1. This is an appeal against the judgment of the first Subordinate Judge of Chittagong dated the 17th of September 1906.
2. The plaintiffs are the sons of and heirs of Ram Kawal Shoba and Ramballabh Shoba. The pro forma defendants Nos. 5-8 were proprietors of certain properties and as such they mortgaged those properties to the principal defendants on the 2nd of July, 1891, one of the Mahals thus mortgaged was lot No. 3 of the first schedule of the plaint.
3. On the 19th of July 1893, a declaration was made by Government under the Land Acquisition Act for acquiring a portion of lot No. 3. On the 2nd of April 1894, the Collector took possession of the portion thus acquired by Government. This appeal relates exclusively to that portion.
4. On the 25th of November 1895, the mortgagors executed another mortgage bond in respect of some properties in favour of the late Ram Kawal Shoba and Ramballabh Shoba the predecessors in title of the plaintiffs; and again on the 21st of August 1896, they executed another mortgage bond in respect of the properties specified in Schedule 1 of the plaint, in favour of the said predecessors in title of the plaintiffs, the amount due on the mortgage bond of the 25th of November 1895, being a portion of the consideration for the second bond. It would appear therefore that the principal defendants Nos. 1-4 are the first mortgagees and the plaintiffs if their predecessors can be regarded as mortgagees at all, are the representatives in interest of the second mortgagees of the property to which this appeal relates. From the above synopsis of the dates of the different transactions mentioned above, it would appear that on the date of their second mortgage namely the 21st August 1896, the mortgagors had ceased to have any interest in that portion of lot No. 3 which was acquired by Government and taken possession of by the Collector on the 2nd of April 1894, as the land thus acquired vested absolutely in Government free of all incumbrances from the date of possession.
5. The Collector's award was contested by the pro forma and the principal defendants as mortgagors and mortgagees of the land, in question. They fought the matter out up to the High. Court with the result that ultimately a decree for Rs. 34,726 was passed as compensation, for the land acquired by Government. The mortgagors were owners of only three-fourths of the land thus acquired and their share in the compensation money would he in proportion to their interest in the land acquired.
6. The principal defendants as first mortgagees claim a lien on the compensation money as the land acquired by Government had been mortgaged to them prior to its acquisition. Their mortgage being a valid mortgage, their lien is said to have been transferred to the compensation money awarded for the mortgaged property.
7. The principal defendants as first mortgagees obtained a decree on their mortgage on the 30th of June 1899. We find that the decree thus obtained by the principal defendants was two-fold; namely, a mortgage decree for Rs. 49,051 and a money and personal decree for Rs. 17,617-10. This point has been disputed and it is contended by the respondents that the appellant's decree for Its. 49,051 included the sum of Rs. 1.7,61.7. But this is clearly erroneous. The judgment on which the decree is based begins thus: 'In June 1891 Gogan executed in favour of the plaintiff a mortgage deed for Rs. 30,000 hypothecating some of the family properties. Of this sum its. 19,792 purported to be for loans received Rs. 5,207 per cash then paid and Rs. 5,000 for future advances.' This shows that the sums of Rs. 19,792 and of Rs. 10,207 (Rs. 5,207 plus Rs. 5,000) were entirely distinct. Later on we find the passage: 'We must hold therefore that all the members of the family are liable for the debt incurred by Gogan prior to the date on which the mortgage bond was executed, and that to that extent there was a good charge on the family property. As regards the debts subsequently incurred including the sum of Rs. 10,207 advanced on the mortgage we think that there was no good charge imposed by the mortgage bond.' Finally there was a mortgage decree for the sum of Rs. 19,792 etc., and a personal decree 'for the balance of the money decreed in the Lower Court with costs etc.' The decree shows that a mortgage decree was passed for Rs. 49,051-9-5 made up as follows:
Principal ... ... 19,792 11 0
Interest ... ... 20,369 1 0
Do. ... ... 6,700 4 9
Costs ... ... 1,745 2 0
Do ... ... 444 6 8
Total ... 49,051 9 5
and it was 'further ordered and decreed that the defendants do pay to the plaintiffs the sum of Its. 17,617-10' with interest and costs. These extracts make it quite clear that the claim for which a personal decree was given, was quite distinct from the claim for which a mortgage decree was given.
