LAW AND EQUITY: AN OVERVIEW
In law, the term equity refers to a particular set of remedies and associated procedures. These
equitable doctrines and procedures are distinguished from "legal" ones.
Laws are actually rules and guidelines that are set up by the social institutions to govern
behavior. These laws are made by government officials. Laws must be obeyed by all. Laws set
out standards, procedures and principles that must be followed. Equity is a branch of law that
was developed as a supplement to the strict statutory laws that may provide too harsh
punishments. In layman’s terms, equity is a part of law that decides punishment on the basis of
justice and fairness after looking at all aspects of the punishment, including the motive of the
accused.
Equitable relief is generally available only when a legal remedy is insufficient or inadequate in
some way. This could be when a claim involves a particular piece of real estate, or if specific
performance is the relief requested by the plaintiff. The rules of equity arose in England where
the strict limitations of common law would not solve all problems, so the King set up separate
courts of chancery (equity) to provide remedies through the royal power.
Equity came around approximately 200-300 years after the development of the common law
system in England. The courts of law during that time were filled with the enforcers of the king’s
law and were trained to administer punishments that were set in stone. However, any person that
was not satisfied with the outcome of the law courts in England, could appeal to the King for a
lesser punishment. When the number of appeal cases grew, the King forwarded this duty to his
High Chancellors. The High Chancellors were church clergymen and would usually take into
consideration the surrounding factors before making a decision. This court became known as the
‘Court of Chancery.’ Following 17th century, the court of Chancery started appointing proper
lawyers instead of clergymen or nobles.
Following this pattern in America some states created "chancery courts" dealing with equitable
relief only. In other states, the courts of common law were empowered to exercise
equity jurisdiction. Separate courts of chancery have largely been abolished and the same court
that may fashion a legal remedy has the power to prescribe an equitable one. If one is in
a legal battle, the difference between whether a judge is sitting in a court of equity or law makes
a huge difference. Specifically, a judge in a court of law MUST follow the law even if you were
justified stealing the bread. In a court of equity, the court can use its own discretion to determine
whether you were justified in stealing the bread (with exceptions on the criminal nature of this,
as always).
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Difference between law and equity can be understood by an easy example such as an example of
a painter for your house. If you sign a contract for someone to paint your house and it does not
work out well, you have an “action” based on a court of law issue. Either the painter painted
according the contract or not.
However, if a painter thought you had a contract, but you did not, and yet it improved your
house, then the painter has an action in equity.
Generally speaking contract, landlord/tenant, foreclosure and other written document cases are
court of law cases. It doesn’t matter whether you could pay or not pay, the matter is “black letter
law” that you should have paid. It is a matter of “you did or did not do” something, regardless of
the social circumstances.
Equity cases are family law cases, bankruptcy cases, and sometimes cases like my painting
situation above. The court will hear what is fair, and the outcome is based on factors rather than
contract terms.
In the court of law cases, the facts are what they are, and you win or lose; in equity cases, the
court will fashion almost any remedy it seems fit so that both parties win or both parties lose.
Law and Equity in Indian Context
With the fusion of common law and equity in India beginning in the late 19 th century, statutes
and other laws have incorporated equitable principles. A classic example is Section 151 of the
Code of Civil Procedure, 1908 that grants an inherent power to the Court to “pass such orders as
may be necessary for the ends of justice..”. The law of trusts and aspects of company law are also
an integral part of equity. Equitable remedies of injunctions, specific performance and various
remedies for breach of trust, i.e. rendering accounts for profit, return of property, tracing,
following etc have also found their place in statutes in India.
Most of the equitable principles and rules have, in India, been embodied in the statute law and
has been made applicable to the extent of the provisions made therein. That, the provisions of
equity in Indian statute books might have their source in common law or in equity or in an
adjustment between the two, is immaterial.
Statutory recognitions of the principles of equity is found in the Indian Contract Act, 1872,
the Specific Relief Act, 1877, the Indian Trust act, 1882, the Transfer of Property Act,1882, and
in the Indian Succession Act, 1925.
The equitable doctrines featuring in the Indian Contract Act are mainly, the doctrine of
penalties and forfeiture, stipulations as to time in a contract, equitable relief on the ground of
misrepresentation, fraud and undue influence.
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The statutory recognition of the principles of equity in the Specific Relief Act are regarding
injunction, specific performance, cancellation, rectification and recession etc.
The rules administered by the English Courts of equity under the head of justice, equity and
good conscience are contained in the Indian Trust Act.
Many doctrines of equity are contained in the Transfer of Property Act. The English
doctrine of part performance has been drawn in section 53A of the Act. Section 48 and 51 are
also based on the equity principles.
