AD-1136-R

Trust and Equity

LL.B.(Part I)(Second Semester)Examination, 2016
Attempt 5 questions in all.
All questions carry 20 marks each.
Define Trust with illustrations. Distinguish Trust with Contract and Agency.
A trust is a fiduciary relationship (A fiduciary relationship is where one person places some type of trust,
confidence, and reliance on another person.) in which one party, known as a trustor, gives another party, the
trustee, the right to hold title to property or assets for the benefit of a third party, the beneficiary. Trusts are
established to provide legal protection for the trustor’s assets, to make sure those assets are distributed
according to the wishes of the trustor, and to save time, reduce paperwork and, in some cases, avoid or reduce
inheritance or estate taxes. While they are generally associated with the idle rich, trusts are highly versatile
instruments which can be used for a wide variety of purposes to achieve specific goals. Each trust falls into six
broad categories—living or testamentary, funded or unfunded, revocable or irrevocable.
Understanding Trusts
Trusts are created by settlors (an individual along with his or her lawyer) who decide how to transfer parts or
all of their assets to trustees. These trustees hold on to the assets for the beneficiaries of the trust. The rules of a
trust depend on the terms on which it was built. In some areas, it is possible for older beneficiaries to become
trustees. For example, in some jurisdictions, the grantor can be a lifetime beneficiary and a trustee at the same
time.
A trust can be used to determine how a person’s money should be managed and distributed while that person is
alive, or after their death. A trust helps avoid taxes and simplify or eliminate the probate process. Probate is
the legal process for distributing a deceased person's property to their heirs and beneficiaries and settling any
debts. The probate process carries out the instructions in a person's will. If there's no will, it follows state law.
Trust can protect assets from creditors, and it can dictate the terms of an inheritance for beneficiaries. The
disadvantages of trusts are that they require time and money to create, and they cannot be easily revoked.
A trust is one way to provide for a beneficiary who is underage or has a mental disability that may impair his
ability to manage finances. Once the beneficiary is deemed capable of managing his assets, he will receive
possession of the trust.
Common Purposes for Trusts: A trust is a legal entity employed to hold property, so the assets are generally
safer than they would be with a family member.
Though they seem geared primarily toward high net worth individuals and families, since they can be
expensive to establish and maintain, those of more middle-class means may also find them useful – in
ensuring care for a physically or mentally disabled dependent, for example.
Some individuals use trusts simply for privacy. The terms of a will may be public in some jurisdictions. The
same conditions of a will may apply through a trust, and individuals who don't want their wills publicly posted
opt for trusts instead.
Trusts can also be used for estate planning. Typically, the assets of a deceased individual are passed to the
spouse and then equally divided to the surviving children. However, children who are under the legal age of 18
need to have trustees. The trustees only have control over the assets until the children reach adulthood.
Trusts can also be used for tax planning. In some cases, the tax consequences provided by using trusts are
lower compared to other alternatives. As such, the usage of trusts has become a staple in tax planning for
individuals and corporations.
Assets in a trust benefit from a step-up in basis, which can mean a substantial tax savings for the heirs
who eventually inherit from the trust. By contrast, assets that are simply given away during the owner’s
lifetime typically carry his or her original cost basis.
Illustration: Here's how the calculation works: Shares of stock that cost $5,000 when originally purchased,
and that are worth $10,000 when the beneficiary of a trust inherits them, would have a basis of $10,000. Had
the same beneficiary received them as a gift when the original owner was still alive, their basis would be
$5,000. Later, if the shares were sold for $12,000, the person who inherited them from a trust would owe tax
on a $2,000 gain, while someone who was given the shares would owe tax on a gain of $7,000. (Note that the
step-up in basis applies to inherited assets in general, not just those that involve a trust.)
Finally, a person may create a trust to qualify for Medicaid and still preserve at least a portion of their
wealth.

three things are necessary for the creation of a trust:

(i) certainty of words,
(ii) certainty of subject-matter, and
(iii) certainty of object.
(a) Certainty of intention - Certainty being an essential requirement for the constitution of a trust, the words
expressing a trust must be so used that on the whole they ought to be constructed as imperative.
Moreover, if on the whole it can be gathered that a trust was intended, no particular form of expression is
necessary.
If the intention to create a trust, the purpose of it, the beneficiaries to it, and the trust-property are indicated by
the settlor (or trustor) along with a transfer of the trust-property to the trustee, all with reasonable certainty,
there is nothing that can stop a trust from taking form.
But if the "intention" in the declaration of trust is lacking, no trust can arise and the transferee takes the
property beneficially for himself.
(b) Certainty of subject-matter [Section 8] - The subject-matter of a trust must be property transferable to
the beneficiary.
Property of any kind, movable or immovable, that is legally transferable can be the subject of trust. But a mere
beneficial interest under a subsisting trust cannot be a subject-matter of trust in India.
It therefore follows that a trust of "mere expectancy" which is not transferable according to Section 6 of the
Transfer of property Act, is not possible in India.
Similarly, a chance being an heir apparent to succeed a contingent interest of a reversioner, a public office, pay
of a public office, pension of a government servant or any other interest restricted to enjoyment personally,
cannot be a subject of trust.
For creation of trust the owner of the property must fully divest himself of the property. The subject-matter of
a trust must be certain or the "bulk" of property bound by the trust must be definite; if not, the trust cannot
arise.
The subject-matter falls under two heads: (a) the trust-property, and (b) the beneficial interest. If some part of
the interest for the beneficiaries is certain while some other part is uncertain, that uncertain part fails and the
principal beneficiary takes the whole.
(c) Certainty of object - Certainty of the or the beneficiaries is also necessary for the validity of a trust, except
where the trust is for the benefit of "charity". A non-charitable trust therefore fails if the object is uncertain.
Where trust fails for the uncertainty of object, the donee does not and cannot take for his own benefit, but
holds for the settlor or his legal representatives as a trustee, i.e., a resulting trust arises here.
(d) Lawful purpose and transfer of trust-property - Section 6 of the Trust Act, 1882 adds two further
essentials to the above said three certainties. They are:
(i) the purpose of the trust, and
(ii) the transfer of the trust-property to the trustee.
If the trust is to be operative the purpose of the trust, the ultimate intention of creating the trust, must be lawful.
If it is otherwise, the trust cannot operate though it exists. This is laid down by Section 4.
Lawful purpose - A trust may be created for any lawful purpose. The purpose of a trust is lawful unless it is
(a) forbidden by law, or
(b) is of such a nature that, if permitted, it would defeat the provisions of any law, or
(c) is fraudulent, or
(d) involves or implies injury to the person or property of another, or
(e) the court regards it as immoral or opposed to public policy.
So far as the purpose is concerned, a trust which postpones the enjoyment of the property for an indefinite
period or prevents its alienation forever, being in breach of the rule against perpetuities, is void.
A trust seeking to alter the ordinary law of descent or succession or violating the rules for valid disposition of
property is void. A trust to defraud creditors, a trust in restraint of marriage, or for future illegitimate children
are in the same way void being against public policy. But trust for an illegitimate child in existence is valid. If
a trust is directed to more than one purpose, all of which are unlawful, the trust is void, but if some of them
only is unlawful, and the unlawful can be served from the lawful, the lawful purpose will take effect.
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Agency - An agent and a trustee both administer property on behalf of another and they cannot become the
beneficial owner thereof, i.e., each is subject to fiduciary obligations towards his principal or beneficiaries.
Agents, like trustees, must act personally in the business of the agency and are accountable to their
principals, as are trustees to beneficiaries, for any profit made out of the property or business entrusted to
them. The relation in each case is a fiduciary one. Agency is also known as “mandate”. It is where a person
appoints a second person called an “agent” for duties to be executed on his behalf. The agent will execute
orders given to him by the owner of the property. Trust resembles agency in the sense that the persons who
execute orders are not the absolute owners of the property. The deference deducted between them is that a
trustee is the owner of the property he administers whereas an agent does not possess a legal title. Moreover,
the authority of the trustee is derived from the trust instrument. That of the agent is purely a matter of
delegation from the person whose agent he is.

The differences between Trust and Agency are:

(i) Trusts are governed by equity, agency by Common law.
(ii) Agency normally arises by contract between the principal and agent (except in case of agency of necessity)
whereas in most trusts no such contractual relationship between trustees and beneficiaries exists.
(iii) Property of agency does not vest in the agent where a trustee has property vested in him.
(iv) While an agent can make his principal liable, a trustee cannot involve his beneficiaries in liability.
(v) An agent always acts on behalf of his principal and is subject to his control. A trustee is not subject to such
a control either from the settlor or from the beneficiaries.
(vi) An agent when he goes beyond his powers and out of his sphere canot pass a legal s-title to a bona fide
purchaser for value without notice of the trust.
(vii) An agent derives his authority to act by delegation from his principal, whereas a trustee derives such an
authority from the instrument of trust.

The differences between Contract and Trust are:

Contracts - (i) A contract is a common law personal obligation resulting from an agreement, a trust is an
equitable proprietory relation which can arise independently of an agreement. However, the trust may arise as
a result of an agreement for consideration, in which case there may be both-a trust and contract.
(ii) A contract is enforceable at Common law; it is a bilateral act, it springs from an offer and acceptance, it
gives a right in personam, a stranger to a contract can have neither the benefit of it nor its liability, and
contracts without consideration cannot be enforced.
On the other hand, trust is a matter of confidence was enforced by equity courts: it may be a purely unilateral
act (where the settlor himself is a trustee), there is no offer and the trustee's acceptance is presumed unless he
disclaims a trust, it almost gives a right in rem, its benefit is claimed not by the trustor (unless he is also a
beneficiary) but by the cestui que trust who is not a party to the contract, and lastly, the consideration supplied
in contract and trust are of different nature.

What are the various categories of Trust ???

Trusts can be classified using a number of different methods or elements. The element may be:
disbursement—a protective trust (where the settlor is a beneficiary) or a qualifying trust (where the settlor is
not a beneficiary)
character—a charitable purpose trust (also called public trust, where the beneficiary strictly fits any of four
charitable categories) or a non-charitable purpose trust (a private trust where the beneficiary isn’t necessarily
an ascertainable individual)
revocability—a revocable trust (where the settlor retains ownership and control of trust assets and can alter the
trust deed at any time) or an irrevocable trust (where the settlor cannot alter or make changes to the trust deed)
establishment—an express trust (where the settlor establishes or creates the trust) or one that is imposed by
law (sub-types include statutory trust, resulting or implied trust, and constructive trust)
For clarity and continuity reasons, we’ll only discuss express trusts. Of course, as previously noted, a trust can
be rightly classified as an express trust (established by you, the settlor), a protective trust (you specify yourself
as beneficiary), and a revocable trust (you can make changes to the trust deed).

Types of express trusts

For an express trust to be valid there has to be three certainties. These are certainty of intention, certainty of
subject matter, and certainty of objects. Without these certainties, an express trust will not be valid. The
purpose of these certainties is to ensure the trust is properly controlled and enforced.
Express trusts come in different flavours. The type you choose depends primarily on the reason to establish it.
The most commonly used types are:
Bare, simple, or absolute trusts
As the name suggests, this is the most basic kind of trust.
 You (the settlor) places assets in to the trust, appoint trustees, specify the intended beneficiaries, and
state that all assets should be passed directly to them.
 The trustees assume ownership of transferred assets.
 The beneficiary or beneficiaries are entitled to, and have absolute right to all of the capital and the
income of the trust at any time; as long as he or she is at least 18 years of age.
Usually the beneficiary cannot be changed after establishing a bare trust - that means the trustees have no say
over what the beneficiary receives and do not perform any active duty.
Simple trusts are often used to transfer assets to minors (young people who do not meet the aforementioned
age requirement), with the trustees looking after the assets until a beneficiary comes of age.
Interest-in-possession trusts
These comprise of two categories of beneficiaries - income beneficiaries and capital beneficiaries.
The trustee transfers all trust income (less any expenses and tax) to the income beneficiary for a fixed period,
an indefinite period; or more often, for the rest of the income beneficiary’s life.
An income beneficiary entitled to income for as long as he or she lives is called a life tenant. And the trust is
called a life interest trust.
Regardless of the duration for which income is disbursed, the income beneficiary is said to have an interest in
possession in the trust.
For life interest trusts, the interest in possession ends on the death of the income beneficiary with the capital
beneficiaries receiving the entirety of the trust property afterwards.
Interest in possession trusts are often used to provide for a surviving spouse with the capital of the trust kept
intact and passed on to heirs (usually children) when the spouse dies.
For example, you may create an interest-in-possession trust, where you designate your wife as the income
beneficiary, your children as capital beneficiaries, and all your shares as the trust property.
You may state as part of the trust instrument that when you die, income from the shares should go to your wife
for the rest of her life. And that the shares should be passed on to your children when she dies.
Typically, in this arrangement, the income beneficiary has no right to the shares themselves (or the powers that
the shares confer) - just the income.

Discretionary trusts
You give trustees the power to decide how to use the income, and sometimes, the capital of the trust.
You would have to stipulate how much power the trustees possess in the trust instrument, often in the form of
a letter of wishes.
You may give the trustees the freedom to make a decision on what is paid out (income or capital), which
beneficiary receives disbursements, the timing and frequency of disbursements, and/or whether or not to
impose conditions on beneficiaries.
You may set up a discretionary trust if you’ve already identified intended beneficiaries but are unsure of how
much help they would need in the future and in what proportions. For instance, a grandchild may be in need of
more financial help than other beneficiaries at some point.
You may also create a discretionary trust to take care of beneficiaries who are not responsible or capable
enough to handle cash themselves.
You may set up a variant of discretionary trust called an accumulation and maintenance trust, if you want to
give trustees the ability to augment or accumulate the income and capital of the trust through savings and
investments. Typically, you’d allow for this accumulation to continue until a specific date when the beneficiary
is entitled to some income or all the capital of the trust.
Vulnerable beneficiaries
Another variant of a trust is a trust for vulnerable beneficiaries also called a trust for disabled
beneficiaries.
This can be any of the types of trust above, but where one or more of the beneficiaries is a vulnerable person -
someone who is otherwise unable to look after the assets in the trust himself or herself.
It is commonly used for a child under 18 or for a beneficiary who is a mentally or physically disabled.
The trust may also be used to hold compensation payments for individuals who became disabled because of
personal injury.
Vulnerable beneficiaries’ trusts have special tax exemptions.

Mixed or hybrid trusts

A hybrid trust incorporates characteristics of several types of express trusts. In other words, it does not strictly
fit the description of only one trust type. Mixed trusts demonstrate just how flexible trusts can be.
Accordingly, tax rules for a mixed trust are a mixture those that apply to the different parts of the hybrid trust.
A good example of a mixed trust is a trust where some assets are treated as though they were part of an interest
in possession trust, while other assets are treated as though they were part of a discretionary trust.
You may use this subtype of mixed trust when you intend for siblings of different ages (who meet the age
requirement at different times) to benefit from the same trust fund.
Settlor-interested trusts
This term generally refers to protective trusts, where the settlor is also a beneficiary.
However, according to UK trust law, a trust you create that specifies your spouse or civil partner as a
beneficiary also counts as a settlor-interested trust (even though it isn’t exactly a protective trust).
A settlor-interested trust may take on the characteristics of either an interest-in-possession, discretionary, or
accumulation trust.
For example, if an injury or illness erodes your ability to work, creating a discretionary trust is a smart way to
ensure that you wouldn’t be short on cash in the future.

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Categories of Trusts Although there are many different types of trusts, each fits into one or more of the
following categories:
Living or Testamentary: A living trust – also called an inter-vivos trust – is a written document in which an
individual's assets are provided as a trust for the individual's use and benefit during his lifetime. These assets
are transferred to his beneficiaries at the time of the individual's death. The individual has a successor trustee
who is in charge of transferring the assets. A testamentary trust, also called a will trust, specifies how the
assets of an individual are designated after the individual's death.
A testamentary trust is a trust that is created before the date of effect, which is the death of the person who
creates it. It is often established through a last will and testament. For testamentary trusts, the person who
creates the trust is not called a settlor, but a testator. A testamentary trust is a legal entity that manages the
assets of a deceased person in accordance with instructions in the person's will.
Revocable or Irrevocable: A revocable trust can be changed or terminated by the trustor during his lifetime.
An irrevocable trust, as the name implies, is one the trustor cannot change once it's established, or one that
becomes irrevocable upon his death. An irrevocable trust cannot be modified, amended or terminated without
the permission of the grantor's named beneficiary or beneficiaries.
Living trusts can be revocable or irrevocable. Testamentary trusts can only be irrevocable. An irrevocable trust
is usually more desirable. The fact that it is unalterable, containing assets that have been permanently moved
out of the trustor's possession, is what allows estate taxes to be minimized or avoided altogether.
Funded or Unfunded
A funded trust has assets put into it by the trustor during his lifetime. An unfunded trust consists only of the
trust agreement with no funding. Unfunded trusts can become funded upon the trustor’s death or remain
unfunded. Since an unfunded trust exposes assets to many of the perils a trust is designed to avoid, ensuring
proper funding is important.
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What is a Trust?
Trusts can be used to minimize taxes, simplify or eliminate the probate process, and protect assets. Probate is
the legal process for distributing a deceased person's property to their heirs and beneficiaries and settling any
debts. The probate process carries out the instructions in a person's will. If there's no will, it follows state law.
A trust is a legal entity established under state law to manage and distribute assets to the beneficiaries.
The trust grantor/ settlor/ true owner creates the trust and places assets into it.
A trustee selected by the grantor is responsible for managing the trust and eventually distributing its assets to
the beneficiaries, who are selected by the grantor at the time the trust is established. A beneficiary may be
anyone the grantor wishes, but he/she is always an heir, a member of the family, or a charity.
Trusts may be used to minimize taxes, simplify the probate process, or abolish it, and protect properties. There
are plenty of different types of trusts (revocable, irrevocable, testamentary, asset security, charitable, special
needs and so on), but trust is either a simple trust or a complex trust when it comes to tax status.
A simple trust is also called a bare trust, in which the assigned trustee does not have to do anything rather
ensure that the trust property is provided to the specified beneficiary within the prescribed time, as determined
by the trust.
Three basic features describe a simple trust:
 The trust must allocate any profit it receives on trust assets to the beneficiaries annually.
 The trust can't distribute the trust's principal.
 The trust cannot make distributions to charities.
When this form of trust is used, the income from the trust is taxable to the beneficiaries, even though they do
not withdraw the income from the trust. Taxes on capital gains are applied to the Trust itself. Rules of a
simple trust are as below:
 A simple trust is a taxable organization.
 Every beneficiary typically has to pay tax on the income, which they receive from the trust.
 Trusts are not subjected to a double taxation scheme, so the trust is exempt from all taxable income
paid to the beneficiaries.
 The money distributed to the beneficiaries retains its character, so that, for example, if the trust
distributes long-term capital gains to the beneficiaries, they will list it on their tax returns as a long-
term capital gain.
 Mostly, the income earned by the trust comes under the tax regime, but the principal is not. Therefore,
the trust should allocate every principal and income to each beneficiary in case if the trust distributes
both principal and income.
A simple trust must distribute all its income currently. Generally, it cannot accumulate income,
distribute out of corpus, or pay money for charitable purposes. If a trust distributes corpus during a
year, as in the year it terminates, the trust becomes a complex trust for that year.

A complex trust is essentially the opposite of a simple trust. To be classified as a complex trust, it must do at
least one of three activities within the year:
 The trust must retain some of its income and not distribute all of it to beneficiaries.
 The trust must distribute some or all of the principal to the beneficiaries.
  The trust must distribute some funds to charitable Organizations.

Or

1. What are the three certainties of Valid Trust ? Consider the effect of absence of each of them
on the validity of Trust.

Define Beneficiary. What are his rights against a Trustee ?

A trust is a legal arrangement through which one person, called a "settlor" or "grantor," gives assets to another
person (or an institution, such as a bank or law firm), called a "trustee." The trustee holds legal title to the
assets for another person, called a "beneficiary." The rights of a trust beneficiary depend on the type of trust
and the type of beneficiary. As a trust beneficiary, you may feel that you are at the mercy of the trustee, but
depending on the type of trust, beneficiaries may have rights to ensure the trust is properly managed.
RIGHTS OF BENEFICIARIES: Sec:55-67, deals with the rights of beneficiary classified broadly under
2 heads.
a) Rights of beneficiary (sec:55-61)
b) Remedies available to beneficiary (sec:62-67)
55.Right to rents and profits.—The beneficiary has, subject to the provisions of the instrument of trust, a right
to the rents and profits of the trust property.
56. Right to specific execution.—The beneficiary is entitled to have the intention of the author of the trust
specifically executed to the extent of the beneficiary’s interests. Right to transfer of possession. —And, where
there is only one beneficiary and he is competent to contract, or where there are several beneficiaries and they
are competent to contract and all of one mind, he or they may require the trustee to transfer the trust property
to him or them, or to such person as he or they may direct. When property has been transferred or bequeathed
for the benefit of a married woman, so that she shall not have power to deprive herself of her beneficial
interest, nothing in the second clause of this section applies to such property during her marriage.
Illustrations (a) Certain Government securities are given to trustees upon trust to accumulate the interest until
A attains the age of 24, and then to transfer the gross amount to him. A on attaining majority may, as the
person exclusively interested in the trust property, require the trustees to transfer it immediately to him.
(b) A bequeaths Rs. 10,000 to trustees upon trust to purchase an annuity for B, who has attained his majority
and is otherwise competent to contract. B may claim Rs. 10,000.
(c) A transfers certain property to B and directs him to sell or invest it for the benefit of C, who is competent to
contract. C may elect to take the property in its original character.
57. Right to inspect and take copies of instrument of trust accounts, etc.— The beneficiary has a right, as
against the trustee and all persons claiming under him with notice of the trust, to inspect and take copies of the
instrument of trust, the documents of title relating solely to the trust property, the accounts of the trust
property, and the vouchers (if any) by which they are supported, and the cases submitted and opinions taken by
the trustee for his guidance in the discharge of his duty.
58. Right to transfer beneficial interest.—The beneficiary, if competent to contract may transfer his interest,
but subject to the law for the time being in force as to the circumstances and extent in and to which he may
dispose of such interest: Provided that when property is transferred or bequeathed for the benefit of a married
woman, so that she shall not have power to deprive herself of her beneficial interest, nothing in this section
shall authorise her to transfer such interest during her marriage.
59. Right to sue for execution of trust.—Where no trustees are appointed or all the trustees die, disclaim or are
discharged, or where for any other reason the execution of a trust by the trustee is or becomes impracticable,
the beneficiary may institute a suit for the execution of the trust, and the trust shall, so far as may be possible,
be executed by the Court until the appointment of a trustee or new trustee.
60. Right to proper trustees.—The beneficiary has a right (subject to the provisions of the instrument of trust)
that the trust property shall be properly protected and held and administered by proper persons and by a proper
number of such persons. Explanation I.—The following are not proper persons within the meaning of this
section:— A person domiciled abroad; an alien enemy; a person having an interest inconsistent with that of the
beneficiary; a person in insolvent circumstances; and, unless the personal law of the beneficiary allows
otherwise, a married woman and a minor.
Explanation II.—When the administration of the trust involves the receipt and custody of money, the number
of trustees should be two at least.
Illustrations (a) A, one of several beneficiaries, proves that B, the trustee, has improperly disposed of part of
the trust property, or that the property is in danger from B’s being in insolvent circumstances; or that he is
incapacitated from acting, as trustee. A may obtain a receiver of the trust property.
(b) A bequeaths certain jewels to B in trust for C. B dies during A’s lifetime; than A dies, C is entitled to have
the property conveyed to a trustee for him.
(c) A conveys certain property to four trustees in trust for B. Three of the trustees die. B may institute a suit to
have three new trustees appointed in the place of the deceased trustees.
(d) A conveys certain property to three trustees in trust for B. All the trustees disclaim. B may institute a suit to
have three trustees appointed in place of the trustees so disclaiming.
(e) A, a trustee for B, refuses to act, or goes to reside permanently out of India or is declared an insolvent, or
compounds with his creditors, or suffers a cotrustee to commit a breach of trust, B may institute a suit to have
A removed and a new trustee appointed in his room.
61. Right to compel to any act of duty. —The beneficiary has a right that his trustee shall be compelled to
perform any particular act of his duty as such, and restrained from committing any contemplated or probable
breach of trust. Illustrations (a) A contracts with B to pay him monthly Rs. 100 for the benefit of C, B writes
and signs a letter declaring that he will hold in trust for C the money so to be paid. A fails to pay the money in
accordance with his contract, C may compel B on a proper indemnity to allow C to sue on the contract in B’s
name. (b) A is trustee of certain land, with a power to sell the same and pay the proceeds to B and C equally. A
is about to make an improvident sale of the land. B may sue on behalf of himself and C for an injunction to
restrain A from making the sale.
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 re-transferred by the trustee, if it remains in his
hands unsold, or, if it has been bought from him by any person with notice of 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 nett profits of the property,
(b) be charged with an occupationrent, 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 re-
transferred, 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.
63. Following trust property into the hands of third persons.—Where trust property comes into the hands of a
third person inconsistently with the trust, the beneficiary may require him to admit formally, or may institute a
suit for a declaration, that the property is comprised in the trust. Into that into which it has been converted.—
Where the trustee has disposed of trust property and the money or other property which he has received
therefor can be traced in his hands, or the hands of his legal representative or legatee, the beneficiary has, in
respect thereof, rights as nearly as may be the same as his rights in respect of the original trust property.
Illustrations (a) A, a trustee for B of Rs. 10,000, wrongfully invests the Rs. 10,000 in the purchase of certain
land, B is entitled to the land. (b) A, a trustee, wrongfully purchases land in his own name, partly with his own
money, partly with money subject to a trust for B. B is entitled to a charge on the land for the amount of the
trust money so misemployed. 64. Saving of rights of certain transferees.—Nothing in section 63 entitles the
beneficiary to any right in respect of property in the hands of—
(a) a transferee, in good faith for consideration without having notice of the trust, either when the purchase-
money was paid, or when the conveyance was executed, or (b) a transferee for consideration from such a
transferee. A judgment-creditor of the trustee attaching and purchasing trust property is not a transferee for
consideration within the meaning of this section. Nothing in section 63 applies to money, currency notes, and
negotiable instruments in the hands of a bona fide holder to whom they have passed in circulation, or shall be
deemed to affect the Indian Contract Act, 1872 (9 of 1872), section 108, or the liability of a person to whom a
debt or charge is transferred.
65. Acquisition by trustee of trust property wrongfully converted.—Where a trustee wrongfully sells or
otherwise transfers trust property and afterwards himself becomes the owner of the property, the property
again becomes subject to the trust, notwithstanding any want of notice on the part of intervening transferees in
good faith for consideration.
66. Right in case of blended property.—Where the trustee wrongfully mingles the trust property with his own,
the beneficiary is entitled to a charge on the whole fund for the amount due to him.
67. Wrongful employment by partner-trustee of trust property for partnership purposes.—If a partner, being a
trustee, wrongfully employs trust property in the business or on the account of the partnership, no other partner
is liable therefor in his personal capacity to the beneficiaries, unless he had notice of the breach of trust. The
partners having such notice are jointly and severally liable for the breach of trust.
Illustrations (a) A and B are partners. A dies, having bequeathed all his property to B in trust for Z, and
appointed B his sole executor. B instead of winding-up the affairs of the partnership, retains all the assets in the
business. Z may compel him, as partner, to account for so much of the profits as are derived from A’s share of
the capital. B is also answerable to Z for the improper employment of A’s assets.
(b) A, a trader, bequeaths his property to B in trust for C, appoints B his sole executor, and dies. B enters into
partnership with X and Y in the same trade, and employs A’s assets in the partnership business. B gives an
indemnity to X and Y against the claims of C. Here X and Y are jointly liable with B to C, as having
knowingly become parties to the breach of trust committed by B.

Or
2. How is a Trust extinguished ? Can a Trust be revoked ?

3. State the main features of a Charitable Trust. How does it differ from a Private Trust ? Explain
it.
 Or
4. What is “Constructive Trust” ? Explain the various ways in which sch a Trust is created.

What do you understand by Equity ? Describe the nature and scope of Equity.
Equity is a Latin word which means fairness, justice. It is a system of law originating in the English
chancery and comprising a settled and formal body of substantive and procedural rules and doctrines
that supplement, aid, or override common and statutory law. "Equality is giving everyone the same
pair of shoes. Equity is giving everyone a pair of shoes that fits."

The Court of King's Bench, formally known as The Court of the King Before the King Himself, was a
court of common law in the English legal system. Created in the late 12th to early 13th century from the curia
regis, the King's Bench initially followed the monarch on his travels. The King's Bench finally joined
the Court of Common Pleas and Exchequer of Pleas in Westminster Hall in 1318, making its last
travels in 1421. The King's Bench was merged into the High Court of Justice by the Supreme Court of
Judicature Act 1873, after which point the King's Bench was a division within the High Court. The King's
Bench was staffed by one Chief Justice (now the Lord Chief Justice of England and Wales ) and usually
three Puisne Justices.
The Court of Common Pleas, or Common Bench, was a common law court in the English legal
system that covered "common pleas"; actions between subject and subject, which did not concern the king.
Created in the late 12th to early 13th century after splitting from the Exchequer of Pleas, the Common Pleas
served as one of the central English courts for around 600 years. Authorised by Magna Carta to sit in a fixed
location, the Common Pleas sat in Westminster Hall for its entire existence, joined by the Exchequer of
Pleas and Court of King's Bench.
The Exchequer of Pleas, or Court of Exchequer, was a court that dealt with matters of equity, a set of legal
principles based on natural law and common law in England and Wales. Originally part of the curia
regis, or King's Council, the Exchequer of Pleas split from the curia in the 1190s to sit as an independent
central court. The Court of Chancery's reputation for tardiness and expense resulted in much of its business
transferring to the Exchequer. The Exchequer and Chancery, with similar jurisdictions, drew closer together
over the years until an argument was made during the 19th century that having two seemingly identical courts
was unnecessary. As a result, the Exchequer lost its equity jurisdiction. With the Judicature Acts, the
Exchequer was formally dissolved as a judicial body by an Order in Council on 16 December 1880.
In the 15th and 16th centuries, the King's Bench's jurisdiction and caseload was significantly challenged
by the rise of the Court of Chancery and equitable doctrines as one of the two principal common law
courts along with the Common Pleas. To recover, the King's Bench undertook a scheme of revolutionary
reform, creating less expensive, faster and more versatile types of pleading in the form of bills as opposed to
the more traditional writs. Although not immediately stemming the tide, it helped the King's Bench to recover
and increase its workload in the long term. While there was a steep decline in business from 1460 to 1540, as
the new reforms began to take effect the King's Bench's business was significantly boosted; between 1560 and
1640, it rose tenfold. The Common Pleas became suspicious of the new developments, as legal fictions such as
the Bill of Middlesex damaged its own business. Fighting against the King's Bench in a reactionary and
increasingly conservative way, an equilibrium was eventually reached in the 17th century until the merger in
1873.
The King's Bench's jurisdiction initially covered a wide range of criminal matters, any business not claimed by
the other courts, and any cases concerning the monarch. Until 1830, the King's Bench acted as a court of
appeal for the Exchequer of Pleas and Common Pleas, and required Parliament to sign off on its decisions.
From 1585, the Court of Exchequer Chamber served for appeals of King's Bench decisions.

Equity is based on a judicial assessment of fairness as opposed to the strict and rigid rule of common
law. For centuries, the common law was referred to as the law, in contrast with equity. As to the most
common criticism of equity, these words of the English jurist, John Selden (1584-1654)
The typical Court of Equity (also known as Court of Chancery) decision would prevent a person from
enforcing a common law court judgment. The kings delegated this special judicial review power over common
 law court rulings to a judge called chancellor, the court the Chancery. Later, this was too much work for a
single judge and more judges were appointed, called chancellors. The term Chancellor is still in use in England
today and now refers to the British minister of justice. Thus, a new branch of law developed known as equity,
with their decisions eventually gaining precedence over those of the common law courts.
The Norman Conquest was the 11th-century invasion (was achieved over a five-year period from 1066 CE to
1071 CE.) and occupation of England by an army made up of thousands of Normans, Bretons, Flemish, and
men from other French provinces, all led by the Duke of Normandy, later styled William the Conqueror. The
conquest was the final act of a complicated drama that had begun years earlier, in the reign of Edward the
Confessor, last king of the Anglo-Saxon royal line. Edward, who had almost certainly designated William as
his successor in 1051, was involved in a childless marriage and used his lack of an heir as a diplomatic tool,
promising the throne to different parties throughout his reign. William was crowned in Westminster Abbey on
Christmas Day, 1066.
Equity means Justice and Egalitarianism. Equality means each individual or group of people is given the
same resources or opportunities. Equity recognizes that each person has different circumstances and allocates
the exact resources and opportunities needed to reach an equal outcome. Equity is a solution for addressing
imbalanced social systems. The route to achieving equity will not be accomplished through treating everyone
equally. It will be achieved by treating everyone justly according to their circumstances.
Equity under Roman Law: The Praetor was the famous judicial magistrate of a Roman law. The exercising
of power at that time was by the means of formulae and written statements. Everything was bounded or
surrounded all around the statements. Gradually, the Praetor started following another mode of jurisdiction,
which is termed as an extraordinary jurisdiction. After a phase, the cases and areas where the Praetor could
interfere become more common and through this only the principle of morality and equity was introduced in
the Roman Law.
General Principles of Equity / The Maxims of Equity
The methods relating to the unbiased jurisdiction are basically derived from the crucial truth of righteousness.
The importance of the maxims not to be exaggerated as it is really a far more from immutable principles. There
are some of the principles which have their own ultimate source of equity as these sources are also termed to
be as a maxim. These are the general principles which broadened under the term equity, some of them are
recapitulated below:
He who seeks equity must do equity:
➢ This maxim clearly shows a directive on the applicant of equity. This doctrine relates to the past conduct of
the parties and states that the person who comes to the court seeking equity must not have involved in an
inequitable act himself in the past. Application and cases

This maxim has application in the following doctrines-

i) Illegal loans: In Lodge v. National Union Investment Co. Ltd., the facts were as follows. One B borrowed
money from M by mortgaging certain securities to him. M was a unregistered money-lender. Under the
Money-lenders’ Act, 1900, the contract was illegal and therefore void. B sued M for return of the
securities. The court refused to make an order except upon the terms that B should repay the money
which had been advanced to him.
ii) Doctrine of election: Where a donor A gives his own property to B and in the same instrument purports to
give B’s property to C, B will be put to an election, either accept the benefit granted to him by the donor
and give away his own property to C or retain his own property and refuse to accept the property of A on
condition. But B can not retain his property and at the same time take the property of A.
iii) Consolidation of mortgages: Where a person has become entitled to two mortgages from the same
mortgagor, he may consolidate these mortgages and refuse to permit the mortgagee to exercise his
equitable right to redeem one mortgage unless the other is redeemed. The right of consolidation now
exists in England but after the enactment of the Law of Property Act, 1925, it can exist only by express
reservation in one of the mortgage deeds.
iv) Notice to redeem mortgage: Notice to a mortgagor to redeem one’s mortgage is an equitable right of the
mortgagor.
He who comes into equity must come with clean hands
Equity demands fairness not only from the Defendant but also from the Plaintiff. It is therefore said that
“he that hath committed an inequity, shall not have equity.” While applying this maxim, the court
believed that the behaviour of the Plaintiff was not against conscience before he came to the court.
Application and cases: In Highwaymen case, two robbers were partners in their own way. Due to a
disagreement in shares, one of them filed a bill against another for accounts of the profits of robbery.
Courts of relief do grant relief in case of partnership but here was a case where the cause of action arose
from an illegal occupation. So, the court refused to help them.
Everet v Williams [1725] is an English court case dating back to 1725, regarding the enforceability of
contracts to commit crimes. In this case, the contract was to share the spoils of armed robbery, which the
court refused to uphold.
Equity follows the Law:
This maxim is also expressed as “aequitas sequitur legem”, which means that equity will not allow a remedy
that is contrary to the law. This maxims lays down that equity supplements law and does not supersede it. The
discretion of the court is governed by law and equity which are subservient to one another. ➢ This maxim
means that the equity does not violate the law. It follows the appropriate form of law. Application and case:
At common law, where a person died intestate who owned an estate in fee-simple, leaving sons and
daughters, the eldest son was entitled to the whole of the land to the exclusion of his younger brothers and
sisters. This was unfair, yet no relief was granted by Equity Courts. But in this case it was held that if the
son had induced his father not to make a will by agreeing to divide the estate with his brothers and sisters,
equity would have interfered and compelled him to carry out his promise, because it would have been
against conscience to allow the son to keep the benefit of a legal estate which he obtained by reason of
his promise. This decision was held in Stickland v. Aldridge. Equity follows the law and even if by
analogy law can be followed, it should be followed.
Equity will not be a wrong to be with or without a remedy:
This maxim, in Latin, is “Ubi Jus Ibi Remedium ” which means “where there is a right there is a remedy”.
The maxim states that in situations where the common law confers a right, it also gives a remedy for
infringement of that right. It must be kept in mind that this principle is applicable only where the right and the
remedy both are within the jurisdiction of the court. In the Law of Equity, injunction and specific performance
are also the types of remedies available. In Ashby v. white a qualified voter was not allowed to vote and thus
he sued the returning officer, this case deals with the principle laid down in this maxim, i.e. if a person has
been granted a right, he is also granted with a remedy. ➢ This maxim states that it is developed as common law
which basically doesn’t lay down any new remedies but it has only nominal damages.
Equality is equity:
This principle is expressed by the Latin maxim Aequitas est quasi aequalitas which means equality is equity.
This maxim implies that as far as possible, equity strives to put the litigating parties on an equal level and
equate their rights and responsibilities. The ordinary law may give one party advantage over the other but the
court of equity, wherever possible, puts the parties on an equal footing. Application and cases:
a. Marshalling of assets: Marshaling is a doctrine that a court may use to force a creditor foreclose on a
debtor's assets in a particular order. A court may marshal the assets of a debtor when a senior creditor holds a
debt that is secured by more than one asset and a junior creditor holds a debt secured by only one of those
assets.
b. Equal distribution of joint funds and joint purchases: During a marriage, each spouse will
usually accumulate assets in his or her name. Frequently, there will also be assets titled in the name of both
spouses, jointly. “Equitable distribution” is the equitable, and not necessarily equal, division of those assets
between the spouses pursuant to a matrimonial action. Absent an agreement between the parties, a court will
determine each parties respective rights to “marital property” and “separate property,” and will provide for the
disposition thereof in the final judgment. Marital property “shall be distributed equitably between the parties,
considering the circumstances of the case and of the respective parties,” whereas separate property shall
remain that spouse’s property.
Equity looks to the intent rather than the form
This is the maxim by the means of which an equitable remedy was established which allows for the terms of a
contract to be interpreted by taking into account the intention of the parties. The common law was very rigid
and could not respond favourably to demand of time, this meant regarding the form of the contract more
important than the substance. Equity, on the other hand, looks to the spirit and not the letter of the contract.
Application and cases:
Relief in regard to mortgages - The mortgagor has a right to obtain his property back by payment of the debt
and that is his right of redemption. The mortgagor’s right of redemption is guarded by courts and this has been
expressed in a well-known legal maxim, “Once a mortgage, always a mortgage, and nothing but a mortgage”.
Relief against penalties and forfeitures- Common Law courts insisted on the literal form of the contract that
if the contract is breached, certain amount must be given as compensation, though the actual loss is not that
much. Equity interpret the purpose and intent of the contract itself. The principal object of the contract is to
perform it and not the compensation. The compensation is a subsidiary matter.
Delay defeats equity
The Latin maxim for this principle is “Vigilantibus non dormientibus aequitas subvenit” which means that
Equity assists the vigilant and not those who sleep on their rights. Unreasonable delay in bringing forth a
claim is known as laches. Laches may also result in dismissal of the claims. Thus, a party must assert an
action within a period of reasonable time. There are certain situations where the law of limitation is expressly
applied, in such cases, there is a particularized legal situation where a time period, which has been expressly
prescribed, has elapsed and the party is barred from bringing a suit of action. In case of laches, the defence of
acquiescence can be applied by the court and the plaintiff may be disallowed from seeking an equitable
remedy as the court would assume that he has acquiesced to the questionable actions of the
defendant. Application and case: Allcard vs Skinner.
Key point: Laid down the difference between actual and presumed undue influence.
Facts
 Allcard (C) inherited her family’s wealth, became a member of a religious group (the sisterhood) the rules
of which demanded her obedience to the lady superior, Skinner (D)
 Under the expectation that she should do so, C gifted her property to the sisterhood
 C left the sisterhood but waited 6 years to reclaim her property
Held (Court of Appeal): Although C was unduly influenced, the transfer was affirmed due to delay and
acquiescence

Equitable Remedies:
There are some remedies available by the court of law mainly for the plaintiff just to compensate for the
damages he has suffered from. Some of them are:
1. Injunctions: It is a type of remedy in which the court provides the certain law and order which the
parties are pressured to do or abstain from doing a certain specific task. Case Law- Mohd. Afzal Shah
v. Ghulam Ahmad Shah and Ors.
2. Specific performance: In this type of remedy, the court passes a statement to the parties in order to
fulfil certain tasks which are interlinked or already a part of a contract. Case Law- Executive
Committee of Vaish v. Lakshmi Narain and Ors.
3. Recession: This remedy alternatively takes back the parties to their normal position as they were in
before entering the contract. Case Law- Bedi and Bedi Ltd. Bangalore v. The Commissioner of
Central.
4. Rectification: In this type of remedy court orders to rectify or make certain changes in the written
document so that to reflect what is actually said on the first page. Case Law- M/s Harinagar Sugar
mills Ltd. V. Shyam Sunder Jhunjhunwala.
In India, the common law doctrine of equity has been followed after independence. “The Specific Relief
Act 1963” was successfully passed by the Parliament rescinding the earlier Act. There was certain
authorization which was codified in the 1963 Act such as Recovery of possession of immovable property,
Declaratory Decrees etc. With the certain mode of the nature of equitable reliefs earlier was recast to make
them into statutory rights. Under Section 150 of Code of Civil Procedures the court continues to exercise their
inherent powers.
Differences between Equality and Equity ?
Conceptually, ‘equity’ and ‘equality’ are completely different to one another. Moreover, the difference
between equity and equality helps us to understand the notion of social justice, social equity, social inclusion,
racial justice and social security.
Equality is the end result that we all seek to achieve. But, to get there, we must first ensure equity. Equity
ensures that those people who are behind (socially, economically, politically, geographically etc.) others get a
little bit of extra support and push so that they can reach to their fullest potential and stand on a equal ground
with everyone. Therefore, although equity and equality are meaningfully different to each other, they are also
deeply inter-related with each other.
Equity Equality
The term ‘equality’ refers to equal opportunity, equal
access, equal treatment, equal sharing and division i.e.
The term ‘equity’ refers to fairness and justice. keeping everyone at the same level.
Equality= Sameness.
Equity= Fairness and justice. It is mainly about treating everyone equally irrespective
It is about taking rationale and logical decision. of being rationale or not.
According to Equality and Human Rights
Equity focuses on individual needs and Commission, equality means “ensuring that every
requirement. Thus, it is also known as a need- based individual has an equal opportunity to make the most
approach. of their lives and talents.”
Equality is not affected by the need of the people or
society. Equality gives same thing to all the people,
Equity is about giving people what they need. irrespective of their need and demand.
It focuses on giving more to those who need more and Here, an individual will only get what everyone else
less to those who need less. gets.
Equity is positive discrimination. It refers to
proportional representation (by race, gender, class Equality might give rise to negative discrimination. It
etc.) to achieve a fair outcome. does not follow proportionality in representation.
Equality is the outcome/end result/end goal of the
Equity is the means to reach to equality. process.
In equitable approach, people are treated fairly but In equality approach, people are treated equally but
differently. may be unfairly.
Equality does not focus on social and racial justice.
Equity focuses and stresses on social justice, racial Rather, it creates systemic barrier for social inclusion
justice, social inclusion and social change. and social security.
Equity is subjective. It differs from situation to Equality is measurable. It does not vary and neither
situation and from person to person. matter whoever looks at it.
Equity respects individual differences and Equality does not give enough value to individual
diversity. differences and diversity.
Equity justifies things on the basis of quality. Equality justifies things on the basis of quantity.
It identifies the differences and tries to reduce the gap It is not concerned with the differences or gap
between the groups or race. between two or more groups or race.
Equity cannot be achieved through equality. Equality can be achieved through equity.
Proper analysis of the existing situation is needed to No such analysis is needed is needed to practice
practice equity approach. equality approach.
Equity principle works even if people do not start Equality principle can only work if everyone starts
from the same point. from the same place.
Principle of equity is mainly prioritized by the
government in its public policy and guiding Principle of equality is usually practiced by most of
documents. the private organizations and agencies.
While following the principle of equity, different While following the principle of equality, there is no
instruction and action is taken for people of different differentiated instruction for people of different race,
race, gender or group. gender or group.
Equity practitioners believe in equitable resource Equality practitioners believe in equal resource
allocation and thus looks everyone differently. allocation and thus does not look anyone differently.
Inequality does not always undermine social justice
Lack of equity i.e. inequity undermines social justice and fairness. However, it might compromise with the
and fairness. actual need of the people/society.
Inequity is worse to equality. Inequality is better than inequity.
Example of gender equality: Giving equal quantity
Example of gender equity: Giving more nutritious of food to all the family members including pregnant
and additional quantity of food to the pregnant and and lactating (breastfeeding) women, and adolescent
lactating (breastfeeding) women and adolescent girls, girls, irrespective of their nutritional requirement and
based on their dietary requirement. need.
Example of education equity: Arranging extra
classes and giving special attention to the
academically weak student in order reduce his/her Example of education equality: Giving equal
existing educational achievement gap and improve attention and equal effort by the teacher to all the
his/her education and classroom/school student in the classroom/ school OR arranging
performance. This will ultimately help the extra classes for all the student irrespective of
individual student to reach his/her fullest their exam grades, marks and classroom/school
potential. performance.
Example of resource equality: When distributing a
Example of resource equity: When distributing a pair of shoes to the football players, giving same size
pair of shoes to the football players, giving a right of shoes to all the players without any concern to their
pair of shoes to all the players as per their feet size. feet size.
Example of workplace equality: Same salary,
Example of workplace equity: Difference in salary, benefits and rewards to all the employees
benefits and rewards to the employees as per their irrespective of the difference in their work
work performance, expertise and specialty. performance.

