Table of Contents

ACKNOWLEDGEMENT ........................................................... ERROR! BOOKMARK NOT DEFINED.

INTRODUCTION .......................................................................................................................... 2

RESEARCH METHODOLOGY...................................................................................................... 3

OBJECTIVES ........................................................................................................................... 3

HYPOTHESIS .......................................................................................................................... 3

RESEARCH QUESTIONS ......................................................................................................... 3

SCOPE AND LIMITATIONS ..................................................................................................... 3

CITATION METHOD ............................................................................................................... 4

THE DOCTRINE OF SUBROGATION ........................................................................................... 5

DEFINITION ............................................................................................................................ 5

THE CHANGING CONTOURS OF THE DOCTRINE: FROM SIMPSON TO PRESTON .................... 7

SIMPSON V. THOMSON .......................................................................................................... 7

CASTELLAIN V. PRESTON: DOCTRINE OF SUBROGATION TO ENFORCE THE

FUNDAMENTAL RULE ............................................................................................................ 8

AFTER CASTELLAIN .............................................................................................................. 9

SUBROGATION IN INSURANCE CONTRACTS ........................................................................... 11

THE GENYSIS OF SUBROGATION IN INSURANCE LAW....................................................... 11

APPLYING CASTELLAIN ...................................................................................................... 11

DIVERGENCE FROM CASTELLAIN....................................................................................... 12

THE INDIAN LAW OF SUBROGATION ...................................................................................... 15

VASUDEV MUDALIAR V. CALEDONIAN INSURANCE CO. ................................................... 15

UNION OF INDIA V SRI SARADA MILLS .............................................................................. 16

ECONOMIC TRANSPORT V CHARAN SPINNING MILLS ...................................................... 16

CONCLUSION ........................................................................................................................... 18
 INTRODUCTION

The doctrine of subrogation has confounded academicians and practitioners for many
decades due to its elusive nature. The doctrine has undergone various changes throughout
the last two centuries in various contexts. A review of the cases applying the doctrine would
demonstrate its flexibility and fecundity. It holds a special place in common law
jurisdictions due to its nature and importance in indemnity contracts. In fact, it is often
viewed as a necessary feature of the contract of indemnity.1

It has a special place in contracts of insurance which are also contracts of indemnity. It has
been reformulated in a seminal case to include principles of equity within its ambit and
entitle insurers to equitable reliefs. Currently, Indian Courts are averse of applying equitable
principles as robustly as common law courts, especially in commercial laws due to the very
nature of adjudication it undertakes. Thus, the common law doctrine of subrogation must be
understood in India in such a perspective.

This project seeks to understand the doctrine in this manner by investigating whether Indian
courts grant wide equitable reliefs under the doctrine. In the first part of the project, we shall
understand the doctrine from a historical perspective. In the second part, we see how cases
have applied the doctrine in insurance contracts. In the third part, we see its applicability in
the Indian context and the controversies which have arisen due to the doctrine.

1
C Mitchell, the Law of Subrogation (Oxford, Clarendon Press, 1994) 68–74.
 RESEARCH METHODOLOGY

OBJECTIVES

This project aims to do the following—

 Understand the concept of subrogation from a historical perspective.

 Understand the applicability of the doctrine of subrogation in common law.
 Understand the doctrine of subrogation, as applied in the Indian context.


HYPOTHESIS

The project moves with the assumption that the doctrine of subrogation in India entitles
insurers to equitable reliefs.

