Mahant Ramdhan Puri vs Bankey Bihari Saran and Others

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeal No. 239 of 1954

Decision Date: 23 May 1958

Coram: P.B. Gajendragadkar, A.K. Sarkar, Subba Rao J.

In the matter titled Mahant Ramdhan Puri versus Bankey Bihari Saran and Others, a judgment was delivered on the twenty‑third day of May, 1958 by a bench comprising Justice P. B. Gajendragadkar, Justice A. K. Sarkar and Justice Subbarao K. Gajendragadkar, together with Justices A. K. Bose and Vivian, and reported in 1958 AIR 941 and 1959 SCR 1085. The petitioner was Mahant Ramdhan Puri and the respondents were Bankey Bihari Saran and others. The factual matrix involved a document executed by a person designated as D in favour of a person designated as M, wherein D hypothecated an eight‑anna share in a village as security for the discharge of a monetary liability of Rs 29,496 owed by D to an individual denoted as Al. At the time of this hypothecation, a pre‑existing tenancy (thika) existed in favour of a person identified as J for a term of nine years, under which D had received a peshgi sum of Rs 2,205 without interest and the annual rent for the land had been fixed at Rs 2,205. The instrument executed by D contained several stipulations: (i) interest at a rate of one‑half per cent per month was to be payable on the principal sum of Rs 29,496; (ii) to preserve the subsistence of the thika, M would receive the rent from J, appropriate Rs 1,769‑12‑0 towards interest, and pay Rs 435‑4‑0 as rent to D; (iii) after the expiry of the thika, M would take physical possession of the land, appropriate the produce to meet interest, and again pay Rs 435‑4‑0 as rent to D; (iv) upon the thika’s expiry, M would return the peshgi amount of Rs 2,205 to J, and that amount would be added to the principal due; (v) after a period of fifteen years, or any extended period, D would be required to repay the entire principal amount; and (vi) the land was furnished as security for the amount payable by D. The respondents, claiming to be the successors of D, instituted a suit for redemption on the basis that the transaction constituted a usufructuary mortgage, that accounts were required to be rendered, and that any surplus profits should be recovered. The appellant, representing the successor of M, contended that the suit for redemption was not maintainable because the transaction was a lease rather than a mortgage, and further argued that even if it were a mortgage, the statutory duty to render accounts did not arise because the document stipulated that receipts would be taken in lieu of interest, invoking Section 77 of the Transfer of Property Act, 1882.

The judgment concluded that the arrangement was unequivocally a mortgage and not a lease. It emphasized that the primary rule of construction requires an inquiry into the intention of the parties, and that when a debt is secured by land with a view to redemption, the arrangement must be treated as a mortgage irrespective of the label attached to it by the parties. The decision held that a contract existed between the mortgagor and mortgagee that fell within the meaning of Section 77 of the Transfer of Property Act, whereby the receipts from the mortgaged property were to be taken in substitution for interest. Accordingly, the mortgagee was not obligated to render accounts, as the stipulation for payment of Rs 435‑4‑0 to the mortgagor represented a personal obligation of the mortgagee, who retained the right to appropriate the entire receipts from the land in lieu of interest. The judgment further observed that the mention of an interest rate of one‑half per cent per month served merely to enable the parties to calculate the amount to be appropriated by the mortgagee from the rent, and that this reference did not defeat the application of Section 77 given the clear intention of the parties as expressed in the instrument.

The Court observed that the mortgagee had no statutory duty to render accounts. It noted that clause 1086 in the agreement required the mortgagee to pay Rs 435‑4‑0 to the mortgagor, and that this payment represented a personal obligation of the mortgagee. Consequently, the mortgagee was entitled to retain all receipts generated from the land in substitution for interest. Although the document fixed the interest rate as a certain percentage per month, the Court explained that the purpose of stating the rate was merely to enable the parties to estimate approximately the sum that the mortgagee could appropriate from the rent received from the thikadar. The Court further held that the mere inclusion of an interest rate could not defeat the applicability of Section 77 of the Transfer of Property Act, because the parties had clearly expressed an intention that Section 77 should govern the arrangement. The Court referred to the precedent set in Pandit Bachchu Lal v. Chaudhri Syed Mohammad Mah, (1033) 37 C.W.N. 457, to support this conclusion.

