in the case of executed as distinguished from executory
documents, the same words of limitation have been required to convey an
equitable interest in fee simple, as if it were a legal estate. (But now under
the L.P.A., a conveyance of freehold land to a person without words of
limitation will pass the whole interest which the grantor had power to convey
unless a contrary intention appears.) -
(c) As to limitation for actions,—see "Delay defeats equity'.
(B) India.
It has already been pointed out that the distinction between legal and
equitable interests does not exist in India, (see p. 9, ante). 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 considerations
will not be allowed to override the provisions of the statute. Thus,--
(i) In all actions, the Court is to apply the law of limitation
enacted in
the Indian Limitation Act, 1963, and the Judge cannot, on equitable grounds,
"enlarge the time allowed by the law, postpone its operations or introduce
exceptions not recognised by it'1.
In a recent case, our Supreme Court has said—
Rules of equity have no application where there are definite statutory provisions
specifying the grounds on the basis of which alone the stoppage or suspension of
running of time can arise. While the Courts are necessarily astute in checkmating fraud,
it should be equally borne in mind that statutes of limitation are statutes of repose"2.
There cannot be any 'equitable' construction of a statute of limitation.
As the Privy Council observed—
'The fixation of periods of limitation must always be to some extent arbitrary,
1. Saraf Kaminiv. Nagendra, (1925) 29 C.W.N. 973.
2. Yswant v. Walcha,d. (1950) S.C.R. 852 (868).
 CHAP. Ill] MAXIMS OF EQUITY 21

and may frequently result in hardship. But in construing such provisions equitable
considerations are out of place, and the Strict grammatical meaning of the words
is the only safe guide.3
Very little reflection is necessary to show that great hardships may occasionally
be caused by statutes of limitation in cases of poverty, distress and ignorance of
rights; yet the statutory rules must be enforced according to their ordinary meaning
in these and in other like cases."4
The only apparent exception to the above rule is to be found in the
principle "Act of Court hurts no person". This means that where the suitor
himself is not negligent, but delay has been caused by oversight or
negligence of the Court itself or its officers, the suitor should not suffer,
by the strict application of the law of limitation. In such cases, relief is
granted to undo the mischief due to the act of the Court itself. Hence, it
is not really an exception to the principle that limitation is not to be
extended on equitable considerations.
(ii) Just as the Court cannot enlarge the period of limitation prescribed
by the law, it cannot also shorten that period, on equitable considerations,
such as laches (on this point, see under 'Delay defeats equity', .posT).
(iii) The law of registration cannot be overridden by applying an equitable
doctrine, such as part performance, 5 nor can the formalities laid down by the law
of transfer6 be overridden by any such doctrine. As the Privy Council observed—
'Nor can equity override a statute and confer upon a person a right which the
statute enacts and shall be conferred only by a registered instrument.5
(iv) On the same principle, taxation being the creature Of a statute, there
is no equity about a tax. 7 If a particular income is not taxable under the
Income Tax Act, it cannot be taxed on the basis of any equitable doctrine. On
the other hand, if a person comes within the letter of the law, he must be taxed,
however great the hardship may appear to the judicial mind to be.8
He who seeks equity must do equity.
(A) England.
This maxim means that equitable relief, which is discretionary by nature,
will be granted to the plaintiff Only upon condition that he gives the
defendant any corresponding rights that the defendant may be entitled
to, in respect of the transaction in whcih relief is sought. In other words,
while a Court of Law would give relief to the plaintiff as soon as a legal
injury is proved, regardless of any corresponding right to relief of the
other party, leaving that to be the subject-matter of a separate suit, a
3. Nagendrapath v. Suresh, A.I.R. 1932 P.C. 165.
4. Luchmee v. Ranject, 20 W.R. 375 P.C.
5. Ariff V. Jadunath, (1931)31 C.W.N. 550 P.C.
6. Probodh v. Dantmara Tea Co., (1949) 45 C.W.N. 132 P.C.
7. Commr. of LT. v. Firm Muar, A.I.R. 1965 S.C. 1216 (para. 13).
8. C.!. T. V. Motor General Stores, A. 1968 S. C. 200 (para. 6); Bank of Chettinad
V. C.!.T., A.I.R. 1940 P.C. 183.
22 EQUITY, TRUSTS, SPECIFIC RELIEF [CHAP. III

Court of Equity would 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 rule is illustrated by—
(a) The conditions upon which equitable remedies are granted by a
Court of Equity:
One who seeks to have his contract rectified, or cancelled, on the
ground that he has been the victim of a mistake, fraud or sharp practice,
must not only show that his dealings throughout the transaction have
been s forward in every respect, but he will get the relief only on
terms of doing equity to the other party, (e.g., by compensation to the
other party), which justice may require. Thus, in setting aside uncon-
scionable bargains, the Court would see that the money borrowed is
repaid with fair interest (see Ch. XVI, post). The principle is—
"No man can at once treat the contract as avoided by him, so as to resume
the property which he parted with under it, and at the same time keep the money
or other advantage which he has obtained under it." (dough v. I.& N. W.R.. 1871
7 Ex. 26).
(b) The doctrine of mutuality in specific performance. Equity will not
decree specific performance of a contract at the suit of one party, unless it
will decree specific performance at the suit of the other party as well.
(c) The maxim is also illustrated generally in the doctrines of election
and mortgage. Thus, equity would allow the rngrtcia qor to redeem the
property even after expiry of the contractual period, but only on conditions
which are fair to the mortgagee.
(c) This equity also underlies the rule which enjoins 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 a
person entitled in equity. "Where a purchaser for value is evicted in equity,
under a prior title, he will be credited with all money expended by him in
necessary repairs or permanent improvements (except improvements made
after he had discovered the defect of title)" (Dart).
(e) Another application of the principle is
'A constructive trust may arise where a person, who is only a part owner,
acting bona fide,—permanently benefits an estate by repairs or improvements, for
a lien or trust may arise in his favour in respect of the sum he has expended in
such -repairs or improvements.'
When a person in possession of property has, under a 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 [Halsbury, 2nd Ed., Vol XIII, p. 86.]
9. Lake v. Gibson, (1729) 1 Eq. Ca. 294.
 CHAP. 1111 MAXIMS OF EQUITY 23

(0 It also underlies the equitable doctrine of mortgage by deposit of

title-deeds. If a man pledges his title-deeds as a security for a loan, he
must pay the money 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. 10
(B) India.
1. In India, the principle of restitution or compensation as a condition
for equitable relief has been embodied in ss. 30 and 33 at the Specific
Relief Act, 1963 and ss. 19A and 64 of the Contract Act.
(i) S. 19A of the Contract Act says--
"1 9A. When consent to an agreement is caused by undue influence, the
agreement is a contract voidabf6 at the option of the party whose consent was
I so 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 to the Court may seem just.
Illustration
A, a moneylender, advances Rs. 100 to B, an agriculturist, and, by undue
influence, induces B to execute a bond for Rs. 200 with interest at 6 per cent per
month. The Cowl may set the bond asido, ordering B to repay the As. 100 with
such interest as may seem just."
The illustration explains the section. It means that when a party seeks
to set aside a contract on the ground of undue influence, the Court may
require that party to restore to the other party the benefit that the former
has received under the contract, or compensate him.
(ii) S. 64 of the Contract Act provides—
"The party rescinding a voidable contract shalt, if he has received an 5enef it
thereunder from another party to such contract, restore such benefit, so far as
may be, to the person from whom it was received."
This section differs from s. 19A in the following respects: (a) While S. 19A
is confined to the case of 'undue influence', s. 64 is comprehensive
enough to include not only undue influence, but also other grounds upon
which a contract becomes voidable, such as coercion, fraud, misrepresen-
tation as well as the cases mentioned in ss. 39, 53 and 55. (b) While S. 19A
uses the word 'may', S. 64 uses the word 'shall'. Hence, where the plaintiff
who seeks to rescind a contract on the ground of undue influenW has
received some benefit under the contract, the Court must direct him to restore
the benefit and to this extent s. 19A is to be read subject to s. 64.
Since the obligation to restore the benefit is absolute under s. 64,
where a contract is rescinded under s. 39 (because the defendant has
10. Russel v. Russel, (1783) 1 Bro. C.C. 269.
24 EQUITY, TRUSTS, SPECIFIC RELIEF [CHAP. III

refused to perform or disabled himself from performing), the plaintiff has

to restore the benefit even though he is entitled to obtain damages from
the defendant for breach of the contract."
(iii) S. 30 of the Specific Relief Act, 1963. says—
'30. On adjudging the rescission of a contract, the Court may require the party
to whom such relief is granted to restore, so far as may be, any benefit which
he may have received from the other party and to make any compensation to the
other which justice may roquire.
S. 27 of the Specific Relief Act, 1963, enumerates the conditions upon
which rescission of a contract is available. One of these is that the contract
is voidable. So far s. 30 is on common ground with S. 64.
(iv) S. 33 of the Specific Relief Act, 1963, says—
"33. On adjudging the cancellation of an instrument, the Court may require the
party to whom such relief is granted to restore, sofar as may be, any benefit which
he may have received from the other party and to make any compensation to the
other which justice may require."
S. 33 is wider than s. 30 of the Specific Relief Act inasmuch as (a)
it includes not only voidable but also void instruments; (b) it is not confined
to contracts but relates to all written instruments (vide S. 39).
The following principles apply to the equity of restoration under s. 33:
(a) The relief is discretionary with the Court but the discretion is very
wide. The Court is competent to require the party to make 'any compensation
which justice may require. Whether compensation should be awarded at all
or what should be the measure of compensation must depend on the special
circumstances of each case.
(b No compensation is payable where the contract is without considera-
tion.1
(C) The discretion conferred upon the Court by sec. 41 should be so
int'rpreted and exercised as only to impose upon a plaintiff seeking relief
by way of cancellation of an instrument such conditions as the law would
impose upon him if the position of the parties were reversed and he were
the defendant in a suit brought to enforce the instrument according to its
terms. 13 'Justice of the case' requires that the parties should be restored to
the position which they occupied at the time the contract was entered into.
Upon the cancellation of instruments of hypothecation and sale on proof of
fraud and collusion between the grantee, who had advanced money, and the
manager of the grantor's estate, the grantor having been unduly influenced in the
transaction, it was held that the condition of cancellation should be not the
repayment of all money received by the manager, but only of sums shown to have
tt Muralidhar v. International Film Co., A.I.R. 1943 P.C. 34.
12, Ram Setup v. Brij Mohan, A.I.R. 1038 Oudh. 14.
13. Gaya Prasad V. SarIaraz, 19 I.C. 972.
 CHAP. III MAXIMS OF EQUITY 25

been paid to the grantor personally and of such sums received by the manager
as he would have been justified in borrowing in the course of a prudent management
of the estate.14
2. The principle underlying S. 33 of the Specific Relief Act has been
applied to cancellation of contracts on the ground of minority, which renders
the contract void.
(i) Though a contract with a minor is void, when a person purchases
property from a minor without knowledge of the executant's minority, the
sale can be rescinded on the ground of the executant's minority only on
condition that the minor refunds to the purchaser the amount of consideration
received from him. 15 Though a minor is not personally liable to repay a loan,
where he induces a person to enter into a contract with him on a fraudulent
representation that he is a major, then unless the other party was himself
aware of the fact of minority, the minor can have the contract set aside only
on restoring the benefit he has received from the contract, e.g., on condition
of refund of purchase money in the case of sale. 16-17
(ii) But the Court would refuse to exercise its discretionary power under
s. 41 where the defendant had advanced money to the minor with full
knoiedge of his infancy. 18
A mortagagor employing an attorney, who also acts for the mortgagee in a
mortgage transaction, must be taken to have notice of all the facts brought to the
knowledge of the attorney and therefore where the Court rescinded the contract
of mortgage on the ground of the mortgagor's infancy and found that the attorney
had notice of the infancy, or was put upon inquiry as to it, it was held that the
mortgagor was not entitled to compensation under the provisions of the S.R. Act.18
3. But this equity is not confined to cases governed by the Contract
Act or the Specific Relief Act, but is one of general application. Thus, it has
been applied in cases under the Hindu Law, when an alienation by a widow
is set aside at the instance of a reversioner on the ground of legal necessity.
It the alienation was justified by necessity and the transferee acted in good
faith and after the enquiry as to its existence, the alienation would be upheld
in toto, even though a part of the consideration money is not eventually
applied for the purposes of necessity; no question of application of the
equitable principle arises in such a case. 19 It, on the other hand, there was
no necessity for the alienation or the alienee knew that the money was not
required, in whole or in part, for purposes of necessity, but a portion of the
money was in fact spent for such purposes, the alienation would be set
aside only on equitable terms, viz., on condition of repayment of the sum
14. Ajit Singh v. Bojai Bahadur, ii Cal. 61 P.C.
15, Syedui V. ArilI, (1916) 21 C.W.N. 257 P.C.
16. Harnath V. Indar, 45 All. 179 P.C.
17. Sad/quo v. Jai K/shore. (1928) 32 C.W.N. 874 P.C.
18. Mohori B/bee v. D/7armodas, 30 Cal. 639 P.C.
19. Surajv. Chain Siikh, A. 1927 P.C. 257; Krish,n v. Nathu, (1927)49 All. 149 (P.C.).
26 EQUITY, TRUSTS, SPECIFIC RELIEF [CHAP. III

