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Equitable doctrine of subrogation

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(1987) AIR(Calcutta) 280 : (1990) 69 CompCas 663

CALCUTTA HIGH COURT

DIVISION BENCH

( Before : Sukumar Chakravarty, J; Gobinda Chandra Chatterjee, J )

SM. MAMATA GHOSH — Appellant

Vs.

UNITED INDUSTRIAL BANK LTD. AND OTHERS — Respondent

A.F.O.O. No. 743 of 1983

Decided on : 09-04-1987

Civil Procedure Code, 1908 (CPC) – Order 39 Rule 1, Order 39 Rule 2
Contract Act, 1872 – Section 140
Transfer of Property Act, 1882 – Section 92
Civil Procedure Code, 1908 (CPC) – Order 39, Rule 1 and 2 – Applicability of doctrine of subrogation – Guarantor by invoking doctrine of subrogation can apply for temporary injunction – Even before payment of the debt the guarantor by invoking this principle can apply for injunction.

Cases Referred

In re Upendra Nath Kar. Bhowanipore Banking Corporation Ltd., AIR 1937 Cal 336 : 173 Ind. Cas. 906
Brahm Parkash Vs. Manbir Singh and Others, AIR 1963 SC 1607 : (1964) 66 PLR 392 : (1964) 2 SCR 324

Counsel for Appearing Parties

Saktinath Mukherjee and Bhaskar Ghosh, for the Appellant; S.P. Roy Chowdhury and Ramapati Roy, for the Respondent

JUDGMENT

Sukumar Chakravarty, J.—This appeal is directed against the order dated 19th April, 1983, passed by Shri G. Banerji, the learned Subordinate Judge. 2nd Court, Alipore in Title Suit No. 30 of 1977, rejecting the application for temporary injunction filed by the defendant No. 4 who is the appellant here, in the said Title Suit for restraining the defendant No. 3 from disposing of his personal properties till the disposal of the aforesaid suit.

2. Plaintiff United Industrial Bank Ltd. filed the aforesaid title suil against the defendants 1 to 5 praying for a declaration that the land and properties at 10, Ballygunge Station Road and 23/B, Kankulia Road, Calcutta, the documents of title whereof were deposited with the plaintiff as security against the loan taken by the defendants Nos. 1 to 3 from the plaintiff, and fully described in Schedule ‘D’ to the plaint stood charged in favour of the plaintiff for the repayment of the sum of Rs. 4,92,868.19 mentioned in Schedule ‘A’ to the plaint together with further interest and for a declaration that the goods mentioned in the Schedule to the agreement for Hypothecation dated 22-12-71 described in Schedule “C” to the plaint were charged and mortgaged and/or hypothecated for payment of the dues of the plaintiff; and for a preliminary mortgage decree in favour of the plaintiff under Order 34, Rule 4 of the CPC for the aforesaid sum with interest and costs and further interest according to law and for getting the decretal amount satisfied by the sale of the mortgaged properties and also the hypothecated properties, if the decretal amount was not paid by the defendants.

3. The defendant No. 1 firm of which the defendant No. 2 Sujit Kumar Ghosh and defendant No. 3, Prasanta Kumar Ghosh were the partners took loans from the plaintiff bank against the equitable mortgage by depositing the title deeds in respect of the properties and against the hypothecation of some moveable properties as mentioned above and also on the guarantee given by the guarantors, viz., the defendant No. 4 Mamala Ghosh and defendant No. 5, Parimal Bala Ghosh who is the mother of the defendant No. 3.

The defendant No. 4 filed the petition for temporary injunction in the trial Court in December, 1982, in the aforesaid title suit instituted in 1977 for restraining the defendant No. 3 from disposing of his personal properties till the disposal of the suit on the allegation that in the said suit the plaintiff bank prayed for a personal decree against the defendants and that the personal properties of the defendant partners of the firm were to be attached and sold to satisfy the amounts of the decree, if any, before the decree-holder would lay its hand upon the personal properties of the guarantors to get the decree satisfied. It was further alleged that the defendant No. 3 had already sold some of his personal properties after the filing of the suit by the plaintiff bank and that further transfer or encumbering of the personal properties of the defendant No. 3 would give rise to complication and would put the guarantor defendant No. 4 to serious loss, inconvenience and prejudice.

4. The petition for temporary injunction was opposed by the defendants Nos. 3 and 5 by filing the written statement in the trial Court.

