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PETITIONER: GANESHI LAL

       Vs.

RESPONDENT: JOTI PERSHAD.

DATE OF JUDGMENT: 07/11/1952

BENCH: AIYAR, N. CHANDRASEKHARA BENCH: AIYAR, N. CHANDRASEKHARA MUKHERJEA, B.K. BHAGWATI, NATWARLAL H.

CITATION:  1953 AIR    1            1953 SCR  243  CITATOR INFO :  F          1979 SC1937  (29,30)

ACT: Mortgage-Co-mortgagors-Redemption of entire mortgage by  co- mortgagor  paying  less  than  amount  really  due-Right  to contribution from others- Whether limited, to their share on amount actually paid-principles of equity.

HEADNOTE:   On  principles  of equity, justice  and  good  conscience, which  apply to the Punjab (where the Transfer  of  Property Act,  1882,  is  not  in force)  if  one  of  several  joint mortgagors  redeems the entire Mortgage by paying a  s  less than the-full amount due under the mortgage, he is  entitled to receive from his co-mortgagors, only their  proportionate shares  on  the  amount actually paid by  him.   He  is  not entitled  to claim their proportionate shares on the  amount which  was  due  to the mortgagee under  the  terms  of  the mortgage on the date of redemption.   Hodgson  v. Shaw (40 E. R. 70), Digambar Das  v.  Harendra Narayan  Panday [(1910) 14 C.W.N. 6171 and Suryanarayana  v. Sriramulu [(1913) 25 M.L.J. 16] referred to.   Judgment of the High Court of Punjab at Simla affirmed.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 166 of  1951. Appeal  from  the Judgment and Decree  dated  September  15, 1948,  of  the  High Court of Judicature for  the  State  of Punjab  at  Simla (Mahajan and Teja Singh  JJ.)  in  Regular Second Appeal No. 1844 of 1945 from the Judgment and  Decree dated  June  5, 1945, of the Court of  the  District  Judge, Gurgaon, in Civil Appeal No. 171 of 1943, arising out of the Judgment  and Decree dated August 27, 1943, of the Court  of the  Subordinate  Judge, Gurgaon, in Civil Suit  No.  11  of 1943. Tarachand Brijmohanlal for the appellant. Gurubachan Singh (Radha Krishan Aggarwal, with him) for  the respondent. 1952, November 7. The Judgment of the Court was delivered by

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Chandrasekhara Aiyar J. 32 244 CHANDRASEKHARA AIYAR J.-The plaintiffs, Joti Prasad and  Sat Narain,  sued  for partition and possession  of  their  two- fifths share in the suit properties  alleging that the first defendant  wag  alone  in possesSion  of  the  same,  having redeemed  a mortgage executed by the joint family  of  which the plaintiffs and defendants were members, in favour of one Raghumal in the year 1896 on paying Rs. 5,800.  Defendants 2 to 5 were impleaded as co-sharers.  Out of them,  defendants 2 and 3 admitted the claims of the plaintiffs.  Defendant  4 died pending suit, and her name was struck off.  Defendant 5 supported  the  first defendant.  On the date of  the  trial court’s  decree,  the two plaintiffs were held  entitled  to one sixth share each.  The  first defendant resisted the plaintiffs’  claim.   He contended  that  the redemption by him in 1920  was  not  on behalf of the joint family as alleged by the plaintiffs  but on  his  own account as there had been a disruption  of  the joint  family  status  much earlier,  and  that  before  the plaintiffs could get arty relief, they were bound to pay him not  merely  a proportionate share in the sum of  Rs.  5,800 which  he  paid to the mortgagee for  redemption  but  their share in the original mortgage debt of Rs. 11,200.  He  also denied that the original mortgage was executed on behalf  of the joint family.  The Subordinate Judge, and on appeal, the High Court found that the original mortgage was a mortgage transaction of the joint  family,  and that the first defendant,  Ganeshi  Lal, redeemed  the  mortgage on his own account and for  his  own benefit at a time when there was no longer any joint  family in  existence.  It was further held by the trial court  that the plaintiffs and other co-sharers were bound to pay  their proportionate  share  of  the  amount  paid  by  the   first defendant  to redeem the mortgage, namely, Rs.  5,800.   But from  this a sum of Rs. 1,200 which he had already  received by  way of redemption of certain mortgage rights had  to  be deducted.  The District Judge enhanced this sum of RS. 4,600 to 245 Rs. 5,000, as the first defendant had paid taxes due on  the property  up to 1940, but he confirmed the main findings  of the  Subordinate  Judge.  A second appeal preferred  by  the first  defendant  was dismissed by the High Court  at  Simla (Mehr  Chand Mahajan and Teja Singh JJ.). They repelled  the contention of the first defendant that a suit for  partition and possession was not maintainable without bringing a  suit for  redemption.   They also negatived his right  to  get  a proportionate share in the amount of  Rs. 11,200 due on  the mortgage.   Two  other learned Judges gave leave  to  appeal under  section  109 (c) of the Civil Procedure  Code,  as  a substantial question of law was involved.  Three points were argued before us by learned counsel  for the  appellant;  firstly,  there was an  assignment  of  the mortgage in favour of the appellant with the result that the entire rights of the mortgagee vested in him; secondly, even viewing  the  question as one of legal subrogation,  he  was entitled,  under the principles of justice, equity and  good conscience  which  governed  the State  of  Punjab,  as  the Transfer of Property Act has not been applied to the  State, to recover from the co-mortgagors not merely their shares in the  sum of Rs. 5,800 which he had paid for  redemption  but their shares in the full amount of Rs. 11,200 due under  the mortgage;  and thirdly, that the suit for partition  without

