Narayana Kutti Goundan vs Pechiammal alias Mahali Ammal and c.

Sundara Aiyar, J.—The facts necessary for the disposal of this second appeal may be very briefly stated. One Venkatachella Mudali

hypothecated certain land to one Muthu Goundan in 1898 and died in 1904 leaving behind him two widows, the 1st and and defendants in this

suit, and 5 daughters defendants Nos. 3 to 7. Muthu Goundan obtained a decree on his mortgage bond against the widows and certain purchasers

from them. The property was directed to be sold in execution of the decree and while the sale was actually going on, Narayana Kutti Goundan,

one of the plaintiffs in this suit, paid the amount of the decree into court. Four of the daughters executed a mortgage bond in favour of the two

plaintiffs here for the amount which the bond alleges was received from them for discharging the amount required for paying up the decree amount

due to Muthu Goundan. The property mortgaged under the instrument was the same as that which had been mortgaged to Muthu Goundan. The

plaintiff''s suit is to recover the amount due under their mortgage bond by sale of the mortgaged property and personally from the defendants Nos.

3 to 6, the executants of the bond. The District Munsif was of opinion that the daughters as reversioners having only a spes successionis had no

such interest in the mortgaged property as would entitle them to redeem Muthu Goandan, and that the plaintiffs obtained no legally enforceable

right under the mortgage to them as against the mortgaged property. He therefore refused to pass a decree for the sale of the land, but gave the

plaintiffs a personal decree against the defendants Nos. 3 to 6. On appeal the District Judge confirmed the Munsif''s decree holding that, though the

defendants Nos. 3 to 6 must be held to have some interest in the land and might be entitled to a charge on the land against the 1st and 2nd

defendants, the plaintiffs who lent money to the daughters could not be held to have obtained any valid right under their mortgage. The 1st plaintiff,

Narayana Kutti Goundan, has appealed to this court from the decree of the District Judge.

It is clear from the facts of the case that the plaintiffs lent moneys to the four daughters on the security of such interest as they would obtain in the

land by redeeming Muthu Goundan''s mortgage. If the daughters obtained a valid charge on the land against the widows, the defendants Nos. 1

and 2, by redeeming the mortgage, there is no reason for holding that they could not create the mortgage in question in the plaintiffs'' favour

charging their right.

The plaintiffs then would stand in the position of submortgagees with respect to the defendants Nos. 1 and 2 and would be entitled to sue both

their mortgagors, the daughters, and the defendants Nos. 1 and 2 to enforce their mortgage by the sale of the 1st and 2nd defendants'' rights in the

land. It was not suggested in the courts below that the plaintiffs lent the money merely on the personal security of the executants of the mortgage

deed. The question for decision in this second appeal therefore is whether the daughters who executed it, obtained any charge over the land by

discharging the amount due to Muthu Goundan. It is contended for the appellant, first, that they would stand in the shoes of Muthu Goundan by

subrogation merely by discharging his debt, and, secondly, that they were persons entitled to redeem Muthu Goundan''s mortgage u/s 91 of the

Transfer of Property Act and by redeeming him became entitled to his right as against the 1st and 2nd defendants The first of these two arguments

was put on a broader ground than the second, it being contended that, whether a reversioner under the Hindu Law is a person entitled to redeem

u/s 91 of the Transfer of Property Act or not, the right of subrogation was wider, and that, the daughters having discharged a burden on

Venkatachellam''s estate in the hands of the 1st and 2nd defendants, the land in their possession became liable for the amount paid by them. In

support of this argument, the judgment of Warrington J. in Butler v. Rice (1910) 2 Ch. 277 was relied on. In that case, one Mrs. Rice was the

owner of a house in Bristol and of property in Cardiff, which were together subject to a charge in favour of a bank to secure � 450 and interest,

and the title-deeds ot both the properties were deposited with the bank. Mr. Rice asked the plaintiff Butler to lend him � 450 for the purpose of

paying off the mortgage. Mr. Butler agreed to lend the amount upon a legal mortgage for � 300 of the Bristol house and a guarantee of � 150

