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Abdul Khaleque Vs. Medaswar Hossain - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtKolkata High Court
Decided On
Case NumberA.F.A.O. No. 137 of 1960
Judge
Reported inAIR1967Cal56
ActsTransfer of Property Act, 1882 - Section 78; ;Code of Civil Procedure (CPC) , 1908 - Order 21, Rule 46 - Order 34, Rule 4; ;Transfer of Property Act - Section 73(2) and 73(3); ;West Bengal Estates Acquisition Act, 1954 - Section 3
AppellantAbdul Khaleque
RespondentMedaswar Hossain
Appellant AdvocateManindra Nath Ghosh, ;Jamini Kumar Banerjee and ;Apurba Krishna Das, Advs.
Respondent AdvocateC.F. Ali and ;Kazi Md. Ali, Advs.
DispositionAppeal allowed
Cases ReferredDurga Chandra Roy v. Koilash Chunder Roy.
Excerpt:
- .....right to compensation under the west bengal instates acquisition act can be sold under a mortgage decree at the instance of the mortgagee with whom the intermediary mortgaged the three items of properties in suit. the sale proclamation in this case under the mortgage decree relates to three items--hems nos. 1. 2 and 3 valued respectively at rs. 450. rs. 325 and rs. 225 amounting altogether to a sum of rs 1000.2. the facts giving rise to this question of law may be briefly stated al the outset. the mortgage in this case is dated 17th august 1934. the mortgagor failed to pay the debt and a suit was brought by the mortgagee upon that mortgage. a preliminary mortgage decree was passed on the 20th march 1950. it was followed by the final decree for sale on the 13th march 1952. the.....
Judgment:

P.B. Mukharji, J.

1. The main and significant question of law raised by this second appeal is whether the intermediary's right to compensation under the West Bengal Instates Acquisition Act can be sold under a Mortgage decree at the instance of the mortgagee with whom the intermediary mortgaged the three items of properties in suit. The sale proclamation in this case under the mortgage decree relates to three items--Hems Nos. 1. 2 and 3 valued respectively at Rs. 450. Rs. 325 and Rs. 225 amounting altogether to a sum of Rs 1000.

2. The facts giving rise to this question of law may be briefly stated al the outset. The mortgage in this case is dated 17th August 1934. The mortgagor failed to pay the debt and a suit was brought by the mortgagee upon that mortgage. A preliminary mortgage decree was passed on the 20th March 1950. It was followed by the final decree for sale on the 13th March 1952. The execution of the mortgage decree started on the 31st July, 1953, and the dues to the morgagee-decree-holder were calculated to be Ks. 91t-5-3p. Thereafter, the significant event that took place was the nationllsation of lands. On the 15th April, 1955 the estates vested in the State of West Bengal under the West Bengal Estates Acquisition Act 1953. The result was that the mortgaged properties in this suit could no longer be sold under the mortgage decree What the mortgagee-decree-holder did was to make an application on the 13th November 1966 to sell the mortgagor's right to compensation that was payable to the mortgagor under that Act. On the 30th November, 1956 the sale proclamation was issued, as I have said, stating that what was to be sold was 'sale of the right to compensation' valued at the said three figures of Rs. 450. Rs. 325 and Rs. 225.

3. Then begun the legal batlles. The present appellant is the 5th judgment-debtor Abdul Khaleque. He filed an application under Section 47 of the Code of Civil Procedure taking the point thai since the land vested in the State of West Bengal the mortgagee-decree-holder could not put the disputed properties to sale any more and that the deeree-holder was not entitled to put to sale the right to the entire compensation. It was also contended in that application that the decree-holder had not adopted the right procedure for sale of the right to compensation. It was contended that the right to compensation could not he sold under the law. The learned Munsif who dealt with that application, under Section 47, rejected it. The judgment-debtor appealed to the District Judge. The learned District Judge dismissed the appeal. From that decision the present appellant filed this Second Appeal raising the question stated above. The learned District Judge records the faet that no specific sum of money has reached the hands of the Collector on account of compensation for the disputed properties and in fact the amount of compensation has not yet been fixed. That was the record of fact on the 30th March, 1960 when the lower appellate Court dismissed the appeal.

4. I do not know of any decided cases which have held or decided that a right to compensation or to get some money can be sold. Reliance has been placed on four decisions of this Court.

