J.A. Patil, J.
1. L.A.R. No. 18/78 is a reference under section 30 of the Land Acquisition Act, 1894 (for short, the Act); while L.A.R. No. 30/82 is under sections 18 and 30 of the Act. The contesting claimants in both the references being common, they are being disposed of by this common order so far as the question of apportionment of compensation amount is concerned. L.A.R. 30/82, in so far as it relates to section 18 of the Act will be decided separately after the claimants adduce their evidence on the issue of enhancement of compensation.
2. In L.A.R. 18/78, the following lands were acquired for public purpose viz. construction of Goregaon Mulund link road. The lands are situated at Village Nahur, Taluka Kurla at Bombay Suburban District.
Sr. No. Hissa No. A.G.As. Area in Sq. mtrs.
88 Part 3-20-0 14,175
77 Part 1-07-0 4,763
74 Part 0-24-8 2,487
These lands alongwith other lands were notified for acquisition under section 126(2) & (4) of the Maharashtra Regional Town Planning Act read with section 6 of the Act by the Commissioner, Bombay Division under a notification dated 15-11-73 read with an erratum dated 15-3-74. The Special Land Acquisition Officer National Highways passed his Award dated 30-11-77 and awarded a total compensation of Rs. 6,77,765.15 under section 11 of the Act. The same has however not been paid to any of the claimants as there is a dispute of title of the lands. The said amount is deposited in this Court. The possession of the land under acquisition has not been taken as there are some encroachments on the lands. The persons interested in claiming ownership to the lands are as under:
--------------------------------------------------------------------- Claimant Name of claimant Area claimed Area in No. --------------------------------------------- A.G.As. Sq. meters
1. M/s. Hochest 88 pt. 750-00
Pharmaceutical Ltd. sq. yds.
2. The Official 74 pt. 0 24 8 2487 Assignee in 77 pt. 1 7 0 4763 Insolvency Case 88 pt. 3 20 0 14175 No. 84 of 1966.
3. Smt. Sakinabai --------------do------------------ w/o Musa Mohamed
Patel and 5 others.
4. Shri Sayyad
and 7 others. ---------------do-------------------
5. Rajaram Sakharam 88 pt. 3 20 0 14175-00 Ohol. 77 pt. 0 37 0 3473-34
6. M/s. Modern Bricks 74 pt. 2880 Manufacturers 88 pt.
1) Ismail Yusuf and
2) Ilyas Gulam Rasul.
7. Shri Lakhaji Laxman 88 pt. - 2000
Chudasama. sq. yds.
8. Shri Bhaidas 88 pt. - 2000 Dharsibhai Bhuta sq. yds.
3. In L.A.R. No. 30/82, the following lands were acquired for Bombay Municipal Corporation for widening the access road to Bhandup Treatment Plant at Bhandup Complex. These lands also are situated at village Nahur, Taluka Kurla.
C.T.S. Nos. Approximate area of the
land in sq. mtrs.
1. 470 part 2,480.50
2. 479 part 786.90
3. 485 part 413.87
4. 485 part 186.25
5. 485 part 305.37
6. 485 part 638.50
7. 486 part 164.50
Notification under section 4 of the Act in respect of these lands was issued on 18-2-80 with an erratum dated 3-4-81. The lands were finally notified for acquisition under section 6 of the Act by the Commissioner of Bombay Division on 13-11-81 and the notification was published in the gazette on 3-12-81. The S.L.A.O. passed his Award under section 11 of the Act on 29-4-82 and fixed the amount of compensation at Rs. 2,35,431.57 which also has been deposited in this Court since there is a dispute of title. The possession of the lands has been taken on 12-6-78 and 3-7-78 and handed over to the acquiring body. M/s. Hoechst Pharmaceuticals Ltd. Company alone has filed its application under section 18 of the Act.
