STATE OF KERALA AND ORS. versus KOKIYAT ESTATES

Citation: [1999] SUPP. 2 S.C.R. 307 · Decided: 13-09-1999 · Supreme Court of India · Bench: K.T. THOMAS · Disposal: Disposed off

Judgment (excerpt)

... 
STATE OF KERALA AND ORS. 
A 
v. 
KOKIY AT EST A TES 
SEPTEMBER 13, 1999 
[K.T. THOMAS AND D.P. MOHAPATRA, JJ.] 
B 
Transfer of Property Act, I 882: 
Section 60 last paragraph-Exception clause-Applicabi/ity-
Mortgage-Redemption of-Pro tanto reduction in mortgage money-Claim C 
of-By mortgagor-Conditions to be fulfilled- Mortgagor obtained loan 
from Bank by executing a mortgage deed-But by operation of the Kera/a 
Land Reforms Act and Kera/a Private Forest (Vesting and Assignment) Act, 
a part of the mortgaged property vested in the State Government free from 
afl encumbrances-Several years later Government paid mortgage debt to D 
the Bank and took assignment of mortgage right-Held: To invoke the 
exception clause two conditions must be fulfilled-One is share of mortgagor 
in the property should have been "acquired" and second is person who so 
acquires should have been the mortgagee-Jn such a situation mortgagor 
entitled to redeem his own share only on payment of a proportionate amount 
remaining due on the mortgage-"Acquired" in this context includes vesting E 
of the property in the Government by statutory process-When government 
acquired a part of the property it was not a mortgagee and, therefore, 
mortgagor not entitled to pro tanto reduction in mortgage money on 
redemption-Kera/a Land Reforms Act, 1960, S. 86(2)-Kerala Private Forest 
(Vesting and Assignment) Act, 1971. 
Words and Phrases 
"Except only where" and "acquired"-Meaning of-Jn the context of 
S. 60 last paragraph of the Transfer of Property Act, I 882. 
"Acquisition"-Meaning of 
F 
G 
The respondent-firm obtained loan from a Bank under the Agricultural 
Re-financing Scheme and a tripartite agreement between the Bank, the 
respondent and the appellant-State was executed. Pursuant to the said 
agreement the respondent executed a mortgage deed in favour of the bank 
3W 
H 
308 
SUPREME COURT REPORTS [1999] SUPP. 2 S.C.R. 
A and the State Government stood as the guarantor for the due re-payment of 
the loan in terms of the agreement. 
B 
c 
While the mortgage was subsisting a part of the mortgaged property 
vested in the State Government in 1970 free from all encumbrances under 
the Kerala Land Reforms Act, 1970. In 1971 another area of the mortgaged 
property stood vested in the Government free from all encumbrances under 
the Kerala Private Forest (Vesting and Assignment) Act, 1971. On 7-9-1978 
the State Government paid the mortgage debt to the Bank and took assignment 
of the mortgage right. Armed with it the State Government threatened the 
respondent with proceedings under the Revenue Recovery Act for realisation 
of the mortgage money. 
The respondent filed a suit for redemption of the mortgage and claimed 
a pro tanto reduction of the mortgage debt on the footing that the State 
Government had become the mortgagee when it took assignment of mortgage 
right and the right of the respondent-mortgagor over a large area of 
D mortgaged land had now become vested with the mortgagee. The aforesaid 
claim was presumably made under the last paragraph of Section 60 of the 
Transfer of Property Act, 1882. 
E 
F 
The State Government resisted the claim for pro tanto reduction in the 
mortgage debt by pleading firstly that the vesting process under the aforesaid 
\ 
two enactment took place long before assignment of mortgage right which 
the original mortgagee made in favour of the Government secondly, since 
such vesting took place free from all encumbrances, it is not an acquisition 
of the said land as mortgagee. The trial court repelled the Government's 
contention and passed a preliminary decree for redemption in terms of the 
respondent's plea for pro tanto reduction. The High Court, in appeal confirmed 
the judgment and decree passed by the trial court. Hence this appeal: 
Disposing of the appeal, the Court 
HELD: 1.1. The vesting of land in the Government was free from all 
G encumbrances. In other words, Government would have no liability to clear 
any encumbrance on the land so vested. If the lands were covered by a 
mortgage the liability therein would not remain with that part of the land 
which the Government got through the vesting process. [313-H; 314-A] 
1.2. The last paragraph of Section 60 of the Transfer of the Property 
H Act, 1882 can be vivisected into two segments. The first part contains 
... 
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STATE v. KOKIYATESTATES 
309 
neg11tion to the holder of part of equity of redemption to redeem that part A 
alone on payment of t

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