Bangaru Ammal vs M.V. Kuppuswami Chettiar and Others

Jagadisan, J.—This is a simple appeal; but a question of law is raised on facts which are plain and undisputed. The appellant claims a right of

subrogation to the extent of Rs. 850 u/s 92 of the Transfer of Property Act in the following circumstances.

The first respondent, who is now dead and is represented by his legal representatives, respondents 2 to 5, instituted the suit, O. S. No. 5o of

1956, Sub Court, Tiruchirapalli, for recovery of money due on a simple mortgage dated 1-11-1944 in his favour executed by the first defendant in

the suit. Items 1 to 3 of the plaint schedule properties belonged absolutely to the first defendant. Defendants 2, 3 and 4 were impleaded as puisne

mortgagees, holding usufructuary mortgages, of items 1 to 3 respectively. The first defendant held only mortgage rights over items 5 and 6 of the

plaint schedule and the fifth defendant was impleaded as he claimed a vendor''s lien over these items. The fourth defendant, who was the

usufructuary mortgagee of the plaint item 3 resisted the suit, questioning the truth and validity of the mortgage sued upon, and also claiming priority

to the extent of Rs. 850, in respect of that item relying upon the doctrine of subrogation. The learned Subordinate Judge found that the suit

mortgage was true, valid and supported by consideration and negatived the right of subrogation. He passed the usual preliminary mortgage decree

for the suit amount and granted two months time for redemption. This appeal is by the fourth defendant against the said judgment and decree. The

mortgagor first defendant has been adjudicated as insolvent pending the appeal and the Official Receiver in charge of his estate is now the sixth

respondent before me.

The necessary facts, on which the appellant''s claim for priority to the extent of Rs. 850 rests, may now be stated. Plaint item 3 was originally

owned by one Kaveri Ammal. She executed an othi deed (usufructuary mortgage) in favour of one Nagammal under a registered document dated

9-9-1940, to secure a debt of Rs. 850. The first defendant purchased the property from Kaveri Ammal under a conveyance dated 21-5-1954,

agreeing to discharge Nagammal''s mortgage in part payment of the consideration due for the purchase. He failed to do so, and executed an othi

deed dated 4-4-1947 in favour of Radhakrishnammal securing a debt of Rs. 1600. He got Rs. 750 cash from Radhakrishnammal and directed her

to discharge Hagammal''s mortgage. Radhakrishnammal paid Rs. 850 to Nagammal, discharged her mortgage and obtained possession of the

hypotheca. On 23-5-1954. Radhakrishnammal assigned her mortgage right to the fourth defendant for proper consideration and thus the fourth

defendant came to occupy the position of an usufructuary mortgagee. Her contention is that Radhakrishnammal got sub-rogated to the rights of

Nagammal who was a prior incumbrancer to the plaintiff. As already stated, the plaintiff obtained the suit mortgage only on 1-11-1944. The fourth

defendant as the assignee of Radhakrishnammal is entitled to stand in her shoes, but the question is whether Radhakrishnammal has a valid claim of

subrogation u/s 92 of the Transfer of Property Act, in respect of Nagammal''s mortgage which she admittedly discharged.

The relevant provisions of the Transfer of Property Act relating to subrogation are :

Besides the mortgagor, any of the following persons may redeem, or institute a suit for redemption of the mortgaged property, namely :

(a) any person (other than the mortgagee of the interest sought to be redeemed) who, has any interest in, or charge upon, the property mortgaged

or in or upon the right to redeem the same;......

Any of the persons referred to in Section 91 (other than the mortgagor) or 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 mortgages.

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 had advanced to a 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 person shall be subrogated.

Nothing in this section shall be deemed to confer a right of subrogation on any person unless the mortgage in respect of which the right is claimed

has been redeemed in full.

The essential requisites for a valid claim for subrogation are : (i) the person claiming the right must have an interest in or charge upon the pro perty

mortgaged entitling him to redeem the mort gage; (2) he must, redeem the mortgage; or (3) a person must have advanced money to a mortgagor to

redeem a mortgage with an agreement under a registered instrument that he shall be subrogated to the rights of the mortgagee whose mortgage is

discharged.

