DOCTRINE OF SUBROGATION

THE TAMIL NADU NATIONAL LAW SCHOOL,

TIRUCHIRAPPALLI.

ACADEMIC SESSION

2016-2017
TRANSFER OF PROPERTY ACT PROJECT
ON
“DOCTRINE OF SUBROGATION”
SUBMITTED TO: SUBMITTED BY:
Mr. S. Mohammad Azaad SAXENA UTSAV
TNNLS, B. Com. LL.B (HONS.)
TIRUCHCHIRAPPALLI ROLL NO. – BC0140051

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 DOCTRINE OF SUBROGATION

DECLARATION

I, UTSAV SAXENA hereby declare that the project work submitted to Tamil Nadu National
Law School; Tiruchirappalli, is the record of a bonafide work done by me under the supervision
and guidance of Mr. S. Mohammed Azaad, Faculty of Law, Tamil Nadu National Law School;
Tiruchirappalli.

All information furnished in the project is true to the best of my knowledge and belief devoid of
plagiarism. If under the circumstances plagiarism is truly established, then the Law School may
be pleased to proceed with any action against me according to the University’s rules and
regulations.

UTSAV SAXENA
B.Com.LL.B(H).
01-11-2016.

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 DOCTRINE OF SUBROGATION

ACKNOWLEDGEMENTS

At the outset, the researcher takes this opportunity to thank Mr. S. Md. Azaad from the bottom
of my heart who has been of immense help during moments of anxiety and torpidity while the
project was taking its crucial shape.

Secondly, the researcher convey my deepest regards to the administrative staff of TNNLS who
held the project in high esteem by providing reliable information in the form of library
infrastructure and database connections in times of need.

Thirdly, the contribution made by my parents and friends by foregoing their precious time is
unforgettable and highly solicited. Their valuable advice and timely supervision paved the way
for the successful completion of this project. Hence as a student, the researcher am extremely
grateful and forever deeply indebted to him.

Finally, the researcher thanks the Almighty who gave me the courage and stamina to confront all
hurdles during the making of this project. Words aren’t sufficient to acknowledge the
tremendous contributions of various people involved in this project--- as the researcher know
‘Words are Poor Comforters’. the researcher once again wholeheartedly and earnestly thank all
the people who were involved directly or indirectly during this project making which helped me
to come out with flying colors.

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TABLE OF CONTENTS

CHAPTER 1 .................................................................................................................................. 6

1.1 INTRODUCTION ................................................................................................................. 6

1.2 HISTORICAL PERSPECTIVE ........................................................................................... 9

CHAPTER 2 ................................................................................................................................ 12

KINDS OF SUBROGATION.................................................................................................... 12

CHAPTER 3 ................................................................................................................................ 17

IMPORTANT CASE LAWS ................................................................................................... 17

CHAPTER 4 ................................................................................................................................ 23

SUBROGATION AND ALLIED PRINCIPLES ..................................................................... 23

CHAPTER 5 ................................................................................................................................ 25

CONCLUSION .......................................................................................................................... 25

BIBLIOGRAPHY ....................................................................................................................... 26

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INDEX OF AUTHORITIES
STATUTES

TRANSFER OF PROPERTY ACT, 1882

JUDGMENTS

SR. NO. CASE NAME CITATION

1 Biswar Prasad v. lal Sarnam Singh 1907) 6 Cal. L.j. 134

1 Ves. sen. 98, 27 Eng. Rep.
2 Randal V. Cockran 916 (1748).

3 Stringer v. The English and Scotch Marine L.R. 4 Q.B. 676 (1868-
Insurance Co 69).

4 National Fire Insurance Co. V. McLaren (1886), 12 O.R. 682 at

687 (H.C.J.).

5 London Assurance Co. V. Sainsbury 3 Doug. 61, 99 Eng.

Rep. 538 (1782).

6 Gokuldas V. Puranmal 11 IA 26.

7 Pillai Rajasekharan V. Padmanabha Pillai AIR 2004 SC 1206.

8 Graythorn v. Swimburne 14 (Ves. 160)

9 Malireddy Ayyareddy V. Gopi Krishnayya AIR 1924 PC 36

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CHAPTER 1
1.1 INTRODUCTION

Subrogation is the substitution of one person for another. The doctrine of subrogation confers
upon the insurer the right to receive the benefit of such rights and remedies as the assured has
against third parties in regard to the loss to the extent that the insurer has indemnified the loss
and made it good. The insurer is, therefore, entitled to exercise whatever rights the assured
possess to recover to that extent compensation for the loss, but it must do so in the name of
assured.

The Doctrine of subrogation in the Transfer of Property Act, 1882, has been laid down under
section 92, inserted after an amendment in the year 1929.

