State Bank of India v Sood [1997] 1 All ER 169

Key point

  • If security in land is granted in relation to a pre-existing debt, beneficial interest can be overreached despite no payment to trustees


  • Trustees charged a property to a bank to give the bank security for their existing debt to the bank, no capital money was advanced to the trustees
  • The trustees defaulted and the assignee of the bank, C, sought possession
  • The beneficiaries, Ds, argued that their beneficial interests had not been overreached as their was no payment of money to the trustees when the charge was executed

State Bank of India v Sood Diagram

Held (Court of Appeal)

  • Possession granted to C, Ds interests were overreached

Peter Gibson LJ

  • s2(1)(ii) LPA 1925 did not provide that capital money had to arise at the time of execution of the legal charge for overreaching to occur
  • Ds’ beneficial interest attached to the trustees’ equity of redemption when the charge was executed