In the present civil appeal, numbered 239 of 1954, the appellant challenged the judgment and decree dated 12 December 1950 of the Patna High Court, which had set aside the earlier decree of the Subordinate Judge of Gaya. The appeal was filed under a certificate issued pursuant to Article 133(1)(a) of the Constitution of India. The matter arose from a document executed on 20 August 1923 by Deokinand, the common ancestor of plaintiff‑respondents 1 to 4 and provisional respondents 6 to 12, in favour of Mahant Tokhnarain Puri of Nadra, the predecessor‑in‑interest of defendant 1. That document hypothecated an eight‑anna milkiat share in mauza Lodipur, Mahimabigha, Tauze No. 4246, to discharge a debt of Rs 31,701 owed by Deokinand to the Mahanth. The plaintiff‑respondents claimed that the transaction created a usufructuary mortgage, while the appellant contended that it was a lease. Accordingly, the plaintiff‑respondents instituted Title Suit No. 4 of 1945 before the Additional Subordinate Judge, IV Class, Gaya, seeking redemption of the document on the basis that it was a usufructuary mortgage, and also seeking a rendition of accounts and the recovery of surplus profits. The appellant, in addition to denying the mortgage nature of the transaction, argued that even if the instrument were a mortgage, it would constitute an anomalous mortgage that did not impose any statutory liability to render accounts, and that, if it were a usufructuary mortgage, it should be governed by Section 77 of the Transfer of Property Act, thereby removing it from the operation of Section 76.

The Court noted that the appeal only required reference to clauses (d) and (g) of the statute in question and that it was unnecessary to set out the other defences because none of those issues affected the outcome of the appeal. The learned Subordinate Judge had concluded that the instrument in dispute created a usufructuary mortgage rather than a lease and that section 77 of the Transfer of Property Act applied, thereby relieving the appellant of any duty to render accounts. Accordingly, the Subordinate Judge issued a conditional decree granting possession to respondents I to IV, on the condition that they deposited the sum of Rs 26,839‑7‑0 in Court within six months of the date of the decree. The plaintiff‑respondents challenged that decree by filing an appeal in the Patna High Court. The High Court affirmed the Subordinate Judge’s finding that the instrument was a usufructuary mortgage, but it differed on the question of whether section 77 of the Transfer of Property Act should be applied. Consequently, the High Court set aside the Subordinate Judge’s decree and instead made a preliminary decree for redemption and for the sale of the property in the event of default of payment. That decree also ordered that the parties render accounts to one another in accordance with the directions contained in the judgment. The second defendant, against whom the High Court’s decree was made, then filed the present appeal.

The first issue for determination was whether the transaction should be characterised as a lease, as the opposing respondents alleged. The Court observed that the only reliable principle drawn from existing case law is that the parties’ intention must be examined, and that “once a debt is secured by land for its redemption, the arrangement is a mortgage by whatever name it is called,” a view recorded in Ghosh on Mortgages, V edition, volume 1, page 102. To discover the parties’ intention, the Court turned to the terms of the instrument identified as Exhibit A (3). It observed that the document was not prepared by a professional drafter; rather, it appeared to be the product of a village scribe and was therefore poorly organised. The Court decided to read the document while omitting recitals that were irrelevant to the question at hand.

In the opening portion of the instrument, it was recited that the executant was heavily indebted to the other party under mortgage bonds and other obligations. It further stated that mutual friends had agreed that a portion of the mortgaged lands should be let out under an ijara arrangement with possession, at a reduced rate of interest, so that “the increment of interest may be checked and the present necessities may be met.” The instrument also mentioned a pre‑existing thika (lease) dated 21 April 1922 in favour of Munshi Dodraj Lal, also known as Munshi Jatadhari Lal, for a term of nine years. Under that earlier lease, the executant had received Rs 2,205 as peshgi money without interest, and the rent had been fixed at Rs 2,205. The document then continued with the following wording: “In respect of Rs 29,496 the total sum of peshgi money,” which leads to the subsequent provisions that were to be examined in the following part of the judgment.

