DR.

RAM MANOHAR LOHIYA

NATIONAL LAW UNIVERSITY

LUCKNOW

SUBJECT- PROPERTY LAW

FINAL DRAFT

ON

SECTION 92; DOCTRINE OF SUBROGATION

Under the Guidance of: Submitted by:

Mr. Manish Singh Irul Srivastava

Asssociate Professor 5th semester

DR.RMLNLU,[LUCKNOW] Section- A

ENROLL: 059
 ACKNOWLEDGEMENT

This project was a topic requiring extensive research and analysis. And I would not have
been able to do all of that alone. So, I would take this opportunity to express my profound
gratitude to everyone who has been even remotely involved in shaping this project to its
present form.

I would like to express my sincere gratitude to my teacher Mr Manish Singh who has been a
constant stream of information on the guidelines of how to make an effective project. Without
her constructive feedbacks and constant encouragement it would have been very difficult to
understand how to frame the project.

Also, I extend my gratitude to the IT staff for their regular endeavours towards helping us
avail the benefits of a fully-functional LAN network. Without the help of the library staff, it
would have been even harder to finish the project. So, thanks are in order for the library staff
as well.

I would thank all my friends for being a constant support system as well as source of help for
my doubts. And lastly I would give my parents the credits for this project for they are the
ones who inspire me each day to work harder.

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 TABLE OF CONTENTS

I. Introduction....................................................................................................5

II. The Idea Behind The Concept of Subrogation............................................5

III. What Constitutes the Doctrine of Subrogation?.........................................6

IV. Associated Limitation With the Doctrine of Subrogation..........................8

V. Interpretation of Section- 92 By the Indian Courts...................................10

VI. Conclusion................................................................................................12

VII. Bibliography..............................................................................................13

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 A. INTRODUCTION

Section 92 in The Transfer of Property Act, 1882 reads as follows:

1[92. 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 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 persons shall be

so 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 term "subrogate" descends from the Latin sub (under) and rogare (to ask). The

denotative sense has been transmuted from an "asking under" to a substitution or succession

with respect to the right of payment.

Subrogation means substitution, for the person redeeming is substituted for the encumbrancer

whom he has paid off.1 Subrogation is either conventional or legal.

1
Balchand v. Ratanchand, AIR 1942 Nag. 111; c.f. Paul, Solil, ed., Mulla The Transfer of Property Act 1882,
(Butterworths Publications India, New Delhi, 9th Edn., 2000), 917
4
It has been said that subrogation is conventional when there is an agreement, express or

implied, that the person making the payment shall exercise the rights and powers of the

original creditor,2 and that very slight evidence is sufficient to establish such an agreement.3

Legal subrogation, or subrogation by operation of law, arises when a person, who has, in the

property an interest of his own to protect, discharges a prior encumbrance.4

2
Gurdeo Singh v. Chandrikah Singh, (1909) 36 Cal. 19
3
Re Wrexham, Mold & Connah’s Quay Ry (1899) 1 Ch 440
4
Bisseswar Prasad v. Lala Sarnam Singh (1907) 6 Cal LJ 134
5
 B. THE IDEA BEHIND THE CONCEPT OF SUBROGATION

Subrogation rests upon the doctrine of equity and the principle of natural justice and not on

the privity of contract. One of the principles is that a person, paying money which another is

bounded by law to pay, is entitled to be reimbursed by the other. This principle is found in

Section 69 of the Indian Contract Act, 1872. Another principle is found in equity: “one who

seeks equity must do equity”.5

A redeeming co-mortgager discharging the entire mortgage debt, which was the joint and

several liability of himself and his co-mortgager, was in equity entitled to be subrogated to

the rights of the mortgagee redeemed and to treat the non-redeeming co-mortgager as his

mortgager to the extent of the latter’s portion or share in the 6hypothec and to hold that

portion or share as security for the excess payment made by him.

This arises from the doctrine that he was a principal debtor in respect of his own share only

and his liability in respect of the shares of others was that of a surety; and when the surety

had discharged the entire debt, he was entitles to be subrogated to the securities held by the

creditors, to the extent of getting himself reimbursed for the amount paid by him over and

above his share to discharge the common mortgage debt. The right of the non- redeeming co-

mortgager to pay off subsists so long as the redeeming co-mortgager’s right to contribution

subsists. This right of the non-redeeming co-mortgager is purely an equitable right, which

exists irrespective of whether the right of contribution, which the redeeming co-mortgager

has as against the other co-mortgager, amounts to a mortgage or not. Where, therefore, the

Transfer of Property Act is not inn force and a co-mortgager discharges the whole of the

mortgage-debt, he will, in equity, have two distinct rights, first to be subrogated to the rights

of the mortgagee discharged and second to recover contribution towards the excess paid bu

him on the portion belonging to other co-mortgager.7

5
Krishna Pillai v. Padmanabha Pillai, (2004) 12 SCC 754.
6
Valliama v. Sivathanu, AIR 1979 SC 1937.
7
Id.
6
 C. WHAT CONSTITUTES THE DOCTRINE OF SUBROGATION?

