Appeal No 8 of 1965
Appeal by special leave from the judgment and decree dated October 5 1962 of the Bombay High Court in Appeal No 598 of 1960 from Appellate Decree
section T Desai and J P Aggarwal for the appellant
O P Malhotra and P C Bhartari for the respondents
425 The Judgment of the Court was delivered by Sikri J
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 follows 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 5000 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 9224 12 0 Rs 4612 6 0 as principal and Rs 4612 6 0 as interest thereon within six months from that date
A preliminary decree was directed to be drawn up
The appellant filed an appeal in the Court of the District Judge Ahmednagar 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 loan
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 section 76h of the IV of 1882 and were therefore proper
The method of accounting followed by the Commissioner ap pointed 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 426 month to month the outgoings were deducted in the following order of priority  1
Payment of taxes
Payment of interest on the amount of expenditure on maintenance and repairs
Payment of the expenditure on maintenance and repairs
Interest on the amount of principal of the mortgage bond
Amount of principal under dispute
The learned counsel for the appellant Mr section T Desai says that item 4 above should be item 3 and to substantiate this has submitted three propositions before us  1 Section 76h does not lay down any order of priority inconsistent with the order of priority mentioned in section 76d and does not reverse that order
Both the provisions must be read together and in a harmonious manner 2 The liability for repairs under section 76d 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 i expenses mentioned in clause c and ii interest on the principal money 3 If the mortgagee expends more for repairs than the surplus left after the last mentioned deductions that expense would not be in pursuance of any liability of his under section 76d but would be claimed under the right conferred by section 63A2 and section 72b
Such expenses would be treated as additions to the principal money
Sections 76 c d h 63A and 72b read as follows 76
When during the continuance of the mortgage the mortgagee takes possession of the mortgaged property c he must in the absence of a contract to the contrary out of the income of the property pay the Government 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 paymentof which the property may be summarily sold d he must in the absence of a contract to the contrary make such necessary repairs of the property as he can pay for out of the rents and profits thereof after 427 deducting from such rents and profits the payments mentioned in clause c and the interest on the principal money h his receipts from the mortgaged property or where such property is personally occupied by him a fair occupation rent in respect thereof shall after deducting 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 mortgagee  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 provide d 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
A mortgagee may spend such money as is necessary b for the preservation of the mortgaged property from destruction forfeiture or sale and may in the absence of a contract to the contrary add such money  to the principal money at the rate of interest payable on the principal and where no such rate is fixed at the rate of nine per cent per annum Provided that the expenditure of money by the mortgagee under clause b or cause e shall not be deemed to be necessary 428 unless the mortgagor has been called upon and has failed to take proper and timely steps to preserve the property or to support the title   It seems to us clear that
the object of section 76d 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 mentioned 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 1 the expenses properly incurred for the management of the property and the collection of rents and profits and the other expenses mentioned in cls
c and d 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
In our view there is no contradiction between section 76d and section 76h
It is true as stated in proposition No 2 of the learned counsel that 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
This is so because as we have stated above section 76d is not con cerned with the question of priorities but with limiting the amount which can be spent by the mortgagee in possession for carrying Out necessary repairs
Coming now to the third proposition it is not necessary to deal with the question of the relationship between section 63A section 72b and section 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 section 63A2
Similarly he never alleged or proved that he spent money which was necessary for the preservation of the mortgaged property from destruction forfeiture or sale within section 72b
There is no allegation or evidence that the mortgagor had been called upon and failed to take proper and timely steps to preserve the property
We may mention that the only allegation to which our atten 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 for taxes expenses maintenance repairs and con structions
The defendant made constructions and 429 repairs and spent more than Rs 10000 ten thousand therefor because it was his 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 sough to be made
For the aforesaid reasons the appeal fails and is dismissed with costs
GC Appeal dismissed


Summary:
The respondents filed a suit against the appellant for redemption of a mortgage
The suit was decreed subject to payment of a sum of Rs 9224 12 0 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 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 loan
 The appeal was dismissed
A second appeal in the High Court also failed
The appellant came to this Court by special leave
It was urged on his behalf that the priorities in section 76h of the Transfer of Property Act were subject to the priorities in section 76d and therefore interest on the principal amount should in the present case have been given priority over the payment of the expenditure on maintenance and repairs
HeldThe appeal must fail
The object of section 76d 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 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 cls c and d 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
There is no contradiction between section 76d and section 76h
The fact that section 76d 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 E