4. Originally all these lands alongwith other lands admeasuring about 1,57,674 sq. yards belonged to one Syed Abdul Hamid Kadri. On 5-8-63 he mortgaged the same to the Trustees of Khoja Girls Orphanage (Claimant Nos. 41 to 48) for security of the repayment of a loan of Rs. 3 lakhs borrowed from them. The mortgage deed however could not be registered immediately for want of certificate under section 230-A of the Income Tax which was to be produced by the said S.A.H. Kadri. In the meantime on 13-11-65 he entered into an agreement of sale with Hoechst Pharmaceuticals Ltd. (claimant No. 1) and agreed to sell 17000 sq. yds. of the mortgaged lands. Kadri was not regular in repaying the mortgage money and/or interest thereon. The trustees therefore decided to recover the mortgage debt by selling the mortgaged lands. Accordingly advertisements for sale were published in the news papers in June and July, 1965. Kadri then filed Suit No. 265/65 in the High Court restraining the trustees from selling the mortgaged lands. In that suit he took out a Notice of Motion for interim injunction. At the final hearing of the said notice of motion, the parties filed consent terms which provided that Kadri would pay up the entire mortgage debt with interest thereon before 31-1-1966 and that till then the trustees should not put the mortgaged property to sell. It was further provided that if Kadri failed to pay the mortgage debt with interest within the stipulated time, the trustees would be entitled to put the mortgaged property for sale after giving 7 days notice to him. Despite the time so granted, Kadri committed defaults in payment of the mortgage debt. Hence the trustees again gave advertisements for sale of the mortgaged property. Kadri then through his attorney's letter pointed out that the mortgage deed not being a registered document, the trustees could not sell the mortgaged property. It was then only for the first time that the trustees came to know that the mortgage was not registered. They therefore, filed Suit No. 299/67 against their own attorneys for negligence.
5. In the meantime, one of the creditors Asharafali Q. Jairazbhoy filed Insolvency Petition No. 86/66 against Kadri for adjudicating him as insolvent. In that petition Kadri was adjudicated as insolvent on 7-2-67. Kadri filed a schedule of his assets and liabilities on 9-8-67 acknowledging his liability for the debt incurred from the trust under the mortgage deed dated 5-8-63. As stated earlier prior to his adjudication, Kadri had made an agreement of sale in favour of Hoechst Pharmaceuticals Ltd. in respect of 17,000 sq. yds. out of his lands at Nahur. In view of the same, the petitioning creditor Ashrafali took out a notice of motion on 18-1-68 for an order that the Official Assignee (claimant No. 2) do sell and convey the said land to Hoechst Pharmaceuticals Ltd. as per the agreement of sale. In the said Notice of Motion, order came to be passed on 16-4-68 directing the Official Assignee to convey the vacant piece of land at Nahur, admeasuring 17,000 sq. yds. to Hoechst Pharmaceuticals Ltd. as per the agreement dated 13-11-65 made by Kadri. It was further directed that after deducting the costs, charges etc., the Official Assignee shall retain with him the amount of net sale proceeds. The order further provided:
"And it is further ordered that the said net amount do retain the same character as the immovable property directed to be sold with the rights and obligations of all the parties attaching to the immovable property attaching thereto."
Pursuant to this order, the Official Assignee completed the sale transaction in favour of Hoechst Pharmaceuticals Ltd. on 16-1-1975 and invested the net sale proceeds of Rs. 4,23,300/- in fixed deposit with Bank of India.
6. It may be pointed out that Kadri died in September, 1968 and thereafter one of his heirs filed Suit No. 846/75 for a declaration that the Official Assignee, Hoechst Pharmaceuticals Ltd. and others had no title, right and interest in the mortgaged property on the ground that the same did not vest in the Official Assignee as deceased Kadri had merely occupancy rights thereto and had no saleable interest therein. It was also contended that the agreement of sale in favour of Hoechst Pharmaceuticals Ltd. had frustrated as the sale transaction was not completed during the life time of Kadri. It appears that no interim relief was claimed in that suit. In the meantime, the trustees were making efforts to obtain registration of the deed of mortgage dated 5-8-63. The Income Tax Commissioner finally agreed to register the mortgage deed on the trustees giving an undertaking to pay Rs. 1,12,174.89 towards the Income Tax arrears due from Kadri. Finally on 22-2-78, the deed of mortgage came to be registered.
