What is 'conventional subrogation' under the Transfer of Property Act?

Question: What is 'conventional subrogation' under the Transfer of Property Act? [RJS 1988]

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Answer

Conventional subrogation arises when a person discharges a mortgage debt based on a contract or agreement, either express or implied, intending to step into the shoes of the original mortgagee and avail their rights and remedies. This is not automatic but depends on mutual consent among the relevant parties.

After the amendment of Section 92 of the Transfer of Property Act:

• A written and registered agreement is mandatory to claim conventional subrogation.
• This applies especially when the person paying off the mortgage has no independent right or interest in the mortgaged property (e.g., a stranger or volunteer).
• Merely discharging the mortgage debt does not entitle the person to be subrogated to the mortgagee’s rights unless there is a valid registered contract to that effect.

Key Distinctions: Legal v. Conventional Subrogation

Legal subrogation arises by operation of law and does not require any agreement between the parties. It typically applies in situations where a person who has an interest in the property, such as a co-owner, a subsequent mortgagee, or anyone legally entitled to redeem the mortgage, discharges the mortgage debt to protect their rights.

In such cases, the law automatically substitutes that person in place of the original mortgagee, allowing them to exercise the rights and remedies available to the mortgagee. No express agreement or registration is necessary for legal subrogation, as it is rooted in equity and fairness.

On the other hand, conventional subrogation is based on an express or implied contract between the person discharging the mortgage and the mortgagee (or mortgagor), where it is agreed that the payer will be entitled to the rights of the original creditor. This form of subrogation is not automatic and must be evidenced by a written and registered agreement, particularly after the amendment of Section 92 of the Transfer of Property Act.

It generally applies when the person paying off the mortgage has no legal interest or right to redeem the property and does so solely under a contract. Without such a registered agreement, even if the person pays the debt, they cannot claim the benefit of the original mortgagee's security.

In Surjug Devi v. Dulhin Kishori Kuer (A.I.R. 1960 Pat. 474), it was held that a mere volunteer—someone with no interest in the property—cannot claim subrogation rights, even if they paid off the mortgage and took possession. The rightful owner can still recover possession without refunding the mortgage amount.

In essence, conventional subrogation today requires a valid, registered agreement, particularly if the paying party has no inherent right to redeem the mortgage. Otherwise, such a person is treated as a volunteer, with no right to subrogation.