5. The trial Court rejected the petition for temporary injunction upon hearing the both sides and on consideration of the materials in the record, by observing that in a suit of this nature involving the equitable mortgage the plaintiff bank would realise according to law the dues of the decree, if any, and that the guarantor defendant No. 4 had no right to claim injunction as prayed for as there would be no case of any irreparable injury and balance of inconvenience on the side of the defendant No. 4.

6. Mr. Mukherjee, appearing for the appellant-defendant No. 4 has submitted that in a suit of this nature where the creditor Bank has brought the suit against the debtors and guarantors, the guarantors have the equitable right of subrogation and accordingly can claim for temporary injunction as in the instant suit for protection on his such right when the debtors defendant No. 3 has already disposed of his some personal properties and is trying to dispose of his other personal properties in order to defeat the guarantor’s future claim against the debtors in case of creditor’s realisation of the dues of the decree if any from the guarantor. In support of his such submission Mr. Mukherjee has relied on the decision in AIR 1949 218 (Federal Court) . Mr. Mukherjee has further submitted that the debtors defendants Nos. 1 to 3 have got no longer any existing interest in the alleged charged properties covered by the title deeds deposited with the creditor plaintiff Bank and that the guarantor defendant No. 4 has become the exclusive owner of the said properties at 10, Ballygunge Station Road, Calcutta as a result of partition between the co-sharers.

7. Mr. Roy Chowdhury, appearing for the respondents 3 and 5 has submitted that in the petition for temporary injunction, no specific case has been made out with regard to the defendant No. 4’s any right of subrogation and that the said petition for injunction is conspicuously silent about defendant No. 4’s exclusive ownership over the mortgaged immovable properties. Mr. Roy Chowdhury has further submitted that in the case of guaranteed debt, the right of subrogation of the guarantor arises on his payment of the debt, to the creditor and in the case of mortgage the right of subrogation arises in favour of the person who redeems the mortgage in full in respect of which the right is claimed. According to Mr. Roy Chowdhury, as the guarantor defendant No. 4 has not paid the debt nor has she redeemed the mortgage, the defendant No. 4 has not yet acquired any right of subrogation and accordingly the defendant No. 4 cannot claim any protection of such right by invoking the Court’s power under Order 39, Rule 1 of the CPC in the form of temporary injunction. Mr. Roy Chowdhury has drawn our attention to the provisions of Section 140 of the Indian Contract Act and Section 92 of the Transfer of Property Act and has relied on the decision in AIR 1937 Cal 336 and Brahm Parkash Vs. Manbir Singh and Others, in Support of his submission. Mr. Roy Chowdhury has further submitted that the application for temporary injunction was a mala fide one as the defendant No. 4 has sought to restrain only the debtor defendant No. 3 and not the other debtor defendant No. 2 who is none else than the son-in-law of the defendant No. 4.

8. There is no dispute to the fact that the defendants 3 to 5 were the owners of 10, Ballygunge Station Road, Calcutta and 23/B, Kankulia Road, Calcutta and that defendants Nos. 2 and 3 who were the partners of the defendant No. 1 firm had their leasehold interest in 10, Ballygunge Station Road, Calcutta when the title deeds of both the leasehold interest and free-hold interest regarding 10, Ballygunge Station Road, Calcutta and the title deeds of 23/B, Kankulia Road, Calcutta were deposited with the plaintiff Bank as security against the loans taken from the plaintiff Bank in addition to the hypothecation of the movables of the defendants Nos. 1 to 3 with the plaintiff Bank.

9. Mr. Mukherjee wants the Court to take into consideration also the application for temporary injunction filed before this appellate Court in the appeal itself containing various facts which were not at all mentioned in the application for temporary injunction filed in the trial Court and upon rejection of which the present appeal has been preferred.

10. Mr. Roy Chowdhury strongly objects the same and submits that this appellate Court while considering the appeal against the impugned order rejecting the petition for temporary injunction can no doubt look into the petition for temporary injunction and objection thereto filed in the trial Court and the affidavits and other documents filed by the parties in the trial Court in support of their respective contentions along with the pleadings in the suit itself but cannot look into the new injunction petition containing various new matters filed before this appellate Court in the appeal. Mention may be made here that the relief sought for in the application for injunction filed in the appellate Court was allowed till the disposal of the appeal.

11. We find substance in the submission of Mr. Roy Chowdhury when it appears that the new additional facts as mentioned in the application for injunction in this appellate Court were not given in connection with the hearing of the appeal under any order from the Court. We therefore keep the contents of the application for injunction in this appellate Court, which were not admitted by Mr. Roy Chowdhury in his submission, outside our consideration while disposing of the appeal against the impugned order based on the petition for temporary injunction filed in the trial Court.

