SAIDUZZAMAN SIDDIQUI, J.-This appeal under clause 10 of the then Letters Patent, is directed against the judgment of a learned Single Judge of the erstwhile High Court of the West Pakistan, Karachi Bench, dated 17-6-1968, in a suit for closure and sale of the mortgaged property, directing taking of accounts in the case.
2. We have heard Mr. S. S. Pirzada and Mr. Mansoorul Arfin, the learned counsel for the appellant and respondent, respectively in this appeal.
3. The learned counsel for the appellant has raised the following contentions before us;
(1) That the appellant having tendered the mortgage debt on or before 23rd February, 1963 which was not accepted by the respondent, are absolved from the liability of payment of any future interest on the mortgage debt from the above date.
(2) That the respondent as mortgagee-in-possession were bound to realise the amount of profit and income arising from the mortgage property as a person of ordinary prudence would, if it were his own property and the respondent having failed to realise the same are liable to account for the same and the appellant is entitled to adjustment thereof against the mortgage debt."
In order to understand the controversy in its true perspective it is necessary to state here some of the facts stated before us. The admitted position in the case is that a sum of Rs. 5,50,000 was advanced as a loan to the appellant by the respondent Bank and to secure the same the appellant executed a mortgage by way of conditional sale in favour of the respondent on 30th June, 1962 in respect of their property bearing No. 19, measuring 9665 sq. Yds. Or there about, situated in West Wharf Industrial Area, Karachi. It is alleged by the appellant that soon after the execution of the mortgage deed the appellant were prevailed upon by the respondent to sell the mortgaged property to Messrs Rizvi Traders Ltd., for a sum of Rs. 5,78,000 and in this connection the appellant were made to sign agreement of sale (Exh. 9) drafted under the instructions of respondent which was a tripartite agreement between the appellant, respondent and the said Messrs Rizvi Traders Limited. The reason, it is alleged, for bringing about the execution of Exh. 9 was the existence of close association between the then Chief Executive of respondent Mr. Agha Hassan Abidi and the Chief Executive of Messrs Rizvi Traders Ltd., Mr. Shujaat Sheshmahal. It is an admitted position on record that upon execution of Exh. 9, possession of mortgaged property which was with the appellant was transferred to Messrs Rizvi Traders, who continued to remain in possession thereof. It is also admitted in the case that after taking over possession of the mortgaged property by Messrs Rizvi Traders Limited, differences arose between the parties and Exh. 9 was not performed. It i& the case of appellant that thereafter they made efforts and tendered the amount of mortgage debt to the respondent which they refused to accept. It is also urged on behalf of appellant that the agreement Exh. 9, in clear terms provided that if it was not performed within a period of four months from the date of its execution, then the permission given by the respondent to Messrs Rizvi Traders Limited, for use and occupation of the mortgaged property was to stand revoked and Messrs Rizvi Traders were to deliver back the vacant and peaceful possession of the same to respondent within 30 days thereafter and in default of that the respondent was entitled to receive from Messrs Rizvi Traders a sum of Rs. 1,000 per day as use and occupation charges of mortgaged property, which the respondent it is alleged failed to realise from Messrs Rizvi Traders Limited. In this back--ground of the facts we will now examine the contentions raised on behalf of the appellant in this appeal.
3. The learned counsel for the appellant in support of his first contention took us through the evidence recorded before the learned Single Judge and urged that as soon as four months period expired from the date of execution of Exh. 9 the appellant started making efforts to repay the amount of mortgage debt to the respondent. The learned counsel referred us to the letter dated 18th February, 1963 (Exh. 10) written by the appellant to the respondent as a preliminary step to repay the amount of loan to the respondent. The learned counsel also referred us to Exh. 11 written by the Standard Co-operative Bank Limited to the respondent, enquiring from the respondent the amount of mortgage loan due against the appellant and offering to discharge the same. The learned counsel went on to argue that after sending the letter dated 21-2-1963 (Exh. 11) a pay order in the sum of Rs. 5,65,000 was issued by the Standard Co-operative Bank Limited, in favour of the respondent. It is claimed that this pay order was offered unconditionally by the appellant to the respondent in discharge of the mortgage loan but it was improperly refused by them. The respondent on the other hand asserted that the above pay order was offered by one of the Directors of appellant subject to the condition mentioned in their letter Exh.