8. The plaintiffs also as second mortgagees brought a suit on the strength of their mortgage and obtained a decree on the 12th of July 1898, for a sum of Rs. 8,837-8 and for Rs. 601 on account of costs and also for interest on the pending period and future interest.
9. It is worthy of note that the plaintiffs who are the second mortgagees were no parties to the decree obtained by the principal defendants as first mortgagees; and the principal defendants were no parties to the decree obtained by the plaintiff's. In the present case the pro forma defendants who are the mortgagors do not appear at all.
10. In the suit which has given rise to the present appeal the plaintiffs claim that they have a lien on the balance of the compensation money in their mortgage right and they pray that an account be made of the amount due to the principal defendants on account of their first mortgage and then a decree may be awarded to the plaintiffs against them for the amount that may be found to have been drawn by them in excess of their mortgage decree. They further pray that a decree may be passed in their favour as mortgagees for the amount in deposit mentioned in schedule II of the plaint and they also claim the entire cost of the suit.
11. The Subordinate Judge has given a decree to the plaintiffs to the effect that out of the amount taken by the principal defendants from the Treasury the plaintiff do get a decree for Rs. 1,185 against the principal defendants who appear to have overdrawn that amount and further that they also get a decree for the sum of Rs. 6,356-14-11, at present lying in the Treasury.
12. The principal defendants now appeal to this Court and the grounds taken are: (I) That inasmuch as the mortgagor's interest in that portion of the lot No. 3 which was acquired by Government, had ceased to exist on the 2nd of April 1894, they could not validly mortgage that portion to the plaintiffs' predecessors in title on the 21st of August 1896, and hence they can claim no lien on the compensation money lying in the Treasury. (II) That their claim is barred by the Statute of Limitation with regard to the money drawn by the defendants. (III) That the defendants are entitled to be credited with the actual costs incurred by them in the land acquisition proceedings.
13. The plaintiffs on the other hand contend that they having obtained a mortgage decree and the decree having ordered the sale of all the mortgaged properties, one of them being lot No. 3 of the schedule attached to the plaint they have lien on the balance of the compensation money to which a portion of their mortgaged property was converted. In support of this contention they rely on a judgment of the High. Court dated the 5th of August 1904. This judgment relates to an execution case in which the principal defendants of the present case claim as mortgagee decree-holders the payment of the surplus of the amount in deposit. In this case the learned judges observed: 'In our opinion when the property covered by the mortgage was under the Land Acquisition Proceedings converted into money, the lieu which was attached to the property (lot No. 3) was transferred to that which then represented the property; namely, the compensation standing to the credit of the mortgagors (pro forma defendants in the present suit) in the collectorate and we can see no reason why the mortgagees (plaintiffs of the present suit) in satisfaction of their 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 this payment of the mortgage debt by transferring 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, dis-entitle the mortgagee from recovering the amount of his debt out of that money.' Another passage in that judgment is: 'In our opinion a decree-holder is entitled to obtain through the court which granted him the decree, in satisfaction of that decree, out of the money awarded as compensation on the acquisition of the mortgaged property by Government, that money representing so far as they are concerned, the property which was hypothecated to them as security for the mortgage debt.' We have read this judgment very carefully but we think that all the necessary facts were not fully represented to the learned judges who decided that case, as we do not find in the said judgment any passage indicating that they were aware of the important fact that the so called mortgaged property had vested in Government sometime before it was mortgaged to the plaintiffs. In fact reading the judgment as a whole it seems almost certain that the learned judges were under the impression that the land had been, mortgaged, while still the property of the mortgagors. Moreover the judgment was passed, in the execution of the decree obtained by the plaintiffs which ordered all the mortgaged properties to