The plain text of the section is as under:

Subrogation: Any of the persons referred to in section 91 (other than the mortgagor) and any co-
mortgagor shall, on redeeming property subject to the mortgage, have, so far as regards
redemption, foreclosure or sale of such property, the same rights as the mortgagee whose
mortgage he redeems may have against the mortgagor or any other mortgagee.

The right conferred by this section is called the right of subrogation, and a person acquiring the
same is said to be subrogated to the rights of the mortgagee whose mortgage he redeems. A
person who has advanced to mortgagor money with which the mortgage has been redeemed shall
be subrogated to the rights of the mortgagee whose mortgage has been redeemed, if the
mortgagor has by a registered instrument agreed that such persons shall be so subrogated.
Nothing in this section shall be deemed to confer a right of subrogation on any person unless the

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mortgage in respect of which the right is claimed has been redeemed in full.1

The persons referred in Section 91 of the Act are-

1) Any person other the mortgagor who has interest in the mortgaged property.
2) any surety for the payment of the mortgage-debt or any part thereof
3) Any creditor of the mortgagor who has in a suit for the administration of his estate
obtained a decree for sale of the mortgaged property.2

From the above we can conclude that section 92 provides for:

I. any person other than the mortgagor referred to in section 91, and any co-mortgagor,

II. on redeeming the mortgaged-property,

III. shall have the same rights as the mortgagee whose mortgage he redeems may have
against the mortgagor or any other mortgagee,
IV. The rights are regarding redemption, foreclosure or sale of the mortgaged property.

V. This right is known as the right of subrogation and the person acquiring the same is said to
be subrogated to the rights of the mortgagee whose mortgage he redeems.

As defined under the Black's Law dictionary, 'Subrogation' is: the substitution of one person
in the place of another with reference to a lawful claim, demand or right, so that he
who is substituted succeeds to the rights of the other in relation to the debt or claim, and
its rights, remedies, or securities.

The doctrine of subrogation is a doctrine of equity jurisprudence. It does not depend upon the
privity of contract, express or implied, except in so far as equity maybe supposed to be
imported into the transaction, and thus raise a contract by implication. The doctrine will be
1
Section 92, Transfer of Property Act, 1882
2
Section 91, Transfer of Property Act, 1882

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applied in general where ever the person other than a mere volunteer pays a debt or a demand,
which in equity or good conscience should have been satisfied by another or where the liability
of one person is discharged out of a fund belonging to another, or where one person is
compelled for his own protection or that of some interest which he represents to pay a debt for
which another is primarily responsible or wherever a denial of right would be contrary to equity
and good conscience, the doctrine will never be permitted, where the application of it would
3
work injustice to the rights of those having equal or superior equities.

Such a principle of reimbursement is also recognized by Section 69 of the Contract Act, but the
section gives only a personal right, whereas this section gives a charge on the property.

AIMS AND OBJECTIVES- The aim of this research is to understand the concept of
‘subrogation’ under the Transfer of property Act, 1882 and other property laws, the history of the
doctrine of subrogation and its development, also to critically analyze the rights and liabilities of
mortgagor and mortgagee under this doctrine. The researcher will also review the recent case
laws related to this doctrine.

RESERARCH QUESTIONS-
1) What are the various types of subrogation?
2) What are the recent developments under this doctrine?
3) Who all can sue and may be sued for redemption?

RESEARCH METHODOLOGY-

The methodology used for the research in this project is from doctrinal and primary sources,
books in relation to topic and various internet websites. Various case laws regarding the topic are
also being referred in the research to substantiate the arguments. The scope of the study is
limited to the section 92 of the transfer of property Act, 1882 which is subrogation.

3
Biswar Prasad v. lal Sarnam Singh (1907) 6 Cal. L.j. 134

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1.2 HISTORICAL PERSPECTIVE

Subrogation is a roman term, which means 'substitution'4. Lord Hardwicke in his decision
in Randal V. Cockran5marked its identification with equity, in his opinion expressed, he
suggested a possible theoretical basis for the doctrine and a justification for the role of equity
in the area of contribution. In a letter to Lord Kames, he had noted that new commercial
conditions, new methods of dealing with property, and different forms of property made it
necessary for equity to play a novel part in the further development of subrogation.