10. We may here also mention that during the course of arguments Mr. S. S. Pirzada, learned counsel for the appellant referred us to a letter dated 23rd February; 1963, copy whereof was filed along with the memo. Of appeal. This letter was addressed by the Standard Co-operative Bank Limited to the United Bank, forwarding a pay Order No. 1 430, dated 23-2-1963' in the sum of Rs. 5,65,000 in discharge of the liability )0,0f the loan of the appellant. This letter it is admitted before us by the learned counsel was not tendered in the evidence before the learned Single Judge and even in this appeal no prayer has been made for production of this letter in evidence under Order XLI, rule 27, C. P. C. In these circumstances we will keep this letter out of consideration as the same is not produced in evidence and proved in accordance with the law. The learned counsel for the appellant contends that the evidence tendered before the learned Single Judge in the form of two letters namely, Exhs.
1.0 and 11 coupled with the oral evidence of Ishaque Sultan, one of the Directors of the appellant proved a valid tender of the amount of mortgage debt to respondent which they improperly declined to accept and therefore the respondent were not entitled to claim any interest on that amount after that date in view of section 84 of the Transfer of Property Act. The learned counsel for the respondent on the other hand contended that the tender of the amount by 'the appellant towards payment of mortgage debt was a conditional offer and therefore it could not have the effect of discharging the appellant from the liability of payment of future interest. 1t is further contended on behalf of respondent that in order to entitle the appellant to cessation of future interest on the mortgage debt the amount should have been deposited in Court as provided under section 83 of the Transfer of Property Act and mere tender of amount unaccompanied by a deposit in Court could not relieve the mortgagor from the liability of payment of interest on the mortgage debt. Section 38 of the Contract Act provides that where promisor has made an offer of performance to the promise, and the offer has not been accepted, the promisor is not responsible for non--performance, nor does he thereby lose his rights under the contract. But this section further provides that in order to have effect as aforesaid every such offer must be-'---
(1) unconditional ;
(2) it must be made at a proper time and place and under such circumstance that the person to whom it is made may have a reasonable opportunity of ascertaining that the person by whom it is made is able and willing there and then to do the whole of what he is bound by this promise to do ; and
(3) if the offer is an offer to deliver anything to the promisee, the promisee must have a reasonable opportunity of seeing that the thing offered is the thing which the promisor is bound by his promise to deliver.
Section 83 of the Transfer of Property Act, provides that at any time after the principal money payable in respect of any mortgage has become due and before a suit for redumption of the mortgaged property is barred, the mortgagor, or any other person entitled to institute such suit, may deposit in any Court in which he might have instituted such suit to the account of the mortgagee, the amount remaining due on the mort--gage, and section 84 of the Transfer of Property Act provides that when mortgagor or such other person as aforesaid has tendered or deposited in Court under section 83 the amount remaining due on the mortgage, interest on the principal money shall cease from the date of the tender and in the case of a deposit, in Court under section 83 from the time the mortgagor or such other person as aforesaid has done all that has to be done by him to enable the mortgagee to take such amount out of Court a the case 'may be. In view of above provisions of law, in our view, in order to relieve the mortgagor from the liability of payment of future interest on the mortgage debt the payment must be offered to mortgagee covering the principal amount as well as the interest due on such date unconditionally an if the amount so offered is declined to be accepted by the mortgagee then the mortgagor will not be liable for payment of future interest from the date h made such tender to the mortgagee and he improperly declined to accept the same. In the case before us, therefore, in order to entitle the appellant to claim cessation of interest on the mortgage debt from the date of tender of the amount 'of mortgage debt it has to be shown that the tender of the amount by them to the respondent was unconditional. We are unable to agree with the learned counsel for the respondent that the liability for pay--ment of future interest on a mortgage debt by the mortgagor will cease to arise only when the tender of the amount is followed by a deposit in Court under section 83 of the Transfer of Property Act. The provisions of sec--tion 84 of Transfer of Property Act are quite clear and do not require that in order to enable a mortgagor to claim cessation of future interest on a mortgage debt on the ground of tender of the amount he must also deposit the same in Court to avail the cessation. This section clearly contemplates two situations in which cessation of interest will take place and in each of these situations a different time is provided from which the interest shall cease to accrue on the mortgage debt. In case of a tender by the mortgagor of the amount of mortgage debt the cessation of future interest on the amount takes place from the date of tender whereas in case of deposit in Court under section 83 of the Transfer of Property Act the interest cease to accrue on amount from the time when the mortgagor does everything in that behalf which enables the mortgagee to take such amount out of the Court. The learned counsel for the respondent in support of his contention that in order to entitle the mortgagor to claim cessation of future interest on the mortgage debt, the tender of amount must be followed by its deposit in Court, relied upon the cases of Abdul Rehman v. Noor Mohammad I L R 16 Bom. 141,and Maung Bakyard v. Nanigram Jajcmath AIR 1939 Rang. 316In the Bombay case referred to above a learned Single Judge of that Court took the view that according to Order XXII, rule 3 under the Judicature Act a plea of tender before action must be accompanied by a payment into Court after action. No reference in this case was made to the provision of section 84 of the Transfer of Property Act which will govern the present case and as such this decision is of no avail to the respon--dent.