actually spent for purposes of necessity, with reasonable interest. 20 But in

adjusting the equities between the parties, the Court cannot make a new
bargain between the parties and uphold the alienation of a proportionate
part of the property; the alienation must be set aside in Iota but on term of
repayment of such part of the consideration money as was justified.21
The above principles have been applied in setting aside alienation by
other limited owners such as the manager of a Hindu joint family, 21 Sevait
of a Deity, 22 the proprietor of an impartible estate.20
4. The principle of compensation for improvements is embodied in
s. 51 of the Transfer of Property Act which says-
51. When the transferee of immovable property makes any improvement on
the property, believing in good faith that he is absolutely entitled thereto, and he
is subsequently evicted therefrom by any person having a better title, the transferee
has a right to require the person causing the eviction either to have the value of
the improvement estimated and paid or secured to the transferee, or to sell his
interest in the property to the transferee at the then market value thereof, irrespective
of the value of such improvement ...........
It embodies the principle enunciated in Lake v. Gibson, which has been
stated at p. 22, ante. The conditions for application of this section are—
(a) The person entitled to the benefit of this section must be a transferee.
A trespasser or a stranger building upon a land, knowing it to be the land
of another, is not entitled to any equity, and the true owner can recover the
land together with all improvements made by the trespasser.23
(b) The transferee must, while making the improvement, believe himself
to be absolutely entitled to the land.
(c) Such belief must be in 'good faith'.
Hence, a lessee or a tenant or a mortgagee is not entitled to the
benefit of this section, because these persons cannot possibly believe in
good faith that the land belongs to them absolutely.
(c) The transferee must be subsequently evicted by a person having
'better title'.
If all the above conditions are satisfied, the evictor is put to his option
to choose between two alternatives-
(i) either, to pay the value of the improvements to the 'transferee',
(ii) or, to sell his interest to the 'transferee', at its the then market value,
irrespective of the value of such improvement.
(IV) He who comes into equity must come with clean hands.
1. When the plaintiff's claim is tainted with some illegality or fraud, in
20. Nagappa v. Brahadambal, ( 1935) 39 C.W.N. 709 (P.C.).
21. Ramsundar v. Lachmi. (1929) 33 C.W.N. 699 (P.C.).
22. lswar Lakshi Durga V. Surendra. (1941) 45 C.W.N. 665.
23. Val/abhdas v, Development 0/ficor. (1929) 53 Born. 589 (P.C.).
 28 EQUITY, TRUSTS, SPECIFIC RELIEF [CHAP. Ill

to allow a claim to be asserted after an undue lapse of time.- In the words

of Lord Camden in Smith v. Clay, [(1767) 3 Bro. C.C. 640],
"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 those are wanting the Court is passive and does nothing."
As Strahan observes—
The doctrine of lachos in a 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 tarily be regarded as equivalent
to a waiver of it, or where by his conduct or neglect he has, though perhaps not
waiving that remedy, yet put the other party in a situation in which it would not
be reasonable to place him it the remedy were afterwards to be asserted, in either
of these cases lapse of time and delay are most material. Thus, for example,
where a purchaser seeks to set aside or rescind a contract induced by fraud, he
must apply for relief with reasonable diligence, and where owing to delay on his
part other parties have acquired rights or the property has deteriorated in value
or changed in condition, the Court will refuse rescission."
3. (a) This maxim, however, has no application to cases to which the
Statutes of Limitation apply expressly or by analogy. In these cases, equity
follows the law and allows the same time for enforcing the right, whether
legal or equitable, as a Court of Law would, and delay short of the statutory
period is no bar to a claim, whether legal or equitable.
(b) But where the relief sought is purely equitable and there is no
alternative or corresponding legal remedy, the Statutes of Limitation are not
applicable even by analogy. In these cases, equity will refuse Via equitable
remedy if the plaintiff has been guilty of unreasonable delay in applying for
it. Such unreasonable delay is technically called laches.
4. Delay wi!l be fatal to a claim for equitable relief, only (i) if it has
resulted in the destruction or loss of evidence by which the claim might
have been rebutted, or (i) if it is evidence of an agreement by the plaintiff
to abandon or release his right, or (iii) it 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 circumstance,
delay will be immaterial. 25
5. 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
a satisfactory explanation of delay [Allcard v. Skinner, ( 1887) 36 Ch. D. 145.]
II. Laches and Acquiescence.
1. Lachesis thus an equitable defence which bars an equitable remedy.
Acquiescence is a similar equitable defence which is sometimes treated as
- 25. Black v. Gale, (1886) 32 Ch. 58.
CHAP. III] MAXIMS OF EQUITY 1 29

identical with laches but is in fact quite distinct from the latter both as to its
meaning and effect.
"When a Court of Equity is asked to enforce a covenant by decreeing specific
performance or granting an injunction, in other words, when equitable as distinguished
from legal relief is sought, equitable as distinguished from legal defences may have
to be considered. The conduct of the plaintiff may disentitle him from relief; his
acquiescence in what he complains of, or his delay in seeking relief, may of itself be
sufficient to preclude him from obtaining it." (Knight v. Simmonds, (1896) 2 Ch. D. 297).
In the words of Green V.C. 26 :-
'The defence of laches and acquiescence are cognate but not correlative; they
both sprang from the cardinal rule that 'he who seeks equity, must do equity'.
Acquiescence, however, properly speaking, relates to inaction during the perfor-
mance of act. Laches relates to delay after the act is done."
2. The distinction between laches and acquiescence may further
be explained as follows:-
Laches is merely passive while acquiescence almost implies active
consent. Laches means that a plaintiff is bound to prosecute his claim
without undue delay. But the defence of laches is only allowed where there
is no statutory bar. When there is a statute of limitation, the plaintiff is entitled
to the full statutory period before his claim becomes unenforceable.
But acquiescence operates only by way of estoppel. It is quiescence
in such circumstances that assent may reasonably be inferred. Acquies-
cence depends on knowledge, capacity and freedom. Lapse of time or
statutory limitation is of no importance. The plaintiff is estopped immedi-
ately by his conduct. A person does not acquiesce in a wrong by merely
delaying to enforce his right, but if he lies by with full knowledge of his
rights, 2 " and tacitly allows conduct which is inconsistent with them, and
thereby induces another to incur expense, or alter his condition, or leads
innocent parties to gain interests which would be prejudiced by the
subsequent e.iforcement of his right, he will be precluded from questioning
in equity acts which he himself has authorised by his conduct.
"If a party having a right stands by and sees another dealing with the property
in a manner inconsistent with that right, and makes no objection white the act is
in progress, he cannot afterwards complain. That is the proper sense of the word
'acquiescence'." Duke of Loedsv. Earl of Amherst. (1846) 78 R.R. 47]
It is to be remembered, however, that if the person doing the act
himself knew that he was doing a wrong, the defence of acquiescence
will not be available against the rightful owner.28

26. Hall v. Otter, 52 Eq. 522.

27. There is no acquiescence where the party is under a mistake as to the true legal
position (Kochuni V. Kuttanunni, A.I.R. 1948 P.C. 47).
28. Smith v. Smith, (1875) L.A. 20 Eq. 500.
30 EQUITY, TRUSTS, SPECIFIC RELIEF ICHAP. III

(B) India
1. Pleas of laches and acquiescence are frequently, and rather vaguely,
taken in Indian pleadings. But as the law of limitation is in this country
directly applicable to all kinds of actions and suits, simple laches or delay
for any length of time, short of the statutory period, will not be an absolute
bar to a plaintiff's suit. (see pp. 19-20, ante). But-
(,) A considerable delay, if unexplained, may sometimes raise a
presumption against the existence of the right which the plaintiff seeks to
enforce, and induce the Court to look with very great jealousy at the evidence
produced in support of it [Ameerunissav. Ashrufunessa, 17 W.R. 259 P.C.].
(ii) Again, the policy of the law being to secure quiet possession to
people who are in apparent lawful holding of an estate, lapse of a long time,
coupled with the absence of evidence as to the circumstances in which the
possession commenced, leads to a presumption that it originated in a lawful
title [Magniram V. Kasturbhai, (1921) 46 Bom. 481 P.C.]. Thus, where the
validity of a permanent lease or transfer made by a limited owner (such as
a sevait) comes into question after a long time since the grant, so that it is
not possible to ascertain-the circumstances in which it was made, the Court
should assume that the grant was made for necessity so as to be valid
[Gaurishankarv. Jiwan, (1927) 32 C.W.N. 257 P.C.]. 'In such circumstances,
presumptions are permissible to fill in the details which have been obliterated
by time" [Venkata v. Rani Saheba, (1919) 43 Mad. 341 (345) P.C.].
(iii) Such laches may also be a ground for refusing a relief which the
Court has a discretion to grant or refuse, e.g., costs [Bangachandra v. Jagat,
(1916) 21 C.W.N. 225 P.C.]. But it would not apply to suits for specific
performance or for recission of contracts which are equitable reliefs in
England, but are statutory in India.
2. The scope of acquiescence is larger. It is expressly recognised in
cls. (h) and (j) of s. 56 of the Specific Relief Act. Under this section, injunction
cannot be granted—
(a) to prevent a continuing breach in which the applicant has acquiesced;
(b) when the conduct of the applicant or his agents has been such as to
disentitle him to the assistance of the Court.
3. Apart from these statutory provisions, "where there is more than
mere laches, where there is conduct or language inducing a reasonable
belief that a right is foregone, the party who acts upon the belief so induced,
and whose position is altered by this belief, is entitled in this country, as in
other countries, to plead acquiescence and the plea, if sufficiently proved,
ought to be held a good answer to an action, although the plaintiff may have
brought his suit within the period prescribed by the law of limitation".. 29
4. The doctrine of equitable estoppel as enunciated in the case of
29. Uda Bcgum V. Irnarnuddin, (1879) 1 All. 82.
CHAP. ID ) MAXIMS OF EQUITY 31

Beniram v. KundanlaP 0 is an application of the principle of acquiescence

[see under Ch. XVII, post].
(VI) Equality is equity. (Aequalitus est quasi equitas).
(A) England.
"Equity delighteth in equality." This may be illustrated as follows:
1. 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 (notwithstanding the legal estate being vested in the survivor).
In other words, equity applied the rule of tenancy-in-common and not
of joint tenancy in case of-
(i) Joint purchases: Where the money has been advanced in unequal
shares, as appears from the deed. But, if the purchase money has been
advanced equally, the purchasers may be presumed to have purchased with
a view to benefit survivorship (Lake v. Gibson). Even where money is
advanced equally, equity will readily treat the joint tenancy as severed on
the slightest grounds.
(ii) Joint mortgages: Where a mortgage is made to two persons jointly,
whether the money is advanced equally or unequally.The mere circumstance
of the transaction being a loan is sufficient to repel the presumption of an
intention to hold the mortgage as a joint tenancy.
(iii) Partners: It partners buy land for the business of the firm, they were always.
regarded as tenants-in-common [Lake v. Craddock, (1732) 3 P. Wms. 1581.
2. The doctrine of contribution as between joint-debtors and sureties
is also founded on this principle, viz., that when several persons are debtors,
all shall be equal and if the creditor does not make thern contribute equally,
the Court of Equity will secure that object [Poring v. Winchelsea, (1787) 1
Cox. 318].
The rule of contribution betweer, co-sureties, however, becomes a little
more complicated when any of the sureties becomes insolvent. So long
as all the sureties are solvent, the extent of liability of e each is equal, both
in law and in equity; in other words, each is liabl for a fraction of the
liability corresponding exactly to the number of sureties.
3. As regards co-mortgagors, the principle of contribution s that a
property which is equally liable with other properly to pay debt shall not escape,
because the creditor has been paid out of the other properly alone. So,
'If several estates be mortgaged for or subject equally to one debt, the several
30. Beniram V. Kundanlal, (1899) 21 All. 496 P.C.
 32 EQUITY, TRUSTS, SPECIFIC RELIEF ICHAP. Ill

estates shall contribute rateably to tha, debt, being valued for that purpose, after
deducting fom each estate any other incumbrances by which it is affected ."31
4. The doctrine of Contribution between co-trustees is also an offshoot
of this maxim. When trustees are equally to blame for a breach of trust,
they are jontly and severally liable to the beneficiaries, and when one of
them makes good the breach, he is entitled to contribution from his
co-trustees [Fletcher v. Green, (1864) 33 Beav. 426; see, further, under
Ch. XIII, post].
(B) India.
1. S. 42 of the Indian Contract Act, 1872, applies the principle of
tenancy-in-common and not of joint tenancy as regards the devolution of joint
liabilities:
"42. When two or more persons have made a joint promise, then, unless a
contrary intention appears by the contract, all such persons during their joint lives,
and alter the death of any of them, his representative jointly with the survivor or
survivors, and after the death of the last survivor, the representatives of all jointly,
must fulfil the promise."
This means that when a joint promisor dies, his liability falls on his
representatives jointly with the survivor or survivors, and on the death of
the last survivor, the representatives of all the joint promisors must fulfil
the promise, unless, of course, there is a contrary intention in the contract.
2. In India, provisions relating to contribution are contained in ss. 43,
69-70, 146-147 of the Contract Act and S. 82 of the Transer of Property
Act. But the application of the rule of contribution is not confined within the
above statutory provisions, and it will be applied whenever justice, equity
and good conscience call for its application. Thus, a heir under Mahomedan
Law is bound to Contribute towards debts properly paid by his co-heirs to
the extent of his share, even though different portions of the assets devolve
according to different rules of descent.32
3. The rule of contribution between the joint promisors is laid down in
s. 43 of the Contract Act:
'43. When two or more persons made a joint promise, the promisee may, in
the absence of an express agreement to the coiitrary, compel any one or more
of such joint promisors to perform the whole of the promise.
Each of two or more joint promisors may Compel every other joint promisor to
contribute equally with himself to the performance of the promise, unless a contrary
intention appears from the contract.
If any one of two or more joint promisors makes default in such contribution, the
remaining joint promisors must bear the loss arising from such default in equal shares.
Explanation.—Nothing in this section shall prevent a surety from recovering,
from his principal, payments made by the surety on behalf of the principal, or
31. Fisher on Mortgage, 6th Ed.. p. 688.
32. Kazim V. Sadiq, (1938) 42 C.W.N. 900 P.C.
CHAP. III] MAXIMS OF EQUITY 33