Or
5. Explain any two maxims of the following:
 Equality is Equity.
 Delay defeats Equity.
  Equity follows the Law.
 Equity looks at the intent rather than to the form.

6. Discuss fully the meaning, nature and principles of fiduciary relationship.

Or
7. Explain and discuss the fact and principles of law laid down in Janaki Ram Ayyar Vs Neelkant
Ayyar, AIR 1962 SC 633.

SE-217
Trust and Equity
LL.B.(Part I)(Second Semester)Examination, 2017
Attempt 5 questions in all.
All questions carry 20 marks each.

Describe the nature and concept of Trust.

The nature of trusts
There is no single agreed definition of a trust, but one that has been accepted by the courts is as follows:
'A trust is an equitable obligation, binding a person (who is called a trustee) to deal with property over which
he has control (which is called the trust property), for the benefit of persons (who are called the beneficiaries
or, in old cases, cestuis que trust), of whom he may himself be one, and any one of whom may enforce the
obligation.'
A trust is a fiduciary relationship in which one party, known as a trustor, gives another party, the trustee, the
right to hold title to property or assets for the benefit of a third party, the beneficiary.
THE ‘TRUST’ CONCEPT
At its simplest, a trust is an arrangement whereby property or assets are transferred from one person (the
‘settlor’) to another person (the ‘trustee’) to hold the property for the benefit of a specified list or class of
persons (the ‘beneficiaries’). A trust can be created solely by verbal agreement but it is usual for a written
document (the ‘trust deed’) to be prepared. This evidences the creation of the trust, sets out the terms and
conditions upon which the trustees hold the trust assets and outlines the rights of the beneficiaries.
The practical advantages of a trust are gained from the distinction that is drawn between the formal or legal
owner of property, the trustee, and those people that have the use or benefit of the property, the beneficiaries.
It is vital that the trustee remains independent and exercises proper control over the trust property. A trust may
be deemed to be invalid if the settlor continues to exercise power over the trust assets by retaining benefit or
control, or by giving directions to the trustees.
Those unfamiliar with the trust concept are often concerned at the prospect of transferring ownership of their
property to a trustee. This concern can be alleviated if the trust concept and the distinction between legal and
beneficial ownership is properly understood and it is clear that the trust is governed by a reliable trust law that
can be enforced in a reputable jurisdiction.
Trust law imposes strict obligations and rules on trustees. There is a basic rule that a trustee may not derive any
advantage, directly or indirectly, from a trust unless expressly permitted by the trust – for example, where a
trust provides a professional trustee with the right to charge for its services. Full disclosure of the basis and
amount of charges is required.
 Trustees must follow the trust deed and are subject to very strict rules governing the way in which
their powers and discretion may be exercised. The courts regard a trust as creating a special
relationship that places the most serious and onerous obligations on the trustee.
  Best interests of beneficiaries – Trustees must at all times exercise their powers in the best interests of
the beneficiaries of the trust, and disregard the interests of others, including the settlor.
 Act prudently – Whether or not a trustee is remunerated, he or she must act prudently in the
management of trust property and will be liable for breach of trust if – by failing to exercise proper
care – the trust fund suffers loss. In the case of a professional trustee, the standard of care that the law
imposes is higher. Failure to exercise the requisite level of care will constitute a breach of trust for
which the trustees will be liable to compensate the beneficiaries. This duty can extend to supervising
the activities of a company in which the trustees hold a controlling shareholding.

Or

Discuss the rights and powers of a Trustee.

36. General authority of trustee.—In addition to the powers expressly conferred by this Act and by the
instrument of trust, and subject to the restrictions, if any, contained in such instrument, and to the provisions of
section 17, a trustee may do all acts which are reasonable and proper for the realisation, protection or benefit of
the trust-property, and for the protection or support of a beneficiary who is not competent to contract. Except
with the permission of a principal Civil Court of original jurisdiction, no trustee shall lease trust-property for a
term exceeding twenty-one years from the date of executing the lease, nor without reserving the best yearly
rent that can be reasonably obtained.
37. Power to sell in lots, and either by public auction or private contract.—Where the trustee is
empowered to sell any trust-property, he may sell the same subject to prior charges or not, and either together
or in lots, by public auction or private contract, and either at one time or at several times, unless the instrument
of trust otherwise directs.
38. Power to sell under special conditions. Power to buy-in and re-sell.—The trustee making any such sale
may insert such reasonable stipulations either as to title or evidence of title, or otherwise, in any conditions of
sale or contract for sale, as he thinks fit; and may also buy-in the property or any part thereof at any sale by
auction, and rescind or vary any contract for sale, and re-sell the property so bought in, or as to which the
contract is so rescinded, without being responsible to the beneficiary for any loss occasioned thereby. Time
allowed for selling trust-property.—Where a trustee is directed to sell trust-property or to invest trust-money in
the purchase of property, he may exercise a reasonable discretion as to the time of effecting the sale or
purchase.
Illustrations (a) A bequeaths property to B, directing him to sell it with all convenient speed and pay the
proceeds to C. This does not render an immediate sale imperative. (b) A bequeaths property to B, directing him
to sell it at such time and in such manner as he shall think fit and invest the proceeds for the benefit of C. This
does not authorise B, as between him and C, to postpone the sale to an indefinite period.
39. Power to convey.—For the purpose of completing any such sale, the trustee shall have power to convey or
otherwise dispose of the property sold in such manner as may be necessary.
40. Power to vary investments.—A trustee may, at his discretion, call in any trust-property invested in any
security and invest the same on any of the securities mentioned or referred to in section 20, and from time to
time vary any such investments for others of the same nature: Provided that, where there is a person competent
to contract and entitled at the time to receive the income of the trust-property for his life, or for any greater
estate, no such change of investment shall be made without his consent in writing.
41. Power to apply property of minors, etc., for their maintenance, etc.—Where any property is held by a
trustee in trust for a minor, such trustee may, at his discretion, pay to the guardians (if any) of such minor, or
otherwise apply for or towards his maintenance or education or advancement in life, or the reasonable
expenses of his religious worship, marriage or funeral, the whole or any part of the income to which he may be
entitled in respect of such property; and such trustee shall accumulate all the residue of such income by way of
compound interest, by investing the same and the resulting income thereof from time to time in any of the
securities mentioned or referred to in section 20, for the benefit of the person who shall ultimately become
entitled to the property from which such accumulations have arisen: Provided that such trustee may, at any
time, if he thinks fit, apply the whole or any part of such accumulations as if the same were part of the income
arising in the then current year. Where the income of the trust-property is insufficient for the minor’s
maintenance or education or advancement in life, or the reasonable expenses of his religious worship, marriage
or funeral, the trustee may, with the permission of a principal Civil Court of original jurisdiction, but not
otherwise, apply the whole or any part of such property for or towards such maintenance, education,
advancement or expenses. Nothing in this section shall be deemed to affect the provisions of any local law for
the time being in force relating to the persons and property of minors.
42. Power to give receipts.—Any trustees or trustee may give a receipt in writing for any money, securities or
other moveable property payable, transferable or deliverable to them or him by reason, or in the exercise, of
any trust or power; and, in the absence of fraud, such receipt shall discharge the person paying, transferring or
delivering the same therefrom, and from seeing to the application thereof, or being accountable for any loss or
misapplication thereof.
43. Power to compound, etc.—Two or more trustees acting together may, if and as they think fit—
(a) accept any composition or any security for any debt or for any property claimed;
(b) allow any time for payment of any debt;
(c) compromise, compound, abandon, submit to arbitration or otherwise settle any debt, account, claim or thing
whatever relating to the trust; and 16
(d) for any of those purposes, enter into, give, execute and do such agreements, instruments of composition or
arrangement, releases and other things as to them seem expedient, without being responsible for any loss
occasioned by any act or thing so done by them in good faith. The powers conferred by this section on two or
more trustees acting together may be exercised by a sole acting trustee when by the instrument of trust, if any,
a sole trustee is authorized to execute the trusts and powers thereof. This section applies only if and as far as a
contrary intention is not expressed in the instrument of trust, if any, and shall have effect subject to the terms
of that instrument and to the provisions therein contained. This section applies only to trusts created after this
Act comes into force.
44. Power to several trustees of whom one disclaims or dies.—When an authority to deal with the trust-
property is given to several trustees and one of them disclaims or dies, the authority may be exercised by the
continuing trustees, unless from the terms of the instrument of trust it is apparent that the authority is to be
exercised by a number in excess of the number of the remaining trustees.
45. Suspension of trustee’s powers by decree.—Where a decree has been made in a suit for the execution of
a trust, the trustee must not exercise any of his powers except in conformity with such decree, or with the
sanction of the Court by which the decree has been made, or, where an appeal against the decree is pending, of
the Appellate Court.
=========================================================
The rights and powers of trustees have been laid down in Chapter IV, Sections 31 to 45 of the Indian Trusts
Act. Accordingly a trustee is entitled (i) to have the title deeds of the trust-property in his possession, (ii) to be
reimbursed of the expenses incurred in respect of the property of the trust, (iii) to seek the court’s opinion, (iv)
to have the accounts of the trust-property examined and settled, and (v) to be indemnified from the gainer by
breach of trust.
A part from the above rights, a trustee can give a valid title to a bona fide purchaser from him without notice
even though his act of alienation may be one resulting from his breach of trust.
Rights to title deed [Section 31] : In the eyes of the law, a trustee is the owner of the trust estate and therefore
he is entitled to have in his possession the instrument of trust and all the other documents of title relating solely
to the trust-property.
When a trust is created there must be a transfer of property to the trustee or else no trust can come into
existence.
When the title deeds relating to the property are not delivered up to the trustee, a trustee has the right to secure
them so that the same may not be used otherwise and so that he can be safe and the property secured.
Powers
Nature of powers
Exercise of power depends upon the nature of a trust and the character and situation of the beneficiary. In case
of absolute power to the trustee the court cannot compel him to exercise it, but the court will see that it is not
exercised improperly.
In case of power coupled with duty, its proper and timely exercise will be compelled by a court but the manner
and method of its exercise cannot be dictated. Powers must be exercised for the benefit of a trust and its
exercise must be bona fide, reasonable and impartial.
The Indian Trusts Act, 1882 lays down the powers of a trustee in Sections 36 to 45.
General authority of a trustee [Section 36]
A trustee has been given a general authority by this Act by virtue of which he “may do all acts which are
reasonable and proper” for
(i) the realisation, protection or benefit of the trust-property, and
(ii) for the protection and support of a beneficiary who is not competent to contract.
Of course this general authority is subject to the following restrictions: (i) restrictions contained in the
instrument, (ii) provisions of Section 17 (a trustee to be impartial), and (iii) restriction as to leasing of trust-
property.
Statutory powers of a trustee
These statutory powers are enlisted in Sections 37 to 45. They are (i) power to sell; (ii) power to sell under
special circumstances; (iii) power to convey; (iv) power to vary investments; (v) power to apply property of
minors, etc., for their maintenance; (vi) power to give receipts; and (vii) power to compound. Sections 44 and
45 provide for joint power and suspension of a trustee’s power.

Trustees-Their Disabilities
Trustees cannot renounce [Section 46]
Nobody can be compelled to accept the office of trustee against his will. A person appointed as trustee who
wishes to disclaim should do so by deed, as this provides a clear evidence of the disclaimer.
However, a disclaimer may be implied; apathy will be evidence of an intention the disclaim, provided the
apathy is consistent.
But if the trustee meddles with the estate, his conduct will be construed as an acceptance. Once he has
disclaimed he can no longer accept. Once he has accepted he can no longer disclaim, but he may retire.
Summary
A trust is an obligatory affair; its office is fraught with duties, discretions, disabilities, rights and powers.
Accordingly,
(i) a trustee cannot renounce his office;
(ii) cannot delegate his office;
(iii) cannot act single (if there are two or more trustees);
(iv) may not charge for his services;
(v) may not use trust-property;
(vi) cannot set up an adverse title to trust-property;
(vii) must not misuse his position as a trustee to get an advantage from the trust-property or dealings therewith;
(viii) cannot profit out of a trust;
(ix) cannot compete with the trust business;
(x) may not buy trust-property either from himself or from a co-trustee;
(xi) may not buy beneficiary interest without court’s prior permission; and
(xii) may not lend money to one of co-trustees.

1. Discuss the rights of the beneficiary enshrined under the Indian Trust Act.
Or
2. Write short notes on :
 Disabilities of Trustees
 Discharge of Trustees
3. Explain the Doctrine of Cy pres and illustrate your answer.
Or
4. How is a Trust extinguished ? Discuss.

5. Explain the following maxims:

 Delay defeats Equity
 ‘Where there is Equal Equity, the Law shall prevail.’
Or
6. Explain the Equity and describe its Jurisdiction.

7. Explain and discuss the facts and principles of law laid down in the case of Deoke Nandan Vs
Murlidhar and Others AIR 1957 SC 133.
Or
8. Discuss fully the meaning, nature and principles of fiduciary relationship.

LA-153
Trust and Equity
LL.B.(Part I)(Second Semester)Examination, 2018
Attempt 5 questions in all.
All questions carry 20 marks each.
1. State the rights and duties of the Trustees.
Or
2. What do you mean by ‘Breach of Trust’ ? Mention the Law relating to the Breach of Trust.

3. What are the rights of Beneficiaries ? Explain the circumstances in which a beneficiary can
follow trust property falling in the hands of third party.
Or
4. How is a Trust revoked ? Discuss. How is a Trust extinguished ?

5. What do you mean by Constructive Trust ? Mention the law relating to Constructive Trust.
Or
6. Explain the Doctrine of Cy pres and illustrate your answer.

7. Trace the origin and development of Equity in England and discuss two leading principles of
English Equity which have been incorporated in Indian Statutory Law.
Or
8. How will you classify the Equitable Rights ? Discuss.
 9. “Fiduciary relations and law relating to them is the outcome of human behaviour.” Do you
agree ?
Or
10. Explain and discuss the fact and principles of law laid down in Janaki Ram Ayyar Vs Neelkant
Ayyar, AIR 1962 SC 633.

LB-123
Trust and Equity
LL.B.(Part I)(Second Semester)Examination, 2019
Attempt 5 questions in all.
All questions carry 20 marks each.
1. How is Trust created ? What is the difference between Trust of Immovable and Movable
Property ?
Or
2. What are the duties of Trustees ? Discuss with Illustrations.

3. Describe in brief the various disabilities of Trustees.

Or
4. Describe the various rights of beneficiaries.

5. Explain “Charitable Trust” with example.

Or
6. Explain the Doctrine of Cy pres.

7. What do you understand by Equity ? Explain.

Or
What do you understand by Maxims of Equity ? What is the importance of Maxims of Equity ?
Explain.
A short, pithy statement expressing a general truth or rule of conduct Or. An established principle or
proposition.
Maxims of Equity
1. EQUITY WILL NOT SUFFER A WRONG TO BE WITHOUT A REMEDY
Meaning
Where there is a right there is a remedy. This idea is expressed in the Latin Maxim ubi jus ibi remedium. It
means that no wrong should go unredressed if it is capable of being remedied by courts. This maxim indicates
the width of the scope and the basis of on which the structure of equity rests. This maxim imports that where
the common law confers a right, it gives also a remedy or right of action for interference with or infringement
of that right.
2. EQUITY FOLLOWS THE LAW
Meaning
The maxim indicates the discipline which the Chancery Courts observed while administering justice according
to conscience. The discretion of the court is governed by the rules of law and equity, which are not to oppose,
but each, in turn, to be subservient to the other. Thus equity came not to destroy the law but to fulfill it, to
supplement it, to explain it; The goal of equity and law is the same, but due to their nature and due to historic
accident they chose different paths. Equity respected every word of law and every right at law but where the
law was defective, in those instances, these Common Law rights were controlled by recognition of equitable
Rights.
3. HE WHO SEEKS EQUITY MUST DO EQUITY
Meaning
The maxim means that to obtain an equitable relief the plaintiff must himself be prepared to do, that is, a
plaintiff must recognize and submit to the right of his adversary.
4. HE WHO COMES INTO EQUITY MUST COME WITH CLEAN HANDS
Meaning
Equity demands fairness not only from the defendant but also from the plaintiff. It is therefore said that he that
hath committed an inequity, shall not have equity. While applying this maxim the court believed that the
behavior of the plaintiff was not against conscience before he came to the court.
5. DELAY DEFEATS EQUITIES
Meaning
A Latin term in this regard is Vigilantibus, non dormentibus, jura subvenient which means Equity aids the
vigilant and not the indolent. So, if one sleeps on his rights, his rights will slip away from him. Legal claims
are barred by statutes of limitation and equitable claims may be barred not only by limitation law but also by
unreasonable delay, called laches.
6. EQUALITY IS EQUITY
Meaning
Plato defined that If you cannot find any other, equality is the proper basis. This maxim is also explained as
"equity delighteth in equality”, which means that as far as possible equity would put the litigating parties on an
equal level so far as their rights and responsibilities are concerned.
7. EQUALITY LOOKS TO THE INTENT RATHER THAN THE FORM
Meaning
Common law was very rigid and inflexible. It could not respond favourably to the demand of time. It regarded
the form of a transaction to be more important than its substance. It looked to the very letter of the agreement
and not the intention behind it. On the other hand, Equity looks to the spirit not to the letter, it looks to the
intention of parties and not to the words.
8. EQUALITY LOOKS ON THAT AS DONE WHICH OUGHT TO BE DONE
Meaning
If someone undertakes an obligation for the other, equity courts look on it as done and as producing the same
results as if the obligation had been actually performed. Equity courts therefore look to the acts of the person
bound by his conscience and interpret and construe them in such a way that they amount to what ought to be
done.
9. EQUALITY IMPUTES AN INTENTION TO FULFILL AN OBLIGATION
Meaning
Equity considered and estimated acts of parties. Thus where a person is under an obligation to do a certain act,
and he does some other act which is capable of being regarded as an act in fulfillment of his obligation. In
other words a person is presumed to do what he is bound to do.

The importance of equity was greater emphasis than the common law system. During the centuries it gained
importance and became an integral part of an Indian legal system too. In India it developed through various
statues which have gained momentum with the various acts which have been passed throughout.
In law, the term "equity" refers to a particular set of remedies and associated procedures involved with civil
law. ... A court will typically award equitable remedies when a legal remedy is insufficient or inadequate.
 8. “Law relating to fiduciary relation is the backbone of Hindu Law.” Discuss.
Or

========================================

Explain and discuss the facts and principles of law laid down in the case of Deoki Nandan Vs Murlidhar
and Others AIR 1957 SC 133.
Equivalent citations: 1957 AIR 133, 1956 SCR 756
DATE OF JUDGMENT:04/10/1956
ACT:
Hindu Law-Religious endowment-Temple-Publicor private -Question of mixed fact and law-Gift to
idol—Whether worshippers are the beneficiaries-Dedication to public-Construction of will -Ceremonies
relating to installation of
idol-User of temple.
HEADNOTE: The issue whether a religious endowment is a public or a private one is a mixed question of
law and fact the decision of which must depend on the application of legal concepts of a public and a private
endowment to the facts found and is open to consideration by the Supreme Court.
Judgement
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 250 of 1953, Appeal from the judgment and decree
dated July 14, 1948 of the Chief Court of Audh, Lucknow in Second Appeal No. 365 of 1945 arising out of the
decree dated May 30, 1945 of the Court of District Judge, Sitapur in Appeal No. 4 of 1945 against the decree
dated November 25, 1944 of the Court of Additional Civil Judge, Sitapur in Regular Civil Suit No. 14 of 1944.
A. D. Mathur, for the appellant.
Jagdish, Chandra, for respondent No. 1.
1956. October 4. The Judgment of the Court was delivered by VENKATARAMA AYYAR J.-The point for
decision in this appeal is whether a Thakurdwara of Sri Radhakrishnaji in the village of Bhadesia in the
District of Sitapur is a private temple or a public one in which all the Hindus are entitled to worship.

One Sheo Ghulam, a pious Hindu and a resident of the said village, had the Thakurdwara constructed during
the years 1914-1916, and the idol of Shri Radhakrishnaji ceremoniously installed therein. He was himself in
management of the temple and its affairs till 1928 when he died without any issue. On March 6, 1919, he had
executed a will whereby he bequeathed all his lands to the Thakur. The provisions of the will, in so far as they
are material, will presently be referred to. The testator had two wives one of whom Ram Kuar, had
predeceased him and the surviving widow, Raj Kuar, succeeded him as Mutawalli in terms of the will and was
in management. till her death in 1933. Then the first defendant who is the nephew of Sheo Ghulam, got into
possession of the properties as manager of the endowment in accordance with the provisions of the will. The
appellant is a distant agnate of Sheo Ghulam, and on the allegation that the first defendant bad been
mismanaging the temple and denyinng the rightg of the public therein, he moved the District Court of Sitapur
for relief under the Religious and Charitable Endowments Act XIV of 1920, but the court declined to interfere
on the ground that the endowment was private.

An application to the Advocate-General for sanction to institute a suit under section'92 of the Code of Civil
Procedure was also refused for the same reason. The appellant then filed the suit, out of which the present
appeal arises, for a declaration that the Thakurdwara is a public temple in which all the Hindus have a right to
worship. The first defendant contested the suit, and claimed that "the Thakurdwara and the idols were private",
and that "the general public had no right to make any interference".
The Additional Civil Judge, Sitapur, who tried the suit was of the opinion that the Thakurdwara had been built
by Sheo Ghulam "for worship by his family", and that it was a private temple. He accordingly dismissed the
suit. This judgment was affirmed on appeal by the District Judge, Sitapur, whose decision again was affirmed
by the Chief Court of Oudh in second appeal. The learned Judges, however, granted a' certificate under s.
109(c) of the Code of Civil Procedure that the question involved was one of great importance, and that is how
the appeal comes before Us.

The question that arises for decision in this appeal whether the Thakurdwara of Sri Radhakrishnaji at Bhadesia
is a public endowment or a private one is one of mixed law and fact. The distinction between a private and a
public trust is that whereas in the former the beneficiaries are specific individuals, in the latter they are the
general public or a class thereof.
“The purpose of making a gift to a temple is not to confer a benefit on God but to confer a benefit on those
who worship in that temple, by making it possible for them to have the worship conducted in a proper and
impressive manner. This is the sense in which a temple and its endowments are regarded as a public trust".
When once it is understood that the true beneficiaries of religious endowments are not the idols but the
worshippers, and that the purpose of the endowment is the maintenance of that worship for the benefit of the
worshippers, the question whether an endowment is private or public presents no difficulty. The cardinal point
to be decided is whether it was the intention of the founder that specified individuals are to have the right of
worship at the shrine, or the general public or any specified portion thereof. In accordance with this theory, it
has been held that when property is dedicated for the worship of a family idol, it is a private and not a public
endowment, as the persons who are entitled to worship at the shrine of the deity can only be the members of
the family and that is an ascertained group of individuals. But where the beneficiaries are not members of a
family or a specified individual, then the endowment can only be regarded as public, intended to benefit the
general body of worshippers. In the light of these principles, we must examine the facts of this case. The
materials bearing on the question whether the Thakurdwara is a public temple or a private one may be
considered under four heads:(1) the will of Sheo Ghulam, Exhibit A-1, (2) user of the temple by the public, (3)
ceremonies relating to the dedication of the Thakurdwara and the installation of the idol with special reference
to Sankalpa and Uthsarga, and (4) other facts relating to the character of the temple.
(1) The will, Exhibit A-1, is the most important evidence on record as to the intention of the testator and the
scope of the dedication. Its provisions, so far as they are material, may now be noticed. The will begins with
the recital that the testator has two wives and no male issue, that he has constructed a Thakurdwara and
installed the idol of Sri Radhakrishnaji therein, and that he is making a disposition of the properties with a
view to avoid disputes. Clause I of Exhibit A-1 provides that after the death of the testator "in the absence of
male issue, the entire immovable property given below existing at present or which may come into being
hereafter shall stand endowed in the name of Sri Radhakrisbnan, and mutation of names shall be effected in
favour of Sri Radhakrishnan in the Government papers and my wives Mst. Raj Kuer and Mst. Ram kuer shall
be the Mutawallis of the waqf. Half the income from the properties is to be taken by the two wives for their
maintenance during their lifetime, and the remaining half was to "continue to be spent for the expenses of the
Thakurdwara". It is implicit in this provision that after the lifetime of the wives, the whole of the income is to
be utilised for the purpose of the Thakurdwara. Clause 4 provides that if a son is born to the testator, then the
properties are to be divided between the son and the Thakurdwara in a specified proportion; but as no son was
born, this clause never came into operation. Clause 5 provides that the Mutawallis are to have no power to sell
or mortgage the property, that they are to maintain accounts, that the surplus money after meeting the expenses
should be deposited in a safe bank and when funds permit, property should be purchased in the name of Sri
Radhakrishnaji. Clause 2 appoints a committee of four persons to look after the management of the temple and
its properties, and of these, two are not relations of the testator and belong to a different caste. It is further
provided in that clause that after the death of the two wives the committee "may appoint my nephew Murlidhar
as Mutawalli by their unanimous opinion". This Murlidhar is a divided nephew of the testator and he is the first
defendant in this action. Clause 3 provides for filling up of vacancies in the committee. Then finally there is cl.
6, which runs as follows:
"If any person alleging himself to be my near or remote heir files a claim in respect of whole or part of the
waqf property his suit shall be improper on the face of this deed".
The question is whether the provisions of the will disclose an intention on the part of the testator that the
Thakurdwara should be a private endowment, or that it should be public. The learned Judges of the Chief
Court in affirming the decisions of the courts below that the temple was built for the benefit of the members of
the family, observed that there was nothing in the will pointing "to a conclusion that the trust was a public
one", and that its provisions were not "inconsistent with the property being a private endowment". We are
unable to endorse this opinion. We think that the will read as a whole indubitably reveals an intention on the
part of the testator to dedicate the Thakurdwara to the public and not merely to the members of his family.

Then we have clause 2, under which the testator constitutes a committee of management consisting of four
persons, two of whom were wholly unrelated to him. Clause 3 confers on the committee power to fill up
vacancies; but there is no restriction therein on the persons who could be appointed under that clause, and
conceivably, even all the four members might be strangers to the family. It is difficult to believe that if Sheo
Ghulam intended to restrict the right of worship in the temple to his relations, he would have entrusted the
management thereof to a body consisting of strangers. Lastly, there is clause 6, which shows that the
relationship between Sheo Ghulam and his kinsmen was not particularly cordial, and it is noteworthy that
under clause 2, even the appointment of the first defendant as manager of the endowment is left to the option
of the committee. It is inconceivable that with such scant solicitude for his relations, Sheo Ghulam would have
endowed a temple for their benefit. And if he did not intend them to be beneficiaries under the endowment,
who are the members of the family who could take the benefit thereunder after the lifetime of his two wives? If
we are to hold that the endowment was in favour of the members of the family, then the result will be that on
the death of the two wives, it must fail for want of objects. But it is clear from the provisions of the will that
the testator contemplated the continuance of the endowment beyond the lifetime of his wives. He directed that
the properties should be endowed in the name of the deity, and that lands are to be purchased in future in the
name of the deity. He also provides for the management of the trust after the lifetime of his wives. And to
effectuate this intention, it is necessary to hold that the Thakurdwara was dedicated for worship by members of
the public, and not merely of his family. In deciding that the endowment was a private one, the learned Judges
of the Chief Court failed to advert to these aspects, and we are unable to accept their decision as correct.

2. In the absence of a deed of endowment constituting the Thakurdwara, the plaintiff sought to establish the
true scope of the dedication from the user of the temple by the public. The witnesses examined on his behalf
deposed that the villagers were worshipping in the temple freely and without any interference, and indeed, it
was even stated that the Thakurdwara was built by Sheo Ghulam at the instance of the villagers, as there was
no temple in the village. The trial Judge did not discard this evidence as unworthy of credence, but he held that
the proper inference to be drawn from the evidence of P.W. 2 was that the public were admitted into the temple
not as a matter of right but as a matter of grace. P.W. 2 was a pujari in the temple, and be deposed that while
Sheo Ghulam's wife was doing puja within the temple, he stopped outsiders in whose presence she used to
observe purdah, from going inside. We are of opinion that this fact does not afford sufficient ground for the
conclusion that the villagers did not worship at the temple as a matter of right. It is nothing unusual even in
well-known public temples for the puja hall being cleared of the public when a high dignitary comes for
worship, and the act of the pujari in stopping the public is expression of the regard which the entire villagers
must have had for the wife of the founder, who was a pardanashin lady, when she came in for worship, and
cannot be construed as a denial of their rights. We are accordingly of opinion that the user of the temple such
as is established by the evidence is more consistent with its being a public endowment.

3. It is settled law that an endowment can validly be created in favour of an idol or temple without the
performance of any particular ceremonies, provided the settlor has clearly and unambiguously expressed his
intention in that behalf. Where it is proved that ceremonies were performed, that would be valuable evidence
of endowment, but absence of such proof would not be conclusive against it. In the present case, it is common
ground that the consecration of the temple and the installation of the idol of Sri Radhakrishnaji were made with
great solemnity and in accordance with the Sastras. P. W. 10, who officiated as Acharya at the function has
deposed that it lasted for seven days, and that all the ceremonies commencing with Kalasa Puja and ending
with Sthapana or Prathista were duly performed and the idols of Sri Radhakrishnaji, Sri Shivji and Sri
Hanumanji were installed as ordained in the Prathista Mayukha. Not much turns on this evidence, as the
defendants admit both the dedication and the ceremonies, but dispute only that the dedication was to the
public.

In the court below, the appellant raised the contention that the performance of Uthsarga ceremony at the time
of the consecration was conclusive to show that the dedication was to the public, and that as P. W. 10 stated
that Prasadothsarga was performed, the endowment must be held to be public. The learned Judges considered
that this was a substantial question calling for an authoritative decision, and for that reason granted a certificate
under section, 109(c) of the Code of Civil Procedure. It would therefore follow that if Uthsarga is proved to
have been performed, the dedication must be held to have been to the public. But the difficulty in the way of
the appellant is that the formula which according to P. W.-IO was recited on the occasion of the foundation
was not Uthsarga but Prasadoasarga, which is something totally different. Prasada' is the 'mandira', wherein the
deity is placed before the final installation or Prathista takes placer' and the Prathista Mayukha prescribes the
ceremonies that have to be performed when the idol is installed in the Prasada. Prasadothsarga is the formula to
be used on that occasion, and the text relating to it as given in the Mayukha runs as follows:
It will be seen that this is merely the Sankalpa without the Uthsarga, and there are no words therein showing
that the dedication is to the public. Indeed, according to the texts, Uthsarga is to be performed only for
charitable endowments, like construction of tanks, rearing of gardens and the like, and not for religious
foundations. Therefore, the question of inferring a dedication to the public by reason of the performance of the
Uthsarga ceremony cannot arise in the case of temples. The appellant is correct in his contention that if
Uthsarga is performed the dedication is to the public, but the fallacy in his argument lies in equating
Prasadothsarga with Uthsarga. But it is also clear from the texts that Prathista takes the place of Uthsarga in
dedication of temples, and that there was Prathista of Sri Radhakrishnaji as spoken to by P.W. 10, is not in
dispute. In our opinion, this establishes that the dedication was to the public.
(4)We may now refer to certain facts admitted or established in the evidence, which indicate that the
endowment is to the public. Firstly, there is the fact that the idol was installed not within the precincts of
residential quarters but in. a separate building constructed for that very purpose on a vacant site. And as
pointed out in Delroos Banoo Begum v. Nawab Syud Ashgur Ally Khan(1), it is a factor to be taken into
account in deciding whether an endowment is private or public, whether the place of worship is located inside
a private house or a public building. Secondly, it is admitted that some of the idols are permanently installed on
a pedestal within the temple precincts. That is more consistent with the endowment being public rather than
private. Thirdly, the puja in the 'temple is performed by an archaka appointed from time to time. And lastly,
there is the fact that there was no temple in the village, and there is evidence on the side of the plaintiff that the
Thakurdwara was built at the instance of the villagers for providing a place of worship for them. This evidence
has not been considered by the courts below, and if it is true, that will be decisive to prove that the endowment
is public.

It should be observed in this connection that though the plaintiff expressly pleaded that the temple was
dedicated "for the worship of the general public", the first defendant in his written statement merely pleaded
that the Thakurdwara and the idols were 'private. He did not aver that the temple was founded for the benefit of
the members of the family. At the trial, while the witnesses for the plaintiff deposed that the temple was built
with the object of providing a place of worship for all the Hindus, the witnesses examined by the defendants
merely deposed that Sheo Ghulam built the Thakurdwara for his own use and "for his puja only". The view of
the lower court that the temple must be taken to have been dedicated to the members of the family goes beyond
the pleading, and is not supported by the evidence in the case. Having considered all the aspects, we are of
opinion that the Thakurdwara of Sri Radhakrishnaji in Bhadesia is a public temple.
In the result, the appeal is allowed, the decrees of the courts below are set aside, and a declaration
granted in terms of para 17 (a) of the plaint. The costs of -the appellant in all the courts will come out of
the trust properties. The first defendant will himself bear his own costs throughout.
Appeal allowed.
In Deoki Nandan Vs. Murlidhar, it was held: “When once it is understood that the true beneficiaries of
religious endowments are not the Idols but the worshippers, and that the purpose of the endowment is the
maintenance of that worship for the benefit of the worshippers, the question whether an endowment is private
or public presents no difficulty. The cardinal point to be decided is whether it was the intention of the founder
that specified individuals are to have the right of worship at the shrine, or the general public or specified
portion thereof. In accordance with this theory, it has been held that when property is dedicated for the worship
of a family Idol, it is a private and not a public endowment, as the persons who are entitled to worship at the
shrine of the Deity can only be the members of the family, and that is an ascertained group of individuals. But
where the beneficiaries are not members of a family or a specified individual, then the endowment can only be
regarded as public, intended to benefit the general body of worshippers.”
the decision of Deoki Nandan v. Murlidhar, AIR 1957 SC 133 had drawn the distinction between a public
and a private temple.
========================================

Mortgage : रेहन रखना ; गिरवी रखना ; बंधक What do you understand by Mortgage.
How many types of Mortgage are there ? Explain.
A mortgage is a type of home loan in which the lender provides a property loan against the mortgage of the
property itself. This gives them the right to acquire and sell the property if the borrower defaults on the
repayment or violates the set terms and conditions otherwise.
Section 58 in The Transfer of Property Act, 1882, “Mortgage”, “mortgagor”, “mortgagee”, “mortgage-
money” and “mortgage-deed” defined.—
(a) A mortgage : रेहन रखना ; गिरवी रखना is the transfer of an interest in specific

immoveable property for the purpose of securing the payment of money advanced or to be advanced by way of

loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary

liability. The transferor is called a mortgagor, the transferee a mortgagee; the principal money and interest of

which payment is secured for the time being are called the mortgage-money, and the instrument (if any) by

which the transfer is effected is called a mortgage-deed.

(b) Simple mortgage सरल बंधक —Where, without delivering possession of the mortgaged property, the
.

mortgagor binds himself personally to pay the mortgage-money, and agrees, expressly or impliedly, that, in the
event of his failing to pay according to his contract, the mortgagee shall have a right to cause the mortgaged
property to be sold and the proceeds of sale to be applied, so far as may be necessary, in payment of the
mortgage-money, the transaction is called a simple mortgage and the mortgagee a simple mortgagee.
(c) Mortgage by conditional sale. सशर्त बिक्री द्वा रा बंधक—Where, the mortgagor ostensibly sells the
mortgaged property— on condition that on default of payment of the mortgage-money on a certain date the
sale shall become absolute, or on condition that on such payment being made the sale shall become void, or on
condition that on such payment being made the buyer shall transfer the property to the seller, the transaction is
called mortgage by conditional sale and the mortgagee a mortgagee by conditional sale: 1[Provided that no
such transaction shall be deemed to be a mortgage, unless the condition is embodied in the document which
effects or purports to effect the sale.]
(d) Usufructuary mortgage. सूदखोरी बंधक—Where the mortgagor delivers possession 1[or expressly or by
implication binds himself to deliver possession] of the mortgaged property to the mortgagee, and authorises
him to retain such possession until payment of the mortgage-money, and to receive the rents and profits
accruing from the property 2[or any part of such rents and profits and to appropriate the same] in lieu of
interest, or in payment of the mortgage-money, or partly in lieu of interest 3[or] partly in payment of the
mortgage-money, the transaction is called an usufructuary mortgage and the mortgagee an usufructuary
mortgagee.
(e) English mortgage.—Where the mortgagor binds himself to repay the mortgage-money on a certain date,
and transfers the mortgaged property absolutely to the mortgagee, but subject to a proviso that he will re-
transfer it to the mortgagor upon payment of the mortgage-money as agreed, the transaction is called an
English mortgage.
(f) Mortgage by deposit of title-deeds. टायटल डिड जमा करके गिरवि रखना —Where a person in any of

the following towns, namely, the towns of Calcutta, Madras, [and Bombay], [* * *] and in any other town

which the [State Government concerned] may, by notification in the Official Gazette, specify in this behalf,

delivers to a creditor or his agent documents of title to immoveable property, with intent to create a security

thereon, the transaction is called a mortgage by deposit of title-deeds.

