Report No. 70
It is obvious from section 91 that not only the mortgagor, but also several other persons mentioned in that section, have-right to redeem the mortgage. Redemption by a person other than the mortgagor puts an end to the mortgagee's rights, and the mortgagee henceforward goes out of the picture. But this does not conclude the matter as regards the other consequences that may flow from redemption by a person who is not a mortgagor or who is one of the mortgagors.
In certain cases, he may, as against the mortgagor, or the mortgagee, acquire substantially the same rights as the mortgagee had. He is, in other words, substituted in place of the mortgagee, in the specified cases. To this legal consequence of substitution, the law gives the name of subrogation. The principal provision on the subject is section 92, which reads as follows:
"92. 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 right 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 person 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."
82.2. Nature of subrogation.-
The section raises the question of the nature of subrogation and the principle on which it is founded. That principle is thus explained by Mr. Justice Sutherland in Ellisworth v. Lockwood, (1870) 42 NY 89, quoted by Mokkerjee, J. in Gurdeo Singh v. Chandrikah Singh, ILR 36 Cal 193 (217), "Subrogation or substitution by operation of law to the rights and interests of the mortgagee in the land is by redemption, and redemption is payment of the mortgage debt after forfeiture by the terms of the mortgage contact, so that really the subrogation or substitution by operation of law arises or proceeds on the theory that the mortgage debt is paid.
If the holder of a bond assigned to it a party claiming a right to redeem, the latter is subrogated by the assignment to the mortgage debt and mortgage security and to the instrument evidencing such debt and security, and there is no room or occasion for subrogation by operation of law."
Consequently, it may be said, in general, that to entitle one to invoke the equitable right of subrogation, he must either occupy the position of a surety of the debt or must have made the payment under an agreement with the debtor or creditor that he should receive and hold an assignment of the debt as security, or he must stand in such a relation to the mortgaged premises that his interest cannot otherwise be adequately protected.
The doctrine of subrogation-at least in some of its aspects-seems to have been derived from the Roman law. Thus, in Roman Law, a creditor who lent money to the debtor for paying off a mortgage on the condition that the creditor was to be substituted in the place of the mortgagee, was entitled to claim the benefit of the security that had been discharged with the aid of the money lent by the creditor.1 No doubt, the particular situation of the creditor advancing money, as dealt with in third paragraph of section 92, has led to certain controversies.2 But it should not be overlooked that this is a familiar instance of subrogation.
1. Ghose Law of Mortgage in India, (1902), p. 397.
2. See infra.
82.4. Various situations.-
Section 92 must be read with section 91. So read, it will disclose that several different types of subrogation are dealt with in section 92, though the arrangement of the matter in the section does not bring out distinctly these various types of situations.
In the first place, we come to persons other than the mortgagor and co-mortgagors, mentioned in section 91. Under section 91(a), a person having an interest in or charge upon the mortgaged property or the right to redeem the same can institute a suit for redemption and by virtue of section 92, first paragraph, such persons have the right to subrogation. Secondly, there is the position of sureties-section 91(b) and section 92, first paragraph. Thirdly, there is the creditor who in an administration suit obtains a decree for the sale of the mortgaged property-section 91(c) and section 92, first paragraph. Fourthly, there is the co-mortgagor, expressly mentioned in section 92, first paragraph.
Finally, there is under section 92, third paragraph, the case of a person who has advanced to a mortgagor money with which the mortgage has been redeemed. His subrogation to the rights of the mortgagee is dependent upon the existence of a registered instrument by which the mortgagor has agreed to such subrogation.
82.5. Reimbursement in other cases.-
Of course, section 92 is not exhaustive of the law of subrogation or of the law of reimbursement. At least two other topics may be referred to-the personal right of reimbursement1 and equitable charge claimed in the nature of salvage lien. On the second topic,2 the law is unsettled. For example, where one of two co-sharers in a revenue paying estate pays the whole revenue to save the estate, has he, besides the personal right of reimbursement under the Contract Act, a charge on the share of the defaulting purchaser?
The position in this regard is not definite. The answer given by the High Courts of Kerala, Madras and Nagpur is in the affirmative, while the answer given by the High Court of Allahabad, Bombay, Calcutta and Patna is in the negative.3 These cases need not detain us, because they are outside the subject-matter of subrogation to the rights of a mortgagee created by contract. They are referred to here only to show that the equitable principle of reimbursement, which is the basis of the right of legal subrogation4 has operation in other fields also.
1. Section 69, Contract Act.
2. Mulla, (1973), pp. 583-584.
3. See case law reviewed in Mulla, (1973), p. 584.
4. Mulla, (1973), p. 585.
82.6. Persons interested.-
Subrogation of persons interested in the property or in the security-the first situation mentioned above,1 raises, no problems.
1. Para. 82.4, supra.
Turning to sureties, it is well established that a surety is entitled to every remedy which the creditor has against the principal, debtor, to enforce every security and all means of payment. The observations of Markby J. in Heeralal v. Oozeer Ali, (1874) 21 Weekly Reports 347 (Cal), are of interest. He observed that by the Law of England and Scotland and also by the general law of Europe, when a surety has paid off the debt of the principal, not only all the collateral securities are transferred to the surety, but, by what is called subrogation, the right is also transferred to him to stand in the place of the original creditor and to use against the principal debtor every remedy which the principal creditor himself could have used.
82.8. We may pass over the case of creditors in an administration suit-the third situation-as not of pretrial importance.
82.9. The co-mortgagor's case is the most interesting one, since he has a dual capacity to perfor.- he is mortgagor and yet is subrogated. Redemption by a co-mortgagor is a case of subrogation and was known as such even before the Act. Not only can the owner of the equity of redemption or a part of an estate under mortgage redeem the whole, but, where he pays the entire mortgage debt, he also thereby puts himself in the place of the mortgagee whose mortgage has been redeemed and acquires a right to treat the original mortgagor as his mortgagor and a right to hold that portion of the estate in which he would have no interest but for the payment, as a security for any surplus payment which he may have made.
82.10. Persons advancing under third paragraph.-
The last situation of subrogation that dealt with in the third paragraph has come to assume considerable practical importance.