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 pl