(g) Anomalous mortgage. विषम बंधक —A mortgage which is not a simple mortgage, a mortgage by
conditional sale, an usufructuary mortgage, an English mortgage or a mortgage by deposit of title-deeds within
the meaning of this section is called an anomalous mortgage.]
(i) It must be a mortgage as defined by Section 58 of the Transfer of Property Act.
(ii) It is negatively defined and should not be anyone of the mortgages listed above.
(iii) Anomalous mortgages are usually a combination of two mortgages. Examples of such mortgages are:
(a) a simple and usufructuary mortgage, and
(b) an usufructuary mortgage accompanied by conditional sale. There may be other forms, molded by custom
and local usage.
(c) Merits and Demerits of an Equitable Mortgage
Merits
(i) The borrower saves the stamp duty on the mortgage deed and the registration charges. It involves
minimum formalities.
(ii) It involves less time and can be conveniently created.
It can be done without much publicity and therefore, the customer’s position is not exposed to public gaze.
Demerits
(i) In case of default, the remedy is to obtain a decree for sale of the property. Since, this involves going to
the Court, it is expensive and time consuming. This shortcoming can be overcome by inserting a covenant
by which the mortgagee is given the power of sale. In that case, the mortgage deed must be properly
stamped and registered and the mortgage loses the advantage of being simple in procedure and less expensive.
(ii) Where the borrower is holding the title deeds in his capacity as a trustee and equitable mortgage of
the same is effected, the claim of the beneficiary, under trust will prevail over any equitable mortgage.
Therefore, the banker has to make a proper scrutiny of the title deeds before accepting them as a security.
(iii) The borrower may create a subsequent legal mortgage in favour of another party. However, this
possibility is not there, if the equitable mortgagee holds the original title deeds. In India, there is no difference
between the two types of mortgages. According to Section 48 of the Registration Act, 1908, a mortgage by
deposit of title deeds prevails against any subsequent mortgage relating to the same property. Similarly, the
title of the equitable mortgagee, is not defeated by any subsequent sale without notice. However, to avoid any
risk of this type, the equitable mortgage should be accepted only after obtaining the original title deeds.
================================================
Section 115 in The Indian Evidence Act, 1872, Estoppel. —When one person has, by his declaration, act or
omission, intentionally caused or permitted another person to believe a thing to be true and to act upon such
belief, neither he nor his representative shall be allowed, in any suit or proceeding between himself and such
person or his representative, to deny the truth of that thing. Illustration A intentionally and falsely leads B to
believe that certain land belongs to A, and thereby induces B to buy and pay for it. The land afterwards
becomes the property of A, and A seeks to set aside the sale on the ground that, at the time of the sale, he had
no title. He must not be allowed to prove his want of title.
===========================================================
Section 35 in The Transfer of Property Act, 1882, 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.
Illustrations: The farm of Sultanpur is the property of C and worth Rs. 800. A by an instrument of gift
professes to transfer it to B, giving by the same instrument Rs. 1,000 to C. C elects to retain the farm. He
forfeits the gift of Rs. 1,000. In the same case, A dies before the election. His representative must out of the Rs.
1,000 pay Rs. 800 to B. The rule in the first paragraph of this section applies whether the transferor does or
does not believe that which he professes to transfer to be his own. A person taking no benefit directly under a
transaction, but deriving a benefit under it indirectly, need not elect. A person who in his one capacity takes a
benefit under the transaction may in another dissent therefrom. Exception to the last preceding four rules.—
Where a particular benefit is expressed to be conferred on the owner of the property which the transferor
professes to transfer, and such benefit is expressed to be in lieu of that property, if such owner claims the
property, he must relinquish the particular benefit, but he is not bound to relinquish any other benefit conferred
upon him by the same transaction. Acceptance of the benefit by the person on whom it is conferred constitutes
an election by him to confirm the transfer, if he is aware of his duty to elect and of those circumstances which
would influence the judgment of a reasonable man in making an election, or if he waives enquiry into the
circumstances. Such knowledge or waiver shall, in the absence of evidence to the contrary, be presumed, if the
person on whom the benefit has been conferred has enjoyed it for two years without doing any act to express
dissent. Such knowledge or waiver may be inferred from any act of his which renders it impossible to place the
persons interested in the property professed to be transferred in the same condition as if such act had not been
done.
Illustration: A transfers to B an estate to which C is entitled, and as part of the same transaction gives C a
coal-mine. C takes possession of the mine and exhausts it. He has thereby confirmed the transfer of the estate
to B. If he does not within one year after the date of the transfer signify to the transferor or his representatives
his intention to confirm or to dissent from the transfer, the transferor or his representative may, upon the
expiration of that period, require him to make his election; and, if he does not comply with such requisition
within a reasonable time after he has received it, he shall be deemed to have elected to confirm the transfer. In
case of disability, the election shall be postponed until the disability ceases, or until the election is made by
some competent authority. COMMENTS When question of election arises A case of election arises only when
the transferee takes a benefit directly under a transaction. When the transferee derives any benefit indirectly,
no question of election arises, as he, in that case, cannot be said to take under the deed; Valliammai v.
Nagappa, AIR 1967 SC 1153.
===========================================================
Explain and discuss the facts and principles of law laid down in the case of L. Janakirama Iyer And
Others vs P. M. Nilakanta Iyer And Others on 26 October, 1961; Equivalent citations: 1962 AIR 633,
1962 SCR Supl. (1) 206
ACT: Trust-Debtors conveying property to three trustee for repayment of Debts-Administration suit by
debtors dismissed on withdrawal subsequent suit on behalf of general body of creditors if
barred by res judicata Limitation claim for possession- Mainteinability sale deed executed by two
of the three trustees validity Amendment of decree by High Court after admission of appeal by Supreme
Court-Award of net profit to trust estate and internal to alienation in favour of person intermeddling
with trust estate Trustee de son
tort Indian Trusts Act 1882(2 of 1882) ss 48,63-Code of Civil Procedure, 1908 (Act V of
1908) ss.11, 151 and 152 Indian Limitation Act, 1908 (IX of 1908) Arts 134, 120.

These appeals arose out of a representative suit filed on behalf of the creditors of defendants I to 6
who had executed a trust deed on August 26, 1936, conveying their properties to three trustees with
authority to dispose of the one and distribute the sale proceeds ratably amongst the creditors. The
trust deed required “the three trustees to act according to the decision arrived at either unanimously
or by majority.” The trustees accepted the trust and conveyed all the properties except the family
house in administration of the trust. Two of the sale deeds in favour of two of the creditors,
defendants 13 and 14, a mortgagee creditor, in the suit were executed by only two of the trustees.
Defendant 14 and his sons defendants 18 to 24 are the appellants in Civil Appeal No. 62 of 1959
while defendants 12, 13 and 16 are the appellants in Civil Appeal No. 77 of 1959.

Defendants 1 to 6 are the debtors.

They were members of an undivided Hindu family known as Kalakkad Pannayar family in Tirunelveli District.
The family was doing Commission agency business in petrol, kerosene and crude oil.
It had secured agency rights from the Burmah-Shell Company.
The members of the family became heavily indebted by about June, 1936, and as a result there was a pressure
from their creditors.

In order to meet the said pressure a deed of composition was executed (EX. B. 2) on July 8, 1936.
As a result of this composition 56 out of the creditors of the family agreed to a scheme for settlement of their
debts.
Under this deed, defendant 7 was constituted as a trustee and as such was empowered to take over the assets of
the debtors, sell them to the best advantage and distribute the proceeds rateably amongst all credit. The trust
deed required “the three trustees to act according to the decision arrived at either unanimously or by majority.”
It appears that before the scheme under the competition could be successfully or effectively worked out, one of
the creditors, Ayyah Ayyar, filed an insolvency petition, No. 26 of 1936, in the Sub-Court at Tirunelveli on
July 30, 1936.
By this petition the creditor wanted defendants 1 to 6 to be adjudged insolvent.

During the pendency of these proceedings, on August 26, 1936 defendants 1 to 6 executed a deed of trust,
(Ex.B.7);
by this document they conveyed all their movable and immovable properties including the outstanding due to
them to three trustees.
These were defendant 7 Subbarayalu Reddiar, Veerabahu Pillai and Narayana Pillai. The trustees were
authorised to dispose of the assets of (defendants 1 to 6 and distribute the proceeds rateably amongst the
creditors.
Narayana Pillai died in February, 1938. Veerabahu Pillai died some time before the present suit was instituted.
Defendants 9 and 10 are the undivided sons of defendants 7, whereas defendant 11 is the widow and
defendants 12 and 13 are the step-brothers of Veerabahu Pillai. The trustees accepted the trust and entered
upon their duties. They took possession of the immovable properties covered by the trust. They paid off the
secured creditors, and in regard to unsecured creditors they arranged to pay 50% of their dues by selling the
immovable properties either to the creditors themselves or to third parties directing them to discharge the
secured debts, and the unsecured debts to the extent of 50% of their value. It is common ground that except
their family house in which defendants 1 to 6 resided all other immovable properties belonging to them were
conveyed under the trust deed.

Where s. 11 is the thus inapplicable it would not be permissible to rely upon the general doctrine of res
judicata. We are dealing with a suit and the only ground on which res judicata can be urged against such a suit
can be the provisions of s. 11 and no other. In our opinion therefore, there is no substance in the ground that
the present suit is barred by res judicata.
The next question which falls to be considered is the most important question in these appeals. We have
already seen that three trustees were appointed under the trust deed executed by defendants 1 to 6 and two of
the impugned sale deeds have been executed by only two out of the said three trustees. The Courts below have
held that two out of the three trustees could not convey a valid title and so on that ground alone the two
transfers are invalid.
Section 48 of the Trusts Act provides that when there are more trustees than one, all must join in the execution
of the trust, except where the instrument of trust otherwise provides. It is thus clear that all acts which the
trustees intend to take for executing the trust must be taken by all of them acting together. Therefore, there can
be no doubt that if the validity of the alienations effected by the trustees falls to be considered only in the light
of s. 48 the fact that out of the three trustees only two have executed the sale deeds would by itself make the
transactions invalid and would not convey title to the alienees. This position is not in doubt.
In the result Civil Appeal No. 77 of 1959 preferred by defendants 12, 13 and 16 fails and is dismissed
with costs.
Appeals dismissed.

= = = = = = = == = = = = = = == = = = = = = == = = = = = = == = = = = = = = = = = = =

Section 84 IPC embodies McNaughton rules as follows: “Nothing is an offence which is done by a person
who, at the time of doing it, by reason of unsoundness of mind, is incapable of knowing the nature of the
act or that he is doing what is either wrong or contrary to the law.”
A test applied to determine whether a person accused of a crime was sane at the time of its commission and,
therefore, criminally responsible for the wrongdoing.
The M'Naghten rule is a test for criminal insanity. Under the M'Naghten rule, a criminal defendant is not guilty
by reason of insanity if, at the time of the alleged criminal act, the defendant was so deranged that he/she did
not know the nature or quality of his/her actions or, if he/she knew the nature and quality of his/her actions,
he/she was so deranged that he/she did not know that what he/she was doing was wrong.
Daniel McNaughton was the son of a Glasgow wood turner. He was harboring a delusion that there was
a conspiracy against him, and he perceived harassment by the spies sent by Catholic priests with the
help of Jesuits and Tories.
The following was the revelation by McNaughton during interrogation in Bowstreet police station. “The Tories
in my native city have compelled me to do this. They followed me to France, into Scotland and all over to
England. In fact, they follow me wherever I go… They have accused me of crimes of which I am not guilty;
they do everything in their power to harass and persecute me. In fact they wish to murder me.”
The Commissioner of Police was aware of McNaughton's condition for 18 months before the shooting
incident. Two years before the shooting incident, McNaughton asked him to put a full stop to the persecution
and later reminded him to apply to the Sheriff. His delusions were directed against the Tories, and he decided
to kill the Tory Prime Minister Sir Robert Peel.
On 20th June 1843 Edward Drummond, the Private Secretary of Sir Robert Peel, was coming out of the
Prime Minister's residence and McNaughton mistook him for Peel. He followed him out of Whiteall
Garden and in Parliament Street; and in front of numerous spectators, he shot him in the back and he
died five days later.
McNaughton was arrested by a constable who had witnessed the incident and was taken to BowStreet police
station. At the inquest in BowStreet, the verdict was willful murder and McNaughton was indicted.
During the trial, Alexander Cockburn (counsel for defense), asked Dr. Monro whether the delusions of
McNaughton were real or assumed. Dr. Monro confirmed that the delusions were real and considered that the
killing was committed under a delusion and McNaughton carried out of an idea which had haunted him for
years. All others who gave evidence confirmed that McNaughton was insane. Terms like homicidal
monomania and partial delusion were discussed during the trial, and the foreman jury without the retiring jury
returned a verdict of insanity.
McNaughton was acquitted of murder; and considering insanity, he was forcibly institutionalized for the rest of
his life under Criminal Lunatics Act 1800. He was first remanded to Bethlem Royal Hospital (stayed there for
20 years); and in 1864 he was transferred to Bradmoor Asylum, and he died on 3rd May 1865 at the age of 52.
The establishment and the press protested the verdict. Queen Victoria was displeased to a greater extent and
wrote to Sir Robert Peel for a wider interpretation of the verdict.
On 6th March 1843, there was a discussion in the House of Lords, and Lord Chancellor put five questions to a
panel of His Majesty's judges. The five questions were replied on 19th June 1843, and they were construed as
McNaughton's rules. The following are the main points of McNaughton's rules:
1. Every man is to be presumed to be sane and to possess a sufficient degree of reason to be responsible
for his crimes, until the contrary be proved.
2. An insane person is punishable “if he knows” at the time of crime.
3. To establish a defense on insanity, the accused, by defect of reason or disease of mind, is not in a
position to know the nature and consequences.
4. The insane person must be considered in the same situation as to responsibility as if the facts with
respect to which the delusion exists were real.
5. It was the jury's role to decide whether the defendant was insane.
McNaughton's rules stressed on “understandability of right and wrong” and “intellectual” rather than a moral
or affective definition dominated in its formulation. Lack of control and irresistible drives or impulses were
neglected. In essence, it was the “test of knowing” or “test of right and wrong.” If McNaughton's rules had
been applied to McNaughton at the time of trial, he could not have been found guilty on the grounds of
insanity.
Explain and discuss the facts and principles of law laid down in the case of Attorney-General v
Ironmongers Company: Chancery

Explain and discuss the facts and principles of law laid down in the case of S. Darshan Lal vs Dr. R.E.S.
Dalliwall And Anr. on 2 April, 1952; Equivalent citations: AIR 1952 All 825
1. This is an application in revision against an order of the District Judge of Saharanpur refusing to
discharge the applicant from his office of trusteeship.
2. One Mr. H.B.S. Dalliwal, a barrister, residing at Mussoorie and owning considerable property at that place
executed two deeds of trust, one on 21-4-1921 and the other on 25-6-1921. On 8-5-1926 he executed a will in
respect of some other properties. Mr. Dalliwal died on 12-5-1926. The trustees of the trust deeds and the
executors of the will appointed by him did not agree to act and, therefore, the District Judge appointed the
applicant, Sri S. Darshan Lal, Barrister-at-law of Dehra Dun, as the sole trustee of the properties by his order
dated 19-8-1926. One of the beneficiaries under the trust deeds and the will was Mrs. E.B. Dalliwal, while the
two sons of Mr. H.B.S. Dalliwal, Roy and Kenneth, were the other two beneficiaries. Mrs. E.B. Dalliwal died
on 22-10-1944.
On 29-1-1947 the opposite parties, the two sons of Mr. Dalliwal, made an application to the District Judge
alleging that the trust had come to an end and prayed that the properties held by the trustee might be made over
to them and the trustee might be asked to explain accounts. Sri Darshan Lal was agreeable to explain the
accounts but was unwilling to part with the property as he claimed that he had spent some money out of his
own pocket which he was entitled to get back before he could be ordered to hand over the property. On an
agreement between the parties the District Judge appointed a commissioner to go into the accounts. The report
submitted by the Commissioner was not acceptable to either of the parties.
3. The opposite parties' case before the Court below was that as under the terms of the trust deed of 25-6-1921
the trust had come to an end, the trustee was bound to hand over the properties covered by that deed to them.
Sri Darshan Lal's case was that the trust had not yet come to an end. But during the pendency of the
proceedings he made an application on 31-5-1948 stating that :
"the accounts of the entire property upto date have been rendered. The amount of debts borrowed by the
applicant under the orders of this Court from time to time as trustee and manager are to be paid by this
property of the trust and the beneficiaries and the same are taken therefor.
It is, therefore, prayed that an order of discharge under the circumstances be passed in favour of the applicant."
It is obvious that what Sri Darshan Lal meant by this application was not a formal order declaring that he has
ceased to be a trustee but a release from the liabilities incurred by him in his capacity as a trustee.
4. The learned District Judge upon an interpretation of the trust deed of 25-6-1921 held that the trust had come
to an end and that, therefore, the trustee stood discharged from his office but that he had no power, in those
circumstances, either to order the return of the property to the opposite parties or to pass an order of discharge
in favour of Sri Darshan Lal. The opposite parties submitted to the order passed against them but Sri Darshan
Lal came up in revision to this Court against that order. During the pendency of the revision application, the
opposite parties made an application under Section 18, Trustees Act, No. XXVII of 1866, praying that an order
vesting the property in the opposite parties be passed by this Court. These two applications are now before us
for disposal.
5. We have heard learned counsel for the parties and have come to the conclusion that both the applications
must be dismissed.
6. The first point to be decided is whether the trust has come to an end. The second trust-deed of 25-6-1921
provided that out of the income of the trust property Rs. 200 monthly would be paid to the executant's wife
Mrs. E.B. Dalliwal, and 2/3 of the remaining income to the executant's son Roy H. S. Dalliwal so long as he
remained in a college and 1/3rd to the executant's second son Kenneth H.S. Dalliwal so long as he was in
school; but when Roy H.S. Dalliwal left college, he was to get 1/3rd instead of 2/3rd and when Kenneth H.S.
Dalliwal went to college he was to get 2/3rd instead of 1/3rd, and when both sons had completed their
education and left college, the remainder after paying the executant's wife Rs. 200 monthly was to be divided
equally between the two sons, and from and after the death or divorce, if any, of Mrs. E.B. Dalliwal, the said
sum of Rs. 200 was to be divided between the two sons in equal shares, and in the event of death of any son,
his share was to go to his legal heir or heirs. After making these provisions the trust deed declared :
"This trust will come to an end at the death of Mrs. E.B. Dalliwal, provided Kenneth H.S. Dalliwal has also
attained the age of 23 years. It is also provided that when this trust comes to an end as provided above, the trust
property or the sale proceeds thereof as the case may be shall be divided in equal shares among my said two
sons."
Mrs. E.B. Dalliwal, as stated above, died on 22/10/1944 and Kenneth attained the age of 23 years long ago. In
the terms of the trust, therefore, the trust came to an end on the death of Mrs. B. E. Dalliwal. The provision that
on the trust coming to an end the trust property or the sale proceeds thereof, as the case may be, shall be
divided in equal shares among the two sons, did not keep the trust continuing. The purpose of the trust was not
the division of the property by metes and bounds between the two sons; its purpose was to provide for the
maintenance of the executant's wife and the education of the executant's children and to give the property to
the two sons. The words of the deed are absolutely clear that the trust is to come to an end at the death of Mrs.
E.B. Dalliwal or when Kenneth attains the age of 23 years, whichever is later and the property is to be divided
after the trust has come to an end. It cannot be maintained that the trust does not terminate so long as the
property is not divided between the sons. The expression 'property will be divided in equal shares among the
sons' does not imply a physical division by metes and bounds. It is a common expression used for vesting the
property in defined shares.
7. Under Section 77, Trusts Act, a trust is extinguished when its purpose is completely fulfilled. In our opinion
the purpose of the trust has come to an end and the trust has terminated. Under Section 71, a trustee is
discharged from his office by the extinction of the trust. The trustee, in the present case, therefore, stands
automatically discharged from his office. But this discharge does not mean that the trustee is relieved from his
duty of rendering accounts and delivering the trust property to the beneficiaries. In the present case, the trustee
wants an order of discharge in the sense of release from his liabilities. This, in our opinion, cannot be done in a
summary procedure upon an application to the District Judge. The only provision in the Trusts Act for the
District Judge for ordering a discharge of a trustee is contained in Section 71 which runs as follows:
Section 71:--"The trustee may be discharged from his office only as follows:
(a) by the extinction of the trust;
(b) by the completion of his duties under the trust;
(c) by such means as may be prescribed by the instrument of trust;
(d) by appointment under this Act of a new trustee in his place;
(e) by consent of himself and the beneficiary, or, where there are more beneficiaries than one, all the
beneficiaries being competent to contract or
(f) by the Court to which a petition for his discharge is presented under this Act."
8-9. Clause (f) of Section 71 read in conjunction with the other clauses clearly refers to the discharge of a
trustee by the Court in circumstances other than those mentioned in-the earlier Clauses (a) to (e). The language
of Section 72 which deals with the manner in which the District Judge may discharge a trustee upon a petition
presented to him also leads to the same conclusion.
10. Section 72 is in these terms:
"Notwithstanding the provisions of Section 11, every trustee may apply by petition to a principal Civil Court of
original jurisdiction to be discharged from his office; and if the Court finds that there is sufficient reason for
such discharge, it may discharge him accordingly and direct his costs to be paid out of the trust property. But
where there is no such reason, the Court shall not discharge him, unless a proper person can be found to take
his place."
11. The last sentence of the section clearly suggests that the whole of the section applies to a subsisting trust in
which when one trustee is discharged another has to be appointed. A consideration of the scheme of the Act
also fortifies this conclusion. The Act defines the rights and duties of trustees and beneficiaries. It defines a
trust (Section 3), the purposes for which a trust may be made (Section 4), how it shall be created (Sections
5 and 6), and the rights and duties of trustees and beneficiaries. One of the duties of a trustee is to keep and
render accounts (Sections 19 and 57). One of his rights is to have the accounts of the administration of the trust
property examined and settled and where nothing is due to the beneficiary under the trust, to an
acknowledgment in writing to that effect (Section 35). There is nothing, however, to show that he can have this
right to settlement of accounts done through the agency of the District Judge upon a petition.
Wherever the Act authorises the District Judge upon a petition in a summary proceeding to do a certain thing,
the Act makes a specific mention of it. For instance in the following sections the District Judge has been
authorised to make orders under the Act (Sections 11, 22, 32, 34, 36, 41, 46, 49, 53, 71, 72, 73 and 74) and in
none others. All these sections deal with summary matters, and in Section 34 it is specifically stated that a
trustee may, without instituting a suit, apply by petition to a principal Civil Court of original jurisdiction for its
opinion, advice or direction on any present questions respecting the management or administration of the trust
property other than questions of detail, difficulty or importance, not proper in the opinion of the Court for
summary disposal. The question of settlement of accounts, is a matter of detail and difficulty. It is not fit for a
summary disposal. That is why in Section 35 there is no mention that the right there mentioned may be
exercised by a petition to the District Judge. It follows, therefore, that the District Judge cannot under Sections
71 and 72 give a discharge to the trustee in the sense of a release from his liability to render account. When a
trustee has ceased to be a trustee by the fulfilment of the object of the trust, he is under a liability to render
account to the beneficiaries. As the settlement of accounts cannot be done by the District Judge, his discharge
or release from liability cannot be ordered by him. Sections 71 and 72, therefore, when they authorise the
District Judge to discharge a trustee refer to a case in which a trustee wishes to go out of his office during the
subsistence of the trust when another person may be appointed in his place. This can only be done if there is a
sufficient : reason to do so. We are, therefore, of opinion, that the Court below had no jurisdiction to discharge
a trustee when he has been discharged automatically by the extinction of the trust, and even if there was such
jurisdiction, there was no jurisdiction to release him from his liability to render accounts.

12. The application made on behalf of the opposite parties under Section
18, Trustees Act (27 of 1866) has next to be considered. Act 27 of 1866, as
its preamble shows, applies to conveyance and transfer of moveable and
immoveable property in British India vested in mortgagees and trustees, in
cases to which English law is applicable. Section 3 further clarifies the
matter :

"The powers and authorities given by this Act to the High Court shall and
may be exercised only in cases in which English law is applicable."

The parties in the present ease are not governed by the English law. It was,
however, contended by Diwan Charanjit Lal, learned counsel for the
opposite parties, that the English law applied as the common law of the
country in cases in which there was no other provision of law in respect of
the particular subject matter in controversy. The proposition that the
English law is the common law of this country and has to be followed
where no other rule of law is applicable or provided for cannot be
accepted.

13. The civil Courts in Bengal, Bihar, D.P. and Assam are governed by the
Bengal, Agra and Assam Civil Courts Act, 12 of 1887. The civil Courts in
Bengal, U. P. and Assam subordinate to the High Court are to decide cases
in certain matters according to Mohammadan or Hindu law if the parties
are Mohammadans or Hindus respectively and in other cases by "any other
law for the time being in force" or if there be no such law according to
"justice, equity and good conscience", vide Section 37, Bengal, Agra and
Assam Civil Courts Act, 12 of 1887.

14. The High Court is to apply the law that would be applied by the civil
Courts subordinate to it, vide paras 13 and 14 of the Letters Patent.

15. English law has been applied in India as supplying the rule of justice,
equity and good conscience but only if it is found applicable to Indian
society and circumstances, Waghela Rajsanji v. Shekh Masludin, 11 Bom.
551 (P.C.) at p. 561. English law, therefore, does not apply here of its own
force.

16. The matter may be considered upon broader principles. According to

English law, Englishmen carry English law with them in countries which
were formerly uninhabited and are peopled by them. English common law
as well as Statute law brought into force up to the date of the settlement is
applicable to such colony to the extent to which such laws are suitable to
the conditions of the colony. Statutes passed subsequently apply to the
colony only if they are made expressly applicable to it. In an inhabited
country, however, obtained by conquest or cessation, law already prevalent
therein continues to prevail except to the extent to which English law has
been introduced and also except to the extent to which such law is not
civilised law at all, vide Yeap Cheah Neo v. Ong Cheng Neo, (1875) 6 p.
c. 381. India fell in the category of conquered or ceded country because it
was already inhabited and civilised law prevailed therein before the advent
of the British and, therefore, prima facie there can be no presumption that
English law applied to Indians in India.

17. The history of the acquisition of India by the British is well known.
With the exception of the Island of Bombay ceded to Charles II in 1661 by
the King of Portugal as part of the marriage dowry of the Infanta and
which Charles II granted to the East India Company, the other acquisitions
by the East India Company in the earlier stages were confined to certain
factories established at Madras, Calcutta and other places. The acquisition
of these factories was not made by the East India Company in the exercise
of a sovereign power but was made in their capacity of land-owners under
the sovereignty of the Moghal Emperor. The history of the matter has thus
been given by Lord Brougham in Mayor of Lyons v. East India Co., 1
Moo. Ind. App. 175 (P.C.) at pp. 272-274 :

"The district on which Calcutta is built, was obtained by purchase, from

the Nabob of Bengal, the Emperor of Hindustan's Lieutenant, at the very
end of the 17th century. The Company had been struggling for nearly 100
years, to obtain a footing in Bengal, and till 1696 they nerer had more than
a Factory here and there, as the French, Danes, and Dutch also had. Till
1678, their whole object was to obtain the power of trading, and it was
only then that they secured it, by a Firman from the Emperor; from that
year, till 1696, they in vain applied to the native Government, for leave to
fortify their Factory on the Hoogley, and it was only then that they made a
fortification, acting upon a kind of half consent, given in an equivocal
answer of the Nabob; encouraged by the protection which they were thus
enable to afford the natives, many of them built houses, as well as the
English subjects; and when the Nabob, on this account was about to send a
Kadi or Judge, to administer justice to those natives, the Company's
servants bribed him, to abstain from this proceeding. Some years
afterwards the Company obtained a grant of more land and villages from
the Emperor, with renewed permission to fortify their Factories; during all
this period, tribute was paid to the Emperor, or his officer, the Nabob; first,
for leave to trade, afterwards as Zamindars, under the Emperor and in
1757, the year memorable for the battle of Piassey, the Treaty with Jaffier
Ally, indemnifying them for their losses, ceding the French possessions,
and securing their rights, and binding them to pay their revenues like other
"zamindars". Bight years later, they likewise received from the native
government, a grant of the Dewanny, or receivership of Bengal, Behar, and
Orissa; and of their subsequent progress in power, it is unnecessary to
speak; enough has been said to show that the settlement of the Company in
Bengal was effected by leave of a regularly established Government, in
pogatssion of the country, invested with the rights of sovereignty, and
exercising its powers that by permission of that Government Calcutta was
founded, and the factory fortified, in a district purchased from the owners
of the soil, by permission of that Government, and held under it by the
Company, as subjects owing obedience as tenants rendering rent, and even
as officers, exercising, by delegation, a part of its administrative authority."

18. So long as the East India Company or rather the British Crown through
the East India Company did not acquire rights of sovereignty over Indian
soil, there could be no question of the introduction of of English law in
India.

19. Even if we assume that the English common law was introduced in the
Presidency towns, there is no warrant for assuming that it was also
introduced in the Mofassil, except with reference to Englishmen governed
by the English law.

20. No statute of the British Parliament has been brought to our notice
showing that English Law as such was introduced outside the Presidency
Towns. We have the high authority of the Privy Council in support of the
view that no such thing was done.
21. In Ram Lal Dutt v. Dhirendra Nath, A. I. R. 1943 P.C. 24, their
Lordships had a case in which the question was whether the tenant could
refuse to pay the entire rent of a holding in the district of Bengal, when he
was dispossessed of a portion only of the holding by the landlord. The
Calcutta High Court had in a long series of cases followed the English
common law in such cases, that an eviction of a tenant from a part of the
lands by title paramount gives rise to an apportionment but eviction by the
landlord for a part entails a suspension of the entire rent. The Privy
Council observed that :

"Since 1772, no Court has had authority to apply to the districts of Bengal
rules devised upon other principles than justice, equity and good
conscience. The doctrine of suspension of rent is not the less to be
regarded because it has been drawn from the common law, but this origin
will not serve by itself for a justification."

22. The result, therefore, is that we dismiss the application in revision and
also the application of the respondents under Section 18, Trustees Act. In
the circumstances of the case, we order the parties to bear their own costs
in this Court.

The Doctrine of Cypres (see-pray doctrine) is the legal concept which gives Court the power to interpret the
terms of a will, gift, or charitable trust. This doctrine can be invoked when the intention of the original
document is not carried out and therefore, the court can interfere. The word cypress means 'as close as
possible. ' The doctrine of cypress is a principle of the English law of trusts. Under this doctrine, a trust is
executed, or carried out as nearly as possible, according to the objects laid down in it.
The Doctrine of Cypres is the legal concept which gives Court the power to interpret the terms of a will, gift,
or charitable trust. This doctrine can be invoked when the intention of the original document is not carried out
and therefore, the court can interfere. This doctrine is applicable though the precise object to be benefited or
the mode of application of the fund is uncertain. When the charitable trust cannot be executed due to some
short coming or for insufficient of the subject matter, it shall not be void rather it shall be executed as nearly as
possible.
The cy-pres doctrine is employed when the original charitable purpose of a charitable trust is no longer
possible to carry out. Because charitable trusts can continue on into perpetuity, it is not uncommon for trusts to
outgrow or outlive their original purposes. When this happens, the court will usually intervene by way of the
cy-pres doctrine in order to apply the trust funds in a way that is as nearly like the original charitable purpose
as possible.
In order to invoke the cy-pres doctrine, two primary conditions must be present. First, the designated original
purpose of the trust must be either fulfilled or frustrated. In other words, the purpose of the trust must have
been accomplished completely, or the purpose of the trust must be either impossible or impractical to continue
carrying out or illegal. It is not sufficient if only a better purpose has revealed itself over time.
Second, it must be clear in the trust documentation that the creator of the trust intended his or her gift for a
specific charitable purpose. In other words, the charitable intent must have been general as opposed to
restricted. If the charitable donor intended his or her gift for a specific charity, without regard for any change in
circumstances, then cy-pres cannot be invoked.
If the court rules positively on both the above two conditions, then the trust funds can be re-directed to another
charitable purpose in line with the donor’s initial intention. In the event that one or the other conditions is not
present, then the contents of the trust will revert back to the donor and/or the donor’s successors.
Section. 92 of the Civil Procedure Code, deals with Doctrine of Cypres,
 The Court may alter an express or constructive trust created for public purpose of a charitable or
religious nature and allow the property or income of such trust or any portion to be applied cy pres in
one or more of the following circumstances.
 Where the original purpose of the trust in whole or in part have been fulfilled or cannot be carried out
at all or cannot be carried out according to the directions given in the instrument creating the trust.
 Where the original purpose of the trust is used for a part available by virtue of the trust or
 Where the original purpose in whole or in part, they were laid down.

CHAPTER I
PRELIMINARY
3. Interpretation-clause—“trust”:—A “trust” is an obligation annexed to the ownership of property, and arising
out of a confidence reposed in and accepted by the owner, or declared and accepted by him, for the benefit of
another, or of another and the owner:

“author of the trust”: “trustee”: “beneficiary”: “trust-property”: “beneficial interest”: “instrument of trust”:—
the person who reposes or declares the confidence is called the “author of the trust”: the person who accepts
the confidence is called the “trustee”: the person for whose benefit the confidence is accepted is called the
“beneficiary”: the subject-matter of the trust is called “trust-property” or “trust-money”: the “beneficial
interest” or “interest” of the beneficiary is his right against the trustee as owner of the trust-property; and the
instrument, if any, by which the trust is declared is called the “instrument of trust”:
“breach of trust”:—a breach of any duty imposed on a trustee, as such, by any law for the time being in force,
is called a “breach of trust”:

CHAPTER VIII
OF THE EXTINCTION OF TRUSTS
77. Trust how extinguished.—A trust is extinguished—
(a) when its purpose is completely fulfilled; or
(b) when its purpose becomes unlawful; or
(c) when the fulfilment of its purpose becomes impossible by destruction of the trust-property or otherwise; or
(d) when the trust, being revocable, is expressly revoked.

78. Revocation of trust.—A trust created by will may be revoked at the pleasure of the testator. A testator is a
person who has made a will or given a legacy.
A trust otherwise created can be revoked only—
(a) where all the beneficiaries are competent to contract—by their consent;
(b) where the trust has been declared by a non-testamentary instrument or by word of mouth—in exercise of a
power of revocation expressly reserved to the author of the trust; or
(c) where the trust is for the payment of the debts of the author of the trust, and has not been communicated to
the creditors—at the pleasure of the author of the trust.
Illustration
A conveys property to B in trust to sell the same and pay out of the proceeds the c claims of A’s creditors. A
reserves no power of revocation. If no communication has been made to the creditors, A may revoke the trust.
But if the creditors are parties to the arrangement, the trust cannot be revoked without their consent.
79. Revocation not to defeat what trustees have duly done.—No trust can be revoked by the ‘author of the
trust’ (a person who sets up a trust transferring property to another person.) so as to defeat or prejudice what
the trustees may have duly done in execution of the trust.

What constitutes a breach of trust?

A breach of trust occurs when a trustee contravenes the terms of the trust or the duties of a trustee.
Trustees are jointly and severally liable for breach of trust to their beneficiaries where the breach has given rise
to a loss.
Common allegations of breach of trust include (i) distributing assets to a beneficiary not entitled to them
under the trust deed; (ii) investing trust assets in a way not permitted; (iii) breach of fiduciary duty; and
(iv) breach of the common law or statutory duty of care.
Beneficiaries may be able to get monetary damages or equitable remedy for breaches of trust. Breach of trust
can also refer to when an owner allows someone to borrow or periodically control their property and that
person steals or inappropriately uses the property. For example, a breach of trust would occur if you paid a
valet to park your vehicle, and the valet drove your vehicle around the city.

What are the possible defences to a breach of trust claim?

Exemption clause: An express clause in the trust deed may exempt a trustee from loss or damage.
Statutory relief under Section 61 of the Trustee Act 1925: The court may relieve a trustee wholly or partly
from personal liability for a breach of trust if the trustee is found to have acted honestly, reasonably and ought
fairly to be excused for the breach and for failing to obtain court directions.
Beneficiary consent: It is a defence for a breach of trust if a beneficiary of full age and capacity and not
subjected to undue influence has assented to or concurred with the breach. It is not necessary for the
beneficiary to have benefited from the breach.
Limitation: The limitation period, which is the prescribed statutory time period allowed for making any claim
for breach of trust, is 6 years. No such period is applicable in the instance of fraud and/or recovery
proceedings. The limitation period for claims in a deceased person’s estate is 12 years.
Delay: If there is an unreasonable delay on the part of the claimant in pursuing a breach of trust claim and that
delay has given rise to prejudice to the trustee’s position, then the court may use its discretion to not permit the
claim to proceed.
What is the extent of the liability faced by a trustee for breach of trust?
If a trustee is found to have acted in breach of trust they are required to restore the trust fund to the position it
would have been in had the breach not occurred.

Section 405 in The Indian Penal Code

Criminal breach of trust.—Whoever, being in any manner entrusted with property, or with any dominion over
property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes
of that property in violation of any direction of law prescribing the mode in which such trust is to be
discharged, or of any legal contract, express or implied, which he has made touching the discharge of such
trust, or wilfully suffers any other person so to do, commits “criminal breach of trust”.
A person, being an employer of an establishment [whether exempted under section 17 of the Employees’
Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952), or not] who deducts the employee’s
contribution from the wages payable to the employee for credit to a Provident Fund or Family Pension Fund
established by any law for the time being in force, shall be deemed to have been entrusted with the amount of
the contribution so deducted by him and if he makes default in the payment of such contribution to the said
Fund in violation of the said law, shall be deemed to have dishonestly used the amount of the said contribution
in violation of a direction of law as aforesaid.
A person, being an employer, who deducts the employees’ contribution from the wages payable to the
employee for credit to the Employees’ State Insurance Fund held and administered by the Employees’ State
Insurance Corporation established under the Employees’ State Insurance Act, 1948 (34 of 1948), shall be
deemed to have been entrusted with the amount of the contribution so deducted by him and if he makes default
in the payment of such contribution to the said Fund in violation of the said Act, shall be deemed to have
dishonestly used the amount of the said contribution in violation of a direction of law as aforesaid.

What is a Will ? Define a Trust? What are the key difference between Will and Trust ?

Comparison Chart
BASIS FOR
WILL TRUST
COMPARISON

Meaning A will contain a declaration of the A trust is a legal arrangement, in which the
testator, regarding the management and trustor authorizes a trustee to manage the
distribution of his personal estate. transferred asset for the sake of beneficiary.

Document Will Trust deed

Covers All the assets of testator's estate. Specific asset, as stated in the deed.

Effective On the demise of the testator. On the transfer of asset to the trustee.

Probate The will goes through probate. The trust does not go through probate.

Revocation Anytime before the death of the Depends on the type of trust.
testator.

Publicized Yes, on the death of the owner. No, it is kept private.

Definition of Will
As the name suggests, a will refers to the wish. In legal terminology, will means a document that expresses the
last wishes of a person. The person who created the will is known as a testator. The testator can appoint an
executor who will oversee the transfer of a testator’s estate to his legal heir.
The will undergoes probate after the demise of the testator, in which court assures that the last wishes of will
maker are carried out properly. It may also contain the directions or instructions regarding the use of testator’s
asset after he passes away.
The will comes into effect only after the death of the testator. The testator has the right to revoke or alter the
will anytime, before his death and of sound mind. If a person has created multiple wills for the distribution of
his assets, then his ‘latest will’ will be executed. If a person dies without creating a will, then his property is
designated to his legal heirs, as per the law of inheritance. Here, legal heirs refer to children, spouse, father,
mother, etc.
Definition of Trust
A trust is defined as a legal arrangement, in which the trust owner authorises a person called a trustee, to hold
the asset, for the benefit of a third party called the beneficiary. It allows a person to nominate beneficiaries of
his assets, before or after he passes away. The document in which the terms of the trust are stated is known as
the trust deed, and the subject matter is known as trust property.
A trust is created with the intention to reduce estate taxes. The best thing about trust is that it does not go
through probate, i.e. there is no court process. It can be of two types i.e. revocable trust which can be altered or
terminated any time during the life of the trust owner and an irrevocable trust in which the trust cannot be
altered or cancelled once it comes into force.
The trust may contain the following facts:
 Objective of trust
 Assets covered
 Rights and limitations of trustee
 Compensation of trustee
 In case, if there are multiple beneficiaries, the proportion in which the asset is transferred to each
beneficiary.
Key Differences Between Will and Trust
The basic differences between will and trust are described in the following points:
 A declaration regarding the management and distribution of the testator’s assets after his demise is
known as Will. A trust, on the other hand, is a legal arrangement in which the settlor authorises a
person as trustee to hold the asset for the sake of beneficiary.
 The Will itself is a document containing all the details. Conversely, the trust deed is executed, in the
case of a trust.
 All the assets of the testator’s estate are covered under will whereas only a certain asset stated in the
trust deed is transferred in trust.
 A will become effective only on the demise of the testator. Unlike, a trust which comes into effect,
when the asset is transferred to the trustee.
 A will undergo through probate i.e. a process in which court checks the validity and looks after the
administration of the will. As opposed to trust, which does not undergo through probate.
 A will can be revoked any time before the demise of the testator. In contrast to trust, in which
revocation depends on the type of trust, i.e. in the case of a revocable trust, it can be revoked anytime
during the lifetime of the author while an irrevocable trust cannot be revoked after it comes into effect.
 A will become a public document when the testator passes away. On the other end trust, is a private
document.