entitle the principal to recover anything from the surety on account of payments
made by the principal.
Illustrations.
(a) A, B, and C jointly promise to pay 0, 3,000 rupees. D may compel either
A or B or C to pay him 3,000 rupees.
(b) A. B, and C jointly promise to pay 0 the sum of 3,000 rupees. C is
compelled to pay the whole. A is insolvent, but his assets are sufficient to pay
one-half of his debts. C is entitled to receive 500 rupees from A's estate, and
1,250 rupees from B."
Thus, in the absence of a contrary intention in the contract, a joint
promisor has a right of contribution against co-promisors, if the promisee
has compelled him to perform the entire contract or recovered more than
what was due in his share. 33 The right to contribution arises after the
debt has been discharged by the person who claims it and not before it;
mere existence of a decree against him is not enough.34
The implied contract between the joint promisors to contribute is
independent of the contract between the promisors and the promisee.
Hence, the promisee cannot, by an action on his part, absolve a joint
promisor from his liability to contribute.35
4. As to contribution between co-mortgagors, the Supreme Court has
laid down 36 that the law on this subject is contained in S. 82 of the Transfer
of Property Act, 1882, and that the provisions of this section are not to be
modified by anything contained in S. 43 of the Contract Act or on equitable
considerations.
S. 82 of the Transfer of Property Act provides-
82. When property subject to a mortgage belongs to two or more persons
having distinct and separate rights of ownership therein, the different shares in or
parts of such property owned ,by such persons are, in the absence of a contract
to the contrary, liable to contribute rateably to the debt secured by the mortgage,
shall contribute, the value thereof shall be deemed to be its value at the date of
the mortgage after deduction of the amount of any other mortgage or charge to
which it may have been subject on that date.
Where, of two properties belonging to the same owner, onc is mortgaged to
secure one debt, and then both are mortgaged to secure another debt, and tne
former debt is paid out of the former property, each property is, in the absence
of a contract to the contrary, liable to contribute rateably to the latter debt after
deducting the amount of the former debt from the value of the property out of
which it has been paid.
Nothing in this section applies to a property liable under section 81 to the claim
of the subsequent mortgagee." -
33. La/ta Prasad v. Zahurudciin, 32 All. 479 (483).
34. Ram Porshadv. Neerbhoy, (1872) 11 B.L.R. 76; see also ills. (b)-(d) to s. 43.
35. Nareodra v. Pashupati, A.I.R. 1849 Cal. 242.
36. Kidar v. Han, (1952) S.C.R. 179. [On the contrary, the English equitable principle
has been applied to an area to Which the Transfer of Property Act did not extend—Caneshi
v. Joti, A.I.R. 1953 S.C. 1; Valliama v. Sivathanu, A.I.R. 1979 S.C. 1937.
 34 EQUITY, TRUSTS, SPECIFIC RELIEF [CHAP. III

The principle underlying the section is that, in the absence of a contract

o the contrary, co-mortgagors are bound to Contribute proportionately to the
'alue of the shares or parts of the mortgaged property owned by them and
iot in proportion to the extent of the benefits derived by each of them.36
A, B and C separately own properties of unequal value.—Blackacre,
/hiteacre and Greenacre (the values being As. 30,000; As. 20,000; As. 10,000,
?spectively). A, B and C, in various combinations, incur debts,—their individual
ability for the same being assumed to be Rs. 2,000; As. 3,000 and As. 5,000
spectively.
In order to clear off the above debts, A, B and C jointly mortgage their three
states for As. 10,000, the total aggregate sum due at the date of the mortgage
em the three of them. There is no contract between thorn either in the mortgage
eed or otherwise, regarding their respective shares of responsibility in the mortgage
ebt of Rs. 10,000.
At the date of redemption, the mortgage debt has swollen to As. 15,000. A
lone rec'-oms by selling Blackacre, which is his separate estate, to the
ortgageo for As. 35,000 (that being the value of Blackacre at the date of
demption). Rs. 15,000 of this is applied in satisfaction of the mortgage debt.
(hat are As rights as against B and C for the payment of this As. 15,000?
If they were to contribute in proportion to the extent of the benefits derived by
em, B would have to contribute As. 4,500 (i.e., 3/ 1 oth of As. 15,000) and C would
we to contribute As. 7,500 (i.e., 5/wth of Rs. 15,000). But in the absence of a
)ntract to the contrary, the rules laid down in as. 82 and 92 of the T.P. Act must
)ply. Hence, they are to contribute according to the value of their interests in the
operties mortgaged. 36
(VII) Equity looks to the intent rather than to the form.
In every transaction, equity looks to the real intention of the parties
ither than to the external forms which were scrupulously regarded in
ammori law. The principle underlying this maxim was thus explained in
'arkin v. Thorold, (1852) 16 Beav. 59.
"Court of Equity made a distinction in all cases between that which is a mailer
substance and that which is a matter of form; and if it finds that, by insisting
n the form, the substance will be defeated, it holds it to be inequitable to allow
i person to insist on such form, and thereby defeat the substance."
This maxim is illustrated by-
(,) The equitable doctrines governing Mortgages. The whole law of
-nortgage in equity is based upon the conception of the transaction as a
-nere debt, as contrasted with the common law view of mortgage as an
absolute transfer, subject to a Condition (see Ch. XIII).
(ii) The doctrine of Penalties and Forfeitures. Equity refwsed to enforce
stipulations in a contract imposing a money-penalty in terrorem for the breach
of the contra,3t, if such breach could be adequately compensated by
damages, on the principle that performance of the act was the principal and
CHAP. iflI MAXIMS OF EQUITY 35

the penalty or forfeiture was merely accessory (see Ch. XV). On the same
principle, equity relieved against forfeitures in leases designed to secure the
performance of some collateral act, e.g., the payment of rent, when the
Court could give by way of compensation all that was required. But not
otherwise.
(iii) The doctrine of Precatory Trusts is also founded on this maxim.
(VIII) Equity looks on that done which ought to have been done.
(A) England.

(a) This maxim has its chief application in the case of contracts. Equity
will treat the subject-matter of a contract as to its consequences and incidents
in the same manner as if the act contemplated in the contract had been
completely executed,—from the moment the agreement has been made,
though all the legal formalities of the contract have not yet been complied
with. But this equity arises only in favour of persons entitled to enforce the
contract specifically, and not in favour 01 volunteers, i.e. persons who have
paid no Consideration. Thus,
(i) With regard to an executory contract for lease of land—a person,
who enters into possession of land under an 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 [Walsh v. Lonsdale, (1882) 21 Ch. D. 9].
(ii) Similarly, as to an agreement for sale of land.—Though at law, the
ownership remains with the vendor, in equity the purchaser is looked upon
as the owner of the land, and the vendor, who holds the legal estate, holds
it as a trustee for the vendee, from the moment the agreement is made
though the conveyance has not yet been made. (See Ch. XI, post).
(iii) According to this maxim, a contract to transfer aiter-acquired
property, if made for valuable consideration, is enforced in equity. At law,
non-existing property (to be acquired at a future time) is not assignable. In
equity, such assignment is possible; the agreement operates upon the
property the moment it comes into existence and becomes a complete
equitable assignment [Ho/royd v. Marshall, (1862) 10 H.L.C. 191].
When a person executes a document purporting to assign property to be
afterwards acquired by him, that property, on its acquisition, passes in equity to
the assignee' (Performing Rights Society v. London Theatre, (1924) A.C. 1 13).
Thus, an assignment of future book-debts passes the equitable interest
in book-debts acquired alter the assignment. The only condition for the
application of this doctrine is that the property must be ascertainable or
identifiable at the time when the Court is asked to enforce the contract
[Tailby v. Official Receiver, (1888) 13 A.C. 523].
(b) To this maxim may also be referred the equitable doctrine of
 36 EQUITY, TRUSTS. SPECIFIC RELIEF [CHAP. In

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 the
transaction takes effect, and conversely.
(B) India.
1. In India, the doctrine in Walsh v. Lonsdale ( p. 16-17, ante), does
not apply. The doctrine converts an equitable interest into a legal interest,
as between the parties according to the maxim 'Equity looks on that as
done which ought to ave been done'. But, in India, no distinction is made
between legal an equitable interests. An agreement for lease only creates
a personal right. (a) It the tease is from year to year or for a term exceeding
one year or reserving a yearly rent, interest in land can be obtained only
by a registered instrument (S. 107, T.P. Act) and the equity in Walsh v.
Lonsda/o will not apply so as to avoid the statutory requirement of
registration. It has been laid down by the Privy Council in Mian Hr Bux v.
Mahorned Tahar, [(1934) CO C.L.J. 370 P.C.] that the equitable right is not
available in violation of the Indian statuie. So, if A sues B for ejectment, B
cannot raise the defence that he is in possession in pursuance of an
(unregistered) agreement for lease (or sale) 737a. Of course, he can apply
for specific performance of the agreement if that is yet available, or defend
his possession under s. 53A of the Transfer of Property Act, if the agreement
is in writing. (b) If the term is for a period less than one year, a lease can
no doubt be made without a registered instrument—by oral agreement
accompanied by delivery of possession. But then there is no scope for the
application of the rule in Walsh v. Lonsdale, inasmuch as possession perfects
the title of the lessee and he requires nothing more for the protection of his
interest. [See, further, under Oh. XVI, post].
The following test has been laid down by the Supreme Court 38 to determine
whether a particular document constitutes L, lease or a mere agreement for
lease: A present demise is required to create a lease .38 But even when
words of present demise are used in the deed, it would be construed as a
mere agreement for lease where certain things have to be done by the
lessor before the tease is granted, e.g., the completion of repairs on the
premises, or by the lessee, e.g., the obtaining of sureties.38
2. For the same reason, the maxim does not apply to agreements for
sale so as to make the purchaser the owner in equity from the moment of
the agreement, for, in India, there is no equitable ownership (seep. 8, ante).
This is given statutory confirmation by s. 54 of the Transfer of Property Act
which says that a contract for the sale of immovable property 'does not, of
itself, create any interest in such property'.
37.De//ij Motor Co. v. Basrurkar. Al a; 1968 S.C. 794.
37a. State of Maharashtra V. Atur, (1904) 2 S.C.C. 497 (Para, 28).
38. Tolarara v. State of Bombay. A.I.R. 1954 S.C. 496.
 kh-

CHAP. III MAXIMS OF EQUITY 37

This is also the result of the 2nd paragraph of s. 40 01 the Transfar

of Property Act, which has been ex p lained by our Supreme Court in Ram
Baran v. Rain Mobil, A.I.R. 1967 S.C. 744, thus:
The second paragraph of sec. 40 of the Transfer of Property Act makes a
substantial departure from the English law, for an obligation under a contract which
creates no interest in land but which concerns land is made enforceable against
an assignee of the land who takes from the promisor either gratuitously or takes
for value but with notice. A contract of this nature does not stand on the same
footing as a mere personal contract, for it can be enforced against an assignee
with notice. There is a superficial kind Cl resemblance between the personal
obligation created by the contract of sale described under sec. 40 of the Act which
arises out of the contract, and annexed to the ownership of immovable property
but not amounting to an interest therein or easement thereon and the equitable
interest of the person purchasing under the English law, in that both these rights
are liable to be defeated by a purchaser for value without notice. But the analogy
cannot be carried further and the rule against perpetuity which applies to equitable
estates in English law cannot be applied to a covenant of pre-emption because
sec. 40 of the statute does not make the covenant enforceable against the assignee
on the footing that it creates an interest in the land."
3. Similarly, a contract for assignment of future property does not
create an equitable title in the assignee as soon as the future property
comes into existence.
There may be a transfer of existing property to operate in future
(S. 5 of the T.P. Act), but there cannot be a transfer of nonexisting
property, and a conveyance of property to be acquired in future conveys
no interest in the property to the transferee. Nevertheless, the equitable
maxim referred to above has been adopted in India by compelling specific
performance oi the contract as soon as the property comes into existence.
'The bill of sale in such a case can only be evidence of a co,itract to be
performed in future, and upon the happening of a contingency, of which
the purchaser may claim a specific performance, if he comes into Court
showing 'that he has himself done all that he was bound to do."39
So what an assignee of a non-existent property in India gets after the
property comes into existence is not any equitable interest in the property,
but a mere personal right to have the agreement to assign specifically
performed by the assignor.
The princi p le applies to assignment by sale, mortgage or charge.40
But even though the assignee does not get any interest in the
after-acquired property but gets only the right to sue for specific
performance, this personal right creates an 'obligation annexed' to the
property within the moaning of the second paragraph of s. 40 of the
Transfer of Properly Act, so that if the assignor again assigns the property
39. Pcdr/nd V. Budd/rao,(iOG-J) 12 M. Lk 275.
40. Vatsavyaya v. Poosapati, AIR. 1924 P.C. 162.
 38 EQUITY. TRUSTS, SPECIFIC RELIEF [CHAP.

to a third person, the first assignees right shall be enforeab!e against

such subsequent assignee unless he is an assignee for value without
notice of the prior assignment.
The principle underlying s. 17(a) of the Specific Relief Act, 1963, is
similar except that it applies where the vendor or lessor had an 'imperfect
title' at the time of a contract for sale or lease.
4. It is also to be noted that the equity in favour of future property
arises only for contracts for consideration. Since there is no equity in favour
of a volunteer, a gift of future property does not attract the equitable doctrine
and is, accordingly, void for all purposes. This principle is also embodied in
c. 124 of the Transfer of Properly Act, which says—
"A gift comprising both existig and future property is void as to the latter."
(IX) Equity imputes an intention to fulfil obligation.
(A) England.
1. "Where a man is under an obligation to do an act, and he does
some other act which is capable of being considered as a fulfilment of his
obligation, the latter act will be so considered, because 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." The doctrines of
Satisfaction and Performance are based on ths maxim. Both depend upon
a presumed intention to carry out an obligation, but in satisfaction the thing
done is something different from the thing agreed to be done, whereas in
performance the identical act which the party contracted to do is considered
to have been done. For example, where a person, for valuable consideration,
covenants to purchase and settle lands and subsequently purchases lands
of the same nature, it will be presumed that they were purchased in
Performance of the covenant, by which they will accordingly be bound. On
the other hand, if A, after contracting a debt, makes a will giving the creditor
a legacy, the legacy is presumed to be in satisfaction of the debt, if it is
equal to or greater than the debt.
2. The doctrine of Performance lays down the following presumptions:
(i) Where a person covenants for valuable consideration to purchase
and settle lands upon certain trusts, and subsequently purchases lands of
the nature of those coveranted to be settled, but he retains such lands
unsettled till his death, equit y will presume that such lands were purchased
in performance of the covenant and are bound by it. [Lechmere v. Earl of
Carlisle, (1773) 3 P.W. 211.1.
(ii) Where a person co'. ' for a valuable consideration that he will
leave by will a certain legacy or annuity, and subsequently dies intestate,
or by his will leaves a different sum or annuity to such person—equity will
presume that any share of the covenantor's estate received by such person
CHAP. III] MAXIMS OF EQUITY 39

under the intestacy or different sum or annuity left by his will is a complete or
pro tanto performance of the covenant [B/andy v. Widmore, (1716) 1 P.W. 3231.
3. The doctrine of relief against defective execution of power is also
founded on the present maxim. The doctrine was thus stated in To/let v.
ToIlet [(1728) 2 P. Wms. 489 (490)]
A defective execution.........will always be aided in equity under the circumstan-
ces mentioned, it being the duty of every man to pay his debts, and a husband
or father to provide for his wife or child."
The donee of a power, which is not in the nature of a trust, need not
execute the power at all. If, however, he shows his willingness to execute
it, but his execution is defective, 'equity will take the will for the deed,
and render his attempt effective, by treating it as an execution".
(B) India.