RESEARCH QUESTIONS

I. What is the Doctrine of Subrogation in Common Law?

II. Does the Doctrine of Subrogation include equitable principles?
III. How has the Doctrine been understood in India?

SCOPE AND LIMITATIONS

This research has been limited to a study of select cases from common law jurisdictions and
few seminal Indian cases.
 CITATION METHOD

The OSCOLA citation guidelines have been followed for this project.
 THE DOCTRINE OF SUBROGATION

DEFINITION

The doctrine of subrogation is one of the most recognized doctrines in common law.2 The
doctrine was developed to prevent unjust enrichment.3 For instance, in Assignee v.
Mahoney,4 the cashier of a bank allowed the defendant to overdraw from her account. When
the cashier discovered the shortage, he gave his note for the amount. He subsequently
became bankrupt and the bank established its claim against him. The assignee, then, sued
the defendant for the amount. It was held in the case that the assignee was subrogated in
place of the bank and could sue the defendant for the said amount.5 The doctrine is of
subrogation is only applicable to a person who comes with clean hands.6Subrogation must
be permitted in all cases where it can prevent unjust enrichment and the plaintiff is entitled
to equitable relief.7

The doctrine of subrogation has been defined in many ways. A dictionary definition of the
term would be—

“In Law the act or operation of law in vesting a person who has satisfied, or is
ready to satisfy, a claim which ought to be borne by another with the right to
hold and enforce the claim against such other for his own indemnification."8

Black’s Law Dictionary defines the doctrine as—

“The substitution of one person in the place of another with reference to a lawful
claim, demand or right, so that he who is substituted succeeds to the rights of
the other in relation to the debt or claim, and its rights, remedies, or securities.”9

A rather pithy exposition of the doctrine can be found in Justice Miller’s opinion in the

2
ML Marasinghe, ‘An Historical Introduction to the Doctrine of Subrogation: The Early History of the Doctrine
I’, 10 Val. U. L. Rev. 45 (1975).
3
See 26 Harv. L. Rev. 364, 382 (1912-1913).
4
Assignee v. Mahoney, 150 S.W. 503 (Ky.).
5
Ibid.
6
See Johnson v. Moore, 33 Kan. 90, 5 Pac. 506.
7
In Re McBride, 19 N.B.R. 452.
8
The Century Dictionary.
9
The Century Dictionary.
 Supreme Court of the United States Case of Aetna L. Ins. Co. v. Middleport10, where he
wrote—

“The doctrine of subrogation is derived from the civil law, and ‘It is said to be
a legal fiction, by force of which an obligation extinguished by a payment made
by a third person is treated as still subsisting for the benefit of this third person,
so that by means of it one creditor is substituted to the rights, remedies, and
securities of another….It takes place for the benefit of a person who, being
himself a creditor, pays another creditor whose debt is preferred to his by reason
of privileges or mortgages, being obliged to make the payment, either as
standing in the situation of a surety, or that he may remove a prior incumbrance
from the property on which he relies to secure his payment. Subrogation, as a
matter of right, independently of agreement, takes place only for the benefit of
insures; or of one who, being himself a creditor, has satisfied the lien of a prior
creditor; or for the benefit of a purchaser who has extinguished an incumbrance
upon the estate which he has purchased; or of a co-obligor or surety who has
paid the debt which ought, in whole or in part, to have been met by another.’
Sheldon Subrogation, pp. 2,3.”

Another very important and controversial explanation of the doctrine can be found in Brett
L.J.’s opinion in Castellain v. Preston11—

“…that as between the underwriter the assured the underwriter is entitled to the
advantage of every right of the assured, whether such right consists in contract,
fulfilled or unfulfilled, or in remedy for tort capable of being insisted on or
already insisted on, or in any other right, whether by way of condition or
otherwise, legal or equitable, which can be, or has been exercised or has
accrued, and whether such right could or could not be enforced by the insurer
in the name of the assured by the exercise of acquiring of which right or
condition the loss against which the assured is insured, can be, or has been
diminished. That seems to me put this doctrine of subrogation in the largest form
possible”

10
Aetna L. Ins. Co. v. Middleport, 124 U.S. 534, 538-9.
11
Castellain v. Preston, (1) 8 Q.B.D. 613 (1883).
 It must be noted that even though the cases were decided in the context of an insurance
contract, the doctrine of subrogation was not restricted in the context of insurance contracts.
It has historically been invoked in various situations, especially in the context of a contract
of guarantee.12 Authors have distinguished the doctrine of subrogation as being applicable
in three distinct situations— legal subrogation, conventional subrogation and statutory
13
subrogation. In this project, we shall try to understand the concept in light of insurance
law.