12. It has already been stated that in the petition for injunction filed by the defendant No. 4 in the trial Court, no case with regard to the defendant No. 4’s right of subrogation has been made out and nowhere in the said petition it has been alleged that defendant No. 4 has become the exclusive owner of the mortgaged property, either, at 10, Ballygunge Station Road, Calcutta or at 23/B, Kankulia Road, Calcutta.

13. As regards the non-use of the legal term like ‘right of subrogation‘ in the petition for injunction we may not be too much technical. On perusal of the petition for injunction itself we find that the idea about the injury to the right of subrogation and inconvenience to exercise that right in future is involved in the allegation as made in the petition. Such being the position, we can consider whether there is any prima facie case about the right of subrogation in favour of the defendant No. 4 the applicant for temporary injunction, as urged by Mr. Mukherjee. The decision in Brahm Parkash Vs. Manbir Singh and Others, as referred to by Mr. Roy Chowdhury based on different context does not stand on the way of our such consideration. In the case reported in Brahm Parkash Vs. Manbir Singh and Others, , it has been held that if the puisne mortgagee was disputing the plea of the subsequent mortgagee that the intention of such mortgagee in discharging prior mortgagee’s mortgages was to retain the benefit of subrogation, it was for him to have raised it by proper pleading when, an issue would have been struck and evidence led for or against such a contention and that it would not be proper to permit the puisne mortgagee to urge this ground before the Supreme Court.

14. Mr. Mukherjee has not disputed the legal principle as spelt out in Section 140 of the Indian Contract Act with regard to the arising of the right of subrogation in favour of the guarantor on his payment of the debt to the creditor and as spelt out in Section 92 of the Transfer of Property Act with regard to the accruing of the right of subrogation in favour of a person who redeems the mortgage in full; and the well settled position as enunciated in this respect in In re Upendra Nath Kar. Bhowanipore Banking Corporation Ltd., , Mr. Mukherjee, however, submits on the authority of some books on equity and injunction and on the reliance of the decision in AIR 1949 218 (Federal Court) , that equitable doctrine of subrogation can be invoked even before payment. In the case reported in AIR 1949 218 (Federal Court) , B. K. Mukherjea, J. has observed as follows : —

“But as the guardian was personally liable under the contract, he would be entitled to re-imbursement from the minor’s estate under the rule of Hindu Law if the borrowing was for necessity or benefit of the minor. The creditor in such circumstances can invoke the equitable doctrine of subrogation in his favour and claim to be placed in the position of the guardian for enforcement of the latter’s right of re-imbursement against the minor’s estate. Instead of there being two suits, one by the creditor against the guardian and the other by the guardian against the minor, both the reliefs may be worked out in one and the same suit and thereby multiplicity of litigation could be avoided.”

15. The Para 327 at page 138 of the book “Story on Equity” 3rd Edn. reads as follows :–“Sureties also, are entitled to come into a Court of equity, after a debt has become due to compel the debtor to exonerate them from their liability by paying the debt; or sue in the creditor’s name, and collect the debt from the principal, if he will indemnify the creditor against the risk, delay and expense of the suit. In Snell’s Principles of Equity, 28th Edition by P. V. Baker and P. St.J. Langanat p. 467 “Remedies of Surety” have been discussed under two heads, viz. “(A) before payment and (B) after payment”. The remedies of surety before payment have been discussed under the principle “Quia timet relief”. It has been stated there that the surety has an equitable right to compel the principal debtor to pay the debt and so relieve the surety from the necessity of paying it out of his own pocket. It is in the nature of quia timet, and is based on the principle that it is “unreasonable that a man should always have such a cloud hang over him,” so that he ought to be entitled to remove it. It is therefore immaterial that the creditor has refused to sue, or even that he has made no demand. A fortiori, the action lies where the principal debtor threatens to commit a breach of the obligations which the surety has guaranteed; and an order may be made even though the principal debtor is without funds. But the action will not lie if the debt is not an actual accrued and definite debt or, if on its true construction the guarantee precludes action before the creditor demands payment. In the book “Chitty on Contracts”, 24th Edition, Vol. II in Para 4855 there is some discussion about surety’s rights before payment. It has been stated therein that even before payment by the surety, he has certain potential or inchoate rights against the principal debtor which may have important practical consequences. In Woodroffe’s Tagore Law Lectures, 1897 on “The Law Relating to Injunctions”, 6th Edition at Page 215 it has been stated that if in any suit it be proved by affidavit or otherwise that the defendant threatens, or is about to remove or dispose of his property with intent to defraud his creditors Court may, by order, grant a temporary injunction to restrain such act or give such other order for the purpose of staying and preventing the removal or disposition of the properly as the Court thinks fit or refuse such injunction or other order.

