Report No. 70

Chapter 62

Improvements

Section 63A

62.1. Introductory.-

In general, accessions increase or add to the extent or quantity of the property. Those alternations which increase the value of the property form a special category of, or are at least analogous to, accessions. These are dealt with under the head of "improvements" in section 63A, which reads:

"63A. (1) Where mortgaged property in possession of the mortgagee has, during the continuance of the mortgage, been improved, the mortgagor, upon redemption, shall, in the absence of a contract to the contrary, be entitled to the improvement; and the mortgagor shall not, save only in cases provided for in sub-section (2), be liable to pay the cost thereof.

(2) Where any such improvement was effected at the cost of the mortgagee and was necessary to preserve the property from destruction or deterioration or was necessary to prevent the security from becoming insufficient, or was made in compliance with the lawful order of any public servant or public authority, the mortgagor shall, in the absence of a contract to the contrary, be liable to pay the proper cost thereof as an addition to the principal money with interest at the same rate as is payable on the principal, or where no such rate is fixed, at the rate of nine per cent. per annum, and the profits, if any, accruing by reason of the improvement shall be credited to the mortgagor."

62.2. Scope.-

Section 63A does not enable the mortgagor to claim the value of improvements in every case. Sub-section (1) specifically provides that all such improvements shall, in the absence of a contract to the contrary, on redemption belong to the mortgagor and that he shall not be liable to pay the cost thereof. It is only in the special circumstances laid down in sub-section (2) that the mortgagee is entitled by a statutory right to be paid the proper cost of improvements,1 of course, subject to a contract to contrary.

1. Modiu v. Mammunhi, 1947 Ker LJ 95: 1974 Ker LT 879.

62.3. Scope of the section and its significance.-

The section was inserted in 1929 in view of the fact that before that amendment, there was a difference of opinion on the question whether a mortgagee who had effected improvements on the mortgaged property was entitled to claim the cost thereof from the mortgagor. According to one set of cases, the mortgagee was not so entitled except where the improvements constituted necessary repairs.1 According to another set of cases which followed the English law, the mortgagee was entitled to a charge for improvements if they were reasonable.2 Yet another view left the matter to custom.3 The section settles the controversy by making a specific provision.

According to the English law as summarised in the contemporaneous edition of Fisher on Mortgages,4 the test was of reasonableness. The improvements must always be reasonable, having regard to the nature and value of the estate. The Special Committee, whose Report led to the amendment of 1929, instead of leaving it to the court to determine whether improvements were reasonable, proposed to have a "uniform and definite rule". That explains the rather elaborate provision in the section. The limitations imposed by the section make it difficult for the mortgagee-rightly s.-to "improve the mortgage out of his (mortgagor's) estate".5

1. 1896 ILR 19 Mad 327 (329).

2. (a) AIR 1918 Born 84 (85); (b) 1899 ILR 26 Cal 1 (8).

3. Union v. Rama, 1885 ILR 8 Mad 415 (418).

4. Fisher on Mortgages, as referred to by the Special Committee.

5. Gyan Chand v. Ram Prasad, AIR 1960 Pat 503.

62.4. Contract and custom.-

It is to be noted that while section 63A makes an exception for a contractual stipulation to the contrary, it does not make an exception for "customary" improvements. There appears to exist in certain areas in the South a custom of allowing claims of the mortgagee for value of improvements effected by him, apart from an agreement.

62.5. No change.- The above discussion discloses no need for amending the section.