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Case Number

Appeal from Appellate Decree No. 542 of 1921, from a decision of G. Rowland, Esq. District Judge of Gaya, dated the 22nd December, 1920, affirming a decision of M.S Hasan, Subordinate Judge of Gaya, dated the 17th December, 1919.,Appeal No. 542 of 1921

Advocates

Lakshmi Narain Singh, Bipin Bejiari Saran and Bhagwan Prasad, for the appellants.
Siveshivar Dayal, for the respondents.

Judges

Coutts
Das, JJ.

Acts

Article 132 of the second Schedule of the Indian Limitation Act, 1877.
SECTION 74 TRANSFER OF PROPERTY ACT
section 69 of the Indian Contract Act,
Article 132 of the Limitation Act
Order XXI, rule 90,

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Smart Summary

Structured Summary of Opinion (Das, J.)

Factual and Procedural Background

The material facts as stated by the court are:

On 13 December 1904 defendants 1 to 5 borrowed money from Mussammat Chandrabadan Koer and executed a mortgage bond payable on 29 May 1905.
The defendants executed three successive mortgages in favour of the plaintiffs covering the same properties.
The plaintiffs sued on their mortgages and obtained a preliminary decree on 28 August 1916 and a final decree on 11 May 1917. Mussammat Chandrabadan Koer also obtained a preliminary decree on 2 September 1916 and a final decree on 2 March 1917 on her mortgage.
In execution of the plaintiffs' decree the mortgaged properties were sold and purchased by the plaintiffs on 3 January 1918. The defendants applied under Order XXI, Rule 90 to set aside that sale.
Mussammat Chandrabadan Koer commenced execution proceedings on 16 November 1917. The plaintiffs, as puisne mortgagees and for their protection, paid off Mussammat Chandrabadan Koer on 17 April 1918, ending her execution proceedings.
The sale to the plaintiffs was subsequently set aside pursuant to the mortgagors' application (by compromise in which the mortgagors paid off the plaintiffs and the sale was set aside).
On 4 January 1919 the plaintiffs commenced the present action seeking either enforcement of Mussammat Chandrabadan's security against the defendants (by subrogation) or, in the alternative, a personal decree against the defendants for reimbursement of the amount they had paid to Chandrabadan.
The courts below had allowed the plaintiffs' claim; the defendants appealed to this Court.

Legal Issues Presented

Whether, in the circumstances (including that the plaintiffs had purchased the equity of redemption and that a challenge to that purchase was pending and ultimately set aside), the plaintiffs were entitled to the benefit of the security held by Mussammat Chandrabadan (i.e., entitlement by subrogation to her security).
Whether, in any event, the plaintiffs' right to enforce the security of Mussammat Chandrabadan is barred by limitation (specifically Article 132 of the Limitation Act).

Arguments of the Parties

Appellants' (Defendants') Arguments

First, that the plaintiffs are not entitled to the benefit of the prior security held by Mussammat Chandrabadan because when the plaintiffs discharged Chandrabadan's debt the equity of redemption was in the plaintiffs and they were effectively in the mortgagor's position (and equity does not allow a person who is primarily liable or in that position to claim subrogation/cession of the security).
Second, that the plaintiffs' right to enforce the security (even if they claim by subrogation) is barred by limitation under Article 132 of the Limitation Act, because the cause of action to enforce the original mortgage accrued to Chandrabadan on 29 May 1905 and the plaintiffs were claiming in her right.

