1. The 5th defendant is the appellant. His mortgage is evidenced by Ex. 1 which was executed in the year 1923. In that mortgage deed, there is: an undertaking for the discharge, of a still prior mortgage (Ex. B) for Rs. 500, held by one Murugesa Mudaliar. The 5th defendant made default in the discharge of that mortgage debt and thereupon the mortgagors executed another mortgage in favour of one Alagirisami Chetti for Rs. 700 in 1924, which is evidenced by (Ex. A). A portion of the consideration fortius mortgage, viz., a sum of Rs. 560, was paid by Alagirisami in discharge of the mortgage debt due under Ex. B. Subsequently in 1927, the same property was mortgaged to the plaintiff for Rs. 1,000 under Ex. C.A. sum of Rs. 700, out of this consideration was paid in discharge of the mortgage debt due under Ex. A. In the present suit brought by the plaintiff for the recovery of the amount due to him under Ex. C. the 5th defendant claims priority. To his claim, the plaintiff sets up a counter by reason of his having discharged Alagirisami's mortgage under Ex. A. He wants to be subrogated to the rights of Murugesa under the earliest mortgage deed Ex. B. There is no doubt that,if the plaintiff could be subrogated to ,the rights of Alagirisami, he could equally be subrogated to the rights of Murugesa, but the dispute is as regards the right of subrogation claimed by the plaintiff in respect of Alagirisami's mortgage. Under the old Transfer of Property Act, the plaintiff could not claim a statutory right of subrogation, for the simple reason that when he made the payment on September 6, 1927, he had not obtained a registered mortgage deed in his favour. Slrictly speaking, he was not a puisne encumbrancer when he made the payment on that date towards the mortgage deed Ex. B, but the question which remains for consideration is, whether the equitable doctrine of subrogation as recognised by judicial decisions cannot be invoked for the aid of the plaintiff in this case. We find from Ex. C that the plaintiff paid the sum of Rs. 700, towards Alagirisami's mortgage debt as requested by the mortgagors and in pursuance of the agreement for the mortgage entered into between him and the debtors. There is no difficulty in holding that the plaintiff made this payment in order to discharge the previous mortgage debt of Alagirisami and to protect his own interest which would accrue to him on the execution of the mortgage deed in pursuance of the agreement. He is not, therefore, a mere volunteer who intermeddles with the estate of another and in whose favour no equitable considerations arise. The equitable principle has been well stated in Jones on Mortgages, which is extracted in the decision in Narayana Kutti Goundan v. Pechiammal 15 Ind. Cas. 206 : 36 M. 426 438 : 11 M.L.T. 174 : (1912) M.W.N. 353 : 22 M.L.J. 364.
Under the equitable principle of subrogation, one who pays a mortgage debt under an agreement for an assignment or for a new mortgage, for his own protection or for the benefit of another, acquires a right to the security held by the other.
2. The same rule has been stated, in an American case quoted on the same page from which this principle is clear, viz., where one advances.
money under an agreement, express or implied, made either with the debtor or creditor, that he would be subrogated to the rights and remedies of the creditor.
3. That equitable right can be enforced by such a person when a necessity arises later on. In the present case, can we imply such an agreement from the circumstances disclosed in the evidence? The very recitals in the mortgage deed (Ex. C) clearly show that there must have been an agreement between the plaintiff and the mortgagors for the payment of a portion of the consideration in discharge of the earlier mortgage debt of Alagirisami. In pursuance of that agreement, the payment was made on September 6, 1927, and the mortgage bond itself was got back with the endorsement of discharge. On the very next day, the mortgage deed itself was executed in plaintiff's favour, and he retained the discharged mortgage bond in token of the rights secured to him by such payment. It is scarcely necessary to say that but for this implied agreement that he should be subrogated to the rights of Alagirisami if a necessity should arise, this precaution would not have been resorted to. The plaintiff would not have been ventured to advance Rs. 1,000, on this property without clearing off the encumbrance in favour of Alagiri sami. A perusal of the mortgage deed in favour of Alagirisami discloses the existence of the mortgage of 1917 which was discharged out of the consideration paid by Alagirisami. The argument strenuously advanced by the appellant is, that on the date of the payment of Rs. 703, by the plaintiff, he had no legal interest in the property; but that is not the only condition which would entitle him to the rights of subrogation. We have already stated that he is not a mere volunteer and it is enough if he had a really bona fide concern in the transaction, as was held in recent decision of this High Court in Kattukkavil Kizhakkapat Nangunni Kovilamma v. Keli Nedungadi : AIR1929Mad860 . It cannot be denied that the plaintiff had a real bona fide concern in this matter, so as to oblige him to enter into an agreement with the mortgagor for rights of subrogation. Such an agreement is not express in this case, but there are sufficient grounds to imply the existence of such an agreement.
4. Some stress was laid on a clause in Ex. C which is something like a guarantee clause:
If any encumbrance not disclosed to the plaintiff should be found to exist, the mortgagors make themselves liable for all the losses arising therefrom.
5. This clause does not in our opinion negative the existence of an implied agreement, whereby the plaintiff would be entitled to claim rights of subrogation. On the other hand, if there was any contrary intention of surrendering the rights of subrogation,' we should expect a definite clause to that effect.
6. We, therefore, agree with the lower Court, that the plaintiff has a preferential claim for the amount paid by him which went towards the discharge of Murugesa's mortgage.
7. A sum of Rs. 500 was paid by Alagirisami for the principal and Rs. 60, for interest in discharge of Ex. B. On the date of the plaintiff's mortgage, viz., September 7, 1927, nothing was due for interest under Ex. A. A sum of Rs. 560, out of the amount of Rs. 700, paid by the plaintiff represents the amount that went in satisfaction of Murugesa's mortgage debt. Interest on Rs. 500 at the rate specified in Ex. B should be calculated and allowed from September 7, 1927. Out of the amount so calculated, a sum of Rs. 67-8-0 should be deducted, as it should be deemed to have been paid towards interest subsequent to the date of the plaintiff's mortgage. This is clear from an admission in the plaint itself about the receipt of Rs. 135, for interest. The preferential claim of the plaintiff should consist of Rs. 560, and interest on Rs. 500, at the rate above-mentioned from the date of the plaintiff's mortgage deed up to the dale of plaint minus a sum of Rs. 67-8-0. With this modification, the decree of the lower Court is confirmed and this appeal is dismissed with costs of plaintiff (1st respondent).