General Principles of Equity
The subject matter of the equity can be grouped around some legal maxims
which embody the general principles on which the court of chancery exercised its jurisdiction.
Some of such important maxims are as follows:
(1) Aequitaes est corectio legis generalities latae, qua parte deficit: i.e., Equity is a
correction of the general law in the part where it is defective – For a long time, the English
Courts were guided by the doctrine ubi remedium ibi jus (where there is a remedy there is a
right) but with the development of the Court of Chancery in England, this doctrine gave way to a
more pragmatic and just doctrine called ‘ubi jus ibi remedium’ (where there is a right there is a
remedy).
A right is a right only when it can be enforced by the court. A remediless right is of no
consequence. Thus, in order to give effect to a right which is suitable for judicial enforcement
but which could not be enforced at common law due to some technical defect, the Court of
Chancery developed the maxim ‘equity will not suffer a wrong to be without a remedy.’
The Court of Chancery applied the maxim in those cases where there was a failure of justice
due to the deficiencies in law, and to help the litigants in obtaining legal reliefs for the violation
of legal rights by offering facilities in evidence and procedure which the common law courts did
not secure. The maxim is to give an adequate relief where the one available in common law court
was inadequate.
Place of the maxim in the Indian context
The maxim finds its embodiment in many Indian enactments like, the Specific Relief Act,
provides for equitable remedies by way of specific performance of contracts, rectification of
instruments etc. The Code of Civil Procedure particularly captures the maxim in section 9.
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(2) Aequitas sequitur legem i.e. equity follows the law – Equity does not claim to override
the law. Equity generally operates by recognising the legal rule and adding some further rule,
remedy or the other machinery of its own.
The Court of Chancery, which developed equitable law never wanted to give the equity an
overriding effect to the common law. The jurisdiction of equity is debarred from overreaching
the boundaries established by the prior course of adjudication.
Another maxim which needs a mention in this discussion is ‘Aeguitas nunquam contravenit
leges’ i.e., equity never counteracts law. In India, since there is no distinction between a legal
interest and equitable interest, therefore, in all matters relating to legal as well as equitable
interests, the statutory provisions shall apply if there are any.
(3) He who seeks equity must do equity – This maxim put a mandate on the seeker of
equity that he must, in his turn, be equitable in recognising and submitting to the right of his
adversary as no one can be justified in requiring another to be conscientious without himself
being so. A litigant, claiming something by way of equity, must, himself be ready and willing to
grant to his opponent, that which the opponent is entitled.
A litigant cannot seek equitable remedies as a matter of right as such remedies are at the
discretion of the court. The court before granting it, must enquire whether the plaintiff himself
would be prepared to act as a man of conscience towards the defendants.
Incorporation of the maxim in Indian Laws
Section 38 of the Specific Relief Act provides that on adjudging recession of a contract, the
Court may require the party to whom such relief in granted, to make any compensation to the
other which justice may require. Section 30 and 38 also provide that on adjudging the
cancellation of an instrument, the Court may require the party to whom such relief is granted, to
make compensation to the other which justice may require.
An equitable condition is imposed on the beneficiary to repay the trustee, the purchase with
interest and other legitimate expenses when he seeks a declaration on trust or retransfer of trust
property wrongfully bought by the trustee, by section 62 of the Indian Trust Act, section 86
imposes the equitable condition of repaying the consideration paid in transfer of property
pursuant to a rescindable contract.
According to section 35 of the Transfer of Property Act, that he who takes a benefit under an
instrument must accept or reject the instrument as a whole. This section incorporates the
‘Doctrine of Election’ dealt under a separate head.
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Section 51 of the Transfer of Property Act, provides that he who makes improvement on any
immovable property believing in good faith that he is absolutely entitled thereto and in
subsequently evicted therefrom by a person having better title, is entitled to compensation for the
improvement made by him.
The Indian Contract Act lays that “when consent to an agreement is caused by undue
influence, the argument is a contract voidable at the option of the party whose consent was 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 there under, upon such terms and conditions as the court may
deem first.” (Section 19A)
Further section 64 and 65 of the Indian Contract Act are also based on the doctrine ‘he who
seeks equity must do equity’.
The maxim, however, does not apply when relief sought by the plaintiff and equitable right
or relief secured to or sought by the defendant belongs to or originates from two entirely separate
and distinct matters. Further, it is not applicable where the plaintiff seeks to enforce purely legal
rights.
(4)Vigilantibus, non dormientibus jura subvenient i.e., the law helps the vigilant and the
dormant – While a legal claim is not barred by any lapse of time less then the prescribed
statutory period of limitation, an equitable claim, on the other hand, may be barred by delay on
the part of the plaintiff seeking relief.
