Transfer of Property Act (TPA)
Subrogation under Section 92: Legal and Conventional Subrogation, Its Conditions, and Sections 94 and 95
A person who pays off somebody else's mortgage should not be treated as having made a present of the money. Subrogation puts him in the place of the mortgagee he has paid — he takes that mortgage's rights and, what matters most, its priority. The Act recognises two routes. Legal subrogation arises by operation of law in favour of the persons who were entitled to redeem. Conventional subrogation arises by agreement in favour of a stranger who lent the money, and the Act requires that agreement to be by a registered instrument.
1. The Section
Section 92, TPA 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 that property, the same rights as the mortgagee whose mortgage he redeems may have against the mortgagor or any other mortgagee. The right so conferred is called the right of subrogation, and a person acquiring it is said to be subrogated to the rights of the mortgagee whose mortgage he redeems. A person who has 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 so subrogated. Nothing in the section confers a right of subrogation on any person unless the mortgage in respect of which the right is claimed has been redeemed in full. |
2. The Doctrine
- It is substitution, not extinction. The mortgage the payer discharges is treated as kept alive for his benefit, so far as regards redemption, foreclosure and sale.
- What he gets is priority. The value of the doctrine lies in the rank of the security he takes over: a third mortgagee who redeems the first stands, to that extent, ahead of the second.
- It rests on the prevention of unjust enrichment. Without it, the person whose payment relieved the property would be an unsecured creditor, and the intermediate encumbrancers would be enriched at his expense.
- And it is limited by section 93. Subrogation gives him the priority of the mortgage he paid off, and nothing more; he gains no priority for his own separate advance.
3. Legal and Conventional Subrogation
Point | Legal subrogation | Conventional subrogation |
|---|---|---|
How it arises | By operation of law, on redemption by a person entitled | By agreement between the mortgagor and the person who advances the money |
Who may claim | The persons in section 91 other than the mortgagor — a puisne mortgagee, a purchaser of the equity of redemption, a surety, a person with a charge — and any co-mortgagor | A stranger who advances money to the mortgagor with which the mortgage is redeemed |
What is required | Redemption of the mortgage in full by a person having an interest | An agreement by the mortgagor, by a registered instrument, that the lender shall be subrogated |
Why the difference | The payer had his own interest to protect, and equity substitutes him without more | A stranger has no interest to protect; without an agreement his payment is a loan, not a substitution |
Effect | The same in both — the rights of the redeemed mortgagee as regards redemption, foreclosure and sale | The same |
4. The Conditions for Conventional Subrogation
- An advance of money to the mortgagor, by a person who is not himself entitled to redeem.
- The mortgage must actually have been redeemed with that money. The section speaks of money with which the mortgage has been redeemed; a loan which the mortgagor applied elsewhere founds no claim.
- An agreement by the mortgagor that the lender shall be subrogated, and that agreement must be by a registered instrument. An oral understanding, however clearly proved, is not enough.
- And the mortgage must have been redeemed in full, which is a condition of every claim to subrogation under the section.
5. Subrogation and Assignment Distinguished
Point | Subrogation | Assignment |
|---|---|---|
How it comes about | By redemption — payment of the mortgage debt by a person entitled, or by a stranger under a registered agreement | By a transfer of the mortgage debt and the security from the mortgagee to the assignee |
Who is the source of the right | The law, or the mortgagor's registered agreement | The mortgagee, who conveys what he holds |
The mortgagee's part | He is paid off; his concurrence is not needed for legal subrogation | He is the transferor, and the transaction is his act |
What the person takes | The rights of the redeemed mortgagee so far as regards redemption, foreclosure and sale | The whole of the mortgagee's rights under the mortgage, as they stand |
Formality | Legal subrogation needs no instrument; conventional subrogation needs a registered instrument from the mortgagor | The assignment of a mortgage is itself a transfer of an interest in immoveable property, and follows the ordinary rules of registration |
Against the mortgagor | The subrogee stands in the shoes of the mortgagee for enforcement of the security redeemed | The assignee stands in the shoes of the mortgagee generally |
6. Section 94: The Rights of a Mesne Mortgagee
Section 94, TPA 'Where a property is mortgaged for successive debts to successive mortgagees, a mesne mortgagee has the same rights against mortgagees posterior to himself as he has against the mortgagor.' |
The mesne mortgagee — the man in the middle — is thus in a double position. Towards the prior mortgagee he is a person entitled to redeem under section 91, and on redeeming he is subrogated under section 92. Towards the later mortgagees he is himself in the position of a mortgagor's mortgagee: he may foreclose or sell as against them exactly as he could against the mortgagor, and they must redeem him if they wish to protect their own security.
7. Section 95: The Redeeming Co-mortgagor's Charge
Section 95, TPA 'Where one of several mortgagors redeems the mortgaged property, he shall, on obtaining possession of the property, be entitled to a charge on the share of each of the other co-mortgagors for his proportion of the expenses properly incurred in so redeeming and preserving the property.' |
- He gets a charge, not the property. Redemption by one co-mortgagor does not make him the owner of the whole; it enures for the benefit of all, and his protection is the statutory charge.
- The charge is for a proportion. Each other co-mortgagor's share bears its own proportion of the expenses properly incurred in redeeming and in preserving the property.
- It is enforced as a charge under section 100, that is, by sale in the manner provided for a simple mortgage.
- And it sits alongside section 92, under which the redeeming co-mortgagor is also subrogated to the rights of the mortgagee he paid off.
8. A Worked Illustration
Three mortgages, one redemption A mortgages his property to B for ₹6 lakh, then to C for ₹4 lakh, then to D for ₹5 lakh. D redeems B's mortgage in full. D is subrogated to B's mortgage. On a sale he takes ₹6 lakh first, in B's place. C then takes his ₹4 lakh. D's own mortgage of ₹5 lakh ranks last. He does not tack. Section 93 prevents D from claiming B's priority for his own ₹5 lakh; subrogation gives him the priority of the debt he discharged and no more. And if a stranger, E, had lent A the money to pay off B, E would be subrogated only if A had agreed by a registered instrument that he should be. |
9. Landmark Cases
📖 Valliamma Champaka Pillai v. Sivathanu Pillai, (1979) 4 SCC 429 Held: The Court explained the two kinds of subrogation recognised by section 92. Legal subrogation arises by operation of law in favour of a person who, having an interest to protect, redeems the mortgage. Conventional subrogation arises where a stranger advances the money with which the mortgage is redeemed, and it is available only where the mortgagor has agreed by a registered instrument that he shall be subrogated. Ratio: Legal subrogation needs no writing; conventional subrogation is available only under a registered agreement. |
📖 Aldrich v. Cooper, (1803) 8 Ves 382 Held: The equitable foundation of the doctrine was stated in the course of the law relating to the marshalling of securities: a person who discharges an encumbrance for the protection of his own interest is not to be treated as a volunteer, and equity will keep the security alive in his favour so that the burden falls where it properly belongs. Ratio: Subrogation rests on the principle that the person whose payment relieved the property must not be left worse off than the parties he has benefited. |
10. Related Topics and Provisions
- Persons Entitled to Sue for Redemption, Section 91 — who may redeem and so be subrogated
- Contribution and Subrogation Between Co-mortgagors — the position among co-owners
- Doctrine of Tacking, Section 93 — the limit on what subrogation gives
- Priority Between Mortgages — the rank the subrogee takes over
- Section 100, TPA — charges, and the enforcement of the section 95 charge
- Section 82, TPA — contribution between properties liable to one debt