The above case arose out of a decree by King George II allowing compensation to be paid to
those that suffered losses in a war with Spain. Some individuals had already been indemnified
by their insurers for the losses that they had suffered, and the insurers successfully sought
to be subrogated to the rights of their insured to receive this compensation.6

The first English case to adopt the word 'subrogation' was Stringer v. The English and Scotch
Marine Insurance Co7. In this case, the plaintiffs insured a ship cargo with the defendants
for 'taking at sea, arrests, restraints, and detainment of all Kings, princes and people.' The ship
was subsequently captured by a United States cruiser and taken into New Orleans, where a suit
for its condemnation was instituted. The plaintiffs contested the action successfully and the
captors appealed. The court ordered the plaintiffs to furnish security against costs, which they
could not afford. As a result, the ship was condemned; the plaintiffs gave formal notice of
abandonment of the cargo, and requested the insurers pay for their total loss. The court,
in holding for the plaintiff, noted that the plaintiff as the assured was free to choose between
defending the appeal before the American court or claiming a loss under the policy. Because
the assured chose the latter, the insurers were obligated to pay. However, having paid, the

4
Dr. Avtar Singh, The Transfer of Property Act pg 292, 4th edition.
5
1 Ves. sen. 98, 27 Eng. Rep. 916 (1748).
6
M.L. Marasinghe, An Historical Introduction to the Doctrine of Subrogation, Valparaiso University Law Review,
(Oct 25,2016, 10.04 PM), http://scholar.valpo.edu/cgi/viewcontent.cgi?article=1680&context=vulr.
7
L.R. 4 Q.B. 676 (1868-69).

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insurers were entitled 'to be subrogated to them, and get what they can out of the hands of
the Americans for their own benefit.'

Though, there has been some disagreement in English courts about whether subrogation is an
equitable or legal doctrine. Canadian courts have treated it as the former. The leading case in
Canada is National Fire Insurance Co. V. McLaren8 which states:

“The doctrine of subrogation is a creature of equity not founded on contract, but arising out of
the relations of the parties. In cases of insurance where a third party is liable to make good the
loss, the right of subrogation depends upon and is regulated by the broad underlying
principle of securing full indemnity to the insured on the one hand, and on the other of
holding him accountable as trustee for any advantage he may obtain over and above
compensation for his loss. Being an equitable right, it partakes of all the ordinary incidents
of such rights, one of which is that in administering relief the Court will regard not so much
the form as the substance of the transaction. The primary consideration is to see that the insured
gets full compensation for the property destroyed and the expenses incurred in making good
his loss. The next thing is to see that he holds any surplus for the benefit of the insurance
company.”

Whether the doctrine is equitable or not, the Canadian and English jurisprudence is agreed that
subrogated rights do not come from the contract of indemnity but arise by operation of the
common law to govern the relationship that such a contract creates.

At common law, no subrogated rights arise until the insured is fully indemnified for its loss.
Once full indemnity is made, the insurer has the right to commence proceedings against the
wrongdoer in the insured's name and make all decisions in the litigation. The insured has a duty
to co-operate in the litigation in matters such as giving evidence at trial.

8
(1886), 12 O.R. 682 at 687 (H.C.J.).

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It was in the case of London Assurance Co. V. Sainsbury9the principles of subrogation

established by equity were taken and forged into the common law. However, the common law
also assumed a major role in fashioning the future progress of the purely equitable doctrine. The
Court of Exchequer in the case of Deering v. Winchelsea10, held that The basis of 'bottom
of contribution' was said to be a fixed principle of Justice, and is not founded in Contract:
This contribution is considered as founded in Equity; Contract is not mentioned. The principle
operates more clearly in a Court of Equity than at Law. At Law the party is driven to an Audita
Querela or Seire Facias to defeat the execution, and compel execution to be taken against all.

11
In Craythorn V. Swinburn , the court explained the grounds upon which the courts of law
could justify the application of equitable rules in the field of contribution:

It has been long settled that, if there are co-sureties by the same instrument, and the creditor calls
upon either of them to pay the principal debt, or any part of it, that surety has a right in this
Court, either upon a principle of Equity, or upon Contract, to call upon his co-surety for
contribution; and I think, that right is properly enough stated as depending rather upon a
principle of Equity than upon Contract: unless in this sense; that, the principle of Equity being in
its operation established, a Contract may be inferred upon the implied knowledge of that
principle by all persons, and it must be upon such a ground of implied assumption, that in
modern times Courts of Law have assumed a jurisdiction upon this subject.

The Privy Council in the case of Gokuldas V. Puranmal 12held that Gokuldas was subrogated to
the rights of the prior mortgagee whom he had paid off and that this claim could not be
disposed unless it was redeemed. As per the facts of the case Gokuldas, was the creditor of the
mortgagor, purchased the equity of redemption at a sale in execution of a money decree and
got possession. He paid off a prior mortgagee but was sued for possession by a puisne
mortgagee. Further the council through this decision declared the inapplicability of the rule
in Toulmin V. Steere in India, according to the principle laid down by this case when a

9
3 Doug. 61, 99 Eng. Rep. 538 (1782).
10
(vol. 1, pp. 60-71, with American notes in the Law Library edition, vol. 65, pp. 78-104)
11
[1807] EngR 343, (1807) 14 Ves Jun 160, (1807) 33 ER 482.
12
11 IA 26.

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purchaser of equity of redemption is redeeming a mortgage there is no presumption that he

intend to keep it alive against subsequent encumbrance of which he has no knowledge but may
have had constructive notice.

