M. S. H. QURAISHI, J.--The question for consideration in this petition for leave to appeal is whether a non-evacuee mortgagor's right in a property stands extinguished by its having been treated as evacuee property and acquired by the Central Government under section 3 of the Displaced Persons (Compensation and Rehabilitation) Act, 1958.
2. The property in question is No. S-37-R-124, Beadon Road, Lahore. It was owned by Lala Dina Nath and had been mortgaged with possession in favour of Mst. Padmavati Thakur in 1932 for the sum of Rs. 26,500.00 Lala Dina Nath embraced Islam, assumed the name. Of Sh. Din Muhammad and remained in Pakistan. The mortgagee Mst. Padmavati became evacuee. In November 1947 she, however, brought a suit against the mortgagor for recovery of the mortgage amount. She also applied to the Custodian for restoration to her of the property which had meanwhile been treated as evacuee. As a question arose whether the mortgage debt had not already been extinguished, the application was disposed of with the observation that she should first establish her title. She then obtained a decree on 6-6-1949 against the mortgagor in the sum of Rs. 6,832. Neither the money was paid nor did she take any further action. Sh. Din Muhammad died in 1957 and among his heirs, 3 son of his, namely, Ram Kishan alone had embraced Islam under the name of Riaz Ahmad (respondent No; 1) and had remained in Pakistan, others having become evacuees.
3. The property which had been allotted in favour of the petitioners as early as 1947 was transferred in their favour in 1959. Some three months after the, transfer, that is, on 10-12-1959, Riaz Ahmad respondent applied under section 25 of the Pakistan (Administration of Evacuee Property) Act XII of 1957 for redemption of the property. The Deputy Custodian by his order dated 24-10-1969 found that the mortgage debt had become fully discharged, that Riaz Ahmad was entitled to restoration of the property and that as excess income recovered by the Custodian was insignificant, nothing was payable to him by the Custodian. Riaz Ahmad appealed from this order before the Custodian where the case had also been referred by the Deputy Custodian for confirmation. Isis application was ultimately dismissed by the Custodian on 19-9-1962 on the ground that the property having been treated as evacuee property since 2947 and having been acquired under section 3 of the Displaced Persons (Compensation and Rehabilitation) Act, it had vested in the Government free front all encumbrances, that the Central Government not having been impleaded no decision as prayed could be given by the Custodian and that no recourse having been taken to section 22 of Act X11 of 1957, the non-evacuee mortgagor had forfeited his right of equity of redemption in the property. The Custodian further expressed that after the acquisition of the property the same had ceased to be evacuee and as such he had no power to make any order in respect of the same.
The order was challenged by Riaz Ahmad in the constitutional jurisdiction of the Lahore High Court, where the matter was first heard by a learned Single Judge who then referred the following questions for determination by a larger Bench:- "(1) Is it necessary for a mortgagor of an urban immovable property to apply under section 22 of the Pakistan (Administration of Evacuee Property) Act, 1957, for a declaration of the interest of equity of re--demption in the property?
(2) Can the Custodian reuse to render accounts to him on behalf of the evacuee mortgagee in possession on the liquidation of the mortgage debt merely on the ground that the property had been acquired under section 3 of the Displaced Persons (Compensation and Rehabilitation) Act, 1958 ?
(3) Is not the Custodian bound to register the claim of the mortgagor against the evacuee mortgagee under section 25 of the Pakistan (Administration of Evacuee Property) Act, 1957, and what would be its effect ?"
The Division Bench before which the matter was placed, relying mainly an this Courts decision in Muhammad Khan v. Chief Settlement and Rehabilitation Commissioner (PLD1962SC284) held that only the mortgagee's rights in the property wet evacuee property and that as such it was not necessary for Riaz Ahmad t have obtained any further declaration nor had he forfeited his right in the property. The questions referred to the Bench having thus been answered in favour of Riaz Ahmad, the transfer of the property in favour of the peti--tioners was declared to be without lawful authority and of no legal effect. Before parting with the case, the Division Bench; however observed that the petitioners would suffer in consequence of the order for no fault on their part, the Settlement Department was "obliged to transfer them any alternate property of the same type and value and if no such property is available, any plot of land of about the same value".
5. The contentions raised before us by Sh. Ghias Muhammad on behalf of the petitioners are that -
(1) the property after its acquisition under section 3 of the Displaced Persons (Compensation and Rehabilitation) Act, 1958, having --deceased to be evacuee property, the Custodian was right in holding that he had no jurisdiction to give any relief to the respondent. Reliance was placed on Ghulam Fatima v. Muhammad Hussain PLD 1976 SC 729;
(2) the property having been treated as evacuee right from 1947, its that status could not be disturbed except by a declaration obtained under section 22 of Act XII of 1957;
(3) the petitioners having not been impleaded before the Deputy Custodian, the order of the Deputy Custodian and every subsequent order based thereon are of no effect against the petitioners ; and
(4) no relief having been sought byway of cancellation of the transfer made in favour of the petitioners, the High Court could not have declared Against the validity of the transfer.
6. In regard to urban properties mortgaged by locals with evacuees, the Chief Settlement and Rehabilitation Commissioner had issued instruction under Memo. No. 90-POL 61, dated 5-12-1961, followed by a Press note dated 8-12-1961 (appearing at pages 543 abd 544 of M. A. Latif's book on Displaced Persons (Compensation and Rehabilitation) Act (1969 Edition), wherein the authorities had been clearly told to take measures to afford the mortgagors an opportunity to redeem their property. No action appear to have been taken in the -present case although the Department was full aware, on account of the applications made by Mst. Padmavati in November 1947 and by. Riaz Ahmed in 1959, that non-evacuee mortgagor' s interest was involved to the property. Anyway, the first two contentions have been e rightly resolved by a reference the principle enunciated by this Court in Muhammad Khan's case wherein in respect of evacuee land mortgage with possession to locals it was held that the interest of the mortgagee locals could not be acquired by the Government under section 4 of the Displaced Persons (Land Settlement) Act, 1958, that notwithstanding the words "free from all encumbrances" in that section the mortgagee locals were entitled to retain possession of land until the mortgage was redeemed and that it was not necessary for the mortgagee in order to safeguard his rights to have sought a declaration under section 22 of Act XII of 1957. Relying on the rule laid down in Muhammad Khan's case another Division Bench of the Lahore High Court, in Writ Petition No. 458/R of 1976, decided on 5-7-1977 in respect of an urban property also situate in the City of Lahore, had held that only the evacuee interest of the evacuee mortgagee had vested in the Custodian which had come to the compensation pool and was available to the Settlement authorities for disposal, that anything in excess of it did not vest in the Custodian or constitute the compensation pool or could be transferred by the Settlement authorities and that the non-evacuee mortgagor's right to redeem the mortgage "did not ever come to be extinguished". As according to the finding of the Deputy Custodian recorded on 24-10-1960, the mortgage debt had stood fully discharged, Riaz Ahmad was entitled to the restoration of the property by way of redemption. That being so, the transfer made in favour of the peti--tioners could not stand.
7. The last two points are merely technical. The petitioners, even though they had not been a party before the Deputy Custodian, had not only been heard by the Custodian but their contentions there had even prevailed. Moreover, if the non-evacuee mortgagor's interest could not be acquired, as has already been so held, the property could not be transferred or if transfer--red it would be subject to the mortgagor's right of redemption.
8. We are thus satisfied that no case is made out for grant of leave to appeal. The petition is accordingly dismissed. We, however, hope that the Department will keep in mind the observations made by the Division Bench of the High Court for giving the petitioners some other property if available.