In the document the executant was required, for the purpose of satisfying interest on the advance, to execute a usufructuary mortgage deed that carried a lower rate of interest. This deed concerned an eight‑anna share, that is, a half share, in Mauza Lodipur Mahima Bigha together with its principal and dependent lands, both known and unknown tola, for a period of fifteen years, with an annual rent fixed at Rs 2,205. Under this arrangement the eight‑anna proprietary interest, the thikadari interest, the advance money and the right to receive thikadari rent from the thikadars were to be mortgaged. At the request and appeal of the executant, the Mahanthji, moved by the executant’s circumstances, consented to the request and prepared to have the usufructuary mortgage deed executed.

Consequently the executant voluntarily let out, in ijara with possession, the entire eight‑anna or half share of Mauza Lodipur Mahima Bigha for a total advance of Rs 31,701. Of this amount Rs 29,496 was to bear interest at one‑half percent per month, while Rs 2,205 was to be an interest‑free advance. The annual rent, including revenue and cesses, was fixed at Rs 2,205 for a term of fifteen years, commencing from the year 1331 Fasli and ending in 1345 Fasli, and the ijaradar was placed in possession of the ijara property as the executant’s representative. The document expressed the desire that the ijaradar should remain in possession as long as the thika held by Munshi Dodraj Lal alias Jatadhari Lal remained valid and in force. The ijaradar was to collect rent from the thikadars, their heirs and representatives in accordance with the stipulations contained in the thika patta and kabuliat, and to bring that rent into his own possession. By his own authority the ijaradar was to set off an amount of Rs 1 769‑12‑0 each year as interest on the interest‑bearing advance and to remit the balance of Rs 435‑4‑0, the reserved rent, to the executant and his heirs and representatives. The ijaradar was expressly prohibited from defaulting; should he or his heirs default, they would be liable to pay interest at one‑half percent per month.

The deed further incorporated terms that would take effect after the termination of the thikadari interest. It provided that the ijaradar, or his heirs and representatives, acting on his own authority, would be competent to bring the thika property into his possession as ijara property, acting as the executant’s representative, in accordance with the provisions of the patta and kabuliats, after setting off Rs 2,205 of the advance money due to the thikadars against the annual thikadari rent. The ijaradar was directed to arrange cultivation of the ijara property, to have it cultivated by others, and to realise the cash proceeds and

The ijara deed stipulated that the income generated from the ijara property by way of rent from the tenants and the produce of both shares of the property would be collected by the ijaradar. The executant, together with his heirs and representatives, were expressly denied any right, claim or demand to any portion of the produce or the income of the ijara property for as long as the ijara deed remained in force, except that they were entitled to receive a rent of Rs 435‑4‑0 after the payment of, and deduction for, interest on the peshgi money that bore interest. The document further assigned responsibility for any improvement expenses and amounts spent in connection with boundary disputes to one or the other of the parties who had signed the deed. It then set out that the peshgi money, amounting to Rs 31,701 with and without interest as mentioned in the ijara deed, had been obtained from the ijaradar in the following manner: the executant allowed Rs 28,246 as the principal loan amount, together with simple and compound interest calculated according to the schedule provided below, after the remission of the interest that was due to the ijaradar under all three mortgage bonds. This interest remission was to be set off against the peshgi money by affixing a note to the reverse side of the mortgage bonds, which the executant permitted to remain with the ijaradar as evidence of the payment of the peshgi money covered by the deed. The term of the ijara deed with possession was fixed to end in the month of Jeth, 1345 Fasli, at which time the executant or his heirs and representatives were required to repay the entire sum of Rs 31,701, representing the peshgi money with and without interest, in a single lump‑sum cash payment to the ijaradar or his heirs and representatives, and to take the ijara property back into his possession. If the executant failed to make this repayment on the expiry of the term, the deed with possession would continue to remain in full force and effect, with all its stipulations, until the whole amount, together with interest, was paid in full. Moreover, the executant and his heirs and representatives were prohibited from making any claim or demand for any increase in the produce of the property, except for the fixed rent already specified. In order to secure the payment of the peshgi money with or without interest, the executant declared that he had mortgaged, hypothecated, encumbered and made the ijara property liable as security. He further made an unequivocal declaration that, until the entire peshgi money had been fully repaid, he would not, directly or indirectly, mortgage, hypothecate, encumber or transfer the ijara property on any allegation. In sum, the transaction showed that the executant was heavily indebted to the other party under mortgage bonds and other arrangements; through the assistance of mutual acquaintances, an effort was made to salvage part of the property, thereby addressing the large amount owed by the executant to the other party.

