1964 (12) TMI 74 - HC - Indian Laws

Summary

Issues Involved:
1. Whether the intermediary's right to compensation under the West Bengal Estates Acquisition Act can be sold under a mortgage decree.
2. The process and legality of selling the right to compensation.
3. The applicability of Section 73 of the Transfer of Property Act and related provisions.
4. The impact of the West Bengal Estates Acquisition Act on mortgagee rights and compensation.

Detailed Analysis:

1. Whether the intermediary's right to compensation under the West Bengal Estates Acquisition Act can be sold under a mortgage decree:

The primary issue in this case was whether the intermediary's right to compensation under the West Bengal Estates Acquisition Act could be sold under a mortgage decree. The court examined various precedents and statutory provisions to determine the legality of such a sale. The court concluded that the right to compensation cannot be sold under a mortgage decree. The rationale was that the mortgagee has a right to satisfy the debt from the compensation money, but this does not extend to selling the right to compensation as an ordinary saleable property under a mortgage decree.

2. The process and legality of selling the right to compensation:

The court noted that the mortgagee attempted to sell the mortgagor's right to compensation after the properties vested in the State of West Bengal. The legal battles ensued when the judgment-debtor challenged this action under Section 47 of the Code of Civil Procedure, arguing that the mortgagee-decree-holder could not put the disputed properties to sale any more and that the right to compensation could not be sold under the law. The court agreed with this contention, emphasizing that the right to compensation is not saleable under a mortgage decree.

3. The applicability of Section 73 of the Transfer of Property Act and related provisions:

The court extensively discussed Section 73 of the Transfer of Property Act, which deals with the right to proceeds of compensation on acquisition. It was highlighted that under Section 73(2), the mortgagee is entitled to claim payment of the mortgage money from the compensation awarded for the mortgaged property. However, this right to claim compensation does not translate into a right to sell the compensation. The court cited several precedents, including a Supreme Court decision, to support this interpretation. The court also noted that the West Bengal Estates Acquisition Act does not exclude the operation of Section 73 of the Transfer of Property Act.

4. The impact of the West Bengal Estates Acquisition Act on mortgagee rights and compensation:

The court examined the provisions of the West Bengal Estates Acquisition Act and how they interact with the rights of mortgagees. It was noted that the Act provides for the vesting of estates in the State free from all encumbrances, which affects the saleability of the mortgaged properties. The court also discussed the practical difficulties in valuing and selling the right to compensation, which is influenced by various factors such as gross and net income and deductions of dues. The court concluded that selling the right to compensation would lead to speculation and gambling, which is not permissible under the law.

Conclusion:

The appeal was allowed, and the court held that the right to compensation money cannot be sold under a mortgage decree. The judgment emphasized that while the mortgagee has a right to satisfy the debt from the compensation money, this does not extend to selling the right to compensation. The court also provided guidance on the appropriate legal steps for the mortgagee to take to satisfy the mortgage debt from the compensation money, without resorting to the sale of the right to compensation.