Saji Koduvath, Advocate, Kottayam.

Introduction

The English Court of Chancery exercised jurisdiction (during 13^th to 19^th centuries) over trusts, land law, the estates of lunatics and the guardianship of infants. ‘Chancery’ itself meant ‘equity’. It applied principles of equity in the matters before it, and applied its own liberal rules avoiding harsh or inflexible common law procedures; though it did not give-a-go-bye-to fundamental basic-principles of law and procedure (See: Vinod Seth v. Devinder Bajaj, 2010-8 SCC 1; Jagjit Singh v. Pamela Manmohan Singh, 2010-5 SCC 157; Kusheshwar Prasad Singh v. State Of Bihar, 2007-11 SCC 447).

Though there are no Equity Courts in India, Indian Courts are said to be ‘courts of law and equity’ (Dinesh Singh Thakur v. Sonal Thakur, 2018-17 SCC 12). The equity principles are embedded in Indian enactments (from the British-codification-period), in both –

• substantive legislations (like Easement Act, TP Act, NI Act) and
• procedural statutes (like CPC, CrPC).

Thereby, the framework of courts, concept of justice and the tasks of courts are fundamentally founded on equitable principles; that is, based on “equity, justice and good conscience”.

When an Indian Court Invokes Equitable Jurisdiction

When there are no enacted laws, or generally accepted legal principles, on a particular matter, courts in India apply principles of Equity to do justice to the injured persons.  (Muhammed Sherieff K. S.  v. Registrar of Co-Operative Societies, 2016-2 Ker HC 665; 2016-2 KerLJ 592, Dama Seshadri Naidu, J.).

Courts of Equity Proceed on First Principles

In Crabb v. Arun DC, [1976] 1 Ch 179 (Court of Appeal), Lord Denning, speaking for the Court of Appeal, while discussing promissory estoppel, it was observed as under:

• “The basis of this proprietary estoppel – as indeed of promissory estoppel – is the interposition of equity. Equity comes in, true to form, to mitigate the rigours of strict law. The early cases did not speak of it as “estoppel”. They spoke of it as “raising an equity” If I may expand that, Lord Cairns said: “It is the first principle upon which all Courts of Equity proceed”, that it will prevent a person from insisting on his legal rights – whether arising under a contract or on his title deed, or by statute – when it would be inequitable for him to do so having regard to the dealings which have taken place between the parties.” (Quoted in: State of Jharkhand v. Brahmputra Metallics Ltd. , 2020-12 JT 78; 2020-13 Scale 500)

Where No Positive Law, Equity Invoked to Fill the Gaps

It is held in Bola v. Sardana, (1997) 8 SCC 522, as under:

• “Equity steps in where the law has left yawning gaps”. (Quoted in: A. P. Showkath Ali v. State of Kerala, 2018-11 SCC 688).

In A. P. Showkath Ali v. State of Kerala, 2018-11 SCC 688, it was held as under:

• “Even for courts, equity jurisdiction is meant to be exercised when there is no law operating in the field.”

It is observed in M.  Siddiq v. Mahant Suresh Das, (Ayodhya Case), 2020 1 SCC 1, as under:

• “658. The correlation between law and justice was the defining factor– in one sense, equity modifies the applicable law or ensures its suitability to address the particular circumstances before a court to produce justice. The modification of general rules to the circumstances of the case is guided by equity, not in derogation or negation of positive law, but in addition to it. It supplements positive law but does not supplant it. In a second sense however, where positive law is silent as to the applicable legal principles, equity assumes a primary role as the source of law itself. Equity steps in to fill the gaps that exist in positive law. Thus, where no positive law is discernible, courts turn to equity as a source of the applicable law. In addition to these, Derrett notes that there is a third sense in which equity or aequitas assumed importance – where established political authority is taken away or is in doubt and the formal sources of law are in doubt, the nature of judicial office requires a decision in accordance with ex bono et aequo. This was evidenced in decisions concerning widows and orphans and in the realm of mercantile law.”

