The Doctrine of subrogation in the Transfer of Property Act


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.

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.

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:

[t]his 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.

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. Steere 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.

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.'


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.

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.

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 Krishnayya 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.'

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.


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.

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 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. , 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 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.'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.

Additionally, in the case of Raghavendracharya Appacharya Katti'V.'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 Gujrath Andhra Road Carriers Transport Contractors V. 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.

Contribution, Indemnity and Subrogation

Technically speaking, 'contribution' and 'indemnity' are mutually exclusive remedies but are often asserted as alternative causes of action in the same lawsuit. 'Indemnity' shifting less than complete liability is really contribution and 'contribution' shifting all liability is actually indemnity.

Additionally, Contribution and indemnity actions sometimes appear to seek the same relief as subrogation allows and are often asserted as alternative theories to subrogation recovery. The distinction between contribution/indemnity and subrogation lies in the person claiming the right and the person whose debt is paid is because contribution and indemnity require a common liability with the one against whom contribution and indemnity are sought.

As defined under the Black's Law dictionary, Contribution is the right of one who has discharged a common liability to recover from another also liable the proportion of the loss which he ought to pay or bear, whereas Indemnity has been defined as a contractual or equitable right whereby the entire loss is shifted from one who is only technically or passively at fault to another who is primarily or a

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