Explain and discuss the facts and principles of law laid down in the case of Bhim Singh & Anr vs Kan
Singh(And Vice Versa) on 21 December, 1979. Equivalent citations: 1980 AIR 727, 1980 SCR (2) 628
Act: Benami-What is-Tests for deciding benami transactions.
Headnote: Plaintiff no. 1 and plaintiff no. 2 were father and son while defendant was the brother of plaintiff
no.1. The plaintiffs in their suit against the defendant claimed that the suit house in which the defendant was
living, belonged to them by virtue of a patta issued in their names. They alleged that the deceased brother of
plaintiff no. 1, who remained a bachelor till his death, loved plaintiff no. 2 as his son and had thought of
adopting plaintiff no. 2 but since he died all of a sudden it could not be done. The defendant on the other
hand claimed that he and his deceased brother lived as members of a joint family after the partition of their
family that as a result of the joint efforts of himself and his deceased brother the Maharaja, of Bikaner
sanctioned sale of the house to them, that the purchase money was paid out of their joint income but that the
patta was granted in the names of the plaintiffs due to political reasons and therefore the plaintiffs were at the
most benamidars.
The trial court held that the house was acquired by the deceased brother from the Government of Bikaner for
the plaintiffs and the patta was granted in favour of the plaintiffs and that they were in its possession till
1956. It rejected the defendant's claim that it was acquired with the joint funds of himself and his deceased
brother.
On appeal the High Court held that the house had been purchased by the deceased brother out of his own
money in the names of the plaintiffs without any intention to confer any beneficial interest on them and on his
death plaintiff no. 1 and the defendant succeeded jointly to the estate as his heirs.
HELD: The transaction under which the patta was obtained was not a benami transaction. The
house was acquired by the deceased brother with his money and with the intention of constituting plaintiff no.
2 as the absolute owner thereof.
Where a person buys property with his own money but in the name of another person without any
intention to benefit such other person, the transaction is called benami. In that case the transferee holds
the property for the benefit of the person who has contributed the purchase money and he is a real
owner. The second case which is loosely termed a benami transaction is a case where a
person, who is the owner of the property, executes a conveyance in favour of another without the
intention of transferring the title to the property there under. In this case the transferor continues to
be the real owner. The difference between the two kinds of benami transactions is that whereas in the
former there is an operative transfer from the transferor to the transferee, though the transferee holds
the property for the benefit of the person who has contributed the purchase money, in the latter there is
no operative transfer at all and the title rests with the transferor notwithstanding the execution of the
conveyance. One common feature in both cases is that the real title is divorced from the ostensible
title and they are vested in different persons. The question whether a transaction is a benami
transaction or not depends upon the intention of the person who has contributed the purchase money in
the former case, and upon the intention of the person who has executed the conveyance in the latter case.
The principle underlying the former case is statutorily recognized in section 82 of the Indian Trust Act,
1882.
The principles governing the determination of the question whether a transfer is a benami or not are:
(1) The burden of showing that a transfer is a benami transaction lies on the person who asserts that it is
such a transaction;
(2) if it is proved that the purchase money came from a person other than the person in whose favour the
property is transferred, the purchase is prima-facie assumed to be for the benefit of the person who
supplied the purchase money,
unless there is evidence to the contrary;
(3) the true character of the transaction is governed by the intention of the person who has contributed the
purchase money and
(4) the question as to what his intention was, has to be decided on the basis of the surrounding circumstances,
the relationship of the parties the motives governing their
Action in bringing about the transaction and their subsequent conduct.

==========================================
Explain and discuss the facts and principles of law laid down in the case of Bhim Singh & Anr vs Kan
Singh(And Vice Versa) on 21 December, 1979. Equivalent citations: 1980 AIR 727, 1980 SCR (2) 628
Facts of the case:
Gad Singh, Bharat Singh, Bhim Singh (plaintiff No. 1) and Kan Singh (defendant) are the sons of Sur Singh.
Bharat Singh died unmarried in September, 1955. Gad Singh died thereafter leaving behind him three sons,
Duley Singh, Dhaney Singh and Deep Singh. Dalip Singh, the second son of plaintiff No.1 died in September,
1956. Bharat Singh and the defendant were residing in the house which was the subject matter of the suit. After
the death of Bharat Singh, the plaintiffs Bhim Singh and Himmat Singh filed the suit out of which this appeal
arises against Kan Singh, the defendant for recovery of possession of the suit house and other ancillary reliefs.
In the plaint, they pleaded that the suit house belonged to them by virtue of a patta dated July 12, 1940 issued
in their names; that the defendant who was the brother of plaintiff No. 1 and uncle of plaintiff No. 2 was living
in a part of the house with their consent; that plaintiff No. 2 and his younger brother Dalip Singh were also
living in the house till the year 1956; that the defendant had refused to receive a notice issued by them in the
month of September, 1957 calling upon him to hand over possession of the house to the plaintiffs; that the
defendant had done so on account of personal ill will and that the plaintiffs were, therefore, entitled to recover
possession of the suit house and damages from the defendant. These were briefly the allegations made in the
plaint. On the above basis, the plaintiffs prayed for a decree for the reliefs referred to above.
In the written statement, the defendant did not admit the existence of the patta on the basis of which the
plaintiffs claimed title to the suit house. He denied the allegation that the plaintiffs were the owners in
possession of the suit house. He claimed that he was the exclusive owner of the suit house, and in support of
the said claim stated as follows:-
There was a partition amongst the sons of Sur Singh in the year 1929. At that partition, Gad Singh and plaintiff
No. 1 became separated and they were given all the family properties which were situated in their village,
Roda. As Bharat Singh and the defendant had been educated at the expense of the family, they were not given
any share in the property. Bharat Singh and he settled in Bikaner and lived together as members of joint Hindu
family. Bharat Singh died on September 2, 1955 leaving the defendant as a surviving coparcener. On his death,
the defendant became the owner of the properties of Bharat Singh 'as a member of joint Hindu family'. He
further pleaded that from the year 1928, Bharat Singh and he who were working as the Aid-de-Camp and
Private Secretary respectively of the Maharaja of Bikaner were living in the suit house which then belonged to
the Maharaja. The defendant filed an application for purchasing the house. The proceedings had not terminated
when the defendant left the service of the Maharaja and went to Banaras for higher studies. On his return from
Banaras, he joined the service of the Maharaja in the civil department of Bikaner. After a long time on account
of the joint efforts of Bharat Singh and the defendant, the sale of the house was sanctioned. Bharat Singh who
was living jointly with him paid the consideration for the sale on November 4, 1939 'out of the joint income.'
Thus according to the defendant, Bharat Singh and he became its owners from the date of payment of the
consideration. He further pleaded that 'if the patta of the property had been granted in the names of the
plaintiffs due to some reasons, political and other surrounding circumstances and for the safety of the property,
it cannot affect the right of the defendant'. It was also stated that Bharat Singh and the defendant had not
executed any sale deed in favour of the plaintiffs and so they could not become owners of the suit house. In
another part of the written statement, the defendant pleaded thus:
"The plaintiffs have taken the entire ancestral property of the village. Still they are harassing the defendant due
to avarice. The defendant and Thakur Bharat Singh had been doing Government service. So there was always
danger or removal or confiscation of the property. Even if Thakur Bharat Singh might have written or given his
consent for entering the names of the plaintiffs in the patta in this view, it is not binding. The plaintiffs are at
the most 'benami' even though the patta which is not admitted might be proved."
It is thus seen that the defendant put forward a two-
fold claim to the suit house-one on the basis of the right of survivorship another on the basis of a joint purchase
along with Bharat Singh. Even though in one part of the written statement, he declined to admit the existence
of the patta, in paragraph 13 of the written statement which is extracted above, he put forward the plea that the
plaintiffs were at the most holding the property as benamdars. He, however, did not claim that he was entitled
to the property as an heir of Bharat Singh alongwith plaintiff No. 1. and Gad Singh who would have inherited
the estate of Bharat Singh on his death being his nearest heirs.
In the reply, the plaintiffs denied that the defendant was entitled to the suit house as a surviving coparcener on
the death of Bharat Singh. They, however, pleaded that plaintiff No. 1 had purchased the suit house out of his
income; that Bharat Singh used to love plaintiff No. 2 'as his son' and was thinking of adopting him but he died
all of a sudden and that the defendant had not disclosed in his written statement the special political
circumstances under which the names of the plaintiffs were entered in the patta. They denied that the defendant
had any interest in the suit house.
On the basis of the oral and documentary evidence produced before him, the learned District Judge who tried
the suit held that Bharat Singh had secured the house from the Government of Bikaner for the plaintiffs with
their money; that the patta of the house had been granted by the Patta Court in favour of the plaintiffs; that the
plaintiffs were in possession of the suit house till September, 1956 and that the defendant being their close
relative was living in the house not on his own account but with the plaintiffs' permission. The learned District
Judge also held that the defendant had failed to prove that the suit house had been acquired by him and Bharat
Singh with their joint fund. Accordingly he decreed the suit for possession of the house in favour of the
plaintiffs and further directed that the defendant should pay damages for use and occupation at the rate of Rs.
50 per month from September 20, 1956 till the possession of the house was restored to them. Aggrieved by the
decree of the trial court, the defendant filed an appeal before the High Court of Rajasthan in Civil First Appeal
No. 31 of 1960. The High Court rejected the case of the plaintiffs that the consideration for the house had been
paid by Bharat Singh out of the funds belonging to them and also the case of the defendant that the house had
been purchased by Bharat Singh with the aid of joint family funds belonging to himself and the defendant. The
High Court held that the house had been purchased by Bharat Singh out of his own money in the names of the
plaintiffs without any intention to confer any beneficial interest on them. It further held that the suit house
belonged to Bharat Singh and on his death, Gad Singh, plaintiff No. 1 and the defendant succeeded to his
estate which included the suit house in equal shares. Accordingly in substitution of the decree passed by the
trial court, the High Court made a decree for joint possession in favour of plaintiff No. 1. The rest of the claim
of the plaintiffs was rejected. Dissatisfied with the decree of the High Court, the plaintiffs and the defendant
have filed these two appeals as mentioned above.
The principal issue which arises for consideration relates to the ownership of the suit house. It is admitted on
all hands that though Bharat Singh and the defendant were living in the suit house from the year 1928, it
continued to be the property of the Maharaja of Bikaner till the date on which the patta (Exh. 4) was issued by
the Patta Court of Bikaner and that on the issue of the patta, the State Government ceased to be its owner. It is
also not disputed that the patta constituted the title deed in respect of the suit house and it was issued in the
names of the plaintiffs on receipt of a sum of Rs. 5,000. On January 11, 1930, the defendant had made an
application, a certified copy of which is marked as Exhibit A-116 to the Revenue Minister of the State of
Bikaner making enquiry about the price of the suit house on coming to know that the State Government
intended to sell it. After the above application was made, the defendant left the service of the State of Bikaner
and went to Banaras for studies. Bharat Singh who was also an employee of the State Gov-
ernment was working as the Aid-de-Camp of the Maharaja in 1939. At the request of Bharat Singh, an order
was made by the Maharaja on May 4, 1939 sanctioning the sale of the suit house for a sum of Rs. 5,000.
Exhibit A-118 is the certified copy of the said order. Exhibit A-120 is a certified copy of the order of Tehsil
Malmandi showing that a sum of Rs. 5,000 had been deposited on behalf of Bharat Singh towards the price of
the suit house. It also shows that Bharat Singh was asked to intimate the name of the person in whose favour
the patta should be prepared. Presumably, the patta was issued in the names of the plaintiffs as desired by
Bharat Singh and Exhibit A-121 shows that it was handed over on September 30, 1940. The patta was
produced before the trial court by the plaintiffs.
By the time the patta was issued in the names of the plaintiffs, the mother of plaintiff No. 2 had died. He was
about eight years of age in 1940 and he and his younger brother, Dalip Singh were under the protection of
Bharat Singh who was a bachelor. They were staying with him in the suit house. The defendant also was
residing in it. The plaintiffs who claimed title to the property under the patta in the course of the trial attempted
to prove that the sum of Rs. 5,000 which was paid by way of consideration for the patta by Bharat Singh came
out of the jewels of the mother of plaintiff No. 2 which had come into the possession of Bharat Singh on her
death. The plaintiff No. 2 who gave evidence in the trial court stated that he had not given any money to Bharat
Singh for the purchase of the house but he had come to know from his father, plaintiff No. 1 that it had been
purchased with his money. Jaswant Singh (P.W. 2) and Kesri Singh (P.W. 3) to whose evidence we will make a
reference in some detail at a later stage also stated that they had heard from Bharat Singh that the jewels of the
mother of plaintiff No. 2 were with him suggesting that they could have been the source of the price house.
Plaintiff No. 1 who could have given evidence on the above question did not enter the witness box. It is stated
that he was a person of weak mind and after the death of Bharat Singh was behaving almost like a mad man.
The defendant stated in the course of his evidence that the mother of plaintiff No. 2 had gold jewels weighing
about 3-4 tolas only. In this state of evidence, it is difficult to hold that the plaintiffs have established that the
consideration for the suit house was paid by them. The finding of the trial court that the house had been
purchased by Bharat Singh for the plaintiffs with their money cannot be upheld. The case of the defendant that
the price of the suit house was paid out of the funds belonging to him and Bharat Singh has been rejected both
by the trial court and the High Court. On going through the evidence adduced by the defendant, we feel that
there is no reason for us to disturb the concurrent findings arrived at by the trial court and the High Court on
the above question. We shall, therefore, proceed to decide the question of title on the basis that the
consideration for the purchase of the house was paid by Bharat Singh out of his own funds.
It was contended by the learned counsel for the defendant that since the plaintiffs had failed to establish that
they had contributed the price paid for the suit house, the suit should be dismissed without going into the
question whether Bharat Singh had purchased the suit house with his money in the names of the plaintiffs for
the benefit of plaintiff No. 2. The plaint does not disclose the name of the person or persons who paid the sale
price of the suit house. The suit is based on the patta standing in the names of the plaintiffs. In the written
statement of the defendant, there was an allegation to the effect that even though the patta was standing in the
names of the plaintiffs, they were only benamidars and the real title was with Bharat Singh and the defendant.
The particulars of the circumstances which compelled Bharat Singh or the defendant to take the patta in the
names of the plaintiffs were not disclosed although it was stated that it had been done owing to some political
and other surrounding circumstances and for the safety of the property. From the evidence led by the parties,
we are satisfied that they knew during the trial of the suit that the question whether the transfer effected under
the patta was a benami transaction or not arose for consideration in the case. Even in the appeal before the
High Court, the main question on which arguments were addressed was whether the transaction was a benami
transaction or not. Merely because the plaintiffs attempted to prove in the trial court that the money paid for
purchasing the house came out of their funds, they cannot in the circumstances of this case be prevented from
claiming title to the property on the basis that even though Bharat Singh had paid the consideration therefor,
plaintiff No. 2 alone was entitled to the suit house.

Now we shall refer to the facts of the present case. When the suit house was purchased from the Maharaja of
Bikaner, Bharat Singh was a bachelor and he did not marry till his death in the year 1955. The wife of Bhim
Singh had died before 1939 leaving behind her two young children. Plaintiff No. 2 was about eight years old in
the year 1939 and his younger brother Dalip Singh was about two years old. These two children were living
with Bharat Singh. Bhim Singh, plaintiff No. 1 was almost in indigent condition. The defendant had by then
acquired a degree in law and also had practised as a lawyer for some time. It is stated that the defendant had
again been employed in the service of the State of Bikaner. The patta was issued in the names of plaintiffs 1
and 2 at the request of Bharat Singh. Even though the defendant stated in the written statement that the patta
had been taken in the names of the plaintiffs owing to certain political circumstances, he had not disclosed in
the course of his evidence those circumstances which compelled Bharat Singh to secure the patta in the names
of the plaintiffs, though at one stage, he stated that it was under his advice that Bharat Singh got the patta in the
names of the plaintiffs. Bharat Singh had no motive to suppress from the knowledge of the public that he had
acquired the property. It was suggested in the course of the arguments that he had taken the patta in the names
of the plaintiffs because he was in the service of the State. We do not find any substance in this submission
because the property was being purchased from the State Government itself and there was no need for him to
shield his title from the knowledge of the State Government. It appears that Bharat Singh acquired the suit
house for the benefit of plaintiff No. 2 for the following circumstances: The first circumstance is that the
original patta had been handed over by Bharat Singh to plaintiff No. 2 on his passing B. Sc. Examination. This
fact is proved by the evidence of plaintiff No. 2 and it is corroborated by the fact that the patta was produced
by the plaintiffs before the Court. In the course of his evidence, the defendant no doubt stated that the patta had
been stolen by plaintiff No. 2 from the suit house during the twelve days following the death of Bharat Singh
when the keys of Bharat Singh's residence had been handed over to plaintiff No. 2 by the defendant. It is
difficult to believe the above statement of the defendant because of two circumstances-(i) that the defendant
did not state in the written statement that the patta had been stolen by plaintiff No. 2 and (ii) that within a
month or two after the death of Bharat Singh, plaintiff No. 2 wrote a letter which is marked as Exhibit A- 124
to the defendant stating that the rumour which the defendant was spreading that plaintiff No. 2 had stolen some
articles from the suit house was not true since whenever plaintiff No. 2 opened room or any of the almirahs of
Bharat Singh in the suit house, Devi Singh the son of the defendant was keeping watch over him. That letter
has been produced by the defendant and there is no reference in it to a false rumour being spread about the
theft of the patta by plaintiff No. 2. Plaintiff No. 2 however, while asserting his claim to the suit house in the
course of that letter stated that he had seen that the patta had been executed in his favour; and that the patta
contained his name. The defendant does not appear to have sent any reply to Exhibit A. 124 nor did he call
upon the plaintiffs to return the patta to him. He did not also file a complaint stating that the patta had been
stolen by plaintiff No. 2. We are of the view that there is no reason to disbelieve the evidence of plaintiff No. 2
that the patta had been handed over to him by Bharat Singh on his passing the B.Sc. examination. This conduct
of Bharat Singh establishes that it was the intention of Bharat Singh when he secured the patta from the State
Government in the names of the plaintiffs the plaintiff No. 2 whom he loved should become the owner. It is no
doubt true that the name of plaintiff No. 1 is also included in the patta. It may have been so included by way of
abundant caution as plaintiff No. 2 was a minor when the patta was issued. The above circumstance is similar
to the one which persuaded their Lordships of the Privy Council in the case of Mohammad Sadiq Ali Khan
(supra) to hold that the property involved in that case belonged to the person in whose favour the conveyance
had been executed.
The second circumstance which supports the view that Bharat Singh intended that plaintiff No. 2 should
become the owner of the suit house is proved by the declarations made by Bharat Singh regarding the title to
the suit house. Jaswant Singh (P.W. 2) was a former Prime Minister of the State of Bikaner. His wife was a
cousin of plaintiff No. 1, Bharat Singh and the defendant. Being a close relative of Bharat Singh who was also
the Aid-de-Camp of the Maharaja of Bikaner, he was quite intimate with Bharat Singh who used to discuss
with him about his personal affairs. P.W. 2 has stated in the course of his evidence that Bharat Singh thought it
proper to purchase the house in the name of plaintiff No. 2 and that he intended to make plaintiff No. 2 his heir
and successor. He has also stated that Bharat Singh had expressed his desire to give all his property to plaintiff
No. 2 by a will and that he had told Kesri Singh (P.W. 3) just a day prior to his (Bharat Singh's) death that a
will was to be executed. This statement of Jaswant Singh (PW. 2) is corroborated by the evidence of Kesri
Singh (P.W.
3) whose wife was also a cousin of Bharat Singh, plaintiff No. 1 and the defendant. The relevant portion of the
deposition of Kesri Singh (P.W. 3) reads thus:
"I came from Jaipur to Bikaner by train one day before the death of Bharat Singh and when I was returning
after a walk I found Bharat Singh standing at the gate of his house. I asked Bharat Singh to accompany me to
my house to have tea etc. Bharat Singh came with me to my house. Bharat Singh told me at my house that he
was not quite all right and that he might die at any time. He wanted to execute a will. He further told me that
his house really belonged to Himmat Singh. It has been purchased in his name. He wanted to give even other
property to Himmat Singh.. By other property which Bharat Singh wanted to give to Himmat Singh was meant
Motor car, bank balance and the presents which he had. The house regarding which my talk took place with
Bharat Singh at my house was the house in dispute."
There is no reason to disbelieve the evidence of these two witnesses. Their evidence is corroborated by the
deposition of Dr. Himmat Singh (D.W. 6) who was the Secretary of a Club in Bikaner of which Bharat Singh
was a member. He was examined by the defendant himself as his witness. In the course of his cross-
examination, Dr. Himmat Singh (D.W. 6) referred to what Bharat Singh had told him a few months prior to his
death. The substance of his deposition is found in the judgment of the trial court, the relevant portion of which
reads thus:
"D.W. 6 Dr. Himmat Singh is the Secretary of the Sardul Club, Bikaner. He is the Senior Eye-Surgeon in the
Government Hospital, Bikaner. He has stated that Bharat Singh was the member of Sardul Club. A sum of Rs.
425/6/-remained outstanding against him till the year 1955. This amount was received on 28-10-1955. He has
said that he does not know who deposited this amount. On the merits of the case, he has stated that he
intimately knew Bharat Singh and members of his family. Bhim Singh and his sons Himmat Singh and Dalip
Singh used to live in this house. Bharat Singh took this house for Bhim Singh and Himmat Singh. Four months
before his death, Bharat Singh told the witness that he had already taken the house for Bhim Singh and
Himmat Singh and that whatever else would remain with him shall go to them. Dr. Himmat Singh refutes the
defendant's stand and supports the plaintiff's case."
It was argued on behalf of the defendant that there is some variation between the deposition of Dr. Himmat
Singh (D.W. 6) and the above passage found in the judgment of the trial court and that the evidence of D.W. 6
should not be believed as he had turned hostile.
The deposition of Dr. Himmat Singh (D.W. 6) was read out to us. It was also brought to our notice that an
application had been made by the defendant to treat D.W. 6 as hostile and that it had not been granted by the
trial court. Even though there is a slight variation between what is stated by D.W. 6 and what is contained in
the judgment of the trial court with regard to certain details, we do not feel that the said variation is of any
substantial nature. The evidence of D.W. 6 suggests that Bharat Singh was of the view even during his life time
that the suit house belonged to plaintiffs and not to himself. Even though an application had been made by the
defendant to treat D.W. 6 as hostile, we feel that this part of the evidence of D.W. 6 cannot be rejected on that
ground since it is consistent with the evidence of Jaswant Singh (P.W. 2) and Kesri Singh (P.W. 3).
It is seen from the judgment of the High Court that the effect of the statement of Kesri Singh (P.W.3) in his
deposition that Bharat Singh had told him that the suit house was the property of plaintiff No. 2 has not been
considered. The High Court while dealing with the evidence of Jaswant Singh (P.W. 2) and Kesri Singh (P.W.
3) laid more emphasis on those parts of their evidence where there was a reference to the alleged utilisation of
the jewels or moneys belonging to the plaintiffs by Bharat Singh for the purpose of acquiring the suit house.
The High Court has also observed in the course of its judgment that neither of them had stated that Bharat
Singh had told them that he was purchasing or had purchased the suit house as a gift to Bhim Singh and
Himmat Singh. The above observation does not appear to be consistent with the evidence of Kesri Singh (P.W.
3) discussed above.
It was, however, contended on behalf of the defendant that the statement made by Bharat Singh in the year
1955 could not be accepted as evidence in proof of the nature of the transaction which had taken place in the
year 1940. It was contended that the question whether a transaction was of a benami nature or not should be
decided on the basis of evidence about facts which had taken place at or about the time of the transaction and
not by statements made several years after the date of the transaction.
It was next contended that the defendant had spent money on the repairs and reconstruction of the building
subsequent to the date of the patta and that therefore, he must be held to have acquired some interest in it. We
have gone through the evidence bearing on the above question. We are satisfied that the defendant has not
established that he had spent any money at all for construction and repairs. Even if he has spent some money in
that way with the knowledge of the actual state of affairs, it would not in law confer on the defendant any
proprietary interest in the property.
It is also significant that neither Gad Singh during his life time nor his children after his death have laid any
claim to a share in the suit house which they were entitled to claim alongwith the defendant if it was in fact a
part of the estate of Bharat Singh. Their conduct also probabilities the case of the plaintiffs that Bharat Singh
did not intend to retain for himself any interest in the suit house.
On the material placed before us, we are satisfied that the transaction under which the patta was obtained was
not a benami transaction and that Bharat Singh had acquired the suit house with his money with the intention
of constituting plaintiff No. 2 as the absolute owner thereof. Plaintiff No. 2 is, therefore, entitled to a decree for
possession of the suit house.
The trial court passed a decree directing the defendant to pay damages for use and occupation in respect of the
suit house at the rate of Rs. 50/- per month from September 20, 1956 till the possession of the house was
delivered to the plaintiffs. The operation of the decree of the trial court was stayed by the High Court during
the pendency of the appeal before it. In view of the decree passed by the High Court, the defendant has
continued to be in possession of the suit house till now. Nearly twenty years have elapsed from the date of the
institution of the suit. In the circumstances, we are of the view that the defendant should be directed to pay
mesne profits at the rate of Rs. 50/- per month till today and that an enquiry should be made by the trial court
under Order 20, Rule 12 of the Code of Civil Procedure to determine the mesne profits payable by the
defendant hereafter till the date of delivery of possession.
In the result, the decree passed by the High Court is set aside and a decree is passed directing the defendant to
deliver possession of the suit house to plaintiff No. 2 and to pay mesne profits to him at the rate of Rs. 50/- per
month from September 20, 1956 till today and also to pay future mesne profits as per decree to be passed by
the trial court under Order 20, Rule 12 of the Code of Civil Procedure.
For the foregoing reasons, Civil Appeal No. 626 of 1971 is accordingly allowed with costs throughout.
Civil Appeal No. 629 of 1971 is dismissed but without costs.

==========================================
==========================================
Explain and discuss the facts and principles of law laid down in the case of Gopeekrist Gosain v.
Gungapersaud Gosain (Privy Council) No. | 18-07-1854
In the year 1854, in the case of Gopeekrist Gosain v Gungapersuad Gosain, the privy council recognised
Benami transactions as they were a part of Hindu custom. Though Benami Transactions was not
recognised in England, their validity was upheld in India.
Consequently, in the year 1882, Benami transactions were per se legitimised by the Indian Trusts Act.
Sections 81, 82 and 94 of the Indian Trusts Act gave statutory protection to the Benami transactions by
labelling such transactions protected by a
relationship of trust.
Two types of transactions are often referred to as Benami transactions and are used interchangeably.
Firstly, the transaction wherein a person buys a property with his own money but in the name of another person
having no intention to benefit such other person. For example, A sells a property to B, but the sale deed
mentions X as the purchaser. Here the sale itself is genuine, but the real purchaser is B, X being his
'Benamidar'.
Secondly, where a person who is the owner of the property executes a conveyance in favour of another person
without handing over the possession and with no intention of transferring the title to the property thereunder. In
this case, the transferor continues to be the real owner. This is technically a sham transaction. For example,
when A purports to sell his property to B without intending that his title should cease or pass to B.

The Appellant and Respondent in this case were brothers, and joint heirs by the Hindu Law of their deceased
father, Rogoram Gosain. The question raised by the suit in the Court below and by their present appeal was,
whether a talook called Gheritty, situated in the district of Hooghly, in Bengal, which was purchased by
Rogoram Gosain many years before his death, and previously to the birth of the Appellant, in the name of the
Respondent, did or did not, at the time of his death, form part of the real estate of Rogoram Gosain, so as to
pass to the Appellant and Respondent jointly under a general devise to them contained in his Will, or
descended to them as joint heirs in case of intestacy. The case of the Appellant was, that the talook formed part
of his father’s real estate. The Respondent, on the contrary insisted, that it was his separate property, having
been bought by his father in his name, for his separate use and benefit.
The circumstances giving rise to this question were as follows:
Rogoram Gosain, a Hindu, of considerable property, was, up to the year 1831, jointly possessed with his
brother, Ruggubram Gosain, of property derived from their father; of which a partition was in that year
effected, and his share of the property ascertained. In the year 1825, Rogoram Gosain purchased, for the sum
of Rs 64,000, the talook in question. The receipt for the purchase-money and the conveyance was taken in the
name of the Respondent, who was then his only son, of the age of two years or thereabouts. The conveyance
of the talook was in the English language and form, by lease and re-lease, dated the 12 th and 13th July, 1825, in
which the respondent was simply described as Zemindar of Serampore. As between himself and his brother,
Rogoram Gosain debited himself with the purchase-money, but he shortly afterwards opened an account in his
private books with the Respondent, and therein debited the Respondent with the purhcase-money, and credited
him from time to time with the rents of the talook; this account was continued down to the time of the death of
Rogoram Gosain.
In the year 1832, subsequent to the birth of the Appellant, and after the partition between Rogoram Gosain and
Ruggubram Gosain had been effected, Rogoram Gosain bought another talook, called Chattra, the conveyance
of which was taken in the name of the Appellant, and Rogoram Gosain debited the Appellant in another
account, which he opened in his books in the Appellant’s name, with the purchase-money of this talook, and
credited him in the account, from time to time, with the rents, in like manner as he did in the account in respect
of Gheritty with regard to the Respondent. This account was also continued down to the time of the death of
Rogoram Gosain. He also made other purchases of land in the name of other members of his family.
Rogoram Gosain died in the year 1842, having executed an instrument purporting to be a Will, dated the 5 th of
November, 1841; by which he bequethed the whole of his property, real and personal, whether Zemindary, or
rent-free tenure, houses, Company’s papers and other obligations, bonds, notes, to his sons, Gungapersaud
Gosain and Gopeekrist Gosain, in equal shares; and he gave also certain pecuinary legacies to his four
daughters and their issue.
As this instrument contained no appointment of executors, the Appellant and Respondent did not consider it as
a Will, and they accordingly, after taking the usual legal proceedings, were admitted to be the heirs and
representatives of Rogoram Gosain; and acted as such, treating the instrument as of no effect as a Will. The
rents of two talooks, Gheritty and Chattra, were, after the death of Rogoram Gosain, generally received on the
joint receipt of the Appellant and Respondent; but the rents of Gheritty were carried in the joint books of the
Appellant and Respondent to the credit of the Respondent.
In the year 1848, the Appellant, for the first time, set up a claim to have Gheritty treated as forming part of the
real estate of Rogoram Gosain, and as such belonging to the Appellant and the Respondent jointly. The
Respondent refused to recognise this claim, and insisted that Gheritty was his own separate property, being
purchased in his name.
The Appellant took proceedings before the Magistrate of Serompore for the purpose of enforcing his right to a
joint possession with the Respondent of Gheritty, but the Magistrate decided in favour of the Respondent. The
Appellant then appealed to the Sessions Judge, who reversed the decision of the Magistrate, and directed that
both the Applicant and Respondent should be put in possession of Gheritty. In consequence thereof, the
Respondent, in May 1849, brought an action of ejectment in the Supreme Court at Calcutta, on the plea side of
the Court, against the Appellant, for the purpose of recovering possession of Gheritty, and the cause stood for
trial, when the Appellant, on the 18 th of July, 1849 brought the present suit on the equity side of the Supreme
Court against the Respondent. The bill stated, that it was customary for Hindus of property to purchase various
parcels of real estate in the names of their different sons, but without any intention whatever of giving to such
sons whose names were so used, the sole beneficial estate or interest therein than what the son would or might
ultimately take in the rest of the estate and property upon the father’s death. That Rogoram Gosain took the
two conveyances in the names of the Appellant and Respondent respectively, in conformity with such custom,
and without any intention whatever of altering the succession thereto; and that he intended that the Appellant
and Respondent should hold the talooks respectively upon the same trusts and to the same uses as the rest of
his estate and property. That in devising to the Appellant and Respondent jointly all his estate and property, he
included and meant to include therein both of the talooks, as the Appellant had always admitted with respect to
Chattra. That in the year 1825, when Rogoram Gosain so purchased Gheritty, he was joint with his brother,
Ruggubram Gosain, as to a certain ancestorial real property, and that his object in taking the same in the
Respondent’s name was to keep it separate from the joint ancestral estate in which Ruggubram Gosain was
interested, and under the colour of which Ruggubram Gosain set up a claim or joinder on the whole estate of
Rogoram Gosain. That Rogoram Gosain purchased Chattra in the Appellant’s name, because he at the time
was alleged to be involved in the Calcutta Bank, in partnership with the late firm of Palmer & Co., which had
failed in business. The bill then contained various allegations relative to the manner in which Rogoram Gosain
and the Respondent and Appellant respectively had at different times acted in reference to Gheritty and
Chattra; and after stating the legal proceedings which had taken place between the Appellant and Respondent,
prayed that the talooks of Gheritty and Chattra might be declared and decreed to have been parcels respectively
of the real estate of Rogoram Gosain, deceased, and to have passed under the general devise in his Will to the
Appellant and Respondent as joint devisees thereof; and that the Respondent might be declared to be a trustee
for himself and Appellant jointly, in respect of the Gheritty talook and premises, and might be decreed to
execute such conveyance or other deed in respect thereof as might be necessary to secure to the Appellant his
right and interest as such devisee as aforesaid in a moiety thereof; and that he might be restrained from further
prosecuting the action of ejectment, and from commencing or proceeding with any other action of ejectment,
in respect of the talook and premises, against the Appellant, either in that Court, or in the Mofussil Courts, or
doing any other act to oust the Appellant, or to obtain exclusive possession of the talook and premises, or to
prevent the Appellant from receiving his moiety of the rents and profits thereof.
Judgement in the action of ejectment was obtained by the Appellant, but extension was stayed pending the suit
in Equity.
The Respondent, by his answer, admitted the death of Rogoram Gosain, and that in his lifetime he signed the
instrument in writing, dated the 5 th of November, 1841, as before-mentioned; and submitted to the Court the
effect of such instrument, and whether the Appellant and Respondent were thereby constituted executors. The
answer also admitted the purchase of Gheritty, and that the conveyance was by lease and release to and in the
name of the Respondent, but not as the eldest son, and then the only son, of Rogoram Gosain, he being
described in the deeds respectively simply as Zemindar. And the Respondent, by his answer, further admitted
tht Rogoram Gosain was at that time joint with his brother as to certain ancestral real estate, but denied that at
the time of such purchase, Rogoram Gosain had a dispute with his brother, Ruggubram Gosain, as in the bill
mentioned, or that there was any dispute between them as to their joint estate previus to the year 1828. And he
admitted that Rogoram Gosain debited his own account in the joint books of himself and brother with the
purchase-money, but under the head of Gungapersaud Gosain, as a transaction of Rogoram Gosain, by way of
temporary loan to the Respondent; that, after separation from his brother thereinafter mentioned, he transferred
the purchase-money to separate accounts, which he opened under the separate head of the Respondent, who
was debited therewith; and that in the year 1832, having previously in the year 1831, effected partition between
himself and his brother, he debited another account, which he opened in his own separate books, under the
head of the Appellant with the purchase-money of the other talook, called Chattra; and the Respondent denied
that Rogoram Gosain bought the same in the name of the Appellant, but as benamee merely, and by his answer
he further stated that Rogoram Gosain bought the same for the separate use and benefit of the Appellant in the
same manner as he bought the talook of Gheritty, in the name and for the separate use and benefit of the
Respondent. He also admitted that it was sometimes done, but denied that it was customary, for the Hindus of
property to purchase various parcels of real estate in the names of different sons, but insisted that such practice
was without any intention whatever of giving to such sons whose names were so used, the sole beneficial
estate or interest therein, or any other beneficial estate or interest therein than what the son would or might
ultimately take in the rest of the estate and property upon the father’s death; and the Respondent denied that
Rogoram Gosain took the two conveyances respectively, in the names of the Appellant and Respondent
respectively, in confrmity with such alleged custom or any custom, or without any intention whatever of
altering the succession thereto, or that he did, from the time of the purchase thereof up to his death, hold and
enjoy the talook of Gheritty as part of his real estate, but stated that Rogoram Gosain, as the father and natural
guardian of the Respondent till he was of proper age to act for himself, held the talook, and collected and
received, and at his pleasure disposed of, the rents and profits thereof. And the Respondent denied that
Rogoram Gosain intended that the Respondent and Appellant should respectively hold the talooks upon the
same trusts and to the same users as the rest of his estate and property; or that in devisiing, by the before-
mentioned instrument (if any devise were therin contained), jointly all his estate and property, he included or
meant to include therein both the talooks; or that the Appellant had admitted the same as regarded Chattra, save
that when he found the same was not quite so valuable as the talook of Gheritty, by circumstances that
happened after the purchase, he then set up the case made by the bill. And the Respondent denied that he and
the Appellant had always held the talook of Chattra jointly – and stated that since the beginning of the
Bengally year 1255 (A.D. 1848), the Appellant had received and expended the rents and profits, and entered
the same in his separate books of account which he had kept since the last-mentioned period.
Both parties entered into evidence relative to the purchase of the talooks of Gheritty and Chattra; and also
relative to the manner in which the accounts of the purchase-moneys and of the rents of the two talooks were
kept, both during the lifetime of Rogoram Gosain and subsequently to his death. The effect of this evidence is
fully considered and commented upon in the judgement.
The cause was heard by the Supreme Court on the 1 st, 2nd, and 3rd days of August, 1850; and on the 13 th of
September in the same year judgement was delivered by Mr Justice Colvile, sitting for the Chief Justice, the
material part of which was as follows:
“The question in this cause is, whether a certain talook, purchased by Rogoram Gosain many years before his
death, in the name of one of his sons, became the property of that son, or is to pass under a general devise of
his estate to his two sons in equal shares. If the question had arisen between British subjects, the principles on
which it would have to be decided are clearly defined, and not difficult of application. In ordinary cases, if an
estate be purchased in the name of one, but by and with the money of another, there arises, by a presumption of
law, a resulting trust in favour of that other. In the exceptional case, wherein the person who thus employs his
money stands in the relation of parent to him in whose name the purchase is made, the law presumes an
advancement, and the resulting trust does not arise. This presumption of advancement is, however, capable of
being rebutted by evidence, showing that the real intention of the parent was, that the purchase should ensure
for his benefit, and that the child should take only as trustee. Declarations by the parent, if contemporaneous
with the purchase, are admissible to prove such an intention, but declarations subsequent are rejected. The
reason of this distinction is obvious. A contemporaneous declaration is an indication of a present intention; a
subsequent declaration is, at most, evidence of what a former intention was, and as such can rank no higher
than any other declaration, which, unless against the interest of the party making it, is excluded by the known
rules of evidence from judicial consideration. This case arises between Hindus, and is one which the Hindu
law, so far as it is distinguishable from the English Law, must govern. ‘Benamee transactions’ are common
among Hindus; but I am not aware that there is any authority for applying to them the doctrine of resulting
trust, as a presumption of law. On the other hand, the presumption of advancement does not necessarily arise
upon a purchase by a father in the name of his son. There seems, then, to be nothing in the Hindu Law which
is contrary to either the Plaintiff’s or the Defendant’s view of this case. And the Court must determine the case
upon its own conviction, deduced from the evidence of what the intention of Rogoram Gosain in this particular
transaction was. We ought not, however, in dealing with this question, entirely to leave out of consideration
the decisions of the English Courts, because, although the presumptions which I have mentioned are not to be
applied as legal presumptions, the process of reasoning on which they are founded, so far as it rests on
experience, or observation of the ordinary principles of human action, and is not repugnant to any of the
peculiarities of Hindu faith or customs, may, most legitimately and usefully, be applied to the construction of
ambiguous acts, and to the deduction of a particular intention from them; and further, because in determining
what is and what is not admissible to prove intention, we must in this, as in every other case, follow the
English law of evidence.
“Now, although several witnesses have been examined, and a large mass of documentary evidence has been
put in on both sides, we cannot say that the evidence on the one side or the other is conclusive upon the
question of intention. A great portion of it relates to the purchase by Rogoram Gosain, in 1832, of another
talook called Chattra, in the name of his younger son, the Plaintiff; but since it is admitted that his intention
(whatever it was), with respect to the purchase of Gheritty in the name of the elder son, was the same with the
intention afterwards manifested by him in the purchase of Chattra in the name of the younger son, this portion
of the evidence ought, equally with the rest, to receive the careful consideration of the Court. Again, the
evidence is divisible into proof of things done by Rogoram Gosain and his sons in the lifetime of the former,
and proof of things done by the sons after their father’s death. The effect of these two classes of proofs it will
be convenient to consider separately.
“The evidence shows that Gheritty was purchased when Rogoram Gosain was joint in estate with his brother
Ruggubram Gosain. The conveyance is in the English form of lease and release, and direct from the vendor to
the Defendant, Gungapersaud (then an infant). There can, therefore, be no doubt, that at law, the estate became
vested in possession in the Defendant. There are, besides, some entries in the books of the charges for setting
up a bamboo, which, it may be presumed, is some symbolical mode of taking possession. But this, considering
the nature of the conveyance, could only import a possession taken in the name and on account of
Gungapersaud, the nominal purchaser.
“There is no satisfactory evidence of any parol conemporaneous declaration by Rogoram, of his intention in
respect of this purchase, whether it was to be for his own or for his son’s benefit. Rustomjee Cowasjee says,
generally, that he recollects the purchase; that it was in the name of the son; that Rogoram told him he bought
it in the name of his son. Assuming this communication to have been contemporary with the purchase, it is
ambiguous as respects the point in dispute. The conversations deposed to by Goberdone Sain, and the cashier
in the official assignee’s office, appear to have been conversations subsequent to the event, and they are hardly
more conclusive of the question of intention than that deposed to by Rustomjee Cowasjee.
“The books seem to show that upon the purchase Rogoram debited himself in the joint books, as between
himself and Ruggubram, with the purchase-money of the estate, Rs 64,000; and that he then, or shortly
afterwards, opened an account between himself and his son, Gungapersaud, in which he debited his son with
the principal purchase-money, and credited him with the net rents of the talook. This account, so opened,
seems to have been continued on that footing, in one or other of the books, up to the time of Rogoram’s death.
“It is further proved, that long after the purchase, in 1838 and 1839, upon an attempt being made to assess the
Lakhiraj lands of Gheritty for Government revenue, Rogoram Gosain, in his memorials to the Deputy
Collector, and to the then Deputy Governor of Bengal, treated this talook as the property of his son, and that he
also so treated it in a letter to Mr. Storm, who rented part of the estate.
“As to the general management of the estate during the life of Rogoram Gosain, the evidence, I think pretty
conclusively shows, that the ostensible ownership was in the son, that the estate stood in his name in the
Collector’s books, that leases were granted, and receipts for rent given to the tenants and Ryots, also in his
name; but on the other hand, that the rents when collected were received by Rogoram Gosain, and the receipts
for those collections given in his name; and that with the concurrence of the Defendant after he attained his
majority. The books, however, show that the rents so received by Rogoram were duly carried to the account I
have mentioned, - the account wherein the Defendant was credited with those rents, and debited with the
principal purchase-money.
“The general management of Chattra appears to have been the same as that of Gheritty. There is, however, this
further evidence as to the original purchase of Chattra, namely, that if the witness, Hurrochander Lahoree, is
believed, Rogoram expressed, at the time of that purchase, an intention to purchase for the benefit of his
younger son, what he probably conceived would be equal invalue to the purchase already made for the benefit
of his elder son. The conversation spoken to by Rustomjee Cowasjee, which would imply an intention on the
part of Rogoram to purchase Chattra in the name of the younger son, in order to prevent its falling into and
becoming part of the estate wherein he was joint with Ruggubram, evidently relates, not to the actual purchase
of Chattra, which was after the separation in estate of Rogoram and his brother’s representatives, but to a
former and ineffectual treaty for that purchase.
“The Plaintiff relies strongly on evidence of other purchases in the name of the Defendant, which are admitted
to be part of the joint estate that passed by the Will of Rogoram, and upon one particular book, called the
abstract account book of the estate of Rogoram Gosain, in which the rents of Gheritty and Chattra are entered
with those of estates admitted to be the property of Rogoram.
“As to the first, the Defendant’s answer is, and the books seem to support this view, that Rogoram Gosain,
whether he had or had not any right so to do, did make a transfer to himself of other properties, particularly of
the house in Calcutta, which he had purchased in the name of the Defendant, but that he did not so transfer the
talook, Gheritty; but, on the contrary, continued up to the time of his death, to make a distinction between that
and the transferred property, crediting the Defendant with the rents, and debiting him with the principal
purchase-money of the estate.
“As to the second, it is to be observed, that the book itself is of so late a date as 1837, and, therefore, the
declaration, if one is to be implied from the ambiguous entry of the rents of these estates in such a book, that
the beneficial interest in the estates was in the father, would not be admissible in evidence against the son. But
if this be the meaning of these entries, it is difficult to reconcile them with the Exhibits, Nos. 11 and 12, proved
by the Defendant, which show that at that time, and up to a later date, he continued to credit his sons
respectively with the rents of Gheritty and Chattra.
“Upon the whole, therefore, the case would seem to stand thus : - the legal estate in Gheritty, and the ostensible
ownership of it, were clearly vested in the Defendant. They were never vested in his father. The purchase was
made by the father in the name of an infant son of tender years. Without applying the English doctrine of
advancement, we may fairly consider an intention to benefit a son as prima facie more probable than a like
intention in favour of a stranger in blood; and we may treat the age of the nominal purchaser as a circumstance
contradictory of an intention on the part of the father to reserve the dominion over the estate to himself, or to
make a trustee of one incapable of executing a trust. It is also more reasonable to suppose, that the intention
was to provide for the son by a purchase made with money borrowed by the father from the joint estate, than to
suppose that he intended to create a secret trust in favour of himself in fraud of the brother with whom he was
thus joint in estate. As to any declared intention, the evidence, unsatisfactory at best, seems to us to
preponderate in favour of the Defendant. The perception of rents by the father in his lifetime is not inconsistent
with the Defendant’s claim.

