Report No. 70
The right of the mortgagee to accessions is dealt with in section 70. It may be recalled that the subject of accessions, in the context of the right of the mortgagor, has already been dealt within section 63. In regard to leases, the matter is governed by section 108(h) and (i). There are, no doubt, certain differences between sections 63 and 70-perhaps unintentional-with which we shall be concerned later. At this stage, it would be sufficient to say that the law of accession in general is based on the principle that an acceretion becomes blended with the property to which it becomes accessory.
The subject was discussed at great length in Roman law, and the familiar maxim accessio cedit principle (the increase follows the principal), and its elaborations, have been the basis of civil law systems on the continent. The position in the common law jurisdictions, of course, is not different in substance. For some reasons not easily ascertainable, however, the matter has received more extensive attention in Roman law than in the common law.
70.2. Roman law.-
In Roman law,1 there is preserved an opinion of Paul which more nearly answers to the layman's conception of equity. A house given as security was burnt down, and L.T. bought the site and built thereon. A question arose concerning the pledge right. Paul gave as his opinion that the pledge could still be followed, and that therefore what was built upon the ground was considered to pass with it, that is, with the pledge right; that possessors in good faith can, however, be obliged to restore the building to creditors only upon condition that they recover outlay upon the structure, to the extent of the increase effected in the value.2
But if a mortgaged house is pulled down and a new building erected in its place by an assignee of the equity of redemption the mortgagee can enforce his security on the new building.3
1. Ghose Law of Mortgage in India, (1902), pp. 350-351
2. 1-29, 2 D. de Pign 20, 1.
3. Morais v. Hafeezun, 1860 SD (NWP) 432.
70.3. Accession to mortgaged property.- Section 70 reads-
"70. If, after the date of a mortgage, any accession is made to the mortgaged property, the mortgagee, in the absence of a contract to the contrary, shall, for the purposes of the security, be entitled to such accession."
There are two illustrations-
"(a) A mortgages to B a certain field bordering on a river. The field is increased by alluvion. For the purposes of his security, be entitled to the increase.
(b) A mortgages a certain plot of building land to B and afterwards erects a house on the plot. For the purposes of his security, B is entitled to the house as well as the plot."
A case of accretion to the mortgaged property must be distinguished from one in which something is substituted for the original subject of the mortgage. Thus, to take a familiar instance from the Roman law, if a farm, together with the slaves upon it, is pledged, and the slaves die and are replaced by others, the right of the pledgee shall not extend to the latter, unless they happen to be the offspring of those who have died.1
But substituted property may be effectually included in a security by apt words which should never be wanting in mortgages of stock, machinery, plantations or the like, in which the subject-matter of the pledge may change from day to day. But where an article is substituted for something which was an essential part2 of the pledge, then the substituted article will pass in the same way as the original article, even though there may be no words to that effect in the mortgage-deed.
1. Ghose Law of Mortgage in India, (1902), p. 351.
2. Ghose Law of Mortgage in India, (1902), p. 351.
70.5. Need for provision.-
The need for a specific provision on the subject may be explained. So far as property existing at the time of the mortgage is concerned, section 8 would have been sufficient to transfer the legal incidents of the property mortgaged, to the mortgagee. But obviously that section could not be relevant in the case of subsequent enlargement either of the interest or of the property. The rationale underlying sections 63 and 70 is that the subsequent accession becomes a part and parcel of the property as soon as the accession takes place. Before the Act, the Privy Council, in one of the reported decisions on appeal from Oudh, observed:1
"Most acquisitions by the mortgagor ensure for the benefit of the mortgagee, increasing thereby the value of his security; and, on the other hand, many acquisitions by the mortgagee are in like manner treated as accretion to the mortgaged property or substitutions for it, and therefore subject to redemption."
1. Kishen Datt v. Mumtaz Ali, 1878 ILR 5 Cal 198 (PC).
70.6. Puisne mortgages.-
It should be noted that the principle that the accession follows the principal finds illustrations in other contexts; after redemption of the first mortgage, the accessions to the property ensure for the benefit of the subsequent mortgage. This proposition is not enacted in so many words in section 70. But since it uses the word "mortgagee", the proposition may be easily spelt out from the section.1
1. Compare Ghose Law of Mortgage in India, (1902), p. 351.
The section is limited to "purposes of security", but the principle that the accession follows the principal might become available-sometimes with unusual results-in a situation like following. In a Travancore-Cochin case,1 the defendant had hypothecated the property in plaint in favour of the plaintiff. Of the two buildings found on the property, one was in existence at that time, and the second was subsequently put up by the defendant. The plaintiff sued on the mortgage bond and obtained a decree for foreclosure and in execution of the decree, obtained delivery through Court.
The buildings were excluded in these proceedings. It was held that under the law, the defendant (mortgagor) had no right to compel the plaintiff, who had become absolute owner of the site in question to purchase the building standing thereon. It was the right of the defendant mortgagee to get possession of the site after removal of the buildings. His obligation to pay the value of the building arose only in case he wants that and the tenants are prepared to sell them at an agreed price.
1. Anthony Ouseph v. M. George, AIR .1950 Tray-Co 78 (79).