by Mr. and Mrs. Rice''s solicitor, who was to hold the title-deeds for him in the meantime. The money was paid and the deeds of the Bristol

property which were recovered from the bank passed into the custody of the solicitor. Mrs. Rice did not know of the transaction and subsequently

refused to execute a mortgage in favour of the plaintiff. B itler instituted an action against Mr. and Mrs. Rice and the solicitor for a declaration that

he was entitled to a charge on the Bristol property for � 450 and interest. Warrington J. took the question for determination to be whether in the

circumstances of the case, Mrs. Rice was entitled to hold the Bristol property discharged from the debt of $ 450, not one penny of which, said the

learned Judge, she had paid off herself, or whether the person who paid was entitled to treat the bank''s charge as still on foot in his favour. The

learned Judge observes : "" In the first place, I find from the facts I have stated that it was not the intention of the plaintiff, nor indeed is it possible to

suppose that any sensible man would have such an intention, to discharge the property from the debt. There are only two questions which have to

be dealt with in order to arrive at the further conclusion that in equity the debt is still kept alive. The first is this : is it material that the owner of the

property, the mortgagor, has not requested the person who paid the money to make the payment and, secondly, is the plaintiff''s right affected by

the further intention that, when the transaction was fully carried out, his position should be secured by a legal mortgage for � 300 and a guarantee

of �150 ? On the first question, it should be observed that this is not a case in which a person seeks to create a charge in his own favour. Here,

there was an existing charge, and the only question is whether it had been paid off or kept alive. On such a question as that, it appears to me that

the concurrence of the mortgagor is immaterial. Her position is not affected. The only alteration in her position is that instead of owing the money to

A she will in future owe it to B. ""Again he says: "" Then, does the fact that the plaintiff intended, if the transaction was carried out, to have a legal

mortgage on the Manor Road property only and a guarantee for the remaining �150 prevent the application of the doctrine ? .Plainly not. His

meaning was that he should have a further security , but that is no evidence that he intended in the meantime to give up such security as a transfer of

the .deeds to him would give him. The evidence which he gives, which I find to be true, as to what he said at the second interview supports this,

namely, that the deeds were to be taken by the solicitor and held by him for the plaintiff. Such security as that gave would be superseded by the

better security to be given afterwards."" It maybe noted that it was not contended that her husband had any right to act on behalf of Mrs. Rice or

that the solicitor was entitled to enter into any agreement on her behalf. In these circumstances, it appears to me that the judgment of the learned

Judge went very far and is not supported by any previous decision of the English courts. The learned Judge appears to hold that, though the

plaintiff had no previous interest in the property to sustain his action in paying off a previous mortgage and claiming a charge for the amount paid by

him, he was entitled to stand in the shoes of the bank whose charge he discharged. He observes that as there was an existing charge in favour of

the bank the concurrence of the mortgagor is immaterial. The learned Judge no doubt refers to the agreement between Butler and Mr. Rice and the

solicitor that the deeds were to be taken by the solicitor and held by him for Butler, but it is difficult to see that this would have any bearing on the

question if Mr. Rice and the solicitor had no right to act for Mrs. Rice. The decision seems almost to go the length of holding that even a volunteer

who pays off an existing mortgage would be entitled to a charge on the mortgaged property for the amount he paid. The decision is not based on

any agreement between Butler and the debtor that the former should have the rights of the latter? The learned Judge says that the judgment in

Patten v. Bond 60 Law Times. 583 and the decision in particular of Romer J. in Chetwynd v. Allen (1899) 1 Ch. 353 are consistent with the view

expressed by him, ""for in the case before him as in this, the material payment was made without the knowledge and without any communication

with the person who was the real owner of the mortgaged property, and, notwithstanding that, Romer, J. held that the charge was still on foot."" In