7. Thereafter, Asharafali Jairabhoy, the petitioning Creditor in the insolvency proceeding took out Notice of Motion No. 53/78 in that proceeding for an order directing the Official Assignee to pay to the Income Tax Department a sum of Rs. 1,12,174.89 out of the sale proceeds of the land sold by the Official Assignee to Hoechst Pharmaceuticals Ltd. and the remaining amount to the petitioning creditor towards part satisfaction of the mortgage debt. The said Notice of Motion was dismissed on 7-12-78 as being premature. The trustees then filed Appeal No. 475/80 against that order and the same came to be allowed by the Division Bench on 27-1-86. The Official Assignee was directed to pay out of Rs. 7,74,000/- lying with him, a sum of Rs. 1,12,174.89 to the Income Tax Department and pay the balance amount to the appellants Trustees. Accordingly the Official Assignee paid to the Income Tax Department a sum of Rs. 1,12,174.89 and to the trustees the balance amount of Rs. 6,93,772.89 on 26-7-86.
8. In 1979, the Trustees filed Suit No. 1220/79 against the Official Assignee, M/s. Hoechst Pharmaceuticals Ltd. and others for a declaration that the properties mortgaged by Kadri under the deed of mortgage dated 5-8-63 were validly mortgaged to them and that as on the date of the suit i.e. 31-7-79, they were entitled to receive a sum of Rs. 6,75,375/- towards the mortgage debt of Rs. 3 lakhs and interest thereon. They further prayed for a direction to the Official Assignee to pay to them a sum of Rs. 5,46,055.55. The suit is still pending.
9. Suit No. 846/75 filed by one of the legal heirs of Kadri came to be dismissed on 29-10-90. In 1992, the trustees took out Chamber Summons No. 167/88 in the present proceedings and prayed for being joined as the claimants. The said chamber summons was allowed on 30-9-92 and the trustees came to be joined as claimant Nos. 22 to 29. The trustees filed their statement of claim on 10-3-93 making a claim of Rs. 17,71,539.00 as on that date.
10. Coming back to the present reference viz. L.A.R. 18/78 claimant No. 1 viz. Hoechst Pharmaceuticals has filed its statement of claim stating that it is claiming compensation in respect of 782 sq. mts. land out of Sy. No. 88 part which consists of four small packets having area of 378 sq. mts., 87 sq. mtrs., 113 sq. mtrs. and 204 sq. mtrs. respectively. According to it, the first two packets form part of a land admeasuring 34904 sq. yds. (29185.11 sq. mtrs.) purchased by it from one Bhaidas Bhuta under a registered sale deed dated 11-9-56. The third pocket forms part of the land admeasuring 3154 sq. yds. (2637.15 sq. mts.) purchased by it from one U.P. Singh and one Ram Narayan Singh under a conveyance deed dated 22-12-65. The fourth pocket forms part of the land admeasuring 19450 sq. yds. (16262.72 sq. mts.) and the same was purchased by it from one P.R. Singh under a conveyance deed dated 30-4-65. Claimant No. 1 has submitted that it was in possession of all these four pockets right from the dates of the abovementioned three conveyance deeds and that it handed over possession of the said four pockets to the Special Land Acquisition Officer on 24-12-85. Claimant No. 1 claims Rs. 22,418.00 with solatium of Rs. 3,362.00 at the rate of 15% thereon.
11. The Official Assignee is claimant No. 2 who in his statement of claim has referred to some of the aforementioned facts and pointed out that as per the Court's order he sold and conveyed the following properties to claimant No. 1 Hoechst Pharmaceuticals Ltd.:
Sy. No. City Sy. No. Area in sq. yds.
77(part) 486(part) 760
88(part) 485(part) 13849
74(part) 485(part) 881
88(part) - 1210
13,963 sq. mtrs.
It is stated that the total consideration in respect of the sale of the said land was Rs. 4,59,250/- which was invested in fixed deposit in a bank. It is further stated that a sum of Rs. 1,12,174.89 was paid to the Income Tax Department and a sum of Rs. 6,93,722.39 was paid to claimant Nos. 41 to 48. Thus a total sum of Rs. 6,93.722.39 was paid to claimant Nos. 41 to 48. Thus a total sum of Rs. 8,05,897.28 has been paid towards the mortgage claim. The Official Assignee has submitted that except an area of 1419 sq. mts., the entire land admeasuring 22,844 sq. mts. which is subject matter of this reference forms part of the estate of the deceased insolvent Kadri and that save and except the Official Assignee, no one has any claim, right, title or interest in the said property. He has contended that in view of the order of adjudication passed against the insolvent his entire property became vested in the Official Assignee.
