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subrogation u/TPA

 Subrogation under TPA: Kinds & Essentials

By Shreya Verma

The equitable principle of subrogation is as old as a Roman law and was earlier applicable in Indian and English courts as an equitable principle. Subrogation means ‘substitution’- i.e., when a person having any interest in the mortgaged property redeems the mortgage which means, he pays off the mortgaged money to the mortgagee, he substitutes mortgagee and acquires all his rights. Meaning thereby, if a person other than the mortgagor himself, redeems the mortgage, then in such case, he enters into the shoes of mortgagee and substitute the mortgagee for the purpose of redemption, foreclosure and sale.

In Bisseswar Prasad vs. Lala Sarnam Singh (1910) Cal., It was held that, subrogation is not dependent upon the doctrine of privity of contract. Which means a third person (Other than the parties to mortgage- The mortgagor and the mortgagee) can enforce foreclosure, sale or redemption of the mortgage if he redeems the mortgage on the behalf of the mortgagor.

Essentials of subrogation:

  1. There has been a mortgage;

  2. In that mortgage-

 -> a person interested in the mortgage property other than the mortgagor; or

 ->Any other person has advanced money to the mortgagor for redemption of the mortgage;

  1. Such person is then said to be subrogated (substituted) to the right of the mortgagee – whose mortgage is redeemed; and

  2. by virtue of such subrogation or substitution, that person acquires a right of redemption, foreclosure or sale of such property in the same manner as the of the mortgagee would have. 

Illustration: ‘A’ and ‘B’ Are joint owners of the property X, having equal shares each. The mortgaged X to ‘C’ And advanced a loan of Rs.10,000. ‘B’ then paid the entire sum of Rs.10,000 to ‘C’. Here, ‘B’ by this act of his substitutes ‘C’ and gets all the rights which ‘C’ would otherwise have against ‘A’ as a mortgagee. 

It is necessary for this provision to be applicable that, the person redeeming must have some interest in the property, or else, he may enter into a contract with the mortgagor that he would pay off the mortgagee only if he gets the right of subrogation.

 Kinds of subrogation:

  1.  Legal Subrogation: When a person interested in the mortgage property is entitled to be subrogated in the place of the mortgagee.

Following are the persons who are interested in the mortgaged property or equity of redemption-

(a) Puisne or subsequent mortgagee:

Illustration: ‘A’ mortgaged X to ‘B’ for Rs. 5000

‘A’ mortgaged X to ‘C’ for Rs. 3000

‘A’ mortgaged X to ‘D’ for Rs. 2000

‘D’ paid Rs. 5000 to ‘B’. Here, ‘D’ By virtue of this act-gets priority over ‘C’.

Also, he will be treated as the first mortgagee, i.e., when ‘C’ wants to get mortgage from ‘D’ will get a priority him.

(b) Co-mortgagor: He’s a person who is also the co-owner of the mortgaged property. Thus, is the one interested in mortgaged property. Therefore, by paying off the whole of the loan advanced to the mortgagee, he gets clothed as mortgagee against the other co-mortgagor.

  1. (c) Surety: If a surety, who has been appointed to satisfy the loan advanced, in case of failure of mortgagor to repay -> The surety gets all the rights, be it the right of redemption, foreclosure or sale whichever the mortgagee would get against the mortgagor.

(d) Purchaser of equity of redemption: In Gokuldas vs Puranman (1884) Cal., Gokul das, the creditor of the mortgagor, purchased equity of redemption and paid off the prior mortgagee as well. The Privy Council held, that Gokuldas, being the purchaser of equity of redemption has been subrogated to the rights of mortgagee.

By Such act – the purchaser does not become owner of the mortgaged property, but he has all rights which the mortgagee would have against the mortgagor who sold equity of redemption.

  1.  Conventional Subrogation- When a person by an agreement in writing and registered, advances money to the mortgagor on the condition that he would be subrogated to the rights of the mortgagee and thereby redeems the mortgage by that money. Then, that person Subrogates mortgagor- It is necessity that the prior mortgage must be discharged as a whole.


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