1. This is a simple appeal; but a question of law is raised on facts which are plain and undisputed. The appellant claims a right of subrogation to the extent of Rs. 850 under Section 92 of the Transfer of Property Act in the following circumstances.
2. The first respondent, who is now dead and is represented by his legal representatives, respondents 2 to 5, instituted the suit, O. S. No. 5o of 1956, Sub Court, Tiruchirapalli, for recovery of money due on a simple mortgage dated 1-11-1944 in his favour executed by the first defendant in the suit. Items 1 to 3 of the plaint schedule properties belonged absolutely to the first defendant. Defendants 2, 3 and 4 were impleaded as puisne mortgagees, holding usufructuary mortgages, of items 1 to 3 respectively. The first defendant held only mortgage rights over items 5 and 6 of the plaint schedule and the fifth defendant was impleaded as he claimed a vendor's lien over these items. The fourth defendant, who was the usufructuary mortgagee of the plaint item 3 resisted the suit, questioning the truth and validity of the mortgage sued upon, and also claiming priority to the extent of Rs. 850, in respect of that item relying upon the doctrine of subrogation. The learned Subordinate Judge found that the suit mortgage was true, valid and supported by consideration and negatived the right of subrogation. He passed the usual preliminary mortgage decree for the suit amount and granted two months time for redemption. This appeal is by the fourth defendant against the said judgment and decree. The mortgagor first defendant has been adjudicated as insolvent pending the appeal and the Official Receiver in charge of his estate is now the sixth respondent before me.
3. The necessary facts, on which the appellant's claim for priority to the extent of Rs. 850 rests, may now be stated. Plaint item 3 was originally owned by one Kaveri Ammal. She executed an othi deed (usufructuary mortgage) in favour of one Nagammal under a registered document dated 9-9-1940, to secure a debt of Rs. 850. The first defendant purchased the property from Kaveri Ammal under a conveyance dated 21-5-1954, agreeing to discharge Nagammal's mortgage in part payment of the consideration due for the purchase. He failed to do so, and executed an othi deed dated 4-4-1947 in favour of Radhakrishnammal securing a debt of Rs. 1600. He got Rs. 750 cash from Radhakrishnammal and directed her to dischargeHagammal's mortgage. Radhakrishnammal paid Rs. 850 to Nagammal, discharged her mortgage and obtained possession of the hypotheca. On 23-5-1954. Radhakrishnammal assigned her mortgage right to the fourth defendant for proper consideration and thus the fourth defendant came to occupy the position of an usufructuary mortgagee. Her contention is that Radhakrishnammal got sub-rogated to the rights of Nagammal who was a prior incumbrancer to the plaintiff. As already stated, the plaintiff obtained the suit mortgage only on 1-11-1944. The fourth defendant as the assignee of Radhakrishnammal is entitled to stand in her shoes, but the question is whether Radhakrishnammal has a valid claim of subrogation under Section 92 of the Transfer of Property Act, in respect of Nagammal's mortgage which she admittedly discharged.
4. The relevant provisions of the Transfer of Property Act relating to subrogation are :
'91. Besides the mortgagor, any of the following persons may redeem, or institute a suit for redemption of the mortgaged property, namely :
(a) any person (other than the mortgagee of the interest sought to be redeemed) who, has any interest in, or charge upon, the property mortgaged or in or upon the right to redeem the same;...... 92. Any of the persons referred to in Section 91 (other than the mortgagor) or 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 mortgages.
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 had 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 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.'
The essential requisites for a valid claim forsubrogation are : (i) the person claiming the rightmust have an interest in or charge upon the property mortgaged entitling him to redeem the mortgage; (2) he must, redeem the mortgage; or (3) aperson must have advanced money to a mortgagorto redeem a mortgage with an agreement under aregistered instrument that he shall be subrogated to the rights of the mortgagee whose mortgage is discharged.