12. Claimant No. 11 is Sayyed Mohmed Shah Kadri who is one of the legal heirs of the original owner. Kadri has stated in his statement of claims that his father S.A.H. Kadri had purchased Khoti lands admeasuring 1,57,674 sq. yds. of village Nahur in 1947 and was paying land revenue assessment to the Khot of Bhandup Estate. He has further averred that under a Government Memorandum dated 25-9-1956 the Khoti lands at village Nahur forming part of Bhandup Estate were ordered to be treated as Personal Inami lands and by virtue of the Bombay Personal Inami Abolition Act, 1952 and the Bombay Land Tenures Abolition Act, 1958 Kadri became the absolute owner of the said lands. Claimant No. 11 has also referred to the mortgage transaction made by his father in favour of the trustees and the agreement of sale in favour of Hoechst Pharmaceuticals Ltd. as well as the sale deed executed by the Official Assignee in favour of the said company. According to him, he is entitled to get the compensation in respect of the land excluding the land conveyed to the said company.
13. Claimant No. 40 is Bafna Charitable Trust and on its behalf its trustee had filed a statement of claim wherein it is stated that the trust is the owner of the following lands forming part of the acquired lands.
--------------------------------------------------------- Sy. Nos. Land Acquired Land belonging to
(in sq. mts.) claimant No. 40
--------------------------------------------------------- 88(part) 14,175 4,060
74(part) 2,487 2,487
77(part) 4,763 4,763
174(part) 1,419 -
It is pointed out that the trust claims ownership under a Deed of Settlement dated 14-1-71 made between one Pratap Singh Mathuradas and others on one part and the then trustees of claimant No. 40 of the other part. The claim in respect of the acquired lands made by claimant No. 40 is of Rs. 9,22,614.91 and the same includes market value of Rs. 5,13,570/- at the rate of Rs. 47/- per sq. mt., interest of Rs. 2,49,573.91 at the rate of 121/2% p.a. and 30% solatium of Rs. 1,59,471.00
14. Claimant Nos. 41 to 48 are the trustees of Khoja Girls Orphanage a public charitable trust and in their statement of claim they have pointed out that the deed of mortgage dated 5-8-63 provided for re-payment of loan together with interest at the rate of 9% p.a. to be computed on monthly basis and to be capitalised in the event of non-payment thereof. They have referred to subsequent events which are already stated above. According to them the mortgage debt has been satisfied to the extent of Rs. 8,05,947.28 but a sum of Rs. 17,32,801.00 is still due to them and the same is secured against the security of the mortgaged property comprising of Sy. No. 88(part), Sy. No. 74(part) and Sy. No. 77(part). It is pointed out that as the deed of mortgage was not registered, notices under the Land Acquisition Act were not served on these claimants and therefore they had no opportunity to participate in the acquisition proceeding. They had therefore to take out Chamber Summons No. 166/88 and this Court by its order dated 30-9-92 allowed them to be joined in this reference.
15. I have heard Shri Chandran for claimant No. 1, Shri Bhagat for claimant No. 11, Shri Kishor Jain for claimant No. 2 and Shri Kothari for claimant Nos. 41 to 48.
16. So far as the claimant No. 1 viz. Hoechst Pharmaceuticals Ltd. is concerned, nobody disputes its claim for compensation in respect of 784 sq. mts. of area out of the acquired land. The said area comprises of four small pockets of land purchased by it under three different sale deeds dated 11-9-56 from Bhaidas Gupta, dated 22-12-65 from U.P. Singh and dated 30-4-65 from P.R. Singh. These four pockets do not form part of the land of Kadri which was mortgaged. There is therefore no doubt that claimant No. 1 entitled to get the amount of compensation in respect of 784 sq. mts. of area as per the Award dated 30-11-77.
