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Report No. 70

74.11. Section 76(d).-

Under clause (d) of section 76, the mortgagee is bound, in the absence of a contract to the contrary, to make such necessary repairs of the property as he can pay out of the rents and profits thereof, after deducting from such rents and profits the payments mentioned in clause (c) and the interest on the principal money. In contrast, clause (c) seems to impose an absolute obligation. Clause (d) is limited to the extent of the rents and profits received by the mortgagee.

The key word in this clause is the word "necessary". This is illustrated by a Madras case.1 The mortgagee in possession laid down water pipes in the house mortgaged to him and claimed credit for the money spent thereon. It was held that this was not a "necessary" repair, and that he was not entitled to be credited with the amount so paid. On the other hand, expenditure incurred in preserving the irrigation system of a zamindari has been held to be necessary for keeping the property in good repair.2

1. Kuttuva Narayanaswami v. Sornaminal, AIR 1914 Mad 151 (152) (substantial repair).

2. Rajendra Prasad v. Bahuria, AIR 1916 Pat 96.

74.12. Section 76(e).-

Section 76(e) prohibits the mortgagee from committing any act which is destructive of, or permanently injurious to, the property. Where the mortgagor is in possession, section 66 prohibits such acts by the mortgagor. Where a lessee is in possession, section 108(o) imposes on the lessee similar duty. The mortgagee must not only himself commit such acts, but must also not allow others to do so.1-2 A striking illustration of this is furnished by a Madras case,3 in which garden land was denuded of all fertility by cutting off the trees. For breach of this obligation and for breach of any other obligation of the mortgagee, the normal remedy is damages which would, of course, be assessed when accounts are taken between the parties.4

1. AIR 1928 Pat 17 (18).

2. 1894 ILR 16 All 386 (387).

3. (1954) 2 ML) 665 (666).

4. Section 76, last para.

74.13. Section 76(f).-

Under clause (f) of section 76, where the mortgagee has insured the whose or any part of the property against loss or damage by fire, he must, in case of such loss or damage, apply any money which he actually receives under the policy, or so much thereof as may be necessary in re-instating the property, or, if the mortgagor so directs, in reduction or discharge of the mortgage-money. Certain problems arising out of the inter-relation between section 72 and section 76(f) have been already deal with.1

1. See discussion as to section 72, supra.

74.14. Section 76(g).-

Section 76(g) provides that the mortgagee must keep clear, full and accurate accounts of all sums received and spent by him as mortgagee, and give the mortgagor, at his request and cost, true copies of such accounts and of the vouchers by which they are supported.

No comments are required on this clause.

74.15. Section 76(h).-

Section 76(h) provides that the receipts from the mortgaged property in possession of the mortgagee shall be applied, on where such property is personally occupied by him, a fair occupation-rent in respect thereof shall, after deducting the expenses properly and the collection of rents and profits and the other expenses mentioned in clauses (c) and (d), "and interest thereon", be debited against him in reduction of the amount from time to time due to him on account of interest and, so far as such receipts exceed any interest due, in reduction or discharge of the mortgage money; the surplus, if any, shall be paid to the mortgagor.

We have no comments on this clause. Chose has criticised the use of different words "receipts, rents and profits" for indicating the same concept but, with respect, we think that the various expressions include different shades of meaning and may be left undisturbed.

74.16. Discrepancy between clauses (c), (d) and (h)-Recommendation.-

It would be noticed that in section 76, clause (d), there is a mention of the mortgagee making the necessary repairs from the rents and profits, after deducting furniture rents and profits, the payment mentioned in clause (c) and the interest on the principal money. Under clause (c), the mortgagee has to pay the Government revenue and public charges and arrears of rent which may entail a summary sale.

When one comes to clause (h), one finds that whilst it mentions the "expenses" mentioned in clauses (c) and (d) and the interest "thereon" (that is to say, the interest on the expenses themselves, clause (h) is silent about the interest on the principal money which is mentioned in clause (d).

It is apparently for this reason that Ghose1 has made the comment-"clauses (d) and (h) do not fall in line with one another, for the repairs are only to be made out of the net income after deducting the interest". We agree with this comment, and we recommend that in clause (h), after the words "interest thereon", the words "the interest on the principal money" should be added.

1. Ghose Law of Mortgage in India, (1902), p. 870.

74.17. Section 76(h)-fair-occupation rent.-

As regards the words "fair occupation rent" in clause (h), some difficulty seems to have arisen where the mortgagee personally cultivates the land instead of letting it out to tenants. The question arises whether the net profits of cultivation can be taken as occupation rent. The Allahabad High Court1 has held in a Full Bench decision that the expression "net profits of cultivation" cannot be taken as covering occupation rent. This was a ruling under section 9(1) of the U.P. Debt Redemption Act which uses that expression, but it was held that the expression should be interpreted in the same sense in which "fair" occupation rent is used in section 76(h).

1. AIR 1971 All 643 (648, 651).

74.18. Section 76, last paragraph.-

Under the last paragraph of section 76, if the mortgagee fails to perform any of the duties imposed upon him by this section, he may, when accounts are taken in pursuance of a decree made "under this Chapter", be debited with the loss, if any, occasioned by such failure. The words "under this Chapter", though not appropriate in that the decree is passed under the Code of Civil Procedure, are not, however proposed to be disturbed in view of the fact that in a certain sense, the decree embodies the remedy of foreclosure, allowed by the relevant sections contained in this Chapter.

An illustration of a case falling under this paragraph is furnished by an Oudh decision.1 It was held that where a mortgagee fails to make any payment of the Government revenue which, in terms of section 76(c), he is bound to pay, he must be debited with the loss caused to the mortgagor, who would be entitled to compensation for the default.

1. AIR 1943 Oudh 433.

74.19. Estimate of loss-separate view-suit.-

Ordinarily speaking, the estimate of loss caused to the mortgagor by the failure of the mortgagee is an item which is considered in determining the accounts in settlement of the mortgage when accounts are taken after the passing of the decree for redemption. There appears to be some conflict of decisions on the question whether, if a mortgagor fails to get the matter of the loss settled at the time of the preparation of the decree for redemption, he can file a separate suit.

The Bombay view1-2 on the subject has always been that a separate suit is not permissible, the reasoning being that the liability of the parties to the mortgage in a redemption suit can be decided only once and it is not the policy of the Code of Civil Procedure to allow separate proceedings for determination of these questions.

1. AIR 1922 Born 156(2).

2. AIR 1954 Bonn 417 (418).

74.20. The Madras view,1 on the other hand, is that section 76 provides a cumulative remedy, and is not intended to operate as a bar to any other remedy which the mortgagor might have under the law. According to the Madras view, a subsequent suit for compensation at the instance of the mortgagor against the mortgagee for such loss would not be barred under Order 2, Rule 2, Code of Civil Procedure, 1908.

According to the Kerala view,2 the remedy of accounting is not inextricably bound up with the remedy of redemption. If the former becomes unenforceable or cannot be granted from any supervening causes, it does not necessarily follow that the result of the accounting also becomes non est.

1. Shiv Chidambaram, ILR 33 Mad 731.

2. AIR 1971 Ker 290.

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