Patten v. Bond 60 Law Times. 583 the money was lent at the request of trustees for the purpose of presetting the trust estate. In such cases, a

right of subrogation is undoubtedly recognised in the English Law. In Chetwynd v. Allen (1899) 1 Ch. 353 the person who claimed the right of

subrogation paid the money at the request, of the trustee for the owner of the property, who was the trustee''s wife, in order to discharge a

mortgage executed on her property with her consent. He was therefore entitled to bind her interest by an agreement which he entered into for

discharging that mortgage. The case is therefore, not similar to Butler v. Rice (1910) 2 Ch. 277. On the other hand, the decision in In re Wrexham,

Mold and Connah''s Quay Railway Company (1898) 2 Ch. 663 and (1899) 2 Ch. 440 appears to be against the view maintained by Warrington

J. There, a Railway Company, which had issued debenture stocks and whose power of borrowing was exhausted, borrowed money from their

bankers to pay a half-year''s interest on the stocks, the bankers paying the interest warrants of the stock-holders when presented to them. Soon

after this a judgment-creditor of the company presented a petition under the Railway Companies Act, 1867, and a Receiver was appointed under

the petition. The Receiver had in his hands sufficient money to pay the next half year''s interest due to some of the stock-holders. The bank claimed

priority in respect of their advances over all interest payable in respect of the debenture stock ; this claim was negatived by Romer J. and by the

Court of Appeal. Rigby h. J. observes: "" The claim is rested on a supposed subrogation and right to stand in the place of, and with the right to the

securities and priorities of the creditors who have been paid off, and this is the only claim with which I propose to deal. I do not think that any right

of subrogation to the securities or priorities of creditors paid off out of moneys borrowed in excess of borrowing powers has ever been allowed, or

can be justified in principle."" Lindley, M.R. and Vaughan Williams L.J. took the same view. It may be observed that the bank''s rights against the

company as a simple creditor apart from any question of priority was not denied as the money though borrowed by the company in excess of their

powers was used for discharging claims lawfully binding on the bank.

The principle governing the right of subrogation in cases where it is claimed by a person, who without any previous interest in the property

discharges a mortgage on it, is expressed in Jones on Mortgages thus : "" Under the equitable principle of subrogation, one who pays a mortgage

debt under an agreement for an assignment or for a new mortgage for his own protection or for the benefit of another, acquires a right to the

security held by the other.'''' The learned author quotes a passage from a recent Georgia case which may be cited here "" It has been said that

subrogation was a '' benevolent'' doctrine and equity would apply it in any case in which justice required it; and under sanction of this elastic

expression cases can be found where it was applied without the semblance of an agreement. We think the safer and better rule to be, and we

therefore hold, that a subrogation will arise only in those cases where the party claiming it advanced the money to pay a debt which, in the event of

default by the debtor, he would be bound to pay or where he had some interest to protect, or where he advanced the money under an agreement

express or implied, made either with the debtor or creditor; that he would be subrogated to the rights and remedies of the creditor. The rule is

stated in similar terms by Sheldon in his book on Subrogation. It has been said that "" whenever a payment is made by a stranger to a creditor in the

expectation of being substituted to the place of the creditor, he is entitled to such substitution. But the doctrine generally adopted, and that of these

very cases when limited to the point actually decided, is that a conventional subrogation can result, only from a direct agreement, express or

implied, made with either the creditor of debtor, and it is not sufficient that a person paying the debt of another should have merely an

understanding on his part that he is to be subrogated to the rights of the creditor, though if the agreement had been made, a formal assignment will

not be necessary."" The English cases do not carry the principle further.

In India the scope of the rule appears to me to be narrower still. A mere agreement either with the creditor holding a mortgage or with the

debtor owing it cannot give a person lending money to discharge the mortgage a lien over the property- see Section 54 of the Transfer of Property

Act. An agreement with the creditor or the debtor may entitle him to sue him for the execution of a mortgage-deed, or a deed. of assignment of the

mortgage as the case may be ; but mortgages for a sum of Rs. 100 and upwards can be created only by registered instruments and a mere

agreement to mortgage is insufficient to create a lien. In England and in America, it may be that the principles of equity would enable the courts to

treat an agreement for a mortgage as giving the lender an equitable interest in t''le property agreed to be mortgaged. But equitable interests are not

recognised in this country as distinct from legal interests, though many principles of law ate borrowed from the principles of English Equity

