LAW AND JUSTICE: LAW OF EQUITY ANDTRUST

Equity in Bangladesh

Contents of the assignment:

1. Introduction.

2. Object of the assignment.

3. Definition of equity.

4. Maxims of equity.

5. Application of the principles of equity in statutory law of Bangladesh.

a. Principles of equity in the Muslim law.

b. Principles of equity in Hindu law.

c. The Specific Relief Act, 1877.

d. The Trust Act, 1882.

e. The Contract Act, 1872.

f. The Transfer of Property Act 1882.

g. Principles of equity in the Civil Procedure Code.

h. Principles of equity in the Constitution of Bangladesh.

6. Conclusion.

7. Bibliography.

Introduction:

As we know that principles of equity were created by the hands of the chancellors of chancery court as compliment of natural justice. In England there was a separate court for the administration of equity. In India and Bangladesh there was never separate court for the administration of equity. The grater 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 principles of equity, justice and good conscience interpreted to mean only those rules of English equity which are applicable to India and Bangladeshi societies and circumstances.

Objects of the assignment:

Although there was never any separate court in Bangladesh for the administration of equity. But the principles of equity are applicable in statutory law of Bangladesh. So the main object of this assignment to find out which rules, Acts and articles of the statutory law of Bangladesh follow the principles of equity.

Definition of Equity:

The term Equity is a derivation from the roman term “acquitas” which means equalization or leveling.

Literal senses: the literal meaning give to Equity is “right” as founded the law of the nature, fairness and justice.

General sense: the most general sense we call that Equity which in human transactions is founded on natural justice honesty and right.

Roman sense: Equity the Roman sense means a body of moral principles introduced in the Roman law by Praetor which constituted Equity by the side of Jus Civil.

English sense: Equity in English senses means the body of rules formulated and administrated by the court of Chancery to supplement the rules and procedure of the common law.

As per famous jurist Snell: Equity law is the part of natural justice though of such a nature as to admit of being judicially enforced, was omitted to be enforced by the common law court an mission which was supplied by the court of Chancery.

According to Maitland: Equity is some principles of Judicature Act in English which is refused by the law court or which is not accepted by the common law court but it is accepted by the equity court of chancellor. The main purpose of equity court is established natural justice. When suit is refused by the common law court learned chancellor tried to solve that problem by their natural justice, good conscience and equity.

[debnath, Candra, Denash The law of Equity and Trust.Published by Kamrul book house.p.9]

Maxims of Equity:

Definition of maxim:

Maxim means some principles which were created by the hands of the chancellor of the chancery court as complement of the natural justice.

According to the salmond: Maxims are the proverbs of the law and provide the useful meaning for the law in a form brief and intelligible.

Kinds of maxim:

The maxims of equity are twelve, which are given below…

1. Equity will not suffer a wrong to be without a remedy.

2. Equity follows the law.

3. He who seeks equity must do equity.

4. He who comes into equity must come with clean hand.

5. Equality is equity.

6. Delay defeats equity.

7. Equity looks to inter rather then to the form.

8. Equity looks on that as done which ought to be done

8. Equity imputes an intention to fulfill an obligation.

9. Equity acts in personam.

10. Where the equities are equal the first in time is prevail.

11. Where there is equal equity the law shall prevail.

Application of Equity law in the statutory law of Bangladesh:

In Bangladesh there is no separate court for the administration of Equity. The grater part of the law to be applied by the court has been codified which are given below…

Application of Equity in Muslim law:

In Mohammedan law the principles of equity are clearly noticeable. Imam abu Hanifa ,the founder of the Hanafi sect of Sunnis , expounded the principle that the rule of law based on analogy could be set aside at the option of the judge on a liberal construction or judicial preference to meet the requirements of a particular case. The principles of Mohammedan law are known as Istihsan, or justice equity. With regard to the Mohammedan law their Lordships of the Privy Council in Hamira Bibi vs. Zubaida Bibi.

Equity in Hindu law:

It has been laid down that in case of a conflict between the rules of “smritis” either may be followed, as reasoning of the principles of equity. Yuktivichar shall decide the solutions.

Jayaswal has also collected authorities to the same effect. He says ‘we may recall “kautilya’s provisions that in the dharma text is found opposed to judiciary reason the dharma text fails and the authority of reason prevails.

