ANANDRAM JIVRAJ CAGLE v. PREMRAJ MUKANDAS & ORS.

**ANANDRAM JIVRAJ** **CAGLE** _v._ **PREMRAJ MUKANDAS &: ORS.** _August_ 31, 1967 (J, C. SHAH, S. M. SIKRI AND J. M. SHELAT, JJ.] _Transfef' of Property_ _Act_ (4 _of_ 1882), ss. 76(d) _and_ 76(h)-Ptiorities laid _down_ _in_ s. 76(h) _whether_ subject _to_ _those_ _in_ s. 76(d). The respondents filed a suit against !he appellant for redemption . of a mortgage. The suit was decreed subject to payment of a sum of Rs. 9,224-lZ.O towards principal and interest within six months. A preliminary decree was directed to be drawn up. The appellant· filed an appeal in the Court of the District Judge and _inter_ _alia_ urged that "the court oJght to have directed the Commissioner to deduct the rent received (i) first towards taxes, then (ii) towards interest of the amount, of repairs etc., then (iii) towardB interest on the principal amount, then towards (iv) amount of repairs and expenses and then towards the principal of the loan." The appeal was dismissed. A second appeal in the High Court also f11iled. The appellant. came to this Court by special leave. It was urged on his tehalf that the priorities in s. 76(h) of the Transfer of Property Act were sutject to the priorities ln s. 76(d) and therefore interest on the principal amount should, in thE! present case, have ti.ren given priority over the payment of the expenditure on **maintenance and . repairs.** **A** **B** **c** **D** Held: The appeal must fail. The object of s. 76(d} is not to fix any priorities but to make it **E** obligatory on t.h!! mortgagee, .in the absence of a contract to the contrary to carry out necessary repairs to.· the property but the amount he can spend is limited to the difference between rents and profits and payments mentioned in cl. ( c) and the interest on the principal money. It is cl. (h) which directs the mortgagee to apply the receipts from the mortgaged property in a certain manner. . The order of application is (1) the expenses properly incurred! for the management of the property and the collection of rents and' profits and the other expenses mentioned in ds,. (c) and (d), (2) interest _**'I!'**_ thereon, (3) the surplus, if any, has to be utilised towards reduction of interest on principal money and ( 4) the principal money itself. There is no contradiction between s. 76(d) and s. 76(h). The fact that s. 76(d) limits the scope of the liability has no bearing on the question whether it lays down any order of priorities inconsistent with those mentioned in cl. (h) [ 428B-EJ OVIL APPELLATE JURISDICTION: Civil Appeal No. 8 of 1965. **G** Appeal by specjal leave from the judgment and decree dated October _5,_ 1962 of the Bombay High Court in Appeal· No. 598 of 1960. from Appellate Decree. _S._ _T. Ilesai_ and /. _P._ _Aggarwal,_ for the appellant. _0._ _P._ _Mdlhotra,_ and _P._ C. _Bhartari,_ for the respondents. ~' **R** ## I . A B ###### c D E p 0 R ANANDllAM I'. PREllllAJ _.(Sikri,_ J.) The Judgment of the Court was delivered by Sikri, _I._ This appeal by special leave is directed against the judgment and decree of the Bombay High Court in Appeal No. 598- of 1960, whereby the High Court confirmed the judgment and decree dated January 30, 1960, passed by the Extra Assistant Judge, District Court, Ahmednagar, in Regular Appeal No. 300 of 1958, confirming the decree dated April 7, 1958, passed by the Joint Civil Judge, Junior Division, Ahmednagar, in Civil Suit No. 609 of 1948. The relevant facts for the determination of the points raised before us by the learned counsel for the appellant-mortgagee, are as fo!lows: The respondents before us filed a suit for the redemption of the mortgage of a bungalow at Ahmednagar alleging that the sale-deed in respect of this bungalow for Rs. 5,000 was in fact a possessory mortgage. One of the terms of this deed, dated August 4, 1928, was : "However, a condition is laid down that if we pay you within three years from this day Rupees five thousand relating to this sale-deed, and (interest) thereon at the rate of 12 twelve annas per cent per mensem at yearly rests, and the amounts spent by you to meet the expenses for repairs, constructions, taxes, etc. together with interest (at the rate) mentioned above, ...... you are to receive the same and allow us to purchase the aforesaid property back." The transaction was held to be a mortgage and there is no dispute on this point. On April 7. 1958, the suit was finally decreed for redemption of the property subject to a payment of Rs .. 9,224-.12-0, Rs. 4,612-6-0 as principal, and Rs. 4,6.12-6-0 as interest thereon, within six months from that date. A 'preliminary decree was directed to be dra.wn up. The appellant filed an appeal in the Court of the District Judge, Ahmednagai, and, among other grounds, alleged that "the Court ought to have directed the Commissioner to deduct the rent received (i) first towards taxes, then (ii) towards interest of. the amount of repairs, etc., then (iii) towards interest on the principal amount, then towards (iv) amount of repairs and expenses and then towards the principal. of the Joan". The Extra Assistant Judge did not agree with this contention, and dismissed the appeal. The appellant filed a second appeal to the High Court The High Court also disagreed with the above contentions. The High Court held that the priorities had been settled by the courts below in accordance with the provisions of s. 76(h) of the Transfer of Property Act, 1882 UV of 1882) and were, therefore, proper. The method of accounting followed by the Commissioner appointed in the case, and which was accepted by the courts below, was as follows : Out of the income derived from the property <There is no dispute that the bungalow was fetching rent from [1968] l s.0.11, month to month) the outgoings were deducted in the fol'owing order of priority : 1. Payment of taxes. 2. ·payment of interest on the amount of expenditure on maintenance and repairs. 3. Payment of the expenditure on maintenance and re pairs. 