DOCTRINE OF SUBROGATION Flashcards
Section 92- Subrogation
1) Subrogation means substitution. It is the right of a person to stand in the place of the creditor after paying off his liabilities. In case of a mortgage,
subrogation takes place only by redemption. Therefore, in order to be entitled to
subrogation a person must pay off the entire amount of a prior mortgage.
A partial payment of the mortgage-debt cannot give rise to a claim for a partial subrogation.
2) Any person other than mortgagor, who having interest in the mortgaged property and who redeems the mortgage, is entitled to be substituted in the place of the mortgagee.
3) The person who pays off the mortgage becomes clothed with all the rights of mortgagee. This is called substitution or subrogation of that person in place of
mortgage for purpose of redemption, foreclosure or sale.
4) Paragraph 1 of Section 92 deals with legal subrogation. Any person (except the mortgagor) who has an interest in the mortgaged property or in the equity of redemption, is entitled to be subrogated in place of mortgagee. Such persons have legal
or statutory right of being substituted in place of mortgagee for purposes of redemption, foreclosure or sale.
5) Legal right of subrogation arises by operation of law. It does not depend on any agreement or consent of the mortgagor.
Who can claim legal subrogation?
1) Puisne mortgagee.
2) Co-mortgagor.
3) Surety.
4) Purchaser of equity of redemption.
Puisne Mortgage]
Persons who have interest in the mortgaged-property or charge upon the mortgaged-property are entitled to redeem the same. Such persons are subsequent mortgagees or puisne mortgagees. A pusine mortgagee has a right to redeem the prior mortgage.
For example, a mortgagor executes successive mortgages of the same property first to A, then to B and a third mortgage to C. Here B is entitled to redeem the mortgage by A and C to redeem B. A prior mortgagee obtained a decree without impleading a puisne mortgagee.
It was held that he became entitled to sue for redemption of the earlier mortgage. The rights of puisne mortgagee are not affected even if the property is sold in the execution of a decree. A puisne mortgagee is the assignee of the equity of redemption. He has to bring a suit to enforce his right.
Co-Mortgagor
Co-mortgagor is a co-debtor. 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. Here a co-mortgagor is considered to be the principal debtor for his own share and is presumed to be the surety for other co-mortgagors (co-debtors).
Ganeshi Lal v. Joti Pershad,
In Ganeshi Lal v. Joti Pershad, it was held by the Supreme Court that where one of the co-mortgagors redeems the whole mortgage but pays less than the entire debt, he is entitled to claim from co-mortgagors’ contribution of only proportionate shares of the amount actually paid by him in respect of their shares in debt.
Surety.
The person who stands as a surety in a mortgage for repayment of loan in case the 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.
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. Now the question arises whether he can be treated as a mortgagor in a mortgage transaction? If such a purchaser steps in place of the mortgagor then he will have no right of subrogation under section 92.
To remove this difficulty the courts introduced the principle of intention. It was held by the courts that in such cases the intention of the purchaser of
equity of redemption is simply to keep the mortgage alive.
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, or to put it in another way, he may keep the encumbrance alive for his benefit and thus come in before a later mortgagee.
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 money under an agreement (express or implied) that he would be subrogated to the rights and remedies
of the mortgagee who is paid off.
