Judiciary Exams Exam > Judiciary Exams Notes > Important Acts and Laws > Cheatsheet: The Principles of Equity with Special Reference to the Law of Trust and Specific Relief
Cheatsheet: The Principles of Equity with Special Reference to the Law of Trust and Specific Relief
1. Principles of Equity
1.1 Origin and Nature of Equity
| Concept | Description |
|---|---|
| Equity | Body of rules developed by Court of Chancery to supplement and mitigate rigors of common law |
| Maxim: Equity follows the law | Equity supplements but does not supplant common law |
| Maxim: Equity aids the vigilant | Those who sleep on their rights shall not be aided by equity |
| Maxim: Equity looks to intent rather than form | Substance prevails over form in equitable proceedings |
| Maxim: He who seeks equity must do equity | Claimant must act fairly towards defendant |
| Maxim: He who comes to equity must come with clean hands | Party with unclean hands cannot seek equitable relief |
| Maxim: Equity regards as done that which ought to be done | Treats obligations as if already performed when required by justice |
| Maxim: Where equities are equal, law prevails | When competing equitable claims are equal, legal title holder prevails |
| Maxim: Equity acts in personam | Equity operates on the person, not on property directly |
1.2 Application of Equity in India
- Section 9, CPC: Courts shall grant all relief the plaintiff is entitled to even if not specifically claimed
- Section 39, Specific Relief Act, 1963: Discretion to grant or refuse specific performance based on equity
- Section 20, Specific Relief Act: Cancellation of instruments based on equitable grounds
- Courts apply principles of justice, equity, and good conscience where statutes are silent
2. Law of Trust
2.1 Definition and Essential Elements
| Element | Description |
|---|---|
| Trust - Section 3, Indian Trusts Act, 1882 | Obligation annexed to ownership of property arising out of confidence reposed in and accepted by owner for benefit of another |
| Author of Trust/Settlor | Person who reposes or declares confidence |
| Trustee | Person who accepts confidence; legal owner of trust property |
| Beneficiary/Cestui que trust | Person for whose benefit trust is created; equitable owner |
| Trust Property | Subject matter of trust; must be specific and transferable |
| Trust Instrument | Document creating the trust (deed, will, etc.) |
2.2 Creation of Trust
2.2.1 Requirements for Valid Trust
- Competent author - Section 7: Any person competent to contract
- Clear intention to create trust - must be definite and certain
- Lawful purpose - Section 4: Must not be forbidden by law, immoral, or defeat any law provision
- Definite beneficiary - Section 9: Must be ascertainable except for charitable/religious trusts
- Transfer of property to trustee - Section 5
- Acceptance by trustee - Section 10: Express or implied
2.2.2 Mode of Creation - Section 5
| Type | Mode |
|---|---|
| Inter vivos trust | By non-testamentary instrument in writing signed by author with registration if immovable property exceeds Rs. 100 |
| Testamentary trust | By will executed according to Indian Succession Act, 1925 |
| Declaration of trust | Author declares himself as trustee for beneficiary |
2.3 Types of Trusts
| Type | Description |
|---|---|
| Private Trust | Created for benefit of one or more definite persons |
| Public/Charitable Trust | For public religious or charitable purposes; governed by specific state laws |
| Express Trust | Created by express declaration of author |
| Implied/Constructive Trust | Imposed by law on grounds of equity, fraud, or breach of confidence |
| Resulting Trust | Arises where beneficial interest reverts to settlor (purchase in name of another without intent to benefit) |
| Executed Trust | No further act required; beneficiary gets immediate interest |
| Executory Trust | Requires further instrument for complete execution |
2.4 Duties and Powers of Trustee
2.4.1 Duties - Sections 11-29
- Section 11: Execute trust with reasonable diligence
- Section 12: Allow inspection and give information to beneficiary
- Section 13: Keep clear and accurate accounts
- Section 14: Not profit from trust; no conflict of interest
- Section 15: Not use trust property for own profit
- Section 16: Duty not to delegate - delegatus non potest delegare (except for ministerial acts)
- Section 17: Invest only in authorized securities unless otherwise empowered
- Section 18: Duty of impartiality among beneficiaries
- Section 20: Duty to keep trust property distinct from own property
2.4.2 Powers - Sections 30-53
- Section 30: Sell trust property when necessary for payment of debts or investments
- Section 31: Apply income for maintenance of minor beneficiary
- Section 32: Insure trust property
- Section 33: Compromise claims
- Section 34: Give receipts and discharge obligations
- Section 35: Power to lease for limited period (maximum 21 years for agricultural, 3 years for other purposes)
2.5 Rights and Liabilities of Trustee
| Aspect | Details |
|---|---|
| Right to indemnity - Section 44 | Reimbursement for expenses properly incurred in execution of trust |
| Right to lien - Section 46 | Lien on trust property for expenses and liabilities incurred |
| Right to payment - Section 48 | No right to remuneration unless provided in trust instrument |