17. The mortgage deed dated 5-8-1963 executed by Kadri in favour of the trustees could not be registered for want of certificate under section 230-A of the Income Tax for about 15 years. But ultimately, the trustees succeeded in securing registration thereof on 22-2-1978. The principal money secured by the mortgage being more than Rs. 100/-, it could validly be effected under section 59 of the Transfer of Property Act either by a registered instrument signed and attested by two witnesses or except in the case of a simple mortgage by delivery of the property. In the instant case, there was no delivery of possession of the mortgaged property by Kadri to the trustees. Section 49 of the Registration Act states the effect of non registration and states inter alia that an unregistered document will not affect any immovable property comprised therein. It can, therefore, be said that till the date of registration on 22-2-1978 the mortgagees (trustees) could not have legally enforced the security to secure repayment of the mortgage money and interest thereon. Section 47 of the Registration Act states the time from which registered document operates. It lays down that a registered document shall operate from the time from which it would have commenced to operate if no registration thereof had been required or made and not from the time of its registration. It will thus be seen that the mortgage in question would take effect from the date of execution i.e. 5-8-1963 and not from the date of its registration i.e. 22-2-1978. But it has to be kept in mind that the mortgage deed dated 5-8-1963 got retrospective effect on 22-2-1978 only.
18. During the intervening period between 5-8-1963 and 22-2-1978 there were certain developments out of the mortgage property admeasuring 1,25,000 sq. yds., a part admeasuring 17,000 sq. yds. was agreed to be sold by Kadri to Hoechst Pharmaceuticals Ltd. on 13-11-1965. No copy of the said agreement of sale is produced on record and therefore, it is not known as to what were the terms and conditions of that agreement. But it appears that possession of the land agreed to be sold was not parted with by Kadri. Thereafter, as pointed out above, Kadri was adjudicated insolvent on 7-2-1967 with the result that all the properties of Kadri, including the mortgaged property became vested in the Official Assignee. Shri Jain submitted that the adjudication of insolvency relates back when the act of insolvency was committed on 9-8-1966. There can be no doubt that the trustees are the secured creditors of Kadri despite the fact that till the adjudication of insolvency of Kadri, the mortgage deed was not registered. Shri Jain contended that unregistered document cannot create security. But this contention ignores the fact that the subsequent registration becomes operative from the date of execution of the mortgage deed. In this connection, it may be pointed out that even Kadri who filed a schedule of his assets and liabilities in the insolvency proceeding has mentioned the trustees as being the secured creditors. It is further seen that in the said proceeding this Court by its order dated 16-4-1968 directed the Official Assignee to sell the Hoechst Pharmaceuticals Ltd. 17000 sq. yds. of land which Kadri had agreed to sell. Accordingly the Official Assignee conveyed the said land to Hoechst Pharmaceuticals Ltd. by a registered sale deed dated 16-1-1975 and invested the net sale proceeds in fixed deposit in a bank. It is an admitted fact that out of the said amount the claim of the Income Tax Department was first satisfied and the remaining amount with accrued interest thereon was paid to the trustees in 1986 as per the order passed in Appeal No. 475/1980. The trustees admit in their statement of claim that the mortgage debt is satisfied to the extent of Rs. 8,05,897.28.
19. The dispute is now restricted to the amount of Rs. 6,77,765.15 which is the amount of compensation in respect of the acquired lands belonging to Kadri and which is deposited by the SLAO in the Court. Who is entitled to get the same? It is the Official Assignee in whom the estate of deceased Kadri vests or is it the trustees whose claim of mortgage money is stated to be not fully satisfied. Besides, there are other claimants but the main contest is between the Official Assignee and the trustees.
20. Claimant Nos. 41 to 48 who are the trustees of Khoja Girls Orphanage are the mortgagees. They had advanced a loan of Rs. 3 lakhs to Kadri in 1963 with interest at the rate of 9% p.a. with monthly rests. The first of such repayment was to be made by the mortgager Kadri on 4-9-1963. The mortgage deed provides that in case of default in payment of any instalment of interest or part thereof, shall be added to the mortgage debt and shall thenceforth carry interest at the like rate of 9% p.a. In short, it provides for capitalization of interest in case the same remains unpaid. The mortgage deed further gives a right to the mortgagees to sell the mortgage property even without intervention of the Court to recover the outstanding dues. This is in keeping with the provisions of section 69 of the Transfer of Property Act and it is subject to certain conditions stated in the deed itself. The mortgage deed is drafted in an exhaustive manner to provide for certain contingencies and to protect the rights of the mortgagees. Two of such contingencies contemplated by it is the adjudication of the mortgagor as insolvent and the acquisition of the mortgage property by the Government. Curiously both of these contingencies did happen in the instant case. As pointed out above the mortgagor Kadri was adjudged insolvent on 7-2-1967 in Insolvency Proceeding No. 84/66 and the State Government acquired part of the mortgage property under the Land Acquisition Act. As regards the first contingency, the mortgage deed provides inter alia as under:
"......if the mortgagor becomes or is adjudicated an insolvent......then in every of the aforesaid cases notwithstanding anything herein contained to the contrary the whole of the mortgage debt shall at the option of the mortgagees become immediately due and payable as in the due date had elapsed and the security hereby constituted shall at the option of the mortgagees become immediately enforceable......"