Similarly in the Rangoon case cited above the learned Single Judge in that case with reference to the Bombay case referred to earlier by us, held that in a suit upon the mortgage, if the mortgagor desired to plead that interest had ceased to run because of a previous valid tender of the amount due, that plea would have to be accompanied by payment into Court. We are unable to agree with the above decision as we failed to find anything in section 84 of Transfer of Property Act which could justify such an inter--pretation. However, on merits, on a careful examination of the evidence in the case we are of the view that the tender of the amount of Rs. 5,65,000 on or about 23rd February, 1963 by the mortgagor to the mortgagee in discharge of the debt was not an unconditional payment and therefore it did not have the effect of absolving the appellant from the liability of payment of future interest on the mortgage debt. It is rightly pointed out by the learned counsel for the respondent that Akram Sultan Exh. 5, who is one of the Directors of the appellant- Company in his evidence in cross-examination unequivocally admitted that repayment of the debt was offered by them subject to the conditions mentioned in their letter Exh.
10. Witness Akram Sultan made the following reply in his cross-examination :- "We were prepared to pay the amounts (due to) the plaintiffs but subject to the (condition) contained in our letter of 13th February, 1963."
Mr. Pirzada, the learned counsel for the appellant contended before us that the points mentioned in the letter Exh. 10 are not actually conditions attached to the payment but are in the nature of obligations arising on the respondent as a mortgagee-in-possession and therefore the tender should be held to be unconditional. It is further contended by the learned counsel that the copy of the letter dated 23rd February, 1963 annexed with the memo. Of appeal under which the Standard Co-operative Bank Ltd., forwarded the pay order to the respondent neither made any reference to the letter of the appellant Exh. 10 nor contained any, condition for payment of the amount offered to the respondent. The learned counsel also relied upon the statement of one of the Directors of the appellant-Company. Akram Sultan who in his evidence before the Court stated that the sum of Rs.
5,50,000 covering the mortgage debt was sent by the Standard Co-operative Bank Limited, directly to the respondent which the latter refused to accept. In so far the letter dated 23rd February, 1963, copy whereof has been annexed with the memo. Of appeal is concerned, we have already held that the aforesaid letter cannot be read in evidence as it was neither produced before the learned Single Judge in evidence nor it has been proved in accordance with the law. In so far the statement of the witness Akram Sultan to the effect that the amount was sent directly by the Standard Co- operative Bank Limited to the respondent is concerned, we may mention here that this witness in his cross-- examination admitted that he was not aware as to how the pay order was sent to the respondent and further categorically stated that neither he nor his brother had taken the pay order to the respondent for payment. The other Director of the appellant, Ishaque Sultan who according to all was the person responsible for holding discussion with Mr. Kapadia of respondent in this behalf, when examined in Court stated in his evidence that the pay order was issued to him by the Standard Co-operative Bank Limited, and he personally took the same to the respondent who refused to accept it. Mr. Kapadia, who was examined in the case on behalf of the respondent and who is now dead, also stated in his evidence that the pay order was brought to him by Ishaque Sultan of appellant and that it was refused by the respondent because it was offered subject to the conditions mentioned in the letter Exh.
10. After a careful examination of the evidence in the case we are of the view that the pay order was issued by the Standard Co-operative Bank Limited to the appellant who offered the same to respondent in discharge of the debt subject to the conditions mentioned in their letter Exh.