THE CHANGING CONTOURS OF THE DOCTRINE: FROM SIMPSON TO

PRESTON

SIMPSON V. THOMSON

The Doctrine of Subrogation was a doctrine which was, historically, developed in the
domain of guarantee contracts and predominantly applied in insurance contracts and cases
of unjust enrichment.14The Doctrine was limited to rights of action in torts and contract.15In
the seminal case of Simpson v. Thomson16, Lord Cairns understood the doctrine in the
following terms—

“On payment the insurers are entitled to enforce all the remedies, whether in
contract or in tort, which the insured has against third parties, whereby the
insured can compel such parties to make good the loss insured against.”

In Simpson, the respondents were underwriters who paid Burrell for the loss of his ship as
total loss after it was abandoned. The ship collided with another ship, the Fitzmaurice, due
to the negligence of the master of Fitzmaurice. However, interestingly Burrell owned both
the ships. The question in this case was whether the underwriters had a claim from Burrell
due to him owning the Fitzmaurice and the negligence of its master. The Court of Sessions

12
Ibid.
13
James M. Mullen, ‘The Equitable Doctrine of Subrogation’, 3 Md. L. Rev. 202 (1939).
14
Mitchell C, 'Subrogation, Unjust Enrichment and Remedial Flexibility.' (1998) 6 RLR 144.
15
Chitty J., quoted in Castellain v. Preston.
16
Simpson v. Thomson, (1877) 3 App.Cas. 279.
 found that a “fresh right” was created in the underwriter’s favour and the underwriter would
be entitled to payment from Burrell. However, the House of Lords, on appeal, rejected this
formulation and held that the underwriters could only claim subrogation.

Since, in that case Burrell could not have claimed from himself, there was no right or action
to which Burrell could be subrogated.17The Court distinguished subrogation as a “transfer
of a right of action”18from the Court of Session’s “fresh right created”. The Court, clearly
and, in our opinion, rightly distinguished subrogation from equity. Authors have vehemently
criticized the judgment for being unjust for not applying equity, while maintaining the
distinction between subrogation and equity.19

CASTELLAIN V. PRESTON: DOCTRINE OF SUBROGATION TO ENFORCE THE FUNDAMENTAL

RULE

A notable divergence from Simpson was seen in the Queen’s Bench judgment in Castellain.
As noted above, Simpson was criticized for not meting justice to the underwriters in the case.
In a case where subrogation, as formulated by Simpson, does not apply, it was felt that an
equitable relief must be granted. The Courts were competent to do so. However, Castellain
took a very different approach.

In Castellain, the Chairman of Liverpool and London and Globe Insurance Company
(Insurer) issued a policy against the insured’s building. The insured entered into a separate
sale agreement with the purchasers after issuing the policy. Later, a fire broke out in the
insured building. The insurer paid a sum of 330 Pounds pursuant to the policy. The purchase
agreement was completed after the settlement, without taking the loss due to fire into
account. It was claimed by the insurer that, due to the purchase agreement the insured
incurred profit, which was against the principle of an insurance contract. As noted above,
Chitty J., in the first instance, denied the insurer’s claim by relying on the formulation of
subrogation in Simpson.

On Appeal, however, this position was reversed. Brett L.J.’s pithy exposition of the law in
the judgment is quite accurate in the formative part where he lays down two fundamental

17
ibid.
18
Ibid at 293.
19
Philip S. James, ‘The Fallacies of Simpson v. Thomson’, 34 The Modern Law Review 150 (1971).
 rules of insurance law20—

1. A Contract of insurance in a marine or fire policy is a contract of indemnity.

2. In case of loss, against which the policy is made, the assured is entitled to full
indemnity, but never more.

It is, thus, clear from the above formulation that the court had to prevent unjust enrichment
in an insurance contract. This consideration further guided the Court to reformulate the
doctrine of subrogation. Brett L.J. noted that that earlier the doctrine of subrogation was not
applicable to insurance contracts as underwriters were not sureties, as in contracts of
guarantee or indemnity. However, Brett L.J. noted that the doctrine of subrogation is a
necessary doctrine to enforce the fundamental rule. The question, then, was whether the
doctrine was limited to enforcement of tort and contractual remedies only.