Yajnavalkya says, where there is a conflict between two smritis texts reason (Equity) is there stronger. He limitis superiority of reason or Equity to a conflict between the sastras themselves.”

The specific Relief Act, 1877:

The specific relief act is admitted besed on doctrine of equity jurisprudence which were originally developed in England. Following sections are regarding the principles of equity..

Discretion as to decreeing specific performance

22. The jurisdiction to decree specific performance is discretionary, and the Court is not bound to grant such relief merely because it is lawful to do so; but the discretion of the Court is not arbitrary but sound and reasonable, guided by judicial principles and capable of correction by a Court of appeal.

Contracts to sell property by one who has no title, or who is a voluntary settler

25. A contracts for the sale or letting of property, whether moveable or immoveable, cannot be specifically enforced in favour of a vendor or lessor-

(a) who, knowing himself not to have any title to the property, has contracted to sell or let the same;

(b) who, though he entered into the contract believing that he had a good title to the property, cannot, at the time fixed by the parties or by the Court for the completion of the sale or letting, give the purchaser or lessee a title free from reasonable doubt;

(c) who, previous to entering into the contract, has made a settlement (though not founded on any valuable consideration) of the subject-matter of the contract.

Illustrations

(a) A, without C's authority, contracts to sell to B an estate which A knows to belong to C. A cannot enforce specific performance of this contract, even though C is willing to confirm it.

(b) A bequeaths his land to trustees, declaring that they may sell it with the consent in writing of B. B gives a general prospective assent in writing to any sale which the trustees may make. The trustees then enter into a contract with C to sell him the land. C refuses to carry out the contract. The trustees cannot specifically enforce this contract, as, in the absence of B's consent to the particular sale to C, the title which they can give C is, as the law stands not free from reasonable doubt.

(c) A, being in possession of certain land, contracts to sell it to Z. On inquiry it turns out that A claims the land as heir of B, who left the country several years before, and is generally believed to be dead, but of whose death there is no sufficient proof. A cannot compel Z specifically to perform the contract.

(d) A, out of natural love and affection, makes a settlement of certain property on his brothers and their issue, and afterwards enters into a contract to sell property to a stranger. A cannot enforce specific performance of this contract so as to override the settlement, and thus prejudice the interest of the persons claiming under it.

What parties cannot be compelled to perform

28. Specific performance of a contract cannot be enforced against a party thereto in any of the following cases:-

(a) if the consideration to be received by him is so grossly inadequate, with reference to the state of things existing at the date of the contract, as to be either by itself or coupled with other circumstances evidence of fraud or of undue advantage taken by the plaintiff;

(b) if his assent was obtained by the misrepresentation (whether wilful or innocent), concealment, circumvention or unfair practices, of any party to whom performance would become due under the contract, or by a promise of such party which has not been substantially fulfilled;

(c) if his assent was given under the influence of mistake of fact, misapprehension or surprise: Provided that, when the contract provides for compensation in case of mistake, compensation may be made for a mistake within the scope of such provision, and the contract may be specifically enforced in other respects if proper to be so enforced.

Illustrations

to clause (c)-

A, one of two executors, in the erroneous belief that he had the authority of his co-executor, enters into an agreement for the sale to B of his testator's property. B cannot insist on the sale being completed.

A directs an auctioneer to sell certain land. A afterwards revokes the auctioneer's authority as to 20 bighas of this land, but the auctioneer inadvertently sells the whole to B, who has not notice of the revocation. B cannot enforce specific performance of the agreement.

(i) The effect of dismissing a Suit for Specific Performance

All of these sections follow the maxim; He who comes into Equity must come with clean hand.

Application of preceding sections to awards and testamentary directions to execute settlements

30. The provisions of this Chapter as to contracts shall, mutatis mutandis, apply to awards and to directions in a will or codicil to execute a particular settlement.

Principles of rectification

33. In rectifying a written instrument, the Court may inquire what the instrument was intended to mean, and what were intended to be its legal consequences, and is not confined to the inquiry what the language of the instrument was intended to be.

Court may require party rescinding to do equity

38. On adjudging the rescission of a contract, the Court may require the party to whom such relief is granted to make any compensation to the other which justice may require.

Above these sactions follow the Maxim , He who seeks equity must do equity.

Equity in the Trust Act 1882:

The rules contained in the Indian Trust Act 1882 are substantially the same which were administrated at that time by English court of Equity under the name of justice, equity, good conscience. Following section are regarding the principles of equity…

Section.23 Liability for breach of trust.