Plaintiffs' Arguments (as stated in the plaint and before this Court)

The plaintiffs contended that because they paid off Mussammat Chandrabadan on 17 April 1918 for their own protection, they were subrogated to the securities held by Mussammat Chandrabadan and thus entitled to enforce those securities against the defendants.
Alternatively, plaintiffs contended that on paying off Chandrabadan they acquired a right to be reimbursed by the defendants for the amount they had paid on 17 April 1918, and that such an action for reimbursement accrues on the date of payment and is therefore within time.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Moulvie Mohammed Shumsool Hooda v. Shewukram	Referenced in support of the proposition that a purchaser of mortgaged premises who pays off incumbrances may be entitled to the benefit of the securities even if the purchase is afterwards set aside.	The court cites this case (along with others) as authorities supporting the conclusion that, on paying off Mussammat Chandrabadan and the subsequent setting aside of their purchase, the plaintiffs became entitled to the securities held by Chandrabadan.
Syamalarayudu v. Subbarayudu	Referenced similarly to support the principle that a purchaser who pays off incumbrances may obtain the benefit of securities despite a subsequent setting aside of purchase.	Used by the court as part of the authority for holding that plaintiffs could claim the benefit of Chandrabadan's securities after paying her off and after the sale was set aside.
Bora Shiblal v. Munni Lal	Cited for the proposition (as held by Banerji, J.) that a puisne mortgagee paying off a prior mortgagee is entitled under section 69, Indian Contract Act, to reimbursement and acquires a charge on the property (and that the right to enforce arises on date of payment).	The court reviews and disagrees with Banerji, J.'s conclusion that a second mortgagee "acquires" a charge on the property on the date of payment; the court accepts that reimbursement accrues on payment but holds that subrogation/enforcement of security is distinct and subject to limitation as applicable to the original creditor.
Mahomed Ibrahim Hossain Khan v. Ambika Pershad Sinah (Judicial Committee)	Applied for the principle that a right to enforce an original security (even when claimed by subrogation) is subject to the same limitation period as affected the original creditor; used to show such a claim can be barred by Article 132.	The court treats this decision as a complete answer to the limitation contention on the subrogation claim and holds that the plaintiffs' suit, insofar as it sought to enforce the 13 December 1904 security, was barred by Article 132 of the Limitation Act.

Court's Reasoning and Analysis

The court's analysis proceeded in stages addressing entitlement by subrogation and the limitation issue, and then the alternative claim for reimbursement.

Entitlement by subrogation:
The court accepted the equitable principle that subrogation is available to a person who is not primarily liable but who discharges a debt either for his own protection or at the request of the person ultimately bound. It rejected the appellants' argument that because the plaintiffs had, by purchase, an equity of redemption at the time they paid Chandrabadan, they were thereby in the position of the mortgagor and precluded from claiming subrogation.

The court emphasized that the plaintiffs' purchase of the equity of redemption was challenged and an application to set aside the sale was pending; when that sale was ultimately set aside, equity would treat the plaintiffs as if they had never acquired the equity of redemption for the purpose of determining their rights. The court relied on the authority (as cited, including Ghose and the named cases) that a purchaser who pays off incumbrances is entitled to the benefit of securities even if the purchase is later set aside. On this basis the court concluded that the plaintiffs, on paying off Chandrabadan and upon their purchase being set aside, were entitled to Chandrabadan's securities by subrogation.
Limitation and the nature of the right claimed:
The court then addressed whether the plaintiffs could enforce Chandrabadan's security at all, given limitation. Three dates were central:
- 29 May 1905 — date when Chandrabadan's mortgage became payable and her cause of action accrued;
- 17 April 1918 — date when plaintiffs paid Chandrabadan;
- 4 January 1919 — date when plaintiffs commenced the present action.
The defendants argued the plaintiffs stand in the right of Chandrabadan and so any suit to enforce her security is barred by Article 132 (the plaintiffs sue in the right of the original creditor and therefore limitation runs from the original accrual). The plaintiffs relied on the view (as in Bora Shiblal v. Munni Lal) that the right to enforce or the charge arises on the date of payment (17 April 1918).

