R.A. Mehta, J.
1. These matters arise out of the final decree for redemption of mortgaged property. The questions involved are regarding the accounts taken and the amounts determined to be due for redemption of the mortgaged property. The trial court held that a sum of Rs. 5,441/- was due to the mortgagee and the plaintiff was directed to pay the same within six months from the date of the decree (30th October 1974) and the mortgagee defendant No. 1 was to give possession of the mortgaged property on receipt of the said amount. The trial court had worked out the amount as follows:
1. Rs. 400/- Principal amount.2. Rs. 1668/- Interest on principal amount of Rs. 400/- for the period from 6-7-35 to 6-4-70 at rate of Re. 1/- perhundred per month without cumulative interest.3. Rs. 2958/- For expenses.Rs. 617/- surface and floor repairing after 6-9-1951.Rs. 400/- water connection in 1954. (S. Y. 2010)Rs. 225/- electric connection No. 1962.Rs. 853/- for construction of ladders and wooden ladder in S.Y. 2019.Rs. 250/- Expenses for rent collection.Rs. 891/- Expenses for rent collection.Rs. 524/- Expenses cut by tenants at the time of paymentof rent to the defendant.4. Rs. 3036/- Interest on expenses.Rs. 1338/- interest on Rs. 617/- for 18 years and 7 months at the rate of I per cent per month.Rs. 768/- Interest on Rs. 400/- for 16 years at a rate of I per cent per month.Rs. 216/- Interest on Rs. 225/- for 8 years at the rate of 1 per cent per month.Rs. 714/- Interest on Rs. 853/- for 7 years at the rate of 1 per cent per month.Rs. 8062/-Rs. 3621/- Less amount being rent received by the defendant No.1 - for suit property.Rs. 5441/- Total amount payable to the defendant by the plaintifffor redemption of mortgagee property.Both the sides went in appeal to the lower appellate court. The appeal of the mortgagee was dismissed and the appeal of the mortgagor-plaintiff was partly allowed and instead of a sum of 'Rs. 5,441/- the District Court reduced the sum of Rs. 3.095/- and it worked out the figures in the following manner: Rs. 400/- The principal amount.Rs. 2958/- for the repairs, improvements and other expenses.Rs. 3358/- Total.PLUS :Rs. 3358/- The amount of interest equal to the principal amount.Rs. 6716/- Total.Rs. 3621/- Less amount of rent recovered by the mortgage payableto the mortgager.Rs. 3095/- Net Amount.
2. Because there were two appeals before the District Court and since the mortgagor (sic mortgagee) is aggrieved by the judgment and decree in both these appeals, has preferred these two Second Appeals even though they arise from one suit and one decree. The mortgagor has also filed cross objections for further reducing this amount.
3. There is no scope for disputing these various amounts in the Second Appeals, as they have been found proved. The trial Court, on appreciation of the evidence and consideration of the report of the Commissioner, has accepted these figures and the lower appellate court has also concurred with the same. 1 do not find that any question of law arises en the quantum of the different entries found to be proved.
4. However certain substantial questions of law do arise in these matters with reward to the mode of adjustment of the income against expenses and interest and then arriving at the principal amount due and interest thereon.
5. The Learned Counsel for the appellant debtor mortgagor has submitted that the lower appellate court has erred in (i) restricting the interest to the extent of the principal amount by applying Section 23 of the Bombay Money Lenders Act; (ii) by determining the interest and limiting the interest before setting off the rent recovered against the interest due; (iii) by not awarding interest from the date of the suit till the date of the decree; and (iv) by not awarding the interest from the date of the decree till realisation.
6. In other words, the mortgagor-debtor has submitted that the lower courts have erred in adding the amount of expenses to the principal amount without deducting the income received by the mortgagee creditor in possession. According to the contention of the mortgagor, even the proved income of Rs. 3,621/- was more than sufficient to meet and set off all the expenses proved i. e. Rs. 2.958/-and therefore there was no question of any addition to the principal amount and, therefore, a decree for a sum of Rs. 400/- on account of principal and a decree of Rs. 400/- on account of interest could have been passed at the most and thus the mortgagor could not have been required to deposit a sum more than Rs. 800/.
7. The mortgage deed ex. 24 provides that it was a mortgage with possession and the rent was to be adjusted towards interest. The principal amount advanced at Rs. 400/- and it appears that the property was rented by the mortgagor to the morgagee himself and the monthly rent of Rs. 4/- was agreed and Rs. 16/ - the rent for four months was to be adjusted towards interest and. the interest was one per cent per month and there is further direction that if the interest was in arrears for four months that amount of arrears of interest would also carry interest at the same rate of one per cent per month. There is no express term regarding the repairs to be carried out by the mortgagee in possession. Ex. 30 is the rent note of the same date 9-7-35. Below that rent note there is a writing ex. 37 dt. 6-9-51 whereby the lease taken by the mortgagor is surrendered and it is mentioned that thereafter whatever rent is received from tenants may be adjusted towards the dues and if any 'kharajat or repairing is to be made by the mortgagee the same was to be debited against the mortgagor. This writing is not signed by the mortgagor but it is signed by one Narottam Mulji, who is a relative. But here also there is no authority to make improvements but the authority was only confined to repairs.
