Report No. 70
72.11. Personal liability.-
There is one question which touches the entire section. Under the section, it seems to be doubtful whether the mortgagee can, in the absence of a convenant to that effect, recover any money which he may spend under this section personally from the mortgagor.1-2
1. See Ghose Law of Mortgage in India, (1902), p. 655.
2. Bavanna v. Bala, (1889) 9 Mij 177; lmdad v. Bodri, 1895 ILR 20 All 401.
72.11A. Claim if can be enforced apart from mortgage.-
The section allows a mortgagee to add to the principal of the mortgage-money the sum expended by him over the purposes mentioned therein. In other words, the mortgagee is entitled to a charge over the mortgage-security even for the amount spent. But can such charge be enforced independently of the mortgage? The High Court of Allahabad has held1 that a claim for expenses cannot be enforced apart from the claim under the mortgage. In that case a mortgagee in possession paid certain arrears of land revenue payable by the mortgagor, to avert the sale of the property.
The mortgagor deposited the principal and the interest thereon in Court which was accepted by the mortgagee and the deed and possession were delivered to the mortgagor. The mortgagee subsequently brought a suit to recover the amount of land revenue by sale of the mortgaged property. The High Court disallowed the suit and observed as follows:-
"In our opinion, whatever may be the position or right of a person paying money under such circumstances, who is not a mortgagee, the position of a mortgagee making such payments is this: if he makes such payments and wishes to seek a direct remedy against the mortgaged property in respect of them by a suit for sale of that mortgaged property, he must do so in his character and position as mortgagee, for it was in that character and position, and that only that he paid the money. He must, if he desires to bring the property to sale in respect of such payments, add on those payments to the principal money due under the mortgage.
In other words, in our opinion, a mortgagee making such payments as mortgagee, does not, by reason of making those payments, obtain a lien independently of that under his mortgage in this case having abandoned their lien and rights as mortgagees, it appears to us that the plaintiffs cannot revive them in order to sustain a suit for money which they could have added to the original mortgage-debt, and in respect of which they were entitled to continue in their character as mortgagees and to hold on the deed of mortgage."
1. ILR 13 All 195 (199) (DB).
72.12. Then, there is a Calcutta case.1 After obtaining a preliminary decree on his mortgage, the mortgagee deposited a certain amount to set aside a sale of the mortgaged property in execution of a rent decree. The property was thereafter sold privately by the mortgagor, who satisfied the preliminary decree completely. The mortgagee brought a suit to establish his right to the lien on the mortgaged property in respect of the deposit that had been made by him.
It was held that the suit was maintainable for the reason that the lien acquired for the mortgagee in respect of the deposit was not discharged by the payment and satisfaction of the preliminary decree. We are not sure, with respect, if this is a correct view. A lien for expenses under this section is enforceable only along with the claim under the mortgage, and only so long as the latter is subsisting; if the latter claim is no longer subsisting, the mortgagee cannot have any remedy under this section.
1. Ambika Charan v. Ramgati Gulia, AIR 1915 Cal 369 (370).
72.13. Section 69, Contract Act.-
But the mortgagee would be entitled, to recover the amount under section 69 of the Contract Act.1-2 Under that section, the mortgagee is entitled to be reimbursed by the mortgagor for the money spent by him on revenue and land taxes, paid in order to save the property from forfeiture and sale.
1. AIR 1937 Nag 225 (226).
2. AIR 1940 Nag 285 (286).
72.14. Remedy under section 69, Contract Act.-
Section 72 entitles the mortgagee to add to the mortgage money the amount spent by him, inter alia, for the preservation of the mortgaged property from destruction, forfeiture or sale, provided that prior to the payment, the mortgagor has been called upon and has failed to take proper and timely steps to preserve the property or to support the title. The provisions of the section are not obligatory. The opening words of this section, namely, "A mortgagee may spend such money as is necessary" are sufficiently indicative that this is a right which is optional for the mortgagee to exercise.
In other words, section 72 gives the mortgagee an additional right, a right over and above what he got under the ordinary provisions of law.1 Where a mortgagee is entitled under the ordinary law to recover the amount spent by him in order to protect the mortgaged property from destruction, forfeiture or sale, that right is not taken away by section 72. When a person who is interested in payment of money pays that amount which benefits the other, he is entitled to be reimbursed by him under section 69. Therefore, section 72 does not exclude the personal right2 of suit which the mortgagee has under section 69.
2. Bhubneswari Devi v. Pandit Sheogovind Lall Missir, AIR 1963 Pat 185.
72.15. Madras case.-
It would be useful to refer in this connection to a Division Bench decision of the Madras High Court.1 In that case, an argument was advanced that the mortgagee was not entitled to bring a separate suit for recovery of the money, spent by him for preservation of the mortgaged property and all that he was entitled to was to add that money to the principal mortgage money and to insist upon repayment rather than upon payment by a separate suit. While repelling this contention, the High Court laid down as follows:
"The language of section 72 is against this contention. The words are-the mortgagee may, in the absence of a contract to the contrary, add such money to the principal money. It is a permissive provision and not an obligation imposed upon the mortgagee. As we read the section, it seems to us that the Legislature intended to give larger rights to the mortgagee than he would otherwise have. Every person who spends money for the benefit of another is entitled to sue for that money.
The ordinary rules of contract would secure him that right. In the case of a mortgagee, the Legislature apparently intended to put him in a higher footing. He is given the liberty of adding the expended moneys to the amount of the mortgage, thereby securing to the moneys a charge upon the property. The use of the word "may" shows that it is an additional remedy conferred upon the mortgagee and that it is not the sale remedy."
1. Tirumalai Muthureera Paramasiva Venkatasami Naicker v. Muthusami Pillai, 45 IC 949 (Mad) (DB).
72.16. A similar view has been expressed by the Calcutta High Court.1 In similar circumstances, it was held in that case that under section 69 of the Contract Act the mortgagee was entitled to succeed. Therefore, the contention that section 72 of the Transfer of Property Act bars a separate suit to recover the amount spent for the preservation of the mortgaged property is not tenable.
1. Umesh Chandra Banerjee v. Khulna Loan Co., 1907 ILR 34 Cal 92.
72.17. A separate suit by the mortgagee for moneys recoverable under section 72(b) is, therefore, maintainable.1 According to the Chief Court of Oudh,2 a prior mortgagee, setting aside a sale by the puisne mortgagee by deposit of the sale amount can only add it to his mortgage amount and cannot get a money decree. 1. Venkat Saattayya v. Mulibai, AIR 1955 Andh 274.
2. Jagannath Singh v. Jagjiwan Das, AIR 1925 Oudh 429.
72.18. Recommendation as to personal liability.-
We do not, with respect, agree with the Oudh view. We recommend that the matter should be clarified by adopting the wider view. Instead of leaving the matter to be governed by section 69 of the Contract Act1 it should be provided in section 72 that the mortgagee shall also be entitled to recover the amount due under section 72 from the mortgagor personally.
1. Para. 72.13, supra.
72.19. Section 72, proviso-Recommendation.-
We would, for obvious reasons, exclude from the operation of the proviso, cases where destruction is imminent, and recommend accordingly that the proviso be modified on the above lines.