As recognized by the American courts, the one who initially discharges the obligation is
called the 'subrogee' and the party who is compensated is the called 'subrogor.'

CHAPTER 2
KINDS OF SUBROGATION

2.1 LEGAL SUBROGATION

This kind of subrogation takes place by operation of Law, and is based on the principle
of reimbursement. Where a person is interested in making some payment, which another is
legally bound to make, than such person must be reimbursed when he makes the payment.
Legal or equitable subrogation is not available to volunteers, and is not available until full
compensation has been paid. It is based on equitable considerations.

Paragraph 1 of the Section deals with legal subrogation and the persons mentioned in the
paragraph acquire the right of subrogation by the mere fact of their redeeming property subject
to the mortgage irrespective of any agreement or consent of the mortgagor. This Section says
that any of the Section referred to in Section 91 of the Act on redeeming the property subject to
the mortgage have, so far as regards redemption, foreclosure or sale of such property, the same
rights as the mortgagee whose mortgage he redeems may have against the mortgagor or any
other mortgagee. The following persons are included as having a right of subrogation:-

1) A puisne mortgagee;

2) A surety;

3) A co-mortgagor; and

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4) A purchaser of the equity of redemption

A) Puisne mortgagee

He is a subsequent mortgagee, who redeems a prior mortgage; he has a right to be subrogated to

the position of the prior mortgage.

Illustration:-

A mortgages X to B for Rs 10,000- First mortgage

A mortgages X to C for Rs 8,000- Second Mortgage

A mortgages X to D for Rs 7,000- Third Mortgage

In the above illustration, A when he mortgages X a second time, he mortgages part of the equity
of redemption, that is to say, C is the assignee of part of the equity of redemption of A against B
and has therefore the right to redeem B. For the same reason D can redeem C and B.

Now when D redeems B, i.e., pays to B Rs 10,000, then D is subrogated to the right of B. In
effect, D steps into the shoes of B and acquires all his rights. For instance, D gets the right of
priority of B which means that if C were to enforce his mortgage, C must pay to D Rs. 10,000.

A subsequent mortgagee when he sues for redemption of a prior mortgage acts on his own
behalf and not an agent of the mortgagor. In fact, it is to the interest of such subsequent
mortgagee to wipe off the prior encumbrances and take away the right of prior mortgage.

B) Co-mortgagor
He is liable only to the extent of his share of the debt. When, besides redeeming his own share,
he pays off the share of the other mortgagor also, he becomes entitled to be subrogated in place
of such other mortgagor. In the case of Krishna Pillai Rajasekharan V. Padmanabha Pillai13 the
question arose whether arose that what were the rights and liabilities the parties qua each other
and whether a suit for the partition was maintainable. The court here held that it was not a case of

13
AIR 2004 SC 1206.

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subrogation by agreement but by the operation of law. Section 92 does not have the effect of a
substitute becoming a mortgagee. The provision confers certain rights on the redeeming co-
mortgagor and also provides for remedies of redemption, foreclosure and sale being available to
the substitutes as they were available to the substituted. Therefore, the suit for declaration,
partition and recovery of possession by non- redeeming co-mortgagor was held to be
maintainable.
Illustration- A and B having equal shares in X mortgage X to C for Rs. 5000. B pays off C Rs
5,000. B stands in the mortgagee’s shoes to the extent of the amount paid in excess.

C) Surety
A surety of the mortgagor is one of the persons mentioned in Section 91 as having a right to
redeem the mortgaged property and consequently he is entitled to be subrogated to the rights of
the creditor if he pays him off. To use the argument of Sir Romilly in Graythorn v.
Swimburne14, “a surety will be entitled to every remedy which the creditor has against the
principal debtor to enforce every security and all means of payment: to stand in the place of the
creditor, not only through the medium of contract, but even by means of securities entered
without the knowledge of the surety, having the right to have those securities transferred to him,
though there was no stipulation of that; and to avail himself of all those securities against the
debtor.”

D) Purchaser of equity of redemption

There were certain doubts regarding the purchaser of equity of redemption that whether he can
be subrogated or not. Equity of redemption is regarded as a property of the mortgagor, which he
can sell or assign. The purchaser of such equity becomes owner of the property. The Privy
Council in the case of Malireddy Ayyareddy V. Gopi Krishnayya15held

'it is now settled law that where in India there are several mortgages on q property, the owner
of the property subject to a mortgage may, if he pays off an earlier charge, treat himself as

14
14 Ves. 160)
15
AIR 1924 PC 36

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buying it and stand in the same position as his vendor, or to put it in another way, he
may keep the encumbrance alive for his benefit and thus come in before a later mortgagee.
This rule would not apply if the owner of the property had covenanted to pay the later
mortgage- debt but in this case there was no such personal covenant.'