1. 1. In India, the English rule of presumption relating to satisfaction and

ademption has been discarded and if a testator wants to satisfy his
obligation by a subsequent gift, he must do so by express words. The Indian
rules are contained in ss. 177-179 of the Indian Succession Act. The reasons
for the departure from the English law have been thus explained by the Law
Commissioners: "We have departed from the English law where its provisions
appeared to us to be objectionable in themselves, or specifically inapplicable
to India. Above all, things we have aimed at giving effect to the plain meaning
of the words of the testator, without endeavouring to do or to say for him
that which he has not done or said for himself. We have accordingly
discarded the rules by which the English Courts are compelled to presume
in the absence of any intimation of a contrary intention—
(a) that where a debtor bequeaths to his creditor a legacy equal to or
exceeding the amount of his debt the legacy is meant by the testator to be
a satisfaction of the debt; (b) that where a parent who is under a legal
obligation to provide a portion for his child fails to do so the legacy shall be
deemed to be satisfaction or fulfilment of the obligation; (C) that where a
father bequeaths a legacy to a child and afterwards advances a portion for
that child, he thereby adeems the legacy."
2. Ss. 177-179 of the Succession Act are as follows:—
"1 77. Where a debtor bequeaths a legacy to his creditor, and it does not appear
from the will that the legacy is meant as a satisfaction of the debt, the creditor
shall be entitled to the legacy as well as to the amount of the debt.
178.Where a parent, who is under obligation by contract to provide a portion
for a child, fails to do so, and afterwards bequeaths a legacy to the child, and
does not intimate by his will that the legacy is meant as a satisfaction of the
portion, the child shall be entitled to receive the legacy as well as the portion.
179.No bequest shall be wholly or partially adeemed by a subsequent provision
made by settlement or otherwise for the legatee.
40 EQUITY, TRUSTS. SPECIFIC RELIEF [CHAP. III

II. As to performance, s. 92 of the Trusts Act codifies the English

principle as follows:—
'Where a person contracts to buy property to be held on trust for certain
beneficiaries and buys the property accordingly, he must hold the property for their
benefit to t' 't necessary to give effect to the contract.

(X) Equity acts in personam (Aequitas agit in personam).

(A) England.

1. As Hanbury observes, "This is the widest of all the maxims. In a

sense it comprises the 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 to trusts.'
2. This highly important maxim is descriptive of the procedure in equity.
It originated in the primary assumption that 'equity is enforceable by a
process of contempt'. While a judgment of the Court of Common Law was
enforced by one of the ordinary writs of execution by means of which th
plaintiff was forcibly put in possession of the property to which he was
entitled under the judgment, the Court of Chancery did not interfere with
the defendants property, but merely made an order against the defendant
personally, and if he failed to comply with it, punished him for his
disobedience by attachment or committal for contempt. Afterwards, however,
the Chancery had recourse to sequestration of the defendant's property,
and since the Judicature Acts, the orders of the Chancery Division can be
enforced by any of the legal writs of execution.
3. But although at the present day equity is not confined to acting in
personam, still its jurisdiction is primarily over the defendant personally [Penn
444]41. Thus, equity will enforce specific
v. Baltimore, (1750) 1 yes.
performance of a contract even where the subject-matter of the suit is
beyond the jurisdiction of the Court provided the defendant is in England
[Coyler v. Finch, ( 1856) 5 H.L.C. 9051.
Consequently, equity entertains action respecting immovables abroad
if there is some contract or equity against a person in England, e.g.,
action for administration [Ewing v. Orr-Ewing, ( 1885)10 A.C. 433]. 42 In
this case Lord Selborne said,—
"The Courts of Equity in England are Courts of conscience; in the exorcise of
41. Penn V. Balrimoie.The plaintiff and defendant being in England, had entered into
articles for settling the boundaries of two provinces in America—Pennsylvania and Maryland.—
and the plaintiff sought a specific performance of the articles. The principal objection was
that the property was out of the jurisdiction of the Court. Held, that the plaintiff was entitled
to specific performance of the articles; for, 'the strict primary decree of this Court is in
porsonam'.
42. Ewing v. Orr-Ewing.—A, domiciled in Scotland, dies leaving personal estate in
Scotland and also in England and heritable property in Scotland. He made a will jr Scotch
Form, and appointed Scotc.hmen to be his executors and trustees. An infant legatee, resident
 MAXIMS OF EQUITY 41
CHAP. III]

this jurisdiction, they have always been accustomed to compel the performance
of contracts and trusts as to subjects which were not either locally or rat lone
ddmicilii within their jurisdiction. They have done so as to land in Scotland, in
Ireland, in the colonies, and in foreign countries".42
4. The doctrine is subject to the following limitations:
land outside
(a) If an action merely involves a question of title to
jurisdictions the English Court will not entertain the action, for the question
of title can be better dealt with by the Courts of the country in which the
land is situate. It will adjudicate on a question of title only when there is
fiduciary
some personal obligation arising out of contract or implied contract,
relation or fraud, or other conduct which in the view of an English Court of
Equity would be unconscionable. [Deschamps v. Miller, (1908) 1 Ch. 856].
(b) Again, though a Court of Equity will protect and preserve the funds
of a charity conducted in a foreign country, by its jurisdiction over the trustees
in personam, it will not interpose its authority, for the purpose of giving
directions for the administration of the charity, because it is not in a position
to supervise its adm i nistration effectively. It will leave questions relating to
the administration of the trust, such as removal and appointment of trustees,
to be dealt with by the Courts of the country where the charity is carried on
43
and its beneficiaries reside.
(c) Since a Court of Equity will not make orders it cannot enforce, it will not
issue an injunction to restrain a defendant within its jurisdiction from committing
1 Ch. 5341.
a tort outside its jurisdiction [Morocco Syndicate v. Harris, (1895)
(B) India
In India, this maxim has a limited application.
has adopted
The Proviso to S. 16 of the Civil Procedure Code, 1908,
the principle in a modified form. It says—
Provided that a suit to obtain relief respeclin', or compensation for wrong to,
immovable property held by or on behalf of the defendant may, where the relief
a
sought can be entirely obt ined through his personal obedience, be instituted either
in the Court within the local limits of whose jurisdiction the property is situate, or
in the Court within the local limits of whose jurisdiction the defendant actually and
voluntarily resides, or carries on business, or personally works for gain.
Explanation. — lfl this section property' means properly situate in India."
in England. brings an action for the administration of the estate against the executor-trustees
who enter appearance without protest. The question was whether the English Court had
jurisdiction to order administiatiori as to the whlo estate? Hold, that the English Court had
case, it would be
jurisdiction as to the whole estate (but that in the circuriistancos of the
more convenient to administer in Scotland). In order to induce the Court to exercise its
jurisdiction over disputes as to land outside England, not only must (i) the defendants or
some of thorn be iii England andcii) the dispute he a matter at conscience, but (iii) the
Court must be the most convenient forum for deciding the dispute. If it is shown that there
is a competent Court to decide the dispute in the country where the land is situate and it
would be more convenient to have that Court decide it, the English Court in exercise of its
discretion to refuse to give an equitable romedy will not entertain the action.
43. Bilasrai v. Shivnar1yan. (1943) 48 C.W.N. 448. (P.C.).
 42 EQUITY, TRUSTS, SPECIFIC RELIEF [CHAP. III

Suits relating to immovable property must be instituted in the Court

within the local limits of whose jurisdiction the property is situate. But a
Court may entertain such a suit even though the property is situate
outside its local jurisdiction, if (:) the relief sought can be entirely obtained
through the personal obedience of the defendant, (ii) the property is held
by or on behalf of the defendant, and (iii) the property is situate in, and
not beyond, India. The Indian Court, therefore, cannot act in personam
if the property is situate abroad.
Generally speaking, specific performance and injunction are reliefs which
can be entirely obtained through the personal obedience of the defendant
and so suits for such reliefs may be instituted in the Court within whose
jurisdiction the defendant resides even though the property to which the
relief relates may situate outside its jurisdiction. But even in such cases, an
Indian Court cannot give relief it the property is situate outside India.
(XI) Where the equities are equal, the first in time shall prevail.
(XII) Where there is equal equity, the law shall prevail.
Maxims XI and XII enunciate rules of priority. They would be better
dealt with in the next Chapter.
 t'1S

MATURE CHAPTER IV

NATURE OF EQUITABLE ESTATES AND INTERESTS

§ 10. Equitable estates and interests are jura In personam.

1. The most important characteristic of equitable estates and interests

is, as Mail/and observes, that they "are rights in personam, but they have
a misleading resemblance to rights in rem".
2. Equitable interests had their origin in the doctrine that 'Equity acts
on the conscience. Acting on the conscience of the legal owner of the
property, equity compelled him to hold for the benefit of another, whenever
it would have been unconscientious to hold for himself. Thus, trust estates
had their origin in the doctrine of equity that a person who has undertaken
a trust is bound to fulfil it: originally, the trust was an obligation which was
specifically enforced in the Court of Chancery.
3. This view is supported by the definition of a trust as given by Coke,
according to which the right of the ceslui que trust was the benefit of an
obligation; "A use is a trust or confidence reposed in some other, not issuing
out of the land, but as a thing collateral annexed in privity to the estate of
the land and to the person touching the land .... cestui que use had neither
jus in re nor jus ad rem, but Only a confidence and trust."
4. But though originally they were enforced as mere rights in personam,
in course of time, they came to look like rights in mm or true proprietary
rights. Malt/and assigns two reasons for this resemblance:
(a) In their internal character they are treated like legal estates and
interests, i.e as regards duration, transmission and alienation see p. 19,
ante).
(b) Secondly, on the external side, they are enforceable not only against
the legal owner, but against all save a bona tide purchaser for value wi.hout
notice.
5. Mail/and illustrates this proposition with reference to the successive
steps in the development of the trust:
(i) The first is reached when the ceslui quo trust has a remedy against
the person who has undertaken to hold the land or goods on trust for him.
(ii) Then the trust is enforced against those who come to the land, or
goods by inheritance or succession from the original trustee,—against his
heir, executors, or administrators.
(iii) A third step is to enforce the trust against the trustee's creditors.

43
44 EQUITY. TRUSTS, SPECIFIC RELIEF [CHAP. IV

(iv) Next, it is enforced against one to whom the trustee has given the
thing without valuable consideration.
(v) The fifth step was taken when the trust was enforced even against
one who purchased for value the thing from the trustee, if he, at the time
of the conveyance, knew of the trust.
(vi) Lastly, it is enforced against those who would have known of the
trust had they behaved as prudent purchasers behave) This is the doctrine
of Constructive Notice. (See §13, below).
But here a limit is reached. Against a person who acquires a legal
right bona fide, for value, without notice, express or constructive, of the
existence of equitable rights, those rights are of no avail.2
6. To sum up—The cestui quo trust has rights enforceable against
all save a bona tide purchaser for value without notice.
While legal interests in property are good against all the world, equitable
interests are good against those persons only who are in conscience
bound to respect them.
§ 11. The defence of bona tide purchaser for value without notice.
1. Here is the second important difference between legal and equitable
interests. An equitable interest will be enforceable against the holder of a
legal title only if the circumstances are such that the equitable claims affects
the conscience of the legal owner. Hence, an equitable interest will not be
enforceable against a purchaser of the legal estate, for value and without
notice of the equitable interest.
A legal right is enforceable against any person who takes the property,
whether he had notice of it or not. If A sells to C land over which B has a
right of way, C takes the land subject to B's right, although he was ignorant.
of the right. But it is different as regards equitable rights. For example, if A
enters i nto an agreement for sale of his estate to B, who pays a part of the
purchase money, then, until the actual conveyance, B has no interest at
law; but in equity, which looks on that as done which ought to be done',
B, from the moment of the contract, is the owner of the estate. Now, if A,
afte, the contract makes an absolute conveyance of the legal estate to C
who purchases it for value without notice of B's right, the Court will refuse
to give B any relief against C who got the legal estate bona tide for value
without notice, and has an equity to retain the estate equal to B's equitable
right. This characteristic of equitable interests follows from the maxim,
"Equity follows the law" [see ante]. A purchaser in good faith has obtained
a legal right. The Court of Law gives him that right. There is nothing by
virtue of which a Court of Equity can take away that right from him, for
his conscience is unaffected; he has not undertaken any obligation, nor
is he guilty of negligence or dishonesty, neither is he a mere volunteer.
L It was decided in Re Nisboti and Potts' C00tr2ct. (1906) 1 Ch. 386, that an equitable
right could also be enforced against a dissoisor. i.e., one who has acquired title by lapse
of time (see post).
2. Pi/chor V. Rawlins. (1872) 7 Ch. 259.
CHAP. IV)
NATURE OF EQUITABLE ESTATES 45