''Jurisprudence. In this country, equitable mortgages by deposit of title-deeds are recognised only in a special class of cases referred to in Section

59 of the Transfer of Property Act when the mortgages are made in the towns of Calcutta, Madras, Bombay, Karachi and Rangoon. In Gurdeo

Singh v. Chandrikah Singh and Chandrikah Singh v. Rashbehary Singh (1907) 5 C.L.J. 611 the rule of subrogation is stated , and it seems to be

assumed that a payment made under agreement with the debtor or creditor that he should receive and hold an assignment of the debt as security

would be sufficient to entitle the lender to the benefit of subrogation--see pages 631 and 632. In Jagatdhar Narain Prasad v. A.M. Brown ILR

(1906) C. 113 it was held that an agreement to give a mortgage would be enough to create a charge by way of subrogation, though the decision of

the case itself does not seem to have required the enunciation of the principle. It appears to me that the important distinction between the English

and Indian Law pointed out above was overlooked in these cases. No doubt a person having an agreement may sue for the specific performance

of the agreement to execute or assign a mortgage, and in suits for the execution of a mortgage-deed, the courts have sometimes passed not only a

decree for specific performance but for sale also following on the execution of the conveyance. But this does not justify the view that the agreement

itself can be treated as creating a charge. In the Auk rican Cyclopaedia of Law and Procedure, Vol-XXVII, the true principle applicable in

England and America is stated by H.C. BLACK, the author of the article on Mortgages. He says: ""An agreement by which a stranger undertakes

to advance the redemption morey and pay it for the mortgagor''s benefit, to hold the premises as security for his reimbursement, and to release or

re-convey to the mortgagor on being re-paid, is valid and enforcible ; it is not within the Statute of Frauds and maybe made the basis for a decree

for specific performance."" The principle is also recognised in Khushal v. Punamchand ILR (1897) B. 164 where the transaction took place in the

town of Bombay and the lender who paid off prior mortgage could therefore claim an equitable mortgage. There are two kinds of cases which

must be distinguished from the class under notice. No conveyance of courts would be required in cases where a person who, having a previous

interest in the property pays off a prior mortgage or where the owner of the equity of redemption paying off a mortgage claims priority over a

subsequent incumbrancer. So also in cases where one claiming under a void or voidable conveyance or bona fide believing himself to have a title to

the property discharges an encumbrance on it and claims a charge as against the owner. The principle contended for by the appellant that the mere

payment of a mortgage debt by a stranger would entitle him to the mortgagee''s rights by subrogation has always been negatived in India. See Ram

Tuhul Singh v. Biseswar Lall Sahu (1875) 2 I.A. 131. It is impossible to argue that it is open to any meddler to claim a lien by discharging a

mortgage with which he has no concern. I must therefore overrule the contention that the plaintiff can claim to be subrogated to the rights either of

the daughters or of Muthu Goundan by the mere fact that he discharged the mortgage of the latter.

The next question for consideration is whether the daughters were entitled to redeem Muthu Goundan u/s 91 of the Transfer of Property Act

and could, by doing so, claim a charge which they could transfer to the plaintiffs. Section 91 provides that any person having any interest in or

charge upon the mortgaged, property and any person having any interest in or charge upon the right to redeem the property may institute a suit for

redemption. Section 85 lays down that all persons having an interest in the property comprised in the mortgage must be joined as parties to any suit

under this chapter relating to such mortgage. The word ""interest"" must be taken to be used in the same sense in both the sections. Can it be held

that a reversioner under the Hindu Law is a person having an interest within the meaning of these sections? I cannot hold that in a suit by the

mortgagee for sale or foreclosure, such a reversioner is a necessary party. Indeed it is doubtful whether he can be held to be a proper party at all.