CPC, CrPC and Constitution of India & Source of Law

The civil courts in India are expressly authorised to invoke inherent powers under Sec. 151 of the Code of Civil Procedure. It is used wherever it requires to invoke ‘equity jurisdiction’. In criminal matters, the High Courts alone can invoke this jurisdiction, under  Section 482 of the Code of Criminal Procedure, 1973. Article 142 of the Constitution of India bestows wide inherent powers on the Supreme Court to pass orders “as is necessary for doing complete justice in any cause of matter pending before it”.

The courts that are authorised to invoke inherent powers are are duty bound to act as an institution to cast-and-apply proper law on the subject wherever it is lacking.

Indian Courts are governed by principle of equity

In Nar Bahadur Khatiwada v. State of Sikkim, 2013 (Pious Kuriakose, J.) held as under:

• “Unlike in England, in this country we do not have separate courts of equity. Indian Courts are governed by principle of equity also. The Supreme Court in Ashok Kapil v. Sana Ullah : ((1996) 6 SCC 342) has held that the maxim “Nullus commodum capere protest de injuria sua propria”, thereby meaning “no man can take advantage of his own wrong” is a salient tenet of equity which Indian Court have been following from time to time.”

It is beyond doubt that in Indian situation, it is necessary and proper to invoke the equity jurisdiction in the matters of pathways to the plots of lands, wherever it is required.

Rule of Equity & No Perpetration of a legal fraud

Black’s Law Dictionary reads follows:

• “Actual fraud. A concealment or false representation through an intentional or reckless statement or conduct that injures another who relies on it in acting. – Also termed fraud in fact; positive fraud; moral fraud.”
• “Constructive fraud.
  • 1. Unintentional deception or misrepresentation that causes injury to another.
  • 2. Fraud in law. Fraud that is presumed under the circumstances, without regard to intent, usu. through statutorily created inference.
• Fraud may be presumed, for example, when a debtor transfers assets and thereby impairs creditors’ efforts to collect sums due. This type of fraud arises by operation of law, from conduct that, if sanctioned, would (either in the particular circumstance or in common experience) secure an unconscionable advantage, irrespective of evidence of an actual intent to defraud. – Also termed legal fraud; fraud in contemplation of law; equitable fraud; fraud in equity.”
• (Quoted in: Sukh Sagar Medical College and Hospital v. State of Madhya Pradesh, 2020)

Legal fraud which a Court of Equity must prevent

It appears that the law understood and applied in India, as regards ‘legal fraud’, slightly differs from what is explained in Black’s Law Dictionary (supra). A fraudulent representation (both actual and constructive) may be taken as ‘legal fraud’ applying the maxim ‘nullus commodum cap ere potest de injuria sua propria’.

The maxim ‘nullus commodum cap ere potest de injuria sua propria’ is applied in cases where false or fraudulent representation is made.

No man can take advantage of his own wrong & No Perpetration of a legal fraud

In Eureka Forbes Ltd. v. Allahabad Bank, 2010-6 SCC 193, the Supreme Court reiterated the principle as under:

• “66. The maxim nullus commodum cap ere potest de injuria sua propria has a clear mandate of law that, a person who by manipulation of a process frustrates the legal rights of others, should not be permitted to take advantage of his wrong or manipulations. In the present case Respondents 2 and 3 and the appellant have acted together while disposing off the hypothecated goods, and now, they cannot be permitted to turn back to argue, that since the goods have been sold, liability cannot be fastened upon Respondents 2 and 3 and in any case on the appellant.”

The Supreme Court, in Ashok Kapil v. Sana Ullah, (1996) 6 SCC 342, held as under:

• “7. If the crucial date is the date of allotment order, the structure was not a building as defined in the Act. But can the respondent be assisted by a Court of law to take advantage of the mischief committed by him? The maxim “Nullus commodum capere ptest de injuria sua propria” (No man can take advantage of his own wrong) is one of the salient tenets of equity. Hence, in the normal course, the respondent cannot secure the assistance of a Court of law for enjoying the fruit of his own wrong. The upshot is, if the District Magistrate has commenced exercising jurisdiction under section 16 of the U.P. Urban Buildings (Regulation of Letting, Rent and Eviction) Act, 1972, in respect of a building which answered the description given in the definition in section 3(i), he would well be within his jurisdiction to proceed further notwithstanding the intervening development that the building became roofless. We are inclined to afford such a liberal interpretation to prevent a wrongdoer from taking advantage of his own wrong.”

