Ganeshi Lal Vs. Joti Pershad  INSC
55 (7 November 1952)
AIYAR, N. CHANDRASEKHARA MUKHERJEA, B.K.
BHAGWATI, NATWARLAL H.
CITATION: 1953 AIR 1 1953 SCR 243
CITATOR INFO :
F 1979 SC1937 (29,30)
Mortgage-Co-mortgagors-Redemption of entire
mortgage by co mortgagor paying less than amount really due Right to
contribution from others Whether limited, to their share on amount actually
paid-principles of equity.
On principles of equity, justice and good
conscience, which apply to the Punjab (where the Transfer of Property Act, 1882,
is not in force) if one of several joint mortgagors redeems the entire Mortgage
by paying a s less than the-full amount due under the mortgage, he is entitled
to receive from his co-mortgagors, only their proportionate shares on the
amount actually paid by him. He is not entitled to claim their proportionate
shares on the amount which was due to the mortgagee under the terms of the
mortgage on the date of redemption.
Hodgson v. Shaw (40 E. R. 70), Digambar Das
v. Harendra Narayan Panday [(1910) 14 C.W.N. 6171 and Suryanarayana v. Sriramulu
[(1913) 25 M.L.J. 16] referred to.
Judgment of the High Court of Punjab at Simla
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 166 of 1951.
Appeal from the Judgment and Decree dated
September 15, 1948, of the High Court of Judicature for the State of Punjab at
Simla (Mahajan and Teja Singh JJ.) in Regular Second Appeal No. 1844 of 1945
from the Judgment and Decree dated June 5, 1945, of the Court of the District
Judge, Gurgaon, in Civil Appeal No. 171 of 1943, arising out of the Judgment
and Decree dated August 27, 1943, of the Court of the Subordinate Judge,
Gurgaon, in Civil Suit No. 11 of 1943.
Tarachand Brijmohanlal for the appellant.
Gurubachan Singh (Radha Krishan Aggarwal,
with him) for the respondent.
1952, November 7. The Judgment of the Court
was delivered by Chandrasekhara Aiyar J.
32 244 CHANDRASEKHARA AIYAR J.-The
plaintiffs, Joti Prasad and Sat Narain, sued for partition and possession of
their twofifths share in the suit properties alleging that the first defendant
wag alone in possesSion of the same, having redeemed a mortgage executed by the
joint family of which the plaintiffs and defendants were members, in favour of
one Raghumal in the year 1896 on paying Rs. 5,800. Defendants 2 to 5 were
impleaded as co-sharers. Out of them, defendants 2 and 3 admitted the claims of
the plaintiffs. Defendant 4 died pending suit, and her name was struck off.
Defendant 5 supported the first defendant. On the date of the trial court's
decree, the two plaintiffs were held entitled to one sixth share each.
The first defendant resisted the plaintiffs'
claim. He contended that the redemption by him in 1920 was not on behalf of the
joint family as alleged by the plaintiffs but on his own account as there had
been a disruption of the joint family status much earlier, and that before the
plaintiffs could get arty relief, they were bound to pay him not merely a
proportionate share in the sum of Rs. 5,800 which he paid to the mortgagee for
redemption but their share in the original mortgage debt of Rs. 11,200. He also
denied that the original mortgage was executed on behalf of the joint family.
The Subordinate Judge, and on appeal, the
High Court found that the original mortgage was a mortgage transaction of the
joint family, and that the first defendant, Ganeshi Lal, redeemed the mortgage
on his own account and for his own benefit at a time when there was no longer
any joint family in existence. It was further held by the trial court that the
plaintiffs and other co-sharers were bound to pay their proportionate share of
the amount paid by the first defendant to redeem the mortgage, namely, Rs.
5,800. But from this a sum of Rs. 1,200 which he had already received by way of
redemption of certain mortgage rights had to be deducted. The District Judge
enhanced this sum of RS. 4,600 to 245 Rs. 5,000, as the first defendant had
paid taxes due on the property up to 1940, but he confirmed the main findings
of the Subordinate Judge. A second appeal preferred by the first defendant was
dismissed by the High Court at Simla (Mehr Chand Mahajan and Teja Singh JJ.).
They repelled the contention of the first defendant that a suit for partition
and possession was not maintainable without bringing a suit for redemption.
They also negatived his right to get a proportionate share in the amount of Rs.