It follows that a reversioner cannot be held to be entitled to institute a suit u/s 91. In Ram Chandar v. Kallu ILR (1908) A. 497 Stanley, C.J. and

Barter Ji, J. held that the reversionary heirs of the deceased husband of a Hindu widow in possession of his property as such could not maintain a

suit lor redemption, although the holder of a mere easement and a remainder man have been held entitled to redeem in England [see SETON on

Judgment and Orders, 6th Edition, p. 1935 : Pearce v. Morris (1870) L.R. 5 Ch. 227, I am on the whole inclined to hold that a reversioner can-

not voluntarily claim to redeem a mortgage made by the last male holder or institute a suit for that purpose. But does it necessarily follow that when

a suit is instituted by a mortgagee for sale, the reversioner has not got a sufficient interest in the property to entitle him to discharge the mortgage to

prevent the loss of the property to which he would be entitled to succeed on the death of the widow ? I do not think I am bound to hold that his

rights stand on the same footing when he claims of his own accord to redeem and when he tries to save the property for the estate upon the

mortgagee attempting to sell it. The right of a person interested in the payment of money which another is bound by law to pay and who therefore

pays it to be re-imbursed by the other is recognised in Section 69 of the Indian Contract Act. There is no reason for holding that only those who

have an interest in a mortgaged property within the meaning of Sections 85 and 91 of the Transfer of Property Act Can be held to be interested in

the payment of the money due on a mortgage created by the last male owner. It has been held by the courts in India that a reversioner is entitled to

resist a claim for probate of a will alleged to have been made by the last male owner by reason of his interest in the estate. See Briniaban Chandra

Shaha v. Sureswar Shaha Paramanick (1909) 10 C.L.J. 263; Puttanna alias Keshava Bhatta v. Ramakrishna Sastri ILR (1906) M. 195 As

observed by Mookerjee J. in the former'' case, "" although a reversioner under the Hindu Law has no present interest in the property left by

deceased, yet it is manifest that he is substantially interested in the protection or devolution of the estate; It is well settled that a reversioner can sue

to restrain waste. The reversioner can, if he makes out a proper case, obtain an order for the appointment of a Receiver. He can maintain a suit for

declaration that an adoption by the female heir in possession is invalid. He can also sue for declaration that an alienation by the female heir in

possession will not be operative beyond her life-time. This has now been placed beyond the possibility of dispute by the provisions of Section 42

of the Specific Relief Act, illustrations (e) and (f) to which section show that such declaratory suits may be maintained. Besides it is manifest that

such a declaratory suit is maintainable by a remote reversioner, who would take an absolute interest in the absence of the immediate reversionary

heir who has only qualified rights in the estate ; and also, when the nearest reversioner has precluded himself from maintaining a declaratory action

by his conduct or by omission to sue within the statutory period, a remote reversioner is entitled to maintain the suit."" In Civil Revision Petitions

Nos. 343 and 344 of 1908 it has been held by this court that a reversioner paying arrears of Government revenue in order to save the estate from

sale is entitled to recover the same from the widow in possession. I am of opinion that the daughters had sufficient interest in the land to entitle them

to discharge Muthu Goundan''s debt when the property was brought to sale and that by doing so they obtained a charge over the land which they

were entitled to assign or charge in favour of the plaintiff. I must therefore hold that the plaintiff obtained a valid charge for the amount paid by him

to discharge Muthu Goundan''s mortgage. The widows cannot contend that they have been put to any disadvantage by the redemption of Muthu

Goundan''s mortgage by the daughters. The amount due to the plaintiff was disputed by the 1st defendant in her written statement. The case does

not appear to have been tried on the merits. We therefore reverse the decrees of the courts below and remand the suit to the court of first instance

for disposal on the merits. The costs up to date will abide the result.

Spencer, J.

I agree with my learned brother in thinking that the defendants Nos. 3 to 7 as reversioners were persons interested within the meaning of Section

69 of the Indian Contract Act in the payment of money which the widows, the defendant Nos. 1 and 2, were bound to pay to Muthu Goundan. By

discharging the debt for which the property of the defendants Nos. 1 and 2 was on the point of being sold, I think that they were equitably entitled

to have a charge on the property. This being so, I am further of opinion that the assignment or sub-mortgage by the defendants Nos. 3 to 7 to the

plaintiff of their lien by the deed of July 3rd, 1909, was in law a valid transaction. The result will be as above stated.