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PETITIONER:

GANESHI LAL

Vs.

RESPONDENT:

JOTI PERSHAD.

DATE OF JUDGMENT:

07/11/1952

BENCH:

AIYAR, N. CHANDRASEKHARA

BENCH:

AIYAR, N. CHANDRASEKHARA

MUKHERJEA, B.K.

BHAGWATI, NATWARLAL H.

CITATION:

1953 AIR 1 1953 SCR 243

CITATOR INFO :

F 1979 SC1937 (29,30)

ACT:

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.

HEADNOTE:

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 affirmed.

JUDGMENT:

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

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Chandrasekhara Aiyar J.

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244

CHANDRASEKHARA AIYAR J.-The plaintiffs, Joti Prasad and Sat

Narain, sued for partition and possession of their two-

fifths 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

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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 was involved.

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

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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.

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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 comortgagors

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

unsound.

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

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75 conferred the right to redeem in express terms only on

second or other subsequent mortgagees, though the co-

mortgagor'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,

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equity and good conscience.

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.

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"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 Second Edition:

" 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 125:

" 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

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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

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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 still stronger.

" 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

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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 above-

mentioned 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

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circumstances...................."

Whatever the difference might be between the English law

and the Indian law as regards the right

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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

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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 observations occur:

" 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,

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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.

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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.

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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.

Appeal dismissed.

Agent for the appellant: Nehal Chand Jain.

Agent for the respondent: B. P. Maheshwari.

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