Paragraph (i) of Section 92 deals with what is familiarly called ""legal"" subrogation and paragraph 3 covers cases of ""conventional"" subrogation,

so called, outside paragraph I. The appellant does not claim that she is entitled to subrogation under a registered agreement, as obviously there is

no such agreement. Her, contention, however, is that she, as the assignee from Radhakrishnammal was a person interested in discharging the

encumbrance in favour of Nagammal, and that, therefore, she would be entitled to invoke the benefit conferred by the first part of Section 92. The

assignor of the appellant was a puisne mortgagee who discharged a prior mortgage under a term of the puisne mortgage. The said assignor paid

Nagammal only as the agent of the first defendant, mortgagor, from and out of his funds reserved with her for that purpose. Though she had

certainly no antecedent right or interest in the hypotheca, prior to the mortgage in her favour, which needed protection. The fact that she paid the

money to Nagammal did not make her the redeeming party. The redemption was effected by the first defendant through the medium of the

appellant''s assignor by the machinery of a mortgage in her favour. It is true that she became a mortgagee but that was the very transaction under

which she covenanted to discharge the earlier mortgage in favour of Nagammal. Can it be said that the redemption of the prior mortgage was

necessitated to protect any preexisting right of the appellant''s assignor? The answer can only be in the negative. The real position is that the

mortgagor, the first defendant, redeemed the mortgage of Nagammal by raising money on a fresh hypothecation of the property in favour of

Radhakrishnammal to claim to be subrogated to the rights of Nagammal, solely on the ground that part of consideration for the mortgage in her

favour was utilised to pay Nagammal. It is well accepted rule of law that the mere fact that one individual advances money to another tc enable him

to pay specific debts does not in the absence of a special bargain confer on the lender the rights of those whose debts are discharged. (Eve J. in

Wylie v. Carlyon, 1922-1 Ch. 51.)

In Naduvile Marathe Ikkali Amma''s daughter tavazhi Manager Lakshmi Amma Vs. Karuppath Ammalu Amma''s son Sankara Narayana

Menon, , it was held that a subsequent mortgagee, who undertakes to pay off three prior mortgages but pays only two of them cannot resist the

claim of the third mortgagee who remains unpaid by setting up the discharge of the other encumbrances as a shield and claiming priority in respect

of those payments unless there is an agreement between the mortgagor and the subsequent mortgagee that the latter shall be subrograted in respect

of the mortgages discharged. At page 7 (of Mad LJ) : (at p. 174 of AIR), Varadachariar J. observes :

There is a well established distinction between cases in which a person who has a pre-existing interest in property pays off a prior charge on that

property for the protection of his own interest and cases in which a person acquires an interest in property only by reason of his advancing money

to pay off an existing mortgage debt. It seems to me that the first clause of Section 92 must be held to relate to the first type of cases above

referred to and the third clause to the second type.

In Vedantam Subbarayudu (dead) and Others Vs. Chattapalli Lakshminarasamma and Others, it was contended that a person who advances

money to a mortgagor and takes a mortgage or sale would come within the first clause of Section 92. A Division Bench consisting of

Venkataramana Rao and Newsam JJ. repelled the contention. Venkataramana Rao J. points that, prior to the enactment of Section 92, an

advance of money by a mortgagee or vendee to discharge a prior mortgage resulted only in the extinction of that mortgage, though the rule would

be different if there was an intermediate encumbrance. Complicated questions involving niceties of intention and state of mind of the subsequent

mortgagee arose frequently and equity leaned in favour of such mortgagee who had discharged a prior encumbrance. Venkataramana Rao J.

observes at page 547 (of Mad LJ) : (at p. 956 of AIR) :

In order, therefore, to avoid question of intention and onus being gone into by courts and with a view to place the right of subrogation on a

statutory basis the Legislature enacted Section 92 of the Transfer of Property Act............ Section 92(i) deals with the case of a person having an

existing interest and Section 92(iii) deals with the case where under the previous state of the law the right of subrogation invoked on the doctrine of

conventional subrogation.

I respectfully agree with this observation. In Mullah''s Transfer of Property Act, the position is succinctly summed up thus at page 552 :

The weight of authority clearly seems to be in favour of the view that the two paragraphs (of Section 92) are mutually exclusive and that the first

paragraph: deals with persons who having a pre existing interest in the property redeems a prior mortgage to protect his own interest and that a

person who acquires interest only by advancing money with which the prior mortgage it satisfied does not come within the first paragraph even

though he secures his advance by a mortgage or becomes a purchaser. Such a person comes within the third paragraph and can only claim

subrogation if there be an agreement between him and the mortgagor in, writing registered.

The decision of the court below is right. The appellant cannot sustain the claim for priority based on subrogation. The appeal fails and is dismissed

with costs.