State Bank of India v Sood [1997]
Equity – Property – Overreaching – Repossession – Trust – Beneficial Interest – Mortgage – Law of Property Act 1925
Facts
In this case, the first and second defendants were the legally registered proprietors of the family home, which the third to seventh defendants had lived in. The first and second defendants held this property on trust for themselves, as well as the other defendants as beneficial tenants in common. The first and second defendants mortgaged the home to guarantee any present and future debts for their company, known as Sobel Textiles Ltd. However, the Soods defaulted on these mortgage payments. This meant that the complainants, State Bank of India, started proceedings to seek the repossession of the property for failed payments.
Issues
The third to seventh defendants claimed that they had a beneficial interest in the property, which would override the State Bank of India. The case concerned section 27(2) of the Law of Property Act 1925. The issue was whether these defendants had a beneficial interest in the property and if it was overreached, even though the money had not been paid under conveyance.
Decision/Outcome
It was held that the beneficial interests of the defendants had been overreached. This meant that the rights they had under the trust of the property attached to the proceeds of the sale. It was stated that section 27(2) of the Law of Property Act 1925 would only apply where the transferring of the property would give rise to capital. There would only be an obligation to make a payment to two of the trustees if there was capital.
Updated 21 March 2026
This case summary accurately reflects the decision in State Bank of India v Sood [1997] Ch 276 (CA). The Court of Appeal held that overreaching under ss.2 and 27 of the Law of Property Act 1925 could occur even where no capital money was paid, because the mortgage in question did not immediately generate capital monies. The beneficial interests were overreached and attached to the equity of redemption rather than the proceeds of sale. The summary is broadly accurate, though readers should note that its description of the overreaching requirement — suggesting capital money must be generated before overreaching can operate — slightly conflates the reasoning. The court’s point was that the obligation to pay capital money to two trustees only arises where capital money actually arises, and since none arose here, there was no breach of s.27(2). This distinction matters in understanding the scope of overreaching. The legal position established in Sood remains good law and has not been reversed or significantly modified by subsequent legislation or case law. Readers should however be aware that the broader law on overreaching and third-party rights in registered land continues to be debated academically, and the interaction with Schedule 3, paragraph 2 of the Land Registration Act 2002 (overriding interests based on actual occupation) remains an important related consideration not addressed in this summary.
