1. The question with which we are concerned in this second appeal is one of subrogation. The property concerned in the suit is a house which originally belonged to defendant No. 1. He mortgaged it three times in all. The first mortgage was for Rs. 300 in May, 1931, in favour of one Shantappa. The second was for Rs. 400 in favour of one Kalappa in September, 1931. The third was to the plaintiff in October, 1933, for Rs. 650. The plaintiff's mortgage mentioned the other two mortgages and provided that out of the consideration money Rs. 308 should be spent by the plaintiff in paying off the first mortgage. In January, 1936, defendant No. 2 took out execution of a money decree which he had obtained against defendant No. 1 and bought the property in suit for Rs. 800 subject to the second mortgage. He paid off the second mortgage, and Rs. 670-3-0 (i.e. Rs. 800 less defendant No. 2's expenses) was paid into Court. The plaintiff has now sued defendants Nos. 1 and 2 to enforce his own mortgage, the third of the series. He has been paid Rs. 670-3-0, and he now claims to be paid the balance. It is admitted that the plaintiff did in fact pay off the first of the mortgagees. Defendant No. 2's defence to the suit is that by reason of Section 92 of the Transfer of Property Act he is subrogated to the second mortgagee whose mortgage he has paid off, and on that ground he claims to have priority over the plaintiff's mortgage.
2. As being a person having an interest in the mortgaged property other than the mortgagor (see Section 92 read with Section 91) he is prima facie entitled to subrogation. But his claim has been rejected by the lower appellate Court by reason of Section 59A of the Transfer of Property Act. That section is as follows:
Unless otherwise expressly provided, reference in this Chapter to mortgagors and mortgagees shall be deemed to include references to persons deriving title from them respectively.
3. The learned Judge says that by Section 59A the term mortgagor includes a person deriving the title from him, that defendant No. 2 by purchasing the right, title and interest of the mortgagor defendant No. 1 simply stepped into his shoes,; and that he cannot therefore claim to be subrogated to the rights of the second mortgagee whose mortgage he redeemed. But in reasoning in this way the learned Judge appears to overlook the words 'unless otherwise expressly provide' occurring in Section 59A. In providing that 'Besides the mortgagor the following persons are entitled to redeem' and in including among those persons such persons as derive title from the mortgagor, Section 91 clearly distinguishes between the mortgagor and persons deriving title from the mortgagor. And in saying that any of the persons mentioned in Section 91 other than the mortgagor are entitled to subrogation, Section 92 obviously repeats the distinction and so provides an exception to the general rule laid down in Section 59A. To this extent Section 92 merely reaffirms the law as it stood in India before the enactment of 1929, and the Privy Council had already held that an auction purchaser under a money decree who paid off a prior mortgage was entitled to subrogation against a subsequent mortgagee: see Malireddi Ayyareddi v. Gopala-krishnayya : . I may also refer to Sir Dinshah Mulla's 'Transfer of Property Act', second and., where at p. 523 the learned author says:-
Although the word 'mortgagor' includes a purchaser of the equity of redemption (see Section 59A), yet the purchaser of an equity of redemption is not excluded from the right of subrogation. This is because (1) he is under no covenant or personal liability to the mortgagee whose mortgage he discharges, and (2) the principle that the mortgagor cannot derogate from his grant has no application to him.
4. It follows that defendant No. 2 is protected against the third mortgagee by his having paid off the second of the mortgages.
5. But on behalf of the plaintiff respondent it is argued that he in his turn is subrogated to the first mortgagee, he having admittedly paid off the first mortgage as arranged for in his own mortgage. It is said that as puisne mortgagee he is ipso facto entitled to subrogation, and reference is made to a decision of the full bench of the Allahabad High Court in Tola Ram v. Ram Lap (1932) I.L.R. 54 All. 897, F.B. The learned Judges who decided that case declined to accept the argument that a mortgagee whose mortgage provides for paying off a prior mortgage as part of the consideration and pays it off accordingly does so as an agent of the mortgagor. They said that the whole question of subrogation had been simplified by the amendment of the Code of 1929, under which we have our present Section 92, and they took the view that a puisne mortgagee was entitled to subrogation merely by virtue of his being included in the list of persons entitled under Section. 91 to redeem and on that account being included among the persons entitled under Section 92 to subrogation. But in a later case of the same High Court, Him Singh v. Jai Singh  All. 880, a bench of five Judges disagreed with the reasoning in Tota Ram v. Ram Lal and held that a puisne mortgagee who pays off a prior mortgage as part of the consideration for the puisne mortgage is using the mortgagor's money and not his own, so that he obviously acquires no right for himself by his payment. That decision was referred to with approval by our own High Court in Vithaldas Bhagwandas v. Tukdram Vithoba (1940) 43 Bom. L.R. 225. In Lakshmi Amma v. Sankara Narayana Menon (1935) I.L.R. 59 Mad. 359, F.B. a full bench of the Madras High Court reached the same result upon a different ground. It was held, upon a consideration of the first and the third clauses of Section 92 together, that a puisne mortgagee in circumstances such as these could not be intended to be included in the first clause, since that clause referred only to persons holding pre-existing interests in the property, and that he could get no right of subrogation unless he held a registered agreement to that effect as provided in Clause (5). In Mukaram Marwari v. Mahatmmad Hosain (1935) I.L.R. 62 Cal. 677 a puisne mortgagee was held to be disentitled to subrogation from the very fact that his mortgage contained a covenant to pay off the prior mortgage; and this decision was arrived at after reference to numerous authorities. But for our purposes it is enough to say that the plaintiff must be held to have been using the mortgagor's money when he paid off the first mortgage, so that he gets no right of subrogation by his payment.
6. The appeal of defendant No. 2 therefore succeeds and the decree will have to be modified. The order of the Court below is for payment by the defendants to the plaintiff of Rs. 970, together with interest on Rs. 650 at eighteen per cent. per annum from the date of the suit and costs, and that on their failure to pay the plaintiff should apply for a final decree for the sale of the mortgaged property. In view of our finding that defendant No. 2 is entitled to subrogation, the liberty given to the plaintiff to apply for sale must be made subject to the modification that he pays defendant No. 2 Rs. 800, (which is the amount paid by defendant No. 2 in satisfaction of the second mortgage) together with interest at six per cent. from June 2, 1936, to the date of payment. That means the plaintiff will not be entitled to apply for a final decree for sale of the mortgaged property unless and until he pays this amount. The order of costs in the trial Court will stand. But defendant No. 2 is entitled to his costs in this Court and in the lower appellate Court from the plaintiff respondent No. 1.