In this case the parties had agreed that the amount due from the executant would be fixed at twenty‑nine thousand four hundred ninety‑six rupees, and that a half‑share in the mauza would be given as security to the creditor. At the time the deed was executed an outstanding thika document existed in favour of a third person, under which that third person had advanced two thousand two hundred five rupees to the executand and was entitled to receive the same amount as annual rent. The creditor consented to release the advance paid by the third person to the executand, and in return the right to collect the rent from the third person was also assigned to the creditor as additional security. Consequently the executand received a total of thirty‑one thousand seven hundred one rupees under the deed; of this sum, twenty‑nine thousand four hundred ninety‑six rupees bore interest at one percent per month, while the balance of two thousand two hundred five rupees was exempt from interest, presumably because the creditor did not actually pay that portion to the executand.

The deed divided the transaction into two distinct phases. The first phase dealt with the terms applicable while the thikadari interest was in force. During that period the creditor was to receive the annual rent of two thousand two hundred five rupees from the thikadars, to deduct one thousand seven hundred sixty‑nine rupees twelve annas as interest on the advance money, and to forward the remaining four hundred thirty‑five rupees four annas to the executand as reserved rent. The second phase, which commenced after the thikadari interest expired in the year one thousand three hundred thirty‑eight Fasli, required the creditor to take actual possession of the ijara property by setting off the two thousand two hundred five rupees of advance money against the annual thikadari rent. Once in possession, the creditor would arrange for cultivation of the land and appropriate the produce to satisfy the interest, paying the executand only the fixed rent of four hundred thirty‑five rupees four annas. The earlier deeds were discharged and endorsements confirming the discharge were placed on the back of the documents. It was further stipulated that if the debt remained unsettled by one thousand three hundred forty‑five Fasli, the ijara deed with possession would continue in full force until the entire advance money was repaid. The executand expressly undertook not to claim any increase in the produce except for the rent fixed in the deed. From this summary the following facts emerged: the executand owed a large sum to the creditor; interest of one percent per month was payable on twenty‑nine thousand four hundred ninety‑six rupees, i.e., on the whole consideration excluding the amount advanced by the thikadars; the method of debt discharge was prescribed, with the creditor receiving rent from the thikadars during the interest period, deducting interest, and paying the residual rent to the executand.

According to the terms of the deed, the other party was required to pay a rent of Rs 435‑4‑0 to the executant. After the period of the thikadari interest ended, the other party was expected to take actual possession of the land, to appropriate the agricultural produce in order to satisfy the interest due, and to continue paying only the same amount of Rs 435‑4‑0 as rent to the executant. The deed further stipulated that, after a period of fifteen years—or after any extension of that period—the executant would be obligated to repay the whole principal sum to the other party. In addition, a specific parcel of land measuring eight annas in the mauza was expressly earmarked as security for the amount that the executant was required to pay.

The document created a clear creditor‑debtor relationship between the two parties, with the property being offered as security for the loan together with the agreed interest. Although the instrument was described in the record as a “cowle,” the parties had previously dealt with one another and were therefore deemed to have fully understood the character of the transaction they were entering into. The nature of the transaction was spelled out in clear and explicit language in more than one clause of the deed. The executant asked the other party to execute, in relation to the advance amount and the interest, a usufructuary mortgage deed that would carry a lower rate of interest on the eight‑anna share of land.

After setting out the various conditions, the executant restated the parties’ intention in the following words: “In security of the payment of the peshgi money with or without interest mentioned in this ijara deed, I, the executant, have mortgaged, hypothecated, encumbered and made liable the ijara property.” This unequivocal declaration removed any doubt that might have arisen from the earlier recital, confirming that the property was given as security for the loan and that the instrument was executed in the character of a mortgage. The substance of the deed was therefore not a simple lease of premises with rent reserved, but a mortgage of the premises in which only a small portion of the income was to be paid to the plaintiff as rent.

Consequently, the Court found no room for the argument that the deed should be treated as a lease rather than a mortgage. Agreeing with the decision of the High Court, it held that the instrument constituted a mortgage and not a lease. The appellant’s counsel subsequently contended that the deed did not create a usufructuary mortgage but an “anomalous” mortgage, arguing that if the latter characterization applied, the parties’ rights and obligations would be governed solely by the terms of their contract and not by section 76 of the Transfer of Property Act. The Court observed that this specific issue did not need to be resolved in the present case. Whether the transaction was classified as a usufructuary mortgage or as an anomalous mortgage, the Court noted that, given the factual circumstances, there would be no practical difference with respect to the requirement to render accounts, a point that would be further explained in the subsequent analysis.