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asking for redemption was not maintainable.  Points  Nos.  1  and.  3  have  no  force  whatever.   The registered deed of redemption does not contain any words  of assignment.   To say that Ganeshi Lal shall be the owner  of the  entire  amount  due  from  the  mortgaged  property  is something different from stating   that  the  security   has been  assigned  in  his  favour.  On  the  other  hand,  the endorsement of receipt   of  payment  on  the  back  of  the mortgage deed itself and the statement of the mortgagee that he has released the mortgaged property from his mortgage  go to show that there was no assignment. 246  The non-maintainability of the suit does not seem to  have been  in issue either before the trial court or  before  the District  Judge, and it appears to have been raised for  the first time before the High Court.  It was pointed out by the learned  Judges,  and  quite rightly, that  so  long  as  no question of limitation was involved, there was no  objection to  a  claim  for  redemption and  one  for  possession  and partition being joined together in the same suit.  Only the second point remains for consideration, and  this raises  an  interesting question of law.  It is  not  denied that  Ganeshi  Lal  who  redeemed  the  prior  mortgage   is subrogated to the mortgagee’s rights, but the controversy is about  the extent of his rights as subrogee.  By  virtue  of the redemption, does he get all the rights of the  mortgagee and hold the mortgage as a shield against the  co-mortgagors for  the  full  amount due on the mortgage on  the  date  of redemption  whatever  he  may have himself paid  to  get  it discharged,  or does he stand in the mortgagee’s shoes  only to  the extent of getting reimbursed from  the  comortgagors for  -their shares in the amount actually paid by him?   The lower  courts  have  held that the  latter  is  the  correct position  in  law, but the appellant has  challenged  it  as unsound. The  first  two  clauses of the present section  92  of  the Transfer of Property Act run in these terms:  " 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 such property, the  same rights  as the mortgagee whose mortgage he redeems may  have against the mortgagor or any other mortgagee.  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."   It is a new section and was inserted by the amending  Act XX of 1929.  The original sections 74 and 247 75  conferred the right to redeem in express terms  only  on second  or  other  subsequent  mortgagees,  though  the  co- mortgagor’s   right   to  subrogation  on   redemption   was recognised even before the Act.  As the Transfer of Property Act has not been extended to the State of East Punjab, it is unnecessary to decide whether section 92 is retrospective in its  operation, on which point there has been a conflict  of opinion between the several High Courts.  Section 95 of  the Act  which removed the confusion caused by the  old  section which,  conferring  on the co-mortgagor what  was  called  a charge, and thus seeming to negative the application of  the doctrine of subrogation, is also inapplicable to the present case.  We therefore steer clear of sections 74 and 75 of the old  Act and sections 92 and 95 of the present Act,  and  we are  free to decide the question on principles  of  justice,