Where the trustee commits a breach of trust, he is liable to make good the loss which the trust-property or the beneficiary has thereby sustained, unless the beneficiary has by fraud induced the trustee to commit the breach, or the beneficiary, being competent to contract, has himself, without coercion or undue influence having been brought to bear on him, concurred in the breach, or subsequently acquiesced therein, with full knowledge of the facts of the case and of his right as against the trustee.
A trustee committing a breach of trust is not liable to pay interest except in the following cases:-

(a) where he has actually received interest:

(b) where the breach consists in unreasonable delay in paying trust-money to the beneficiary:

(d) Where he may be fairly presumed to have received interest.
He is liable, in case (a), to account for the interest actually received, and, in cases (b), (c) and (d), to account for simple interest at the rate of six per cent. per annum, unless Court otherwise directs.

(e) where the breach consists in failure to invest trust-money and to accumulate the interest or dividends thereon, he is liable to account for compound interest (with half-yearly rests) at the same rate.

(f) where the breach consists in the employment of trust-property or the proceeds thereof in trade or business, he is liable to account, at the option of the beneficiary, either for compound interest (with half-yearly rests) at the same rate, or for the net profits made by such employment.

This section follows the maxim “He who comes into equity must come with clean hand”.

Section.62 Wrongful purchase by trustee:

Where a trustee has wrongfully bought trust-property, the beneficiary has a right to have the property declared subject to the trust or retransferred by the trustee, if it remains in his hands unsold, or, if it has been bought from him by any person with notice or the trust, by such person. But in such case the beneficiary must repay the purchase-money paid by the trustee, with interest, and such other expenses (if any) as he has properly incurred in the preservation of the property; and the trustee or purchaser must (a) account for the net profits of the property, (b) be charged with an occupation-rent, if he has been in actual possession of the property, and (c) allow the

beneficiary to deduct a proportionate part of the purchase-money if the property has been deteriorated by the acts or omissions of the trustee or purchaser.
Nothing in this section-

(a) impairs the rights of lessees and others who, before the institution of a suit to have the property declared subject to the trust or retransferred, have contracted in good faith with the trustee or purchaser; or

(b) entitles the beneficiary to have the property declared subject to the trust or retransferred where he, being competent to contract, has himself, without coercion or undue influence having been brought to bear on him, ratified the sale to the trustee with full knowledge of the facts of the case and of his rights as against the trustee.

This section is created to follow the maxim “He who seeks equity must do equity.”

Section.86transfer pursuant to rescindable contract:

Where property is transferred in pursuance of a contract which is liable to rescission or induced by fraud or mistake, the transferee must, on receiving notice to that effect, hold the property for the benefit of the transferor, subject to repayment by the latter of the consideration actually paid.

This section is also created to follow the maxim “He who seeks equity must do equity.”

Section.91 property acquired with notice of existing contract:

Where a person acquires property with notice that another person has entered into an existing contract affecting that property, of which specific performance could be enforced, the former must hold the property for the benefit of the latter to the extent necessary to give effect to the contract.

This section follows the maxim “Equity looks on that as done which ought to be done.”

Section.92 purchase fly person contracting to buy property to be held on trust:

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 the extent necessary to give effect to the contract.

This section follows the maxim “Equity imputes an intention to fulfill an obligation.”

Principles of equity in the Contract Act 1872:

There are certain equitable doctrines which have been important in the contract, and some of the important doctrine relating generally to the law of contract is doctrine of penalties and forfeitures, stipulation as to time in a contract, equitable relief on the ground of misrepresentation, fraud and undue influence. Following sections are directly related to the principles of Equity…

Power to set aside contract induced by undue influence

19A. when consent to an agreement is caused by undue influence, the agreement is a contract voidable at the option of the party whose consent was 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 to the Court may seem just.

(a) A's son has forged B's name to a promissory note. B, under threat of prosecuting A's son, obtains a bond from A for the amount of the forged note. If B sues on this bond, the Court may set the bond aside.

(b) A, a money-lender, advances Taka 100 to B, an agriculturist, and, by undue influence, induces B to execute a bond for Taka 200 with interest at 6 per cent per month. The Court may set the bond aside, ordering B to repay the Taka 100 with such interest as may seem just.]