..................................................................................................................................................................................
..................................................................................................................................................................................
.................................................................................

Their Lordships made the following report, which was confirmed by Her Majesty’s Order in Council : -
Declare that the purchases by the late Rogoram Gosain, in the pleadings mentioned, of, amongst others, the
talooks, Gheritty and Chattra, with their appurtenances, severally comprised in the indenture of lease and
release, dated the 12th and 13th days of July, 1825, and the indenture of lease and release dated the 29 th and 30th
days of January, 1832, in the name of the Appellant and Respondent respectively, as in the pleadings
mentioned, were and are benamee transactions, and that the Appellant and Respondent thereby severally
became and thenceforth continued, and were, up to and at the time of the death of their father, Rogoram
Gosain, trustees respectively for him, as the absolute and beneficial owner of each of the two talooks
respectively, with their appurtenances aforesaid. And that it ought to be further declared that talooks, Gheritty
and Chattra, respectively, with their appurtenances aforesaid, were, at the time of the death of Rogoram
Gosain, integral parts of the estate and property of him, Rogoram Gosain, and that execution upon the
judgement (if any) inthe action of ejectment in the pleadings mentioned, and all proceedings in the action,
ought to be stayed, and that in case the possession shall have been changed under any execution issued upon
the judgement, such possession ought to be restored as the same stood before such execution was issued; and
their Lordships are further of opinion that the cause ought to be remitted back to the Supreme Court, with
directions to the Supreme Court to give effect to this report and to Her Majesty’s Order made thereupon: and
their Lordships not thinking fit to deal with the costs incurred as aforesaid, do recommend the Supreme Court
to deal with the costs of the parties incurred and to be incurred in the Court below, as to the Supreme Court,
having regard to the declarations and directions aforesaid, shall seem just

==========================================

The Benami Transactions (Prohibition) Amendment Act, 2016

The amendment act of 2016 (hereinafter referred as 'the Amendment Act') is a comprehensive version of the
1988 act. The Amendment Act, 2016 appears to be a promising legislation to address the legal infirmities and
gaps that existed in the Act, 1988.
The act contains various provisions for Adjudicating Authority, Composition of Authority, Qualifications for
appointment of Chairperson and Members, Powers of Adjudicating Authority, Officers and employees of
Adjudicating Authority, Authorities and jurisdiction, Power of authority to impound documents, Power of
authority to
conduct inquiry etc. The scope of benami transactions is extended. As per section 2 (9) of the Amendment Act,
a Benami transaction is:
a. a transaction or an arrangement where a property is transferred to, or is held by, a person, and the
consideration for such property has been provided, or paid by, another person; and the property is held
for the immediate or future benefit, direct or indirect, of the person who has provided the
consideration,
b. a transaction or an arrangement in respect of a property carried out or made in a fictitious name;
c. a transaction or an arrangement in respect of a property where the owner of the property is not aware
of, or, denies knowledge of, such ownership;
d. a transaction or an arrangement in respect of a property where the person providing the consideration
is not traceable or is fictitious

This section also excludes some particular transactions from being rendered illegal.

a. These are a Karta, or a member of a Hindu undivided family given that the property is held for the
benefit of the family and the consideration for such property paid out of the known sources.
b. A person in a particular fiduciary capacity, these are a trustee, executor, partner, director of a company,
a depository or a participant as an agent of a depository under the Depositories Act, 1996 and any
other person as may be notified by the Central Government for this purpose;
c. any person buying in the name of his spouse or in the name of his child and the consideration for such
property has been paid out of the known sources of the individual;
d. any person buying in the name of his brother or sister or lineal ascendant or descendant, where the
names of brother or sister or lineal ascendant or descendant and the individual appear as joint-owners
in any document, and the consideration for such property has been provided or paid out of the known
sources of the individual.

The act of 1988 contained provisions where a person may file a suit for recovering a property held
benami(Section 4(3), Act 1988). However, the Amendment Act removed these exceptions. As per the
Amendment Act, a person can not recover his benami property on any ground and under any circumstance.
Moreover, a benamidar cannot transfer the property held on his name, such transfer would be null and void.

AD-1136-R
Trust and Equity
LL.B.(Part I)(Second Semester)Examination, 2016
Attempt 5 questions in all.
All questions carry 20 marks each.
Define Trust with illustrations. Distinguish Trust with Contract and Agency.
A trust is a fiduciary relationship in which one party, known as a trustor, gives another party, the trustee, the
right to hold title to property or assets for the benefit of a third party, the beneficiary. Trusts are established to
provide legal protection for the trustor’s assets, to make sure those assets are distributed according to the
wishes of the trustor, and to save time, reduce paperwork and, in some cases, avoid or reduce inheritance or
estate taxes. While they are generally associated with the idle rich, trusts are highly versatile instruments which
can be used for a wide variety of purposes to achieve specific goals. Each trust falls into six broad categories—
living or testamentary, funded or unfunded, revocable or irrevocable.
Understanding Trusts
Trusts are created by settlors (an individual along with his or her lawyer) who decide how to transfer parts or
all of their assets to trustees. These trustees hold on to the assets for the beneficiaries of the trust. The rules of a
trust depend on the terms on which it was built. In some areas, it is possible for older beneficiaries to become
trustees. For example, in some jurisdictions, the grantor can be a lifetime beneficiary and a trustee at the same
time.
A trust can be used to determine how a person’s money should be managed and distributed while that person is
alive, or after their death. A trust helps avoid taxes and probate. It can protect assets from creditors, and it can
dictate the terms of an inheritance for beneficiaries. The disadvantages of trusts are that they require time and
money to create, and they cannot be easily revoked.
A trust is one way to provide for a beneficiary who is underage or has a mental disability that may impair his
ability to manage finances. Once the beneficiary is deemed capable of managing his assets, he will receive
possession of the trust.
Common Purposes for Trusts: A trust is a legal entity employed to hold property, so the assets are generally
safer than they would be with a family member.
Though they seem geared primarily toward high net worth individuals and families, since they can be
expensive to establish and maintain, those of more middle-class means may also find them useful – in
ensuring care for a physically or mentally disabled dependent, for example.
Some individuals use trusts simply for privacy. The terms of a will may be public in some jurisdictions. The
same conditions of a will may apply through a trust, and individuals who don't want their wills publicly posted
opt for trusts instead.
Trusts can also be used for estate planning. Typically, the assets of a deceased individual are passed to the
spouse and then equally divided to the surviving children. However, children who are under the legal age of 18
need to have trustees. The trustees only have control over the assets until the children reach adulthood.
Trusts can also be used for tax planning. In some cases, the tax consequences provided by using trusts are
lower compared to other alternatives. As such, the usage of trusts has become a staple in tax planning for
individuals and corporations.
Assets in a trust benefit from a step-up in basis, which can mean a substantial tax savings for the heirs
who eventually inherit from the trust. By contrast, assets that are simply given away during the owner’s
lifetime typically carry his or her original cost basis.
Illustration: Here's how the calculation works: Shares of stock that cost $5,000 when originally purchased,
and that are worth $10,000 when the beneficiary of a trust inherits them, would have a basis of $10,000. Had
the same beneficiary received them as a gift when the original owner was still alive, their basis would be
$5,000. Later, if the shares were sold for $12,000, the person who inherited them from a trust would owe tax
on a $2,000 gain, while someone who was given the shares would owe tax on a gain of $7,000. (Note that the
step-up in basis applies to inherited assets in general, not just those that involve a trust.)
Finally, a person may create a trust to qualify for Medicaid and still preserve at least a portion of their
wealth.

Agency - An agent and a trustee both administer property on behalf of another and they cannot become the
beneficial owner thereof, i.e., each is subject to fiduciary obligations towards his principal or beneficiaries.
Agents, like trustees, must act personally in the business of the agency and are accountable to their
principals, as are trustees to beneficiaries, for any profit made out of the property or business entrusted to
them. The relation in each case is a fiduciary one. Agency is also known as “mandate”. It is where a person
appoints a second person called an “agent” for duties to be executed on his behalf. The agent will execute
orders given to him by the owner of the property. Trust resembles agency in the sense that the persons who
execute orders are not the absolute owners of the property. The deference deducted between them is that a
trustee is the owner of the property he administers whereas an agent does not possess a legal title. Moreover,
the authority of the trustee is derived from the trust instrument. That of the agent is purely a matter of
delegation from the person whose agent he is.

The differences between Trust and Agency are:

(i) Trusts are governed by equity, agency by Common law.
(ii) Agency normally arises by contract between the principal and agent (except in case of agency of necessity)
whereas in most trusts no such contractual relationship between trustees and beneficiaries exists.
(iii) Property of agency does not vest in the agent where a trustee has property vested in him.
(iv) While an agent can make his principal liable, a trustee cannot involve his beneficiaries in liability.
(v) An agent always acts on behalf of his principal and is subject to his control. A trustee is not subject to such
a control either from the settlor or from the beneficiaries.
(vi) An agent when he goes beyond his powers and out of his sphere canot pass a legal s-title to a bona fide
purchaser for value without notice of the trust.
(vii) An agent derives his authority to act by delegation from his principal, whereas a trustee derives such an
authority from the instrument of trust.

The differences between Contract and Trust are:

Contracts - (i) A contract is a common law personal obligation resulting from an agreement, a trust is an
equitable proprietory relation which can arise independently of an agreement. However, the trust may arise as
a result of an agreement for consideration, in which case there may be both-a trust and contract.
(ii) A contract is enforceable at Common law; it is a bilateral act, it springs from an offer and acceptance, it
gives a right in personam, a stranger to a contract can have neither the benefit of it nor its liability, and
contracts without consideration cannot be enforced.
On the other hand, trust is a matter of confidence was enforced by equity courts: it may be a purely unilateral
act (where the settlor himself is a trustee), there is no offer and the trustee's acceptance is presumed unless he
disclaims a trust, it almost gives a right in rem, its benefit is claimed not by the trustor (unless he is also a
beneficiary) but by the cestui que trust who is not a party to the contract, and lastly, the consideration supplied
in contract and trust are of different nature.

What are the various categories of Trust ???

Categories of Trusts Although there are many different types of trusts, each fits into one or more of the
following categories:
Living or Testamentary: A living trust – also called an inter-vivos trust – is a written document in which an
individual's assets are provided as a trust for the individual's use and benefit during his lifetime. These assets
are transferred to his beneficiaries at the time of the individual's death. The individual has a successor trustee
who is in charge of transferring the assets. A testamentary trust, also called a will trust, specifies how the
assets of an individual are designated after the individual's death.
Revocable or Irrevocable: A revocable trust can be changed or terminated by the trustor during his lifetime.
An irrevocable trust, as the name implies, is one the trustor cannot change once it's established, or one that
becomes irrevocable upon his death.
Living trusts can be revocable or irrevocable. Testamentary trusts can only be irrevocable. An irrevocable trust
is usually more desirable. The fact that it is unalterable, containing assets that have been permanently moved
out of the trustor's possession, is what allows estate taxes to be minimized or avoided altogether.
Funded or Unfunded
A funded trust has assets put into it by the trustor during his lifetime. An unfunded trust consists only of the
trust agreement with no funding. Unfunded trusts can become funded upon the trustor’s death or remain
unfunded. Since an unfunded trust exposes assets to many of the perils a trust is designed to avoid, ensuring
proper funding is important.

Or
8. What are the three certainties of Valid Trust ? Consider the effect of absence of each of them
on the validity of Trust.

Define Beneficiary. What are his rights against a Trustee ?

A trust is a legal arrangement through which one person, called a "settlor" or "grantor," gives assets to another
person (or an institution, such as a bank or law firm), called a "trustee." The trustee holds legal title to the
assets for another person, called a "beneficiary." The rights of a trust beneficiary depend on the type of trust
and the type of beneficiary. As a trust beneficiary, you may feel that you are at the mercy of the trustee, but
depending on the type of trust, beneficiaries may have rights to ensure the trust is properly managed.
RIGHTS OF BENEFICIARIES: Sec:55-67, deals with the rights of beneficiary classified broadly under
2 heads.
a) Rights of beneficiary (sec:55-61)
b) Remedies available to beneficiary (sec:62-67)
55.Right to rents and profits.—The beneficiary has, subject to the provisions of the instrument of trust, a right
to the rents and profits of the trust property.
56. Right to specific execution.—The beneficiary is entitled to have the intention of the author of the trust
specifically executed to the extent of the beneficiary’s interests. Right to transfer of possession. —And, where
there is only one beneficiary and he is competent to contract, or where there are several beneficiaries and they
are competent to contract and all of one mind, he or they may require the trustee to transfer the trust property
to him or them, or to such person as he or they may direct. When property has been transferred or bequeathed
for the benefit of a married woman, so that she shall not have power to deprive herself of her beneficial
interest, nothing in the second clause of this section applies to such property during her marriage.
Illustrations (a) Certain Government securities are given to trustees upon trust to accumulate the interest until
A attains the age of 24, and then to transfer the gross amount to him. A on attaining majority may, as the
person exclusively interested in the trust property, require the trustees to transfer it immediately to him.
(b) A bequeaths Rs. 10,000 to trustees upon trust to purchase an annuity for B, who has attained his majority
and is otherwise competent to contract. B may claim Rs. 10,000.
(c) A transfers certain property to B and directs him to sell or invest it for the benefit of C, who is competent to
contract. C may elect to take the property in its original character.
57. Right to inspect and take copies of instrument of trust accounts, etc.— The beneficiary has a right, as
against the trustee and all persons claiming under him with notice of the trust, to inspect and take copies of the
instrument of trust, the documents of title relating solely to the trust property, the accounts of the trust
property, and the vouchers (if any) by which they are supported, and the cases submitted and opinions taken by
the trustee for his guidance in the discharge of his duty.
58. Right to transfer beneficial interest.—The beneficiary, if competent to contract may transfer his interest,
but subject to the law for the time being in force as to the circumstances and extent in and to which he may
dispose of such interest: Provided that when property is transferred or bequeathed for the benefit of a married
woman, so that she shall not have power to deprive herself of her beneficial interest, nothing in this section
shall authorise her to transfer such interest during her marriage.
59. Right to sue for execution of trust.—Where no trustees are appointed or all the trustees die, disclaim or are
discharged, or where for any other reason the execution of a trust by the trustee is or becomes impracticable,
the beneficiary may institute a suit for the execution of the trust, and the trust shall, so far as may be possible,
be executed by the Court until the appointment of a trustee or new trustee.
60. Right to proper trustees.—The beneficiary has a right (subject to the provisions of the instrument of trust)
that the trust property shall be properly protected and held and administered by proper persons and by a proper
number of such persons. Explanation I.—The following are not proper persons within the meaning of this
section:— A person domiciled abroad; an alien enemy; a person having an interest inconsistent with that of the
beneficiary; a person in insolvent circumstances; and, unless the personal law of the beneficiary allows
otherwise, a married woman and a minor.
Explanation II.—When the administration of the trust involves the receipt and custody of money, the number
of trustees should be two at least.
Illustrations (a) A, one of several beneficiaries, proves that B, the trustee, has improperly disposed of part of
the trust property, or that the property is in danger from B’s being in insolvent circumstances; or that he is
incapacitated from acting, as trustee. A may obtain a receiver of the trust property.
(b) A bequeaths certain jewels to B in trust for C. B dies during A’s lifetime; than A dies, C is entitled to have
the property conveyed to a trustee for him.
(c) A conveys certain property to four trustees in trust for B. Three of the trustees die. B may institute a suit to
have three new trustees appointed in the place of the deceased trustees.
(d) A conveys certain property to three trustees in trust for B. All the trustees disclaim. B may institute a suit to
have three trustees appointed in place of the trustees so disclaiming.
(e) A, a trustee for B, refuses to act, or goes to reside permanently out of India or is declared an insolvent, or
compounds with his creditors, or suffers a cotrustee to commit a breach of trust, B may institute a suit to have
A removed and a new trustee appointed in his room.
61. Right to compel to any act of duty. —The beneficiary has a right that his trustee shall be compelled to
perform any particular act of his duty as such, and restrained from committing any contemplated or probable
breach of trust. Illustrations (a) A contracts with B to pay him monthly Rs. 100 for the benefit of C, B writes
and signs a letter declaring that he will hold in trust for C the money so to be paid. A fails to pay the money in
accordance with his contract, C may compel B on a proper indemnity to allow C to sue on the contract in B’s
name. (b) A is trustee of certain land, with a power to sell the same and pay the proceeds to B and C equally. A
is about to make an improvident sale of the land. B may sue on behalf of himself and C for an injunction to
restrain A from making the sale.
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 re-transferred by the trustee, if it remains in his
hands unsold, or, if it has been bought from him by any person with notice of 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 nett profits of the property,
(b) be charged with an occupationrent, 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 re-
transferred, 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.
63. Following trust property into the hands of third persons.—Where trust property comes into the hands of a
third person inconsistently with the trust, the beneficiary may require him to admit formally, or may institute a
suit for a declaration, that the property is comprised in the trust. Into that into which it has been converted.—
Where the trustee has disposed of trust property and the money or other property which he has received
therefor can be traced in his hands, or the hands of his legal representative or legatee, the beneficiary has, in
respect thereof, rights as nearly as may be the same as his rights in respect of the original trust property.
Illustrations (a) A, a trustee for B of Rs. 10,000, wrongfully invests the Rs. 10,000 in the purchase of certain
land, B is entitled to the land. (b) A, a trustee, wrongfully purchases land in his own name, partly with his own
money, partly with money subject to a trust for B. B is entitled to a charge on the land for the amount of the
trust money so misemployed. 64. Saving of rights of certain transferees.—Nothing in section 63 entitles the
beneficiary to any right in respect of property in the hands of—
(a) a transferee, in good faith for consideration without having notice of the trust, either when the purchase-
money was paid, or when the conveyance was executed, or (b) a transferee for consideration from such a
transferee. A judgment-creditor of the trustee attaching and purchasing trust property is not a transferee for
consideration within the meaning of this section. Nothing in section 63 applies to money, currency notes, and
negotiable instruments in the hands of a bona fide holder to whom they have passed in circulation, or shall be
deemed to affect the Indian Contract Act, 1872 (9 of 1872), section 108, or the liability of a person to whom a
debt or charge is transferred.
65. Acquisition by trustee of trust property wrongfully converted.—Where a trustee wrongfully sells or
otherwise transfers trust property and afterwards himself becomes the owner of the property, the property
again becomes subject to the trust, notwithstanding any want of notice on the part of intervening transferees in
good faith for consideration.
66. Right in case of blended property.—Where the trustee wrongfully mingles the trust property with his own,
the beneficiary is entitled to a charge on the whole fund for the amount due to him.
67. Wrongful employment by partner-trustee of trust property for partnership purposes.—If a partner, being a
trustee, wrongfully employs trust property in the business or on the account of the partnership, no other partner
is liable therefor in his personal capacity to the beneficiaries, unless he had notice of the breach of trust. The
partners having such notice are jointly and severally liable for the breach of trust.
Illustrations (a) A and B are partners. A dies, having bequeathed all his property to B in trust for Z, and
appointed B his sole executor. B instead of winding-up the affairs of the partnership, retains all the assets in the
business. Z may compel him, as partner, to account for so much of the profits as are derived from A’s share of
the capital. B is also answerable to Z for the improper employment of A’s assets.
(b) A, a trader, bequeaths his property to B in trust for C, appoints B his sole executor, and dies. B enters into
partnership with X and Y in the same trade, and employs A’s assets in the partnership business. B gives an
indemnity to X and Y against the claims of C. Here X and Y are jointly liable with B to C, as having
knowingly become parties to the breach of trust committed by B.

Or
9. How is a Trust extinguished ? Can a Trust be revoked ?

10. State the main features of a Charitable Trust. How does it differ from a Private Trust ? Explain
it.
Or
11. What is “Constructive Trust” ? Explain the various ways in which sch a Trust is created.

What do you understand by Equity ? Describe the nature and scope of Equity.
Equity is a Latin word which means fairness, justice. It is a system of law originating in the English
chancery and comprising a settled and formal body of substantive and procedural rules and doctrines
that supplement, aid, or override common and statutory law. "Equality is giving everyone the same
pair of shoes. Equity is giving everyone a pair of shoes that fits."

The Court of King's Bench, formally known as The Court of the King Before the King Himself, was a
court of common law in the English legal system. Created in the late 12th to early 13th century from the curia
regis, the King's Bench initially followed the monarch on his travels. The King's Bench finally joined
the Court of Common Pleas and Exchequer of Pleas in Westminster Hall in 1318, making its last
travels in 1421. The King's Bench was merged into the High Court of Justice by the Supreme Court of
Judicature Act 1873, after which point the King's Bench was a division within the High Court. The King's
Bench was staffed by one Chief Justice (now the Lord Chief Justice of England and Wales ) and usually
three Puisne Justices.
The Court of Common Pleas, or Common Bench, was a common law court in the English legal
system that covered "common pleas"; actions between subject and subject, which did not concern the king.
Created in the late 12th to early 13th century after splitting from the Exchequer of Pleas, the Common Pleas
served as one of the central English courts for around 600 years. Authorised by Magna Carta to sit in a fixed
location, the Common Pleas sat in Westminster Hall for its entire existence, joined by the Exchequer of
Pleas and Court of King's Bench.
The Exchequer of Pleas, or Court of Exchequer, was a court that dealt with matters of equity, a set of legal
principles based on natural law and common law in England and Wales. Originally part of the curia
regis, or King's Council, the Exchequer of Pleas split from the curia in the 1190s to sit as an independent
central court. The Court of Chancery's reputation for tardiness and expense resulted in much of its business
transferring to the Exchequer. The Exchequer and Chancery, with similar jurisdictions, drew closer together
over the years until an argument was made during the 19th century that having two seemingly identical courts
was unnecessary. As a result, the Exchequer lost its equity jurisdiction. With the Judicature Acts, the
Exchequer was formally dissolved as a judicial body by an Order in Council on 16 December 1880.
In the 15th and 16th centuries, the King's Bench's jurisdiction and caseload was significantly challenged
by the rise of the Court of Chancery and equitable doctrines as one of the two principal common law
courts along with the Common Pleas. To recover, the King's Bench undertook a scheme of revolutionary
reform, creating less expensive, faster and more versatile types of pleading in the form of bills as opposed to
the more traditional writs. Although not immediately stemming the tide, it helped the King's Bench to recover
and increase its workload in the long term. While there was a steep decline in business from 1460 to 1540, as
the new reforms began to take effect the King's Bench's business was significantly boosted; between 1560 and
1640, it rose tenfold. The Common Pleas became suspicious of the new developments, as legal fictions such as
the Bill of Middlesex damaged its own business. Fighting against the King's Bench in a reactionary and
increasingly conservative way, an equilibrium was eventually reached in the 17th century until the merger in
1873.
The King's Bench's jurisdiction initially covered a wide range of criminal matters, any business not claimed by
the other courts, and any cases concerning the monarch. Until 1830, the King's Bench acted as a court of
appeal for the Exchequer of Pleas and Common Pleas, and required Parliament to sign off on its decisions.
From 1585, the Court of Exchequer Chamber served for appeals of King's Bench decisions.

Equity is based on a judicial assessment of fairness as opposed to the strict and rigid rule of common
law. For centuries, the common law was referred to as the law, in contrast with equity. As to the most
common criticism of equity, these words of the English jurist, John Selden (1584-1654)
The typical Court of Equity (also known as Court of Chancery) decision would prevent a person from
enforcing a common law court judgment. The kings delegated this special judicial review power over common
law court rulings to a judge called chancellor, the court the Chancery. Later, this was too much work for a
single judge and more judges were appointed, called chancellors. The term Chancellor is still in use in England
today and now refers to the British minister of justice. Thus, a new branch of law developed known as equity,
with their decisions eventually gaining precedence over those of the common law courts.
The Norman Conquest was the 11th-century invasion (was achieved over a five-year period from 1066 CE to
1071 CE.) and occupation of England by an army made up of thousands of Normans, Bretons, Flemish, and
men from other French provinces, all led by the Duke of Normandy, later styled William the Conqueror. The
conquest was the final act of a complicated drama that had begun years earlier, in the reign of Edward the
Confessor, last king of the Anglo-Saxon royal line. Edward, who had almost certainly designated William as
his successor in 1051, was involved in a childless marriage and used his lack of an heir as a diplomatic tool,
promising the throne to different parties throughout his reign. William was crowned in Westminster Abbey on
Christmas Day, 1066.
Equity means Justice and Egalitarianism. Equality means each individual or group of people is given the
same resources or opportunities. Equity recognizes that each person has different circumstances and allocates
 the exact resources and opportunities needed to reach an equal outcome. Equity is a solution for addressing
imbalanced social systems. The route to achieving equity will not be accomplished through treating everyone
equally. It will be achieved by treating everyone justly according to their circumstances.
Equity under Roman Law: The Praetor was the famous judicial magistrate of a Roman law. The exercising
of power at that time was by the means of formulae and written statements. Everything was bounded or
surrounded all around the statements. Gradually, the Praetor started following another mode of jurisdiction,
which is termed as an extraordinary jurisdiction. After a phase, the cases and areas where the Praetor could
interfere become more common and through this only the principle of morality and equity was introduced in
the Roman Law.
General Principles of Equity / The Maxims of Equity
The methods relating to the unbiased jurisdiction are basically derived from the crucial truth of righteousness.
The importance of the maxims not to be exaggerated as it is really a far more from immutable principles. There
are some of the principles which have their own ultimate source of equity as these sources are also termed to
be as a maxim. These are the general principles which broadened under the term equity, some of them are
recapitulated below:
He who seeks equity must do equity:
➢ This maxim clearly shows a directive on the applicant of equity. This doctrine relates to the past conduct of
the parties and states that the person who comes to the court seeking equity must not have involved in an
inequitable act himself in the past. Application and cases

This maxim has application in the following doctrines-

i) Illegal loans: In Lodge v. National Union Investment Co. Ltd., the facts were as follows. One B borrowed
money from M by mortgaging certain securities to him. M was a unregistered money-lender. Under the
Money-lenders’ Act, 1900, the contract was illegal and therefore void. B sued M for return of the
securities. The court refused to make an order except upon the terms that B should repay the money
which had been advanced to him.
ii) Doctrine of election: Where a donor A gives his own property to B and in the same instrument purports to
give B’s property to C, B will be put to an election, either accept the benefit granted to him by the donor
and give away his own property to C or retain his own property and refuse to accept the property of A on
condition. But B can not retain his property and at the same time take the property of A.
iii) Consolidation of mortgages: Where a person has become entitled to two mortgages from the same
mortgagor, he may consolidate these mortgages and refuse to permit the mortgagee to exercise his
equitable right to redeem one mortgage unless the other is redeemed. The right of consolidation now
exists in England but after the enactment of the Law of Property Act, 1925, it can exist only by express
reservation in one of the mortgage deeds.
iv) Notice to redeem mortgage: Notice to a mortgagor to redeem one’s mortgage is an equitable right of the
mortgagor.
He who comes into equity must come with clean hands
Equity demands fairness not only from the Defendant but also from the Plaintiff. It is therefore said that
“he that hath committed an inequity, shall not have equity.” While applying this maxim, the court
believed that the behaviour of the Plaintiff was not against conscience before he came to the court.
Application and cases: In Highwaymen case, two robbers were partners in their own way. Due to a
disagreement in shares, one of them filed a bill against another for accounts of the profits of robbery.
Courts of relief do grant relief in case of partnership but here was a case where the cause of action arose
from an illegal occupation. So, the court refused to help them.
Everet v Williams [1725] is an English court case dating back to 1725, regarding the enforceability of
contracts to commit crimes. In this case, the contract was to share the spoils of armed robbery, which the
court refused to uphold.
Equity follows the Law:
This maxim is also expressed as “aequitas sequitur legem”, which means that equity will not allow a remedy
that is contrary to the law. This maxims lays down that equity supplements law and does not supersede it. The
discretion of the court is governed by law and equity which are subservient to one another. ➢ This maxim
means that the equity does not violate the law. It follows the appropriate form of law. Application and case:
At common law, where a person died intestate who owned an estate in fee-simple, leaving sons and
daughters, the eldest son was entitled to the whole of the land to the exclusion of his younger brothers and
sisters. This was unfair, yet no relief was granted by Equity Courts. But in this case it was held that if the
son had induced his father not to make a will by agreeing to divide the estate with his brothers and sisters,
equity would have interfered and compelled him to carry out his promise, because it would have been
against conscience to allow the son to keep the benefit of a legal estate which he obtained by reason of
his promise. This decision was held in Stickland v. Aldridge. Equity follows the law and even if by
analogy law can be followed, it should be followed.
Equity will not be a wrong to be with or without a remedy:
This maxim, in Latin, is “Ubi Jus Ibi Remedium ” which means “where there is a right there is a remedy”.
The maxim states that in situations where the common law confers a right, it also gives a remedy for
infringement of that right. It must be kept in mind that this principle is applicable only where the right and the
remedy both are within the jurisdiction of the court. In the Law of Equity, injunction and specific performance
are also the types of remedies available. In Ashby v. white a qualified voter was not allowed to vote and thus
he sued the returning officer, this case deals with the principle laid down in this maxim, i.e. if a person has
been granted a right, he is also granted with a remedy. ➢ This maxim states that it is developed as common law
which basically doesn’t lay down any new remedies but it has only nominal damages.
Equality is equity:
This principle is expressed by the Latin maxim Aequitas est quasi aequalitas which means equality is equity.
This maxim implies that as far as possible, equity strives to put the litigating parties on an equal level and
equate their rights and responsibilities. The ordinary law may give one party advantage over the other but the
court of equity, wherever possible, puts the parties on an equal footing. Application and cases:
a. Marshalling of assets: Marshaling is a doctrine that a court may use to force a creditor foreclose on a
debtor's assets in a particular order. A court may marshal the assets of a debtor when a senior creditor holds a
debt that is secured by more than one asset and a junior creditor holds a debt secured by only one of those
assets.
b. Equal distribution of joint funds and joint purchases: During a marriage, each spouse will
usually accumulate assets in his or her name. Frequently, there will also be assets titled in the name of both
spouses, jointly. “Equitable distribution” is the equitable, and not necessarily equal, division of those assets
between the spouses pursuant to a matrimonial action. Absent an agreement between the parties, a court will
determine each parties respective rights to “marital property” and “separate property,” and will provide for the
disposition thereof in the final judgment. Marital property “shall be distributed equitably between the parties,
considering the circumstances of the case and of the respective parties,” whereas separate property shall
remain that spouse’s property.
Equity looks to the intent rather than the form
This is the maxim by the means of which an equitable remedy was established which allows for the terms of a
contract to be interpreted by taking into account the intention of the parties. The common law was very rigid
and could not respond favourably to demand of time, this meant regarding the form of the contract more
important than the substance. Equity, on the other hand, looks to the spirit and not the letter of the contract.
Application and cases:
Relief in regard to mortgages - The mortgagor has a right to obtain his property back by payment of the debt
and that is his right of redemption. The mortgagor’s right of redemption is guarded by courts and this has been
expressed in a well-known legal maxim, “Once a mortgage, always a mortgage, and nothing but a mortgage”.
Relief against penalties and forfeitures- Common Law courts insisted on the literal form of the contract that
if the contract is breached, certain amount must be given as compensation, though the actual loss is not that
much. Equity interpret the purpose and intent of the contract itself. The principal object of the contract is to
perform it and not the compensation. The compensation is a subsidiary matter.
Delay defeats equity
The Latin maxim for this principle is “Vigilantibus non dormientibus aequitas subvenit” which means that
Equity assists the vigilant and not those who sleep on their rights. Unreasonable delay in bringing forth a
claim is known as laches. Laches may also result in dismissal of the claims. Thus, a party must assert an
action within a period of reasonable time. There are certain situations where the law of limitation is expressly
applied, in such cases, there is a particularized legal situation where a time period, which has been expressly
prescribed, has elapsed and the party is barred from bringing a suit of action. In case of laches, the defence of
acquiescence can be applied by the court and the plaintiff may be disallowed from seeking an equitable
remedy as the court would assume that he has acquiesced to the questionable actions of the
defendant. Application and case: Allcard vs Skinner.
Key point: Laid down the difference between actual and presumed undue influence.
Facts
 Allcard (C) inherited her family’s wealth, became a member of a religious group (the sisterhood) the rules
of which demanded her obedience to the lady superior, Skinner (D)
 Under the expectation that she should do so, C gifted her property to the sisterhood
 C left the sisterhood but waited 6 years to reclaim her property
Held (Court of Appeal): Although C was unduly influenced, the transfer was affirmed due to delay and
acquiescence

Equitable Remedies:
There are some remedies available by the court of law mainly for the plaintiff just to compensate for the
damages he has suffered from. Some of them are:
5. Injunctions: It is a type of remedy in which the court provides the certain law and order which the
parties are pressured to do or abstain from doing a certain specific task. Case Law- Mohd. Afzal Shah
v. Ghulam Ahmad Shah and Ors.
6. Specific performance: In this type of remedy, the court passes a statement to the parties in order to
fulfil certain tasks which are interlinked or already a part of a contract. Case Law- Executive
Committee of Vaish v. Lakshmi Narain and Ors.
7. Recession: This remedy alternatively takes back the parties to their normal position as they were in
before entering the contract. Case Law- Bedi and Bedi Ltd. Bangalore v. The Commissioner of
Central.
8. Rectification: In this type of remedy court orders to rectify or make certain changes in the written
document so that to reflect what is actually said on the first page. Case Law- M/s Harinagar Sugar
mills Ltd. V. Shyam Sunder Jhunjhunwala.
In India, the common law doctrine of equity has been followed after independence. “The Specific Relief
Act 1963” was successfully passed by the Parliament rescinding the earlier Act. There was certain
authorization which was codified in the 1963 Act such as Recovery of possession of immovable property,
Declaratory Decrees etc. With the certain mode of the nature of equitable reliefs earlier was recast to make
them into statutory rights. Under Section 150 of Code of Civil Procedures the court continues to exercise their
inherent powers.
Differences between Equality and Equity ?
Conceptually, ‘equity’ and ‘equality’ are completely different to one another. Moreover, the difference
between equity and equality helps us to understand the notion of social justice, social equity, social inclusion,
racial justice and social security.
Equality is the end result that we all seek to achieve. But, to get there, we must first ensure equity. Equity
ensures that those people who are behind (socially, economically, politically, geographically etc.) others get a
little bit of extra support and push so that they can reach to their fullest potential and stand on a equal ground
with everyone. Therefore, although equity and equality are meaningfully different to each other, they are also
deeply inter-related with each other.
Equity Equality
The term ‘equality’ refers to equal opportunity, equal
access, equal treatment, equal sharing and division i.e.
The term ‘equity’ refers to fairness and justice. keeping everyone at the same level.
Equity= Fairness and justice. Equality= Sameness.
 It is mainly about treating everyone equally irrespective
It is about taking rationale and logical decision. of being rationale or not.
According to Equality and Human Rights
Equity focuses on individual needs and Commission, equality means “ensuring that every
requirement. Thus, it is also known as a need- based individual has an equal opportunity to make the most
approach. of their lives and talents.”
Equality is not affected by the need of the people or
society. Equality gives same thing to all the people,
Equity is about giving people what they need. irrespective of their need and demand.
It focuses on giving more to those who need more and Here, an individual will only get what everyone else
less to those who need less. gets.
Equity is positive discrimination. It refers to
proportional representation (by race, gender, class Equality might give rise to negative discrimination. It
etc.) to achieve a fair outcome. does not follow proportionality in representation.
Equality is the outcome/end result/end goal of the
Equity is the means to reach to equality. process.
In equitable approach, people are treated fairly but In equality approach, people are treated equally but
differently. may be unfairly.
Equality does not focus on social and racial justice.
Equity focuses and stresses on social justice, racial Rather, it creates systemic barrier for social inclusion
justice, social inclusion and social change. and social security.
Equity is subjective. It differs from situation to Equality is measurable. It does not vary and neither
situation and from person to person. matter whoever looks at it.
Equity respects individual differences and Equality does not give enough value to individual
diversity. differences and diversity.
Equity justifies things on the basis of quality. Equality justifies things on the basis of quantity.
It identifies the differences and tries to reduce the gap It is not concerned with the differences or gap
between the groups or race. between two or more groups or race.
Equity cannot be achieved through equality. Equality can be achieved through equity.
Proper analysis of the existing situation is needed to No such analysis is needed is needed to practice
practice equity approach. equality approach.
Equity principle works even if people do not start Equality principle can only work if everyone starts
from the same point. from the same place.
Principle of equity is mainly prioritized by the
government in its public policy and guiding Principle of equality is usually practiced by most of
documents. the private organizations and agencies.
While following the principle of equity, different While following the principle of equality, there is no
instruction and action is taken for people of different differentiated instruction for people of different race,
race, gender or group. gender or group.
Equity practitioners believe in equitable resource Equality practitioners believe in equal resource
allocation and thus looks everyone differently. allocation and thus does not look anyone differently.
 Inequality does not always undermine social justice
Lack of equity i.e. inequity undermines social justice and fairness. However, it might compromise with the
and fairness. actual need of the people/society.
Inequity is worse to equality. Inequality is better than inequity.
Example of gender equality: Giving equal quantity
Example of gender equity: Giving more nutritious of food to all the family members including pregnant
and additional quantity of food to the pregnant and and lactating (breastfeeding) women, and adolescent
lactating (breastfeeding) women and adolescent girls, girls, irrespective of their nutritional requirement and
based on their dietary requirement. need.
Example of education equity: Arranging extra
classes and giving special attention to the
academically weak student in order reduce his/her Example of education equality: Giving equal
existing educational achievement gap and improve attention and equal effort by the teacher to all the
his/her education and classroom/school student in the classroom/ school OR arranging
performance. This will ultimately help the extra classes for all the student irrespective of
individual student to reach his/her fullest their exam grades, marks and classroom/school
potential. performance.
Example of resource equality: When distributing a
Example of resource equity: When distributing a pair of shoes to the football players, giving same size
pair of shoes to the football players, giving a right of shoes to all the players without any concern to their
pair of shoes to all the players as per their feet size. feet size.
Example of workplace equality: Same salary,
Example of workplace equity: Difference in salary, benefits and rewards to all the employees
benefits and rewards to the employees as per their irrespective of the difference in their work
work performance, expertise and specialty. performance.