10. It now remains to be seen whe--the the conditions mentioned in the letter dated 18th February 1963 (Exh. 10) were conditions attached to the repayment of debt or were only in the nature of obligations arising on the respondent as a mortgagee-in-possession. In order to appreciate the contention of the learned counsel we think it necessary to reproduce here the letter dated 18-2-1962 (Exh. 10) written by the respon--dent to the appellant which is as follows :- "The United Bank Ltd.,5: McLeod Road, Karachi.
Payment of overdraft Dear Sirs, We are pleased to refer to the discussion between Mr. N. Kapadia and the undersigned today the 18th instant and as agreed we are arranging to pay the full amount of Rs. 5,50,000. However, we would request your confirmation to as following points :-
(1) That all the title deeds would be released by you direct to the party to be authorised by us.
(2) That you will pass on all the rights to us in respect of the work--shop under the agreement - between your Bank, Messrs Rizvi Traders Ltd., and this Company.
(3) That you will help us in obtaining vacant possession of the premises.
(4) In case the vacant possession of the premises is not handed over to us by Messrs Rizvi Traders Ltd., immediately you will credit us with the lease money as well as Rs. 1,000 per day which you will recover from Messrs Rizvi Traders Ltd. In persuance of the existing agreement.
(5) That you will credit to our account all recoveries made from Messrs Rizvi Traders Ltd. In pursuance of the present agreement.
(6) That you will not pay Rs. 50,000 lying with you in trust for Messers Rizvi Traders Ltd. Unless they hand over the vacant possession of the premises to us and also clear their dues.
It is our desire to maintain cordial relations with your esteemed Bank and surely with your co- operation we would arrange payment as soon as we have your confirmation to the points raised above.
Thanking you.
Yours faithfully, For J. Tyler & Co. Ltd. (Sd.) Ishaq Sultan. Director."
After carefully examining the contents of the letter (Exh. 10) and the' admission made by the appellant's witness Akram Sultan in cross-examination) that the repayment of loan was offered by the appellant subject to the terms and conditions contained in Exh. 10 we are of the view that the payment offered by the appellant was conditional and that all the conditions mentioned in Exh. .10 were not in the nature of obligations arising on the respondent as a mortgagee-in-possession. At least condition No. 6 of the letter Exh. 10, relating to withholding of payment of a sum of Rs. 50,000 (Rupees Fifty Thousand) lying the respondent to Messrs Rizvi Traders Limited until they hand over vacant possession of the premises cannot in an way be deemed to be an obligation arising on the respondent as a mortgagee---in-possession. We are accordingly of the view that the payment offered by the appellant to respondent was not unconditional and therefore the interest on the amount of debt did not cease to run .From the date of tender. It is next contended by Mr. Pirzada, the learned counsel for the appellant that the respondent. As a mortgagee-in-possession was bound to take care of the property as a person of ordinary prudence would do, if it was his own, and should have used his best efforts to realise and collect rents and profits arising from the mortgaged property. It is urged that the agreement Exh. 9, provided that in case of its non- performance within 4 months of its execution, the occupant Messrs Rizvi Traders Limited were to surrender vacant possession of the property within 30 days thereafter failing which the respondent were entitled to recover a sum of Rs. 1,000 per day as use and occupation charges of the property from them. It is contended that the respondent having failed to recover the sum of Rs. 1,000 per day from Messrs Rizvi Traders Limited, as provided in the agreement Exh.
9. Are liable to account for the same and the appellant are entitled to claim adjustment of this amount from the mortgage debt.
Mr.Arfin, the learned counsel for the respondent in reply to the above argument of Mr. Pirzada, contended that the fact whether the respondent was a mortgagee-in-possession or not is a question of fact which was neither in issue before the learned Single Judge nor this issue arose on the pleadings of the parties. It is accordingly urged that the approach of learned Single Judge in his judgment that the respondent was a mortgagee-in-possession, holding further that they were not liable to account for to the appellant, was not correct. It is contended that in order to decide this issue of fact it must be shown firstly, that it arises from the pleadings of the parties and secondly, specific issue in this behalf should have been framed by the learned Single Judge and opportunity should have been given to the parties to adduce evidence on this issue. The judgment of learned Single Judge shows that it was not disputed before him by the respondent that they were the mortgagee---in-possession. The following observation in the judgment of learned Single Judge are pertinent in this regard :- "It is however the contention, of the Bank that they had no instructions from the mortgagor to do so, and it was not possible for them as mortgagee-in-possession to recover the amount in their own right through a court of law."