As regards the acquisition of the mortgage property the deed provides as under :
"......the said land heridaments and premises or any portion thereof any interest therein being at any time acquired by the Government of India or Maharashtra or by the Bombay Municipal Corporation or by the Trustees of the Port of Bombay or by any other public body for a public purpose, the mortgagees shall notwithstanding that the principle money on the mortgage shall not have become due, be entitled to receive the compensation to which the mortgagee may be entitled or declared entitled and to apply the same or a sufficient portion thereof towards repayment of the moneys for the time being due under these presents including interest in lieu of notice ......"
21. The contention of Shri Jain is to the effect that the trustees (mortgagees) having already filed Suit No. 1220/79 on 31-7-79, for recovery of the dues of mortgage money, it is not open to them to lay a claim on the amount of compensation which is deposited in the Court. It may be pointed out that the mortgage deed not having been registered till 1978, no notice under the Act was issued to them with the result that they could not participate in the acquisition proceeding. It is only in 1993 that they were allowed by the Court to join the proceeding and file their statement of claim. The trustees were however, aware of both the insolvency proceeding taken against Kadri and land acquisition proceeding started by the S.L.A.O. and the result of both the proceedings when they filed the above mentioned suit in 1979. This is clear from the averments made in the plaint in that suit. The said suit is basically for enforcement of the security to recover the outstanding dues of mortgage money with interest as on the date of the suit i.e. 31-7-79 which were Rs. 6,75,375/-. In that suit, the trustees prayed for two declarations; one for their entitlement to get the amount of the sale proceeds of Rs. 5,46,055.55 in respect of the sale of a portion admeasuring 17,000 sq. yds. of the mortgaged property and the other for their entitlement to get the amount of compensation of Rs. 6,77,763.15 in view of the acquisition of a portion admeasuring 21,425 sq. yds. of the mortgaged property. (the total of these two amounts come to Rs. 12,23,820.70 whereas the dues as on 31-7-79 were only Rs. 6,75,375/-. The trustees perhaps appear to have thought that by the time their suit is decided the outstanding arrear would increase on account of interest). As regards the first prayer the same later on did not survive in view of the order dated 27-1-1986 passed by the Division Bench in Appeal No. 475/80. The trustees have been paid a sum of Rs. 6,93,772.89 on 26-7-86 from the amount of the sale proceeds and accrued interest thereon.
22. As regards the second prayer in the said suit, it relates to the amount of compensation. It is true that the Award was passed by the SLAO about 11/2 year prior to the filing of the suit. The mortgage deed not having been registered entries thereof were not made in the record of rights in respect of the acquired lands. Consequently no notices were issued to the trustees in the acquisition proceeding and therefore they could not participate in it. Nevertheless it is a fact that some of the lands which are acquired are mortgaged to the trustees by way of security for the loan they gave to the mortgagor Kadri. The SLAO has determined the compensation of such lands at Rs. 6,77,765.15. Therefore to that extent the security stands converted or substituted in view of section 73(2) and (3) of the Transfer of Property Act which read as under :
Section 73(2). "Where the mortgaged property or any part thereof or any interest therein is acquired under the Land Acquisition Act 1894(1 of 1984) or any other enactment for the time being in force providing for compulsory acquisition of immovable property, the mortgagee shall be entitled to claim payment of the mortgage money in the whole or in part, out of the amount due to the mortgagor as compensation.
(3) Such claims shall prevail against all other claims except those of prior encumberances, and may be enforced notwithstanding that the principal money on the mortgage has not become due."
The trustees are therefore entitled to enforce the security against the amount of compensation.