Of course, if the doctrine as formulated in Simpson were to be followed, there was no right
to be subrogated for in Castellain. The insured would have certainly profited from the sale
agreement, and consequently breached the fundamental rule. This, in our opinion, was the
guiding principle behind Castellain. Due to this, Brett L.J. considerably extended the
application of the Doctrine to include equitable rights within it. Brett L.J.’s final formulation
of the doctrine has been stated in the preceding part of this chapter. As a result, the doctrine
of subrogation is now understood as including accrued as well as exercised rights, legal or
equitable.

AFTER CASTELLAIN

While Castellain has often been treated as the most authoritative exposition of the law of
subrogation, its understanding of the doctrine has been criticized in a number of instances.
Castellain was described as “a decision which, though at least partially just in result must
have puzzled every student of law.”21 It was argued that subrogation was incorrectly
confused with equity and the court should have applied equity in such a case instead of

20
Brett L.J. captures this rule in a single proposition stating— “The very foundation, in my opinion, of every
rule which has been applied to insurance law is this, namely, that the contract of insurance contained in a
marine or fire policy is a contract of indemnity, and of indemnity only and that this contract means that the
assured, in case of a loss against which the policy has been made, shall be fully indemnified, but shall never be
more than fully indemnified.”

21
Philip S. James, ‘The Fallacies of Simpson v. Thomson’, 34 The Modern Law Review 150 (1971).
 conflating subrogation.22As a matter of fact, subrogation itself was based on equity.23 The
High Court of Australia, too, distinguished Castellain as a case applying equity and not
subrogation by writing—

“It was said in the Supreme Court in the present case that Castellain v. Preston was
a case of subrogation…we think this is a mistake, Castellain v. Preston of course was
not a case of subrogation in respect of an outstanding right of action and one might
almost wish that some other word had been used as the label of a right which exists
when it is too late for subrogation in the ordinary sense.”24

It is still unclear whether Castellain is still applied across the world. In India, the Marine
Insurance Act, 1963 recognizes the Castellain formulation by providing—

“79. Right of subrogation.—

Where the insurer pays for a total loss, either of the whole, or in the case of
goods of any apportionable part, of the subject-matter insured, he thereupon
becomes entitled to take over the interest of the assured in whatever may
remain of the subject-matter so paid for and he is thereby subrogated to all
rights and remedies of the assured in and in respect of that subject-matter as
from the time of the casualty causing the loss.”25

By providing subrogation for all “rights” it seems to have accepted Castellain’s formulation
of including equitable rights as well. Castellain has led authors to distinguish between legal
(Simpson) and equitable (Castellain) subrogation. In the next section, we shall explore how
the doctrine has been applied in the context of insurance contracts.

22
Ibid.
23
Ibid.
24
British Traders’ Insurance Co. Ltd. v. Monson, [1964] HCA 24.
25
Section 79, Marine Insurance Act, 1963.
 SUBROGATION IN INSURANCE CONTRACTS

THE GENYSIS OF SUBROGATION IN INSURANCE LAW

As noted above, subrogation was not applied in insurance law until much later as
underwriters in an insurance contract were not sureties.26 It was only after an insurance
contract was recognized as a contract of indemnity that the principle was extended to
insurance law as well.27The law of subrogation has been mostly developed in common law
and, in this section, we shall be dealing with cases from common law jurisdictions before
turning to the Indian law in the next section. The doctrine has mostly attracted the attention
of practitioners rather than academics and is treated as an “indispensable part of insurance
law.”28 Thus, it is necessary that this project includes a thorough study of certain landmark
cases on the law of subrogation.