16. In view of what has been stated in the aforesaid authoritative treatises, we are of the opinion that even before payment of the debt by the guarantor to the creditor the guarantor by invoking the equitable doctrine of subrogation can apply for temporary injunction as has been done in the instant suit.

17. Now the question is whether the application for temporary injunction as filed by the guarantor defendant No. 4 has been a mala fide one as submitted by Mr. Roy Chowdhury. It appears that by the said application for injunction defendant No. 4 has wanted to restrain only one of the debtor’s, viz. the defendant No. 3 and not the other debtor, viz. the defendant No. 2 from disposing of the personal properties. It is an undisputed fact that the defendant No. 2 is none else than the son-in-law of the defendant No. 4 and that the defendant No. 3 is the son of the defendant No. 5. Be that as ii may in the petition for temporary injunclion-in-question it has been alleged that the plaintiff Bank creditor has prayed for a personal decree against the defendants. It has already been stated for what relief the plaintiff Bank has filed the suit and it appears from the relief as sought for in the plaint that the creditor plaintiff Bank seeks to get the dues of the decree if any satisfied first of all by sale of the mortgaged immovable properties and hypothecated movable properties in terms of the Order 34 of the Code of Civil Procedure. Such being the position, the defendant No. 4 as the applicant for the temporary injunction is required to prima facie satisfy the Court that the mortgaged immovable properties and the hypothecated movable properties in the instant case would not be sufficient to satisfy the dues of the decree if any. We find to our surprise that the defendant No. 4 has not been able to prima facie show by filing any affidavit in connection with the hearing of the petition for temporary injunction before the trial Court that the mortgaged immovable properties and the hypothecated movable properties would not be sufficient to satisfy the dues of the decree if any. It has been rather conceded by both sides at the time of their submissions before us that the receiver was appointed in the suit and as per the Court’s direction the receiver sold the hypothecated movable properties including the plant and machineries and more than Rs. 1,50,000/- was deposited and adjusted towards the Bank’s claim against the defendants. The suit was filed with regard to the plaintiff’s total claim of Rs. 4 lakhs and odds with interest and costs. The adjustment of rupees more than l,50,000/- towards the said claim, leaves the dues to the extent of about Rs. 3,50,000/-. The plaint of the suit shows that the leasehold interest and freehold interest in 16 cottahs of land at 10, Ballygunge Station Road. Calcutta and 14 cottahs of land at 23/B, Kankulia Road, Calcutta are under mortgage against the loan taken from the plaintiff Bank. Mr. Roy Chowdhury submits that such considerable quantity of land in Calcutta being under mortgage would be sufficient to satisfy the dues of the decree if any, Mr. Mukherjee with reference to the written statement filed by the present respondents 3 and 5 in the suit has submitted that the defendants Nos. 3 and 5 have admitted in Para 10 of the written statement that the factory shed and the land at 10, Ballygunge Station Road, Calcutta exclusively belong to the defendant No. 4 alone and that such statement supports the submission of Mr. Mukherjee that the debtors 1 and 3 have got no existing interest and ownership in the mortgaged immovable properties at 10, Ballygunge Station Road, Calcutta. We do not find any material in the pleadings or in any other paper filed in connection with the hearing of the petition for temporary injunction filed in the trial Court, to show that the debtors specially the defendant No. 3 have got no existing interest and ownership in 23/B, Kankulia Road. Calcutta along with other co-sharers.

18. The mortgaged immovable properties wherever they do go either by transfer or assignment or by virtue of any partition, would remain always as the first charge for satisfaction of the decretal amount. It could not be prima facie shown before us that the mortgaged properties with such a considerable quantity of land even in the share of defendant No. 3 and the hypothecated movables taken together would not be sufficient to satisfy the dues of the decree if any. Such being the position, even if the defendant No. 4 may have the right to claim for temporary injunction by invoking the equitable doctrine of subrogation, the facts and circumstances of the present case as already discussed do not make out any prima facie case and do not indicate any balance of inconvenience or the chance of irreparable injury in favour of the defendant No. 4 to get the temporary injunction as prayed for.

19. In the result the appeal is dismissed and the impugned order of the learned subordinate Judge is confirmed.

20. We make no order as to costs. Let the connected suit be disposed of as expeditiously as possible. Preparation of formal decree be dispensed with.

G.C. Chatterjee, J.

21. I agree.

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