Two situations may be contrasted under section 92 of T.P. Act, 1882;

i.) Where a mortgagee assigns his interest in favour of another person (i.e. a

stranger);

ii.) Where a co-mortgager or anyone on behalf of the mortgagor and authorized under

law pays the amount and brings to an end the interest which the mortgagee had.

In the first case, the assignee becomes the holder of the same interest which the mortgagee

had i.e. he steps into the shoes of the mortgagee. In the latter case, once the mortgage debt is

discharged by a person beneficially interested in the equity of redemption, the mortgage

comes to an end by operation of law. Consequently, the relationship of mortgagor and

mortgagee cannot subsist.

A person paying off a debt to secure the property either with the consent of others or on his

own volition becomes, in law, the owner entitled to hold and possess the property. But in

equity the right is to hold the property till he is reimbursed. Such right in equity either in

favour of the person who discharges the debt or the person whose debt has been discharged,

does not result in resumption of relationship of mortgagor and mortgagee. Such right of

reimbursement meant, however, carries with it at times, an equitable charge. Section 92, T.P.

Act does not have the effect of a substitute becoming a mortgagee. It confers certain rights on

the redeeming co-mortgagor and also provides for the remedy of redemption, foreclosure and

sale being available to the substitute as they were available to the person substituted. These

rights the subrogee exercises not as a mortgagee reincarnate but by way of rights akin to

those vesting in the mortgagee. The co-mortgagor can be a co-owner too.8

8
Supra at 6.
7
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 Nair V. Padmanabha Pillai,9 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 case10 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-

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.

9
Ganeshi Lal v. Jyoti Pershad, AIR 1953 SC 1
10
Id.
8
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.

D. ASSOCIATED LIMITATION WITH THE DOCTRINE OF SUBROGATION

A most prominent limitation with respect to this concept is the rule that subrogation will not

be allowed to one who was personally and primarily liable on the debt which he has paid, for

the reason that payment by one so liable operates to extinguish the debt with its lien. Within

this description has been included the grantee of encumbered premises who has agreed to

discharge the encumbrance. Although a typical case for subrogation is presented when a

grantee who has merely taken subject to the encumbrance, discharges it in ignorance of a

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junior lien which by his payment will be given priority, 11 a strong line of decisions denies

such relief to the grantee who by his agreement has made himself personally liable on the

obligation.

It is difficult to see why this distinction should be made, and in a number of jurisdictions, of

which the recent case of Tibbits T. Terril,12 is typical, the rule is not applied. In that case a

purchaser from a fraudulent grantor, having constructive, though not actual, notice that the

conveyance to his grantor was in fraud of a judgment creditor having a lien on the land, was

allowed subrogation, as against the judgment creditor, to the lien of a first mortgage which he

had assumed and discharged. Since the courts, where the grantee has not assumed the

encumbrance, have been willing to invoke subrogation to protect him when he has paid off

the prior lien, and is in danger of losing the benefit of his payment because of the existence,

unknown to him, of a junior lien, it seems wrong to deny such relief to another grantee

because, as between himself and his grantor, he had agreed to pay the debt.13

Another element entering into the determination of the right to subrogation in these cases, is

the effect of notice of the existence of a second encumbrance.14 In some of the cases denying

subrogation, though the decisions are based on the effect of an agreement to discharge, the

facts show that the grantee had actual notice of the intervening lien. Such notice should

materially weaken his equity to subrogation, as he made the payment with full knowledge of

the circumstances and not by mistake. As to just what notice is required to defeat the right,

the cases differ; in the principal case and those in accord with it, there was at least

constructive notice by record, and yet the claim allowed. There is, however, good authority

for the holding that subrogation will not be allowed one who has discharged an encumbrance

with constructive notice of an intervening claim.15 In the principal case, the further element of
11
Barnes v. Mott (1876) 64 N. Y. 397; Ryer v. Gass (1881) 130 Mass.227
12
(Colo. 1914) 140 Pac. 936
13
Ophir Silver Mining Co. v. Superior Court (1905) 147 Cal. 467
14
Stantons v. Thompson (1870) 49 N. H.272
15
Ragan V. Standard Scale Co. (1907) 128 Ga. 544
10
fraud was present; the court holding that the grantee was not, through constructive notice,

chargeable with such participation in the fraud on the judgment creditor as mould defeat his

right to subrogation.