In Collector of Bombay v. Municipal Corporation of Bombay, AIR 1951 SC 469, our Apex Court observed as under:

• “Can the Government be now allowed to go back on the representation, and, if we do so, would it not amount to our countenancing the perpetration of what can be compendiously described as legal fraud which a court of equity must prevent being committed? ………. Whether it is the equity recognised in Ramsden’s case, (1866) L.R. 1 H.L. 129, or it is some other form of equity, is not of much importance. Courts must do justice by the promotion of honesty and good faith, as far as it lies in their power. As pointed out by Jenkins C.J. in Dadoba Janardhan’s case, (1901) I.L.R. 25 Bom. 714, a different conclusion would be “opposed to what is reasonable, to what is probable, and to what is fair.”

It is pointed out in Abhilash Vinodkumar Jain v. Cox & Kings (India) Ltd., (1995) 3 SCC 732, as under:

• “It is the duty of the court to defend the law from clever evasion and defeat and prevent perpetration of a legal fraud.” (Quoted in: P.  Mohanraj v. Shah Brothers Ispat Pvt.  Ltd. , AIR 2021 SC 1308;  2021-6 SCC 258)

Perpetration of a legal fraud

In A.P. State Financial Corporation v. Gar Re Rolling Mills, (1994) 2 SCC 647, it was observed as under:

• “A court of equity, when exercising its equitable jurisdiction under Article 226 of the Constitution must so act as to prevent perpetration of a legal fraud and the courts are obliged to do justice by promotion of good faith, as far as it lies within their power. Equity is always known to defend the law from crafty evasions and new subtleties invented to evade law.”

It is observed by Lord Tomlin in Maine and New Brunswick Electrical Power Co. Ltd. v. Alice M. Hart:

• “In order to invoke a rule of equity, it is necessary in the first instance to establish the existence of a state of circumstances which attracts the equitable jurisdiction, as for example, non-performance of a contract of which equity can give specific performance.”
• (See: Bengal Nagpur Ry. Co. Ltd. v.  Ruttanji Ramji, AIR 1935 Cal – 347;
• Ferro Alloys Corporation v. AP State Electricity Board, AIR 1993 SC 2005;
• Dushyant N. Dalal v. Securities and Exchange Board of India, AIR 2018 SC 447; 2017-9 SCC 660)

Mere false description not vitiate, if sufficient legal certainty

The principles of nullus commodum is subject to another principle – mere false description will not vitiate, if there be sufficient certainty as to the object.

In Harikrishna Lal v. Babu Lal Marandi, (2003) 8 SCC 613, the Supreme Court observed as under:

• “13. A reference may usefully be made to the maxim “falsa demonstratio non nocet, cum de corpore constaf” which means mere false description does not vitiate, if there be sufficient certainty as to the object. ‘Falsa demonstratio’ means an erroneous description of a person or a thing in a written instrument and the above rule respecting it signifies that where the description is made up of more than one part, and one part is true, but the other false, there, if the part which is true describes the subject with sufficient legal certainty, the untrue part will be rejected and will not vitiate the device; the characteristic of cases within the rule being that the description, so far as it is false, applies to no subject at all, and, so far as it is true, applies to one only. (See Broom’s Legal Maxims, 10th Edn., pp. 426-27.) Broom quotes (at p. 438) an example that an error in the proper name or in the surname of the legatee should not make the legacy void, provided it could be understood from the Will what person was intended to be benefited thereby.”