The Court indicated that it would examine the issue by first assuming the mortgage to be of a usufructuary nature. On that basis, the appellant argued that he should not be required to render accounts to the mortgagor because, as the mortgage deed provides, he was authorized to retain the receipts in place of interest within the meaning of section 77 of the Transfer of Property Act. The Court then reproduced the relevant statutory provisions. Section 76 states that when, during the continuance of the mortgage, the mortgagee takes possession of the mortgaged property, he must keep clear, full and accurate accounts of all sums received and spent by him as mortgagee, and, at any time during the continuance of the mortgage, give the mortgagor, at his request and cost, true copies of such accounts and of the vouchers by which they are supported; 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 mortgager. Section 77 provides that nothing in section 76, clauses (b), (d), (g) and (h), applies to cases where there is a contract between the mortgagee and the mortgagor that the receipts from the mortgaged property shall, so long as the mortgagee is in possession of the property, be taken in lieu of interest on the principal money, or in lieu of such interest and defined portions of the principal.

From these provisions, the Court observed that clause (g) of section 76 imposes a statutory duty on a mortgagee who is in possession to keep full and accurate accounts supported by vouchers. Clause (h) further requires the mortgagee to debit the net receipts after deducting the amounts due to him as interest, to apply any excess first to reduce or discharge the mortgage‑money, and to pay any remaining surplus to the mortgagor. Consequently, every mortgagee in possession is bound to keep clear accounts and to render them to the mortgagor in the manner prescribed by clause (h). However, section 77 creates an exception to the liability imposed by clauses (g) and (h) of section 76. Under section 77, if a contract exists between the parties agreeing that, while the mortgagee remains in possession, the receipts from the mortgaged property shall be taken in lieu of interest, or in lieu of interest together with defined portions of the principal, then the mortgagee is released from the statutory obligation to keep or render accounts under the said clauses of section 76. The Court therefore noted that the effect of such an agreement is to set off the receipts against the interest, leaving no surplus to be accounted for, and that insisting on the preparation of accounts in such circumstances would amount to a futile formality.

In this case, the Court explained that when a mortgage deed provided that the receipts from the mortgaged property would be taken in place of interest and a specified portion of the principal, the mortgagee was released from the statutory duty to keep detailed accounts or to furnish such accounts to the mortgagor as required by clauses (g) and (h) of section 76 of the Transfer of Property Act. The Court reasoned that because the receipts were directly set off against the interest, there was nothing left to be accounted for, and therefore demanding that the mortgagee keep or render accounts would amount to a mere formality without substance. The Court identified the essential condition for the operation of section 77 as the requirement that the entire receipts of the property be taken in lieu of interest or in lieu of interest together with a defined portion of the principal. The respondents’ counsel submitted that the relief of section 77 could be invoked only if the contract expressly authorised the mortgagee to take the whole receipts in lieu of interest or in lieu of interest and a defined portion of principal. According to that counsel, the purpose of the provision was that the receipts would be fully set off against the interest, leaving nothing to be accounted for; if only a part of the receipts were applied to interest and a defined portion of principal, a surplus would remain with the mortgagee and would have to be accounted for. Relying on this distinction, the counsel argued that in the present matter the mortgagee was required to pay the sum of Rs. 435‑4‑0 to the mortgagor and that the agreement did not authorise the mortgagee to take the entire receipts in lieu of interest within the meaning of section 77. In other words, the argument was that a portion of the receipts was paid to the mortgagor and the mortgagee was authorised only to retain the balance as interest, so that no contract existed for the mortgagee to take all the receipts in lieu of interest. The Court found this line of reasoning difficult to accept. It observed that Exhibit A(3) reflected an unconditional commitment by the mortgagee to pay Rs. 435‑4‑0 in respect of the mortgaged property. That commitment was not conditioned on the amount of receipts generated from the property while the mortgagee was in possession. Whether the land yielded any income or not, the mortgagee remained bound to make the payment to the mortgagor. Although the mortgagee was required to pay rent as consideration for his enjoyment of the land, his liability did not depend on the actual receipts; he was obligated to pay irrespective of whether receipts were earned. Consequently, his liability was a personal obligation independent of the receipts, while the mortgagee was expressly authorised to take

