RIGHT TO SUBROGATION

A research proposal submitted in partial fulfilment of the

course of Property law during the academic session 2018-
22, Semester III

Submitted by: Aanchal

Roll no: 181602

B.B.A. LL.B.(Hons.)

Submitted to: Dr. BRN Sharma

Property law I

September, 2018

Chanakya National Law University, Mithapur, Patna,

800001
 DECLARATION

I, AANCHAL, declare that the project entitled “Right to Subrogation” submitted by me for
the award of course certificate in “Property Law” is my own work. This project has not been
submitted for any other degree/ certificate/ course in any institution/ university.

AANCHAL
 ACKNOWLEDGEMENT

I would like to thank my faculty, Dr. BRN Sharma , whose assignment of such a relevant
topic made me work towards knowing the subject with a greater interest and enthusiasm.

I owe the present accomplishment of my project to my friends, who helped me immensely

with the sources of research materials throughout the project and without whom I couldn’t
have completed it in the present manner.

I would also like to express my gratitude to my parents and all those unseen hands who
helped me out at every stage of my project.
 TABLE OFCONTENTS

1. Introduction
2. Historical Perspective
3. Kinds of Subrogation
4. Analysis of Cases
5. Conclusion and Suggestions
INTRODUCTION
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. 1
The expression of the word subrogation has different meaning in different legal systems. It is
pertinent to state that it is principally concerned with the doctrine of subrogation according to
the English common law and the way it is adopted under the Transfer of Property Act, 1882
enacted for India by the British. The Doctrine of Subrogation cropped up independently of
the Roman law as a purely English law theory. It has its origins in the courts of equity.
Buckland2 has expressed his view about subrogation by commenting on the Roman Equity
that subrogation was a concept unknown to Romans in the manner in which it emerge in the
English common law today. Subrogation under Roman law was a term, which was well
known in Constitutional Law, signifying the replacement of one official by another official or
by replacement of their actions too.3 Buckland talks about the concept of subrogation in the
Private Law wrote: It is not until the time of Justinian that it [subrogation] certainly appears
in private law, and even then it is not in our sense. In an enactment in the code Justinian says,
dealing with testators who cannot for certain reasons get all the witnesses present together,
that those who came later can be 'subrogated,' being formally notified as to what has been
done in their absence.'4 Under the English law doctrine, there is no need for express transfer
of rights; the conveyance of rights was stated to be ipso jure. What was needed is only an
actual transference of rights must have take place. Equity‘s early use of subrogation came
into operation by the English courts. They linked subrogation to the equitable principle of
contribution. By 1748 judges did not use the term subrogation, in cases justifiably deserving
contribution, or in cases concerning problems of indemnities such as suretyship and
insurance.5 The common law courts in England had acknowledged the doctrine of

1
Inserted by Act20 of 1929, Section 47, Original sections 92 to 94 were rep. by Act 5 of 1908,Section 156 and
Schedule V.
2
W. W. BUCKLAND, EQUITY IN ROMAN LAW 47-54 (1911) [hereinafter cited as BUCKLAND].
3
Id.
4
Id
5
Fleetwood v. Charnock, 21 Eng. Rep. 776 (Nels. 1629); Morgan v. Seymour, 1 Chan. Rep. 120, 21 Eng. Rep.
525 (1637).
subrogation and were using it as if it had always been a part of the common law. In Mason V.
Sainsbury,6 Lord Chief Justice Mansfield stated that ―Everyday, the insurer is put in the
place of the insured. The insurer uses the name of the insured.‖ In the middle of nineteenth
century, the word subrogation entered the English legal terminology. Whether or not,
subrogation was of Roman origin was only a matter of slightest importance. Judges were
quite content that equity was what created it. This conviction appears to be enhanced by the
justification tendered by Hardwicke in Randal v. Cockran.7 This case was marked with the
identification with equity. Lord Hardwicke expressed a possible notional basis for the
doctrine and the role of equity in the area of contribution. He in a letter to Kames, ―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.
This case came out of a decree by King George II who allowed compensation to be paid to
those who suffered losses in war with Spain. A number of individuals had already been
indemnified by their insurers for the losses that they had suffered, and the insurers effectively
sought to be subrogated to the rights of their insured to obtain this compensation. In Simpson
V. Thompson,8 Lord Chancellor Cairnes did use the word subrogation to indicate the right of
a person who, agreeing to indemnify the other will on the making good the indemnity will be
entitled to succeed to all the means by which the person indemnified might have protected
himself or reimbursed himself for the loss.9 Stringer V. The English Scotch Marine Insurance
Co was the first case to take on the word ―subrogation.
The facts of this case were 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 was instituted for its condemnation. The plaintiffs challenged the action
successfully and the captors appealed. The court ordered the plaintiffs to furnish security
against costs, which they could not manage to pay for. As a result, the ship was fated; the
plaintiffs gave prescribed notice of leaving behind of the cargo, and asked 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. Since the assured chose the latter, the insurers were constrained to pay.