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equity and good conscience. If we remember that the doctrine of subrogation which  means substitution  of one person in place of another  and  giving him  the  rights of the latter is essentially  an  equitable doctrine  in its origin and application, and if  we  examine the  reason behind it, the answer to the question  which  we have  to  decide in this appeal is  not  difficult.   Equity insists  on  the ultimate payment of a debt by  one  who  in justice  and good conscience is bound to pay it, and  it  is well recognised that where there are several joint  debtors, the  person  making  the payment is a  principal  debtor  as regards  the part of the liability he is to discharge and  a surety in respect of the shares of the rest of the  debtors. Such being the legal position as among the co-mortgagors, if one  of  them  redeems a mortgage over  the  property  which belongs  jointly to himself and the rest, equity confers  on him  a  right to reimburse himself for the amount  spent  in excess by him in the matter of redemption; he can call  upon the co-mortgagors to contribute towards the excess which  he has paid over his own share.  This proposition is postulated in  several  authorities.  In the early case of  Hodgson  v. Shaw (1) Lord Brougham said: (1) 3 Myl. & K. 183; 40 E. R. 70. 248 "The  rule  is  undoubted,  and it is  one  founded  on  the plainest principles of natural reason and justice, that  the surety  paying  off a debt shall stand in the place  of  the creditor,  and  have all the rights which he  has,  for  the purpose of obtaining his reimbursement." I  have italicised the word " reimbursement Sheldon  in  his well-known  treatise  on Subrogation has got  the  following passage in section 13 of the Second Edition: "  There is another class of cases in which he who has  paid money due upon a mortgage of land to which he had some title which might be affected or defeated by the mortgage, and who was  thus entitled to redeem, has the right to consider  the mortgage  as subsisting in himself, and to hold the land  as if it subsisted, until others interested in the  redemption, or  who  held  also  the  right  to  redeem,  have  paid   a contribution."  Be it noted that what is spoken of here is a contribution. Dealing  with  the subject of subrogation of  a,  surety  by payment of a promissory note and citing the observations  of the  Alabama Court, Harris says in his work  on  Subrogation (1889 Edition) at page 125:  " The rule is, that a surety paying a debt, shall stand in the place of the creditor; and is entitled to the benefit of all the securities which the creditor had for the payment of the  debt,  from  the principal debtors; in a  word,  he  is subrogated  to all the rights of the creditor;  the  surety, however, cannot avail himself of the instrument on which  he is surety, by its payment.  By payment it is discharged  and ceases  to exist, and the payment will not, even in  equity, be  considered an assignment; the surety merely becomes  the creditor of the principal to the amount paid for him."  To compel the co-debtors or co-mortgagors to pay more than their  share of what was paid to the creditor  or  mortgagee would be to perpetrate an inequity or 249 injustice,  as  it would mean that the debtor who  is  in  a position  to  pay and pays up can obtain  an  advantage  for himself  over the other joint debtors.  Such a  result  will not be countenanced by- equity; the favouritism shown by law to  a  surety, high as it is, does not extend so  far.   The surety can ask to be indemnified for his loss: he can invoke