5. The first decision is in Re: Cooch Behar Bank Ltd., 62 Cal WN 911 holding that Section 26(1) of the West Bengal Estates Acquisition Act, 1953, exempts 50 p. c. of the compensation money from being attached in execution of a decree and that Section 26(3) of that Act puts a restriction upon the decree-holder to realise the decretal dues by execution by providing that all sums recoverable under an order of attachment shall be deducted from the amount of compensation money payable in non-ncgoliable bonds under Subsection (2) of Section 23. In other words, no execution can be levied on the amount of compensation which is paid or payable in cash according to the table laid down in Section 23. It is also held in that decision that ad interim payments made under Sections 12 (1) and (2) of the Act are immune from attachment or process of execution. It is observed in that decision that Section 73(2) of the T. P. Act was contrary to the scheme and provisions of the West Bengal Estates Acquisition Act in certain respects; viz., (1) the latter Act provides for 50 p. c. of the compensation money being available to the creditor for satisfaction of his dues and (2) no distinction between a mortgage debt or any debt is made in the latter Act. On appeal, that decision was reversed and the judgment of the appellate Court is reported in 67 Cal WN 498 Cooch Behar Bank Ltd v. J.N. Ghosh. The appeal Court came to the decision that Section 26(1) of the Wrsi Bengal Estates Acquisition Act did not prevent the mortgagee decree-holder from recovering the mortgage money out of the compensation money awarded in respect of the mortgaged property. The principle on which the appeal Court proceeded was that when properties were compulsorlly acquired and compensation was paid, the mortgage shifted and attached to the compensation money and the mortgagee's right to have recourse to the compensation monies is in no way abrogated or fettered by the provisions of Sub-section (1) of Section 26 of the West Bengal Estates Acquisition Act. It is also held by the appeal Court in that case that Seclion 26 (3) of the West Bengal Estates Acquisition Act did not protect an ad interim compensation money from the mortgage claim and the mortgage rights shifted and attached also to the ad interim compensation money and a Receiver might be appointed in respect of such compensation monies.

6. The next case on which reliance is placed is Dhirendra Nath De v. Naresh Cliandra Ray reported in : AIR1958Cal453 . It is held there that:

'where properly subject to mortgage or charge undergoes transformation, the mortgage or charge attaches to the form it has taken after the transformation. Accordingly where the properly, on which charge is sought to be created, has ceased to exist and its place has been taken by the compensation money which is payable, there can he a decree declaring a charge on the compensation money that becomes payable.'

7. The other case is another Bench decision of this Court in Nirmala Sundari Dasi v. Sm. Mrinalini Dasi, (1959) 63 Cal WN 869. The ratio of that decision is that there is nothing in the Estates Acquisition Act which destroys in any way the charge which the chargeholder now has over the compensation money or which affects the right of the charge-holder to obtain payment of his dues out of such compensation money. It points out that the order for the appointment of a Receiver cited there in that case was not an order of attachment and that the right to obtain payment of the money secured by the mortgage need not follow the process of attachment. In other words, attachment is not the only process by which compensation money can be realised by the mortgagee. The appeal Court in that case came to the conclusion that the compensation money could be made available to the mortgagee by appointment of a Receiver. It also disapproved the decision reported in (1988) 62 Cal WN 911.

8. Now, all these four decisions do not help the respondent in this case They do not say that the right to compensation can he sold under a mortgage decree. The consequence which follows from the above decisions is that the mortgagee has a right to satisfy the debt from the compensation money In so doing, he does not need to go through the process of attachment, and can realise his dues by the appointment of a Receiver. Thai is not saying that the right to compensation can be sold as an ordinary saleable property under a mortgage decree.

9. A recent decision of the Supreme Court seems to me to be against the contention of the respondent and in favour of the appellant. That decision is Krishna Prasad v. Gouri Kumari Devi, reported in : AIR1962SC1464 . That decision arises out of Bihar Land Reforms Act. The Supreme Court there observes at page 1470 as follows:

'In the present case, the mortgaged property cannot be sold because it has vested in the State free of incumbrances, but in lieu of the mortgaged property, the respondent has become entitled to certain com pensation amount and the appellants are given the statutory right to receive the amount due to them from the said compensation amount under Section 24(5). This provision is somewhat similar to the provisions of Section 73(2) of the Transfer of Property Act which provides inter alia, that where the mortgaged property is acquired under the Land Acquisition Act, or any other enactment for the time being in force providing for the compulsory acquisition of immovable property the mortgagee shall be entitled to claim payment of the mortgage money, in whole or in part, out of the amount due to the mortgagor as compensation. In a sense, the compensation amount payable to the respondent may prima facie be treated to be. like a security substituted in the place of the original mortgaged property under Section 73(2) of the Transfer of Property Act However, that may be, the terms of the decree require that the appellants must first seek their remedy from the said compensation amount before they can proceed against the non-mortgaged property of the respondent. The relevant directions in the decree do not justify the appellant's contention that because the mortgaged property has vested in the State, they are entitled to execute the personal decree without taking recourse to the remedy available to them under Section 24(5) of the Act.'