be sold. Even if the learned judges had been informed of the fact that on the date of the plaintiff's mortgage, the mortgagors had ceased to have any interest in the property acquired by Government they could not have gone behind the decree. The present suit is a regular suit in which it has to be decided, independently of the judgment above referred to, whether the plaintiffs can claim any lien over compensation awarded for property which although ostensibly mortgaged to them, had vested absolutely in Government before the mortgage. For these reasons, we do not think that the judgment of the High Court referred to above is conclusive in favour of the plaintiffs. It may be admitted that when a mortgaged property is acquired by Government the mortgage lien probably attaches to the compensation money. It is true that Section 73 of the Transfer of Property Act refers only to sale proceeds of property sold for arrears. But it has been pointed out on behalf of the respondents that oven before this statutory provision it was held in Heera Lal Chowdhry v. Janokee Nath Mookerjee and others 16 W.R. 222, that if mortgaged property was sold for arrears of revenue the mortgagee had a charge on the surplus, if any, after the payment of arrears on general grounds of equity which would, of course, apply equally to the case of land acquired by Government for public purposes. But although on behalf of the respondents many authorities have been referred to, they all relate to cases of valid mortgages and do not apply to the facts of the present case in which the mortgage by the pro forma defendants to the plaintiffs was a mortgage of property which did not belong to the former and was therefore ab initio invalid. We can find no authority for holding that when a person mortgages property that does not belong to him and that property is subsequently converted by Government into money, the so called mortgagee has a lien on the proceeds that must prevail against the claim of other creditors. For the above reasons we are of opinion that the plaintiffs are not entitled to a lien on the balance of the compensation money in the hands of the Collector. It is admitted clearly by the learned pleader for the appellants that the respondents are entitled to share rateably in the compensation now in the Collector's hands, as holders of a decree for money, Reliance has also been placed on an order passed in execution of the plaintiffs' decree to the effect that 'the decree holders in this case are therefore entitled to get, under their second mortgage, any money left of the sale proceeds of the mortgaged properties in execution case No. 233 after the debt under the mortgage in that case is satisfied.' Execution case No. 233 was the execution of the appellant's decree. It is argued that this order was passed under Section 295 of the former Code in the presence of the appellants and that as it was not attacked by a suit within one year it is final and binding upon them. But clearly the order cannot have this effect. In the first place it relates to sale proceeds and compensation for land acquired for public purposes is not sale proceeds, secondly, the order clearly was not intended to effect a rateable distribution of assets amongst all the creditors. It merely postponed the so called mortgage of the plaintiffs to that of the appellants and it does not appear that the personal decree of the latter was ever taken into consideration. We cannot, therefore, regard this order as concluding the appellants. After holding, as we do, that the plaintiffs have no lien on the compensation money it is evident that so far as the money actually drawn by the defendants their claim is simply a suit for money and is barred by limitation, the money having been drawn on the 24th July 1902.
14. As to the last point, that is to say, that the defendants are entitled to be credited with the actual costs incurred by them in Land Acquisition case, we think that although it was through the exertions of the principal defendants that the amount of compensation was greatly increased, they should be allowed only reasonable costs and we think that the costs allowed for that litigation by the Lower Court are reasonable.
15. The appeal will, therefore, be decreed. The decree of the Subordinate Judge so far as it affects the sum of Rs. 1,185 will beset aside. With respect to the sum of Rs. 6,356-14-11 the plaintiffs will be declared entitled to so much out of it as they can lawfully obtain under Section 73 of the Code. Their success being so small, the order of the lower court as to costs will be set aside and the appellants will be entitled to their costs of this Court.
16. P.S. We have heard the pleaders as to the printing cost. We allow a sum of Rs. 400 as cost of the paper book.