Case: Anandram Jivraj Gagle Vs. Premraj Mukandas &amp; Ors

2. 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. 5,000 was in fact a possessory mortgage. One of the terms of this deed dated August 4, 1928, wasa 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 propertytransaction 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. 4812-6-0 as principal, and Rs. 4,612-6-0 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 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 discharged 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 76 (h) of the Transfer of Property Act, 1882 (IV of 1882) and were, therefore, proper.

Court's reasoning:
In our view there is no contradiction between Section 76 (d) and Section 76 (h). 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. (h). This is so because, as we have stated above, Section 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.7. Coming now to the third proposition it is not necessary to deal with the question of the relationship between Section 83A, Section 72 (b) 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 63A (2). 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 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 property.It seems to us clear that the object of Section 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 mentioned in Clause (c) and the interest on the principal money. When we come to Clause (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 76 (d) and Section 76 (h). 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. (h). This is so because, as we have stated above, Section 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.