5. Paragraph (i) of Section 92 deals with what isfamiliarly called 'legal' subrogation and paragraph 3 covers cases of 'conventional' subrogation,so called, outside paragraph I. The appellant doesnot claim that she is entitled to subrogation undera registered agreement, as obviously there is nosuch agreement. Her, contention, however, is thatshe, as the assignee from Radhakrishnammal wasa person interested in discharging the encumbrancein favour of Nagammal, and that, therefore, she would be entitled to invoke the benefit conferred by the first part of Section 92. The assignor of the appellant was a puisne mortgagee who discharged a prior mortgage under a term of the puisne mortgage. The said assignor paid Nagammal only as the agent of the first defendant, mortgagor, from and out of his funds reserved with her for that purpose. Though she had certainly no antecedent right or interest in the hypotheca, prior to the mortgage in her favour, which needed protection. The fact that she paid the money to Nagammal did not make her the redeeming party. The redemption was effected by the first defendant through the medium of the appellant's assignor by the machinery of a mortgage in her favour. It is true that she became a mortgagee but that was the very transaction under which she covenanted to discharge the earlier mortgage in favour of Nagammal. Can it be said that the redemption of the prior mortgage was necessitated to protect any preexisting right of the appellant's assignor? The answer can only be in the negative. The real position is that the mortgagor, the first defendant, redeemed the mortgage of Nagammal by raising money on a fresh hypothecation of the property in favour of Radhakrishnammal to claim to be subrogated to the rights of Nagammal, solely on the ground that part of consideration for the mortgage in her favour was utilised to pay Nagammal. It is well accepted rule of law that the mere fact that one individual advances money to another tc enable him to pay specific debts does not in the absence of a special bargain confer on the lender the rights of those whose debts are discharged. (Eve J. in Wylie v. Carlyon, 1922-1 Ch. 51.)
6. In Lakshmi Amma v. Sankaranarayana Menon 70 MLJ 1 : AIR 1936 Mad 171, it was held that a subsequent mortgagee, who undertakes to pay off three prior mortgages but pays only two of them cannot resist the claim of the third mortgagee who remains unpaid by setting up the discharge of the other encumbrances as a shield and claiming priority in respect of those payments unless there is an agreement between the mortgagor and the subsequent mortgagee that the latter shall be subrograted in respect of the mortgages discharged. At page 7 (of Mad LJ) : (at p. 174 of AIR), Varadachariar J. observes :
'There is a well established distinction between cases in which a person who has a pre-existing interest in property pays off a prior charge on that property for the protection of his own interest and cases in which a person acquires an interest in property only by reason of his advancing money to pay off an existing mortgage debt. It seems to me that the first clause of Section 92 must be held to relate to the first type of cases above referred to and the third clause to the second type.'
7. In Vedantan Subbarayadu v. Lakshminarasamma : AIR1939Mad949 it was contended that a person who advances money to a mortgagor and takes a mortgage or sale would come within the first clause of Section 92. A Division Bench consisting of Venkataramana Rao and Newsam JJ. repelled the contention. Venkataramana Rao J. points that, prior to the enactmentof Section 92, an advance of money by a mortgagee or vendee to discharge a prior mortgage resulted only in the extinction of that mortgage, though the rule would be different if there was an intermediate encumbrance. Complicated questions involving niceties of intention and state of mind of the subsequent mortgagee arose frequently and equity leaned in favour of such mortgagee who had discharged a prior encumbrance. Venkataramana Rao J. observes at page 547 (of Mad LJ) : (at p. 956 of AIR) :
'In order, therefore, to avoid question of intention and onus being gone into by courts and with a view to place the right of subrogation on a statutory basis the Legislature enacted Section 92 of the Transfer of Property Act............ Section 92(i) dealswith the case of a person having an existing interestand Section 92(iii) deals with the case where under theprevious state of the law the right of subrogationinvoked on the doctrine of conventional subrogation.'
8. I respectfully agree with this observation. In Mullah's Transfer of Property Act, the position is succinctly summed up thus at page 552 :
'The weight of authority clearly seems to bein favour of the view that the two paragraphs (ofSection 92) are mutually exclusive and that the firstparagraph: deals with persons who having a preexisting interest in the property redeems a priormortgage to protect his own interest and that aperson who acquires interest only by advancingmoney with which the prior mortgage it satisfieddoes not come within the first paragraph eventhough he secures his advance by a mortgage orbecomes a purchaser. Such a person comes withinthe third paragraph and can only claim subrogationif there be an agreement between him and themortgagor in, writing registered.'
The decision of the court below is right. Theappellant cannot sustain the claim for prioritybased on subrogation. The appeal fails and is dismissed with costs.