It must be noted though, that the doctrine of subrogation does not apply to all forms of
insurance contracts. As noted above, it only applies to insurance contracts which are
contracts of indemnity. Since, life insurance contracts and accident insurance were not
contracts of indemnity. However, this position has not been fleshed out with much clarity.29
But it is also highly unlikely that victims in such insurance policies would ever be unjustly
enriched and the position has not really been tested before courts.30

APPLYING CASTELLAIN

Manley v. Montgomery Bus Company

One of the notable cases from the United States where the Court applied the doctrine of
subrogation in a broad manner was in the Superior Court of Pennsylvania judgment in

26
Castellain.
27
Darrell v. Tibbitts, (1880) L.R. 5 Q.B. 560. The Court noted that the contract of fire insurance is a contract of
indemnity.
28
See Dalby v. India and London Life Assurance Co, (1854) 15 CB 365; Bradburn v. Great Western Railway
Co, (1874) LR 10 Ex I.
29
ibid.
30
Reuben Hasson, ‘Subrogation in Insurance Law—A Critical Evaluation’, 5(3) Oxford Journal of Legal Studies
416 (1985).
 Manley v.Montgomery Bus Company31. In Manley, a policy was taken by Manley to
indemnify him against loss arising from any collision in which his automobile might
thereafter be injured. Eventually the car collided and both Manley and his car suffered
injuries and damage. He was indemnified under the policy. Pursuant to the policy, Manley
delivered a subrogation receipt.

Before the insurance amount was paid, Manley had brought a suit for injuries and damages
to the car, against the bus company. They ended up settling only for the amount for personal
injury, and Manley abandoned the claim for damage to the car. The trial court awarded
Manley a sum of $2,200 for personal injury. The insurer claimed that the settlement was
entered into without the knowledge of the insurer. It claimed subrogation to the rights of the
insured in the judgment to the extent of the sum it paid for damages.

As we discussed above, the insurer would not have a technical right of subrogation as there
is no right or claim which is the subject matter of the insurance.32 Manley received nothing
for damage to his vehicle and, thus, the claim was argued in a wrong manner. It would have
made better sense to argue that the settlement must be void due to non-disclosure and
ignoring the subrogation terms. Interestingly, the court took note of it and said that—

“The judgment having been obtained in an action in which the whole plaintiff’s
right was asserted, a part of which belonged to the petitioner here, we are of the
opinion that the latter is entitled to be made whole to the extent of the indemnity
paid.”

Thus, the Court held that the insurer would get the amount it paid up, from the $2,200 paid
to Manley, as the whole right was claimed. Although there are distinctions to be drawn from
Castellain, the net effect of the judgment seems to be providing an equitable relief to the
insurer. This judgment, too, has been distinguished as applying equity rather than
subrogation as understood in a technical sense.33

DIVERGENCE FROM CASTELLAIN

31
Manley v. Montgomery Bus Company, 82 Pa. Super. Ct. 530 (1924).
32
It must be noted that this issue did not arise in Castellain to the fullest extent, although Chitty J. considered it
in the first instance.
33
William Otis Jr. Badger, ‘Subrogation’, 62 Ins. L.J. (I) (1924).
Somersall v. Friedman

The Canadian Supreme Court relied on Castellain in a notable instance in Somersall v.

Friedman34, In Friedman, the insured respondents suffered injuries of serious nature in a
vehicle collision and sued the driver of the other vehicle, who was underinsured. The insured
respondents entered into an agreement with the underinsured driver, pursuant to which the
driver would admit liability for the accident and the respondent would not sue him beyond
the extent of his insurance coverage. The insurers claimed that the insured respondents have
interfered with the insurers’ right of subrogation by entering into the said agreement.

The Court rejected this contention, by noting that that in the absence of contractual terms to
the contrary, the insurer’s right of subrogation will not arise until the insured has been fully
indemnified. Rejecting the insurers’ arguments and relying on Castellain, the Court wrote—

“…it is important to keep in mind the underlying objectives of the doctrine of

subrogation which are to ensure (i) that the insured receives no more and no
less than a full indemnity, and (ii) that the loss falls on the person who is legally
responsible for causing it…The doctrine of subrogation operates to ensure that
the insured received only a just indemnity and does not profit from the
insurance: see Castellain v Preston (1883), 11 QBD 380 (CA), at pp 386–87;
AFG Insurances Ltd v City of Brighton (1972), 126 CLR 655 (HC
Austrl)…Consequently, if there is no danger of the insured’s being over-
compensated and the tortfeasor has exhausted his or her capacity to compensate
the insured there is no reason to invoke subrogation. Similarly, if the insured
enters into a limits agreement or otherwise abandons his or her claim against
an impecunious tortfeasor the insurer has lost nothing by the inability to be
subrogated.”