| Liability for breach - Section 23 | Liable for loss caused by breach of trust; must make good the loss |
| Joint trustees - Section 24 | All must join; each liable for own acts and omissions only unless acting jointly |
| Mode | Details |
|---|---|
| Section 77: Purpose fulfilled | Trust terminates when purpose is completely achieved |
| Section 78: Performance impossible | Termination when trust purpose becomes impossible or unlawful |
| Section 79: Destruction of property | Trust ends if entire trust property is destroyed |
| Section 80: Revocation | When power to revoke is reserved by author |
| Agreement of parties | All beneficiaries and trustees agree to terminate if beneficiaries are sui juris |
| Court order | Court may terminate on equitable grounds or changed circumstances |
3. Specific Relief
3.1 Introduction to Specific Relief Act, 1963
| Concept | Description |
|---|---|
| Specific Relief | Equitable remedy requiring actual performance of obligation rather than damages |
| Application - Section 1 | Extends to whole of India; came into force on 1st March 1964 |
| Section 2: Suit for compensation | Party may combine or substitute claim for compensation with specific relief |
| Section 3: Savings | Does not affect rights under other laws |
3.2 Recovering Possession of Property - Sections 5-8
| Section | Provision |
|---|---|
| Section 5 | Recovery of specific immovable property: Person entitled to possess may recover it from wrongful possessor |
| Section 6 | Suit by dispossessed owner: Person dispossessed otherwise than in due course of law may recover possession |
| Section 7 | Recovery of specific movable property: Owner may recover possession with or without damages |
| Section 8 | When relief not available: Cannot recover if property has passed to transferee for value in good faith |
3.3 Specific Performance of Contracts - Sections 9-25
3.3.1 When Granted - Section 10
- Contracts for transfer of immovable property: Court may direct specific performance
- Amendment 2018: Changed from discretionary to mandatory subject to exceptions
- No adequate remedy in damages available
- Contract is in writing, registered, and signed by party against whom relief is sought
3.3.2 When Not Granted - Section 14
| Circumstance | Reason |
|---|---|
| 14(1)(a) | Compensation in money is adequate relief |
| 14(1)(b) | Contract runs into minute or numerous details or involves personal skill |
| 14(1)(c) | Contract is determinable in nature |
| 14(1)(d) | Performance involves violation of other legal provisions |
| 14(1)(e) | Contract is made for inadequate consideration |
| 14(2) | Contract contains negative covenant - injunction more appropriate |
3.3.3 Who Can Obtain and Against Whom - Sections 15-16
- Section 15: Any party to contract may obtain except persons with option to rescind, those who become incapable, or where contract is revocable/voidable at option of defendant
- Section 16: Can be enforced against party to contract, representative in interest, person claiming through title arising after contract
- Section 16(c): Cannot enforce against transferee for value without notice of original contract
3.3.4 Other Provisions
| Section | Provision |
|---|---|
| Section 11 | Contracts not specifically enforceable: Where compensation is adequate, contract involves personal service or skill |
| Section 12 | Part performance of contracts relating to transfer of immovable property |
| Section 13 | Lessor and lessee rights: Lessee can enforce specific performance against lessor |
| Section 20 | Discretion regarding specific performance: Court considers conduct of parties |
| Section 21 | Power to award compensation in addition to or in substitution of specific performance |
| Section 22 | Time limit for suit: Within 3 years from date fixed for performance or if no date, from date of refusal to perform |
3.4 Rectification of Instruments - Section 26
| Ground | Description |
|---|---|
| Fraud or mutual mistake - Section 26(1) | Court may rectify instrument to express real intention when fraud or mutual mistake causes deviation |
| Unilateral mistake - Section 26(2) | Rectification when one party's mistake and other party's fraud/misrepresentation |
| Limitations | Cannot rectify against bona fide purchaser for value without notice |
3.5 Rescission of Contracts - Sections 27-30
| Section | Provision |
|---|---|
| Section 27 | When rescission allowed: Voidable contracts, material alteration/breach, failure of consideration |
| Section 28 | Alternative to rescission: May insist on performance with compensation |
| Section 29 | When rescission refused: Third party rights created, substantial performance with minor breach |
| Section 30 | Court may order refund of benefits received under rescinded contract |
3.6 Cancellation of Instruments - Sections 31-33
- Section 31(1): Court may cancel voidable instruments or which have become void
- Section 31(2): Person with limited interest may apply to cancel encumbrance on that interest
- Section 32: Court may grant cancellation on equitable grounds even if no rescission
- Section 33: Cancellation refused if third party rights in good faith created
3.7 Declaratory Decrees - Section 34
| Aspect | Details |
|---|---|
| Section 34(1) | Person entitled to legal character, right to property, or declaration may obtain declaratory decree |
| Scope | Determines status or right without consequential relief |