11,200 due on the mortgage. Two other learned Judges gave leave to appeal under
section 109 (c) of the Civil Procedure Code, as a substantial question of law
Three points were argued before us by learned
counsel for the appellant; firstly, there was an assignment of the mortgage in
favour of the appellant with the result that the entire rights of the mortgagee
vested in him; secondly, even viewing the question as one of legal subrogation,
he was entitled, under the principles of justice, equity and good conscience
which governed the State of Punjab, as the Transfer of Property Act has not
been applied to the State, to recover from the co-mortgagors not merely their
shares in the sum of Rs. 5,800 which he had paid for redemption but their
shares in the full amount of Rs. 11,200 due under the mortgage; and thirdly,
that the suit for partition without asking for redemption was not maintainable.
Points Nos. 1 and. 3 have no force whatever.
The registered deed of redemption does not contain any words of assignment. To
say that Ganeshi Lal shall be the owner of the entire amount due from the
mortgaged property is something different from stating that the security has
been assigned in his favour. On the other hand, the endorsement of receipt of
payment on the back of the mortgage deed itself and the statement of the
mortgagee that he has released the mortgaged property from his mortgage go to show
that there was no assignment.
246 The non-maintainability of the suit does
not seem to have been in issue either before the trial court or before the
District Judge, and it appears to have been raised for the first time before
the High Court. It was pointed out by the learned Judges, and quite rightly,
that so long as no question of limitation was involved, there was no objection
to a claim for redemption and one for possession and partition being joined
together in the same suit.
Only the second point remains for
consideration, and this raises an interesting question of law. It is not denied
that Ganeshi Lal who redeemed the prior mortgage is subrogated to the
mortgagee's rights, but the controversy is about the extent of his rights as
subrogee. By virtue of the redemption, does he get all the rights of the
mortgagee and hold the mortgage as a shield against the co-mortgagors for the
full amount due on the mortgage on the date of redemption whatever he may have
himself paid to get it discharged, or does he stand in the mortgagee's shoes
only to the extent of getting reimbursed from the co-mortgagors for -their
shares in the amount actually paid by him? The lower courts have held that the
latter is the correct position in law, but the appellant has challenged it as
The first two clauses of the present section
92 of the Transfer of Property Act run in these terms:
" 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." It
is a new section and was inserted by the amending Act XX of 1929. The original
sections 74 and 247 75 conferred the right to redeem in express terms only on
second or other subsequent mortgagees, though the comortgagor's right to
subrogation on redemption was recognised even before the Act. As the Transfer
of Property Act has not been extended to the State of East Punjab, it is
unnecessary to decide whether section 92 is retrospective in its operation, on
which point there has been a conflict of opinion between the several High
Courts. Section 95 of the Act which removed the confusion caused by the old
section which, conferring on the co-mortgagor what was called a charge, and
thus seeming to negative the application of the doctrine of subrogation, is
also inapplicable to the present case. We therefore steer clear of sections 74
and 75 of the old Act and sections 92 and 95 of the present Act, and we are
free to decide the question on principles of justice, equity and good
If we remember that the doctrine of
subrogation which means substitution of one person in place of another and
giving him the rights of the latter is essentially an equitable doctrine in its
origin and application, and if we examine the reason behind it, the answer to
the question which we have to decide in this appeal is not difficult. 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 recognised that where there are
several joint debtors, the person making the payment is a principal debtor as
regards the part of the liability he is to discharge 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. This proposition is postulated in several
authorities. In the early case of Hodgson v. Shaw (1) Lord Brougham said:
(1) 3 Myl. & K. 183; 40 E. R. 70.
248 "The rule is undoubted, and it is
one founded on the plainest principles of natural reason and justice, that the
surety paying off a debt shall stand in the place of the creditor, and have all
the rights which he has, for the purpose of obtaining his reimbursement."
I have italicised the word " reimbursement Sheldon in his well-known
treatise on Subrogation has got the following passage in section 13 of the
" There is another class of cases in
which he who has paid money due upon a mortgage of land to which he had some
title which might be affected or defeated by the mortgage, and who was thus
entitled to redeem, has the right to consider the mortgage as subsisting in
himself, and to hold the land as if it subsisted, until others interested in
the redemption, or who held also the right to redeem, have paid a
contribution." Be it noted that what is spoken of here is a contribution.