In our opinion, this is a correct application of the Castellain ratio. By limiting it to the
holding that subrogation is only available in cases where there is unjust enrichment. This is
a much more temperate approach towards Castellain. The Court also delineated an equitable
relief for technical breaches of subrogation rights.35However, it failed to distinguish
Castellain on this ground in a complete manner. This is, perhaps, because Castellain was

34
Somersall v. Friedman, [2002] 3 S.C.R. 109 (Canada).
35
Somersall, at para 52.
 affirmed in its ratio by the Canadian Supreme Court in Guardian Assurance Co. v. Town of
Chicoutimi,36 this case, however, must be noted for not applying the equitable subrogation
as formulated by Brett L.J. in Castellain, even after affirming it.37

36
Guardian Assurance Co. v. Town of Chicoutimi, [1915] 51 SCR 562.
37
Roger Harris , 'Insurance Subrogation.' (1993) 22(2) Can Bus LJ 308.
 THE INDIAN LAW OF SUBROGATION

The law of insurance is still in its nascent stages as compared to other common law
jurisdictions.38 This has been attributed due to the lesser volume of commerce in India and
the lack of credit and investment information.39 The law of subrogation, too, has witnessed
a paucity of treatment from Indian Courts.40While statutes have explicitly recognized this
right in the context of Marine Insurance as a necessary incident in a contract of indemnity.41

The Courts have not received enough appropriate lis to develop the law as other common
law jurisdictions did. While Courts did indulge with the doctrine in other respects, for
example in the context of transfer of property42, the courts indulged with it in respect of
insurance contracts much later.

VASUDEV MUDALIAR V. CALEDONIAN INSURANCE CO.

One of the earliest instances in which a right of subrogation was examined in the context of
insurance contracts was in the High Court of Madras case of Vasudev Mudaliar v
Caledonian Insurance Co.43 In Vasudev, the insured took a motor vehicle insurance and
later met an accident due to the negligence of a third party. The inured was fully indemnified
under the policy issued by the insurer. The insurer, then took over the car after paying by
treating the case as a total loss. The insurer later sold the car for a lesser price and brought
a suit to recover the rest of the amount from the third party lorry driver. Since, the insured
was not a party to the suit, the insurer claimed that it was subrogated in the insured’s
position.

It was argued before the Court that a right to sue cannot be transferred under Section 6(e) of
the Transfer of Property Act44. It was argued that an assignment was necessary to sustain a
claim of subrogation. The Court clearly noted in paragraph 3 of the judgment that there was

38
KSN Murthy KVS Sarma, Modern Law Of Insurance In India (Lexis Nexis 2013) 143.
39
Ibid.
40
D. BOSE, A TEXT BOOK OF EQUITY (6th ed.).
41
Prashanti Upadhyay, ‘Development of Laws Relating To Marine Insurance In India’, Manupatra
<http://docs.manupatra.in/newsline/articles/Upload/FBF6E3EA-143D-459F-8AC0-FB70D2F84751.pdf>
42
See Alam Ali v. Beni Charan, AIR 1936 All. 33 (F.B.).
43
Vasudev Mudaliar v Caledonian Insurance Co., AIR 1965 Mad 159.
44
Section 6(e), Transfer of Property Act, 1882.
 a paucity of precedent in this context and based the judgment on English Law.

Similar to the line of reasoning used in Castellain and Tibbitts, the Court first found that a
contract of motor insurance is a contract of indemnity. It then, held that the insurer in such
contracts are entitled to the right of subrogation. The Court held that the right of subrogation
are an exception to the general rule that a right to sue for tort is non-assignable. It held that
the insurer in this case was entitled to sue in his own name.