Or
12. Explain any two maxims of the following:
 Equality is Equity.
 Delay defeats Equity.
 Equity follows the Law.
 Equity looks at the intent rather than to the form.

13. Discuss fully the meaning, nature and principles of fiduciary relationship.
Or
14. Explain and discuss the fact and principles of law laid down in Janaki Ram Ayyar Vs Neelkant
Ayyar, AIR 1962 SC 633.

SE-217
Trust and Equity
LL.B.(Part I)(Second Semester)Examination, 2017
 Attempt 5 questions in all.
All questions carry 20 marks each.

Describe the nature and concept of Trust.

The nature of trusts
There is no single agreed definition of a trust, but one that has been accepted by the courts is as follows:
'A trust is an equitable obligation, binding a person (who is called a trustee) to deal with property over which
he has control (which is called the trust property), for the benefit of persons (who are called the beneficiaries
or, in old cases, cestuis que trust), of whom he may himself be one, and any one of whom may enforce the
obligation.'
A trust is a fiduciary relationship in which one party, known as a trustor, gives another party, the trustee, the
right to hold title to property or assets for the benefit of a third party, the beneficiary.
THE ‘TRUST’ CONCEPT
At its simplest, a trust is an arrangement whereby property or assets are transferred from one person (the
‘settlor’) to another person (the ‘trustee’) to hold the property for the benefit of a specified list or class of
persons (the ‘beneficiaries’). A trust can be created solely by verbal agreement but it is usual for a written
document (the ‘trust deed’) to be prepared. This evidences the creation of the trust, sets out the terms and
conditions upon which the trustees hold the trust assets and outlines the rights of the beneficiaries.
The practical advantages of a trust are gained from the distinction that is drawn between the formal or legal
owner of property, the trustee, and those people that have the use or benefit of the property, the beneficiaries.
It is vital that the trustee remains independent and exercises proper control over the trust property. A trust may
be deemed to be invalid if the settlor continues to exercise power over the trust assets by retaining benefit or
control, or by giving directions to the trustees.
Those unfamiliar with the trust concept are often concerned at the prospect of transferring ownership of their
property to a trustee. This concern can be alleviated if the trust concept and the distinction between legal and
beneficial ownership is properly understood and it is clear that the trust is governed by a reliable trust law that
can be enforced in a reputable jurisdiction.
Trust law imposes strict obligations and rules on trustees. There is a basic rule that a trustee may not derive any
advantage, directly or indirectly, from a trust unless expressly permitted by the trust – for example, where a
trust provides a professional trustee with the right to charge for its services. Full disclosure of the basis and
amount of charges is required.
 Trustees must follow the trust deed and are subject to very strict rules governing the way in which
their powers and discretion may be exercised. The courts regard a trust as creating a special
relationship that places the most serious and onerous obligations on the trustee.
 Best interests of beneficiaries – Trustees must at all times exercise their powers in the best interests of
the beneficiaries of the trust, and disregard the interests of others, including the settlor.
 Act prudently – Whether or not a trustee is remunerated, he or she must act prudently in the
management of trust property and will be liable for breach of trust if – by failing to exercise proper
care – the trust fund suffers loss. In the case of a professional trustee, the standard of care that the law
imposes is higher. Failure to exercise the requisite level of care will constitute a breach of trust for
which the trustees will be liable to compensate the beneficiaries. This duty can extend to supervising
the activities of a company in which the trustees hold a controlling shareholding.

Or

Discuss the rights and powers of a Trustee.

36. General authority of trustee.—In addition to the powers expressly conferred by this Act and by the
instrument of trust, and subject to the restrictions, if any, contained in such instrument, and to the provisions of
section 17, a trustee may do all acts which are reasonable and proper for the realisation, protection or benefit of
the trust-property, and for the protection or support of a beneficiary who is not competent to contract. Except
with the permission of a principal Civil Court of original jurisdiction, no trustee shall lease trust-property for a
term exceeding twenty-one years from the date of executing the lease, nor without reserving the best yearly
rent that can be reasonably obtained.
37. Power to sell in lots, and either by public auction or private contract.—Where the trustee is
empowered to sell any trust-property, he may sell the same subject to prior charges or not, and either together
or in lots, by public auction or private contract, and either at one time or at several times, unless the instrument
of trust otherwise directs.
38. Power to sell under special conditions. Power to buy-in and re-sell.—The trustee making any such sale
may insert such reasonable stipulations either as to title or evidence of title, or otherwise, in any conditions of
sale or contract for sale, as he thinks fit; and may also buy-in the property or any part thereof at any sale by
auction, and rescind or vary any contract for sale, and re-sell the property so bought in, or as to which the
contract is so rescinded, without being responsible to the beneficiary for any loss occasioned thereby. Time
allowed for selling trust-property.—Where a trustee is directed to sell trust-property or to invest trust-money in
the purchase of property, he may exercise a reasonable discretion as to the time of effecting the sale or
purchase.
Illustrations (a) A bequeaths property to B, directing him to sell it with all convenient speed and pay the
proceeds to C. This does not render an immediate sale imperative. (b) A bequeaths property to B, directing him
to sell it at such time and in such manner as he shall think fit and invest the proceeds for the benefit of C. This
does not authorise B, as between him and C, to postpone the sale to an indefinite period.
39. Power to convey.—For the purpose of completing any such sale, the trustee shall have power to convey or
otherwise dispose of the property sold in such manner as may be necessary.
40. Power to vary investments.—A trustee may, at his discretion, call in any trust-property invested in any
security and invest the same on any of the securities mentioned or referred to in section 20, and from time to
time vary any such investments for others of the same nature: Provided that, where there is a person competent
to contract and entitled at the time to receive the income of the trust-property for his life, or for any greater
estate, no such change of investment shall be made without his consent in writing.
41. Power to apply property of minors, etc., for their maintenance, etc.—Where any property is held by a
trustee in trust for a minor, such trustee may, at his discretion, pay to the guardians (if any) of such minor, or
otherwise apply for or towards his maintenance or education or advancement in life, or the reasonable
expenses of his religious worship, marriage or funeral, the whole or any part of the income to which he may be
entitled in respect of such property; and such trustee shall accumulate all the residue of such income by way of
compound interest, by investing the same and the resulting income thereof from time to time in any of the
securities mentioned or referred to in section 20, for the benefit of the person who shall ultimately become
entitled to the property from which such accumulations have arisen: Provided that such trustee may, at any
time, if he thinks fit, apply the whole or any part of such accumulations as if the same were part of the income
arising in the then current year. Where the income of the trust-property is insufficient for the minor’s
maintenance or education or advancement in life, or the reasonable expenses of his religious worship, marriage
or funeral, the trustee may, with the permission of a principal Civil Court of original jurisdiction, but not
otherwise, apply the whole or any part of such property for or towards such maintenance, education,
advancement or expenses. Nothing in this section shall be deemed to affect the provisions of any local law for
the time being in force relating to the persons and property of minors.
42. Power to give receipts.—Any trustees or trustee may give a receipt in writing for any money, securities or
other moveable property payable, transferable or deliverable to them or him by reason, or in the exercise, of
any trust or power; and, in the absence of fraud, such receipt shall discharge the person paying, transferring or
delivering the same therefrom, and from seeing to the application thereof, or being accountable for any loss or
misapplication thereof.
43. Power to compound, etc.—Two or more trustees acting together may, if and as they think fit—
(a) accept any composition or any security for any debt or for any property claimed;
(b) allow any time for payment of any debt;
(c) compromise, compound, abandon, submit to arbitration or otherwise settle any debt, account, claim or thing
whatever relating to the trust; and 16
(d) for any of those purposes, enter into, give, execute and do such agreements, instruments of composition or
arrangement, releases and other things as to them seem expedient, without being responsible for any loss
occasioned by any act or thing so done by them in good faith. The powers conferred by this section on two or
more trustees acting together may be exercised by a sole acting trustee when by the instrument of trust, if any,
a sole trustee is authorized to execute the trusts and powers thereof. This section applies only if and as far as a
contrary intention is not expressed in the instrument of trust, if any, and shall have effect subject to the terms
of that instrument and to the provisions therein contained. This section applies only to trusts created after this
Act comes into force.
44. Power to several trustees of whom one disclaims or dies.—When an authority to deal with the trust-
property is given to several trustees and one of them disclaims or dies, the authority may be exercised by the
continuing trustees, unless from the terms of the instrument of trust it is apparent that the authority is to be
exercised by a number in excess of the number of the remaining trustees.
45. Suspension of trustee’s powers by decree.—Where a decree has been made in a suit for the execution of
a trust, the trustee must not exercise any of his powers except in conformity with such decree, or with the
sanction of the Court by which the decree has been made, or, where an appeal against the decree is pending, of
the Appellate Court.
=========================================================
The rights and powers of trustees have been laid down in Chapter IV, Sections 31 to 45 of the Indian Trusts
Act. Accordingly a trustee is entitled (i) to have the title deeds of the trust-property in his possession, (ii) to be
reimbursed of the expenses incurred in respect of the property of the trust, (iii) to seek the court’s opinion, (iv)
to have the accounts of the trust-property examined and settled, and (v) to be indemnified from the gainer by
breach of trust.
A part from the above rights, a trustee can give a valid title to a bona fide purchaser from him without notice
even though his act of alienation may be one resulting from his breach of trust.
Rights to title deed [Section 31] : In the eyes of the law, a trustee is the owner of the trust estate and therefore
he is entitled to have in his possession the instrument of trust and all the other documents of title relating solely
to the trust-property.
When a trust is created there must be a transfer of property to the trustee or else no trust can come into
existence.
When the title deeds relating to the property are not delivered up to the trustee, a trustee has the right to secure
them so that the same may not be used otherwise and so that he can be safe and the property secured.
Powers
Nature of powers
Exercise of power depends upon the nature of a trust and the character and situation of the beneficiary. In case
of absolute power to the trustee the court cannot compel him to exercise it, but the court will see that it is not
exercised improperly.
In case of power coupled with duty, its proper and timely exercise will be compelled by a court but the manner
and method of its exercise cannot be dictated. Powers must be exercised for the benefit of a trust and its
exercise must be bona fide, reasonable and impartial.
The Indian Trusts Act, 1882 lays down the powers of a trustee in Sections 36 to 45.
General authority of a trustee [Section 36]
A trustee has been given a general authority by this Act by virtue of which he “may do all acts which are
reasonable and proper” for
(i) the realisation, protection or benefit of the trust-property, and
(ii) for the protection and support of a beneficiary who is not competent to contract.
Of course this general authority is subject to the following restrictions: (i) restrictions contained in the
instrument, (ii) provisions of Section 17 (a trustee to be impartial), and (iii) restriction as to leasing of trust-
property.
Statutory powers of a trustee
These statutory powers are enlisted in Sections 37 to 45. They are (i) power to sell; (ii) power to sell under
special circumstances; (iii) power to convey; (iv) power to vary investments; (v) power to apply property of
minors, etc., for their maintenance; (vi) power to give receipts; and (vii) power to compound. Sections 44 and
45 provide for joint power and suspension of a trustee’s power.

Trustees-Their Disabilities
Trustees cannot renounce [Section 46]
Nobody can be compelled to accept the office of trustee against his will. A person appointed as trustee who
wishes to disclaim should do so by deed, as this provides a clear evidence of the disclaimer.
However, a disclaimer may be implied; apathy will be evidence of an intention the disclaim, provided the
apathy is consistent.
But if the trustee meddles with the estate, his conduct will be construed as an acceptance. Once he has
disclaimed he can no longer accept. Once he has accepted he can no longer disclaim, but he may retire.
Summary
A trust is an obligatory affair; its office is fraught with duties, discretions, disabilities, rights and powers.
Accordingly,
(i) a trustee cannot renounce his office;
(ii) cannot delegate his office;
(iii) cannot act single (if there are two or more trustees);
(iv) may not charge for his services;
(v) may not use trust-property;
(vi) cannot set up an adverse title to trust-property;
(vii) must not misuse his position as a trustee to get an advantage from the trust-property or dealings therewith;
(viii) cannot profit out of a trust;
(ix) cannot compete with the trust business;
(x) may not buy trust-property either from himself or from a co-trustee;
(xi) may not buy beneficiary interest without court’s prior permission; and
(xii) may not lend money to one of co-trustees.

9. Discuss the rights of the beneficiary enshrined under the Indian Trust Act.
Or
10. Write short notes on :
 Disabilities of Trustees
 Discharge of Trustees

11. Explain the Doctrine of Cy pres and illustrate your answer.

Or
12. How is a Trust extinguished ? Discuss.

13. Explain the following maxims:

 Delay defeats Equity
 ‘Where there is Equal Equity, the Law shall prevail.’
Or
14. Explain the Equity and describe its Jurisdiction.

15. Explain and discuss the facts and principles of law laid down in the case of Deoke Nandan Vs
Murlidhar and Others AIR 1957 SC 133.
 Or
16. Discuss fully the meaning, nature and principles of fiduciary relationship.

LA-153
Trust and Equity
LL.B.(Part I)(Second Semester)Examination, 2018
Attempt 5 questions in all.
All questions carry 20 marks each.
11. State the rights and duties of the Trustees.
Or
12. What do you mean by ‘Breach of Trust’ ? Mention the Law relating to the Breach of Trust.

13. What are the rights of Beneficiaries ? Explain the circumstances in which a beneficiary can
follow trust property falling in the hands of third party.
Or
14. How is a Trust revoked ? Discuss. How is a Trust extinguished ?

15. What do you mean by Constructive Trust ? Mention the law relating to Constructive Trust.
Or
16. Explain the Doctrine of Cy pres and illustrate your answer.

17. Trace the origin and development of Equity in England and discuss two leading principles of
English Equity which have been incorporated in Indian Statutory Law.
Or
18. How will you classify the Equitable Rights ? Discuss.

19. “Fiduciary relations and law relating to them is the outcome of human behaviour.” Do you
agree ?
Or
20. Explain and discuss the fact and principles of law laid down in Janaki Ram Ayyar Vs Neelkant
Ayyar, AIR 1962 SC 633.

LB-123
Trust and Equity
LL.B.(Part I)(Second Semester)Examination, 2019
Attempt 5 questions in all.
All questions carry 20 marks each.
 9. How is Trust created ? What is the difference between Trust of Immovable and Movable
Property ?
Or
10. What are the duties of Trustees ? Discuss with Illustrations.

11. Describe in brief the various disabilities of Trustees.

Or
12. Describe the various rights of beneficiaries.

13. Explain “Charitable Trust” with example.

Or
14. Explain the Doctrine of Cy pres.

15. What do you understand by Equity ? Explain.

Or
What do you understand by Maxims of Equity ? What is the importance of Maxims of Equity ?
Explain.
A short, pithy statement expressing a general truth or rule of conduct Or. An established principle or
proposition.
Maxims of Equity
1. EQUITY WILL NOT SUFFER A WRONG TO BE WITHOUT A REMEDY
Meaning
Where there is a right there is a remedy. This idea is expressed in the Latin Maxim ubi jus ibi remedium. It
means that no wrong should go unredressed if it is capable of being remedied by courts. This maxim indicates
the width of the scope and the basis of on which the structure of equity rests. This maxim imports that where
the common law confers a right, it gives also a remedy or right of action for interference with or infringement
of that right.
2. EQUITY FOLLOWS THE LAW
Meaning
The maxim indicates the discipline which the Chancery Courts observed while administering justice according
to conscience. The discretion of the court is governed by the rules of law and equity, which are not to oppose,
but each, in turn, to be subservient to the other. Thus equity came not to destroy the law but to fulfill it, to
supplement it, to explain it; The goal of equity and law is the same, but due to their nature and due to historic
accident they chose different paths. Equity respected every word of law and every right at law but where the
law was defective, in those instances, these Common Law rights were controlled by recognition of equitable
Rights.
3. HE WHO SEEKS EQUITY MUST DO EQUITY
Meaning
The maxim means that to obtain an equitable relief the plaintiff must himself be prepared to do, that is, a
plaintiff must recognize and submit to the right of his adversary.
4. HE WHO COMES INTO EQUITY MUST COME WITH CLEAN HANDS
Meaning
Equity demands fairness not only from the defendant but also from the plaintiff. It is therefore said that he that
hath committed an inequity, shall not have equity. While applying this maxim the court believed that the
behavior of the plaintiff was not against conscience before he came to the court.
5. DELAY DEFEATS EQUITIES
Meaning
A Latin term in this regard is Vigilantibus, non dormentibus, jura subvenient which means Equity aids the
vigilant and not the indolent. So, if one sleeps on his rights, his rights will slip away from him. Legal claims
are barred by statutes of limitation and equitable claims may be barred not only by limitation law but also by
unreasonable delay, called laches.
6. EQUALITY IS EQUITY
Meaning
Plato defined that If you cannot find any other, equality is the proper basis. This maxim is also explained as
"equity delighteth in equality”, which means that as far as possible equity would put the litigating parties on an
equal level so far as their rights and responsibilities are concerned.
7. EQUALITY LOOKS TO THE INTENT RATHER THAN THE FORM
Meaning
Common law was very rigid and inflexible. It could not respond favourably to the demand of time. It regarded
the form of a transaction to be more important than its substance. It looked to the very letter of the agreement
and not the intention behind it. On the other hand, Equity looks to the spirit not to the letter, it looks to the
intention of parties and not to the words.
8. EQUALITY LOOKS ON THAT AS DONE WHICH OUGHT TO BE DONE
Meaning
If someone undertakes an obligation for the other, equity courts look on it as done and as producing the same
results as if the obligation had been actually performed. Equity courts therefore look to the acts of the person
bound by his conscience and interpret and construe them in such a way that they amount to what ought to be
done.
9. EQUALITY IMPUTES AN INTENTION TO FULFILL AN OBLIGATION
Meaning
Equity considered and estimated acts of parties. Thus where a person is under an obligation to do a certain act,
and he does some other act which is capable of being regarded as an act in fulfillment of his obligation. In
other words a person is presumed to do what he is bound to do.

The importance of equity was greater emphasis than the common law system. During the centuries it gained
importance and became an integral part of an Indian legal system too. In India it developed through various
statues which have gained momentum with the various acts which have been passed throughout.
In law, the term "equity" refers to a particular set of remedies and associated procedures involved with civil
law. ... A court will typically award equitable remedies when a legal remedy is insufficient or inadequate.

16. “Law relating to fiduciary relation is the backbone of Hindu Law.” Discuss.
Or

Explain and discuss the facts and principles of law laid down in the case of Deoki Nandan Vs Murlidhar
and Others AIR 1957 SC 133.
Supreme Court of India
Deoki Nandan vs Murlidhar on 4 October, 1956
Equivalent citations: 1957 AIR 133, 1956 SCR 756
Author: T V Aiyyar
Bench: Aiyyar, T.L. Venkatarama
PETITIONER:DEOKI NANDAN Vs.RESPONDENT:MURLIDHAR.
DATE OF JUDGMENT:04/10/1956
BENCH:VENKATARAMA AIYYAR, JAGANNADHADAS, B.SINHA, BHUVNESHWAR P.
DAS, S.K.
CITATION: 1957 AIR 133 1956 SCR 756
ACT:
Hindu Law-Religious endowment-Temple-Publicor private -Question of mixed fact and law-Gift to
idol—Whether worshippers are the beneficiaries-Dedication to public-Construction of will -Ceremonies
relating to installation of
idol-User of temple.
HEADNOTE: The issue whether a religious endowment is a public or a private one is a mixed question of
law and fact the decision of which must depend on the application of legal concepts of a public and a private
endowment to the facts found and is open to consideration by the Supreme Court.
Judgement
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 250 of 1953, Appeal from the judgment and decree
dated July 14, 1948 of the Chief Court of Audh, Lucknow in Second Appeal No. 365 of 1945 arising out of the
decree dated May 30, 1945 of the Court of District Judge, Sitapur in Appeal No. 4 of 1945 against the decree
dated November 25, 1944 of the Court of Additional Civil Judge, Sitapur in Regular Civil Suit No. 14 of 1944.
A. D. Mathur, for the appellant.
Jagdish, Chandra, for respondent No. 1.
1956. October 4. The Judgment of the Court was delivered by VENKATARAMA AYYAR J.-The point for
decision in this appeal is whether a Thakurdwara of Sri Radhakrishnaji in the village of Bhadesia in the
District of Sitapur is a private temple or a public one in which all the Hindus are entitled to worship.
One Sheo Ghulam, a pious Hindu and a resident of the said village, had the Thakurdwara constructed during
the years 1914-1916, and the idol of Shri Radhakrishnaji ceremoniously installed therein. He was himself in
management of the temple and its affairs till 1928 when he died without any issue. On March 6, 1919, he had
executed a will whereby he bequeathed all his lands to the Thakur. The provisions of the will, in so far as they
are material, will presently be referred to. The testator had two wives one of whom Ram Kuar, had
predeceased him and the surviving widow, Raj Kuar, succeeded him as Mutawalli in terms of the will and was
in management. till her death in 1933. Then the first defendant who is the nephew of Sheo Ghulam, got into
posses- sion of the properties as manager of the endowment in accordance with the provisions of the will. The
appellant is a distant agnate of Sheo Ghulam, and on the allegation that the first defendant bad been
mismanaging the temple and denyinng the rightg of the public therein, he moved the District Court of Sitapur
for relief under the Religious and Charitable Endowments Act XIV of 1920, but the court declined to interfere
on the ground that the endowment was private. An application to the Advocate-General for sanction to institute
a suit under section'92 of the Code of Civil Procedure was also refused for the same reason. The appellant then
filed the suit, out of which the present appeal arises, for a declaration that the Thakurdwara is a public temple
in which all the Hindus have a right to worship. The first defendant contested the suit, and claimed that "the
Thakurdwara an - d the idols were private", and that "the general public had no right to make any interference".
The Additional Civil Judge, Sitapur, who tried the suit was of the opinion that the Thakurdwara had been built
by Sheo Ghulam "for worship by his family", and that it was a private temple. He accordingly dismissed the
suit. This judgment was affirmed on appeal by the District Judge, Sitapur, whose decision again was affirmed
by the Chief Court of Oudh in second appeal. The learned Judges, however, granted a' certificate under s.
109(c) of the Code of Civil Procedure that the question involved was one of great importance, and that is how
the appeal comes before Us.
The question that arises for decision in this appeal whether the Thakurdwara of Sri Radhakrishnaji at Bhadesia
is a public endowment or a private one is one of mixed law and fact. In Lakshmidhar Misra v. Rang-alal(1), in
which the question was whether certain lands had been dedicated as cremation ground, it was observed by the
Privy Council that it was "essentially a mixed question of law and fact", and that while the findings of fact of
the lower appellate court must be accepted as binding, its "actual conclusion that there has been a dedication or
lost grant is more properly regarded as a proposition of law derived from those facts than as a finding of fact
itself". In the present case, it was admitted that there was a formal dedication; and the controversy is only as to
the scope of- the dedication, and that is also a mixed question of law and fact, the decision of which must
depend on the application of legal concepts of a public and a private endowment to the facts found, and that is
open to consideration in this appeal. It will be convenient first to consider the principles of law applicable to a
determination of the question whether an endowment is public or private, and then to examine, in the light of
those principles, the facts found or established. The distinction between a private and a public trust is that
whereas in the former the beneficiaries are specific individuals, in the latter they are the general public or a
class thereof. While in the former the beneficiaries are persons who are (1) [1949] L.R. 76 I.A. 271.
laid down in the Sanskrit Texts. Thus, in his Bhashya on the Purva Mimamsa, Adhyaya 9, Pada 1, Sahara
Swami has the following:
"Words such as 'village of the Gods'land of the Gods' are used in a figurative sense. That is property which can
be said to belong to a person, which he can make use of as he desires. God however does not make use of the
village or lands, according to its desires. Therefore nobody makes a gift (to Gods). Whatever property is
abandoned for Gods, brings prosperity to those who serve Gods". Likewise, Medhathithi in commenting on the
expression "Devaswam" in Manu, Chapter XI, Verse 26 writes: "Property of the Gods, Devaswam, means
whatever is abandoned for Gods, for purposes of sacrifice and the like, because ownership in the primary
sense, as showing the relationship between the owner and the property owned, is impossible of application to
Gods. For the Gods do not make use of the property according to their desire nor are they seen' to act for
protecting the same".
Thus, according to the texts, the Gods have no beneficial enjoyment of the properties, and they can be
described as their owners only in a figurative sense (Gainartha), and the true purpose of a gift of properties to
the idol is not to confer any benefit on God, but to acquire spiritual benefit by providing opportunities and
facilities for those who desire to worship.
In Bhupati Nath Smritititha v. Ram Lal Maitra(1), it was held on a consideration of these and other texts that a
gift to an idol was not to be judged by the rules applicable to a transfer to a 'sentient being', and that dedication
of properties to an idol consisted in the abandonment by the owner of his dominion over them for the purpose
of their being appropriated for the purposes which he intends. Thus, it was observed by Sir Lawrence Jenkins
C. J. at p. 138 that "the pious purpose is still the legate, the establishment of the image is merely the mode in
which the pious purpose is to be effected" and that "the dedication to a deity" may be "a compendious
expression of the pious purposes for which the dedication is designed". Vide also the observations of Sir
Ashutosh Mookerjee at p. 155. In Hindu Religious Endowments Board v. Yeeraraghavachariar(2),
Varadachariar J. dealing with this question, referred to the decision in Bhupati Nath Smrititirtha v. Ram Lal
Maitra (supra) and observed:
"As explained in that case, the purpose of making a gift to a temple is not to confer a benefit on God but to
confer a benefit on those who worship in that temple, by making it possible for them to have the worship
conducted in a proper and impressive manner. This is the sense in which a temple and its endowments are
regarded as a public trust". When once it is understood that the true beneficiaries of religious endowments are
not the idols but the worshippers, and that the purpose of the endowment is the maintenance of that worship for
the benefit of the worshippers, the question whether an endowment is private or public presents no difficulty.
The cardinal point to be decided is whether it was the intention of the founder that specified individuals are to
have the right of worship at the shrine, or the general public or any specified portion thereof. In accordance
with this theory, it has been held that when property is dedicated for the worship of a family idol, it is a private
and not a public endowment, as the persons who are entitled to worship at the shrine of the deity can only be
the members of the family, (1) [1910] I.L.R. 37 Cal. 128.
(2) A.I.R. 1937 Macl. 750.
and that is an ascertained group of individuals. But where the beneficiaries are not members of a family or a
specified individual, then the endowment can only be regarded as public, intended to benefit the general body
of worshippers. In the light of these principles, we must examine the facts of this case. The materials bearing
on the question whether the Thakurdwara is a public temple or a private one may be considered under four
heads:(1) the will of Sheo Ghulam, Exhibit A-1, (2) user of the temple by the public, (3) ceremonies relating to
the dedication of the Thakurdwara and the installation of the idol with special reference to Sankalpa and
Uthsarga, and (4) other facts relating to the character of the temple.
(1) The will, Exhibit A-1, is the most important evidence on record as to the intention of the testator and the
scope of the dedication. Its provisions, so far as they are material, may now be noticed. The will begins with
the recital that the testator has two wives and no male issue, that he has constructed a Thakurdwara and
installed the idol of Sri Radhakrishnaji therein, and that he is making a disposition of the properties with a
view to avoid disputes. Clause I of Exhibit A-1 provides that after the death of the testator "in the absence of
male issue, the entire immovable property given below existing at present or which may come into being
hereafter shall stand endowed in the name of Sri Radhakrisbnan, and mutation of names shall be effected in
favour of Sri Radhakrishnan in the Government papers and my wives Mst. Raj Kuer and Mst. Ram kuer shall
be the Muta- wallis of the waqf". Half the income from the properties is to be taken by the two wives for their
maintenance during their lifetime, and the remaining half was to "continue to be spent for the expenses of the
Thakurdwara". It is implicit in this provision that after the lifetime of the wives, the whole of the income is to
be utilised for the purpose of the Thakurdwara. Clause 4 provides that if a son is born to the testator, then the
properties are to be divided between the son and the Thakurdwara in a specified proportion; but as no son was
born, this clause never came into operation. Clause 5 provides that the Mutawallis are to have no power to sell
or mortgage the property, that they are to maintain accounts, that the surplus money after meeting the expenses
should be deposited in a safe bank and when funds permit, property should be purchased in the name of Sri
Radhakrishnaji. Clause 2 appoints a committee of four persons to look after the , management of the temple
and its properties, and of these, two are not relations of the testator and belong to a different caste. It is further
provided in that clause that after the death of the two wives the committee "may appoint my nephew Murlidhar
as Mutawalli by their unanimous opinion". This Murlidhar is a divided nephew of the testator and he is the first
defendant in this action. Clause 3 provides for filling up of vacancies in the committee. Then finally there is cl.
6, which runs as follows:
"If any person alleging himself to be my near or remote heir files a claim in respect of whole or part of the
waqf property his suit shall be improper on the face of this deed".
The question is whether the provisions of the will disclose an intention on the part of the testator that the
Thakurdwara should be a private endowment, or that it should be public. The learned Judges of the Chief
Court in affirming the decisions of the courts below that the temple was built for the benefit of the members of
the family, observed that there was nothing in the will pointing "to a conclusion that the trust was a public
one", and that its provisions were not "inconsistent with the property being a private endowment". We are
unable to endorse this opinion. We think that the will read as a whole indubitably reveals an intention on the
part of the testator to dedicate the Thakurdwara to the public and not merely to the members of his family.
The testator begins by stating that he had no male issue. In Nabi Shirazi v. Province of Bengal (supra), the
question was whether a wakf created by a deed of the year 1806 was a public or a private endowment.
Referring to a recital in the deed that the settlor had no children, Khundkar J. observed at p. 217: "The deed
recites that the founder has neither children nor grandchildren, a circumstance which in itself suggests that the
imambara was not to remain a private or family institution".
Vide also the observations of Mitter J. at p. 228. The reasoning on which the above view is based is, obviously,
that the word 'family' in its popular sense means children, and when the settlor recites that he has no children,
that is an indication that the dedication is not for the benefit of the family but for the public.
Then we have clause 2, under which the testator constitutes a committee of management consisting of four
persons, two of whom were wholly unrelated to him. Clause 3 confers on the committee power to fill up
vacancies; but there is no restriction therein on the persons who could be appointed under that clause, and
conceivably, even all the four members might be strangers to the family. It is difficult to believe that if Sheo
Ghulam intended to restrict the right of worship in the temple to his relations, he would have entrusted the
management thereof to a body consisting of strangers. Lastly, there is clause 6, which shows that the
relationship between Sheo Ghulam and his kinsmen was not particularly cordial, and it is noteworthy that
under clause 2, even the appointment of the first defendant as manager of the endowment is left to the option
of the committee. It is inconceivable that with such scant solicitude for his relations, Sheo Ghulam would have
endowed a temple for their benefit. And if he did not intend them to be beneficiaries under the endowment,
who are the members of the, family who could take the benefit thereunder after the lifetime of his two wives?
If we are to hold that the endowment was in favour of the members of the family, then the result will be that on
the death of the two wives, it must fail for want of objects. But it is clear from the provisions of the will that
the testator contemplated the continuance of the endowment beyond the lifetime of his wives. He directed that
the properties should be endowed in the name of the deity, and that lands are to be purchased in future in the
name of the deity. He also provides for the management of the trust after the lifetime of his wives. And to
effectuate this intention, it is necessary to hold that the Thakurdwara was dedicated for worship by -members
of the public, and not merely of his family. In deciding that the endowment was a -private one, the learned
Judges of the Chief Court failed to advert to these aspects, and we are unable to accept their decision as
correct.
2. In the absence of a deed of endowment constituting the Thakurdwara, the plaintiff sought to establish the
true scope of the dedication from the user of the temple by the public. The witnesses examined on his behalf
deposed that the villagers were worshipping in the temple freely and without any interference, and indeed, it
was even stated that the Thakurdwara was built by Sheo Ghulam at the instance of the villagers, as there was
no temple in the village. The trial Judge did not discard this evidence as unworthy of credence, but he held that
the proper inference to be drawn from the evidence of P.W. 2 was that the public were admitted into the temple
not as a matter of right but as a matter of grace. P.W. 2 was a pujari in the temple, and be deposed that while
Sheo Ghulam's wife was doing puja within the temple, he stopped outsiders in whose presence she used to
observe purdah, from going inside. We are of opinion that this fact does not afford sufficient ground for the
conclusion that the villagers did not worship at the temple as a matter of right. It is nothing unusual even in
well-known public temples for the puja hall being cleared of the public when a high dignitary comes for
worship, and the act of the pujari in stopping the public is expression of the regard which the entire villagers
must have had for the wife of the founder, who was a pardanashin lady, when she came in for worship, and
cannot be construed as a denial of their rights. The learned Judges of the Chief Court also relied on the
decision of the Privy Council in Babu Bhagwan Din v. Gir Har Saroon(1) as an authority for the position that
"the mere fact that the public is allowed to visit a temple or thakurdwara cannot necessarily indicate that the
trust is public as opposed to private". In that case, certain properties were granted not in favour of an idol or
temple but in favour of one Daryao Gir, who was maintaining a temple and to his heirs in perpetuity. The
contention of the public was that subsequent to the grant, the family of Daryao Gir must be held to have
dedicated the temple to the public for purpose of worship, and the circumstance that members of the public
were allowed to worship at the temple and make offerings was relied on in proof of such dedication. In
repelling this contention, the Privy Council observed that as the grant was initially to an individual, a plea that
it was subsequently dedicated by the family to the public required to be clearly made out, and it was not made
out merely by showing that the public was allowed to worship at the temple "since it would not in general be
consonant with Hindu sentiments or practice that worshippers should be turned away". But, in the present case,
the endowment was in favour of the idol itself, and the point for decision is- whether it was a private or public
endowment. And in such circumstances, proof of user by the public without interference would be cogent
evidence that the dedication was in favour of the public. In Mundancheri Koman v. Achuthan(2), which was
referred to and followed in Babu Bhagwan Din v Gir Har Saroon(1), the distinction between user in respect of
an institution which is initially proved to have been private and one which is not, is thus expressed:
"Had there been any sufficient reason for holding that these temples and their endowment were originally
dedicated for the tarwad, and so were private trusts, their Lordships would have been slow to hold that the
admission of the public in later times possibly owing to altered conditions, would affect the private character
of the trusts. As it is, they are of (1) [1939] L.R. 67 I.A. 1.
(2) [1984] L.R. 61 I.A. 405.
opinion that the learned Judges of the High Court were justified in presuming from the evidence as to public
user which is all one way that the temples and their endowment were public religious trusts".
We are accordingly of opinion that the user of the temple such as is established by the evidence is more
consistent with its being a public endowment.
3. It is settled law that an endowment can validly be created in favour of an idol or temple without the
performance of any particular ceremonies, provided the settlor has clearly and unambiguously expressed his
intention in that behalf. Where it is proved that ceremonies were performed, that would be valuable evidence
of endowment, but absence of such proof would not be conclusive against it. In the present case, it is common
ground that the consecration of the temple and the installation of the idol of Sri Radhakrishnaji were made with
great solemnity and in accordance with the Sastras. P. W. 10, who officiated as Acharya at the function has
deposed that it lasted for seven days, and that all the ceremonies commencing with Kalasa Puja and ending
with Sthapana or Prathista were duly performed and the idols of Sri Radhakrishnaji, Sri Shivji and Sri
Hanumanji were installed as ordained in the Prathista Mayukha. Not much turns on this evidence, as the
defendants admit both the dedication and the ceremonies, but dispute only that the dedication was to the
public.
In the court below, the appellant raised the contention that the performance of Uthsarga ceremony at the time
of the consecration was conclusive to show that the dedication was to the public, and that as P. W. 10 stated
that Prasadothsarga was performed, the endowment must be held to be public. The learned Judges considered
that this was a substantial question calling for an authoritative decision, and for that reason granted a certificate
under section, 109(c) of the Code of Civil Procedure. We have ourselves read the Sanskrit texts bearing on this
question, and we are of opinion that the contention of the appellant proceeds on a misapprehension. The
ceremonies relating to dedication are Sankalpa, Uthsarga and Pra-
thista. Sankalpa means determination, and is really formal declaration by the settlor of his intention to dedicate
the property. Uthsarga is the formal renunciation by the founder of his ownership in the property, the result
whereof being that it becomes impressed with the trust for which he dedicates it. Vide The Hindu Law of
Religious and Charitable Trust by B. K. Mukherea, 1952 Edition, p. 36. The formulae to be adopted in
Sankalpa and Uthsarga are set out in Kane's History of Dharmasastras, Volume 11, p. 892. It will be seen
therefrom that while the Sankalpa states the objects for the realisation of which the dedication is made, it is the
Uthsarga that in terms dedicates the properties to the public (Sarvabhutebyah). It would therefore follow that if
Uthsarga is proved to have been performed, the dedication must be held to have been to the public. But the
difficulty in the way of the appellant is that the formula which according to P. W.-IO was recited on the
occasion of the foundation was not Uthsarga but Prasadoasarga, which is something totally different. Prasada'
is the 'mandira', wherein the deity is placed before the final installation or Prathista takes placer' and the
Prathista Mayukha prescribes the ceremonies that have to be performed when the idol is installed in the
Prasada. Prasadothsarga is the formula to be used on that occasion, and the text relating to it as given in the
Mayukha runs as follows:
It will be seen that this is merely the Sankalpa without the Uthsarga, and there are no words therein showing
that the dedication is to the public. Indeed, according to the texts, Uthsarga is to be performed only for
charitable endowments, like construction of tanks, rearing of gardens and the like, and not for religious
foundations. It is observed by Mr. Mandlik in the Vyavahara Mayukha, Part 11, Appendix II, II,p. 339 that
"there is no utsarga of a temple except in the case of repair of old temples". In the, History of Dharmasastras,
Volume II, Part II, p. 893, it is pointed out by Mr. Kane that in the case of temples the proper word to use is
Prathista and not Uthsarga. Therefore, the question of inferring a dedication to the public by reason of the
performance of the Uthsarga ceremony cannot arise in the case of temples. The appellant is correct in his
contention that if Uthsarga is performed the dedication is to the public, but the fallacy in his argument lies in
equating Prasadothsarga with Uthsarga. But it is also clear from the texts that Prathista takes the place of
Uthsarga in dedication of temples, and that there was Prathista of Sri Radhakrishnaji as spoken to by P.W. 10,
is not in dispute. In our opinion, this establishes that the dedication was to the public.
(4)We may now refer to certain facts admitted or established in the evidence, which indicate that the
endowment is to the public. Firstly, there is the fact that the idol was installed not within the precincts of
residential quarters but in. a separate building constructed for that very purpose on a vacant site. And as
pointed out in Delroos Banoo Begum v. Nawab Syud Ashgur Ally Khan(1), it is a factor to be taken into
account in deciding whether an endowment is private or public, whether the place of worship is located inside
a private house or a public building. Secondly, it is admitted that some of the idols are permanently installed on
a pedestal within the temple precincts. That is more consistent with the endowment being public rather than
private. Thirdly, the puja in the 'temple is performed by an archaka appointed from time to time. And lastly,
there is the fact that there was no temple in the village, and there is evidence on the side of the plaintiff that the
Thakurdwara was built at the instance of the villagers for providing a place of worship for them. This evidence
has not been considered by the courts below, and if it is true, that will be decisive to prove that the endowment
is public.
(1) [1875] 16 Ben. L.R. 167,186.
It should be observed in this connection that though the plaintiff expressly pleaded that the temple was
dedicated "for the worship of the general public", the first defendant in his written statement merely pleaded
that the Thakurdwara and the idols were 'private. He did not aver that the temple was founded for the benefit of
the members of the family. At the trial, while the witnesses for the plaintiff deposed that the temple was built
with the object of providing a place of worship for all the Hindus, the witnesses examined by the defendants
merely deposed that Sheo Ghulam built the Thakurdwara for his own use and "for his puja only". The view of
the lower court that the temple must be taken to have been dedicated to the members of the family goes beyond
the pleading, and is not supported by the evidence in the case. Having considered all the aspects, we are of
opinion that the Thakurdwara of Sri Radhakrishnaji in Bhadesia is a public temple.
In the result, the appeal is allowed, the decrees of the courts below are set aside, and a declaration granted in
terms of para 17 (a) of the plaint. The costs of -the appellant in all the courts will come out of the trust
properties. The first defendant will himself bear his own costs throughout.
Appeal allowed.
===========================================================

Mortgage : रेहन रखना ; गिरवी रखना ; बंधक

What do you understand by Mortgage. How many types of Mortgage are there ? Explain.
A mortgage is a type of home loan in which the lender provides a property loan against the mortgage of the
property itself. This gives them the right to acquire and sell the property if the borrower defaults on the
repayment or violates the set terms and conditions otherwise.
Section 58 in The Transfer of Property Act, 1882, “Mortgage”, “mortgagor”, “mortgagee”, “mortgage-
money” and “mortgage-deed” defined.—
(a) A mortgage : रेहन रखना ; गिरवी रखना is the transfer of an interest in specific

immoveable property for the purpose of securing the payment of money advanced or to be advanced by way of

loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary

liability. The transferor is called a mortgagor, the transferee a mortgagee; the principal money and interest of

which payment is secured for the time being are called the mortgage-money, and the instrument (if any) by

which the transfer is effected is called a mortgage-deed.