| Consequential relief | May also claim consequential relief based on declaration |
| Bare declaration | Pure declaration without further relief permissible |
3.8 Injunctions - Sections 36-42
3.8.1 Types of Injunctions
| Type | Description |
|---|---|
| Temporary/Interlocutory - Section 37(1) | Granted during pendency of suit to preserve status quo |
| Perpetual - Section 37(2) | Granted at hearing as final relief to prevent future breach |
| Mandatory Injunction - Section 37(3) | Compels defendant to perform positive act to restore status quo |
| Prohibitory Injunction | Restrains defendant from doing particular act |
3.8.2 When Granted - Section 38
- Perpetual injunction to prevent breach of obligation existing in favor of applicant
- When invasive act would cause injury not compensable in damages
- When pecuniary compensation inadequate
- Injury threatened is repetitive in nature
- Defendant's wealth makes damages inadequate remedy
3.8.3 When Refused - Section 41
| Ground | Explanation |
|---|---|
| 41(a) | Conduct of plaintiff makes it inequitable to grant relief |
| 41(b) | Plaintiff has no personal interest in matter |
| 41(c) | Plaintiff has adequate alternative remedy |
| 41(d) | Conduct sought to be restrained is for public benefit |
| 41(e) | Application involves multiplicity of acts or continuous supervision |
| 41(f) | Injunction would cause greater hardship to defendant than benefit to plaintiff |
| 41(g) | Injunction prevents lawful exercise of possession |
| 41(h) | Equally effective relief can be obtained otherwise |
3.8.4 Temporary Injunction
- Section 37(1): Granted at any stage of suit
- Order XXXIX, Rule 1-2, CPC: Prima facie case, balance of convenience, irreparable injury test
- Section 41: Same limitations as perpetual injunction with necessary modifications
- Duration: Until disposal of suit or further orders
3.8.5 Mandatory Injunction
- Section 55 read with Order XXXIX, CPC: To restore things to position as of date of filing suit
- Requires stronger case than prohibitory injunction
- Court exercises caution; must be satisfied of urgent necessity
3.9 Other Provisions
| Section | Provision |
|---|---|
| Section 39 | Perpetual injunction when refused: Where injunction would impede defendant's lawful acts without securing benefit to plaintiff |
| Section 40 | Damages in addition to injunction possible |
| Section 41A (Amendment 2018) | Suit for infrastructure project delay: Compensation payable at 1% of contract value for each month of delay |
| Section 42 | Injunction to perform negative agreement enforceable if breach would produce injury not compensable |
4. Interrelation of Equity, Trust, and Specific Relief
4.1 Application of Equitable Principles
- Trusts are creatures of equity; trustees owe fiduciary duties based on equitable principles
- Specific performance is equitable remedy requiring clean hands, readiness, and willingness
- Discretion in granting specific relief guided by maxims of equity
- Injunctions developed in equity to prevent unconscionable conduct
- Constructive trusts imposed by equity to prevent unjust enrichment
4.2 Remedies Overlap
| Situation | Remedy |
|---|---|
| Breach of trust | Injunction to restrain breach; specific performance to compel execution; rectification of trust deed |
| Trustee conflict of interest | Constructive trust on profits; injunction against dealing |
| Transfer in breach of trust | Cancellation of transfer; recovery of property; declaration of rights |
| Charitable trust mismanagement | Injunction; removal of trustee; appointment of new trustee |
4.3 Equitable Defenses
- Laches: Delay defeats equity; bars specific performance and injunctions
- Acquiescence: Acceptance of breach bars equitable relief
- Unclean hands: Plaintiff's misconduct bars relief under Section 41(a), SRA
- Hardship: Balance of convenience and hardship considered under Section 41(f), SRA
- Section 20, SRA: Court considers conduct, readiness, willingness in specific performance
5. Important Case Laws and Principles
5.1 Trust Principles
- Intention to create trust must be clear and unambiguous
- Three certainties: Certainty of intention, certainty of subject matter, certainty of objects
- Trustee cannot purchase trust property - self-dealing rule
- Fair-dealing rule: Trustee dealing with beneficiary must prove fairness
- Doctrine of tracing: Follow trust property in hands of third parties unless bona fide purchaser for value without notice
5.2 Specific Performance Principles
- Readiness and willingness essential - must be pleaded and proved
- Time is essence: If stipulated, delay bars specific performance unless waived
- Contract must be definite, complete, and certain in terms
- Plaintiff must show ability to perform his part of contract
- Amendment 2018: Shifted from discretionary to mandatory subject to exceptions
5.3 Injunction Principles
- Prima facie case, balance of convenience, irreparable injury - three-fold test for temporary injunction
- Irreparable injury: Injury not compensable in terms of money
- Balance of convenience: Comparative mischief/inconvenience to both parties
- Status quo: Position existing as of date of filing suit
- Mandatory injunction requires stronger case and caution
- No injunction against sovereign functions or statutory duties
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