Union Bank of India v. Anil Kumar

Facts

• A debtor's properties were mortgaged to multiple creditors
• A junior creditor sought marshalling to protect their security
• However, applying marshalling would have delayed the senior creditor's recovery and adversely affected an intermediate encumbrancer

Issue

1. Whether marshalling can be refused if its application would prejudice the senior creditor or an intermediate third-party encumbrancer.

Held

• Yes. Marshalling is an equitable remedy. It is not absolute. Courts will refuse to apply it where: (1) it would prejudice the senior creditor's right to timely recovery; (2) it would injure an intermediate encumbrancer; or (3) it would create injustice to innocent third parties.

Ratio Decidendi

Marshalling exists to prevent prejudice to junior creditors. But equity will not cure one injustice by creating another. If marshalling would merely shift prejudice from the junior creditor to the senior creditor or a third party, the court will decline to apply it.