Dealing with the subject of subrogation of a,
surety by payment of a promissory note and citing the observations of the
Alabama Court, Harris says in his work on Subrogation (1889 Edition) at page
" The rule is, that a surety paying a
debt, shall stand in the place of the creditor; and is entitled to the benefit
of all the securities which the creditor had for the payment of the debt, from
the principal debtors; in a word, he is subrogated to all the rights of the
creditor; the surety, however, cannot avail himself of the instrument on which
he is surety, by its payment. By payment it is discharged and ceases to exist,
and the payment will not, even in equity, be considered an assignment; the
surety merely becomes the creditor of the principal to the amount paid for
him." To compel the co-debtors or co-mortgagors to pay more than their share
of what was paid to the creditor or mortgagee would be to perpetrate an
inequity or 249 injustice, as it would mean that the debtor who is in a
position to pay and pays up can obtain an advantage for himself over the other
joint debtors. Such a result will not be countenanced by equity; the
favouritism shown by law to a surety, high as it is, does not extend so far.
The surety can ask to be indemnified for his loss: he can invoke the doctrine
of subrogation as an aid to his right of contribution. Sheldon says in section
105 of his book :
" The subrogation of a surety will not
be carried further than is necessary for his indemnity; if he buys up the
security at a discount, or makes his payment in a depreciated currency, he can
enforce it only for what it cost him. He cannot speculate at the expense of his
principal ; his only right is to be repaid." In section 178, Harris is
" Since subrogation is founded on
principles of equity, the surety who would avail himself of the doctrine and invoke
equity must do equity ; and while' he is entitled to a reimbursement in all
that he pays out properly for his principal, debt, interest and cost, he is not
entitled, in any way to recover more than he has paid. For instance, if he pays
the debt of his principal, in depreciated currency, the rule would seem to be
that he could demand from the principal only the value of that currency at the
time he made the payment. Nor would he upon principles of equity be permitted
to purchase the debt at a discount and then be subrogated to collect the whole
face value of the debt, and especially if he held securities, or if the
creditor held securities which would fall into his hands, out of which to pay
the debt; because the securities are trust funds for the purpose, and set aside
for the payment of that debt and an assignee of trustee cannot speculate in the
purchase of claims against the fund in his hands. It would not be equality; it
would not be equity." While it can be readily conceded that the joint debtor
who pays up and discharges the mortgage 250 stands in the shoes of the
mortgagee, and secures to himself the benefit of the security by such payment,
the extent to which he can enforce his right as against the other joint debtors
is a different matter altogether. In his monumental work on Equity
Jurisprudence, Pomeroy points out that he will be subrogated to the rights of
the mortgagee only to the extent necessary for his own equitable protection.
(See page 632 of Volume IV of the Fifth Edition by Symons).
Clearer still is the passage found at page
640 of the same book:
" The mortgagor himself who has conveyed
the premises to a grantee in such manner that the latter has assumed payment of
the mortgage debt becomes an equitable assignee on payment, and is subrogated
to the mortgagee, so far as is necessary to enforce his equity of reimbursement
or exoneration from such grantee. " It is as regards the excess of the
payment over his own share that the right can be said to exist. Pomeroy says
this at pages 660 and 661:
"In general, whenever redemption by one
of the abovementioned persons operates as an equitable assignment of the
mortgage to himself, he can keep the lien of it alive as security against
others who are also interested in the premises, and who are bound to contribute
their proportionate shares of the sum advanced by him, or are bound, it may be,
to wholly exonerate him from and reimburse him for the entire payment.........
The doctrine of contribution among all those who are interested in having the
mortgage redeemed, in order to refund the redemptor the excess of his payment
over and above his own proportionate share, and the doctrine of equitable
assignment in order to secure such contribution, are the efficient means by
which equity completely and most beautifully works out perfect justice and
equality of burden, under these circumstances...................."
Whatever the difference might be between the English law and the Indian law as
regards the right 251 to enforce decrees and securities for the due payment of
a debt in the case of a surety who discharges a simple money debt and a surety
who pays up a mortgage, it is still noteworthy that Section V of the Mercantile
Law Amendment Act of 1856 (England) provided for indemnification by the principal
debtor( for the advances made and loss sustained by the surety.