The court accepted that the right to reimbursement accrues on the date of payment, but rejected the view that a second mortgagee, by paying off a prior mortgagee, thereby "acquires" a new charge on the property at that date. The court distinguished between two separate legal concepts:
- The contractual right to reimbursement (arising on payment and enforceable in the plaintiff's own right); and
- The equitable right of subrogation to enforce the original creditor's securities (an equitable assignment/assignee-in-equity enforcing in the right of the original creditor and therefore subject to the same limitation as the original creditor).
The court held that a subrogee (equitable assignee) stands no better than a legal assignee in respect of limitation: if the original creditor's right to enforce was barred by limitation, the assignee cannot circumvent that bar by bringing suit after assignment. The court relied on the Judicial Committee decision in Mahomed Ibrahim Hossain Khan v. Ambika Pershad Sinah to support that conclusion, and held that the plaintiffs' suit insofar as it sought to enforce the 13 December 1904 security was barred by Article 132.
Alternative: Action for reimbursement:
Having held the subrogation claim barred by Article 132, the court examined the plaintiffs' alternative claim for reimbursement. The court found the plaint contained facts sufficient to grant appropriate relief and that the plaintiffs had, on 17 April 1918, paid Rs. 1,546-14-5 to Chandrabadan, thereby discharging her mortgage — an obligation which the defendants were bound to satisfy themselves. The court held that the plaintiffs were entitled to be reimbursed by the defendants for that sum and that such an action accrues on the date of payment and is within the limitation period.

The court also determined interest entitlements: interest at 2% per month from 17 April 1918 to the date of the decree, and thereafter interest at 6% per annum on the decreed amount from the date of decree until realization.

Holding and Implications

Core Holding:

The Court allowed the appeal in part: it held that the plaintiffs' suit, insofar as it sought to enforce the mortgage security of 13 December 1904 by way of subrogation, was barred by Article 132 of the Limitation Act. However, the plaintiffs' alternative claim for reimbursement was maintainable and within time.

The Court therefore SET ASIDE the judgments and decrees of the courts below and in lieu thereof entered judgment for the plaintiffs against defendants 1 to 5 for Rs. 1,546-14-5 with interest at the rate of 2% per month from 17 April 1918 to the date of the decree and thereafter interest at 6% per annum until realization. The court made no order as to costs.

Implications:

The decision distinguishes between (a) an equitable subrogation claim to enforce an original creditor's securities (which is pursued in the right of the original creditor and therefore subject to the limitation applicable to that creditor) and (b) a contractual or restitutionary claim for reimbursement (which accrues on payment and is enforced in the payor's own right).
In this case, the subrogation claim was time-barred, but the reimbursement claim succeeded; the judgment gives effect to that practical result for the parties without purporting to create any broad new rule beyond the application of existing equitable and limitation principles.

End of summary.

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Sibanand Misra v. Jagmohan Lall

Das, J.:— The material facts are these: On the 13th December, 1904, the defendants 1 to 5 (who will be referred to as the defendants throughout this judgment) borrowed a sum of money from Mussamniat Chandra Badan Koer and executed a mortgage bond in her favour, the due date of payment fixed in the mortgage bond being the 29th May, 1905. Thereafter the defendants executed three successive mortgages in favour of the plaintiffs to cover the properties mortgaged to Mussammat Chandrabadan Koer. The plaintiffs sued upon their mortgages and got a preliminary decree on the 28th August, 1916, and a final decree on the 11th May, 1917. Mussammat Chandrabadan Koer also sued on her mortgage, and got a preliminary decree on the 2nd September, 1916, and a final decree on the 2nd March, 1917. In execution of the plaintiffs' decree the mortgaged properties were put up for sale and were purchased by the plaintiffs on the 3rd January, 1918. The defendants then presented an application under Order XXI, rule 90, for setting aside the sale. Mussammat Chandrabadan Koer commenced her execution proceedings on the 16th November, 1917, and the plaintiff, on the 17th April, 1918, as puisne mortgagees, and for their own protection, paid off Mussammat Chandrabadan Koer, whose execution proceedings thereupon came to an end. It is important to remember that the discharge of the prior security by the plaintiffs took place at a time when the equity of redemption was in them, though an application for setting aside the sale was Bending at the instance of the mortgagors. The application of the mortgagors for setting aside the sale in favour of the plaintiffs ended in a compromise, the mortgagors paying off the plaintiffs and the sale being set aside. On the 4th January, 1919, the plaintiffs commenced this action to, enforce Mussammat Chandrabadan's security as against the defendants or, in the alternative, for a personal decree as against the defendants. Their case in the plaint is a simple one. They say that on paying off Mussammat Chandrabadan which they were obliged to do for their own protection, they were subrogated, to the securities held by Mussammat Chandrabadan and were entitled to enforce these securities as against the defendants. The Courts below have allowed the plaintiffs' claim and the defendants appeal to this Court.

