Tpa Akash V Project 1
Tpa Akash V Project 1
Submitted to the Tamilnadu national law university in fulfilment of the requirement for the
award of the degree of B.com.LLB (Hons)
AKASH V
Reg. No. BCO210005
Submitted to
Prof. Shanthi Samantha
Assistant professor of law
TIRUCHIRAPALLI - 620027
DECLARATION
I, Akash V, Registration No. BC0210005, hereby declare that this research paper work entitled
as “Critical Analysis on the Doctrine of Subrogation under Transfer of Property Act “been
originally carried out by me under the guidance of Prof. Shanthi Samantha, Assistant professor
of Law, Tamil Nadu National Law University (TNNLU) Tiruchirapalli-620027. This work has
not been submitted either in whole or in part of any degree/ diploma at any university.
Place: Tiruchirappalli
The legal doctrine of subrogation is based on the ideals of justice, fairness, and moral conduct.
This doctrine's main principle is that whomever settles a mortgage receives all of the lender's
rights. In areas of India where the legislation did not directly apply, this idea was expanded.
Section 92 of the Transfer of Property Act of 1882 defines and recognises the Right of
Subrogation.
A person has the authority to act in the place of a creditor once that creditor has completed his
responsibilities. It's referred to as subrogation. Only redemption is possible in a mortgage
situation for subrogation. A person must entirely pay off a previous mortgage in order to be
eligible for subrogation. A partial payment of the mortgage due cannot be used to support a
claim for partial subrogation.
The concept of subrogation, which is based on justice, impartiality, and ethics, is acknowledged
and defined in Section 92 of the Transfer of Property Act of 1882. According to the theory of
subrogation, the individual who repays a mortgage acquires all the rights of the mortgagee. The
main goal of the Act is to create a public system for transferring real estate, which calls for
registration. Property is a general phrase that refers to both the monetary value of an item and
the accompanying legal rights of ownership. It includes all of a person's property rights.
SATEMENT OF PROBLEM
The doctrine of subrogation under the Transfer of Property Act has been a subject of critical
analysis due to its potential impact on the rights and interests of parties involved in property
transactions. The problem arises when the application of the doctrine leads to an unequal
distribution of rights and liabilities among the parties, particularly in cases where there is a
conflict between the interests of the original and the substituted creditor.
RESEARCH QUESTIONS
Whether the doctrine of subrogation as formulated under the Transfer of Property Act
promotes fairness and equity in property transactions?
Whether the principles of subrogation should be applied differently in different types
of property transactions, such as mortgages, leases, and sales?
Whether the application of the doctrine of subrogation in cases of mortgage
assignments and redemption leads to an unequal distribution of rights and liabilities
among the parties involved?
RESEARCH OBJECTIVES
HYPOTHESIS
The current formulation of the doctrine of subrogation under the Transfer of Property
Act leads to potential conflicts of interest and unfair distribution of rights and liabilities
among parties in property transactions.
REVIEW OF LITERATURE
1
“Chandramathi, M. L,Thought on the Doctrine of Subrogation under Transfer of Property Act,
http://www.iaeme.com/MasterAdmin/UploadFolder/IJMET_08_11_095/IJMET_08_11_095.pdf”.
2. Maransinge, M.L2 “An Historical Introduction to Doctrine of Subrogation”. In this
essay, MARASINGE.M.L. Explores the origins of subrogation as well as its historical
interpretation. He asserts that Roman law is where the word "subrogation" first
appeared. His main area of study was English common law's "subrogation" concept.
There are two parts to this article. The English idea of subrogation is examined in the
first section, while the Roman use of subrogation is examined in the second.
2
“Maransinge, M.L. An Historical Introduction to Doctrine of Subrogation.
https://scholar.valpo.edu/cgi/viewcontent.cgi?article=1680&context=vulr”.
3
Chandramathi, M. V. "ONE THOUGHT ON “THE DOCTRINE OF SUBROGATION UNDER TRANSFER OF
PROPERTY ACT”."