UNION OF INDIA V SRI SARADA MILLS

In Union of India v Sri Sarada Mills45, the Supreme Court had to consider the nature of
subrogation and the manner in which it is to be exercised. In the said case, the insured
respondent recovered a certain sum from the insurer and assigned all their rights against the
railway administration to the insurer. The question was whether the insurer can bring an
independent suit in its own name without reference to the insured in the action.

The Court considered whether the letter of subrogation in the given case also assigned a
right to sue to the insurer. In such a case, the insurer can sue in his own name, however,
such an assignment by itself would be bad in law. However, the Court found that this was
not in issue as there was no enforcement sought for assignment. The Majority opinion in the
case found that the insurer had a right to sue in its name.

Matthew J., however, dissented on this point and distinguished Vasudeva. It held that
Vasudeva was correct in noting that the right of subrogation does not ipso jure enable an
insurer to bring a suit in his name. However, he found that Vasudeva was incorrect in stating
that subrogation is an exception to Section 6(e) of Transfer of Property Act, 1882.

ECONOMIC TRANSPORT V CHARAN SPINNING MILLS

The Supreme Court had the chance to revisit the issue in Economic Transport Organization

v. Charan Spinning Mills.46 The Court held that—

I. Equitable right of subrogation arises when the insurer settles the claim of the assured,

45
Union of India v Sri Sarada Mills, AIR 1973 SC 281.
46
Economic Transport Organization v. Charan Spinning Mills, 2010 (2) SCALE 427.
 for the entire loss. When there is an equitable subrogation in favour of the insurer,
the insurer is allowed to stand in the shoes of the assured and enforce the rights of
the assured against the wrong doer.
II. Subrogation does not terminate nor puts an end to the right of the assured to sue the
wrong-doer and recover the damages for the loss. Subrogation only entitles the
insurer to receive back the amount paid to the assured, in terms of the principles of
subrogation.

III. Where the assured executes a letter of subrogation, reducing the terms of
subrogation, the rights of the insurer vis-a-vis the assured will be governed by the
terms of the letter of subrogation.
IV. A subrogation enables the insurer to exercise the rights of the assured against third
parties in the name of the assured. Consequently, any plaint, complaint or petition
for recovery of compensation can be filed in the name of the assured, or by the
assured represented by the insurer as subrogee-cum- attorney, or by the assured and
the insurer as co-plaintiffs or co- complainants
V. Where the assured executed a subrogation-cum- assignment in favour of the insurer
(as contrasted from a subrogation), the assured is left with no right or interest.
Consequently, the assured will no longer be entitled to sue the wrong-doer on its
own account and for its own benefit.
 CONCLUSION

In this project we demonstrated the clear dichotomy between the formulation of the doctrine
of subrogation in Simpson and Castellain. We submitted that the formulation in Castellain
is not how the doctrine has been historically understood. The Castellain formulation
conflates the technical meaning of subrogation with principles of equity and although justice
is meted by such an application, it creates considerable difficulty in understanding the
concept. We demonstrated the application of the Castellain formulation as well.

In the Indian context, however, the doctrine has been examined from a very different
perspective. The controversy in this area has been whether subrogation is an assignment of
a right to sue. This is due to the statutory framework in India which prohibits assignment of
a right to sue for tort. The cases discussed above deal with this aspect thoroughly and the
five- judge bench judgment in Economic Transport Organization is authoritative in this
aspect.

However, the cases do not discuss the application of the doctrine in terms of how Castellain
does. It is thus, unclear as to the extent of the doctrine of subrogation applicable in India and
it is uncertain whether the doctrine entitles insurers to equitable remedies under the
Castellain formulation.47

47
Rahul Pandey, ‘Doctrine of Equitable Subrogation in Indian Law’,Mondaq,
<http://www.mondaq.com/india/x/392864/Insurance/Doctrine+Of+Equitable+Subrogation+In+Indian+Law>.