23. Two remedies are available to the trustees to claim the amount of compensation one by filing a suit for recovery and the other by filing an application in the reference proceeding. The trustees first adopted the remedy of suit although at that time they were aware of the passing of the Award. In the plaint in their suit, they have given reasons for adopting that remedy. After having been permitted by the Court to join themselves in the reference proceeding, the trustees have been adopted the second remedy also. The question is whether simultaneous pursuit of both the remedies is permissible. Shri Jain contended that the trustees having first elected the remedy of filing the suit cannot subsequently resort to the remedy of filing an application under the Act to claim compensation. According to him they are barred by the doctrine of election. Shri Kothari however, pointed out the circumstances under which the suit was filed and submitted that the trustees have not received any benefit under the suit. It is pertinent to note that claim to the amount of compensation in both the proceedings is common. If in the suit the trustees had secured the said relief, then there was no reason or occasion for them to claim it in this reference proceeding. Similarly if in the present reference proceeding they get the said amount of compensation then their prayer in the suit for that amount will become redundant and will survive no longer. At any rate the trustees will not get double benefit. I am therefore, not inclined to accept the contention of Shri Jain.
24. Kadri was adjudicated insolvent on 7-2-1967. Section 17 of the Presidency Towns Insolvency Act states the effect of the order of adjudication and it reads as under :
"17. Effect of order of adjudication.-On the making of an order of adjudication, the property of the insolvent, wherever situate, shall vest in the Official Assignee and shall become divisible among his creditors, and thereafter, except as directed by this Act, no creditor to whom the insolvent is indebted in respect of any debt provable in insolvency shall, during the pendency of the insolvency proceedings, have any remedy against the property of the insolvent in respect of the debt, or shall commence any suit or other legal proceeding except with the leave of the Court, and on such terms as the Court may impose. Provided that this section shall not affect the power of any secured creditor to realise or otherwise deal with his security in the same manner as he would have been entitled to realise or deal with it if this section had not been passed."
The trustees are however, secured creditors since the mortgagor Kadri executed a mortgage deed in their favour ensuring repayment of the loan taken by him. Proviso to section 17 makes it clear that a secured creditor's right to realise or otherwise deal with the security is unaffected by the order of adjudication. A mortgagee can sue on and realise his security. Therefore, in the instant case also the trustees being the mortgagees have a right to recover the mortgage money and their right to recover their dues is not affected in any way on account of the adjudication of Kadri as insolvent.
25. Shri Jain submitted that the trustees are guilty of suppressing a true fact. He pointed out that they had suppressed the fact of filing of Suit No. 1220 of 1979 from the Court when they obtained the order dated 27-1-1986 from the Division Bench for the payment of the amount of the sale proceeds. It is not known as to why the official assignee and others who are parties to the said suit did not point out that fact to the Court. Any way, the amount of the sale proceeds has already been paid to the trustees as far back as in 1989 but so far as the amount of compensation is concerned, the same cannot be immediately ordered to be paid to the trustees since it is now on record that Suit No. 1220/79 filed by the trustees for the said amount is still pending. It is also pointed out that the claim in that suit is barred by time. The mortgage deed is dated 5-8-1963 and the mortgaged money was payable by the mortgager on 4-8-65. The trustees filed their above mentioned suit on 31-7-1979. Under Article 62 of the Limitation Act, the period of limitation prescribed for enforcing the payment of money secured by a mortgage or otherwise charged upon immovable property is 12 years and the same beings to run when the money sued for becomes due. Therefore, ex facie the claim of the trustees for recovery of the mortgage money appears to be time barred. However, it was pointed out by Shri Kotharj that the mortgagor Kadri who filed a statement of his assets and liabilities in the insolvency proceedings on 9-8-1961 acknowledged his liability to pay the mortgage money. Therefore, according to Shri Kothari, fresh period of limitation will begin to run from the date of the acknowledgement signed by Kadri in view of provisions of section 18 of the Limitation Act. In short, according to him, the claim made by the trustees in respect of the amount of Rs. 6,75,375/- together with interest thereon is within time. I think that the question whether the trustees claim is within time or whether it is barred by time cannot and ought not to be decided in this reference since the same is in issue in Suit No. 1220 of 1979. If the amount of compensation is paid to the trustees and if thereafter the trustees suit for that amount is dismissed on the ground of limitation or on any other ground, then what will happen to the amount already paid to them. In that event recovery may become difficult and in the meantime the rights of the other creditors of the insolvent Kadri will be seriously affected.