4
D.Silviya Dixina. A critical analysis on the doctrine of subrogation under transfer of property. Penacclaims.
Retrieved from http://www.penacclaims.com/wp-content/uploads/2018/09/D.-Silviya-Dixina-1.pdf
CHAPTER II
In terms of the “redemption, foreclosure, or sale of the mortgaged property, any of the parties
specified in section 91 (other than the mortgagor) and any co-mortgagor have the same rights
against the mortgagor and other mortgagees as the mortgagee whose mortgage is being
redeemed”. An individual who obtains the privilege granted by this provision is considered to
be subrogated to the rights of the mortgagee whose mortgage he redeems. “The rights of a
mortgagee whose mortgage has been redeemed are subrogated to a person who has borrowed
money to a mortgagor provided the mortgagor has consented to such subrogation in agreement.
Nothing in this section shall be read as affording anybody a right of subrogation unless and
until the mortgage in question has been completely redeemed”.5
5
Transfer of property act 1882,section 92
6
“Chandramathi, M. V. "ONE THOUGHT ON “THE DOCTRINE OF SUBROGATION UNDER TRANSFER
OF PROPERTY ACT”
which the right is claimed has been fully redeemed. The equitable concept of repayment
underpins the legal subrogation right.
In this case, the second mortgagee sued his mortgage without disclosing the name of the first
mortgagee, won the case, advertised the mortgage for sale, bought it, and entered partial
satisfaction of the verdict. The mortgage decree states that he is still liable to pay the mortgage.
“When such a person clears a prior lien, the question of whether he is permitted to act as the
first mortgagee arises. The first mortgagee's authority to enforce his mortgage was not limited
by the second mortgagee's redemption date”. It was determined in Mst.Azizunnissa v. Komal
Singh that the buyer of the mortgaged property pursuant to a mortgagee decree acquired the
mortgagor's equity of redemption in addition to the mortgage interest, making him eligible to
redeem any other mortgages that the mortgagor already held on the same property.
The case's facts state that Gokuldas, the mortgagor's creditor, purchased the equity of
redemption at a sale as payment for a money judgement. A puisne mortgagee sued him for
possession notwithstanding the fact that the former mortgagee had been paid off.The council
further stated in this ruling that the Toulmin v. Steere rule was not relevant in this situation,
finding that a mortgagee who bought the equity of redemption and released other mortgagees
was in no better position than the mortgagor would be if he had released the mortgages. The
buyer was also prohibited from using any mortgages, including his own that he had redeemed
to shield himself from a future encumbrance.
In circumstances where the mortgagee redeems, subrogation is not applicable. After paying off
a previous debt, the mortgagor is not allowed to become a party to his creditor's rights and
remedies. This is because, by removing an old encumbrance he created, he also releases himself
from accountability to his creditor. The Madras High Court has declared that when a mortgage
is redeemed, it is irrelevant whether it is done for the benefit of the mortgagee or the mortgagor.
The sole test for determining whether the party seeking to benefit from section 92 was a
mortgagee at the time the payment was made.7
7
Ibid6
TWO TYPES OF SUBROGATION:
Legal subrogation.
Conventional subrogation.
1. Legal subrogation
Legal subrogation is a theory founded on the concept of fair recompense. It enables a party
who has paid money on behalf of another party who is legally required to make that payment
to seek restitution from the obliged party. Section 69 of the Indian Contract Act and Section 92
of the Transfer of Property Act of India, respectively, address personal liability and equitable
right of subrogation.