10. Now. the remedy to which reference was made by the Supreme Court under Section 24 (5) of the Bihar Land Reforms Act, may now be seen. That statutory provision reads, inter alia, as follows:

'In the case where the interest of a proprietor or tenure-holder is subject to a mortgage or charge, the compensation shall first be payable to the creditor holding such mortgage or charge and the balance, if any, shall be payable to the proprietor or tenure-holder concerned.'

That is the reason why this provision was described by the Supreme Court as somewhat similar to Section 73 of the Transfer of Property Act. Section 78 of the Transfer of Property Act deals with the right to proceeds of compensation on acquisition. Section 73(2) of the Transfer of Property Act provides as follows:

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

11. Now it is plain that the West Bengal Estates Acquisition Act certainly answers the description of 'any other enactment for the time being in force providing for the compulsory acquisition of immovable property' as mentioned in Section 73(2) of the Transfer of Property Act. That means that the mortgagee shall be entitled to claim payment of the mortgage money in whole or in part out of the amount due to the mortgagor as compensation. That means that the mortgagee has a right to look to the compensation money for the satisfaction of his mortgage. It also says in Sub-section (3) of Section 73 of the T.P. Act that 'such claims 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'. In other words, what Subsections (2) and (3) of Section 73 of the T.P. Act do is (1) to give the mortgagee a right to satisfy his claim out of the compensation money and (2) to preserve his priority. But then the right to the compensation money to satisfy the mortgage does not mean that such right can be sold. It is a right to get money and nothing else The question here is 'Is such right to get that money saleable under a mortgage decree?'

12. In my opinion the right to compensation cannot be sold under a mortgage decree. The mortgagor's right is preserved, but it is a new right to proceeds or to the compensation. In my view that is clearly recognised and established under Section 73 (2) and (3) of the Transfer of Property Act. A sale under the mortgage-decree is held under Order 34 of the Code of Civil Procedure which concerns 'suits relating to mortgage of immovable property'. Order 34. Rule 4 dealing with the preliminary decree in a suit for sale makes it clear expressly that:

'the plaintiff shall be entitled to apply for a final decree directing that the mortgaged property or a sufficient part thereof be sold and the proceeds of the sale (after deduction therefrom of the expenses of the sale) be paid into Court and applied in payment of what has been found or declared under or by the preliminary decree due to the plaintiff, together with such amount as may have been adjudged due in respect of subsequent eosts. charges, expenses and interest and the balance, if any, be paid to the defendant or other persons entitled to receive the same'.

That means, in my judgment, that the pro perly is being sold under the mortgage decree only with a view to realise the proceeds of the sale of that mortgaged property out of which the mortgage-debt has to be discharged. When there is no question of any sale of the mortgaged properly but by operation of law the proceeds or compensation are available on compulsory acquisition of the mortgaged property, then no further question of sale of 'immovable property' arises in terms of Order 34, Rule 4. Where the net proceeds of any sale are insufficient to pay the amount due to the plaintiff it is then only that the Court, on an application by the mortgagee, may, if the balance is legally recoverable from the defendant otherwise than out of the property sold, pass a decree for such balance as provided in Order 34, Rule 6. No question of passing a personal decree for the balance arises here in this case. The charge for the mortgage has shifted to the compensation money and it is to that money that the mortgagee has to look for the satisfaction of his mortgage-debt. A Bench decision of this Court in Jatuni Chowdhurani v. Amar Krishna, (1907) 6 Cal LJ 745 clearly lays down the principle that when the property covered by the mortgage was under the Land Acquisition proceedings converted into money, the lien which was attached to the property was transferred to the compensation standing to the credit of the mortgagor in the Collectorate and the mortgagee is entitled to get in execution of a decree for sale of the mortgaged property, the money standing to the credit of the mortgagor in the Collectorate and it was there held that it was not necessary for the mortgagee to obtain a further decree under Section 90 of the Transfer of Property Act Brett, J. who delivered the judgment of the Division Bench observed as follows at pages 747-48:

'In our opinion, this contention is not sound. The suggestion seems to be that, as the mortgagor executed a mortgage after the declaration was made by Government for the acquisition of the property, he can now take advantage of his own fraud and compel the mortgagee to seek to recover the amount of the mortgage-debt from property other than that hypothecated under the mortgage-bond. In our opinion, when the property covered by the mortgage was, under the Land Acquisition proceedings, converted into money, the Hen which was attached to the property was transferred to that which then represented the property, viz., the compensation standing to the credit of the mortgagor in the Collectorale; and, we can see no reason why the mortgagee in satisfaction of his decree should not be allowed to take out execution against the money in the Collectorate. The obvious object of Section 88 of the Transfer of Property Act is to secure the payment of the mortgage debt by transforming the mortgaged property into money, and the mere fact that the mortgaged property has been changed into money by some authority other than the Court, would not, in our opinion, disentitle the mortgagee from recovering the amount of his debt out of that money, or compel him, in order to obtain satisfaction of his debt, to obtain a further decree under Section 90 of the Transfer of Property Act.'

