VEDANTAM SUBBARAYUDU (DEAD) Vs. CHATTAPALLI LAKSHMINARASAMMA

JUDGEMENT

(1.) This appeal raises a question of subrogation. The facts necessary for the disposal of the same lie in a narrow compass. The plaintiff sued to recover a sum of Rs. 8,000 on a mortgage dated 3 October, 1925, executed by defendants 1 to 4 and their father late Subbarayudu in her favour. There was a prior mortgage on the said property dated 1 August, 1914. In execution of a decree obtained thereon the property mortgaged was about to be sold. To discharge the said decree debt the mortgagors - late Subbarayudu and his sons - agreed to sell a part of the said property, namely, plaint items 3 to 7, 9 and 15 to defendants 6 and 7. In pursuance of the said contract, the defendants 6 and 7 obtained a sale-deed dated 2nd November, 1933, and advanced the money with which the said decree debt was satisfied. They therefore claim a right of subrogation in respect of the said sum on the ground that by their having discharged the said decree debt they are subrogated to the rights of the mortgagee under the deed dated 1 August, 1914. The learned Subordinate Judge refused to give them the said relief on the ground that there is no registered instrument reserving the right as required by Section 92(iii) of the Transfer of Property Act. It is this view that is now canvassed in this appeal by Mr. Satyanarayana Rao on their behalf.

(2.) It is conceded that the matter is governed by Section 92 of the Transfer of Property Act, but it is contended that defendants 6 and 7 have a right of subrogation under Clause (i) of the said section. This contention is directly opposed to the interpretation placed on the said section by the Full Bench decision in Lakshmi Amma V/s. Sankara Narayana Menon (1935) 70 M.L.J. 1 : I.L.R. 59 Mad. 359 at 375 (F.B.). But it is contended that the observations regarding the interpretation of that section are obiter and that a different note was struck in a recent judgment by their Lordships Venkatasubba Rao and Abdur Rahman, JJ., in Srinivasulu v. Damodarasami A.I.R. 1938 Mad. 779. In Lakshmi Amma V/s. Sankara Narayana Menon (1935) 70 M.L.J. 1 : I.L.R. 59 Mad. 359 at 375 (F.B.), I observed as follows: The first clause enunciates no new principle (vide Section 74 of the Transfer of Property Act since repealed). It applies to all persons who have an interest in the equity of redemption and are under no personal obligation to discharge prior encumbrances. The third clause has been enacted to confer a benefit on persons who advance money to discharge an incumbrance only if the mortgagee has by a registered instrument agreed that such persons shall be subrogated. The clause is intended to apply to all persons who acquire an interest in the mortgaged property by advancing moneys to discharge prior incumbrances and there is no warrant for restricting the scope of that clause to persons other than purchasers or mortgagees as contended by Mr. Kuttikrishna Menon. The distinction between the two classes of cases aforesaid, namely, those who have an existing interest in the property and those who acquire an interest therein by advancing money, is well recognised in the law relating to subrogation.

(3.) This is also the view taken by Varadachariar, J. - Vide pages 367 and 368 and by Cornish, J. (page 362). Since the date of this decision the matter was considered by a Full Bench of the Allahabad High Court and a Full Bench of the Nagpur High Court. The Full Bench decision of the Allahabad High Court is reported in Hira Singh V/s. Jai Singh sI.L.R. (1937) All. 880 (F.B.). Sulaiman, C.J., after considering the decision in Lakshmi Amma V/s. Sankara Narayana Menon (1935) 70 M.L.J. 1 : I.L.R. 59 Mad. 359 (F.B.) and the previous Full Bench decision in Tota Ram V/s. Ram Lal (1932) I.L.R. 54 All. 897 (F.B.), which was dissented from in Lakshmi Amma V/s. Sankara Narayana Menon (1935) 70 M.L.J. 1 : I.L.R. 59 Mad. 359 (F.B.) affirmed the view taken by us. In that case certain properties were sold for discharging the prior encumbrances and as there was no registered instrument in the case, the right of subrogation was refused. The learned Chief Justice concluded his judgment thus: Having paid the amounts which under their contracts of sale they were bound to pay as part of their sale consideration, and not having obtained any agreement in writing registered that they would be subrogated to the rights of the prior mortgagee, they are not entitled to any such benefit.