Effect of novation, rescission and alteration of contract

62. If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed.

Illustrations

(a) A owes money to B under a contract. It is agreed between A, B and C that B shall thenceforth accept C as his debtor, instead of A. The old debt of A to B is at an end, and a new debt from C to B has been contracted.

(b) A owes B 10,000 Taka. A enters into an arrangement with B, and gives B a mortgage of his (A's) estate for 5,000 Taka, in place of the debt of 10,000 Taka. This is a new contract and extinguishes the old.

(c) A owes B 1,000 Taka under a contract. B owes C 1,000 Taka. B orders A to credit C with 1,000 Taka in his books, but C does not assent to the arrangement. B still owes C 1,000 Taka, and no new contract has been entered into.

Consequences of rescission of voidable contract

64. When a person at whose option a contract is voidable rescinds it, the other party there to need not perform any promise therein contained in which he is promisor. The party rescinding a voidable contract shall, if he have received any benefit there under from another party to such contract, restore such benefit, so far as may be, to the person from whom it was received

Obligation of person who has received advantage under void agreement or contract that becomes void

65. When an agreement is discovered to be void, or when a contact becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for it to the person from whom he received it.

Illustrations

(a) A pays B 1,000 Taka in consideration of B's promising to marry C, A's daughter. C is dead at the time of promise. The agreement is void, but B must repay A the 1,000 Taka.

(b) A contracts with B to deliver to him 250 maunds of rice before the first of May. A delivers 130 maunds only before that day and none after. B retains the 130 maunds after the first of May. He is bound to pay A for them. (c) A, a singer, contracts with B, the manager of a theatre, to sing at his theatre for two nights in every week during the next two months, and B engages to

pay her a hundred Taka for each nights performance. On the sixth night, A willfully absents herself from the theatre, and B, in consequence, rescinds the contract. B must pay A for the five nights on which she had sung. (d) A contracts to sing for B at a concert for 1,000 Taka which are paid in advance. A is too ill to sing. A is not bound to make compensation to B for the loss of the profits which B would have made if A had been able to sing, but must refund to B the 1,000 Taka paid in advance.

All of above these sections are created to follow the maxim “He who seeks equity must do equity.

Any one of joint promisors may be compelled to perform Each promisor may compel contribution Sharing of loss by default in contribution

43. When two or more persons make a joint promise, the promisee may, in the absence of express agreement to the contrary, 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 entitle the principal to recover anything from the surety on account of payments made by the principal.

Reimbursement of person paying money due by another in payment of which he is interested

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

Obligation of person enjoying benefit of non- gratuitous act

70. Where a person lawfully does anything for another person, or delivers anything to him, not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of, or to restore, the thing so done or delivered.

Co-sureties liable to contribute equally

146. Where two or more persons are co-sureties for the same debt or duty, either jointly or severally, and whether under the same or different contracts, and whether with or without the knowledge of each other, the co-sureties, in the absence of any contract to the contrary, are liable, as between themselves, to pay each an equal share of the whole debt, or of that part of it which remains unpaid by the principal debtor.

Liability of co-sureties bound in different sums

147. Co-sureties who are bound in different sums are liable to pay equally as far as the limits of their respective obligations permit.

Above those sections are the results of the maxim “Delay defeats equity.

Principles of Equity in the Transfer of property Act 1882:

The transfer of property Act has also included many doctrines of equity originated in the court of chancery in England. Following sections of this act are directly related to the principles of equity.

Section.40 Burden of obligation imposing restriction on use of land
Where, for the more beneficial enjoyment of his own immovable property, a third person has, independently of any interest in the immovable property of another or of any easement thereon, a right to restrain the enjoyment in a particular manner of the latter property, or

Or of obligation annexed to ownership but not amounting to interest or easement : 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 easement thereon,

such right or obligation 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 or obligation, nor against such property in his hands.

Section.78 Postponement of prior mortgagee
where, through the fraud, misrepresentation or gross neglect of 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.

Above this section are directly related to the maxim “Where there is equal equity the law shall prevail.

Section.48 Priority of rights created by transfer
Where a person purports to create by transfer at different times rights in or over the same immovable property, and such rights cannot all exist or be exercised to their full extent together, each later created right shall, in the absence of a special contract or reservation binding the earlier transferees, be subject to the rights previously created.