In other words, someone who has an interest in the property will benefit from it, not someone
who has no need to return. It is accompanied with an equitable fee. “A financial contribution
made by someone with a stake in the property, such as possession, to prevent a sale generates
an equitable charge in his favour for the sum owed to him”. A puisne mortgagee who redeems
a prior mortgage is legally subrogated to the rights of the prior to mortgagee for whatever
cause.8
Gopalakrishnayya v. Mallireddi Ayyareddi9 The court decided that the buyer might pay off an
earlier charge to be in the same position as the seller, unless the property owner had established
a guarantee to pay the later mortgage. The justices determined that the covenant had to be made
by the original mortgagor or their legal heir, who was legally liable for repaying the debt. They
also suggested that the transaction should be free of any encumbrances and provided the buyer
the right to subrogation if the sale funds were used to repay a prior mortgage.
8
“D.Silviya Dixina. A critical analysis on the doctrine of subrogation under transfer of property. Penacclaims.
Retrieved from http://www.penacclaims.com/wp-content/uploads/2018/09/D.-Silviya-Dixina-1.pdf”
9
58 Ind Cas 493
2. Conventional subrogation
Section 92 of the TP Act has been changed to allow conventional subrogation rights to be
utilised in certain cases. When there is a written agreement between the mortgagee and the
seller or buyer, or between the mortgager and the mortgagee, this can occur. This clause applies
when someone purchases mortgaged real estate or obtains a later mortgage with the intent of
paying off the outstanding mortgage sum. “Subrogation occurs when there is an express or
inferred understanding that the person making the payment would take the rights and powers
of the original creditor. Such an agreement does not need a large amount of proof”.
The new law's Section 92, which covers traditional subrogation, now requires that the
subrogation agreement be in writing and documented. Given this, even if a volunteer or
mortgagee pays the mortgage, he is not acting as the creditor. If a mortgage is paid off, no one
is eligible for creditor protection. If a mortgage debt is simply discharged without a registered
mortgagee's security, no one is usually entitled to the benefit of the mortgagee's security. A
volunteer cannot assert the idea of subrogation.10
Surjug Devi v. Dulhin Kishori Kuer11 to the case, if a person pays off a mortgage on a property
in which they have no interest, they have no claim to the property and are deemed a volunteer.
In this case, the owner of the property's equity can pursue legal action to recover ownership
without having to pay off the mortgage. Subrogation is classified into two types: legal and
customary. Legal subrogation occurs automatically, but conventional subrogation needs
consent. In traditional subrogation, the person paying off the mortgage has no interest in the
property and would only do so under certain conditions. The individual paying off the mortgage
has an interest in safeguarding the mortgagee's rights and completing their responsibilities
under legal subrogation.
10
“D.Silviya Dixina. A critical analysis on the doctrine of subrogation under transfer of property. Penacclaims.
Retrieved from http://www.penacclaims.com/wp-content/uploads/2018/09/D.-Silviya-Dixina-1.pdf”
11
AIR 1960 Pat 474
CHAPTER III
“A person claiming the right must have either paid money to a mortgagor to redeem a mortgage
with an agreement in a recorded document that he will be subrogated to the rights of the
mortgagee whose mortgage is discharged, or have an interest in the mortgaged property that
entitles him to redeem the mortgage”.
According to the law, a person claiming the right to redeem a mortgage must either have paid
off the mortgage with an agreement to take over the mortgagee's rights or have a valid interest
in the property. The crucial aspect, however, is that the claimant must establish that the
redemption amount was paid completely with their own finances for their own advantage,
rather than utilising money held on behalf of the mortgagor. Section 92 of the Act requires that
this criterion be met. Section 92 exemption requires the claimant to demonstrate that they are
not redeeming the mortgage on behalf of the mortgagor.
In the case of Piarey Lal v. Dina Nath12, In a court case where a plaintiff secured the right to
redeem a property and therefore received title from the original borrower, it was determined
that they could not claim the right of subrogation under section 92 because they met the criteria
of a mortgagor under section 59-A. This logic was applied in another case, Taibai vs.
Wasudeorao Gangadhar, where it was contended that money paid from the borrower's funds
remained in the mortgagee's possession belonged to the borrower rather than the mortgagee.