There is a distinction in this respect
between a third party who claims subrogation and a co-mortgagor who claims the
right, and this is brought out by Sir Rashbehary Ghose in his Law of Mortgage
in India, Volume I, 5th Edition. He says at page 354, pointing-out that
co-mortgagors stand in a fiduciary relation :
" I should add that an assignee of a
mortgage is entitled, as a rule, to recover whatever may be due on the
security. But if he stands in a fiduciary relation, he can only claim the price
which he has actually paid together with incidental expenses." The right
of the co-mortgagor who redeems the mortgage is spoken of as the right of
reimbursement at page 372 in the following passage :
"Strictly speaking, therefore, when one
of several mortgagors redeems a mortgage, he is entitled to be treated as an
assignee of the security which be may enforce in the usual way for the purpose
of re-imbursing himself." The redeeming co-mortgagor being only a surety
for the other co-mortgagors, his right is, strictly speaking, a right of
reimbursement or contribution, and in law, when we have regard to the
principles of equity and justice, there should be no difference( between a case
where he discharges an unsecured debt and a case where he discharges a secured
debt. It is unnecessary for us to decide in this appeal whether section 92 of
the Transfer of Property Act was intended to strike a departure from this
position when it states that the co-mortgagor shall have the same 252 rights as
the mortgagee whose mortgage he redeems, and whether it was intended to
abrogate the rule of equity as between co-debtors, and provide for the enforcement
of the liability on the basis of the amount due under the mortgage ; and this
is because, as has been already stated, we are governed not by the statute but
by general principles of equity and justice. If it is equitable that the
redeeming co-mortgagor should be substituted in the mortgagee's place, it is
equally equitable that the other co-mortgagors should not be called upon to pay
more than he paid in discharge of the encumbrance.
In this connection, reference may be made
with -advantage to the decision of Sir Asutosh Mookerjoe and Teunon JJ. in
DigambarDas v. Harendra Narayan Panday (1) where the question arose as regards
the the rate of interest and the period for which the redeeming co-mortgagor
would be entitled. There is an elaborate examination of the nature of the right
of subrogation obtained by one of several joint comortgagors who redeems the
mortgaged property, and in the course of the discussion the following
" In so far as the amount of money which
he is entitled to recover from his co-mortgagors is concerned, he can claim
contribution only with reference to the amount actually and properly paid to
effect redemption to which sum he can add his legitimate expenses ...........
.The substitution, therefore, of the new creditor in place of the original one,
does not place the former precisely in the position of the latter for all
purposes..........If therefore one of several mortgagors satisfies the entire
mortgage debt, though upon redemption he is subrogated to the right 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
favour 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." (1)
(1910) 14 C.W.N. 617.
258 There is a definite expression of opinion
by the Madras High Court on the point in the decision reported in Suryanarayana
v. Sriramulu(1). In that case, a purchaser of a half share of the equity of
redemption claimed to recover half of the amount of the mortgage on the
security of the other share in the hands of the defendant, and it was held that
as his purchase of the decree on the mortgage was prior to his purchase of the
equity of redemption, he was entitled to the full amount claimed by him. The
learned Judges distinguish the case from one where one of two mortgagors
discharges an encumbrance binding on both, and say that in such a case the mortgagor
doing so could not recover from his comortgagors more than a proportionate
share of the amount actually paid by him.
After this rather lengthy discussion of the
subject, we consider it unnecessary to notice and comment on the several
decisions cited for the appellant. It may be said generally that they only lay
down that in cases where the Transfer of Property Act, as it stood originally
or as amended in 1929, is not applicable, we are governed by the principles of
equity, justice and good conscience, and that sections 92 and 95 embody such
principles. None of the cases deals with the extent or degree of subrogation,
and there is nothing in them which runs counter to the view that the doctrine
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,
and we shall be violating this rule if we give effect to the appellant's
contention. The High Court, in our opinion, reached the correct conclusion.
The parties are not agreed on the shares to
which the plaintiffs are entitled, and this is because after the date of the
final decree some of the branches have become extinct by the deaths of their
representatives. Whether under customary law in the Punjab, uncles (1) (1913)
25 M.L.J. 16.
254 exclude nephews or they take jointly, and
whether succession is per stirpes or per capita, was the subject of
disagreement at the Bar before us. This question must therefore be left over
for determination by the trial court, and the case will have to go back to that
court for effecting partition and delivery of possession according to the
shares to which the plaintiffs may be found entitled.
Subject to what is contained in the foregoing
paragraph, the appeal will stand dismissed with costs.
Agent for the appellant: Nehal Chand Jain.
Agent for the respondent: B. P. Maheshwari.