Point of Law: Section 76 of 2013 Act reads as dispute as to apportionment.

ORDER :

Petitioner –Bank is grieving before the Writ Court against non-consideration of its representation dated 25.07.2022 a copy whereof avails at Annexure-G wherein it has requested the 2nd Respondent – SLAO to deposit the compensation amount to the loan account of 3rd Respondent – borrower, toward repayment that was secured by the mortgage of the property in acquisition. Learned counsel for the Petitioner vehemently argues that mortgage is one of the five traditional modes of transfer recognized by the provisions of the Transfer of Property Act, 1882 and therefore, his client has a vested interest in the subject property, which entitles it to the payment of compensation for its appropriation to loan account of the borrower. She expresses anguish against the 2nd Respondent in not considering her client’s Representation in terms of Sections 64 & 73 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013.

2. After service of notice, the Respondent Nos. 1 & 2 are represented by the learned AGA and the 3rd Respondent – borrower who happens to be the mortgager, has chosen to remain unrepresented despite service of notice; however, that will not deter the Court from adjudging the cause brought before it, in accordance with law. Learned AGA contends that the Petitioner can approach the Civil Court for the redressal of its grievance since disputable fact matrix emanates from the case papers, writ remedy not being much suitable. Having so contended, he now fairly agrees to instruct his clients to look into the grievance of the Petitioner in accordance with law, should a reasonable timeline be prescribed and legal norms be stated.

3. Having heard the learned counsel for the parties and having perused the Petition papers, this Court is inclined to grant indulgence in the matter as under and for the following reasons:

a) Petitioner apparently is a scheduled Bank and the 3rd Respondent happens to be its borrower. He has availed certain sum of money as loan having mortgaged the subject land vide registered instrument dated 28.09.2017 for securing the repayment of said loan. The mortgaged land having been acquired, the Petitioner – Bank had made a representation requesting the SLAO to remit the compensation amount to the loan account of the 3rd Respondent, which has since been declared NPA. Except some exchange of notices, nothing concrete appears to have been done in the matter from the side of the SLAO.

b) It is pertinent to mention that where the mortgaged property has been acquired, the amended provisions of Section 73 of the Transfer of Property Act 1882 Act becomes invokable. Subsections (2) & (3) of this Section read as under:

“(2) Where the mortgaged property or any part thereof or any interest is acquired under the Land acquisition Act, 1894, or any other enactment or the time being in force governing the compulsory acquisition of immovable property, the mortgagee shall be entitled to claim payment of mortgage money, in whole or in part, out of the amount due to mortgagor as compensation.

(3) Such claim shall prevail against all other claims except those of prior encumbrances and may be enforced notwithstanding that the principal money on the mortgage has not become due.”

This section is an instance of incorporation application of the “doctrine of substituted security”, viz that the mortgagee is, for the purpose of his security, entitled in lieu of only to the mortgaged property, to anything that is substituted for it. If, by a process of law or by a compelling situation sanctioned by law, the security given to a creditor for the repayment of debt is changed into something other than the property, the mortgagee gets rights over the substituted security namely, the changed one i.e., the compensation or the like.

c) The doctrine of substituted security as an applied idea to protect the interest of secured creditors was treated by the Privy Council nine decades ago in MOHAMMAD AFZAL