Important point
The principle underlying the last clause of Section 60 of the Transfer of Property Act applies only in cases where the mortgagee in the character of a mortgagee acquires the equity of redemption outstanding in the mortgagor.

Headnote:Transfer of Property Act, 1882 -Section 60-Redemption of portion of mortgaged property-Bar and exception thereto-Condition precedent to invoke solitary exception to disentitling fiat-Share of mortgagor should have been acquired and person who so acquired should have been mortgagee-Part of mortgaged property vested in Government by operation of law free from all encumbrances-Much after vesting, Government became mortgagee under a deed of assignment executed by original mortgagee-Suit for redemption-Mortgagor’s claim that he is entitled to pro tanto reduction in mortgage money-Not tenable-Exception to last paragraph of Section 60 not attracted.
       Held : The last paragraph of Section 60 can be vivisected into two segments. The first part contains a negation to the holder of part of equity of redemption to redeem that part alone on payment of the proportionate debt. The second limb of the paragraph provides the solitary exception to the aforesaid negativing edict. The words in that second limb “except only where” are a pointer that the said exception would strictly be confined to the one situation envisaged therein. In order to invoke the solitary exception to the disentitling fiat of the last paragraph of Section 60 of the T.P. Act there must be a conjunction of two postulates. One is that share of the mortgagor in the property should have been “acquired”. Second is that the person who so acquired should have been the mortgagee. (Paras 16 and 17)
       The principle behind the exception to the prohibition clause in the last paragraph of Section 60 of the TP Act is, if the mortgagee is satisfied of a part of the mortgage debt by becoming the owner of a part of the mortgage property it is only equitable to allow the mortgagor to get pro tanto reduction of the mortgage debt, otherwise it would be unjust to allow the entire mortgage debt again to be borne by the remaining mortgage property. By becoming the owner of part of the mortgage property it is not necessary that the mortgage money would have been discharged even proportionately. It depends upon how the mortgagee got share in the mortgage property. (Para 23)
       In the instant case part of the mortgaged property came to be vested in the Government by virtue of provisions of the Kerala Land Reforms Act and Kerala Private Forest (Vesting and Assignment) Act. Much after this vesting the State Government paid the mortgage debt to the bank and took assignment of the mortgage right. Armed with it the State Government threatened the plaintiff with proceedings under the provisions of the Revenue Recovery Act for realisation of the mortgage money. The mortgagor filed suit for redemption and claimed in the suit, a pro tanto reduction of the mortgage debt on the footing that State Government became the mortgagee when it took assignment of Ex.B1 mortgage right and the right of the mortgagor over a large area of mortgaged land has now become vested with the mortgagee. (Paras 5 & 6)
       When part of the mortgage property vested in the Government under the provisions of the above two enactments, that the Government was not the mortgagee. The Government became owner of the part of the mortgage property not as a mortgagee, even apart from the fact that such vesting was through the statutory process. The vesting of portion of the mortgaged property with the government and the subsequent assignment of mortgaged right in favour of the government are not sufficient to formulate the exception provided in the last paragraph of Section 60 of the TP Act. So plaintiff is not entitled to pro tanto reduction in the mortgage money. (Paras 22 and 27)

Judgment

Thomas, J.-The meet question is this: When a mortgage property, or any portion of it, lis vested in Government by operation of law, would it amount to government “acquiring” the said property as contemplated in the last paragraph of Section 60 of the Transfer of Property Act (for short the TP Act). If the answer thereof is in the affirmative the next question is whether the mortgagor is entitled to have the mortgage debt slashed down pro tanto when the Government stands subrogated as the mortgagee. If that ancillary question is also to be answered in the affirmative, the appeal preferred by the State of Kerala by special leave has to be dismissed. To show how the question arose in this case, a brief sketch of the facts is necessary :

2. Respondent “Koliyat Estates” is a firm which possessed extensive acres of plantation in the northern districts of Kerala state. In 1967 the firm obtained a loan of Rs. 46.61 lakhs from the Central Bank of India (the `Bank’ for short). As the loan was sanctioned under a scheme propounded by the Government called Agricultural Re-financing Scheme, a tripartite agreement was executed on 23.10.1967 between the bank and the Koliyat Estate (the plaintiff for short) and the State Government of Kerala. Pursuant to the said agreement the plaintiff firm on the same day executed B1 mortgage deed in favour of the bank and the State Government stood as the guarantor for the due re-payment of the loan in terms of the agreement.

3. While the mortgage was subsisting certain developments took place in the socio-political set up in the State of Kerala. The provisions relating to land ceiling in the Kerala Land Reforms Act (KLR Act for short) came into force with effect from 1.1.1970 and consequently the right, title and interest of the firm over an area of more than 1200 acres of land covered by the mortgage became vested in the Government as per Section 86(2) of the KLR Act. This was sequel to the decision of a Taluk Land Board dated 1.8.1972 (Ex. A17). According to the plaintiff more than 2300 acres had been taken possession of by the Government on the premise that plaintiff had so much of land in excess of the ceiling limit prescribed under the KLR Act.

4. A little later, by virtue of the provisions of another enactment called the Kerala Private Forest (Vesting and Assignment) Act 1971 (hereinafter referred to as Private Forest Vesting Act) another area of 273.75 acres of land, included in the mortgage deed, stood vested in the government as private forest. All those developments took place long before 1978.

5. On 7.9.1978 the State Government paid the mortgage debt to the bank and took assignment of the mortgage right under Ex. B1 as per Ex. B11- Assessment Deal. Armed with it the State Government threatened the plaintiff with proceedings under the provisions of the Revenue Recovery Act for realisation of the mortgage money.

6. It was in the aforesaid background that the plaintiff filed the present suit for redemption of the mortgage. Plaintiff claimed in the suit, a pro tanto reduction of the mortgage debt on the footing that State Government became the mortgagee when it took assignment of Ex. B1 mortgage right and the right of the mortgagor over a large area of mortgaged land has now become vested with the mortgagee. The aforesaid claim was made presumably under the last paragraph of Section 60 of the TP Act.

7. The State Government resisted the claim for pro tanto reduction in the mortgage debt by pleading firstly that the vesting process under the aforesaid two enactments took place long before Ex. BII assignment, which the original mortgagee made in favour of the Government, secondly, since such vesting took place free from all encumbrances, it is not an acquisition of the said land mortgagee. The trial Court repelled government’s contention and passed a preliminary decree for redemption in terms of the plaintiff’s plea for pro tanto reduction. The relevant reliefs granted by the trial Court ar

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Judicial Analysis

SupremeToday

1999 Supreme(SC) 1013

Important pointThe principle underlying the last clause of Section 60 of the Transfer of Property Act applies only in cases where the mortgagee in the character of a mortgagee acquires the equity of redemption outstanding in the mortgagor.

Cases Referred (1)

Judicial Analysis

Important point
The principle underlying the last clause of Section 60 of the Transfer of Property Act applies only in cases where the mortgagee in the character of a mortgagee acquires the equity of redemption outstanding in the mortgagor.