Subrogation in literal sense means substitution. Section 92 of the Transfer of the Property Act explains the right of subrogation as “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 persons shall be so subrogated.” This means that if the mortgagee transfers his debt to any other person or assignee, then that person will have all the rights of the mortgagee. Assignee, after repaying the mortgage debt will have the full right over the mortgage. Hence, redemption is necessary to exercise the right of subrogation.
In the case of Ganeshi Lal v. Jyoti Pershad, the Hon’ble Supreme Court held that the right of subrogation will be implemented even in those parts of the country where the Act isn’t applicable. Right of subrogation is based on the principles of equity, justice and a good conscience and hence it will be applicable across the country.
Types of Subrogation:
Subrogation is of 2 types:
Legal Subrogation: Legal subrogation is achieved by the rule of law. It is a legal subrogation when mortgage debt is paid off by someone who has interest or charge or is a security, creditor or mortgage company to protect the interest. Legal subrogation may occur when the subsequent mortgage holder or the security holder redeems the mortgage.
Conventional Subrogation: A traditional subrogation happens when the person who pays off the mortgaged debt is a stranger, that person has little interest in maintaining the mortgaged land. The person pays the debt under an agreement to subrogate him to the mortgagee’s rights which are paid off. It is an arrangement subrogation. The subrogation agreement may be express or implied, both in writing and in registration.
In the case of Narain v. Narain, the court held that if the mortgagor himself redeems the mortgage debt, then the rule of subrogation will not be executed. The mortgage borrower who will discharge a prior mortgage debt will not be entitled to be subrogated because he will simply discharge his obligation to the creditor by doing so.
Example of Subrogation:
Ram and Sham met with a bike accident. In an accident, Ram’s bike was severely damaged and he needed $4000 for the repair of the vehicle. Ram was having an insurance for the bike and the full amount was paid by the insurance company. Eventually, it was found that the accident was caused due to Sham’s negligence. As the bike met with an accident due to Sham, Ram’s insurance company decided to recover the amount. The insurance company filed the case against Sham by using the doctrine of subrogation where they seek the losses from Sham on the behalf of Ram.