Two questions have been argued before us by Mr. Lakshmi Narain Singh on behalf of the appellants: First, that in the circumstances of the case, the plaintiffs are not entitled to the benefit of the security held by Mussammat Chandrabadan; and, secondly, that, in any event, the right to enforce the security is barred by limitation. The argument as to the extinction of the security rests on the settled view of equity that a person who is primarily liable to discharge the debt and does discharge it is not entitled to claim a cession or assignment of the security. It was argued that, at the time when the plaintiffs discharged the debt of Chandrabadan, the equity of redemption was in them and that they were in fact in the position of the mortgagors primarily liable to discharge the debt due to Chandrabadan. In my opinion, the argument is not entitled to succeed. I accede to the argument that the right of subrogation can be claimed only by a person who, though not primarily liable to discharge a debt, discharges it for his own protection or at the request of the party ultimately bound, and that the right cannot be claimed by the mortgagor or by any person who has assumed the payment of the mortgage debt without having any interest to protect; but I am not prepared to agree with the view that the plaintiffs, after their purchase of the equity of redemption, were in the position of the mortgagor. It must be remembered that their purchase was not left unchallenged by the defendants and that an application for setting aside the sale was actually pending. That sale was ultimately set aside, and the moment it was set aside, equity will place the plaintiffs in the same position as that which they would have occupied but for the transaction which for the time being vested the equity of redemption in them.

“A purchaser of the mortgaged premises, not under a covenant to pay, who pays off incumbrances on the property, is also entitled to the benefit of the securities though the purchase may be afterwards set aside.” [See Ghose on Mortgages (4th Edition), Volume I, page 349.]

See also Moulvie Mohammed Shumsool Hooda v. Shewukram and Syamalarayudu v. Subbarayudu, and the cases cited at page 349 of Ghose on Mortgage. I am of opinion that, on paying off Mussammat Chandrabadan and on their own purchase being set aside, the plaintiffs became entitled to the securities held by Mussammat Chandrabadan.

On the question of limitation, however, I am of opinion that Mr. Lakskmi Narain Singh's arguments ought to prevail. In order to understand the argument it is necessary to remember three important dates in the history of these transactions. Mussammat Chandrabadan was entitled to receive the mortgage money from the defendants on the 29th May, 1905, so that her cause of action to enforce the mortgage of the 13th December, 1904, accrued to her on the 29th May, 1905. The plaintiffs discharged the mortgage debts due to Chandrabadan on the 17th Anril, 1918, and commenced the present action on the 4th January, 1919. The argument of Mr. Lakshmi Narain Singh is this: That, in so far as the plaintiffs are seeking to enforce the security of Chandrabadan, the suit is barred by limitation under Article 132 of the Limitation Act inasmuch as they can only do so not in their own right, but in the right of Chandrabadan. The plaintiffs, on the other hand, maintain that on paying off Chandrabadan they acquired a right as against the defendants to be reimbursed the money Which they had paid for the benefit of the mortgagors, and, as a consequence, to a cession of the securities held by Chandrabadan, and that they acquired this right on the 17th April, 1918, when they discharged the debt due to Chandrabadan. This argument receives considerable support from the decision of Banerji, J., in Bora Shiblal v. Munni Lal; but, with all respect, I am unable to agree with the view expressed by that learned Judge in the case cited. The argument of Banerji, J. is this that a puisne mortgagee in paying off the prior mortgage is entitled, under section 69 of the Indian Contract Act, to be reimbursed by the mortgagor the money which he pays to the prior mortgagee. He also acquires a charge on the property which he relieves of liability on general principles and under section 74 of the Transfer of Property Act. And the conclusion at which that learned Judge arrives may be stated in his own words: “This charge he acquires not when the prior mortgage was made nor when that prior mortgage could be enforced but the date on which he pays off the amount of the prior mortgage. The right also to be reimbursed accrues to him on the date on which he pays off the amount of the decree and relieves the mortgagors of the obligation which under the decree exists on them.”