In Gokuldas v. Puranmal16, the Privy Council had said that it was a question of intention of the
person paying off the mortgage whether he wanted to keep the mortgage alive. The position,
therefore, is that where X mortgages his property first to A and then to B, and C purchases, the
equity of redemption and pays off A, C is subrogated to the rights of A and in action by B to
enforce his mortgage, C can use the prior mortgage in favour of A as a shield.

Mortgagor redeeming his own share and purchasing mortgage rights in respect of remaining
property. He can hold the mortgagee right in view of his purchase. The law permits mortgagee
rights to be acquired both by subrogation if the conditions of Section 92 of the T.P. Act are
satisfied and also purchase. 17

Covenant excludes subrogation-

Although ‘mortgagor’ includes a purchaser of the equity of redemption, yet the purchaser of an
equity of redemption is not excluded from the right of subrogation. But where he discharges a
mortgage because he has undertaken to do so, he cannot claim subrogation.

2.2 CONVENTIONAL SUBROGATION

The conventional Subrogation takes place where the person paying off the mortgage- debt is a
stranger and has no interest to protect, but he advances the under an agreement, that he would be
subrogated to the rights and remedies of the mortgagee who is paid off. The right to subrogation
can be claimed only if the mortgagor has agreed by registered instrument that he shall be
subrogated.

16
(1884) 10 Cal. 1035;11 I.A. 126
17
Roshan v. UOI, AIR 1972 Punj. And Har. 352.

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As stated in Ghosh on mortgage18”the real question in all such cases is whether the payment
made by a person who is not in any way interested in the mortgaged property or the right of
redemption was a mere loan to the debtor on his personal security, or whether it was made under
an agreement that he should be substituted for the creditor. Although in most cases, the court
may presume such an agreement, we think it desirable to provide that such an agreement must be
reduced to writing and must be registered.”

It should be noted, therefore, be noted that the right of subrogation can be claimed under Para 3
only if the mortgagor has agreed by registered instrument that he shall be so subrogated. The
basic difference underlying between Para 1 and Para 3 is that Para 1 refers to a person redeem in
a property while Para 3 to a person who advances money with which a mortgage is redeemed.
Para 1 deals with subrogation arising by operation of law, while Para 3 deals with subrogation by
agreement. At any rate, the first Para is not subject to third Para. The two Para do not overlap
and are mutually exclusive. The doctrine of subrogation is not applied to a mere stranger and
volunteer who has paid the debt of another without any agreement for subrogation.

In Ram Tuhul Singh v. Bisewar lall Sahoo 19it was held that to support the claim to subrogation
by one who has lent money to a mortgagor to redeem a mortgage, an agreement express or
implied that the lender shall be subrogated to the rights of the creditor was necessary to be
proved.

In Janaki Nath Roy v. Pramatha Nath20Malia it was held that in order to succeed on the
equitable doctrine of subrogation to prove that there was an agreement between him and the
debtor or creditor that he should receive and hold an assignment of the debt as security. As he
has not been able to prove such agreement his appeal failed.

After the amendment of the Act the right of subrogation can be claimed by the lender only if the
mortgagor has by a registered instrument agreed that he shall be so subrogated. The question is
not to be determined by nice considerations of what maybe fair or proper according to the
highest morality. To support such a suit there must be an obligation express or implied to repay.

18
Vol. I, p. 364, 5th Ed.
19
(1875) LR 2 IA 131.
20
(1939) LR 67 IA 82

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CHAPTER 3
IMPORTANT CASE LAWS

21
The question before the court in the case of Isap Bapuji Amiji' V. Umarji Abhram Adam ,
was whether, Section 92 of the Transfer of Property Act, 1882, has retrospective effect or not;
as per Broomfield, J., the retrospective effect should be taken as a guide for determining in
cases, where there is a conflict of authority, what equitable rules not inconsistent with the
Act should be adopted as valid in India; whereas according to N.J. Wadia, J., Section 92 of
the Transfer of Property Act, as amended in 1929, has a retrospective effect.

22
It was held in the case of Narain V. Narain , that where the mortgagor himself redeems
the property this doctrine couldn't be invoked. The mortgagor who discharges a prior debt
is not entitled to be subrogated to the rights and remedies of his creditor. This is because by
discharging a prior encumbrance created by himself, he is discharging his own obligation to his
creditor.