(b) Simple mortgage सरल बंधक —Where, without delivering possession of the mortgaged property, the
.

mortgagor binds himself personally to pay the mortgage-money, and agrees, expressly or impliedly, that, in the
event of his failing to pay according to his contract, the mortgagee shall have a right to cause the mortgaged
property to be sold and the proceeds of sale to be applied, so far as may be necessary, in payment of the
mortgage-money, the transaction is called a simple mortgage and the mortgagee a simple mortgagee.
(c) Mortgage by conditional sale. सशर्त बिक्री द्वारा बंधक—Where, the mortgagor ostensibly sells the
mortgaged property— on condition that on default of payment of the mortgage-money on a certain date the
sale shall become absolute, or on condition that on such payment being made the sale shall become void, or on
condition that on such payment being made the buyer shall transfer the property to the seller, the transaction is
called mortgage by conditional sale and the mortgagee a mortgagee by conditional sale: 1[Provided that no
such transaction shall be deemed to be a mortgage, unless the condition is embodied in the document which
effects or purports to effect the sale.]
(d) Usufructuary mortgage. सूदखोरी बंधक—Where the mortgagor delivers possession 1[or expressly or by
implication binds himself to deliver possession] of the mortgaged property to the mortgagee, and authorises
him to retain such possession until payment of the mortgage-money, and to receive the rents and profits
accruing from the property 2[or any part of such rents and profits and to appropriate the same] in lieu of
interest, or in payment of the mortgage-money, or partly in lieu of interest 3[or] partly in payment of the
mortgage-money, the transaction is called an usufructuary mortgage and the mortgagee an usufructuary
mortgagee.
(e) English mortgage.—Where the mortgagor binds himself to repay the mortgage-money on a certain date,
and transfers the mortgaged property absolutely to the mortgagee, but subject to a proviso that he will re-
transfer it to the mortgagor upon payment of the mortgage-money as agreed, the transaction is called an
English mortgage.

(f) Mortgage by deposit of title-deeds. टायटल डिड जमा करके गिरवि रखना —Where a person in any of

the following towns, namely, the towns of Calcutta, Madras, [and Bombay], [* * *] and in any other town

which the [State Government concerned] may, by notification in the Official Gazette, specify in this behalf,
delivers to a creditor or his agent documents of title to immoveable property, with intent to create a security

thereon, the transaction is called a mortgage by deposit of title-deeds.

(g) Anomalous mortgage. विषम बंधक —A mortgage which is not a simple mortgage, a mortgage by
conditional sale, an usufructuary mortgage, an English mortgage or a mortgage by deposit of title-deeds within
the meaning of this section is called an anomalous mortgage.]
(i) It must be a mortgage as defined by Section 58 of the Transfer of Property Act.
(ii) It is negatively defined and should not be anyone of the mortgages listed above.
(iii) Anomalous mortgages are usually a combination of two mortgages. Examples of such mortgages are:
(a) a simple and usufructuary mortgage, and
(b) an usufructuary mortgage accompanied by conditional sale. There may be other forms, molded by custom
and local usage.
(c) Merits and Demerits of an Equitable Mortgage
Merits
(i) The borrower saves the stamp duty on the mortgage deed and the registration charges. It involves
minimum formalities.
(ii) It involves less time and can be conveniently created.
It can be done without much publicity and therefore, the customer’s position is not exposed to public gaze.
Demerits
(i) In case of default, the remedy is to obtain a decree for sale of the property. Since, this involves going to
the Court, it is expensive and time consuming. This shortcoming can be overcome by inserting a covenant
by which the mortgagee is given the power of sale. In that case, the mortgage deed must be properly
stamped and registered and the mortgage loses the advantage of being simple in procedure and less expensive.
(ii) Where the borrower is holding the title deeds in his capacity as a trustee and equitable mortgage of
the same is effected, the claim of the beneficiary, under trust will prevail over any equitable mortgage.
Therefore, the banker has to make a proper scrutiny of the title deeds before accepting them as a security.
(iii) The borrower may create a subsequent legal mortgage in favour of another party. However, this
possibility is not there, if the equitable mortgagee holds the original title deeds. In India, there is no difference
between the two types of mortgages. According to Section 48 of the Registration Act, 1908, a mortgage by
deposit of title deeds prevails against any subsequent mortgage relating to the same property. Similarly, the
title of the equitable mortgagee, is not defeated by any subsequent sale without notice. However, to avoid any
risk of this type, the equitable mortgage should be accepted only after obtaining the original title deeds.
================================================
Section 115 in The Indian Evidence Act, 1872, Estoppel. —When one person has, by his declaration, act or
omission, intentionally caused or permitted another person to believe a thing to be true and to act upon such
belief, neither he nor his representative shall be allowed, in any suit or proceeding between himself and such
person or his representative, to deny the truth of that thing. Illustration A intentionally and falsely leads B to
believe that certain land belongs to A, and thereby induces B to buy and pay for it. The land afterwards
becomes the property of A, and A seeks to set aside the sale on the ground that, at the time of the sale, he had
no title. He must not be allowed to prove his want of title.
===========================================================
Section 35 in The Transfer of Property Act, 1882, 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.
Illustrations: The farm of Sultanpur is the property of C and worth Rs. 800. A by an instrument of gift
professes to transfer it to B, giving by the same instrument Rs. 1,000 to C. C elects to retain the farm. He
forfeits the gift of Rs. 1,000. In the same case, A dies before the election. His representative must out of the Rs.
1,000 pay Rs. 800 to B. The rule in the first paragraph of this section applies whether the transferor does or
does not believe that which he professes to transfer to be his own. A person taking no benefit directly under a
transaction, but deriving a benefit under it indirectly, need not elect. A person who in his one capacity takes a
benefit under the transaction may in another dissent therefrom. Exception to the last preceding four rules.—
Where a particular benefit is expressed to be conferred on the owner of the property which the transferor
professes to transfer, and such benefit is expressed to be in lieu of that property, if such owner claims the
property, he must relinquish the particular benefit, but he is not bound to relinquish any other benefit conferred
upon him by the same transaction. Acceptance of the benefit by the person on whom it is conferred constitutes
an election by him to confirm the transfer, if he is aware of his duty to elect and of those circumstances which
would influence the judgment of a reasonable man in making an election, or if he waives enquiry into the
circumstances. Such knowledge or waiver shall, in the absence of evidence to the contrary, be presumed, if the
person on whom the benefit has been conferred has enjoyed it for two years without doing any act to express
dissent. Such knowledge or waiver may be inferred from any act of his which renders it impossible to place the
persons interested in the property professed to be transferred in the same condition as if such act had not been
done.
Illustration: A transfers to B an estate to which C is entitled, and as part of the same transaction gives C a
coal-mine. C takes possession of the mine and exhausts it. He has thereby confirmed the transfer of the estate
to B. If he does not within one year after the date of the transfer signify to the transferor or his representatives
his intention to confirm or to dissent from the transfer, the transferor or his representative may, upon the
expiration of that period, require him to make his election; and, if he does not comply with such requisition
within a reasonable time after he has received it, he shall be deemed to have elected to confirm the transfer. In
case of disability, the election shall be postponed until the disability ceases, or until the election is made by
some competent authority. COMMENTS When question of election arises A case of election arises only when
the transferee takes a benefit directly under a transaction. When the transferee derives any benefit indirectly,
no question of election arises, as he, in that case, cannot be said to take under the deed; Valliammai v.
Nagappa, AIR 1967 SC 1153.
===========================================================
Explain and discuss the facts and principles of law laid down in the case of L. Janakirama Iyer And
Others vs P. M. Nilakanta Iyer And Others on 26 October, 1961; Equivalent citations: 1962 AIR 633,
1962 SCR Supl. (1) 206
ACT: Trust-Debtors conveying property to three trustee for repayment of Debts-Administration suit by
debtors dismissed on withdrawal subsequent suit on behalf of general body of creditors if
barred by res judicata Limitation claim for possession- Mainteinability sale deed executed by two
of the three trustees validity Amendment of decree by High Court after admission of appeal by Supreme
Court-Award of net profit to trust estate and internal to alienation in favour of person intermeddling
with trust estate Trustee de son
tort Indian Trusts Act 1882(2 of 1882) ss 48,63-Code of Civil Procedure, 1908 (Act V of
1908) ss.11, 151 and 152 Indian Limitation Act, 1908 (IX of 1908) Arts 134, 120.

Section 84 IPC embodies McNaughton rules as follows: “Nothing is an offence which is done by a person
who, at the time of doing it, by reason of unsoundness of mind, is incapable of knowing the nature of the
act or that he is doing what is either wrong or contrary to the law.”
A test applied to determine whether a person accused of a crime was sane at the time of its commission and,
therefore, criminally responsible for the wrongdoing.
The M'Naghten rule is a test for criminal insanity. Under the M'Naghten rule, a criminal defendant is not guilty
by reason of insanity if, at the time of the alleged criminal act, the defendant was so deranged that he/she did
not know the nature or quality of his/her actions or, if he/she knew the nature and quality of his/her actions,
he/she was so deranged that he/she did not know that what he/she was doing was wrong.
Daniel McNaughton was the son of a Glasgow wood turner. He was harboring a delusion that there was
a conspiracy against him, and he perceived harassment by the spies sent by Catholic priests with the
help of Jesuits and Tories.
The following was the revelation by McNaughton during interrogation in Bowstreet police station. “The Tories
in my native city have compelled me to do this. They followed me to France, into Scotland and all over to
England. In fact, they follow me wherever I go… They have accused me of crimes of which I am not guilty;
they do everything in their power to harass and persecute me. In fact they wish to murder me.”
The Commissioner of Police was aware of McNaughton's condition for 18 months before the shooting
incident. Two years before the shooting incident, McNaughton asked him to put a full stop to the persecution
and later reminded him to apply to the Sheriff. His delusions were directed against the Tories, and he decided
to kill the Tory Prime Minister Sir Robert Peel.
On 20th June 1843 Edward Drummond, the Private Secretary of Sir Robert Peel, was coming out of the
Prime Minister's residence and McNaughton mistook him for Peel. He followed him out of Whiteall
Garden and in Parliament Street; and in front of numerous spectators, he shot him in the back and he
died five days later.
McNaughton was arrested by a constable who had witnessed the incident and was taken to BowStreet police
station. At the inquest in BowStreet, the verdict was willful murder and McNaughton was indicted.
During the trial, Alexander Cockburn (counsel for defense), asked Dr. Monro whether the delusions of
McNaughton were real or assumed. Dr. Monro confirmed that the delusions were real and considered that the
killing was committed under a delusion and McNaughton carried out of an idea which had haunted him for
years. All others who gave evidence confirmed that McNaughton was insane. Terms like homicidal
monomania and partial delusion were discussed during the trial, and the foreman jury without the retiring jury
returned a verdict of insanity.
McNaughton was acquitted of murder; and considering insanity, he was forcibly institutionalized for the rest of
his life under Criminal Lunatics Act 1800. He was first remanded to Bethlem Royal Hospital (stayed there for
20 years); and in 1864 he was transferred to Bradmoor Asylum, and he died on 3rd May 1865 at the age of 52.
The establishment and the press protested the verdict. Queen Victoria was displeased to a greater extent and
wrote to Sir Robert Peel for a wider interpretation of the verdict.
On 6th March 1843, there was a discussion in the House of Lords, and Lord Chancellor put five questions to a
panel of His Majesty's judges. The five questions were replied on 19th June 1843, and they were construed as
McNaughton's rules. The following are the main points of McNaughton's rules:
6. Every man is to be presumed to be sane and to possess a sufficient degree of reason to be responsible
for his crimes, until the contrary be proved.
7. An insane person is punishable “if he knows” at the time of crime.
8. To establish a defense on insanity, the accused, by defect of reason or disease of mind, is not in a
position to know the nature and consequences.
9. The insane person must be considered in the same situation as to responsibility as if the facts with
respect to which the delusion exists were real.
10. It was the jury's role to decide whether the defendant was insane.
McNaughton's rules stressed on “understandability of right and wrong” and “intellectual” rather than a moral
or affective definition dominated in its formulation. Lack of control and irresistible drives or impulses were
neglected. In essence, it was the “test of knowing” or “test of right and wrong.” If McNaughton's rules had
been applied to McNaughton at the time of trial, he could not have been found guilty on the grounds of
insanity.
Explain and discuss the facts and principles of law laid down in the case of Attorney-General v
Ironmongers Company: Chancery

Explain and discuss the facts and principles of law laid down in the case of S. Darshan Lal vs Dr. R.E.S.
Dalliwall And Anr. on 2 April, 1952; Equivalent citations: AIR 1952 All 825
1. This is an application in revision against an order of the District Judge of Saharanpur refusing to
discharge the applicant from his office of trusteeship.
2. One Mr. H.B.S. Dalliwal, a barrister, residing at Mussoorie and owning considerable property at that place
executed two deeds of trust, one on 21-4-1921 and the other on 25-6-1921. On 8-5-1926 he executed a will in
respect of some other properties. Mr. Dalliwal died on 12-5-1926. The trustees of the trust deeds and the
executors of the will appointed by him did not agree to act and, therefore, the District Judge appointed the
applicant, Sri S. Darshan Lal, Barrister-at-law of Dehra Dun, as the sole trustee of the properties by his order
dated 19-8-1926. One of the beneficiaries under the trust deeds and the will was Mrs. E.B. Dalliwal, while the
two sons of Mr. H.B.S. Dalliwal, Roy and Kenneth, were the other two beneficiaries. Mrs. E.B. Dalliwal died
on 22-10-1944.
On 29-1-1947 the opposite parties, the two sons of Mr. Dalliwal, made an application to the District Judge
alleging that the trust had come to an end and prayed that the properties held by the trustee might be made over
to them and the trustee might be asked to explain accounts. Sri Darshan Lal was agreeable to explain the
accounts but was unwilling to part with the property as he claimed that he had spent some money out of his
own pocket which he was entitled to get back before he could be ordered to hand over the property. On an
agreement between the parties the District Judge appointed a commissioner to go into the accounts. The report
submitted by the Commissioner was not acceptable to either of the parties.
3. The opposite parties' case before the Court below was that as under the terms of the trust deed of 25-6-1921
the trust had come to an end, the trustee was bound to hand over the properties covered by that deed to them.
Sri Darshan Lal's case was that the trust had not yet come to an end. But during the pendency of the
proceedings he made an application on 31-5-1948 stating that :
"the accounts of the entire property upto date have been rendered. The amount of debts borrowed by the
applicant under the orders of this Court from time to time as trustee and manager are to be paid by this
property of the trust and the beneficiaries and the same are taken therefor.
It is, therefore, prayed that an order of discharge under the circumstances be passed in favour of the applicant."
It is obvious that what Sri Darshan Lal meant by this application was not a formal order declaring that he has
ceased to be a trustee but a release from the liabilities incurred by him in his capacity as a trustee.
4. The learned District Judge upon an interpretation of the trust deed of 25-6-1921 held that the trust had come
to an end and that, therefore, the trustee stood discharged from his office but that he had no power, in those
circumstances, either to order the return of the property to the opposite parties or to pass an order of discharge
in favour of Sri Darshan Lal. The opposite parties submitted to the order passed against them but Sri Darshan
Lal came up in revision to this Court against that order. During the pendency of the revision application, the
opposite parties made an application under Section 18, Trustees Act, No. XXVII of 1866, praying that an order
vesting the property in the opposite parties be passed by this Court. These two applications are now before us
for disposal.
5. We have heard learned counsel for the parties and have come to the conclusion that both the applications
must be dismissed.
6. The first point to be decided is whether the trust has come to an end. The second trust-deed of 25-6-1921
provided that out of the income of the trust property Rs. 200 monthly would be paid to the executant's wife
Mrs. E.B. Dalliwal, and 2/3 of the remaining income to the executant's son Roy H. S. Dalliwal so long as he
remained in a college and 1/3rd to the executant's second son Kenneth H.S. Dalliwal so long as he was in
school; but when Roy H.S. Dalliwal left college, he was to get 1/3rd instead of 2/3rd and when Kenneth H.S.
Dalliwal went to college he was to get 2/3rd instead of 1/3rd, and when both sons had completed their
education and left college, the remainder after paying the executant's wife Rs. 200 monthly was to be divided
equally between the two sons, and from and after the death or divorce, if any, of Mrs. E.B. Dalliwal, the said
sum of Rs. 200 was to be divided between the two sons in equal shares, and in the event of death of any son,
his share was to go to his legal heir or heirs. After making these provisions the trust deed declared :
"This trust will come to an end at the death of Mrs. E.B. Dalliwal, provided Kenneth H.S. Dalliwal has also
attained the age of 23 years. It is also provided that when this trust comes to an end as provided above, the trust
property or the sale proceeds thereof as the case may be shall be divided in equal shares among my said two
sons."
Mrs. E.B. Dalliwal, as stated above, died on 22/10/1944 and Kenneth attained the age of 23 years long ago. In
the terms of the trust, therefore, the trust came to an end on the death of Mrs. B. E. Dalliwal. The provision that
on the trust coming to an end the trust property or the sale proceeds thereof, as the case may be, shall be
divided in equal shares among the two sons, did not keep the trust continuing. The purpose of the trust was not
the division of the property by metes and bounds between the two sons; its purpose was to provide for the
maintenance of the executant's wife and the education of the executant's children and to give the property to
the two sons. The words of the deed are absolutely clear that the trust is to come to an end at the death of Mrs.
E.B. Dalliwal or when Kenneth attains the age of 23 years, whichever is later and the property is to be divided
after the trust has come to an end. It cannot be maintained that the trust does not terminate so long as the
property is not divided between the sons. The expression 'property will be divided in equal shares among the
sons' does not imply a physical division by metes and bounds. It is a common expression used for vesting the
property in defined shares.
7. Under Section 77, Trusts Act, a trust is extinguished when its purpose is completely fulfilled. In our opinion
the purpose of the trust has come to an end and the trust has terminated. Under Section 71, a trustee is
discharged from his office by the extinction of the trust. The trustee, in the present case, therefore, stands
automatically discharged from his office. But this discharge does not mean that the trustee is relieved from his
duty of rendering accounts and delivering the trust property to the beneficiaries. In the present case, the trustee
wants an order of discharge in the sense of release from his liabilities. This, in our opinion, cannot be done in a
summary procedure upon an application to the District Judge. The only provision in the Trusts Act for the
District Judge for ordering a discharge of a trustee is contained in Section 71 which runs as follows:
Section 71:--"The trustee may be discharged from his office only as follows:
(a) by the extinction of the trust;
(b) by the completion of his duties under the trust;
(c) by such means as may be prescribed by the instrument of trust;
(d) by appointment under this Act of a new trustee in his place;
(e) by consent of himself and the beneficiary, or, where there are more beneficiaries than one, all the
beneficiaries being competent to contract or
(f) by the Court to which a petition for his discharge is presented under this Act."
8-9. Clause (f) of Section 71 read in conjunction with the other clauses clearly refers to the discharge of a
trustee by the Court in circumstances other than those mentioned in-the earlier Clauses (a) to (e). The language
of Section 72 which deals with the manner in which the District Judge may discharge a trustee upon a petition
presented to him also leads to the same conclusion.
10. Section 72 is in these terms:
"Notwithstanding the provisions of Section 11, every trustee may apply by petition to a principal Civil Court of
original jurisdiction to be discharged from his office; and if the Court finds that there is sufficient reason for
such discharge, it may discharge him accordingly and direct his costs to be paid out of the trust property. But
where there is no such reason, the Court shall not discharge him, unless a proper person can be found to take
his place."
11. The last sentence of the section clearly suggests that the whole of the section applies to a subsisting trust in
which when one trustee is discharged another has to be appointed. A consideration of the scheme of the Act
also fortifies this conclusion. The Act defines the rights and duties of trustees and beneficiaries. It defines a
trust (Section 3), the purposes for which a trust may be made (Section 4), how it shall be created (Sections
5 and 6), and the rights and duties of trustees and beneficiaries. One of the duties of a trustee is to keep and
render accounts (Sections 19 and 57). One of his rights is to have the accounts of the administration of the trust
property examined and settled and where nothing is due to the beneficiary under the trust, to an
acknowledgment in writing to that effect (Section 35). There is nothing, however, to show that he can have this
right to settlement of accounts done through the agency of the District Judge upon a petition.
Wherever the Act authorises the District Judge upon a petition in a summary proceeding to do a certain thing,
the Act makes a specific mention of it. For instance in the following sections the District Judge has been
authorised to make orders under the Act (Sections 11, 22, 32, 34, 36, 41, 46, 49, 53, 71, 72, 73 and 74) and in
none others. All these sections deal with summary matters, and in Section 34 it is specifically stated that a
trustee may, without instituting a suit, apply by petition to a principal Civil Court of original jurisdiction for its
opinion, advice or direction on any present questions respecting the management or administration of the trust
property other than questions of detail, difficulty or importance, not proper in the opinion of the Court for
summary disposal. The question of settlement of accounts, is a matter of detail and difficulty. It is not fit for a
summary disposal. That is why in Section 35 there is no mention that the right there mentioned may be
exercised by a petition to the District Judge. It follows, therefore, that the District Judge cannot under Sections
71 and 72 give a discharge to the trustee in the sense of a release from his liability to render account. When a
trustee has ceased to be a trustee by the fulfilment of the object of the trust, he is under a liability to render
account to the beneficiaries. As the settlement of accounts cannot be done by the District Judge, his discharge
or release from liability cannot be ordered by him. Sections 71 and 72, therefore, when they authorise the
District Judge to discharge a trustee refer to a case in which a trustee wishes to go out of his office during the
subsistence of the trust when another person may be appointed in his place. This can only be done if there is a
sufficient : reason to do so. We are, therefore, of opinion, that the Court below had no jurisdiction to discharge
a trustee when he has been discharged automatically by the extinction of the trust, and even if there was such
jurisdiction, there was no jurisdiction to release him from his liability to render accounts.

12. The application made on behalf of the opposite parties under Section
18, Trustees Act (27 of 1866) has next to be considered. Act 27 of 1866, as
its preamble shows, applies to conveyance and transfer of moveable and
immoveable property in British India vested in mortgagees and trustees, in
cases to which English law is applicable. Section 3 further clarifies the
matter :

"The powers and authorities given by this Act to the High Court shall and
may be exercised only in cases in which English law is applicable."

The parties in the present ease are not governed by the English law. It was,
however, contended by Diwan Charanjit Lal, learned counsel for the
opposite parties, that the English law applied as the common law of the
country in cases in which there was no other provision of law in respect of
the particular subject matter in controversy. The proposition that the
English law is the common law of this country and has to be followed
where no other rule of law is applicable or provided for cannot be
accepted.

13. The civil Courts in Bengal, Bihar, D.P. and Assam are governed by the
Bengal, Agra and Assam Civil Courts Act, 12 of 1887. The civil Courts in
Bengal, U. P. and Assam subordinate to the High Court are to decide cases
in certain matters according to Mohammadan or Hindu law if the parties
are Mohammadans or Hindus respectively and in other cases by "any other
law for the time being in force" or if there be no such law according to
"justice, equity and good conscience", vide Section 37, Bengal, Agra and
Assam Civil Courts Act, 12 of 1887.

14. The High Court is to apply the law that would be applied by the civil
Courts subordinate to it, vide paras 13 and 14 of the Letters Patent.

15. English law has been applied in India as supplying the rule of justice,
equity and good conscience but only if it is found applicable to Indian
society and circumstances, Waghela Rajsanji v. Shekh Masludin, 11 Bom.
551 (P.C.) at p. 561. English law, therefore, does not apply here of its own
force.

16. The matter may be considered upon broader principles. According to

English law, Englishmen carry English law with them in countries which
were formerly uninhabited and are peopled by them. English common law
as well as Statute law brought into force up to the date of the settlement is
applicable to such colony to the extent to which such laws are suitable to
the conditions of the colony. Statutes passed subsequently apply to the
colony only if they are made expressly applicable to it. In an inhabited
country, however, obtained by conquest or cessation, law already prevalent
therein continues to prevail except to the extent to which English law has
been introduced and also except to the extent to which such law is not
civilised law at all, vide Yeap Cheah Neo v. Ong Cheng Neo, (1875) 6 p.
c. 381. India fell in the category of conquered or ceded country because it
was already inhabited and civilised law prevailed therein before the advent
of the British and, therefore, prima facie there can be no presumption that
English law applied to Indians in India.

17. The history of the acquisition of India by the British is well known.
With the exception of the Island of Bombay ceded to Charles II in 1661 by
the King of Portugal as part of the marriage dowry of the Infanta and
which Charles II granted to the East India Company, the other acquisitions
by the East India Company in the earlier stages were confined to certain
factories established at Madras, Calcutta and other places. The acquisition
of these factories was not made by the East India Company in the exercise
of a sovereign power but was made in their capacity of land-owners under
the sovereignty of the Moghal Emperor. The history of the matter has thus
been given by Lord Brougham in Mayor of Lyons v. East India Co., 1
Moo. Ind. App. 175 (P.C.) at pp. 272-274 :

"The district on which Calcutta is built, was obtained by purchase, from

the Nabob of Bengal, the Emperor of Hindustan's Lieutenant, at the very
end of the 17th century. The Company had been struggling for nearly 100
years, to obtain a footing in Bengal, and till 1696 they nerer had more than
a Factory here and there, as the French, Danes, and Dutch also had. Till
1678, their whole object was to obtain the power of trading, and it was
only then that they secured it, by a Firman from the Emperor; from that
year, till 1696, they in vain applied to the native Government, for leave to
fortify their Factory on the Hoogley, and it was only then that they made a
fortification, acting upon a kind of half consent, given in an equivocal
answer of the Nabob; encouraged by the protection which they were thus
enable to afford the natives, many of them built houses, as well as the
English subjects; and when the Nabob, on this account was about to send a
Kadi or Judge, to administer justice to those natives, the Company's
servants bribed him, to abstain from this proceeding. Some years
afterwards the Company obtained a grant of more land and villages from
the Emperor, with renewed permission to fortify their Factories; during all
this period, tribute was paid to the Emperor, or his officer, the Nabob; first,
for leave to trade, afterwards as Zamindars, under the Emperor and in
1757, the year memorable for the battle of Piassey, the Treaty with Jaffier
Ally, indemnifying them for their losses, ceding the French possessions,
and securing their rights, and binding them to pay their revenues like other
"zamindars". Bight years later, they likewise received from the native
government, a grant of the Dewanny, or receivership of Bengal, Behar, and
Orissa; and of their subsequent progress in power, it is unnecessary to
speak; enough has been said to show that the settlement of the Company in
Bengal was effected by leave of a regularly established Government, in
pogatssion of the country, invested with the rights of sovereignty, and
exercising its powers that by permission of that Government Calcutta was
founded, and the factory fortified, in a district purchased from the owners
of the soil, by permission of that Government, and held under it by the
Company, as subjects owing obedience as tenants rendering rent, and even
as officers, exercising, by delegation, a part of its administrative authority."

18. So long as the East India Company or rather the British Crown through
the East India Company did not acquire rights of sovereignty over Indian
soil, there could be no question of the introduction of of English law in
India.

19. Even if we assume that the English common law was introduced in the
Presidency towns, there is no warrant for assuming that it was also
introduced in the Mofassil, except with reference to Englishmen governed
by the English law.

20. No statute of the British Parliament has been brought to our notice
showing that English Law as such was introduced outside the Presidency
Towns. We have the high authority of the Privy Council in support of the
view that no such thing was done.

21. In Ram Lal Dutt v. Dhirendra Nath, A. I. R. 1943 P.C. 24, their
Lordships had a case in which the question was whether the tenant could
refuse to pay the entire rent of a holding in the district of Bengal, when he
was dispossessed of a portion only of the holding by the landlord. The
Calcutta High Court had in a long series of cases followed the English
common law in such cases, that an eviction of a tenant from a part of the
lands by title paramount gives rise to an apportionment but eviction by the
landlord for a part entails a suspension of the entire rent. The Privy
Council observed that :

"Since 1772, no Court has had authority to apply to the districts of Bengal
rules devised upon other principles than justice, equity and good
conscience. The doctrine of suspension of rent is not the less to be
regarded because it has been drawn from the common law, but this origin
will not serve by itself for a justification."

22. The result, therefore, is that we dismiss the application in revision and
also the application of the respondents under Section 18, Trustees Act. In
the circumstances of the case, we order the parties to bear their own costs
in this Court.

The Doctrine of Cypres (see-pray doctrine) is the legal concept which gives Court the power to interpret the
terms of a will, gift, or charitable trust. This doctrine can be invoked when the intention of the original
document is not carried out and therefore, the court can interfere. The word cypress means 'as close as
possible. ' The doctrine of cypress is a principle of the English law of trusts. Under this doctrine, a trust is
executed, or carried out as nearly as possible, according to the objects laid down in it.
The Doctrine of Cypres is the legal concept which gives Court the power to interpret the terms of a will, gift,
or charitable trust. This doctrine can be invoked when the intention of the original document is not carried out
and therefore, the court can interfere. This doctrine is applicable though the precise object to be benefited or
the mode of application of the fund is uncertain. When the charitable trust cannot be executed due to some
short coming or for insufficient of the subject matter, it shall not be void rather it shall be executed as nearly as
possible.
The cy-pres doctrine is employed when the original charitable purpose of a charitable trust is no longer
possible to carry out. Because charitable trusts can continue on into perpetuity, it is not uncommon for trusts to
outgrow or outlive their original purposes. When this happens, the court will usually intervene by way of the
cy-pres doctrine in order to apply the trust funds in a way that is as nearly like the original charitable purpose
as possible.
In order to invoke the cy-pres doctrine, two primary conditions must be present. First, the designated original
purpose of the trust must be either fulfilled or frustrated. In other words, the purpose of the trust must have
been accomplished completely, or the purpose of the trust must be either impossible or impractical to continue
carrying out or illegal. It is not sufficient if only a better purpose has revealed itself over time.
Second, it must be clear in the trust documentation that the creator of the trust intended his or her gift for a
specific charitable purpose. In other words, the charitable intent must have been general as opposed to
restricted. If the charitable donor intended his or her gift for a specific charity, without regard for any change in
circumstances, then cy-pres cannot be invoked.
If the court rules positively on both the above two conditions, then the trust funds can be re-directed to another
charitable purpose in line with the donor’s initial intention. In the event that one or the other conditions is not
present, then the contents of the trust will revert back to the donor and/or the donor’s successors.
Section. 92 of the Civil Procedure Code, deals with Doctrine of Cypres,
 The Court may alter an express or constructive trust created for public purpose of a charitable or
religious nature and allow the property or income of such trust or any portion to be applied cy pres in
one or more of the following circumstances.
 Where the original purpose of the trust in whole or in part have been fulfilled or cannot be carried out
at all or cannot be carried out according to the directions given in the instrument creating the trust.
 Where the original purpose of the trust is used for a part available by virtue of the trust or
 Where the original purpose in whole or in part, they were laid down.

CHAPTER I
PRELIMINARY
3. Interpretation-clause—“trust”:—A “trust” is an obligation annexed to the ownership of property, and arising
out of a confidence reposed in and accepted by the owner, or declared and accepted by him, for the benefit of
another, or of another and the owner:

“author of the trust”: “trustee”: “beneficiary”: “trust-property”: “beneficial interest”: “instrument of trust”:—
the person who reposes or declares the confidence is called the “author of the trust”: the person who accepts
the confidence is called the “trustee”: the person for whose benefit the confidence is accepted is called the
“beneficiary”: the subject-matter of the trust is called “trust-property” or “trust-money”: the “beneficial
interest” or “interest” of the beneficiary is his right against the trustee as owner of the trust-property; and the
instrument, if any, by which the trust is declared is called the “instrument of trust”:
“breach of trust”:—a breach of any duty imposed on a trustee, as such, by any law for the time being in force,
is called a “breach of trust”:

CHAPTER VIII
OF THE EXTINCTION OF TRUSTS
77. Trust how extinguished.—A trust is extinguished—
(a) when its purpose is completely fulfilled; or
(b) when its purpose becomes unlawful; or
(c) when the fulfilment of its purpose becomes impossible by destruction of the trust-property or otherwise; or
(d) when the trust, being revocable, is expressly revoked.

78. Revocation of trust.—A trust created by will may be revoked at the pleasure of the testator. A testator is a
person who has made a will or given a legacy.
A trust otherwise created can be revoked only—
(a) where all the beneficiaries are competent to contract—by their consent;
(b) where the trust has been declared by a non-testamentary instrument or by word of mouth—in exercise of a
power of revocation expressly reserved to the author of the trust; or
(c) where the trust is for the payment of the debts of the author of the trust, and has not been communicated to
the creditors—at the pleasure of the author of the trust.

Illustration
A conveys property to B in trust to sell the same and pay out of the proceeds the c claims of A’s creditors. A
reserves no power of revocation. If no communication has been made to the creditors, A may revoke the trust.
But if the creditors are parties to the arrangement, the trust cannot be revoked without their consent.
79. Revocation not to defeat what trustees have duly done.—No trust can be revoked by the ‘author of the
trust’ (a person who sets up a trust transferring property to another person.) so as to defeat or prejudice what
the trustees may have duly done in execution of the trust.

What constitutes a breach of trust?

A breach of trust occurs when a trustee contravenes the terms of the trust or the duties of a trustee.
Trustees are jointly and severally liable for breach of trust to their beneficiaries where the breach has given rise
to a loss.
Common allegations of breach of trust include (i) distributing assets to a beneficiary not entitled to them
under the trust deed; (ii) investing trust assets in a way not permitted; (iii) breach of fiduciary duty; and
(iv) breach of the common law or statutory duty of care.
Beneficiaries may be able to get monetary damages or equitable remedy for breaches of trust. Breach of trust
can also refer to when an owner allows someone to borrow or periodically control their property and that
person steals or inappropriately uses the property. For example, a breach of trust would occur if you paid a
valet to park your vehicle, and the valet drove your vehicle around the city.

What are the possible defences to a breach of trust claim?

Exemption clause: An express clause in the trust deed may exempt a trustee from loss or damage.
Statutory relief under Section 61 of the Trustee Act 1925: The court may relieve a trustee wholly or partly
from personal liability for a breach of trust if the trustee is found to have acted honestly, reasonably and ought
fairly to be excused for the breach and for failing to obtain court directions.
Beneficiary consent: It is a defence for a breach of trust if a beneficiary of full age and capacity and not
subjected to undue influence has assented to or concurred with the breach. It is not necessary for the
beneficiary to have benefited from the breach.
Limitation: The limitation period, which is the prescribed statutory time period allowed for making any claim
for breach of trust, is 6 years. No such period is applicable in the instance of fraud and/or recovery
proceedings. The limitation period for claims in a deceased person’s estate is 12 years.
Delay: If there is an unreasonable delay on the part of the claimant in pursuing a breach of trust claim and that
delay has given rise to prejudice to the trustee’s position, then the court may use its discretion to not permit the
claim to proceed.
What is the extent of the liability faced by a trustee for breach of trust?
If a trustee is found to have acted in breach of trust they are required to restore the trust fund to the position it
would have been in had the breach not occurred.

Section 405 in The Indian Penal Code

Criminal breach of trust.—Whoever, being in any manner entrusted with property, or with any dominion over
property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes
of that property in violation of any direction of law prescribing the mode in which such trust is to be
discharged, or of any legal contract, express or implied, which he has made touching the discharge of such
trust, or wilfully suffers any other person so to do, commits “criminal breach of trust”.
A person, being an employer of an establishment [whether exempted under section 17 of the Employees’
Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952), or not] who deducts the employee’s
contribution from the wages payable to the employee for credit to a Provident Fund or Family Pension Fund
established by any law for the time being in force, shall be deemed to have been entrusted with the amount of
the contribution so deducted by him and if he makes default in the payment of such contribution to the said
Fund in violation of the said law, shall be deemed to have dishonestly used the amount of the said contribution
in violation of a direction of law as aforesaid.
A person, being an employer, who deducts the employees’ contribution from the wages payable to the
employee for credit to the Employees’ State Insurance Fund held and administered by the Employees’ State
Insurance Corporation established under the Employees’ State Insurance Act, 1948 (34 of 1948), shall be
deemed to have been entrusted with the amount of the contribution so deducted by him and if he makes default
in the payment of such contribution to the said Fund in violation of the said Act, shall be deemed to have
dishonestly used the amount of the said contribution in violation of a direction of law as aforesaid.
What is a Will ? Define a Trust? What are the key difference between Will and Trust ?

Comparison Chart
BASIS FOR
WILL TRUST
COMPARISON

Meaning A will contain a declaration of the A trust is a legal arrangement, in which the
testator, regarding the management and trustor authorizes a trustee to manage the
distribution of his personal estate. transferred asset for the sake of beneficiary.

Document Will Trust deed

Covers All the assets of testator's estate. Specific asset, as stated in the deed.

Effective On the demise of the testator. On the transfer of asset to the trustee.

Probate The will goes through probate. The trust does not go through probate.

Revocation Anytime before the death of the Depends on the type of trust.
testator.

Publicized Yes, on the death of the owner. No, it is kept private.