This also is an authority which dues not suggest that the right to the compensation money is itself saleable.

13. The Allahabad High Court Full Bench in Girdhar Lal v. Alay Hasan Musanna : AIR1938All221 decides that where a portion of the mortgaged land is acquired by the Government under the Land Acquisition Act and com pensation is awarded to the mortgagor, the principle of substituted security applies to the compensation money and the mortgagee is entitled to recover the same from the mortgagor. It is pointed out there that Sub-sections (2) and (3) of Section 73 of the Transfer of Property Act are intended to give the mortgagee a charge on the compensation money and the priority. In fact, the Allahabad Full Bench decided that the mere fad that mortgagee did not exercise his right to claim compensation money, before it was withdrawn by the mortgagor, did not deprive him of his original rights as mortgagee and he can even bring a suit and enforce his security as againsl the compensation money withdrawn by the mortgagor provided of course his suit was not barred by limitation under Article 132 of the Limitation Act. The Allahabad Full Bench also did not suggest that the right to the compensation money can itself be sold. In Kunj Behari v. Bendudhar Panda, AIR 1942 Pat 185 (2) it is observed at p. 187 as follows :

'Particularly, in the case of a final decree for sale the Court must not direct the sale of any mortgaged property which is no longer liable to be sold under the mortgage. Lol No. 2 having already been sold for arrears of revenue free from the mortgage, there will be no sense in passing a final decree directing the sale of that property. If the property had been sold for arrears of revenue subsequent to the preliminary decree, it could not be reasonably said that the Court in passing the final decree should follow the exact terms of the preliminary decree '

14. This much is certain that an estate which has vested under the West Bengal Estates Acquisition Act in the State free from all encumbrances cannot be sold under this mortgage decree. The right to compensation cannot itself be sold under this mortgage decree because the right is to get satisfaction from the compensation money under Section 73 of the Transfer of Property Act and which independently of the procedure for attachmenl and Receiver mentioned in the four Calcutta cases discussed above, can also be enforced through the well-recognised procedure under Order 21, Rule 46 of the Code of Civil Procedure. It lays down how a debt or share and other property not in possession of a judgment-debtor can be attached in execution of a decree and that attachment is made by a written order prohibiting, in the case of a moveable property other than a debt, or share, the person in possession of the same from giving it over to the judgment-debtor. The terms of the Calcutta Amendment in Rule 46-A are in addition to the provisions of Order 21, Rule 48 and therefore, the non-applicability of Rule 46-A to a debt secured by a mortgage is no obstacle. The prohibitory order on the Collector in this case preventing him from paying over the compensation money to the intermediary-mortgagor without leaving sufficient to satisfy the charge of the mortgagee decree-holder appears to be a sensible and practical remedy.

15. The Land Acquisition Act and some other statutes also make the express provision for preserving the mortgagee's rights. In fact, Section 24 (6) of the Bihar Land Reforms Act; 1950 to which reference was made by the Supreme Court in the decision quoted above made the express provision for the mortgagee-tenure-holder to claim satisfaction of the mortgage-debt from the compensation money. An argument was advanced on behalf of the appellant that as there is no such provision in the West Bengal Estates Acquisition Act, therefore, the mortgagee cannot claim his right as against the compensation money. I am unable to accept that contention of the appellant because Section 78 (2) and (8) of the Transfer of Property Act applies and the West Bengal Estates Acquisition Act does not exclude the operation of Section 78 of the Transfer of Properly Act to a situation like this. The appellant's argument that by Section 3 of the West Bengal Eslales Acquisition Act it is intended that, that Act shall have the effect, notwithstanding anything to the contrary contained in any other law, overrides Section 73 of the Transfer of Properly Act, appears to be untenable. The West Bengal Estates Acquisition Act as it expressly says shall certainly have the effect notwithstanding anything to the contrary contained in any other law But Section 73 deals with the rights of a mortgagee and transferring such rights to the compensation money and it does not in my view, deal with anything which is contrary to the West Bengal Estates Acquisition Act.'