Section.79 Mortgage to secure uncertain amount when maximum is expressed
If a mortgage made to secure future advances, the performance of an engagement or the balance of a running account, expresses the maximum to be secured thereby, a subsequent mortgage of the same property shall, if made with notice of the prior mortgage, be postponed to the prior mortgage in respect of all advances or debits not exceeding the maximum, though made or allowed with notice of the subsequent mortgage.

This two section are created to follow the maxim “Where there is equal equity the law shall prevail and the maxim “Where the equities are equal the first in time is prevail.”

Section.53 Fraudulent transfer
(1) Every transfer of immovable property made with intent to defeat or delay the creditors of the transferor shall be voidable at the option of any creditor so defeated or delayed.

Nothing in this sub-section shall impair the rights of a transferee in good faith and for consideration.

Nothing in this sub-section shall affect any law for the time being in force relating to insolvency.

A suit instituted by a creditor (which term includes a decree-holder whether he has or has not applied for execution of his decree) to avoid a transfer on the ground that it has been made with intent to defeat or delay the creditors of the transferor shall be instituted on behalf of, or for the benefit of, all the creditors.

(2) Every transfer of immovable property made without consideration with intent to defraud a subsequent transferee shall be voidable at the option of such transferee.

For the purposes of this sub-section, no transfer made without consideration shall be deemed to have been made with intent to defraud by reason only that a subsequent transfer for consideration was made.

Section.91 Persons who may sue for redemption.
Besides the mortgagor, any of the following persons may redeem, or institute a suit for redemption of, the mortgaged property, namely,-

(a) any person (other than the mortgagee of the interest sought to be redeemed) who has any interest in, or charge upon, the property mortgaged or in or upon the right to redeem the same;

(b) any surety for the payment of the mortgage-debt or any part thereof; or

(c) any creditor of the mortgagor who has in a suit for the administration of his estate obtained a decree for sale of the mortgaged property.

Above those section are directly follow the maxim “Equity looks on that as done which ought to be done.”

Section.51 Improvements made by bona fide holders under defective titles
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 interest in the property to the transferee at the then market value thereof, irrespective of the value of such improvement.

The amount to be paid or secured in respect of such improvement shall be the estimated value thereof at the time of the eviction.

When, under the circumstances aforesaid, the transferee has planted or sown on the property crops which are growing when he is evicted there from, he is entitled to such crops and to free ingress and egress to gather and carry them.

Section.35 Election when necessary
Where a person professes to transfer property which he has no right to transfer, and as part of the same transaction confers any benefit on the owner of the property, such owner must elect either to confirm such transfer or to dissent from it; and in the latter case he shall relinquish the benefit so conferred, and the benefit so relinquished shall revert to the transferor or his representative as if it had not been disposed of, subject nevertheless, where the transfer is gratuitous, and the transferor has, before the election, died or otherwise become incapable of making a fresh transfer, and in all cases where the transfer is for consideration, to the charge of making good to the disappointed transferee the amount or value of the property attempted to be transferred to him.

Those sections are created to follow the maxim “he who seeks Equity must do Equity.”

Equity in the Civil Procedure Code:

Section-9 o C.P.C may be mentioned as an example of the application of the maxim “Equity will not suffer a wrong to be without remedy. Section-43 of this code is also the example the maxim “Equality is Equity”. According to this section where assets are held by a court and more persons then one have (before the receipt of such assets) made application to court for the execution of decrees for the payment of money passed against the same judgment – debtor and have not obtained satisfaction thereof, the assets, after deducting the costs realization will be ratably distributed among all such persons.

Principles of equity in the Constitution of Bangladesh:

Article no 19(1) of the constitution of Bangladesh has been included maxim of equity specially. The maxim of equity is applied at the time of administration of justice like England. Where there was no sufficient common law Equity law acts as the auxiliary law of the common law. The maxim of equity in the court of England is applied in the court of Bangladesh subject to the necessary amendment.

Conclusion:

Thus we have seen that in enacting many statutes, the Indian and Bangladesh legislature has substantially adopted the English rules of equity, but it must also be noted that all the rules of English Equity are not applicable in India and Bangladesh. The re are many rules in English equity which have either not been followed in India Bangladesh or imported only in modified form in view of the special circumstances of this country. For example, while the English rule is that a court of Equity will not compel specific performance of a continuous duty extending over many years, section21 (g) of the specific relief Act puts a definite time limit in respect, that contract requiring performance of a continuous duty extending over more than 3 years will not be special enforced.