6
3 Doug. 61, 64, 99 Eng. Rep. 538, 540 (1782)
7
1 Ves. sen. 98, 27 Eng. Rep. 916 (1748).
8
3 App. Cas. 279 (1877).
9
Id
However, having paid, the insurers were entitled to be subrogated to them, and get what they
can out of the hands of the Americans for their own benefit‘
Although, there has been some disagreement in English courts regarding-- subrogation is an
equitable or legal doctrine. Canadian courts have treated it as an equitable doctrine. The
leading case on the point concerning Canada is National Fire Insurance Co. V. McLaren
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.
However even if the Doctrine of Subrogation is equitable or not , the rights under the same
do not come from the contract of indemnity but it arises by the operation of law which
governs the relationship of the such a contract it creates. In accordance with the common law,
subrogated rights do not arise until the insured is fully indemnified for its loss. Once the loss
is indemnified, the insurer gets the right to commence proceedings against the wrong doer in
the name of the insured and thereby make all the decisions in the litigation. Nevertheless the
insured has an obligation to co-operate in the litigation in matters such as giving evidences
etc., at trial. In London Assurance Co. V. Sainsbury the doctrine of subrogation established
by equity were taken and forged into the common law. However, the common law also
assumed a major role in styling the future progress of the wholly equitable doctrine. The
Court of Exchequer in the case of Deering v. Winchelsea, held that The basis of 'bottom of
contribution' was said to be a set principle of Justice, and is not founded in Contract. The
assessment of the ‘subrogation‘as one of the most attractive legal concept of insurance
industry has provided an accurate picture of it. In spite of its Roman law roots, subrogation is
a mixture of civil law and common law doctrines. This blended nature of subrogation brings
several resemblances and peculiarity of two legal systems to the forefront. It should also put
up with in mind that although subrogation was first used by common law courts in 1850, in
contrast to civil law jurisdictions, there have been made staple steps in order to modify this
legal concept in common law jurisdictions. In support of this opinion, the doctrines designed
to fructify the harshness of subrogation could be best examples.

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

Subrogation is a roman term, which means 'substitution'. Lord Hardwicke in his decision in
Randal V. Cockran marked 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 loses 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.

The first English case to adopt the word 'subrogation' was Stringer V. The English and Scotch
Marine Insurance Co. 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
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. McLaren 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.

It was in the case of London Assurance Co. V. Sainsbury the 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. Winchelsea, 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.
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. This doctrine was
made applicable even in those parts of India where the Act itself was not applicable.10

The Privy Council in the case of Gokuldas V. Puranmal held 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. Steere11 in India, according to the principle laid down by this case when a
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.
Where mortgagor redeems, subrogation not applicable. 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.12
It has been held by the Madras High Court that when a subsequent mortgagee redeems a prior
mortgage, no question arises as to whether the payment is for the benefit of the mortgagor or
mortgagee. For the applicability of section 92 it is necessary only to see that whether the
person claiming the benefit of this section was a mortgagee at the time when he made the
payment.13
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.'

10
Ganesh Lal V Jyothi pershad, AIR 1953 SC 1: 1953 SCR 243: ILR 1952 Punj 495. Paramjota Devi V Shamlal
Zoha, AIR Pat 6: 2009 (1) AIR Jhar R 725:2009 (1) Civ Lj 301,
11
1817 3 Mer 210: 17 RR 67
12
Narain V Narain, AIR 1931 All 40.
13
Nagayya V Govindayuyar, AIR 1923 Mad 349.
KINDS OF SUBROGATION

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.
The following people can claim Legal Subrogation :
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.
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
Pillai 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 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.14
c) Surety
The person, who stands as a surety in a mortgage for repayment of loan in case mortgagor
fails to do so, is also entitled to redeem the mortgaged property under section 91. When the
surety of the mortgagor redeems the property he is subrogated to the position and rights of the
creditor.

14
Krishna Pillai Rajasekharan V. Padmanabha Pillai, AIR 2004 SC 1206: 2004 AIR SCW 106: (2004) 12 SCC
754
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 Krishnayya15 held
'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
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.'
It is now settled law that where in India there are several mortgages on a property, the owner
of the property subject to a mortgage, may if he pays off an earlier charge treat himself as
buying it and stand in the same position as his vendor. This rule would not apply if the owner
benefit of the property had covenanted to pay the later mortgage-debt, but in this case there
was no such personal covenant.
In case16 ‘A‘ gave a first mortgage to ‘B‘, a second mortgage to ‘C‘ and again a third
mortgage to ‘B‘. Out of the considerations received from the third mortgage, ‘B‘ retained
Rupees 499 for the discharge of the first mortgage and Rupees 790 for paying off ‘C‘s
mortgage which he had agreed. But ‘B‘ did not pay off ‘C‘s mortgagee and ‘C‘ sued on his
mortgage. ‘B‘ was held not entitled to use the first mortgage as a shield.

