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1939 Supreme(SC) 55
PRIVY COUNCIL [ON APPEAL FROM THEEAST INDIES]
LORD THANKERTON, LORD ROMER AND SIR GEORGE RANKIN.
RAJA JANAKI NATH ROY - Appellant
Versus
RAJA PRAMATHA NATH MALIA - Respondents
On appeal from the High Court at Calcutta.
Decided On : Nov. 10. 1939.
Solicitors for appellants in first appeal:W. W. Box & Co. Solicitors for respondent No. 4: Hy. S. L. Polak & Co.
Subrogation occurs when a third party pays the full amount of a specific mortgage. "Redemption" in this context means payment of the mortgage money, not formal reconveyance of property. Multiple charges on the same property are distinct from the legal doctrine of consolidation of separate mortgages.
Headnote:(A) Transfer of Property Act, 1882 - Sections 60, 61 and 92 - Mortgage - Subrogation - Redemption - A person who advances money to a mortgagor to redeem a mortgage is subrogated to the rights of the mortgagee if the mortgage is redeemed in full. The term "mortgage has been redeemed" refers to the payment of the mortgage money and not the extinction of the mortgagee's rights over the mortgaged property or the actual reconveyance of the property. (Paras 194-195)
(B) Doctrine of Consolidation - The doctrine of consolidation applies where a mortgagee holds separate mortgages on different properties belonging to the same mortgagor. It does not apply to a situation where a mortgagee holds a first mortgage and a subsequent charge on the same property; in such cases, the property cannot be redeemed until all charges are satisfied. (Para 194)
(C) Comprehensive Mortgage - A subsequent mortgage that recites previous mortgages and treats them as continuing in existence, without replacing the original covenants for repayment or unifying interest rates and repayment dates, does not constitute a comprehensive mortgage that extinguishes the separate nature of the prior mortgages. (Para 193)
Facts of the case:
A mortgagor executed four successive mortgages on different properties, with subsequent mortgages providing additional security over previous properties. The fourth mortgage stipulated that none of the properties would be redeemable until all debts under all four mortgages were paid. A third party advanced funds to the mortgagor to pay off the first three mortgages in full. The fourth mortgage remained unpaid. The original mortgagees claimed that the fourth mortgage was a comprehensive consolidation of all debts, and thus only partial payment of the total debt had been made, which they argued barred the third party from claiming subrogation.
Findings of Court:
The fourth mortgage was not a comprehensive mortgage replacing the first three; the original mortgages remained independent. The payment of the first three mortgages in full entitled the third party to subrogation, regardless of the remaining debt under the fourth mortgage.
Issues: Whether the fourth mortgage acted as a comprehensive consolidation of all prior debts, and whether a third party who paid off only some of the total debts (but paid specific mortgages in full) is entitled to subrogation.
Ratio Decidendi: Subrogation requires the full payment of the specific incumbrance being redeemed. Since the first three mortgages were paid in full, the third party is subrogated to those rights. The "redemption" required for subrogation under the law refers to the payment of the debt, not the formal reconveyance of the property. The doctrine of consolidation is inapplicable to multiple charges on the same property.
Result: Both the appeal and the cross-appeal were dismissed.
Legal Category Hierarchy
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property law
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mortgages
- subrogation
- redemption
- consolidation
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transfer of property act
- section 92
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mortgages
Judgement
Consolidated Appeals (No. 87 of 1938) from a decree of the High Court (December 1, 1936) which modified a decree of the Subordinate Judge of Howrah (January 3, 1933).
The suit out of which these consolidated appeals arose was brought on January 21, 1931, by the appellants Raja Janaki Nath Roy and Jadu Nath Roy, as mortgagees, against respondent No.1, the mortgagor, Raja Pramatha Nath Malia, and the mortgagors two sons, who were respondents Nos. 2 and 3, claiming repayment of Rs. 1,63,561-14-6, with interest, and in default of payment that properties A, 13, C and D, which had been mortgaged by respondent No. 1 to the appellants, be sold and the sale proceeds applied towards satisfaction of the debt which was due and owing in respect of the fourth mortgage on property D only. Respondent No. 4, Kumar Pramatha Nath Roy, was impleaded as a puisne mortgagee, and the question for decision was whether, as held by the High Court (Guha and Bartley JJ.), respondent No. 4 was entitled to be treated as a mortgagee of the properties A, B and C ranking in priority to the mortgage thereon to the appellants, or whether, as held by the Subordinate Judge, the appellants mortgage ranks in priority to any claim by respondent No. 4.
The facts and the relevant terms of the mortgages appear fully from the judgment of the Judicial Committee.
1939. Oct. 12, 13, 16. L. P. E. Pugh K.C. and J. M. Pringle for the appellants. It is submitted that the fourth mortgage, of November 11, 1927, may be described as a "consolidation" of the whole of the advances made under that and the three previous mortgages, and that, generally speaking, the result was that there was one mortgage of all the properties A, B, C and D for the total amount due on the whole of the mortgages. To enforce their rights under the fourth mortgage the appellants were entitled to sell not only the property the subject of the fourth mortgage, but also the properties A, B, and C under the three earlier mortgages. Respondent No. 4 alleges that because of the payment in full of the sum due under the first three mortgages he had confined the appellants to selling only the property subject to the fourth mortgage, and that if there was a deficiency the appellants could not proceed against the properties of the mortgages A, B and C. That is the main dispute. There is secured by the fourth mortgage a sum which represents the totals of the three previous mortgages and the fourth mortgage itself. The fourth mortgage is therefore one which affects not only property D, but also properties A, B and C. The payment made was in fact the amount which was due on the first three mortgages. Sect. 61 of the Transfer of Property Act, 1882, abolishes the statutory right to consolidate, so there can be no consolidation unless there is a contract permitting it. There is such a contract here. Also by the contract there can be no redemption until there has been a payment of all the moneys. It is largely a question of what the intention of the parties was Gokuldoss Gopaldoss
v. Rambux Seochand (( 1884) L. R. 11 I. A. 126, 133.); Dinobundhu Shaw Chowdhry v. Jogmaya Dasi (( 1901) L. R. 29 I. A. 9, 16.); and Raghunath Prasad v. Sarju Prasad .(( 1923) L. R. 51 I. A. 101,104.) The ordinary doctrine was stated by Lord Selborne L.C. in Jennings v. Jordan (( 1881) 6 App. Cas.698, 700.) as "A mortgagee, who holds several "distinct mortgages under the same mortgagor, redeemable, "not by express contract, but only by virtue of the right "which (in English jurisprudence) is called equity of redemption,’ may, within certain limits, and against certain "persons (entitled to redeem all or some of them), consolidate "them, that is, treat them as one, and decline to be redeemed "as to any, unless he is redeemed as to all."
This Board has decided in reported cases that, by reason of the provisions of the Registration Act, an oral agreement cannot affect a mortgage; all that has happened in the present case is that a certain a