Read Blogs:

• Can Courts Award Interest on Equitable Grounds?
• Right of Private Way Beyond (Other Than) Easement

An Instance of Invoking Equity Jurisdiction in Easement

In Muttil Rajan v. Kuthirakkal Letha, Kerala High Court (Thomas P. Joseph, J.), 2012, found easement of necessity; and, pointed out that the law did not intend “land locking”, in the following words:

• “22. I must notice the precarious situation in which the respondents are placed. Even assuming that towards the south west of plaint A schedule, a portion of the property belongs to the appellants, it is practically admitted that the plaint A schedule is locked by private properties on all sides, the major portion belonging to the appellants. They can gain access to the public road on the extreme north only through private properties surrounding the plaint A schedule. Severance of tenements is also proved. In such a situation, it is hard to say that the respondents are not entitled a right of easement over the plaint C schedule by necessity. Holding so will amount to land locking the plaint A schedule and the appellants not being able to get out of the plaint A schedule. That is not the intend of the law. When the mother of the respondents claimed a right of access along the western side of the plaint B schedule, the appellants pointed  out the plaint C schedule as the way. Now when over the plaint C schedule the respondents made a claim, the appellants would say that it is not plaint C schedule but it is the PQRS way referred to in Exts.C3 and C4 which for reasons above stated, is not a way which respondents could use as of right. I am not inclined to think that by accepting such dilatory contentions raised by the appellants, the respondents should be driven from pillar to post for an access.
• 23. This litigation which in effect started in the year, 1996 had reached this court in several forms. Having regard to the various circumstances, I do not find any substantial question of law, justice or equity in the claim now being raised by the appellants that the respondents can have no right of easement by necessity over the plaint C schedule and that the alternate way available to them is the PQRS shown in Exts.C3 and C4.”

Mere allegation of fraud not sufficient to detract Court from Refer to Arbitration

Our Apex Court, in A.  Ayyasamy v. A.  Paramasivam, AIR 2016 SC 4675; 2016 10 SCC 386, elaborated considered ‘fraud’ and held, in substance, as under:

•  “Mere allegation of fraud simplicitor may not be a ground to nullify the effect of arbitration agreement between the parties. It is only in those cases where the Court, while dealing with Section 8 of the Act, finds that there are very serious allegations of fraud which make a virtual case of criminal offence or where allegations of fraud are so complicated that it becomes absolutely essential that such complex issues can be decided only by civil court on the produced, the Court can side-track the agreement by dismissing application under Section 8 and proceed with the suit on merits.”

Our Apex Court referred to and followed the following observations of the 246^th Law Commission Report. It reads as under:

• “50. The issue of arbitrability of fraud has arisen on numerous occasions and there exist conflicting decisions of the Apex Court on this issue. While it has been held in Bharat Rasiklalv. Gautam Rasiklal, (2012) 2 SCC 144 that when fraud is of such a nature that it vitiates the arbitration agreement, it is for the Court to decide on the validity of the arbitration agreement by determining the issue of fraud, there exists two parallel lines of judgments on the issue of whether an issue of fraud is arbitrable. In this context, a 2 judge bench of the Supreme Court, while adjudicating on an application under section 8 of the Act, in Radhakrishnan v. Maestro Engineers, 2010 1 SCC 72 held that an issue of 28 fraud is not arbitrable. This decision was ostensibly based on the decision of the three judge bench of the Supreme Court in Abdul Qadir v. Madhav Prabhakar, AIR 1962 SC 406. However, the said 3 judge bench decision (which was based on the finding in Russel v. Russel [1880 14 Ch.D 471]) is only an authority for the proposition that a party against whom an allegation of fraud is made in a public forum, has a right to defend himself in that public forum. Yet, following Radhakrishnan, it appears that issues of fraud are not arbitrable.

• 51. A distinction has also been made by certain High Courts between a serious issue of fraud and a mere allegation of fraud and the former has been held to be not arbitrable (SeeIvory Properties and Hotels Private Ltd v. Nusli Neville Wadia, 2011 (2) Arb LR 479 (Bom); CS Ravishankar v. CK Ravishankar, 2011 (6) Kar LJ 417). The Supreme Court in Meguin GMBH v. Nandan Petrochem Ltd., 2007 (5) R.A.J 239 (SC), in the context of an application filed under section 11 has gone ahead and appointed an arbitrator even though issues of fraud were involved. Recently, the Supreme Court in its judgment in Swiss Timing Ltd v. Organising Committee, Arb. Pet. No. 34/2013 dated 28.05.2014, in a similar case of exercising jurisdiction under section 11, held that the judgment in Radhakrishnan is per incuriam and, therefore, not good law.”