Speaking with all respects, I quite agree with the view that the right to be reimbursed accrues to the person paying off the debt on the date on which he pays it off; but I wholly deny that a second mortgagee paying off a prior mortgagee “acquires” a charge on the property or that he acquires it on the date on which he pays off the prior mortgagee. The charge, in my view, was already there; all that he acquires is a right to enforce the charge and to a cession in his favour of the securities held by the prior mortgagee. Section 74 of the Transfer of Property Act, to which Mr. Justice Banerji refers, does not provide that, on paying off a prior mortgagee the subsequent mortgagee acquires a change on the property, but it does provide that he acquires “all the rights and powers of the prior mortgagee as such.” It is one thing to say that a person acquires a charge on the property; it is quite another thing to say that he acquires the rights and powers of the prior mortgagee, one of which is to enforce the charge already existing subject to the law of limitation.

In my opinion the right to reimbursement stands on one footing; the right to enforce a security by virtue of subrogation stands on another footing. The right to reimbursement arises on a contract, express or implied to reimburse; and the party who claims the right enforces it in his own right, and not in the right of another. Consequently the right does not arise until he has discharged the debt of another. But the right to enforce a security by virtue of subrogation is a right which equity concedes to a person who, not being primarily liable to discharge an obligation, does discharge it, and it is a right to demand the performance of the original obligation and the application thereto of all securities held by the creditor. It is a claim which is enforced in the right of the original creditor, and only because the person discharging the obligation becomes clothed with the rights and powers of the original creditor. The subrogee is an assignee in equity and it is difficult to understand how an assignee in equity stands on a better footing than an assignee at law. If, for instance, a creditor assigns his security for valuable consideration to a person who thereupon sues upon the security, it cannot be argued that, though the right to enforce the security in the hands of the creditor may be barred by limitation, the assignee may proceed to enforce it if he brings his suit within twelve years from the date of the assignment. It may be that the right to enforce the security in his own name arises on the date of the assignment; but the limitation has already commenced to run and will not cease to operate just because the creditor has assigned the security to another person. An equitable assignee, in my opinion, stands on no better footing and can only enforce the security in the right of the creditor and therefore subject to the law of limitation that would affect the creditor. As has been pointed out, subrogation is, in most cases, rather an additional remedy than an additional right, and may exist concurrently with, and as a further security, to the right to a simple action for reimbursement, and the fact that a party entitled to reimbursement and also to subrogation is entitled to two distinct remedies, seems often to be overlooked, to the confusion of both doctrines. [See Pomeroy's Equity Jurisprudence (5th Vol.), page 5183.]