2. What is curious to note, however, is that the defence of 'legal' estate by

bona fide purchase for value without notice is not a merely personal defence
flowing from the moral merits of the purchaser, it is also competent to all
who claim through or under him, even though they have notice of the
equitable rights. Suppose, T holds land in trust for A, and sells the land to
Xwho purchases the legal estate bona fide for value and without notice; X
then sells to Y, who has notice of the trust when he takes the conveyance.
In such a case, though Y has notice, he would not be bound by the trust.
As Lewin explains:
"A purchaser with notice from a purchaser without notice is exempt from the
trust, not from the merits of the second purchaser but of the first; (for, if an innocent
purchaser were prevented from disposing of the land, the necessary result would
be a stagnation of the property)."
Thus—
(a) A purchaser with notice of an equitable interest will, nevertheless,
not be bound by it, if he purchases from a person who himself was a
purchaser without notice. Conversely,
(b) A purchaser without notice of an equitable interest will not be bound
by it even though his vendor had notice thereof.
3. The requisites of the defence of a bona fide purchase for value
without notice are three (SneI:-
(1) The defendant must have the legal estate vested in himself, or in
some person on his behalf. (2) He must have given value. (3) He must have
had no notice of the equitable interest at the time when he gave his
consideration for the conveyance.
These conditions fulfilled, "a purchasers plea of a purchase for valuable
consideration without notice is an absolute, unqualified, unanswerable
defence, and an unanswerable plea to the jurisdiction of the Court".2
4. The difference between legal and equitable rights in practical
operation may be further illustrated by another example; (1) A is a tenant
in fee. B is occupying his land as his tenant at will. B forges title-deeds
showing that he is tenant in fee, and sells the land to X, who diligently
investigates the title, finds nothing suspicious, pays his purchase money,
and takes a conveyance. Here A is the legal owner of the land, and X has
taken a conveyance from one who has nothing to convey. Hence,
notwithstanding his diligence, and the absence of notice, he has no rights
against A. On the other hand, (2) if B is a tenant in fee holding land in trust
for A, and B forges title-deeds concealing the trust, and sells to X, showing
himself to be simply a tenant in lee, subject to no equitable liability; and X
investigates the title with reasonable diligence and takes a conveyance,—X
becomes the legal owner of the land. And having come to the ownership
bona fide for value and without notice, actual or constructive of. As
rights,
 46 EQUITY, TRUSTS, SPECIFIC RELIEF [CHAP. IV

A has not equity against him. A's only remedy is against the fraudulent
trustee. But now suppose in the latter case that (3) after thefraudulent
trustee B has contracted to sell, A hears of this and informs the purchaser
of it, before the purchaser has got the legal estate. In this case, neither A
(the cestui que trust), nor X (the purchaser under the agreement of sale),
has legal ownership. Both having equitable rights, the older will prevail, viz.,
A (see § 15). But once the purchaser gets the legal estate without notice,
A's equitable claim will not stand.
§ hA. Equitable Interests in India.
Besides the interest of the cestui quo trust or beneficiary of a trust, equity
recognises other equitable interests in land. Thus, where there is an
agreement for sale of land, the legal estate no doubt remains in the seller
until the agreement is completed by conveyance, but equity recognises an
equitable interest in the purchaser which is good against all the world save
only bona fide purchaser for value without notice of the land, if any.
But the law In India recognises no distinction between legal and
equitable estates or interests. 3 There are rights which resemble the
English equitable interests in that they are liable to be defeated by a
purchaser for value without notice.
But, in India, there i s Only one owner and property is vested in one
person Only at a time. What are equitable interests in England are
recognised hero only as personal rights against the owner for the time
being and not as equitable rights of ownership. Thus, where property is
vested in a trustee, the owner is the trustee. The interest of the beneficiary,
as defined in s. 3 of the Trusts Act, is not an interest in the trust property
but "a right against the trustee as owner of the trust property" [see § 24
A, post]. Similarly, it is specifically enacted in s. 54 of the Transfer of
Property Act that a contract for sale of immovable property does not, of
itself, create any interest in, or charge on, such property. Under s. 40 of
the Transfer of Property Act it is "an obligation arising Out of contract
and annexed to the ownership of property, but not amounting to an interest
or easement therein". See in this connection the Privy Council decision
in Ram Kinkar v. Satyacharan, [(1938) 43 C.W.N. 281 (P.C.)], where it
has been affirmed that the Transfer of Property Act is a self-contained
code, and "it has left no room for such a distinction". S. 48 of the T.P.
Act, on the other hand, does away with the question of priority between
legal and equitable estates as obtains in England, subject only to s. 78
[Imperial Bank of India v. U. Hal Gyaw, (1923) 28 C.W.N. 473 (P.C.)].

§ 12. Doctrine of Notice.

1. The doctrine of nc ce is that a person who purchases an estate, though
3. Wcbb v. McPherso,3 (1903)
8C W _N. 41 P.C.
CHAP. IV] NATURE OF EQUITABLE ESTATES 47

for value, after notice of a prior equitable claim, becomes a ma/a fide
purchaser and takes subject to that right. He cannot by getting in the legal
estate defeat such prior claim. Fraud or ma/a fides is the true ground on
which the Court is governed in the cases of notice [Le Nevo v. La Neve,
(1747) 1 Arnb. 436].
2. Notice means 'knowledge of a fact which would make any rational
man act with reference to the knowledge so acquired'. What constitutes
notice is laid down in s. 199, Law of Property Act, 1925, (replacing the
Conveyancing Act, 1882). A person is said to have notice of a thing when—
(1) It is within his knowledge, or
(2) It has come to the knowledge of his agent as such in the same
transaction, or
(3) It would have come to his knowledge if reasonable inquiries had
been made, or
(4) it would have come to the knowledge of his agent as such if
reasonable inquiries had been made.
3. Notice is thus either actual or constructive.
(A) In Actual Notice knowledge of the tact is brought directly home to
the party. But a person is not bound to attend to vague rumours, and actual
notice, in order to be binding, must be definite information given by a person
interested in the property in respect of which the notice is issued, in the
same transaction, "so that a reasonable man, or an ordinary man of business,
would act upon the information and would regulate his conduct by it" [Lloyd
v. Bankes, (1868) L.R. 3 Ch. 488].
(B) Constructive Notice is knowledge imputed by the Court on
presumption. Notice to an agent is sometimes termed 'Imputed' notice, the
term 'Constructive Notice' being confined to the third and fourth cases in
our definition given above,
§ 13. Doctrine of Constructive Notice,
1. Constructive notice has been defined as "knowledge which the Court
imputes to a person from the case, upon a presumption, so strong that it
cannot be allowed to be rebutted, that the knowledge must be though it
may not have been formally communicated" [Espin v. Pemberton, ( 1859) 3
De G. & J. 547 (554fl. Or, in the words of Dart, it arises "in those
circumstances under which the Court concludes either that notice must be
imputed on the grounds of public policy to an innocent person, or that the
party has been guilty of such negligence in not availing himself of the means
of acquiring it, as, it permitted, might be a cloak to fraud, and which, therefore,
in the common interests of society, should, in its consequences, be treated
as equivalent to actual notice".
2. Constructive notice is of several kinds. In Jones v. Smith, (1 Hare
 48 EQUITY, TRUSTS, SPECIFIC RELIEF (CHAP. IV

43) the cases in which constructive notice has been established were
grouped into 2 classes,—
(A) Actual notice of a fact which would have led to notice of other facts
(of which the Court presumes, he had knowledge). 4 Thus,
(i) Notice of a deed is notice of its contents (e.g., covenants and
restrictions in the deed), except where it does not necessarily affect the title.
(ii) Where the third party is in possession, or the appearance of the
property is such as to put a party upon inquiry, and he chooses not to make
inquiries, whatever title he acquires will be subject to the right of the person
in possession. Thus, occupation by a tenant is notice of all the rights of the
tenant [Hunt v. Luck, (1902) 1 Ch. 428]. In other words, when land is in the
occupation of someone other than the vendor, the fact of the occupation
gives the purchaser constructive notice of any rights of the occupying tenant,
(but it is not constructive notice of third person's rights).
(B) Knowledge imputed by the Court from the evidence that the party
has designedly abstained from inquiry for the very purpose of avoiding
notice.5
This class has been extended to include those cases which follow
from the duty of (a) investigating title, as well as of (b) requiring production
of title-deeds. "Generally speaking, a purchaser or mortgagee is bound
to inquire into the title of his vendor or mortgagor, and will be affected
with notice of what appears upon the title if he does not so inquire"
[Wilson v. Hart, (1866) 1 Ch. 463]. Nor is a purchaser taking a title
depending on adverse possession protected from the equity on the ground
that the "squatter from whom he buys had no actual notice of the equity,
for a squatter is not a purchaser for value without notice". 6 In these cases,
the purchaser is deemed to have constructive notice of any equity affecting
the property, because he has negligently omitted to make the usual
investigation of title which any prudent purchaser should make, though
without any fraudulent design [Agra Bank v. Barry, (1874) 7 H.L. 135].
Not only should a purchaser require an abstract of the vendor's title
to be delivered, but he should also require production of the title-deeds.
Hence, notice that title-deeds are in possession of another constitutes
notice of any equitable claim that the other may have unless sufficient
cause or excuse is given for non-delivery of the deeds. If the purchaser
4. Bisco v. Earl of Banbury, l(1675)lCh. Ca. 2871.-The purchaser had actual notice
of a specific mortgage, but did not inspect the mortgage deed, which referred to other
incurnbrances. Hold, he was bounq by those incurnbrances, for he would have discovered
their existence if he had inspected the deed, as any prudent man would have done.
5. Birch v. El/amos, (1794) 2 Anst. 427.—The title-dods of an estate were deposited
with the plaintiff by way of security. The defendant, 14 years attert,ards, and on the eve of
the mortgagor's bankruptcy, took a mortgage of the property, with notice of the deposit, but
he abstained from enquiring the purpose for which the deposit had been made. Hold, that
the defendant was bound by the plaintiff's rights, as he had designedly omitted enquiry for
the purpose of avoiding notice of the plaintiff's rights.
6. Re Nisbet & Ports' Contract. (1906) 1 Ch. 386.
CHAP. IVI NATURE OF EQUITABLE ESTATES 49

neglects to call for them, and it turns out that the deeds are in the possession
01 an equitable mortgagee, the purchaser will take subject to the mortgage.
notice In India.
§ 13A. Defence of bona fide purchaser for value without
1. Though equitable interests as such are not recognised in India, a bona
tide purchaser for value without notice is protected under many statutory
provisions, e.g., so. 39, 40, 53, 53A, 100 and 126 of the Transfer of Pioperty
Act; S. 19(b) of the Specific Relief Act, 1963, and so on. And the principles
underlying these statutory provisions are the same as in English equity. Thus,-
(:) S. 19(b) of the Specific Relief Act says that specific performance of
a contract is available against either party to the contract and any person
claiming under him but not against a transferee for value in good faith and
without notice of the original contract. This is also the rule in England, where
the rights arising out 01 an agreement relating to land are equitable and are
accordingly liable to be defeated by a transferee for value without notice.
(ii) Similarly, s. 63 of the Trusts Act enacts that the right of a beneficiary
of a trust cannot be enforced against a transferee in good faith without
notice of the trust. Similarly, s. 40 of the Transfer of Property Act 7 provides
that the obligation arising out of a contract for sale of immovable property
cannot be enforced against a transferee for consideration without notice.
2. Even apart from these statutory provisions, the doctrine is applied,
in the absence of any statutory provision governing the case, as a principle
of justice, equity and good conscience [Ramcoomarv. McQueen, ( 1870) 16
W.R. 166 P.C.]. Thus, Hindu law protects the right of maintenance of a
Hindu widow against a transferee with notice, even where it is not charged
on any property:
"The knowledge of collateral rights created by agreement, in equity, frequently
qualifies those acquired by a purchaser. The widow's right to maintenance is a
right maintainable against the holders of the ancestral estate in virtue of their
holding no less through the operation of the law than if it had been created by
agreement, and so when the sale prevents its being otherwise satisfied, it
accompanies the property as a burden annexed to it in the hands of a vendee
with notice that it subsists."8
It follows, therefore, that a transferee without notice is not bound unless
the right is charged upon a particular property, in which latter case even
a transferee without notice is not protected.°
3. It is also clear that, in India, the doctrine of notice will not be applied
so as to contravene the provisions of any statute since equitable rights have
no independent existence in India.

7. As to s. 40 of the Transfer of Property Act, see post.

8. Dan Koer v. Sarla Devi, (1946) 51 C.W.N. 81(87) P.C.
 50 EQUITY, TRUSTS. SPECIFIC RELIEF [CHAP. IV

§ 138. What constitutes notice in India.