16. It is necessary also at this stage to notice another argument advanced on behalf of the appellant by Mr. Ghosh. That contention is that the right to compensation is entirely personal and individual to the intermediary under the West Bengal Estates Acquisition Act. Therefore, it is argued that as between the State and the intermediary no creditor or any right can intervene for any wrangle over the compensation money. In support of this argument reference is made by Mr. Ghosh to the definition of intermediary in Section 2(1) to show that it does not include a mortgagee from an intermediary. Mr. Ghosh has taken me through the entire scheme of the West Bengal Land Acquisition Act and especially through Chapter III of the Act dealing with 'Assessment and payment of compensation' to show from such provisions as Sections 16, 17 and 26 that the mortgagee is not recognised. That argument seems also to be unsound and I am unable to accept it. Again Section 73 of the Transfer of Properly Act is against this argument.

17. The appellant's argument on Section 26 of the West Bengal Estates Acquisition Act need not be considered in this appeal, first because there are Bench decisions of this Court to which reference has already been made and secondly because this is not a case of extent of the recovery of compensation money by attachment. Section 26 of the Wesl Bengal Estates Acquisition Act is only concerned with the extent of recovery of compensation money by attachment. The point which this appeal raises is whether the right to compensation under this Act can itself be sold under a mortgage decree. On that point Section 26 gives no guidance.

18. Mr. Ghosh for the appellant has also contended before me that this right to compensation is similar to a kind of righl to recover mesne profits and, therefore, is not transferable. He relies in this branch of his argument on the decision of this Court in Durga Chandra Roy v. Koilash Chunder Roy. (1898) 2 Cal WN 43. That decision turns on Section 6 of the Transfer of Property Act dealing with what properties can be transferred. It is not necessary in my view to deal with Section 6 of the Transfer of Properly Act and its various clauses and their interpretation in respect of what properties can and what properties cannot be transferred having regard to the express provision in Section 73 of the Transfer of Properly Act giving the mortgagee the right to the compensation monev which are the proceeds of the mortgaged property bv compulsory acquisition by the State. Where there is an express provision as in Section 73 of the Transfer of Properly Act it is unnecessary and irrelevant to consider the effect of Section 6 in that context.

19. From the practical point of view I cannot see how a righl to proceed against compensation money can itself be sold. There are enormous practical difficulties A right to compensation is a total righl under the West Bengal Estates Acquisition Acl. In the first place the final publication of the Compensation Assessment Roll under Section 21 read with the manner of payment of compensation under Section 28 and Sections 16 and 17 of the Act dealing with the gross and nett income with its particular tables, appears to indicate that this compensation depends ultimately on two major factors : (1) deduction of dues and (2) gross and nett income. Now, it may just be possible that in a particular case an intermediary who has his own dues to the Stale under Sections 7, 8, and 9 of the Act. may actually have no particular sum of money to his credit as compensation after deduction of the debts. What then is the concrete and tangible content of the so-called right to compensation which has been advertised in the sale proclamation in the mortgage decree in this case? The attempt to put a valuation on this right to compensation by valuing the three items of proPERties which were mortgaged is both illogical and unauthorised by the statute because the compensation is not relatable to separate items of properties, as such a person's right to compensation in respect of one item of properly may be considerably influenced by his possessing the income from other items oi properties. In that event the other items of properties and their incomes and their shares come into the picture of the calculation of the compensation money that the intermediary gels. That being so, it is not possible to separate the compensation only in respect of the mortgaged items of property. It would he grossly unfair and illegal to include the right to compensation in respect of other properties while selling the so-called right to compensation in respect of the mortgaged property. No such separation can be made in the scheme of compensation and its computation as envisaged and laid down in sections 14, 15, 16, 17, 19, 23 and 25 of the Act. To permit in such a case and in such a context, sale of the mere right to compensation which on the facts of this case itself is indeterminate, and when at the time the sale proclamation in 1956 was made, no compensation roll had even been prepared, would be to encourage speculation and trafficking in a new species of gambling Such a right to compensation due to its vague ness may be bought up by a handful of persons throughout the State to promote rampant speculation and the purchasers would not know what actually they are buying nor the sellers would get the value which has any relation to the reality.

20. On the authority, therefore, of the decisions noticed above and specially of the Supreme Court and for reasons stated both legal and practical, I am of the opinion that this appeal must succeed.

21. The appeal is, therefore, allowed The order and judgment of the lower appellate Court are set aside and I hold that the right to the compensation money cannot be sold under the mortgage decree. This is without prejudice to the rights of the respondent to proceed and take appropriate legal steps for satisfaction of his mortgage debt from the compensation money.

22. There will be no order as to costs. Let the records he sent down expeditiously.


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