4. Interest on the amount of principal of the mortgage bond. _S._ Amount of principal under dispute. The learned counsel for the appellant, Mr. S. T. Desai, says that item _4_ above should be item 3, and to substantiate this has submitted three propositions before us : (!) Section 76(h) does not lay down any order of priority inconsistent with the order · of priority mentioned in s. 76(d) and does not reverse that order. Both the provisions must be read together and in a harmonious manner; (2) The liability for repairs under s. 76(d) is very limited in its scope. This liability arises only if there is a surplus left after deducting from the rents and profits of the property two items. _viz.:_ _1_ A. B c D I p (i) expenses mentioned in clause (c), and (ii) interest on the principal money; (3) If thi; mortgagee expends more for repairs than the surplus left after the last mentioned deduct;ons, that expense would not be in pursuance of any liability of his under s. 76(d) but would be olaimed under the right conferred by s. 63A(2) and s. 72(b). Such expenses would be treated as additions to the principal money. Sections 76 (c), (d), (b), 63A and 72(b) read as follows: "76. When, during the continuance of the mortgage, the mortgagee tall:es possession of the mortgaged property, - - ' '(c) he must, in the absence of a contract to the contrary, out of the jncome of the property, pay the Govern- G ment revenue, all other charges of· a public nature and all rent accruing due in respect thereof during such possession, and any arrears of rent in default of payment of which the property may be summarily sold; (d) he must, in the absence of a contra.ct to the contrary, R make such necessary repairs of the property as he can pay for out of the rents and profits thereof after **427** **A** **B** _**a**_ **D** E .AN.lNDllA!J _v._ 1'1lllltllA.i (Biln,,7. deducting from such rents and profits the payments mentioned in clause (c) and the interest on the princi· pal money; **I** **l** ' (h) his receipts from the mortgaged property, or. where such property is personally occupied by him, a fair oecupation-rent in respect thereof, shall, after deduct· ing the expenses properly incurred for the management of the property 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 (if any) 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 mortgager; ........... . 63A. (]) Where mortgaeed property in possession of the mortgagee has, during the continuance of the m_?rtgage, been improved .. the mortgagor. upon redemption. shall, in the absence of a contract to the contrary, be entitled to the improvement; and the mort~agor 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 neces· sary 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 pav 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 nrofits. if any, accruing by reason of the improvement shall be credited to the mortgagor. 72. A mortgagee may spend such money as is necessary I I I J ·Ii (b) for .the prese!"'ation of the mortgaged property from destruction, forfeiture or sale; ' ' # and mav, in the absence of a contract to the contrary. . add such money to the orincipal monev. at the rate of interest payable on the nrincioal. and where no such rate is fixed, at the rate of nine per cent ner a.nnum; Provided that the expenditure of monev bv the morteagee under clause (b) or c'uusc (c) shall not be deemed to be necessary 428 SUPRE~!E COURT REPORTS [J 908] 1 S,C.R, unless the mortgage)! has been called upon and lias failed to take proper and timely steps to preserve the properly or to support the title ...... ". It seems to us clear that the object of s. 76(d) is not to fix any priorities but to make it obligatory on the mortgagee, in the absence of a contract to the contrary, to carry out necessary repairs to the property but the amount he can spend is limited to the .difference between rents and profits and payments mcntionec! in cl. (c) and the interest on the principal money. When we come to cl. (h), it directs the mortgagee to apply the receipts from the mortgaged property in a certain manner. The order of application is (!) the expenses properly incurred for the management of the property and the collection of rents and profits and the other expenses _mentioned_ in els. (c) and (cl), (2) interest thereon, (3) the surplus, if any, has to be utilised towards reduction of interest on principal money. and (4) the principal money itself. Jn our view, there is no contradiction between s. 76(d) and s. 76(h). It is true, as stated in proposition No. 2 of the learned counsel, tha.t the liability for repairs is limited in its scope and arises only if there is a surplus left after deducting from the rents and profits of the property the expenses mentioned in cl. (c), and the interest on the principal money, but the fact that the liability is limited in scope does not bear on the question whether it lays down any order of priorities inconsistent with the priorities mentioned in cl. (h). This is so because, as we have stated above, s. 76(d) is not concerned with the question of priorities but with limiting the amount which can be spent by the mortgagee in possession for carrying out necessary repairs. A B c D E ### Coming now to the third proposition. it is not necessary to deal with the question of the relationship between s. 63A, s. 72(b) and s. 76, because the plaintiff has neither alleged nor proved that any expenses were incurred by which improvement was effected and the improvement was necessary to preserve the property from destruction or deterioration within s. 63A(2). Similarly, he never F alleged or proved that he spent money which was necessary for the preservation of the mortgaged property from destruction, forfeiture or sale within s. 72(b). There is no allegation or evidence that the mortgagor had been called upon and failed to take proper and timely steps to preserve the properly. #### . . . We may mention that the only allegation to which our atten- G tion was drawn is contained in para 11 of the written statement, which reads as follows : "11. The transaction dated 4-8-28 is not one of security or mortgage. The defendant has never received rent for the suit property more than Rs. 65 per month, The defendant has incurred expenses from time to time H for taxes, expenses, maintenance, repairs, (and) constructions. The defendant made constructions and **B** _r_ **A»ilt>a&K** '· _PU1W1_ (Bi1n. J.) repairs and spent more tbaD. Rs. 10,000 (ten thousand) therefor because it was bis own property. I shall produce an extract in that behalf. For many years the property under dispute was unoccupied." This hardly covers the point now sou~t to be made. For the aforesaid reasons the appeal fails and is dismissed with eosts. G.C. _Appeal dismissed._