The most important element was ascertaining who possessed the monies utilised for the
payment. When a buyer or mortgagee purchases a property and agrees to use the proceeds to
pay off a prior obligation, they are legally making the payment with the seller's money rather
than their own.
12
AIR 1939 All 190
Right of subrogation available on equitable principles even where TPA does not apply:
In circumstances where Property Acts did not apply, if one of the co-mortgagors paid off the
full mortgage obligation, which was the joint duty of both co-mortgagors, they were entitled to
the equitable right of subrogation. This implies they might assume the rights of the redeemed
mortgagee and treat them as their own mortgagor to the extent of the latter's portion of the
collateral. They might then use this share as security to secure the additional payment they
paid.
The co-mortgagor who pays off a portion of the mortgage debt is entitled to a fair share of the
security because they were solely accountable for their piece of the loan and acted as a
guarantor for their co-debtors. This entitlement is founded on fairness principles and is widely
used, even though it is not officially specified in the law. Although the State of Punjab is not
specifically mentioned in the law, the principles of justice, equity, and good conscience have
always guided decisions concerning it.
The Supreme Court's judgement in the Punjab-based case of Ganeshi Lal proved that the
concept expressed in Section 92 of the Transfer of Property Act was applicable. This was due
to the fact that the court recognised the notion of subrogation as an equitable idea, which entails
substituting one person for another and awarding them the same rights as the original person.
The court concluded that if a person is legally and ethically obligated to return a debt, he or she
must do so in full, even if the responsibility is shared by several persons. The individual making
the payment is both a primary debtor for the amount paid and a guarantor for the shares of the
other debtors.13 A person who is legally and ethically compelled to repay a debt must do it in
full. When numerous persons are accountable for a debt, the one making the payment is both a
principal debtor for the amount they are paying and a guarantor for the other debtors' portions.
Despite the fact that the TP Act does not apply in Punjab, the concept of subrogation, as
described in Section 92, is still used there.
13
“D.Silviya Dixina. A critical analysis on the doctrine of subrogation under transfer of property. Penacclaims.
Retrieved from http://www.penacclaims.com/wp-content/uploads/2018/09/D.-Silviya-Dixina-1.pdf”
Volunteers are ineligible to make a subrogation claim
In “Surjug Devi v. Dulhin Kishori Kuer”14, It was decided that a person who has no interest in
the equity of redemption or the mortgaged property but pays off the mortgage and takes
ownership is just a volunteer and is not subrogated to the mortgagee's rights. It is conceivable
for a property owner to petition for possession without paying off the mortgage, however there
are two sorts of subrogation, each having a different origin. Conventional subrogation is based
on legal concepts, whereas legal subrogation is based on an agreement. Conventional
subrogation happens only if the individual agrees to pay off the mortgage. “Legal subrogation,
on the other hand, is motivated by the desire to protect the mortgagee from any responsibilities
arising from the mortgage”.15
The main purpose of this notion is to guarantee that the individual who has settled a debt is not
left without recourse, while also safeguarding the original creditor's legal rights. This approach
is typically used when a third party has paid off a mortgage.
However, there are some criticisms of the doctrine of subrogation under the Transfer of
Property Act. One of the main criticisms is that it can be misused by unscrupulous individuals
or entities. For example, a person may pay off the debt of another person with the intention of
taking over the rights of the creditor, even though they had no legitimate interest in the property.
Another criticism is that the doctrine of subrogation can be complex and difficult to apply in
practice. There are various factors that need to be considered, such as the intention of the parties
involved and the timing of the payment. This can make it difficult for judges and lawyers to
determine whether subrogation should be allowed in a particular case.
Despite these criticisms, the doctrine of subrogation is still an important legal principle in the
transfer of property. It provides a valuable remedy for those who have paid off the debts of
others, and helps to ensure that the rights of the original creditor are not affected. However, it
is important to be aware of the potential for misuse and to ensure that the doctrine is applied
fairly and justly in each case.