1. In India, the definition of 'Notice', as given in s. 3 of the Transfer of
Property Act, comprises both Actual and Constructive Notice, It says—
"A person is said to have notice of a fact when he actually knows that fact,
or when, but for wilful abstention from an inquiry or search which he ought to
have made, or gross negligence, he would have known it.
Explanation /.— Where any transaction relating to immovable property is required
by'law to be and has been effected by a registered instrument, any person acquiring
such property or any part of, or share or interest in, such property shall be deemed
to have notice of such instrument as from the date of registration....
Explanation IL—Any person acquiring any immovable property or any share
or interest any such property shall be deemed to have notice of the title, if any,
of any person who is for the time being in actual possession thereof.
Explanation IlL—A person shall be deemed to have had notice of any fact if
his agent acquires notice thereof whilst acting on his behalf in the course of
business to which that fact is material:
Provided that, if the agent fraudulently conceals the fact, the principal shall not
be charged with notice thereof as against any person who was a party to or
otherwise cognizant of the fraud."
2. It has already been explained (p. 48, ante) that the Court would
infer wilful abstention from inquiry in such circumstances as would show
that the party designedly abstained from inquiry for the very purpose of
avoiding notice.
S left his property to his sons by his first wife, and appointed them executors
of his will; by the same will he gave a certain amount to his sons by his second
wife, charged on the aforesaid property. The Sons of the first wife borrowed a
heavy sum from the Bank of Bombay on depositing some title-deeds relating to
the property left by S by way of equitable mortgage, but did not produce the will.
When the Bank sought to enforce their mortgage against the property, the sons
of the second wife claimed that their charge had precedence. Held, that the charge
would prevail against the mortgage, for, had the Bank made an inquiry as to how
the mortgagors had derived their title from the last owner S. they would have had
cognizance of the will and of the charge in favour of the sons of the second wife.
The Bank was accordingly deemed to have constructive notice of the charge.°
But mere attestation of a deed is not enough to involve the witnesses
with knowledge of the contents of the deed, and this is equally true of
the witnesses who identify the executant before the Registrar. Of courser
there may be circumstances under which an attesting witness may be
affixed with knowledge, but such circumstances must be clearly provided)0
3. The Explanations to s. 3 of the Transfer of Property Act practically
assimilate the law as embodied in the English L.P.A., 1925. Thus,
Explanation Ito s. 3 of the T.P. Act expressly provides that the registration
of an instrument relating to immovable property amounts to notice of the
instrument from the date of registration.
9. Bank of Bombay v. Suleman, (1909) 33 Born. 1 (P.C.).
10. Rajammal v. Sabapathi. A.I.R. 1945 P.C. 82.
 CHAP. IV] NATURE OF EQUITABLE ESTATES 51

The provision, thus, throws a duty of searching the registers on any

person desirous of dealing with immovable property.
Explanation II enacts that actual possession is notice of such title as the
person in actual possession has. The principle underlying the rule is—
"Possession being prima facie evidence of title, and also the only visible badge
of ownership, a man in possession is entitled to impute knowledge of that possession
to all who may have to deal with any interest in the property and persons so
dealing cannot be heard to deny notice of the title under which the possession is
held."11
Consequently, if a purchaser or a mortgagee has notice that the vendor
or mortgagor is not in possession of the property, he must make inquiries
of the person in possession—of the tenant who is in possession—and
find out from him what his rights are. And if he does not choose to do
that, then whatever title he acquires as purchaser or mortgagee will be
subject to the right of the tenant in possession.12
Possession which operates as notice, however, must be actual
possession, and not of a constructive nature.
Explanation Ill enacts that the knowledge of an agent is the knowledge
Of his principal within certain limitations. To affect the principal with notice,
' it is necessary that the notice should have been received by the agent—(1)
during the agency, (2) in his capacity as agent, (3) in the course of the
agency business, (4) in a matter material to the agency business, and
(5) that the notice should not have been fraudulently withheld by the
agent from the principal.
The rule is based on the principle that agency extends to receiving
notice on behalf of the principal of whatever is material to be stated in
the course of the business. In Berwick v. Price [(1905) 1 Ch. 632], it was
.observed, 'if notice to the agent were not notice to the principal, notice
would be avoided in every case by employing agents". The present
Explanation also makes it clear that notice to the agent, whether actual
or constructive, operates as notice to the principal, within Ii e limitations
referred to.
§ 14. Doctrine of Priority.
'Priority' means the right to enforce a claim in preference to others.
The question of priority arises when two or more persons have interest
in the same property. Hardly is it necessary to point out, however, that
two successive legal estates cannot subsist in the same property. For,
once a legal estate is conveyed to another, the grantor loses all interests
in the property, and the grantee becomes the legal owner, co that the
11. Barnhart V. Greenshields, (1853) 9 Moo. P.C. 18.
12. Hunt v. Luck, (1902) 1 Ch. 432.
52 EQUITY, TRUSTS, SPECIFIC RELIEF [CHAP. IV

grantor cannot again convey what he himself no longer possesses. Not

so with equitable interests. An important characteristic of equitable
interests is that an equitable interest may exist over the same property
together with another prior or subsequent legal or equitable interest. For,
as we have seen, equitable interests are mere rights in personam. But
when a legal and an equitable right conflict, the legal right will prevail
over and destroy the equitable, even though subsequent to it in origin,
provided that the owner of the legal right acquired it for value and without
notice of the prior equity. This liability to destruction by conflict with a
subscquent legal right is the third essential feature of equitable rights.
The possible cases of priority, therefore, are two:—(a) as between
equitable interests inter so, and (b) as between an equitable interest and
another (prior or subsequent) legal interest. In such cases, equity applied
two rules:
(A) As between Equitable Interests:
1. As between two equitable interests, a conflict is governed by the
maxim, "Where the equities are equal, the first in time prevails" (Qui
prior est tempore, potior ost lure). Merely equitable rights or estates rank in
order of time. For, every conveyance of an equitable interest is an innocent
conveyance, and passes only that to which the transferee is justly entitled,
and no more. Hence, as between persons having only equitable interests,
equity will prefer one to the other on the ground of priority of time only, until
it finds that there is any other sufficient ground of preference between them
[Cave v. Cave, 13 (1880) 15 Ch. D. 639].
2. But the application of the rule has been restricted by so many
exceptions, that, as Snell observes, "there is little left of the rule". Thus—
(a) The rule applies only where equities are equal. It the moral claims
of the plaintiff and the defendant are not on an equality, the one who has
the better claim will be preferred, although his interest arose after the other's
in point of- time. For example, equity rewards diligence, and if the prior
equitable owner is guilty of negligence, his equity becomes inferior to that
of the subsequent equitable owner, and the rule of priority in order of time
no longer applies [Rice v. Rice, 14 (1853) 2 Drew 731.
13. Cave v, Cave.—T is a trustee of money for A. In breach of trust he purchases land
with it and has it conveyed to himself. T mortgages the land to X who has no notice of A's right.
T thereafter mortgages the land to Y who also has no notice of As right. What is the order of
priority as between A, X and Y? Held, the order of priority is K A, and V. Xs mortgage being
a legal mortgage, he has got the legal estate for value without notice. Hence his claim comes
first. But as between A (coslui que trust) and V (equitable mortgagee), order of time settles order
of right, for they have both equitable interests only.
14. Rice v. Rice—A conveyed land to B without receiving the purchase-money, but
acknowledged in the body of the deed a receipt of the purchase-money, and delivered the
title-deeds to the purchaser B. B subsequently deposited the title-deeds with an equitable
mortgagee, who had no notice that the purchase-money was unpaid. Held, that the vendor's
lien for purchase-money was postponed to the equitable mortgage, though the vendor's lien
was prior in point of time, for owing to the negligence of the vendor is giving a receipt
without receiving the money, the equities were not equal.
CHAP. IV) NATURE OF EQUITABLE ESTATES 53

(b) It does not app!y to chattels. Dealings with equitable interests in

pure personally, or equitable choses in action, or personal bust funds rank
according to the respective times at which notice was given to the legal
owner of the fund, i.e., the trustee. This is known as the rule in Deane v.
Hall [(1823) 3 Russ. 11.15

(B) As between Legal and Equitable Interests:

1. The maxim is, "Where there Is equalequlty, the law shall pervall."
In other words, where the claims of two persons are equally equitable, he
who owns the legal estate in addition will be preferred. The plain meaning
of the maxim, thus, is that the person in possession of the legal estate will
get priority over any prior or subsequent equitable interests, unless it would
be unconscientious on his part to obtain priority.
"If the defendant has a claim to the passive protection of a Court equal to the
claim which the plaintiff has to call for the active protection of the Court, he who
has the legal estate will prevail" [Thorndike v. Hunt, (1859) 3 D.G. & I. 563].16
2. Thus,
(i) The purchaser for value of the legal estate without notice of a prior
equitable interest, is entitled to priority in equity as at law.
(it) Not only a purchaser for valuable consideration without notice of a
l
prior equitable right, obtaining the legal - estate al time of his purchase,
will be protected, but it has also been held that such a purchaser, who has
not obtained the legal estate at the time of purchase, may protect himself
by subsequently getting in the legal estate, so long as he does not by that
act become a party to a breach of trust; as the equities of both parties are
equal, there is no reason why the purchaser should be deprived of the
advantage he may obtain at law by superior activity or diligence. But,
otherwise, this sub-rule means that in order to get the protection of a
purchase for value without notice, the legal estate need not be vested in
the purchaser before he had notice of the equitable interest. It is only
necessary that the value should be actually given before notice; then if the
legal estate is not obtained by the purchaser afterwards, he can rely on it,
save where the conveyance of the legal estate would, to the knowledge of
17
the purchaser, amount to a breach of trust on the part of the legal owner.
15. In England, some basic changes have been introduced by statute—the Law of
Property Act, 1925.
16. Thorndike v. Hunt—C is a co-trustee with T of a will, and also a co-trustee with
B of a settlement. He misappropriates a considerable sum of the settlement fund, and than
applies an equal portion belonging to the will fund in the purchase of a property in the joint
names of himself and B. C dies insolvent. Neither B nor his cosfui quo trust has any notice
that the property was purchased with part of the will fund. Twas also innocent of C's fraud.
The question was, whether T would have the right to have the property transferred to him.
Held, no. The equities in favour of the two funds are equal, for both ha,9 lost owing to the
fraud of the trustee. But B has, in effect, obtained the legal title and that without notice of
the equitable right of T. Hence l's right to follow the money was no greater than B's right
to retain it.
17. Taylor v. London 8 County Banking Co., (1910) 2 Ch. 231.
 54 EQUITY, TRUSTS, SPECIFIC RELIEF [CHAP. IV

(iii) In order that a purchaser for value without notice may obain the
protection of legal estate, it is not absolutely necessary that the legal estate
should be conveyed to him; it is sufficient if, as among persons having
equitable interests, he has the best right to. call for it.17
3. But the legal estate will lose priority if the equity in its favour is inferior:
(a) Where the legal estate is subsequent to the equitable interest, it
cannot get priority if the legal owner takes the legal estate with notice of
the equitable interest, for a purchase with notice makes the purchaser a
ma/a fide purchaser [Le Neve v. Le Neve, see ante p. 47]. He will take the
legal estate subject to the equitable interest irrespective of any question of
negligence; thus in Jared v. Clements [(1903) 1 Ch. 428], it was held that
once a person had notice that an equitable interest subsisted in the property,
he would take it subject to the equitable interest, even though the vendor
induced him by fraud to believe that the equitable interest had determined.
In other words, a purchaser who relies upon the assurance of his vendor
that an equitable interest in the property has been got in or destroyed does
so at his risk (Snell).
(b) Where the legal estate is prior to the equitable interest, the legal
owner will lose priority by participating in fraud or gross negligence. It must
be noted here carefully that though mere negligence is sufficient to postpone
a prior equitable interest (see above), to postpone a prior legal interest what is
required is gross negligence. Mere negligence or want of prudence is not sufficient
[Grierson v. National Provincial Bank of England, 18 (1913) 2 Ch. 181.
4. The law on the point was clearly laid down, with reference to the
priority between legal and equitable mortgages in Northern Counties of
England Fire Insurance Co. v. Whipp [(1884) 26 Ch. D. 482], as follows:
The Court will postpone a prior legal mortgage to a subsequent
equitable mortgage-
°(i) Where the legal mortgagee has assisted in or connived at the fraud
which led to the creation of the subsequent equitable estate.
(ii) When the legal mortgagee has made the mortgagor his agent with
authority to raise money, and the security given for raising such money has,
by misconduct of the agent, been respresented as the first estate."
(iii) But "the Court will not postpone the prior legal estate to the
subsequent equitabie estate on the ground of mere carelessness or want
of prudence on the part of the legal owner."
Thus, in the present case where M, the manager of a joint-tock company
made a legal mortgage of freehol to the company, and handed over to the
18. Grieson v. National Provincial Bank of England.—The owner of a leasehold
premises deposited the lease with his bank as a security for a loan, and then made a legal
mortgage of the premises expressly subject to the bank. The mortgagor paid off the bank,
obtained the tease from the bank, and deposited it with the defendants to secure another
loan, the defendants having no notice of the legal mortgage. Held, that the legal mortgagee
had not been guilty of any misconduct sufficient to deprive him of his priority as against the
subsequent ericumbrancers, the defendants.
CHAP. IV NATURE OF EQUITABLE ESTATES 55

company the deeds, whiâh were kept in a safe to which he had access, and
afterwards he (A' took from the safe the deeds without the mortgage, and created
a new mortgage to B without notice of the mortgage to the company,—it was held
that the company did not lose priority for their mortgage.
5. The following instance is cited by Mail/and by way of illustrating the
difference between a legal and an equitable estate:
A lends money to B, a solicitor, on a securty of a legal mortgage of
freeholds and with the mortgage gets possession of the title-deeds. A
then lends the title-deeds to B on a fraudulent representation by him that
he desires to prepare an abstract of title and conditions of sale in order
to sell and pay oft the debt. B then borrows a further sum from C,
depositing the deeds with him as security, and soon alter absconds. The
property will not suffice to pay A or C. Is As security postponed to C's?
What is the rule as to loss of priority? Would A's position be different if
his mortgage had been an equitable one merely?
(:) Here the legal mortgagee A, is guilty of mere negligence. So
according to the rules laid down in Northern Counties Fire Insurance Co. v.
Whipp, he will not lose priority. He would do so if he had participated in the
fraud. Of course, gross negligence (had he been guilty of such) would be taken
as evidence of fraud. The representation was no doubt reasonable, so there
was no fraud.
(ii) If A were an equitable mortgagee, then he would be postponed, for
mere negligence is enough to postpone an equitable charge. He ought not
to let deeds go into the mortgagor's hands on any pretence.

§ 14A. Priority in India.