Definition of Will
As the name suggests, a will refers to the wish. In legal terminology, will means a document that expresses the
last wishes of a person. The person who created the will is known as a testator. The testator can appoint an
executor who will oversee the transfer of a testator’s estate to his legal heir.
The will undergoes probate after the demise of the testator, in which court assures that the last wishes of will
maker are carried out properly. It may also contain the directions or instructions regarding the use of testator’s
asset after he passes away.
The will comes into effect only after the death of the testator. The testator has the right to revoke or alter the
will anytime, before his death and of sound mind. If a person has created multiple wills for the distribution of
his assets, then his ‘latest will’ will be executed. If a person dies without creating a will, then his property is
designated to his legal heirs, as per the law of inheritance. Here, legal heirs refer to children, spouse, father,
mother, etc.
Definition of Trust
A trust is defined as a legal arrangement, in which the trust owner authorises a person called a trustee, to hold
the asset, for the benefit of a third party called the beneficiary. It allows a person to nominate beneficiaries of
his assets, before or after he passes away. The document in which the terms of the trust are stated is known as
the trust deed, and the subject matter is known as trust property.
A trust is created with the intention to reduce estate taxes. The best thing about trust is that it does not go
through probate, i.e. there is no court process. It can be of two types i.e. revocable trust which can be altered or
terminated any time during the life of the trust owner and an irrevocable trust in which the trust cannot be
altered or cancelled once it comes into force.
The trust may contain the following facts:
 Objective of trust
 Assets covered
 Rights and limitations of trustee
 Compensation of trustee
  In case, if there are multiple beneficiaries, the proportion in which the asset is transferred to each
beneficiary.
Key Differences Between Will and Trust
The basic differences between will and trust are described in the following points:
 A declaration regarding the management and distribution of the testator’s assets after his demise is
known as Will. A trust, on the other hand, is a legal arrangement in which the settlor authorises a
person as trustee to hold the asset for the sake of beneficiary.
 The Will itself is a document containing all the details. Conversely, the trust deed is executed, in the
case of a trust.
 All the assets of the testator’s estate are covered under will whereas only a certain asset stated in the
trust deed is transferred in trust.
 A will become effective only on the demise of the testator. Unlike, a trust which comes into effect,
when the asset is transferred to the trustee.
 A will undergo through probate i.e. a process in which court checks the validity and looks after the
administration of the will. As opposed to trust, which does not undergo through probate.
 A will can be revoked any time before the demise of the testator. In contrast to trust, in which
revocation depends on the type of trust, i.e. in the case of a revocable trust, it can be revoked anytime
during the lifetime of the author while an irrevocable trust cannot be revoked after it comes into effect.
 A will become a public document when the testator passes away. On the other end trust, is a private
document.
Explain and discuss the facts and principles of law laid down in the case of Sachchidananda Banerjee vs
Moly Gupta & Ors on 2 December, 2014. C.S. No. 643 of 1990
Hearing concluded on : November 24, 2014
Judgment on : December 02, 2014
The suit is for specific performance of an agreement dated August 13, 1988.
The original defendant No. 1 was the owner of premises No. 12F, Nather Bagan Street, Kolkata. The plaintiff
claims his father to be a tenant in respect of a portion of the said premises. The plaintiff and the original
defendant No. 1 entered into the agreement dated August 13, 1988 whereby and whereunder the original
defendant No. 1 agreed to sale the said premises to the plaintiff at and for an agreed consideration. The plaintiff
claims that the original defendant No. 1 did not honour the agreement for sale requiring the plaintiff to file the
suit for specific performance of such agreement against the original defendant No. 1 and one of her sons, the
original defendant No. 2.
Issues:
1. Whether the plaintiff is entitled to specific performance of the agreement dated August 13, 1988 as prayed
for?
2. Whether one of the trustees can deal with the trust property in exclusion to the other trustee and beneficiary?
3. Whether the trust deed dated November 26, 1983 stood extinguished prior to the alleged agreement?
4. To what relief, if any, is the plaintiff entitled to?
1. The Court: This application for review arises out of a judgment pronounced by this Court on 21st March,
2017 in APD No. 1 of 2015 arising out of C.S No. 643 of 1990. Some of the grounds for review are set out
hereinbelow:
“I. For that the instant suit being instituted almost 30 years ago and the appellant having changed his Advocate
on record all the cause papers pertaining to the instant suit being C.S No. 643 of 1990 were not available at the
time of hearing of the appeal.
II. For that it was a matter of record in the suit that the appellant/plaintiff had made all attempts to bring on
record the legal heirs and/or representative of Late Karuna Gupta apart from Samir Kumar Gupta being the
youngest son of Late Karuna Gupta and had filed G.A No. 3605 of 1996 under facts mentioned therein.
III. For that the relevant application being G.A No. 3605 of 1996 and pleadings in respect thereof inspite of
being matters of record could not be brought to the notice of this Hon'ble Court as the same was also not to the
knowledge of the Counsels dealing with the matter.
IV. For that since G.A No. 3605 of 1996 and pleadings thereto could not be brought to the notice of the Hon'ble
Court there is an error apparent on the fact of the record since it has been held that the plaintiff did not bring all
the legal heirs and/or representatives of Karuna Gupta as party defendant and consequential orders were
passed.
V. For that it could not be brought to the notice of Hon'ble Court that G.A No. 3605 of 1996 was filed in the
back ground of the Advocate of Karuna Gupta, intimating that he had been unable to obtain and/or secure the
names of the legal heirs as asked for.”
2. The question is whether these grounds are enough for the purpose of this Court coming to a finding that
there was in fact an error apparent on the face of record in the judgment dated 21 March, 2017. Even a plain
reading of the judgment will clearly demonstrate that the same has been rendered while referring to the
plaintiff's case as sought to be made out in the plaint and upon looking into several documents including the
Deed of Settlement dated 26th November, 1983 and the agreement dated 13 August, 1988. This Court after
considering the pleadings referred to and relied upon by the parties and the relevant provisions of law came to
a conclusion that the impugned judgment of the First Court was required to be set aside and C.S No. 643 of
1990 was to be remanded to the First Court for deciding issue no. 5 which was framed and set out in the
judgment dated 21 March, 2017 with a further direction that the First Court should dispose of the suit in the
light of the observation made in the said judgment dated 21 March, 2017.
3. The case which is now sought to be made out by the plaintiff/applicant while referring to an interlocutory
application, being G.A No. 3605 of 1996 and correspondences made by the learned advocates as elaborately
stated in paragraph 4 of the review application, will tantamount to revisit the entire matter even when there is
no error apparent on the face of the judgment dated 21 March, 2017, which was rendered upon considering
whatever documents and pleadings that were referred to and relied upon by the parties during hearing of the
appeal.
4. The review application being G.A No. 2479 of 2017 along with RVWO No. 32 of 2017 is therefore liable to
be dismissed and is accordingly dismissed.
=========================================
Explain the difference between set off and counter claim in Code of Civil Procedure, 1908.
In order to run smooth administration every government enacts certain rules and regulations which must be
obeyed not only by all the persons who live within territorial boundary of country but also government. There
rules and regulations originated from acts of parliament and in legal terminology such rules and regulations are
called law. There are two set of laws namely Substantive law and Procedural Law.
The Code of civil procedure is a procedural law. It neither creates any right nor takes away any right. It
regulates functioning of civil courts. The Code of civil procedure is divided in two parts:-
 The body code containing 158 sections and
 The rules containing 51 orders in Schedule 1.
The code of civil procedure is procedure designed to facilitate justice and further its ends. It is not a penal
enactment for punishment and penalties; not a thing designed to trip people up

Set off (Order VIII, Rule 6]

Meaning of Set Off

Set off is reciprocal acquittal of debts. “Set-off” means a claim set up against another. It is a cross-claim which
partly offsets the original claim. It is an extinction of debts of which two persons are reciprocally debtors to
one another by the credits of which they are reciprocally creditors to one another. Where there are mutual debts
between the plaintiff and the defendant, one debt may be settled against the other. It is a plea in defence,
available to the defendant. By adjustment, set-off either wipes out or reduces the plaintiff’s claim in a suit for
recovery of money.
In a suit for recovery of money, a defendant can stake his claim to any ascertained sum of money-legally
recoverable by him from the plaintiff as a set-off against the plaintiff’s demand if :
(a) the ascertained sum does not exceed the pecuniary jurisdiction of the court; and
(b) both parties fill the same character as they fill in the plaintiff’s case at the first hearing of the suit, but not
afterwards unless permitted by the Court, present a written statement containing the particulars of the debt
sought to be set-off.
The written statement shall have the same effect as a plaint in a cross-suit so as to enable the Court to
pronounce a final judgment in respect of both the original claim and of the set-off. (Order VIII, Rule 6).
In a suit for injunction, the counter claim for possession by defendant can be entertained under Order VIII,
Rule 6 (A) (1).
Where in a suit for recovery of money by the plaintiff, the defendant finds that he has also a claim of some
amount against the plaintiff, he can claim a set-off in respect of the said amount. The doctrine of set-off may be
defined as “the extinction of debts of which two persons are reciprocally debtors to one another by the credits
of which they are reciprocally creditors to one another”. A plea of set-off is “a plea whereby a defendant
acknowledges the justice of the plaintiff’s demand, but sets up another demand of his own, to counterbalance
that of the plaintiff; either in whole or in part”. Thus, it is a “reciprocal acquittal of debts between two
persons”. The right of a defendant to claim set-off has been recognized under Rule 6. It obviates the necessity
of filing a fresh suit by the defendant.
Where, the plaintiff institutes a suit for recovery of money against the defendant and the defendant finds that
he also has a claim of certain amount against the same plaintiff, he may pray for a set-off in respect of that
amount. The term “set-off’ denotes mutual discharge of debts. It is reciprocal satisfaction of the claim of
plaintiff and the defendant against each other. In simple words, “set-off’ means that the amount claimed by the
plaintiff from defendant is to be satisfied against the amount that the plaintiff owes to the defendant. It is a
cross-claim of plaintiff and defendant to be reciprocally discharged. The claim of plaintiff relating to certain
money from the defendant may be discharged against the money due to the defendant from the plaintiff. For
instance, where ‘X’ files a suit against ‘Y’ for recovery of Rs. 15,000/- but ‘Y’ already holds a decree of Rs.
20,000/- against ‘X’, the defendant ‘Y’ may plead for the set-off of the claim of plaintiff ‘X’.
The purpose of set-off is to obviate the necessity of a fresh suit by the defendant. Therefore, the defendant
must specifically raise a plea of set-off in his written statement. Such claim must be made after dealing with
the allegations and accusations leveled against him in the plaint. The written statement must contain full
particulars of the amount claimed by way of set-off and how and when it fell due.

Conditions
However, the defendant is entitled to raise the plea of set-off only when following conditions exist :—
1. The suit is for recovery of money.—The plea of set-off shall be available to the defendant only in a suit
instituted against him for recovery of money. If the suit is not a money-suit, the defendant cannot raise this
plea. For instance, in a suit tor dissolution of partnership, the defendant cannot claim set-off because it not a
money-suit. But, in a suit for ejectment of tenant on the ground of non-payment of rent, in which arrears of rent
have also been claimed, the defendant-tenant may plead set-off. However, in case where ejectment of tenant
has been prayed for but amount of unpaid rent is not demanded, the defendant-tenant cannot raise the plea of
set-off since it is no more a money-suit. Thus, what is necessary is that one of the reliefs sought in the suit
against the defendant must be for recovery of money. In such a suit, the defendant is entitled to raise the plea of
set-off.
2. The defendant’s claim must be for an ascertained sum of money-‘It means that the amount which the
defendant claims against the plaintiff tiff to be set-off must be fixed, definite and known. Such amount may not
by the plaintiff but if it is ascertained, then the defendant may plead set-off. For unascertained sums, the plea of
set-off is not available to the defendant under Rule 6. However, such unascertained sums may be effectually
set-off by consent of parties if the suit is compromised.
3. The money must be legally recoverable.—The term ‘legally recoverable” means that the debtor is liable to
pay the sum under any law. The defendant shall be entitled to claim set-off in respect of such dues only which
the plaintiff is bound to pay under any law. A time-barred debt is not legally recoverable and hence set-off
cannot be pleaded for such amount.
4. Both plaintiff and defendant must fill the same character as they fill in the plaintiffs claim.—The
defendant may plead for set-off only when both the parties i.e., plaintiff and defendant fill may same character
as they fill in the suit. It means that the amount in respect of which the defendant pleads set-off must be
claimable from plaintiff in the same capacity as in the suit. If the amount payable by the plaintiff to the
defendant is in the capacity of a “manager’, but the plaintiff has filed the present suit in his personal capacity,
then the defendant cannot raise the plea of set-off in respect of such amount.
5. The sum claimed by way of set-off must not exceed the pecuniary limits of the court .—It is necessary
that the amount claimed to be set-off by the defendant is within the pecuniary limits of the court in which the
suit has been instituted.

Types of Set Off

Set-off is of two kinds viz., legal set-off and equitable set-off. Rule 6 speaks of legal set-off only. In contrast to
legal set-off, an equitable set-of, can be claimed for unascertained money but it must arise from the same
transaction. For example, where a servant sues his master for recovery of amount of salary, the master can
claim set-off for loss sustained by him due to negligence of servant since it arises out of same relationship.

Legal Set Off

It is apparent from a reading of the above provisions that in order to constitute legal set-off, the following
conditions must be fulfilled, viz.,
 (a) The suit must be for recovery of money.
 (b) The defendant must claim an ascertained sum of money. A sum of money due in respect of a
disputed transaction cannot constitute an ascertained sum.
 (c) That ascertained sum must be legally recoverable from the plaintiff, i.e., it is not barred by the
law of limitation.
 (d) The plaintiff’s claim and the set-off must be claimed in the same character. The amount must
be recoverable by the defendant and if there are more than one defendant, then by all the
defendants. Again, the amount must be recoverable by the defendant from the plaintiff and if there
are more than one plaintiff, then from all the plaintiffs.
 (e) The set-off should be within the pecuniary jurisdiction of the Court.
The above provisions further establish that the Court must treat the claim of the defendant exactly as if the
defendant had filed a plaint and the Court must pass a decree in favour of the defendant, if his claim is
established.’ It is only in a written statement that a plea of set-off can be raised. The rule further confines only
to set-off and does not provide for a counter-claim, which is allowed by way of equitable set-off, and is not
expressly provided in Rule 6-A of Order VIII, by C.P.C. (Amendment) Act, 1976.

Illustrations
 (a) A suit is brought by a Hindu son as the heir and representative of his father to recover from B
certain debt due to the father. B claims to set-off a debt due to him by A’s father. B may do so, for
both the parties fill the same character. But the amount due as manager cannot be set-off against a
personal liability, for both parties do not fill the same character.
 (b) A bequeaths Rs. 2,000 to B and appoints C his executor and residuary legatee. B dies and D
takes out administration to B’s effects. C pays Rs. 1,000 as security for D; then D sues C for the
legacy. C cannot set-off the debt of Rs. 1,000 against the legacy, for neither C nor D fills the same
character with respect to the legacy as they fill with respect to the payment of Rs. 1,000.
 (c) A dies intestate and in debt to B. C takes out administration to A’s effects and B buys part of the
effects from C. In a suit for the purchase money by C against B, the latter cannot set-off the debt
against the price, for C fills two different characters, one as the vendor to B in which he sues B,
and the other as representative to A.
  (d) A sues B on a bill of exchange. B alleges that A has wrongfully neglected to insure B’s goods
and is liable to him in compensation wh1ch he claims to set-off. The amount not being ascertained
cannot be set-off

Equitable set-off
Court of Equity in England allowed set-off when cross-demands arose out of the same transaction, even if the
money claimed by way of set-off was an unascertained sum of money. The Common Law Courts refused to
take notice of equitable claims for they were not ascertained sums. The Courts of Equity, however, held that it
would be inequitable to drive the defendant to a separate cross-suit and that he might be allowed to plead a set-
off though the amount might be unascertained. Such a set-off is called an equitable set-off.
In India, the distinction between legal and equitable set-off remains. The provisions as to legal set-off are
contained in Order VIII, Rule 6, C.P.C. The same has now been enlarged by insertion of Rule 6-A with regard
to counter-claim by the defendant. So far as equitable set-off is concerned it is provided in Order XX, Rule
19(3), C.P.C., which states that “the provisions of this rule (relating to a decree for set-off or counter-claim and
an appeal therefrom) shall apply whether the set-off is admissible under Rule 6 of Order VIII or otherwise.”
The provisions of Order VIII, Rule 6, and Rule 6-A are, therefore, not exhaustive because apart from a legal
set-off an equitable set-off can be pleaded independently of the specific provision of the Code.

Principles governing equitable set-off

As a result of a series of decisions of the Courts in India, the following propositions of law with regard to
equitable set-off emerged :
 1. A equitable right of set-off exists when both the claim of the plaintiff and that of the defendant
arise out of the same transaction.
 2. The law of equitable set-off applies where the cross-claims, though not arising out of the same
transaction, were closely connected together.
 3. In order that a claim for equitable set-off may arise, it is not sufficient that there are cross-
demands; it is further necessary that there should be a connection between them which makes it
inequitable to drive the defendant to a separate suit—as when the demands arise out of the same
transaction or when there is on each side knowledge of and confidence in one debt discharging the
other.

Legal and equitable set-off

The distinction between legal and equitable set-off may now be noted
 In a legal set-off, the amount claimed must be an ascertained sum of money, but in an equitable
set-off, the claim must be allowed even with respect to an unascertained sum of money.
 In a legal set-off, the Court is bound to entertain and adjudicate upon the plea when raised. In the
case of an equitable set-off, however, it is not obligatory on the Court to adjudicate upon it and the
defendant cannot claim it as a matter of right. The Court has the discretion to refuse to take notice
of the equitable set-off if the investigation into the equitable claim is likely to result in delay.
 In a legal set-off, it is not necessary that the cross-demands arise out of the same transaction, but
an equitable set-off is allowed only when the cross-demands arise out of the same transaction as
the plaintiff’s claim.
 In a legal set-off, the amount claimed to be set off must be legally recoverable and not barred by
limitation at the date of the suit, but a claim by way of equitable set-off can be allowed even if it is
barred at the date of the suit where there is fiduciary relationship between the plaintiff and the
defendant.
 If the defendant’s claim is barred at the date of the written statement but not barred at the date of
the suit, the defendant can get an equitable set-off to the extent of the plaintiff’s claim only but not
for the balance found due to him. In a legal set-off, the whole claim is admissible and the
defendant can even get a decree for the balance.
A legal set-off requires a Court-fee because it is a claim that might be established by a separate suit in which a
Court-fee would have to be paid. But there is no such fee required in an equitable set-off which is for an
amount that may equitably be deducted from the claim of the plaintiff where a Court-fee has been paid on the
gross amount.

Counter claim [Order VIII, Rules 6-A to 6-G]

“Counterclaim” may be defined as “a claim made by the defendant in a against the plaintiff”. It is a claim
independent of, and separable from, suit plaintiff’s claim which can be enforced by a cross-action. It is a cause
of action in favour of the defendant against the plaintiff.
In addition to pleading a set-off in a suit, the defendant may also set-up a counter-claim. The term “counter-
claim” means a claim raised by the defendant against the claim of plaintiff in a suit. It is essentially and
substantially a cross-action of the defendant. It may be described as a cause of action accruing to defendant
against the plaintiff. However, such cause of action must accrue before filing of written statement by the
defendant. As such, the defendant may set-up a counter-claim only in respect of a claim for which the
defendant can file an independent suit. However, the defendant must specifically state in his written statement
that he is setting-up a counter-claim. Such counter-claim shall not exceed the pecuniary jurisdiction of the
court.
The defendant must set-up his counter-claim as early as possible because the no counter-claim can be raised
after framing of issues and closure evidence.
One of the pleas open to a defendant to defeat the relief sought by the plaintiff against him is a counterclaim.
Counterclaim may be defined as “a claim made by the defendant in a suit against the plaintiff”. Therefore,
defendant in a suit may, in addition to his right to plead a set-off , a counterclaim. It may be set up only in
respect of a claim for which the defendant can file a separate suit.”.” Thus, a counterclaim is substantially a
cross-action.
Rule 6-A contemplates counter-claim in any suit. The scheme of the new rule is to permit the defendants to set
up counter-claims, which arise between the parties and which are cognizable by the Court where the suit is
pending. A defendant in a suit may, in addition to his right of pleading a set-off under Rule 6, also set up—by
way of counter-claim against the claim of the plaintiff, any right or claim in respect of a cause of action
accruing to the defendant against the plaintiff either before or after the filing of the suit but before the
defendant has delivered his defence or before the time limited for his defence has expired, whether such
counter-claim is in the nature of f a claim for damages or not : provided that such counter-claim shall not
exceed the pecuniary limits of the jurisdiction of the Court. (Order V111, Rule 6-A).
Such counter-claim shall have the same effect as a cross-suit so as to enable the Court to pronounce a final
judgment in the same suit, both on the original claim and on the counter-claim. The plaintiff shall be at liberty
to file a written statement in answer to the counter-claim of the defendant within such period as may be fixed
by the Court. The counter-claim shall be treated as a plaint and governed by the rules applicable to plaints.
Order VIII, Rule 6-A (2-4).
Rule 6-B of Order VIII provides that where any defendant seeks to rely upon any ground as supporting a right
of counter-claim, he shall, in his written statement, state specifically that he does so by way of counter-claim.
That rule does not apply where specifically a counter-claim is raised, but confines itself to a ground mentioned
in the written statement as supporting a right to counter-claim.
Before the Amendment Act of 1976, there was no specific provision for counterclaim in the Code. The
Supreme Court, however, held the right to make a counterclaim statutory.'” It was held that the court has power
to treat the counterclaim as a cross-suit and hear the original suit and counterclaim together if the counterclaim
is properly stamped.
In the leading case of Laxmidas v. Nanabhai[3], the Supreme Court observed, “The question has therefore to
be considered on principle as to whether there is anything in law—statutory or otherwise—which precludes a
court from treating a counterclaim as a plaint in a cross-suit. It is difficult to see any. No doubt, the Code of
Civil Procedure prescribes the contents of a plaint and it might very well be that a counterclaim which is to be
treated as a cross-suit might not conform to all these requirements but this by itself is not sufficient to deny to
the court the power and the jurisdiction to read and construe the pleadings in a reasonable manner. If, for
instance, what is really a plaint in a cross-suit is made part of a written statement either by being made an
annexure to it or as part and parcel thereof, though described as a counterclaim, there could be no legal
Objection to the counter treating the same as a plaint and granting such relief to the defendant as would have
been open if the pleading had taken relief of a plaint. To hold otherwise would be to erect what in substance is
a mere defect in a form of pleading into an instrument for denying what justice manifestly demands.”,
(emphasis supplied)

Object of Counter Claim

Before the Amendment Act of 1976, no counterclaim or set-off could be claimed except in money suits. The
Law Commission of India, however, recommended to avoid multiplicity of proceedings, right to the defend-ant
to raise a plea of set-off in addition to a counterclaim in the same suit. The provisions relating to counterclaim
thus seek to save time of courts, exclude inconvenience to the parties to litigation, decide all disputes between
the same parties avoiding unnecessary multiplicity of judicial proceedings and prolong trials. The object
appears to be to reduce pendency of cases so that cause of action and cross-claim similar in nature could be
clubbed together and disposed of by a common judgment.’ The purpose of the provision enabling filing of a
counter-claim is to avoid multiplicity of judicial proceedings, save the Court’s time and exclude the
inconvenience to the parties by enabling decision in all disputes between them in the course of the same
proceedings. If the counter-claim prolongs the trial, causes delays or complicate the otherwise smooth flow of
proceedings, the court would be justified in exercising its discretion not in favour of permitting a belated
counter-claim. Usually if the issues have already been framed and the trial has already commenced or
concluded, a counter-claim not contained in the original written statement may be refused to be taken on
record.
The right to make a counter claim is statutory and a counter claim is not admissible in a case which is
admittedly not within the statutory provisions.

Nature & scope

By the Amendment Act of 1976, a specific provision has been made for counterclaims by inserting Rules 6-A
to 6-G. Under sub-rule (1) of Rule 6-A, the defendant may set up by way of counterclaim against the claim of
the plaintiff any right or claim in respect of action accruing to the defendant against the plaintiff either before
or after the filing of the suit but before the defendant has delivered his defence or before the time fixed for
delivery of his defence has expired. Such counterclaim, however, should not exceed the pecuniary limits of the
jurisdiction of the court. In other words, by laying the counterclaim, pecuniary jurisdiction of the court cannot
be ousted and the power to try the suit already entertained cannot be taken away by accepting the counterclaim
beyond its pecuniary jurisdiction.
When A has a claim of any land against B and brings an action to enforce that claim, and B has a cross-claim
of any kind against A which by the law he is entitled to raise and have disposed of in the action brought by ,
then B is said to have a right of counterclaim. Similarly, in a suit for injunction, a counterclaim for possession
can be allowed.
In Rohit Singh v. State of Bihar[4],’ there was no counter-claim in terms of VIII, Rule 6-A. The trial court
never formally treated the written statement as the counter-claim. The so-called counter-claim was entertained
after the issues were framed and the evidence was closed. It was directed not against the plaintiff but only
against the co-defendants. The supreme court held that a counter-claim, no doubt, could be filed even after the
written statement is filed, but that does not mean that a counter-claim can be raised after the issues are framed
and the evidence is closed. The counter-claim cannot be raised after framing of issues and closure of evidence.
The court further held that the counter-claim is also not maintainable if directed solely against the co-
defendants. It has to be directed against the plaintiff, though incidentally or along with it, it may also claim
relief against co-defendants. Hence, the so-called counter-claim was not maintainable. The trial court erred in
granting decree in favour of Defendants 3 to 17 on ground of default of co-defendants in filing answer to it.
In Ramchandra Sakharam Mahajan v. DamodarTrimbakTanksale[5],` the Supreme Court remanded the suit to
trial court for decision afresh. The defendants had not appealed against the rejection of their counter-claim,
therefore, the remand of the suit for decision afresh would not entitle defendants to pursue their counter-claim
afresh. It was held that since the defendants have not pursued their counter-claim, the rejection of their
counter-claim would stand confirmed and it would not be necessary for trial court to consider the .counter-
claim afresh.
The counter-claim is treated as a plaint. Hence, the plaintiff is entitled to file a written statement to answer the
counter-claim of the defendant. If, the plaintiff prefers not to reply, the court may pronounce judgment against
him in respect of such counter-claim. If, the plaintiff contends that the claim raised by defendant by way of
counter-claim ought to be raised in an independent suit, he may accordingly apply to the court before
settlement of issues.

Starting time of right to file counter-claim

A pleading by way of counter-claim runs with the right of filing a written statement and that such right to set
up a counter-claim is in addition to the right of pleading a set-off conferred by Rule 6. A set-off has to be
pleaded in the written statement The counter-claim must necessarily find its place in the written statement.
Once the right of the defendant to file written statement has been lost or the time limited for delivery of the
defence has expired, then neither the written statement can be filed as of right nor a counter-claim can be
allowed to be raised, for the counter-claim under Rule 6-A must find its place in the written statement.
The Court has a discretion to permit a written statement being filed belatedly and, therefore, has a discretion
also to permit a written statement containing a plea in the nature of set-off or counter-claim being filed
belatedly but needless to say such discretion shall be exercised in a reasonable manner keeping in view all the
facts and circumstances of the case including the conduct of the defendant, and the fact whether a belated leave
of the Court would cause prejudice to the plaintiff or take away a vested right which has accrued to the plaintiff
by lapse of time.
An application for counter claim under Order VIII, Rule 6-A is not exfacie barred after filing of written
statement.’ In a suit for declaration of title and possession, defendant sought to the WS filed, subsequently
amend claiming recovery of possession, amendment alleged to be necessitated because of tresspass by
plaintiff. It was held that subsequent filing of counter claim on basis of tresspass is not tenable. Tresspass as
cause of action for filing counter claim cannot be said to have arisen prior to filing of WS.
Similarly in Rohit Singh v. State of Bihar,’ it was held that counter claim cannot be raised after issues are
framed and evidence is closed, further, counter-claim directed solely against co-defendants cannot be
maintained. Court cannot proceed and grant decree in favour of said co-defendants only on basis that no
answer has been filed to their counter-claim by other defendants.
A counter claim was filed claiming damages for wrongful detention of goods by locking room in her
possession, 5 years after alleged locking of room. Defendant filing counter claim had knowledge of detention
of goods right from first day. It was held that counter claim was barred, even if not Art. 91 but residuary article
of Limitation Act is applied. Merely because in another suit inventory of goods in said room was prepared that
would not give rise to fresh cause of action for respondent. Suit for damages for wrongful detention of goods is
based on different footing vis-a-vis a continuing wrong. Thus, limitation would run from time when property is
wrongfully taken.
In Mahendra Jung Rana v. Pan Singh Negi, it was observed that the cause of action for the counter-claim
should accrue to the defendant either before or after the filing of the suit but before the defendant has delivered
his defence or before the time for delivering his defence has expired. The limitation of time is clearly in respect
of the cause of action on which the counter-claim is usually made in the written statement. The provision
would u workable if it is so construed as to provide a time limit for filing because inter-claim. Since the
counter-claim can, in law, validly be filed as part a court written statement, the limitation of time that it should
be filed before of the defendant has delivered his defence would make it unworkable. That it the would go to
suggest that the limitation of time is in respect of the also wo of the cause of action for the counter-claim and
not for its actually being raised in the suit.
A defendant can file counter-claim in respect of a cause of action which is independent of cause of action
averred by the plaintiff. It need not confine to money claim or to cause of action of the same nature as of the
plaintiff or be related to or be connected with the original cause of action or matter pleaded by the plaintiff. In
a suit for injunction, counter claim for injunction in respect of the same or different property can be made
under Order VIII. Rule 6-C.
The plaintiff may object to disposal of the claim by way of counter-claim by pleading for its disposal by an
independent suit. and he may, at any time before issues are settled in relation to the counter-claim apply to the
Court for an order that such counter-claim may be excluded. and the Court may, on the hearing of such
application, make such order as it thinks fit. (Order VIII, Rule 6-C).
If the plaintiff makes default in putting in a reply to the counter-claim made by the defendant, the Court may
pronounce judgment against the plaintiff in relation to the counter-claim made against him, or make such order
in relation to the counter-claim as it thinks fit. (Order VIII, Rule 6-E).
Where in any suit a set-off or counter-claim is established as a defence against the plaintiff’s claim, and any
balance is found due to the plaintiff or defendant, as the case may be, the Court may give judgment to the party
entitled to such balance. The rules relating to a written statement by a defendant shall apply to a written
statement filed in answer to a counter-claim. (Order VIII, Rules 6-F and 6-G).
When an application for permission to sue for counter-claim in forma pauperis is filed, the Court is bound to
consider that application and dispose it of according to law.

Mode of setting up counter-claim

There are three modes of pleading or setting up a counter-claim in a civil suit :

 (1) First, the written statement filed under Rule 1 may itself contain a counter-claim which in the
light of Rule 1 read with Rule 6-A would be a counter-claim against the claim of the plaintiff
preferred in exercise of legal right conferred by Rule 6-A.
 (2) Secondly, a counter-claim may be preferred by way of amendment incorporated subject to the
leave of the Court in a written statement already filed.
 (3) Thirdly, a counter-claim may be filed by way of a subsequent pleading under Rule 9.
In the latter two cases the counter-claim though referable to Rule 6.A cannot be brought on record as of right
but shall be governed by the discretion vesting in the Court, either under Order VI, Rule 17 of the CPC if
sought to be introduced by way of amendment, or, subject to exercise of discretion conferred on the Court
under Order VIII, Rule 9 of the CPC sought to be placed on record by way of subsequent pleading.
The purpose of the provision enabling filing of a counter-claim is to avoid multiplicity of judicial proceedings
and save upon the Court’s time as also to exclude the inconvenience to the parties by enabling claims and
counter-claims, that is, all disputes between the same parties being decided in the course of the same
proceedings. If the consequence of permitting a counter-claim either by way of amendment or by way of
subsequent pleading would be prolonging of the trial, complicating the otherwise smooth flow of proceedings
or causing a delay in the progress of the suit by forcing a retreat on the steps already taken by the Court, the
Court would be justified in exercising its discretion not in favour of permitting a belated counter-claim. The
framers of the law never intended the pleading by way of counter-claim being utilized as an instrument for
forcing upon a re-opening of the trial or pushing back the progress of proceeding. Generally speaking, a
counter-claim not contained in the original written statement may be refused to be taken on record if the issues
have already been framed and the case set down for trial, and more so when the trial has already commenced.
But certainly a counter-claim is not entertainable when there is no written statement on record.”

Who may file counterclaim?

Normally, it is the defendant who may file a counterclaim against the plaintiff. But incidentally and along with
the plaintiff, the defendant may also claim relief against the co-defendants in the suit. But a counterclaim
solely against co-defendants is not maintainable.

When counterclaim may be set up?

A counterclaim may be set up by a defendant against a plaintiff in respect of cause of action accruing either
before or after filing of the suit, provided such claim is not barred by limitation.
Effect of counterclaim Such counterclaim has the effect of a cross-suit and the court can pronounce a final
judgment both on the original claim and the counterclaim. The counterclaim of the defendant will be treated as
a plaint and the plaintiff has a right to file a written statement in answer to the counterclaim of the defendant.
The effect of the counterclaim is that even if the suit of the plaintiff is stayed, discontinued, dismissed or
withdrawn, the counterclaim will be decided on merits and the defendant will have a right to get a decree for a
counterclaim as claimed in the written statement. If the plaintiff does not file any reply to the counterclaim
made by the defendant, the court may pronounce the judgment against the plaintiff in relation to the
counterclaim made against him or make such order in relation to the counterclaim as it thinks fit.268 The
counterclaim shall be treated as a plaint and will be governed by the rules applicable to plaints. Similarly, a
reply filed in answer to a counterclaim shall be treated as a written statement and governed by rules applicable
to written statements.
Set Off & Counter Claim
The distinction between set-off and counter-claim may now be noted :
 Set-off is a statutory defence to a plaintiff’s action, whereas a counterclaim is substantially a cross-
action.
 Set-off must be for an ascertained sum or must arise out of the same transaction as the plaintiff’s
claim. A counter-claim need not arise out of the same transaction.
 Set-off is a statutory ground of defence and has to be pleaded in the written statement. It can be
sued as a shield and not as a sword. Counter-claim, on the other hand, does not afford any defence
to the plaintiff’s claim. It is a weapon of offence which enables the defendant to enforce his claim
against the plaintiff as effectually as in an independent action. It is a sort of cross-action.
 If the statute of limitation is pleaded to a defence of set-off, the plaintiff in order to establish his
plea has to prove that set-off was barred when the plaintiff commenced the action. It is not enough
to prove that it was barred at the time when it was pleaded. In the case of a counter-claim, it is
enough for the plaintiff to prove that the counter-claim was barred when it was pleaded.
 An equitable set-off is a claim by the defendant in defence, which generally cannot exceed the
plaintiff’s claim. A counter-claim the defendant may, however, exceed the plaintiff’s claim, being
in nature of the cross action. Under the provision rule 6-F of Order 6, if in any suit a set off or
counter claim is established as a defence against plaintiffs claim and any balance is found due to
the defendant as the case may be the court may give judgment to the party entitled to such balance.

Frequently Asked Questions

1. Describe counter-claim and the mode for setting up a counter claim?

“Counterclaim” may be defined as “a claim made by the defendant in a against the plaintiff”. It is a claim
independent of, and separable from, suit plaintiff’s claim which can be enforced by a cross-action. It is a cause
of action in favour of the defendant against the plaintiff.
By the Amendment Act of 1976, a specific provision has been made for counterclaims by inserting Rules 6-A
to 6-G.
There are three modes of pleading or setting up a counter-claim in a civil suit:
 (1) First, the written statement filed under Rule 1 may itself contain a counter-claim which in the
light of Rule 1 read with Rule 6-A would be a counter-claim against the claim of the plaintiff
preferred in exercise of legal right conferred by Rule 6-A.
 (2) Secondly, a counter-claim may be preferred by way of amendment incorporated subject to the
leave of the Court in a written statement already filed.
 (3) Thirdly, a counter-claim may be filed by way of a subsequent pleading under Rule 9.

2. Define set-off under CPC, 1908.

Set off is reciprocal acquittal of debts. “Set-off” means a claim set up against another. It is a cross-claim which
partly offsets the original claim. It is an extinction of debts of which two persons are reciprocally debtors to
one another by the credits of which they are reciprocally creditors to one another. It is a plea in defence,
available to the defendant. By adjustment, set-off either wipes out or reduces the plaintiff’s claim in a suit for
recovery of money.

3. Differentiate between set off and counter claim.

The distinction between set-off and counter-claim may now be noted :
 Set-off is a statutory defence to a plaintiff’s action, whereas a counterclaim is substantially a cross-
action.
 Set-off must be for an ascertained sum or must arise out of the same transaction as the plaintiff’s
claim. A counter-claim need not arise out of the same transaction.
 Set-off is a statutory ground of defence and has to be pleaded in the written statement. It can be
sued as a shield and not as a sword. Counter-claim, on the other hand, does not afford any defence
to the plaintiff’s claim. It is a weapon of offence which enables the defendant to enforce his claim
against the plaintiff as effectually as in an independent action.
  If the statute of limitation is pleaded to a defence of set-off, the plaintiff in order to establish his
plea has to prove that set-off was barred when the plaintiff commenced the action. In the case of a
counter-claim, it is enough for the plaintiff to prove that the counter-claim was barred when it was
pleaded.

4. What are the principle governing equitable set-off?

As a result of a series of decisions of the Courts in India, the following propositions of law with regard to
equitable set-off emerged:
 1. A equitable right of set-off exists when both the claim of the plaintiff and that of the defendant
arise out of the same transaction.
 2. The law of equitable set-off applies where the cross-claims, though not arising out of the same
transaction, were closely connected together.
 3. In order that a claim for equitable set-off may arise, it is not sufficient that there are cross-
demands; it is further necessary that there should be a connection between them which makes it
inequitable to drive the defendant to a separate suit—as when the demands arise out of the same
transaction or when there is on each side knowledge of and confidence in one debt discharging the
other.

5. Differentiate between legal set-off and equitable set-off?

The distinction between legal and equitable set-off is as follows-
 In a legal set-off, the amount claimed must be an ascertained sum of money, but in an equitable
set-off, the claim must be allowed even with respect to an unascertained sum of money.
 In a legal set-off, the Court is bound to entertain and adjudicate upon the plea when raised. In the
case of an equitable set-off, however, it is not obligatory on the Court to adjudicate upon it and the
defendant cannot claim it as a matter of right.
 In a legal set-off, it is not necessary that the cross-demands arise out of the same transaction, but
an equitable set-off is allowed only when the cross-demands arise out of the same transaction as
the plaintiff’s claim.
 In a legal set-off, the amount claimed to be set off must be legally recoverable and not barred by
limitation at the date of the suit, but a claim by way of equitable set-off can be allowed even if it is
barred at the date of the suit where there is fiduciary relationship between the plaintiff and the
defendant.
 If the defendant’s claim is barred at the date of the written statement but not barred at the date of
the suit, the defendant can get an equitable set-off to the extent of the plaintiff’s claim only but not
for the balance found due to him. In a legal set-off, the whole claim is admissible and the
defendant can even get a decree for the balance.

=========================================

Explain and discuss the facts and principles of law laid down in the case of Madamsetty Satyanarayana
vs G. Yellogi Rao And Two Others on 24 November, 1964. Equivalent citations: 1965 AIR 1405, 1965
SCR (2) 221.

This appeal by certificate raises the question whether the High Court went wrong, in the circumstances of the
case, to give a decree for specific performance of an agreement to sell in favour of the plaintiff. The facts may
be briefly stated : On August 23, 1954, at 10 a.m. defendants 1 and 2, through their Auction Agent, de- fendant
3, advertised and put their plots Nos. 1 to 4 situated in Narayanguda opposite to Deepak Mahal Theatre to
public auction. In regard to plots Nos. 2 and 3 the plaintiff offered the highest bid of Rs. 12,000/-. He wanted
to purchase the plots for the purpose of starting his business. When the plaintiff tendered one-fourth of the sale
price as earnest money in accordance with the terms of the auction, the defendants unlawfully refused to accept
it. On August 30, 1954, the plaintiff gave notice to the 3rd defendant and sent copies thereof to the other
defendants calling upon them to obtain from him the one-fourth amount of the sale price as earnest money
within 24 hours and pass a receipt therefor and accept the balance of the auction price within a period of one
week thereafter in accordance with the condition of the auction sale and to execute a sale deed duly registered
in his favour. Defendants 1 and 2 did not give any reply to the said notice. The plaintiff filed the suit in the
Court of the 4th Additional Judge, City Civil Court, Hyderabad, on April 18,1955, for directing the defendants,
inter alia, to execute the saledeed in his favour. Defendants 2 and 3 in their written- statementadmitted that
therewas an auction sale and that plaintiff was thehighest bidder; butthe 1st defendant, on the other hand,
deniedthat there was any final bid or that it was accepted. He further stated that he gave up the idea of selling
the plots and that after obtaining the necessary permission from the Municipality he began to build shops on
the said plots. The City Civil Judge held that the suit plots were knocked down at the auction in favour of the
plaintiff and that the lst defendant refused to take the earnest money. He further held that though the plaintiff
gave notice as early as August 30, 1954, to the defendants, he did not take any steps to enforce his contract and
that though he knew of the construction a couple of months before he filed the suit, he kept quiet and allowed
the 1st defendant to complete his construction and, therefore, it was not a fit case where he could, in exercise
of his discretion, give a decree for specific performance; instead he awarded to the plaintiff a sum of Rs. 500/-
towards damages. On appeal, a Division Bench of the Andhra Pradesh High Court, on a consideration of the
evidence, came to the conclusion that the delay in filing the suit was due to the illness of the plaintiff's wife
and also on account of the demolition of one of his houses by the Municipal Corporation, that he came to know
for the first time on April 13, 1955, that the 1st defendant was raising a structure on the suit plots and that
without any loss of time within a few days thereafter he filed the suit. The High Court also found that the 1st
defendant did not act bona fide inasmuch as he chose to rush headlong in raising the structure evidently to
defeat the claims of the plaintiff. On those findings, the High Court held that the Trial Court went wrong on
principle in exercising its discretion in favour of the defendants and in refusing to grant a decree for specific
performance in favour of the plaintiff. In the result, the High Court set aside the decree of the Trial Court and
gave a decree for specific performance in favour of the plaintiff on his depositing a sum of Rs. 12,000/-
together with stamp papers and registration charges within a month from the date of the decree. It may also be
mentioned that the learned counsel for the plaintiff made an offer that his client was willing to pay a sum of Rs.
14,750/- towards the cost of the building put up by defendants 1 and 2 on the suit plots and the Court recorded
the same. But, the High Court left it to the said defendants either to give vacant possession of the plots or with
the structure thereon accepting money for it, as they chose. The lst defendant has preferred this appeal by
certificate to this Court making the plaintiff the 1st respondent, and defendants 2 and 3, respondents 2 and 3.
Mr. Lakshmaiah, learned counsel for the appellant, argued (1) The appellant repudiated the contract on the next
day of the auction itself by refusing to take money from the lst respondent; the 1st respondent did not accept
the repudiation, but elected to keep the contract alive by asking the appellant to receive from him one-fourth of
the amount as earnest money at any time within 24 hours thereof and to obtain from him the entire balance
within one week thereafter; by so doing, he not only unilaterally varied the terms of the contract but committed
a breach thereof in not paying the amount; having himself committed a breach of the contract, he could not
specifically enforce it. (2) Time is the essence of the contract, as the object of purchase by the 1st respondent
was to start a business; therefore, the lst respondent should have pursued his remedy with promptitude and
diligence. It was not enough to assert his right by issuing a notice, but he should have taken steps to enforce it;
his inaction and indifference for 7 1/2 months without making any attempt to enforce his right would disentitle
him to the discretionary relief of specific performance. (3) The reasons for the delay, namely, that the 1st
respondent's wife was ill or that one of his houses was demolished by the Municipal Corporation, were
obviously untenable excuses, for both the reasons existed even before the auction was held.
Mr. A. Viswanatha Sastri, learned counsel for the 1st respondent, on the other hand, contended as follows : (1)
Mere delay in filing a suit for specific performance could not possibly be a ground for exercising a discretion
against a plaintiff, as the Limitation Act prescribed a period of 3 years for filing such a suit. (2) Under the
Indian law relief of specific performance could be refused only if the plaintiff abandons or waives his right
under the contract; and in the present case the appellant had not established either abandonment or waiver by
the 1`st respondent of his right under the contract, for indeed as soon as he saw that the appellant had laid
foundations for putting up structures on the plots, he rushed without any delay to the court and filed the suit.
(3) In the circumstances of the instant case there is no scope for holding that the appellant could have had any
reasonable belief that the 1st respondent had waived or abandoned his right, for it was the positive case of the
appellant that there was no concluded sale at all. We cannot allow the learned counsel for the appellant to raise
before us the first question, namely, that the 1st respondent did not accept the repudiation but kept the contract
alive and committed a breach thereof, with the result that he disqualified himself to file the suit for specific
relief, for the said plea was not raised in the pleadings, no issue was raised in respect thereof and no argument-.
were addressed either in the Trial Court or in the High Court. As the question is a mixed question of fact and
law, we cannot permit the appellant to raise it for the first time before us.