23
In the case of Vishnu Balkrishna Naik V. Shankareppa Gurlingappa Wagarali , the Bombay
High Court has opined that:

Where a person himself redeems a mortgage, that is to say, pays the mortgage money out of his
own pocket and not merely discharges a contractual liability to make the payment, he is entitled
to the right of subrogation under the first paragraph of Section 92, if he is one of the persons,
other than the mortgagor, enumerated in Section 91. Where, however, such person does
not himself redeem the mortgage, that is to say, does not himself pay the money out of his
own pocket in excess of his contractual liability but advances money to a mortgagor and the

21
(1937) 39 BOMLR 1309
22
AIR 1931 All 40
23
LAWS(BOM)-1941-10-3

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money is utilized for payment of a prior mortgage, whether the money is actually paid
through the hands of the mortgagor or is left for such payment in the hands of the person
advancing the money and it is then paid to the prior mortgagee through the hands of that person,
the latter acquires the right of subrogation under the third paragraph of Section 92, only if the
mortgagor has by a registered instrument agreed that he shall be so subrogated. The Supreme
Court in the case of Ganesh Lal V. Joti Prasad 24discussed the nature and extent of a redeeming
co-mortgagors right to recover contribution from his co-debtor, The court here held that,

Equity insists on the ultimate payment of a debt by one who in justice and good conscience
is bound to pay it, and it is well recognized that where there are several joint debtors, the
person making the payment is the principal debtor as regards the part of the liability, he is
discharged and a surety in respect of the shares of the rest of the debtors. Such being the
legal position as among the co-mortgagors, if one of them redeems a mortgage over the
property which belongs jointly to himself and the rest, equity confers on him a right to
reimburse himself for the amount spent in excess by him in the matter of redemption; he
can call upon the co-mortgagors to contribute towards the excess which he has paid over
his own share... while it can be readily conceded that the joint debtor who plays up and
discharges the mortgage stands in the shoes of the mortgagee... he will be subrogated to the
rights of the mortgage only to the extent necessary for his own equitable protection... so far
as it is necessary to enforce his equity of reimbursement'.... It is as regards the excess of the
payment over Ms own share that the right can be said to' exist.... The redeeming co-mortgagor
being only a surety for the other co-mortgagors, his right, strictly speaking is a right of
reimbursement or contribution.

The above mentioned judgment has been upheld time and again by the Supreme Court itself and
various High courts.

The same view was upheld by the Supreme Court in the case of Valliamma Champaka Pillai V.
Sivathanu Pillai and Ors25. , where it was held that the rights created in favor of a redeeming

24
1953 AIR, 1 1953 SCR 243
25
1979 AIR 1937, 1980 SCR (1) 354

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co- mortgagor as a result of discharge of debt are 'so far as regards redemption, foreclosure or
sale of such property, the same rights as the mortgagee whose mortgage he redeems'.
Further Subrogation rests upon the doctrine of equity and the principles of natural justice and
not on the privity of contract, One of the principles is that a person, paying money which
another is bound by law to pay, is entitled to be reimbursed by the other. This principle is
enacted in Section 69 of the Contract Act, 1872. Another principle is found in equity: he who
seeks equity must do equity'

The High Court of Kerala in the case of Sivasankara Pillai & Anr.V. Narayana Pillai & Ors. Has
drawn a distinction between section 92 of the TP Act and section 69 of the Indian Contract Act,
1872 on the basis of the fact that, Subrogation rests upon the doctrine of equity and principles of
natural justice and not on privity of contract S. 92 of the Transfer of Property Act and S. 69 of
the Contract Act recognises the principle of equity of reimbursement.

When the scope section 92 of the Transfer of Property act and the extent of rights and powers of
subrogee, came into consideration before the court in the case of Krishna Pillai Rajasekharan
26
Nair V. Padmanabha Pillai , the court summarized the principles laid down in the case of
Ganeshi Lal as under:

Having examined the issue from all-possible angles and having referred to Sir Rashbehary Ghose
on Law of Mortgage in India, Harris on Subrogation, Sheldon on Subrogation, Pomeroy on
Equity Jurisprudence and a few English and Indian authorities available on the point, what Their
Lordships conclusion in Ganeshi Lal 27case may be summed up as under:

1. When the co-debtor or co-mortgagor pays more than his share to the creditor for the
purpose of redeeming a mortgage, the redeeming mortgagor is principal debtor to the extent
of his share of the debt and a surety to the extent of the share in the debt of other co-

26
[2003] Insc 642 (15 December 2003)

27
AIR 1953 SC 1

19
 DOCTRINE OF SUBROGATION

mortgagors. The redeeming co-mortgagor being only a surety for the other co-mortgagors,
his right is, strictly speaking, a right of reimbursement or contribution.

2. The substitution of the redeeming co-mortgagor in place of the mortgagee does not
precisely place the new creditor (i.e. the redeeming co-mortgagor) in place of the original
mortgagee for all purposes. If, therefore, one of the several mortgagors satisfies the
entire mortgage debt, though upon redemption he is subrogated to the rights and remedies of
the creditor, the principle has to be so administered as to attain the ends of substantial justice
regardless of form; in other words, the fictitious cession in favor of the person who effects
the redemption, operates only to the extent to which it is necessary to apply it for his
indemnity and protection.