There being no distinction between legal and equitable estates, the
complications which arise in England in case of a conflict between legal
and equitable interests, do not exist in India. The general rule of priority
is qui prior est fempore potior est lure, which is enacted in s. 48 of the
Transfer of Property Act, viz., that when successive transfers of the same
property have been effected, the later in date must give way to the earlier.
(In the case of written transfers, the priority is determined by the date of
execution and not of registration).
This rule is subject to one exception in the case of registrable documents.
A subsequent registered deed has priority over a prior unregistered deed
of wilich registration is optional, subject to the doctrine of notice. The
Indian law of registration divides registrable instruments into two classes,
according as registration is optional or compulsory. Where registration is
compulsory, the question of priority does not arise; where registration is
optional under s. 50 of the Indian Registration Act, a subsequent registered
instrument will have priority over the previous unregistered one. But if the
previous unregistered deed had been accompanied by delivery of possession,
 56 EQUITY, TRUSTS. SPECIFIC RELIEF fCHAP. IV

then under the doctrine of constructive notice, formulated in S. 3 of the

Transfer of Property Act, actual possession by the former transferee will
be taken as notice, and the subsequent transaction will have no priority.
It hardly requires to point out that where the subsequent transferee by a
registered instrument has actual notice of the prior unregistered transaction
(the registration of which was optional), the registered instrument cannot
gain priority, though the case of actual notice is not mentioned in s. 50
of the Registratior. Act.
Secondly, the rule in s. 48 is subject to the provisions in s. 78, in the
case of mortgages, so that the priority of time shall be forfeited where a
subsequent mortgage has been created through the fraud, misrepresentation
or gros' neglect of the prior mortgagee. This doctrine is based on the rule
in Northern Counties Fire Insurance Co. V. Whipp (see
p. 55, ante).
A mortgage by deposit of title-deeds is specially protected in India. In
England (prior to 1926) the legal mortgage would always prevail against
the equitable unless the holder of the legal has done or omitted anything
which prevents him in equity from asserting his paramount rights. But, in
India, the Proviso to S. 48 of the Registration Act enacts that a mortgage
by deposit of title-deeds shall take effect against any subsequent registered
mortgage deed relating to the same property. The reason is that a
mortgage by deposit o' title-deeds is a completed transfer under s. 58(f)
of the Transfer of Property Act, and not a mere agreement giving rise to
an equitable interest as in England. In fact, the term 'equitable mortgage'
cannot properly be used to refer to a mortgage by deposit of title-deeds
in India. As the Privy Council observed in Imperial Bank v. Rai Gyaw,
[(1923) 1 Rng. 637 P .C.1-1t is to be observed that there is here no
distinction between legal and equitable mortgages as in English law,
where the legal mortgage will always prevail against the equitable unless
the holder of the legal has done or omitted to do something which prevails
in equity from asserting his paramount rights." For the same reason, viz.,
that a mortgage by deposit of title-deeds is as good as the other forms
of mortgage, the provisions of ss. 78-80 of the Act are equally applicable
to a mortgage by deposit of title-deeds.
§ 15. Tacking.
The rule embodied in the maxim "Where there is equal equity, the law
shall prevail",—that not merely an equitable right can be enforced against
one, who has acquired the legal estate bona tide for value without notice,
or better right to call for it,—had an extreme application in the doctrine
of tacking.
(A) England.
Tacking means the union of two incumbrances on the same property
 NATURE OF EQUITABLE ESTATES 57
CHAP. lvi

so as to postpone an
by the mortgagee who has the legal estate,
intermediate incumbraflCe (of course, equitable) which is prior in point of
time to the one tacked, but of which he had no notice. The doctrine has
two Implications.
I. Before 1926-
(a) A third mortgagee, who by buying up a first mortgage obtains a
conveyance of the legal estate, could insist upon being paid the aggregate
amount of the first and third mortgage debts before the 5ond'mortgagee
gets paid anything at alt. In order, however, that the equities may be equal,
of the
the third mortgagee must have advanced his money without notice
second mortgage. The practical effect of this rule was, therefore, that a
subsequent equitable mortgagee might tack his right by getting in the legal
estate (even alter he knew of other mortgages), provided he had no notice
of them when he lent his money. A third mortgagee could,
thus, obtaining
the legal estate, 'squeeze out" a second mortgagee.
Here is, no doubt, an extreme illustration of Mail/and's thesis that legal
rights have a natural preference in equity as in law, over equitable rights.
(b) Secondly, a legal first mortgagee had priority as regards alt future
advances made by him, provided he did not know of the mortgage when
he made the further advances. The doctrine of tacking has lost much of its
importance—
II. After 1926-
S.94 of the L. P. A., 1925, has abolished tacking by a person other
than the prior mortgagee. The only case of priority by tacking possible
after 1926 is that as to further aoancOs by the prior mortgagee:
If the advances were made (a) by arrangement with the subsequent (C) in
mortgagee, or (b) without notice of the subsequent mortgage, or
pursuance of an obligation covenanted in the prior mortgage (notice being
immaterial in this case).
(B) India.
The Indian law, in ss. 79 and 93 of the Transfer of Property Act,
follows the L. P. A., 1925.
Tacking by a subsequent mortgagee has never extended to India.
The provisions of ss. 79 and 93 relate to tacking by a first mortgagee.
S. 79 says—
"If a mortgage made to secure future advances, the performance of an
engagement or the balance of a running account, express the maximum to be
secured thereby, a subsequent mortgage of the some property shall, if made ofwith
all
notice of the prior mortgage, be postponed to the prior mortgage in
or
respect
allowed with
advances or debits not exceeding the maximum, though made
notice of the subsequent mortgage."
 58 EQUITY, TRUSTS, SPECIFIC RELIEF ICHAp. IV

S. 93 says—
"No mortgagee paying off a prior mortgage, whether with or without notice of
an intermediate mortgage, shall thereby acquire any priority in respect of his original
security: and, except in the case provided for by section 79, no mortgagee making
a subsequent advance to the mortgagor, whether with or without notice of an
intermediate mortgage, shalt thereby acquire any priority in respect of his security
for such subsequent advance."
If a first mortgage makes a further advance to the mortgagor, without
notice of second mortgage, the first mortgagee would have priority in
respect of the future advance thus made.
S. 93 says that there will be no priority in respect of subsequent
advances, but S. 79 provides an exception to that rule under certain
conditions. To apply s. 79,-
(i) In order to secure future advances, the prior mortgage must express
the maximum intended to be secured thereby. If no such maximum is fixed,
there will be no priority in respect of the future advances.
(ii) The subsequent mortgage is postponed only if he takes with notice
of the prior mortgage.
(iii) If the above two conditions are fulfilled, it is immaterial whether the
future advances (not exceeding the maximum) are made with notice of the
subsequent mortgage or not.
Thus, if A mortgages to B to secure the balance of As account up to a maximum
of As. 1,000 and Rs. 600 is advanced at the time of the mortgage; and thereafter
A mortgages the same property to C who has notice of the mortgage to B; and
then B advances the balance of As. 400, this advance is not treated as a third
mortgage, but as a fulfilment of the first mortgage, and has priority over Cs
mortgage.
§ 16. Priority as between successive assignments of choses in action.
A chose in action has been described as a personal right of property
which can only be c laimed or enforced by action and not by taking physical
possession. A legal chose in action is one that could be enforced in a
Court of Law (e.g., promissory notes, bills of exchange) while an equitable
chose in action could be enforced only in the Court of Chancery (e.g.,
an interest in trust fund, a legacy). Choses in action were not assignable
at common law, but choses in action, both legal and equitable, were
assignable in equity.
Now that legal choses in action are assignabte at law, under statute
(see below), there is stilt an important difference between a legal and an
equitable assignment of a (legal) chose in action. If the assignment is
legal, the assignee can maintain an action in his own name, but if the
assignment be equitable (i.e., outside the statute), the assignor must
usually be joined.
CHAP. lvi NATURE OF EQUITABLE ESTATES 59

(A) Legal assignment.

At common law, chose in action were not assignable, because a
transfer in common law could only be made by delivery of possession.
Exceptions were made in the case of contracts with the Sovereign and
few other rights. The common law rule was practically abrogated by the
Judicature Act, 1873, S. 25 (now replaced by L. P. A., 1925, s. 136),
which enacted that legal choses in action were assignable at law, provided
the assignment was absolute. To make the assignment a legal one, the
assignment must be (1) absolute., (2) in writing, and (3) express notice
in writing must be given to the debtor. The assignment takes effect from
the date of notice to the debtor and the assignee will take subject to all
equities affecting the assignor at the date of notice. But it enables the
assignee to sue it in his own name and to give a valid discharge. Thus
legal choses in action are now assignable at law. Equitable assignments
are not touched by the statute.
(B) Equitable assignment.
1. Assignments of choses in action were always enforceable in equity,
provided they were for value. In equity the mode or form of assignment is
absolutely immaterial provided the intention of the parties is clear. A mere
order given by a debtor to his creditor upon a third person is deemed a
binding assignment or appropriation [Brandt's v. Dunlop Co., (1905) A. C.
454 ] . The assignment need not be in writing, and may be by mere word of
mouth. It need not be absolute but may be by way of charge. An equitable
assignment, again, is complete between the assignor and assignee from
the date of assignment although no notice is given to the debtor.
2. But it is desirable on the part of the assignee to give notice to the
debtor for two reasons
(a) To prevent the debtor from paying the assignor; the debtor who pays
to the original creditor before receiving notice of the assignment, does so
honestly, and he will be under no liability to the assignee for the same sum.
(b) To preven[a subsequent assignee from gaining priority by notice,
for the claims of competing assignee's rank as between themselves
according to the priority of notice to the debtor or party to be charged, and
not according to the dates at which the creditor assigned his rights to the
assignees respectively. This is known as the rule Deane v. Hal119 [(1823)
3 Russ. 1]—
'Where there are successive assignments of an equitable thing in action, the
claimants are entitled to be paid out of the fund in the order in which they give
notice to the person by whom the fund is distributable, except that a subsequent
19. Doarlo V. Hall.—T holds stocks or shares in trust for E. E gives a charge on his
interest to X as a security for loon, and then gives a similar charge to Y as security for a
later loan. V. having at the time no notice of Xs right, gives notice to T before X does.
Whose charge has priority. X's or Ys? Hold, V gets priority by giving notice.
 60 EQUITY, TRUSTS, SPECIFIC RELIEF [CHAP. IV

assignee who had actual or constructive notice of a previous assignment when

he advanced his money cannot gain priority over it by being the first to give notice.
3. The idea underlying this rule, according to Snell, is "that the first
assignee, by failing to give notice, has left the assignor in apparent
possession of the beneficial interest in the fund, and thus enabled him to
make the subsequent assignment; it is only fair, therefore, that the first
assignee should be postponed, as he has enabled a fraud to be committed
on the second assignee".20
Thus, in an equitable assignment, the assignee must give notice in
order to obtain a right in rem; without notice he has merely a right in
personain against the assignor, and third parties will not be bound. Hence,
the practical rule,—"/f you lake an equitable assignment of a debt or trust
fund, give notice to debtor or trustee" (Malt/and).
4. The notice required by the rule must be given to the debtor, trustee
or other person whose duty it is to pay the money to the assignor. Difficulty
arises when there is no continuously one trustee, i.e., when one trustee is
succeeded by another and different assignees give notice to one or the
other. In such cases, Courts have sometimes adhered to what is called the
registration principle, which means that once notice is given to one trustee, it
is registered, and his successor is also bound by that notice though the latter
may not be personally aware of it [Ward v. Duncombe, (1893) A.C. 269]. The
principle is, as Mail/and says, 'to treat the trustees as a sort of corporation,
so that notice if once got in sticks for good and all or like a register in which
something is inscribed'. But the decisions have not always been consistent
with this principle and, therefore, where the re are more trustees than one,
it is safer to give notice to all of them.
5. Except in the case of negotiable instruments, the assignee takes
subject to the 'equities' existing against the assignor up to the date of notice.
That is to say, all defences, which might have prevailed against the assignor,
prevail against the assgnee. But in any case, he is not affected by equities
arising after the r;cc.
To sum up.: Any assignment which is not absolute but conditional,
and any assignment which on the face of it purports to be by charge
only, cannot be a legal assignment, but may operate as an equitable
assignment. The assignment must be in writing in the former, but it may
take any form in the latter. In the former, the assignment is effectual only
from the date of notice to the debtor, while in the latter it is complete as
between the assignor and assignee from the date of assignment. In a
legal assignment, the assignee can sue the debtor in his own name,
without making the assignor a party to the action, but not so in an equitable
assignment.
20. By the Law of Property Act. 1925, the rule in Deane v. Hall has been extended
to equitable interests in land settled to trust.
CHAP. lvi NAtURE OF EQUITABLE ESTATES 61

§ 16A. Actionable claims and their assignment In India.

1. An actionable claim is defined in s. 3 of the Transfer of Property
Act thus—
'Actionable claim' means a claim to any debt, other than a debt secured by
mortgage of immovable property or by hypothecation or pledge of movable property,
or to any beneficial interest in moveabale property not in the possession, either
actual or constructive, of the claimant, which the Civil Courts recognise as affording
grounds for relief, whether such debt or beneficial interest be existent, accruing,
conditional or contingent" (s. 3).
Actionable claims, therefore, include claims recognised by the Courts
as affording grounds for relief either—(1) as to unsecured debts; or (2)
as to beneficial interests . in moveable property not in possession, actual
or constructive.
2. This definition is thus narrower than that of 'choses in action' in
English law. A chose in action in English law includes all personal rights of
property which can only be claimed or enforced by action and not by physical
possession. Accordingly, debts, benefits of contracts, damages for breach
of contract or tort, and even incorporated rights such as patents, copyrights,
etc., fall under the term 'chose in action'. But rights under a contract other
than those entitling the promisee to the payment of an ascertained sum of
money, i.e., a debt, are excluded from the above definition of actionable
claims. Itihus excludes the right to recover damages for breach of contract
or tort. Again, negotiable instruments are excluded by s. 137 of the Act. A
decree of Court, i.e., a judgment-debt is not an 'actionable claim' because
no action (i.e., a fresh Suit) IS required to realise the judgment-debt; 21 it may
be realised by execution proceeding.
3. As to the mode of assignment of actionable claims, the provisions
of the Transfer of Property Act (Ch. VIII) combine features of legal as well
as equitable assignment. The resemblance to equitable assignment is that
it may be by way of charge or by absolute assignment and it takes effect
as between the assignor and assignee from the date of assignment. On the
other hand, the assignment under s. 130 must be in writing as in legal
assignment, and it enables the assignee to sue in his own name and to
give a valid discharge; and the assignment may be with or without
consideration. Another peculiarity of the Indian law is that as the title of the
assignee is legal and is complete on the execution of the instrument of
assignment, all the rights of the assignor vest in the assignee, excluding
the possibility of a second assignment. Consequently, no question of
priorities between successive assignees arises, and the rule in Deane V.
Hall has no application in India.
4. The provisions relating to these matters are contained in ss. 130-132
of the Act.
21. Ju9u!kishorc v. Raw Cotton Co., A.I.R. 1955 S.C. 376.
 62 EQUITY, TRUSTS, SPECIFIC RELIEF [CHAP iv