One guilty of fraud has no right to equitable relief by subrogation.16 The question here

presented is whether one who has constructive or implied notice of the fraud is chargeable

with participation in it, and it is quite generally held that constructive notice has this effect. A

few jurisdictions, however, including Colorado, seem to differentiate between constructive

notice by record, and knowledge of facts sufficient to put a reasonable man on inquiry,

holding that the former does not as a matter of law charge one with participation, though the

latter may raise a question of fact for the jury as to participation in the fraud.17

E. INTERPRETATION OF SECTION- 92 BY THE INDIAN COURTS

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.

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.

16
Railroad Co. v. Soutter (1871) 13 Wall. 517
17
Greenwald v. Wales (1903) 174 N. Y. 14

11
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 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 discussed 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

12
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 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 Ors., where it was held that the rights created in favor of a redeeming

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 section 92 of the Transfer of

Property Act and section 69 of the Contract Act recognises the principle of equity of

reimbursement.

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

13
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 Ors. 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.

F. CONCLUSION

Subrogation as a concept has been in existence for centuries as an element of common law,

but the modern application of the same has been seen of late. It is periodically argued that the

concept of unjust enrichment provides the conceptual underpinning for the law of

subrogation.18 Whilst this is probably true as a matter of the English language, other academic

commentators have disagreed that subrogation fits squarely with accepted legal reasoning

relating to this field.19

18
Re Miller, Gibb & Co [1957] 1 WLR 703
19
Castellain v. Preston (1883) 11 QBD 380
14
In reality, the argument as to the conceptual underpinning for the legal technique is more

theoretical than practical. There is also lively debate in legal circles as to whether the rights

of subrogation are the subject of an express or implied agreement, or whether they arise

automatically by operation of law. The reasoning of the courts has not always been clear in

relation to this,20 but the answer is probably all three in many cases. It is clear that

subrogation rights can arise even where there is no contract between subrogor and subrogee, 21

so it is clearly not necessary for there to be an express or implied term.

However, it clearly is an implied term of any policy of insurance or guarantee that the

insurer or guarantor will be subrogated in the event of any payment by the insurer to the

insured party. However, in practice, most policies of insurance will contain an express clause

regulating subrogation rights as well.

20
Esso Petroleum v Hall, Russell & Co Ltd [1989] AC 643
21
Morris v Ford Motor Co [1973] QB 792
15
 G. BIBLIOGRAPHY

Cases

 Balchand v. Ratanchand, AIR 1942 Nag. 111

 Gurdeo Singh v. Chandrikah Singh, (1909) 36 Cal. 19

 Re Wrexham, Mold & Connah’s Quay Ry (1899) 1 Ch 440

 Bisseswar Prasad v. Lala Sarnam Singh (1907) 6 Cal LJ 134

 Krishna Pillai v. Padmanabha Pillai, (2004) 12 SCC 754.

 Valliama v. Sivathanu, AIR 1979 SC 1937.

 Ganeshi Lal v. Jyoti Pershad, AIR 1953 SC 1, supra at 6.

 Barnes v. Mott (1876) 64 N. Y. 397

 Ryer v. Gass (1881) 130 Mass.227

 Tibbits T. Terril (Colo. 1914) 140 Pac. 936

 Ophir Silver Mining Co. v. Superior Court (1905) 147 Cal. 467

 Stantons v. Thompson (1870) 49 N. H.272

 Ragan V. Standard Scale Co. (1907) 128 Ga. 544

 Railroad Co. v. Soutter (1871) 13 Wall. 517

 Greenwald v. Wales (1903) 174 N. Y. 14

 Re Miller, Gibb & Co [1957] 1 WLR 703

 Castellain v Preston (1883) 11 QBD 380

 Esso Petroleum v Hall, Russell & Co Ltd [1989] AC 64

 Morris v Ford Motor Co [1973] QB 792

16
Books

 Paul, Solil, ed., Mulla The Transfer of Property Act 1882, (Butterworths Publications

India, New Delhi, 9th Edn., 2000), 917

 Dr. Poonam Pradhan Saxena, ed., Mulla’s The Transfer of Property Act, (Lexis Nexis

Publication, 13th edn. 2018)

17