8. Under Section 63A of the Transfer of Property Act, the mortgagor is not liable to pay the costs of the improvements done by the mortgagee unless the improvement effected 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. Therefore, we shall have to find out as to which are the expenses incurred which can be said to be necessary as contemplated by Section 63-A(2). Section 76 of the Transfer of Property Act provides for liabilities of mortgagee in possession. It provides that such mortgagee shall manage the property as a person of ordinary prudence (Clause a) and he must use his best endeavours to collect the rents and profits thereof (Clause b); 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 deducting from such rents and profits the payments mentioned in (Clause c) and the interest on the principal money (Clause d); he must keep clear, full and accurate accounts of all sums received and spent by him as mortgagee (Clause g); receipts from the mortgaged property after deducting the expenses properly incurred for the management of the property and collection of rents and profits and other expenses and interest be debited against him in reduction of the amount on account of the interest and surplus towards the principal (Clause h).
9. Prom the aforesaid statutory provisions it is clear that under Section 76(d) the mortgagee must. in absence of the contract to the contrary, make such repairs of the property as he can pay for out of the rents and profits thereof after deducting the interest on the principal amount. Therefore, this authority to make repairs is restricted to the net income from the property. Under Section 63-A he can carry out such improvements only which are necessary to preserve the property and the security.
10. In the present case, the trial court has taken the interest from the date of the mortgage in 1935 till the date of the suit 1967; and for that entire period of 35 years the interest is calculated at Rs. 1.668/- on the principal amount of Rs. 400/-, The trial court had similarly taken various amounts of expenses and on that the interest is awarded from the date of expenses till the date of the suit. Thus on the expenses of Rs. 2,958/- interest !of Rs. 3.036/- has been awarded; and from that total amount of principal and interest amounting to Rs. 8,062/- the rent realised Rs. 3,621/- is deducted and an amount of Rs. 5,441/ - is found to be due.
11. The lower appellate court has added up the amount of principal and the expenses and found the total principal amount due to be of Rs. 3,358/- and added equal amount by way of interest, instead of Rs. 4,704/- restricting the amount of interest to the amount of principal amount due and from that total amount of principal and interest the rent realised has been deducted and a sum of Rs. 3.095/- is held to be due and payable.
12. The lower courts have totally ignored the provisions of Section 76 of the Transfer of Property Act while determining the amount due. The total income from the mortgaged property is Rs. 3,621/-. The items of expenses included Rs. 250/- and Rs. 891/- being expenses for rent collection and Rs. 524/- being the expenses deducted by the tenants at the time of making the payment of rent to the mortgagee. These amounts (Rs. 1,665/-) necessarily have to be deducted first from the income of rent then only we can come to the net figure of rent income. Therefore a sum of Rs. 1,665/- is required to be deducted from Rs. 3,621/- and, therefore, the net income from the suit property is Rs. 1,956/-. From this amount the mortgagee was entitled to make appropriation towards interest from time to time. However, he has failed to do so. In fact he has not maintained regular accounts at all and the accounts which have been reconstructed and filed before the Commissioner are the accounts based on memory. Two items are relating to water connection in 1954 and electric connection in 1962 and that expenses comes to Rs. 625/- These expenses cannot be said to be repairs of the existing property but they are improvements for which no authority was given by the martgagor and, therefore, strictly speaking they would not be permissible expenses. However, in view of the fact that on account of these facilities being given higher rent must have been realised and that has been given credit; these items are also required to be set off against the income from rent. Therefore. deducting Rs. 625/- from the net rental income of Rs. 1,956/- two items remain, namely, Rs. 617/- for surfacing and floor repairing and Rs. 853/- in respect of ladder and wooden stair. They can be taken to be permissible repairs and for those amounts the mortgagee would be entitled to credit. However, the same is required to be adjusted against the income from rent. The remaining income from the rent is Rs. 1,331/- and these items of expenses are of Rs. 1,470/-. Thus an amount of Rs. 141/- only is required to be added to the principal amount of Rs. 400/-. Thus the principal amount due on the date of decree is Rs. 541/-. On this amount, if Section 23 of the Bombay Money Lenders Act applies, he would be entitled to a sum by way of interest not exceeding the principal amount of Rs. 541/-. Section 23 of the Bombay Money Lenders' Act reads as follow:
23. Notwithstanding anything contained in any agreement or any law for the time being in force, no court shall in respect of any loan whether advanced before or after the date on which this Act comes into force, decree, on account of interest a sum greater than the principal of the loan due on the date of the decree.
13. The Learned Counsel for the mortgagee submitted that the suit transaction was made in 1975 in Saurashtra area and this Act was made applicable in that area only in 1962 and, therefore, this section would not be applicable to the present case. The present suit is filed in 1970 and the section in very clear and no uncertain terms provides 'notwithstanding anything contained in any agreement or any law' the court shall not decree on account of interest a sum greyer than the principal due on the date of the decree. Therefore at the time when the court passes the decree, the court has applied the law contained in this section and the court has no jurisdiction to pass a decree on account of the interest a sum greater than the principal of the loan due.