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the  doctrine  of  subrogation as an aid  to  his  right  of contribution.  Sheldon says in section 105 of his book :    "  The  subrogation  of a surety  will  not  be  carried further  than is necessary for his indemnity; if he buys  up the  security  at  a discount, or makes  his  payment  in  a depreciated  currency,  he can enforce it only for  what  it cost  him.   He  cannot  speculate at  the  expense  of  his principal ; his only right is to be repaid."     In section 178, Harris is still stronger.  "  Since subrogation is founded on principles  of  equity, the  surety  who  would avail himself of  the  doctrine  and invoke equity must do equity ; and while’ he is entitled  to a  reimbursement  in all that he pays out properly  for  his principal,  debt, interest and cost, he is not entitled,  in any way to recover more than he has paid.  For instance,  if he pays the debt of his principal, in depreciated  currency, the  rule  would seem to be that he could  demand  from  the principal  only  the value of that currency at the  time  he made the payment.  Nor would he upon principles of equity be permitted  to  purchase the debt at a discount and  then  be subrogated to collect the whole face value of the debt,  and especially  if he held securities, or if the  creditor  held securities which would fall into his hands, out of which  to pay the debt; because the securities are trust funds for the purpose,  and set aside for the payment of that debt and  an assignee  of  trustee cannot speculate in  the  purchase  of claims  against  the  fund in his hands.  It  would  not  be equality; it would not be equity."  While it can be readily conceded that the joint debtor who pays up and discharges the mortgage 250 stands in the shoes of the mortgagee, and secures to himself the  benefit of the security by such payment, the extent  to which  he can enforce his right as against the  other  joint debtors is a different matter altogether. In his  monumental work  on  Equity Jurisprudence, Pomeroy points out  that  he will  be  subrogated to the rights of the mortgagee only  to the extent necessary for his own equitable protection.  (See page  632  of  Volume IV of the Fifth  Edition  by  Symons). Clearer  still is the passage found at page 640 of the  same book:  " The mortgagor himself who has conveyed the premises to a grantee  in such manner that the latter has assumed  payment of  the  mortgage  debt becomes  an  equitable  assignee  on payment,  and is subrogated to the mortgagee, so far  as  is necessary   to  enforce  his  equity  of  reimbursement   or exoneration from such grantee.  "  It  is as regards the excess of the payment over  his  own share  that  the right can be said to exist.   Pomeroy  says this at pages 660 and 661:  "In  general,  whenever redemption by one  of  the  above- mentioned persons operates as an equitable assignment of the mortgage  to  himself, he can keep the lien of it  alive  as security  against  others  who are also  interested  in  the premises,   and   who   are  bound   to   contribute   their proportionate  shares  of the sum advanced by  him,  or  are bound, it may be, to wholly exonerate him from and reimburse him   for  the  entire  payment.........  The  doctrine   of contribution  among all those who are interested  in  having the mortgage redeemed, in order to refund the redemptor  the excess  of his payment over and above his own  proportionate share, and the doctrine of equitable assignment in order  to secure  such contribution, are the efficient means by  which equity  completely  and most beautifully works  out  perfect justice    and    equality   of    burden,    under    these

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circumstances...................."  Whatever  the difference might be between the English  law and the Indian law as regards the right 251 to  enforce decrees and securities for the due payment of  a debt  in the case of a surety who discharges a simple  money debt  and  a  surety who pays up a  mortgage,  it  is  still noteworthy  that Section V of the Mercantile  Law  Amendment Act  of 1856 (England) provided for indemnification  by  the principal  debtor( for the advances made and loss  sustained by the surety.  There  is  a distinction in this respect between  a  third party  who claims subrogation and a co-mortgagor who  claims the  right, and this is brought out by Sir Rashbehary  Ghose in his Law of Mortgage in India, Volume I, 5th Edition.   He says at page 354, pointing-out that co-mortgagors stand in a fiduciary relation :   "  I  should  add  that an  assignee  of  a  mortgage  is entitled,  as a rule, to recover whatever may be due on  the security.  But if he stands in a fiduciary relation, he  can only  claim  the price which he has actually  paid  together with incidental expenses."  The right of the co-mortgagor who redeems the mortgage  is spoken  of as the right of reimbursement at page 372 in  the following passage :    "Strictly  speaking,  therefore,  when  one  of  several mortgagors redeems a mortgage, he is entitled to be  treated as  an assignee of the security which be may enforce in  the usual way for the purpose of re-imbursing himself."  The  redeeming  co-mortgagor being only a surety  for  the other  co-mortgagors,  his right is,  strictly  speaking,  a right of reimbursement or contribution, and in law, when  we have  regard to the principles of equity and justice,  there should be no difference( between a case where he  discharges an  unsecured debt and a case where he discharges a  secured debt.   It  is unnecessary for us to decide in  this  appeal whether  section  92  of the Transfer of  Property  Act  was intended  to strike a departure from this position  when  it states that the co-mortgagor shall have the same 252 rights  as  the  mortgagee whose mortgage  he  redeems,  and whether  it was intended to abrogate the rule of  equity  as between  co-debtors, and provide for the enforcement of  the liability on the basis of the amount due under the  mortgage ;  and this is because, as has been already stated,  we  are governed  not  by the statute but by general  principles  of equity  and justice.  If it is equitable that the  redeeming co-mortgagor should be substituted in the mortgagee’s place, it is equally equitable that the other co-mortgagors  should not be called upon to pay more than he paid in discharge  of the encumbrance.  In this connection, reference may be made with  -advantage to  the decision of Sir Asutosh Mookerjoe and Teunon JJ.  in DigambarDas  v.  Harendra  Narayan  Panday  (1)  where   the question  arose as regards the the rate of interest and  the period  for  which  the  redeeming  co-mortgagor  would   be entitled.   There is an elaborate examination of the  nature of the right of subrogation obtained by one of several joint comortgagors who redeems the mortgaged property, and in  the course of the discussion the following observations occur:   "  In so far as the amount of money which he is  entitled to recover from his co-mortgagors is concerned, he can claim contribution only with reference to the amount actually  and properly  paid to effect redemption to which sum he can  add his  legitimate  expenses  ...........  .The   substitution,

