STATE OF KERALA Vs. KOLIYAT ESTATE

JUDGEMENT

(1.) The moot question is this: When a mortgage property, or any portion of it, is vested in government by operation of taw, 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 arosein 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 sociopolitical 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.