3. The doctrine of subrogation must be applied along with other rules of equity so that the
person who discharges the mortgage is amply protected and at the same time there is no
injustice done to the other joint debtors. He who seeks equity must do equity.

4. There is a distinction between a third party who claims subrogation and a co-mortgagor
who claims the right. The co-mortgagors stand in a fiduciary relationship qua each other. The
redeeming co-mortgagor can only claim the price, which he has actually paid together
with incidental expenses. Strictly speaking, therefore, when one of several mortgagors
redeems a mortgage, he is entitled to be treated as an assignee on the security, which he may
enforce in the usual way for the purpose of reimbursing himself. The subrogation to the rights
of the mortgagee by the redeeming co-mortgagor is confined only to the extent necessary
for his own equitable protection. The redeeming co-mortgagor can, just as the surety would,
ask to indemnify for his loss and he can invoke the doctrine of subrogation as an aid to the
right of contribution.

Further in the case of Oriental Fire & General Insurance Co. Ltd.V. American President Lines
Ltd. and Anr.28 , Maharashtra High Court drew an distinction between section 92 and section
135A of the act:

28
(1968) 70 BOMLR 487, 1968 38 CompCas 294 Bom

20
 DOCTRINE OF SUBROGATION

The difference between subrogation under Section 92 of the Transfer of Property Act, 1882,
and Section 135A of the Act is that under Section 92 the subrogation results in the extinction
of the original mortgagee's rights and, therefore, the original mortgagee has no more rights
under the mortgage, whereas a subrogee under Section 135A acquires rights only to the
extent of his payment which may be less than the rights of the assured himself. Another
distinction is that the person who redeems under Section 91 is an interested person or a surety
or a creditor and under that section that subrogee would get the rights conferred under Section
69 of the Indian Contract Act, 1872, because it would be a payment made by a person
interested; but in the case of subrogation under Section 185A the insurer pays under his own
contract of insurance and he is not interested in discharging the liability of the wrongdoer or
the tortfeasor. The third distinction is that Section 92 confers on the person redeeming rights of
the mortgagee 'against the mortgagor or any other person'. It is these words that confer the
right to sue. There are no such words in Section 135A(2) and (3) as 'against the wrongdoer or
tortfeasor.'

In the case of Velayudhan Padmanabhan'V.' K. Thyagarajan29, the court held that, as under
section 92 of the act:

A co-mortgagor is entitled to file a suit for redemption of mortgage. A co-mortgagor who

redeems the mortgage would have the same rights as the mortgagee whose mortgage he redeems
may have against the mortgagor, in so far as regards redemption, foreclosure or sale of the
property, as per Section 92 of the Transfer of Property Act. Such redeeming co-mortgagor gets
subrogated to the rights of the mortgagee whose mortgage he redeems. The redemption sought
for in the present case is in respect of the whole of the mortgaged property and not the one-half
share of the plaintiff. The bar contained in Section 92 of the Transfer of Property Act is that a
right of subrogation would not be available to any person unless the mortgage in respect of
which the right is claimed has been redeemed in full.

29
LAWS(KER)-2011-3-379

21
 DOCTRINE OF SUBROGATION

30
In the case of Maheswaradhathan Nambudiri V. Narayanan Nambudiri and others, Kerala
High Court has further held that:

When a mortgagor redeems a mortgage what happens is the extinction of the mortgage right by
its satisfaction, and the question of redemption partaking the nature of an assignment, thus
keeping the mortgage right alive, can arise only in cases where the redemption gives the person
redeeming the right of subrogation to the rights of the mortgagee whose mortgage he redeems
Section 92 makes it clear that the mortgagor has no such right and it is clear that when a
mortgagor redeems a mortgage the mortgage is extinguished and is in no sense kept alive even if
there be some intervening interest like a puisne mortgage.

In the case of Thamattoor Chelamanna and Anr.V. Thamattoor Kurumbikkat Pare Manakkal
Parameswaran and Ors31 the question that arose before the Kerala High Court was,
whether person redeeming has right of subrogation in respect of redeemed sub-mortgage, The
court here held that, where person redeeming is a mortgagor no such right of subrogation
arises, further, there is no question of mortgagor holding redeemed sub-mortgage as separate
right.

Additionally, in the case of Raghavendracharya Appacharya Katti V. Vaman Shriniwas

Deshpande32 the Bombay High court drew analogy between subrogation and substitution,
as under:

Subrogation means neither more nor less than substitution. A person who is subrogated to the
status of a mortgagee has all the rights of a mortgagee, not merely some of the rights, and those
rights must include rights in connection with the particular mortgage by redeeming which he gets
the benefit of Section 92 of the Transfer of Property Act. One of the implications of the doctrine
of subrogation is that the subrogee keeps the mortgage alive for his own benefit. The mortgage
that is paid off is not extinguished but is treated as assigned to the subrogee.