The method of transfer is simple. It can be effected simply by the

execution of an instrument in writing. Nothing more is required.
'(1) The transfer of an Actionable Claim whether with or without Consideration
shall be effected only by the execution of an instrument in writing signed by the
transferor or his duly authorised agent and shall be complete and effectual upon
the execution of such instrument, and thereupon all the rights and remedies of
the transferor, whether by way of damages or otherwise, shall vest in the transferee,
whether such notice of the transfer as is hereinafter provided be given or not
Provided that every dealing with the debt or other actionable claim by the
debtor or other person from or against whom the transferor would, but for such
instrument of transfer as aforesaid, have been entitled to recover or enforce such
debt or other actionable claim, shall (save where the debtor or other person is a
party to the transfer or has received express notice thereof as hereinafter Provided)
be valid as against such transfer ................................ ..(S. 130).
The transfer takes effect from the date of execution of the instrument.
But the Proviso protects a debtor who without knowledge of the assignment
pays the transferor. Such a payment is a valid discharge as against the
transferee, if the debtor has not been a party to the transfer or has
received no notice of the transfer. For this reason, it is necessary for
transferee to give notice to the debtor for preventing him front
with the transferor to the prejudice of the transferee. But at the same
time, notice is not necessary for the completion of the transfer, and
successive transfers take effect in order of the dates of transfer and not
in order of giving notice.
Upon the execution of the instrument, all the rights and remedies of
the transferor, whether by way of damages or otherwise, shall vest in the
transferee.
But the transferee shall take it subject to all the liabilities and equities
to which the transferor was subject in respect thereof at the date of the
transfer (s. 132).
§ 17. Covenants running with the land.
(A) At Common Law:
1. At law most contracts were personal, and strangers to a covenant
were not bound by i, so that when a party to a contract purported to assign
the benefit of it, the assignee could not sue upon it. To this rule there was
an exception in the case of certain Covenants which were said to 'run with
the land.
2. Thus, both the benefit and burden of covenants Contained in leases
bound the assignees of both parties though there was no privity of contract
between them [Spencer's Case (1583) 5 Co. 16]. (a) The lessor could
enforce the covenant against every assignee of the lease, and (b) an
CRAP. IV] NATURE OF EQUITABLE ESTATES 63

assignee of the lease could enforce it against the lessor and (by a Statute
of 1540) against every assignee of the lessor. For example, the lessor could
enforce the covenant to pay rent against the assignee of the lessee, and
the assignee of the lessee could enforce the covenant for quiet enjoyment
against the lessor. A covenant, to run with the land at law, ( must be made
with a covenantee who has an interest in the land to which it refers, e.g., by
the lessor with the lessee; (ii) must 'touch and concern the land (that is to say,
merely personal covenants do not run); and (iii) must be entered into in the
same instrument. Again, under the L.P.A., 1925, the assignee would be bound
by the convenant whether named in the covenant or not, and even though the
subject-matter may not be in existence when the covenant is made.
3. As to other covenants relating to land, such as in sale of land, the
benefit runs with the estate, if the covenant touches and concerns the land
(e.g., vendor's covenant for title), but the burden never runs with the land
even though assigns be mentioned. Thus, while the purchaser and his
assigns can enforce against the vendor and his representatives a covenant
made with the vendor for the benefit of the land conveyed, the vendor can
never enforce against the purchaser's assigns any covenant restricting the
enjoyment of the land conveyed.

(B) In Equity
1. But equity enforced (by injunction) such covenants not only against
the original purchaser, but against all save bona fide purchasers for value
without notice. Thus, the burden of a restrictive covenant entered into
between a vendor and purchaser of land will be enforced against subsequent
purchasers, unless they obtain legal estate for value without notice, of the
covenant. Equity first began to enforce the covenant by injunction between
the original covenantor and covenantee, on the ground that the legal remedy
of damages was inadequate. It then began to enforce it against the assignee
or underlessee of the land, on the ground that he had come to the land with
notice of the obligation. Thus, the conception was formed that such
covenants ran with the land in equity, though not at law. But Maitland points
out that such a conception is misleading. The meaning of the expression
'running with the land', at law, is that the covenants pass to the assignee
of the lease and bind him without any further express covenant on his part.
The liability of the assignee is quite independent of his having or not having
any notice of the covenant. Again, because an underlessee is not an,
assignee, he is not bound by such a covenant at law. Moreover, at law
there is no distinction between positive and negative covenants. On the
other hand, the doctrine of equity is based on the ground of notice, and not
only the assignee, but anybody save a bona tide purchaser for value without
notice (including an 'adverse claimant') is bound by it. Moreover, the doctrine
is strictly confined to negative covenants (See p. 65, post).
 64 EQUITY, TRUSTS, SPECIFIC RELIEF [CHAP. IV

(1) The rule was first explained in Tulkv. Moxhay, 22 [(1848)2 Ph. 7741,
• thus—"Anyone coming to the possession of land with notice, actual or
constructive, of a covenant entered into by someone through 'irunder whom
he claims restricting the use to be made of that land, will be prohibited from
doing anything in breach of the covenant." The principle on which such
covenants were enforced was that the purchaser gave a smaller price for
the land by reason of the restrictive covenant, and it would be unconscien-
tious for him, or anybody claiming title under him with notice of the covenant,
to make use of the land, except subject to the obligations of the covenant.
Such a covenant affected the conscience of the person who took with notice
thereof. It was observed , by Lord Cotlenham: "the question is not whether
the covenant runs with the land, but whether a party shall be permitted to
use his land in a manner inconsistent with the contract entered into by his
vendor and with notice of which he purchased."
(2) In London and S.W. Ry. v. Gomm [(1882) 20 Ch. D. 5621, it was
suggested that "the doctrine In Tulk v. Moxhay might be treated as an
extension in equity of Spencer's case, or of the doctrine of (legal)
negative easements". A legal easement presupposes two pieces of land,
viz., a servient and a dominant tenement. A negative easement is a right
of the dominant tenement to restrict the owner of the servient tenement from
using his land in some particular manner. For example, if the dominant
tenement has a right to access of light, the owner of the servient tenement
shall be prevented from building so as to obstruct the light. The easement
is a right pertaining to the land, and, therefore, anybody who comes to the
land is bound by it. The observation in the above case, therefore, means
that a restrictive covenant, in equity, created an equitable charge on the
property in the nature of a negative easement, which would bind any person
who takes the land Unless he has acquired the estate for value without
notice, actual or constructive, of the covenant. The result is, that an equitable
owner, even without notice, would be bound by it, because he is not one who
has acquired the legal estate. But though a restrictive covenant resembles an
easement, it is subject to the great exception, viz., that it is destroyable by a
bona fide purchase for value of the legal estate without notice.
(3) The doctrine reached its final development. in Re Nisbet and Pott's
Contract 23 [(1960) 1 Ch. 3861, where, approving the suggestion in
London
and S. W. Ry. v. Gomm, it was laid down that a restrictive covenant will

22. To/k v. Moxhay.—Tulk sold the central part of Leicester Square to Elms, and Elms
covenantednot to build on the land. The land was afterwards sold to Moxhay, who knew
of the covenant, but proceeded to build. Hold, Moxhay is bound by the covenant. A contract
between the owner of a piece of land and purchaser of a part of it, that the latter, or his
assigns shall use or abstain from using the land purchased in a particular way, is enforceable
in equity, against all subsequent purchasers who purchased with notice of this restrictive
covenant.
23. Re Nisbet and Potts' Con fract.—X conveys a farm to A
in fee. A covenants not
to build within 30 feet of a certain road. After several years, 8 enters as disseisor (i.e.,
 CHAP. IV] NATURE OF EQUITABLE ESTATES 65

bind any holder of the land originally subject to it, whether the holder derives
title through the original covenantor or not, unless the holder is a purchaser
of the legal estate for value without notice. Thus, a disseisor or adverse
possessor is also bound by it. For, a disseisor does not claim through or
under the covenantor, but holds by a wrongful title of his own.
2. Here, then, is created a class of negative easements. It is enforced
against one who is not a party to the transaction creating the equity, and
who does not claim through or under any party. Secondly, the burden of
proof is thrown upon the person who asserts that he has no notice. (This
is why a 'squatter' is bound by it.) Nevertheless, the doctrine is one of equity
and is liable to be defeated by the plea of a bona tide purchase for value
of legal estate.
§ 18. Other limitations of the Rule in ni/k v. Moxhay.

(1) It is confined to restrictive or negative covenants and does not

apply to positive or affirmative covenants or to any other covenant involving
expenditure of money. [Hall v. Ewin (1887) 37 Ch. D. 74]. Of course, this
does not mean that an affirmative covenant is not enforceable as between
the parties thereto. It only means that it will not be enforced against an
assignee from the person who made the covenant.
(2) It only applies where the restrictive covenant has been entered into
for the benefit of another land. In this respect it resembles an easement for
the existence of which it is ne'essary that there should be a dominant as
well as a servient tenement. If the covenantee has disposed of his land or
has no other land capable of enjoying the benefit of the restriction, the
covenant cannot be enforced against a purchaser with notice [Formby v.
Barker, (1903) 2 Ch. 539].
(3) The equitable doctrine has been considerably curtailed by the Law
of Property Act, 1925, which has pract\icaIly substituted notice by registration,
so far as restrictive covenants, othe(than those made between the lessor
and lessee, entered into after 1925, are concerned.
§laA. Covenants running with the lnd in India.
1. The doctine of covenants p with the land has been adopted
in the Transfer of Property Act, and i there is no distinction between
adversely), remains in possession, and sells to .bet. At this time neither B nor Nisbet
knows of the covenant. Afterwards Nisbet sells t Potts, but 1110 latter, from independent
information, comes to know of the original .rustrit ye covenant and declines to fulfil the
contract of sale on the ground thata good title has ot been shown. Hold, that the negative
covenant was enforceable against B, because rn all 01 cupiers are bound except the man who
has purchased for value in good faith and without n tice, actual or constructive. Secondly,
it was held that Nisbet who had purchased from B fiad constructive notice, on the ground
that the burden of proof was oray e person who ass eted that he had no notice. (Therefore.
the judgment was in (aour of Potts.)
 66 EQUITY, TRUSTS, SPECIFIC RELIEF ICRAP. IV

legal and equitable rights, the origins have not been overlooked in this
matter. (a) Thus, instances of benefits of covenants running with the land
are to be found in the third paragraph of s. 55(2) (seller's covenant for title);
s. 65, 2nd paragraph (mortgagor's covenants), s. 180(c) (lessor's Covenant
for quiet enjoyment). These are enforceable by any person in whom the
interest of the covenantee is vested for the time being, irrespective of any
question of notice, just as in the case of covenants running with the land
at law in England. (b) On the other hand, restrictive covenants are dealt
with in the first part of s. 40, and the amendment of 1929 makes it clear
that it applies only to negative covenants. Like covenants running in equity,
these are not enforceable against any transferee for consideration and
without notice. It should be noted that since no equitable interest is recognised
in the Indian law, a restrictive covenant does not create any equitable interest
in India as in England.
2. S. 40 of the Transfer of Property Act provides—
"Where, for the more beneficial enjoyment of his own immovable property, a
third person has, independently of any interest in the immovable properly of another
or of any easement thereon, a right to restrain the enjoyment in a particular manner
of the latter property ..........such right may be enforced against a transferee with
notice thereof or a gratuitous transferee of the property affected thereby, but not
against a transferee for consideration and without notice of the right, nor against
such, property in his hands."
The ingredients of this section are—(1) The covenant must be •a
negative covenant, i.e., a covenant 'restraining the enjoyment of the
'property in a particular manner, and not one 'compelling' the enjoyment
in a particular manner.
\(2) The covenant must have been made for the more beneficial
enjoyment of the land to which the covenant relates. A covenant restricting
the u'er of the land transferred may be one imposed for the personal benefit
of the vendor only. Such a covenant is not enforceable against a subsequent

(3) lt\is not enforceable against a transferee without notice of the

covenant. Hut a gratuitous transferee, i.e. a transferee without consideration,
is bound, wether he has notice or not,—on the principle that on taking the
property as a l gift there is no reason why the donee should be in a better
position thane donor.
Thus, theishErlprinciples are broadly adopted in the above provision.
19. Equltable\rlghts and Interests: A summary.
1. An equitableright arises when a right vested in one person by the
law should, in the View of equity be, as a matter of conscience, vested in
another. Where thisate of affairs existed, equity did not attempt to transfer
 CHAP. lvi NATURE OF EQUITABLE ESTATES 67

the legal right but compelled the person entitled to the legal right to use it
for the benefit of the person entitled in conscience to it.
2. When the subject-matter of an equitable right is definite property,
the person entitled to the right is said to have an equitable interest in the
property. This right may be such as to impose on the legal owner any
obligation ranging from one to let the person entitled to it enjoy the whole
benefits of the property (as in a trust) to one binding the legal owner merely
to use the property in a particular way (as in the case of an equitable
easement arising out of a negative Covenant).
3. Not merely the legal owner against whom the equitable right arose
is bound by this equitable interest, but every person who takes the legal
estate out of which it issues and to which it is annexed, unless he is a bona
fide purchaser for value without notice of the equitable right.
4. A bona fide purchaser of property may take free from equitable
interests affecting it, provided (a) he obtains the legal estate in the property
or the legal estate is vested in some person on his behalf, (b) he gives
valuable consideration for it, and (c) when he gave that consideration he
had no notice of the equitable interests. The principle which protects an
equitable interest is that it is an interest affecting the consicence of the legal
owner. If a legal owner purchases for value and without notice, his
conscience is not affected by the equitable interest. In such a case, the
legal owner and the owner of the equitable interest have . equal equities, and
as the legal owner has also the legal title, the maxim applies—°Where
equities are equal, the law shall prevail.'