The deed provided that the mortgagee was entitled to receive the whole income generated by the land and to apply that income to satisfy the interest due, and the mortgagor expressly undertook not to assert any claim or demand for any increase in the produce. In summary, the mortgagee bore a personal liability to pay the sum of Rs 435‑4‑0 to the mortgagor, while at the same time he possessed a right to retain the entire receipts from the land as payment of interest. Consequently, the arrangement was not one in which the receipts from the mortgaged property were to be shared between the mortgagor and the mortgagee; rather, the mortgagee was required to pay a fixed amount to the mortgagor and to appropriate the whole of the receipts for his interest. Accordingly, the Court held that, under the mortgage deed identified as Exhibit A(3), a contract existed between the mortgagee and the mortgagor that fell within the definition of section 77 of the Transfer of Property Act, obliging the parties that the receipts from the mortgaged property should be taken in lieu of interest. Relying on the decision of the High Court, counsel for the respondents further argued that the inclusion of a specific rate of interest in the document indicated that the mortgagee should take only that portion of the net receipts sufficient to discharge the interest, with any surplus to be credited to the mortgagor. The Court noted that merely stating a rate of interest does not inevitably lead to that conclusion. A rate of interest may be stipulated simply to estimate the amount payable as interest, enabling the parties to assess whether the net receipts could reasonably be applied against the interest, and the rate may also serve other purposes. The Judicial Committee, in Pandit Bachchu Lal v Chaudhri Syed Mohammad Mah, observed that even though a particular rate of interest was mentioned in the mortgage deed, a contract within the meaning of section 77 of the Transfer of Property Act still existed. That case involved a mortgage with possession where a specific rate of interest was noted; the deed also permitted repayment of the principal, either wholly or partly, before the stipulated period, but otherwise required the mortgagee to appropriate any surplus profits towards interest, leaving the mortgagee without a claim to interest and the mortgagors without a claim to the profits. The Privy Council, interpreting the deed, affirmed that it contained a contract as defined by section 77 of the Transfer of Property Act, 1882. Likewise, in Exhibit A‑3 of the present case, although the rate of interest is expressed as one percent per month, that figure was evidently included to allow the parties to roughly determine the amount that the mortgagee could appropriate from the rent received from the thikadar. It is clear that the same rate of interest is also cited when the parties consider their rights after the expiry of the thikadari interest.

In several places the mortgage deed expressly stated, in clear and unambiguous language, that the mortgagee was entitled to appropriate the produce as interest and that the mortgagor would make no claim or demand for any increase in that produce. Considering this plainly expressed intention of the parties, the Court could not conclude solely from the inclusion of an interest rate that the document fell outside the scope of section 77 of the Transfer of Property Act. Consequently, the Court held that section 77 applied to the deed and, as a result, the mortgagee was not required to render any account to the mortgagor. Even assuming that the mortgage qualified as an anomalous mortgage, the same conclusion was reached.

The counsel for the appellant argued that, if the mortgage was anomalous, the parties should be governed only by the provisions of section 98 of the Transfer of Property Act and not by section 77. Section 98 provides that, in the case of an anomalous mortgage, the rights and liabilities of the parties shall be determined by their contract as reflected in the mortgage deed, and, to the extent that the contract does not cover an issue, by local usage. The Court noted that it was unnecessary to decide whether section 98 excludes the operation of other relevant provisions of the Act, including section 77, because whether section 77 applied, as contended by the respondents’ counsel, or whether the contract terms alone governed the parties’ rights, as argued by the appellant’s counsel, the outcome would be identical. The question for determination was whether, under the mortgage terms, the mortgagee had the right to appropriate the entire net receipts in lieu of interest.

The Court observed that Exhibit A‑3 not only contained a recital to this effect but also included a specific clause whereby the mortgagor expressly agreed not to claim any produce received by the mortgagee. Whether section 77 was applicable or not, the express terms of the contract made the appellant not liable to render accounts for any excess receipts. No further points were raised before the Court. Accordingly, the decree of the High Court was set aside and the decree of the Subordinate Judge was restored. The appellant was awarded costs throughout. The appeal was allowed.