Delay, however, means unreasonable delay in claiming relief and an ordinary or reasonable
delay. A court of equity has always refused its aid to demands where a party has slept upon his
rights and acquiesced for a great length of time.
An unreasonable delay defeats equity. But such legal or equitable claims to which the statutes
of limitation apply expressly or by analogy the maxim ‘delay defeats equity’ does not apply. In
such cases, delay so far as it is within the statutory period will not defeat a claim.
(5)Equity delights in equality – The English Court of Chancery, incorporated into the Equity
jurisprudence of English Law, the concept of acquitas i.e. the notion of equality and impartiality
as conceived by the Roman jurists. The equity, thus, so far as possible, puts the parties to a
transaction on an equal footing, although the strict rules of law may give one party an advantage
over the other. Equality have does not mean literal equality, but it means ‘proportional equality’.
The maxim has wide application. Following are some illustrations
(1) In case of the assets of insolvent debtor, equity insists on a rateable distribution by
abolishing preferential treatment of certain creditors.
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(2) A creditor having a single clause against several debtors, can, realise the debt from any of
such debtors. But the debtor who had thus been compelled to pay the debt in full, though without
any remedy against his co-debtors, could in equity, claim contribution from them in order that
the burden passes equally.
(3) In a case where there are two creditors of the same debtors, and one creditor has a right to
resort to two funds of the debtors; the other creditor has a right to only one of them. The Court
on basis of the maxim shall as ‘Marshall’ the funds that both the creditors are paid as much and
as far as possible.
Place of the maxim in Indian context
The Code of Civil Procedure, section 48, provides that where assets are held by a court and
more persons than one have (before the receipt of such assets) made application to the Court for
the execution of decrees for the payment of money passed against the same judgement- debtor
and have not obtained satisfaction thereof, the assets after deducting the costs of realisation will
be reliably distributed among all such persons.
Other provisions giving effect to the maxim are section 42 of the Indian Contract Act that
applies the principle of tenancy-in-common, section 43,63-70,146-147 of the Indian Contract Act
and section 82 of the Transfer of Property Act, laying provisions relating to ‘contribution’.
(6)Where equities are equal , the first in time shall prevail – In the absence of a legal
estate in the matter and the contest is among the equitable estate only, the rule is that the person
whose equity attached to the property first will be entitled to priority over other or others e.g., if
A enters into a contract for the sale of his house with B and then with C, the interest of B and C
both being equitable, B will have priority over C because his attached to the property first.
This rule ‘where equities are equal, the first in time shall prevail’ is applicable in cases only
when equities are equal. Therefore, if equities are unequal in the sense that equity on the side of
the person otherwise entitled to priority is worse, that is, he is guilty of anything unconscionable
or unfair, he would lose his priority.
Application of the maxim in India – Section 48, 78 and 79 of the Transfer of Property Act,
provides the example of this maxim.
Section 78 provides that where through the fraud, misrepresentation, gross neglect of a prior
mortgagee, another person has been induced to advance money on the security of the mortgaged
property the prior mortgagee shall be postponed to the subsequent mortgagee.
(7) Legal estate prevails over the equitable estate – Where there is a question of selection
between equity on one hand over text of law on the other, the Court shall choose the latter. To say
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it differently, the person in possession of legal estate is entitled to priority over any person having
merely an equitable estate in that property.
‘Where there is equal equity, the law shall prevail’ is another version of the maxim.
Accordingly, clear text will outweigh the equities written or legal estate prevails over the
equitable estate. This doctrine is different from the one discussed earlier (in 6) in the sense that
whereas in the previous one, the controversy is with regard to equitable rights only and the
question is of time, whereas in the previous one, the controversy is with regard to equitable rights
only and the question is of time, whereas, in the present doctrine, the controversy is between
legal and equitable provision.
Applicability of the maxim in India – The ‘Doctrine of Election’, Marshalling and ‘set off’,
of Indian law are based on this maxim. The principle of the maxim has been incorporated in
section 40 and 78 of the Transfer of Property Act, 1882. According to section 40, where a third
person is entitled to the benefit of an obligation arising out of contract and annexed to the
ownership of immovable property, but not amounting to an interest therein or an easement
thereon, such right or obligation may be enforced against a transferee with notice thereof
gratuitous transferee of the property affected thereby, but not against a transferee for
consideration and without notice of the right or obligation, nor against such property in his
hands. This provision in a case of ‘’prior equitable and subsequent equitable estate.
Further, section 78 provides that where through the fraud, misrepresentation or gross
neglect of a prior mortgagee, another person has been induced to advance money on the security
of the mortgaged property, to the prior mortgagee is to be postponed to the subsequent
mortgagee.