The Learned Counsel for the mortgagor has argued that 'on account of the interest would include not only the interest in arrears but also the interest paid in past. payable at present and that may become payable in future taking into account the interest that has been paid or payable the court has to see that on account of interest the creditor does not pay the sum larger than the principal amount due and in this connection he has relied on the definition of the term 'interest' in Section 2(6) which provides that interest includes any sum by whatsoever name called, in excess of the principal paid or payable to a money-lender in consideration of or otherwise in respect of a loan.
14. Reference was also made to a judgment of the Supreme Court in the case of A. Manick Chand and Ors. v. Elias Saleh Mohamed Suit and Ors. : 2SCR1082 . In that case the Supreme Court was construing Section 17 of the Mysore Money Lenders' Act which was in a form of a directive to a court not to pass a decree on account 'of arrears of interest for a sum greater than the principal of the original loan and the Supreme Court held that the directive was to be carried out by the court at the time of passing of the decree and the maximum prescribed for the arrears of interest must therefore be held to be maximum amount in respect of interest payable upto the date of the decree when the court carries out the directive laid down in that section. In that case before the Supreme Court the language of the section was 'on account of arrears of interest'. The Learned Counsel for the mortgagor submits that in the present case it is not 'arrears of interest' but 'interest' only and the 'interest' is defined as to include the sums paid as well as payable. It is true that the language is different but the effect is not different; because the direction and prohibition is to the court not to award in excess of the principal amount of the loan due on the date of the decree. Therefore, the court is required to find out the amount of loan due on the date of the decree and the court is directed not to pass a decree on account of interest sum greater than the principal amount found due on the date of the decree. It is thus clear that on account of interest the court is required to find out the interest due on the date of the decree and while doing so necessarily the amount of interest which has been paid or appropriated towards interest has to be deducted and excluded on account of interest. Therefore effect is the same as was in the judgment of the Supreme Court in Mysore case. Moreover, the definition of the word interest' in Section 2 is not absolute and it is unless there is anything repugnant in the subject or context'. In the context of Section 23 where the words are 'on account of interest' on the date of the decree, interest already paid, appropriated and adjusted cannot be the subject matter of the decree and, therefore, that definition cannot be bodily and literally inserted and read in Section 23; because it would entirely distort the context.
15. The Learned Counsel for the mortgagee has also submitted that in the present case there was an agreement to pay compound interest on the interest arrears at the interval of every 'four months and there was an agreement to pay interest on such arrears of interest at the same rate. However, the mortgagee has failed to maintain any accounts to show that from time to time rent income was insufficient to pay the interest and that interest had been in fact accumulating and it was credited towards principal at any time. If he had maintained true and correct accounts in accordance with his liability under Section 76, the rental income might have been clearly sufficient to take care of the interest becoming due from time to time. However, since he has failed to maintain any such account and he has failed to carry the' interest due towards the principal from lime to time, it is impossible to hold such amount as the principal amount. It appears that the agreement is merely to pay interest on interest, and not that the accumulated interest is to be compounded with the principal amount. Since the principal amount was advanced by way of loan at that interest, it is a loan as defined in Section 2(9) and Section 23 is clearly attracted and applicable in the present case and, therefore, no amount by way of interest can be decreed on the date of the decree in excess of the principal amount found due on the date of the decree. Since on the date of the decree the principal amount found due is Rs. 541/- he will be entitled to the amount of interest upto the date of the decree to be that amount only. Therefore, the mortgagee would be entitled to a sum of Rs. 1082/- only on the date of the decree.
16. The next question arises as to the interest after the date of the decree till realisation. Under Order 34 Rule 11 (b) the court may order payment of interest to the mortgagee subsequent upto the date of realisation at such rate as the court deems reasonable. In the present case, the mortgagee continues to be in possession and enjoying the income from the rent. From the accounts it appears that the property is capable, of fetching rent of Rs. 55/- per month. He would be liable to render accounts of the same after the date of the decree, from 1974 onwards. However, since this is an old redemption suit of 1970 it would not be worthwhile or even in the interest of justice to further delay the redemption by directing accounts to be taken again. It would be just that interest from the date of the decree is not awarded in view of the fact that during all this period the mortgagee has been continuing in possession and is entitled to realise the rental income therefrom.
17. In the result 'both the Second Appeals filed by the mortgagee fail and the cross objections of the mortgagor are allowed and the judgment and decrees of the lower courts are modified and it is directed that the plaintiff do pay a sum of Rs. 1,082/- to the defendant No. 1 within nine months from today i.e. 16th October, 1984 and defendant No. 1 the present appellant do give possession of 'the mortgaged property to the original plaintiff on receipt of the aforesaid amount of Rs. 1,082/-along with all the documents relating to the mortgaged property. Parties to bear their own costs throughout, in the facts and circumstances of the case.