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therefore, of the new creditor in place of the original one, does  not place the former precisely in the position of  the latter for all purposes..........If therefore one of several mortgagors  satisfies the entire mortgage debt, though  upon redemption he is subrogated to the right and remedies of the creditor,  the  principle has to be so  administered  as  to attain the ends of substantial justice regardless of form  ; in  other  words, the fictitious cession in  favour  of  the person  who  effects the redemption, operates  only  to  the extent  to  which  it  is necessary  to  apply  it  for  his indemnity and protection." (1)  (1910) 14 C.W.N. 617. 258  There  is a definite expression of opinion by  the  Madras High  Court  on  the  point  in  the  decision  reported  in Suryanarayana v. Sriramulu(1).  In that case, a purchaser of a half share of the equity of redemption claimed to  recover half  of the amount of the mortgage on the security  of  the other  share in the hands of the defendant, and it was  held that as his purchase of the decree on the mortgage was prior to his purchase of the equity of redemption, he was entitled to  the  full  amount claimed by him.   The  learned  Judges distinguish  the case from one where one of  two  mortgagors discharges  an encumbrance binding on both, and say that  in such  a case the mortgagor doing so could not  recover  from his  comortgagors  more than a proportionate  share  of  the amount actually paid by him.  After  this rather lengthy discussion of the  subject,  we consider it unnecessary to notice and comment on the several decisions cited for the appellant.  It may be said generally that they only lay down that in cases where the Transfer  of Property Act, as it stood originally or as amended in  1929, is  not  applicable, we are governed by  the  principles  of equity,  justice and good conscience, and that  sections  92 and 95 embody such principles.  None of the cases deals with the extent or degree of subrogation, and there is nothing in them  which runs counter to the view that the doctrine  must be  applied along with other rules -of equity, so  that  the person  who discharges the mortgage is amply protected,  and at  the  same time there is no injustice done to  the  other joint  debtors.  He who seeks equity must do equity, and  we shall  be  violating  this rule if we  give  effect  to  the appellant’s  contention.   The High Court, in  our  opinion, reached the correct conclusion. The  parties  are  not agreed on the  shares  to  which  the plaintiffs are entitled, and this is because after the  date of the final decree some of the branches have become extinct by  the  deaths  of their  representatives.   Whether  under customary law in the Punjab, uncles (1)  (1913) 25 M.L.J. 16. 254 exclude nephews or they take jointly, and whether succession is   per  stirpes  or  per  capita,  was  the   subject   of disagreement  at  the  Bar before us.   This  question  must therefore be left over for determination by the trial court, and  the  case  will  have to go  back  to  that  court  for effecting partition and delivery of possession according  to the shares to which the plaintiffs may be found entitled. Subject to what is contained in the foregoing paragraph, the appeal will stand dismissed with costs.               Appeal dismissed.         Agent for the appellant: Nehal Chand Jain.        Agent for the respondent: B. P. Maheshwari.

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