30
[ In the High Court of Kerala, A. S. No. 208, 209, 210 of 1964 . ] 0
31
AIR1971Ker3
32
(1943) 45 BOMLR 253

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 DOCTRINE OF SUBROGATION

CHAPTER 4
SUBROGATION AND ALLIED PRINCIPLES

Subrogation and Assignment

It was held in the case of Gujrat Andhra Road Carriers Transport Contractors V. United India
Insurance Co. Ltd33., an assignment or transfer can take place only with specific acts of
parties. The assignee or transferee acquires all the rights in the property. A transfer operates as
a transfer of the totality of the rights. Similar principle has been laid down by the American
courts in the case of Western Cas. & Sur. Co. V. Bowling34 and Hospital Serv. Corp.V.
Pennsylvania Ins. Co.35

Whereas Subrogation is the effect of the situation where a mortgage is redeemed by a person
other than the mortgagor, and he subrogated only to the rights of the mortgagor and no more.
While subrogation is not an assignment, in a broad sense subrogation may be considered as
assigning a cause of action by operation of law and typical contractual subrogation provisions
may use assignment language. Further assignment and subrogation may apply in a single case.

Contribution, Indemnity and Subrogation

Technically speaking, 'contribution' and 'indemnity' are mutually exclusive remedies but are
often asserted as alternative causes of action in the same lawsuit. 'Indemnity' shifting less than
complete liability is really contribution and 'contribution' shifting all liability is actually
indemnity.

Additionally, Contribution and indemnity actions sometimes appear to seek the same relief as
subrogation allows and are often asserted as alternative theories to subrogation recovery. The
distinction between contribution/indemnity and subrogation lies in the person claiming the right

33
AIR 2006 AP 401, 2006 (5) ALD 519
34
39 Colo. App. 357, 565 P.2d 970 (1977)
35
101 R.I. 708, 227 A.2d 105 (1967)

23
 DOCTRINE OF SUBROGATION

and the person whose debt is paid is because contribution and indemnity require a common
liability with the one against whom contribution and indemnity are sought.

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 DOCTRINE OF SUBROGATION

CHAPTER 5
CONCLUSION

Countries which have inherited the common law system will typically have a doctrine of
subrogation, though its doctrinal basis may be rationalized differently depending upon the extent
to which Equity remains a distinct body of law in that jurisdiction.

English courts have now accepted that the concept of unjust enrichment has a role to play in
subrogation. In contrast, this approach has been stridently rejected by the High Court of
Australia, where the doctrinal basis of subrogation is said to lie in the prevention of
unconscionable results: for example, the discharge of a debtor or one party getting double
recovery.

Supreme Court of India held that in the case of subrogation, Rights of Subrogation vests by
operation of law rather than as the product of express agreement. Right of Subrogation can be
enjoyed by the insurer as soon as payment is made, whereas an assignment requires an
agreement that the rights of the assured be assigned to the insurer. In the case of subrogation, the
assignee can recover whatever amount has been paid by him to the insurer whereas in the case of
assignment, he can recover more than the actual loss from the insurer/third party. Thus Supreme
Court of India came to the conclusion that the letter styled as "subrogation" was in fact
assignment of the rights by the insured and, therefore, the insurer was not a 'consumer' within the
meaning of the Consumer Protection Act, 1986 and, therefore, not entitled to maintain the
complaint. Where subrogation is available, the subrogated party is entitled to stand in the shoes
of another and enforce that other party's rights. If the equity is established, the court may effect
the subrogation remedy by way of equitable lien, charge, or a constructive trust with a liability to
account. Crucially, the claimant's rights are wholly derivative; hence the claimant has no higher
rights than the person to whom he or she is subrogated.

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 DOCTRINE OF SUBROGATION

BIBLIOGRAPHY

1 Mulla, The Transfer of Property Act, 9th Ed., LexisNexis Butterworths, 2004.
2 Nandi, N., The Transfer of Property Act, 1882, 2nd Ed., Dwivedi Law Agency,
Allahabad, 2010.
3 Row, Sanjiva, The Transfer of Property Act, 4th Ed., Vol. 1, The Law Book Company (P)

Ltd., Allahabad, 1989.

4 Sinha, Dr.R.K., The Transfer of Property Act, 11th Ed., Central Law Agency, Allahabad,

2010.
5 Sohoni, Vishwas Shridhar, Transfer of Property Act, Premier Publishing Company,

Allahabad, 2008.
6 The Transfer of Property Act, 1882, Bare Act, Universal Law Publishing Co. Pvt. Ltd.,

New Delhi, 2010.

7 Vakil, Darashaw J., Commentaries on the Transfer of Property Act, 2nd Ed., Wadhwa
and Company Nagpur, New Delhi, 2004.

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