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.
Whenever the payment is made by a stranger to a creditor in the expectation of being
substituted in the place of creditor, he is entitled to such substitution.17 But the doctrine
generally adopted is that a Conventional Subrogation can result only from a direct agreement

15
(1924) 47 Mad 190: 51 IA 140: AIR 1924 PC 36.
16
BalbhaddraV. Sheomangal, (1931) 130 IC 301: AIR 1931 All 342.
17
Tradesmen‘s Building Association V. Thompson, 32. N.J. Eq.133:Coe V New Jersey Midland R.R Co; 27
N.J. Eq 110
to that effect made with either the creditor or the debtor, and that it is not sufficient that a
person paying the debt of another should do so merely with the understanding on his part that
he is to be subrogated to the rights of the creditor,18 though if the agreement has been made, a
formal assignment is not necessary19 and the agreement may be shown by subsequent acts
which indicate a prior agreement. No claim by subrogation, whether conventional or by
operation of law, to the securities held or the remedies enjoyed by a creditor for the collection
of his demand, can be enforced, until the whole demand of the creditor has been satisfied.20
Until then there can no interference with the creditor‘s rights or securities which might, even
by a bare possibility, prejudice or in any way or embarrass him in the collection of the residue
of his demand.21 Subject to these limitations, any agreement, whether made by the debtor or
the creditor, for the substitution of the person advancing the money for the payment of a debt
to the securities, remedies, or priorities of the creditor, will, to the extent of the agreement, be
enforced in equity.22 Conventional subrogation upon payment of a debt, and remedy for the
payment itself, cannot co-exist.

18
New Jersey Midland R.R. Co., V Wortendyke, 27 N.J Eq 658 reversing in part Coe V. New Jersey Midland
R.R. Co;
19
Neely V. Jones, 16 W.Va. 625
20
Antea, Pg.70, 118, 127.
21
New Jersey Midland R. R. Co; V Wortendyke, 27 N.J. Eq 658.
22
Grant, in re, U.S. Dist. Court,
Analysis of Cases

The question before the court in the case of Isap Bapuji Amiji' V. Umarji Abhram Adam23
, 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. Narain24, 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.

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.

23
(1937) 39 BOMLR 1309.
24
AIR 1931 All 40
The Supreme Court in the case of Ganesh Lal V. Joti Prasad25 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 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 Ors.26 , 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

25
AIR 1953 SC 1: 1953 SCR 243: ILR 1952
26
AIR 1964 Mad 269
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 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 case 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.

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. , Maharashtra High Court drew an distinction between section 92 and
section 135A of the act:

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. Thyagarajan, 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.

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 Vs. 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.

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

Deshpande 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.
Subrogation and Assignment
It was held in the case of Gujrat Andhra Road Carriers Transport Contractors Vs.
United India Insurance Co. Ltd., 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. Bowling and
Hospital Serv. Corp.V. Pennsylvania Ins. Co.
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.
CONCLUSION
Doctrine of Subrogation is a doctrine taking on more than a single thought with perhaps the
most common type being an equitable remedy used to prevent unjust enrichment. For
example, where the goods were sent from place ‘A’ to place ‘B’ and the goods forwarding
note contained a clause that jurisdiction for deciding disputes between the parties would be at
place ‘D‘ and power of attorney was granted at that place in favour of the insurer, it was held
that the suit for damages filed at a place ‘D‘ by insurer and consignee was maintainable.27

The insurer has no better rights than the insured and can only trail actions against a person
who could have been pursued by the insured. Subrogation also permits a person who releases
the debt of another person to be subrogated to any security for that debt. That is, the person
who discharges the debt may step into the shoes of the person originally permitted to security
for that debt and have the benefit of any such security. However the provisions of Section 92
of Transfer of Property Act shall not be construed 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.
And also does not have the effect of a substitute becoming a mortgagee. Supreme Court in
India held that the rights of subrogation vest only by operation of law rather than the creation
of express agreement. In fact Supreme Court of India stated that subrogation was assignment
of the rights by the insured and, therefore the insurer was not a consume within the meaning
of the Consumer Protection Act, 1986 and, therefore not entitled to maintain a complaint.

27
Toulmin V. Steere, (1817) 3 Mer 210: 17 RR 67.