26. Shri Kothari suggested that the Official Assignee may be directed to retain the amount with him till the decision of Suit No. 1220/79. I do not think that such a course will be proper. The suit has been pending for the last 23 years and it is not known when it will be finally decided. It will not be proper to make the other creditors wait indefinitely till the decision of that suit. Moreover no prejudice is going to be caused to the trustees if the amount of compensation in respect of the part of mortgaged property is divided amongst the other creditors of the insolvent. The trustees can recover the dues of the mortgage money by the sale of the remaining part of the mortgaged property. The acquired lands in respect of which compensation is awarded and deposited in the Court is only a small part (21,425 sq. mtrs.) of the mortgaged property which comprises of lands totally admeasuring about 1,57,674 sq. yds. The remaining part of the mortgaged property will obviously be sufficient to satisfy the dues of mortgage money payable to the trustees. Therefore although the trustees being the mortgagees of the insolvent, have a statutory right to claim compensation amount for acquisition of part of the property mortgaged to them, it is not necessary, in view of the aforesaid reasons, that they must be paid the said amount. I am therefore not inclined to allow the claim of the trustees viz. claimant Nos. 41 to 48 to the amount of compensation of Rs. 6,77,765.15.
27. As regards the claim made by claimant No. 11, he is one of the heirs of deceased Kadri. His interest does not conflict with that of the Official Assignee. He will get his share in the amount of compensation, if any thing is left after satisfying the claims of the creditors.
28. As regards the claim of claimant No. 40 viz. Bafna Charitable Trust, nobody appeared on its behalf and adduced any evidence in support of its claim. As regards the remaining claimants, they did not appear before this Court nor did they file any statement of claim.
29. This takes me to the claim in L.A.R. No. 30/82. There the amount of compensation is in respect of an area of 4975.89 sq. mtrs. and the amount of compensation is Rs. 2,35,431.57. As pointed out earlier Hoechst Pharmaceuticals Ltd. alone has filed its claim. Out of the acquired land admeasuring 4975.89 sq. mtrs. an area of 3199.44 sq. mtrs. belonged to it as the same was purchased by it under the sale deed dated 16/1/75 executed by the Official Assignee. Hence it would be proper to direct the payment of proportionate amount out of the amount of compensation of Rs. 2,35,431.57 with due interest thereon. The remaining amount will be at the disposal of the Official Assignee who will divide and distribute the same among the other creditors of the insolvent Kadri.
30. In the result, I pass the following order.
1. Out of the amount of compensation of Rs. 6,77,765.15 claimant No. 1 Hoechst Pharmaceuticals Ltd. be paid the proportionate amount of compensation in respect of 784 sq. mtrs. with due interest thereon.
2. Out of the amount of compensation of Rs. 2,35,431.57 claimant No. 16 Hoechst Pharmaceuticals Ltd. be paid the proportionate amount of compensation in respect of an area of 3199.44 sq. mtrs. with due interest thereon.
3. In addition to the above mentioned amounts, claimant No. 16 (Hoechst Pharmaceuticals Ltd.) shall also be paid a sum of Rs. 34,200/- being the cost of demolition of existing fencing etc. alongwith the accrued interest thereon.
4. The remaining amounts in both the references with accrued interest thereon, if any, shall be at the disposal of the Official Assignee who will pay the same to other creditors, excluding claimant Nos. 41 to 48 viz. the trustees of Khoja Girls Orphanage, according to the priorities of their claims.
5. L.A.R. Nos. 18/78 and 30/82 in so far as they relate to section 30 of the Land Acquisition Act, 1894, are answered accordingly.
6. L.A.R. No. 30/82 to proceed further in so far as it relates to section 18 of the Land Acquisition Act, 1894.
7. Official Assignee to pay the above mentioned amounts after deducting his cost, charges, expenses and commission.
Shri Kothari, the learned Counsel for claimant No. 41 to 48 prays for staying the operation of this order for a period of 8 weeks. Prayer is granted. Accordingly this order is stayed for a period of 8 weeks from today.
Prothonotary and Sr. Master to act on the ordinary copy of the order duly authenticated by associate.