14
AIR 1960 Pat 474
15
Ibid11
CHAPTER IV
JUDICIAL INTERPERTATION
In the case of Smt. Sarabati Devi v. Smt. Usha Rani, the court was asked whether the plaintiff
had the right to subrogation on a mortgage that the defendant had previously paid off. The facts
of the case were that the plaintiff had purchased a property from the defendant, which was
subject to a mortgage. The plaintiff had agreed to pay off the mortgage and the defendant had
given an undertaking to discharge the mortgage. However, the defendant failed to do so.
Following that, the plaintiff paid off the mortgage and sought to be subrogated to the
mortgagee's rights. The defendant challenged the plaintiff's claim, claiming that the plaintiff
had no right to subrogation because she had discharged the mortgage. The plaintiff was granted
subrogation by the court. According to the court, subrogation is a theory that permits someone
who has discharged a mortgage to step into the shoes of the mortgagee and execute the
mortgage against the property. The plaintiff was entitled to subrogation because she had paid
off the mortgage with the goal of retaining her own interest in the property.
The court also held that the fact that the defendant had given an undertaking to discharge the
mortgage did not preclude the plaintiff from seeking subrogation. The court observed that the
defendant's undertaking did not create any new rights in her favour, and that the plaintiff's right
to subrogation arose independently of the defendant's undertaking. Therefore, the court allowed
the plaintiff's claim for subrogation and held that she was entitled to enforce the mortgage
against the property.
16
1984 AIR 346, 1984 SCR (1) 992
Udit Narain Singh Malpaharia vs. Addl. Member Board of Revenue17
Udit Narain Singh Malpaharia vs. Additional Member Board of Revenue, Bihar is a seminal
decision in Indian property law that addresses the idea of subrogation under the Transfer of
Property Act.The case included an agricultural land mortgage issued in favour of the mortgagee
by the original owner. The mortgagee subsequently transferred his interest in the mortgage to
a third party. The original owner then repaid the mortgage debt to the third party and sought to
have the mortgage redeemed. However, the Revenue Board held that the mortgage could not
be redeemed as the original owner had not paid the debt to the original mortgagee, but to a
third party who had acquired the mortgage by assignment.
The matter finally reached the Supreme Court of India, which ruled that the law of subrogation
applied in such instances, and that the original owner was entitled to redeem the mortgage
because the loan had been paid off. The court clarified that subrogation is a legal right that
arises when a person pays off a debt on behalf of another person, and that the subrogee has the
same rights and remedies against the property as the original creditor. The court also held that
subrogation may be express or implied, and that it can arise by operation of law or by contract.
This case is significant as it establishes the importance of the doctrine of subrogation in
property law, and clarifies the rights of parties in mortgage transactions. It also provides
guidance on the circumstances in which subrogation may arise and the rights and remedies
available to subrogees.
In the case of a mortgage, the subrogee enjoys identical rights as the mortgagee but does not
become the mortgagee. A co-owner can also be a co-mortgagor, and if many co-mortgagors
exist, the mortgaged property can be shared among them, with modifications made for the
property's burden. If one co-owner pays off the mortgage, the other co-owner cannot assert a
right superior to what they would have had before. The other co-owner cannot refuse to split
the property, but can propose that the co-owner who paid off the mortgage use their legal right
to partition, subject to the equitable right of the subrogated co-owner to assert contribution.
17
1963 AIR 786, 1963 SCR Supl. (1) 676
18
(2004)12 SCC 754
CONCLUSION
The conclusion was made that registration was not necessary for subrogation rights. Anyone
with a legitimate interest in the property and the ability to redeem it could subrogate against a
mortgage. However, for a claim for conventional subrogation to be valid, there must be a
written agreement, and registration is only necessary when someone without any interest in the
property or right to redeem lends money to pay off a mortgage. The Act was changed during
this amendment.
BIBILIOGRAPHY