That this is the right view is completely borne out by the decision of the Judicial Committee in the case of Mahomed Ibrahim Hossain Khan v. Ambika Pershad Sinah. The facts are somewhat complicated and it is unnecessary to set out all the different transactions which had to be considered by the Judicial Committee in order to enable them to decide points which do not arise here. But it is necessary to set out the following transactions:

On the 20th November, 1874, certain persons, who will be referred to as mortgagors, executed a zarpeshgi deed in favour of Girwar Singh by which they borrowed Rs. 12,000 from Girwar Singh and gave as security for the loan eight items of properties. The loan was for a period of twelve years from the date of the mortgage. On the 7th January, 1888, the mortgagors executed a simple mortgage in favour of Gajadhar for Rs. 2,500 and gave one of the properties already mortgaged to Girwar Singh as a security for the loan. On the 17th February, 1888; they obtained a loan of Rs. 12,000 from Mussammat Alfan for the express purpose of liquidating the zarpeshgi, and executed in her favour a simple mortgage of the properties mortgaged to Girwar Singh including the property mortgaged to Gajadhar. On the 22nd September, 1900, the appellants as successors in interest of Mussammat Alfan commenced their suit to enforce the mortgage of the 17th February, 1888, and they sought to have the benefit of the mortgage covered by the zarpeshgi deed of the 20th November, 1874, and they claimed priority to the various mortgages executed by the mortgagors between the date of the zarpeshgi and the mortgage of the 17th February, 1888, including the mortgage in favour of Gajadhar. It was assumed that the plaintiffs by discharging the mortgage covered by the zarveshgi deed were subrogated to the securities held by Girwar Singh, the first mortgagee; but the question still arose whether, having regard to the lapse of time, they were entitled to enforce these securities as against Gajadhar. If it be considered that their right to enforce the security of Girwar Singh arose on the 17th February, 1888, that is to say the date on which they discharged the mortgage debt of Girwar Singh, their suit was well within time; but the Judicial Committee came to the conclusion that the suit, in so far as it sought to enforce the security of the 20th November, 1874, as against Gajadhar, was barred by limitation. In rejecting the contention advanced on behalf of the plaintiffs, the Judicial Committee said as follows:

“But as the Rs. 12,000 were under the zarveshgi deed of the 20th of November, 1874, repayable in Jeth, 1294, Fasli (September 1887), and this suit was not brought until the 22nd of September, 1900, the claim of the plaintiffs to priority is barred by Article 132 of the second Schedule of the Indian Limitation Act, 1877.” I regard the decision of the Judicial Committee as a complete answer to the argument advanced before us on behalf of the respondents. I hold that the present suit in so far as it seeks to enforce the security of the 13th December, 1904, is barred by Article 132 of the Limitation Act.

The question still remains whether the plaintiffs' action can be regarded as a simple action for reimbursement, and I am of opinion that it can be so regarded. All the necessary facts are stated in the plaint to enable us to give the appropriate relief to the plaintiffs and they expressly ask for a personal decree against the defendants. The Courts below have concurrently found that on the 17th April, 1918, the plaintiffs paid Mussammat Chandrabadan Koer the sum of Rs. 1,546-14-5 and thereby discharged her mortgage. This money the defendants were bound by law to pay Mussammat Chandrabadan Koer, and the plaintiffs were undoubtedly interested in the payment of the money. The plaintiffs are accordingly entitled to be reimbursed by the defendants, and the action, regarded as an action for reimbursement, is well within time. The plaintiffs are also entitled to interest at the rate of 2 per cent, per month, from the 17th April, 1918, to the date of the decree, and are also entitled to interest on the amount decreed at the rate of six per cent, per annum, from the date of the decree up to the date of realization.

I would allow this appeal, set aside the judgments and decrees of the Courts below and in lieu thereof give the plaintiffs a decree as against defendants 1 to 5 for Rs. 1,546-14-5 with interest as already stated. There will be no order as to costs.

Coutts, J.:— I agree.

Appeal decreed.

Sibanand Misra v. Jagmohan Lall

Structured Summary of Opinion (Das, J.)

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellants' (Defendants') Arguments

Plaintiffs' Arguments (as stated in the plaint and before this Court)

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Sibanand Misra v. Jagmohan Lall

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