Mr. Arfin, made a statement at bar during the course of hearing of this appeal before us that this was never the case of respondent before the learned Single Judge and offered to file his personal affidavit in this regard but we did not feel it necessary to ask Mr. Arfin to file his personal affidavit as Mr. Pirzada, the learned counsel for the appellant very fairly stated before us that although from the judgment of learned Single Judge it appears that the respondent had not disputed the position that they were mortgagee-in. Possession but from the notes of the counsel, who appeared for the appellant before the learned Single Judge, and which are available with him, it clearly appears that the respondent had taken the stand that they were not the mortgagee-in-possession. Mr. Pirzada, accordingly stated before us that the statement of Mr. Arfin that the respondent never accepted the position as a mortgagee-in-possession before the learned Single Judge, seems to be correct and may be accepted by us. Mr. Pirzadad, however, added that while it may be correct to say that the respondent did not concede to the position before the learned Single Judge that they were the mortgagee---in-possession, it will not be correct to say that this controversy was not before the learned Single Judge. Mr. Pirzada, invited our attention to the averments made in paragraph 13 of the written statement wherein the defendant alleged that the respondent failed to credit the rent at the rate of Rs. 1,000 per day under clause 4-C of the agreement to the account of the appellant.
The learned counsel also invited our attention to the document Exh. 9 to show that this piece of admitted evidence did show that the respondent was a mortgagee-in-possession. Alternatively it is contended by Mr. Pirzada, that Issue No. 2. As framed in the suit was wide enough to determine the contention of the parties whether the respondent was a mortgagee-in-possession or not. It is also contended by Mr. Pirzada, that the parties having led evidence on the issue, mere fact that the Court had omitted to frame a specific issue on that account could not take away the power of the Court to decide the controversy between the parties. It is further contended that even it be assumed that the controversy with regard to the fact whether the respondent was a mortgagee- in-possession or not was not put in issue specifically but this did not mean that the learned Single Judge, could not decide the same if evidence was led before him on this controversy by the parties. After having gone through the evidence recorded in the case we find sufficient force in the argument of Mr. Pirzada, that the controversy with regard to the fact, whether respondent was a mortgagee-in-possession or not was substantially raised before the learned Single Judge and parties had led evidence also on this point. The point appears to have been argued vehemently by the parties before the learned Single Judge although it is correct to say and in view of the statements o Mr. Arlin and Mr. Pirzada, made before us, that the respondent did no concede before the learned Single Judge that they were the mortgage:-in---possession. We are therefore of the view that mere absence of a specific issue in these circumstances was not of much significance as the learned counsel for the respondent has not been able to show any prejudice having been caused to respondent for that reason. It is rightly pointed out by Mr. Pirzada, that the suggestion given to the appellant's witness in cross--examination by the respondent to the effect that the mortgaged property --was in occupation of Messrs Rizvi Traders Limited, clearly indicates that this controversy was not only existing between the parties at that time but that the respondents were fully conscious of the same and had joined issue on it. We are also of the view that in view of provision of Order XLI; rule 24, C. P. C. We can ourselves decide the issue with regard to the fact whether the respondents was a mortgagee-in-possession or not as there is sufficient evidence available on record on this score. .We would therefore now examine the fact whether the respondents were the mortgagee-in-possession or not as alleged by the appellant. A mortgagee- in-possession is a person who takes over possession of the mortgaged property during the continuance of the mortgage. The rights of mortgagee-in-possession is dealt with in section 72 of the Transfer of Property Act, whereas his liabilities are mentioned in section 76 of the Act. Sub- clause (b) of section 76 provides that a mortgagee-in-possession must use his best endavour to collect the rent and profit thereof. The last clause of section 76 provides that if the mortgagee-fails to perform any of the: duties imposed upon him by section 76 he may, when accounts are taken in pursuance of decree made under the chapter be debited with the loss, if any, occasioned by such failure. Mr. Pirzada, the learned counsel for the appellant contended before us that in view of clauses (3), (4-B) and (4-C) of the agreement (Exh. 9) the respondent became a mortgagee in possession for all practical purposes from the date of its execution and from then onward were liable to the appellant as a mortgagee-in-possession in view of section 76 of the Transfer of Property Act. It will be quite advantageous to reproduce here clauses (3), (4-b) and (4-c) of the agreement (Exh. 9) in order to appreciate the contention of learned counsel. These clauses are as follows:- "(3) That the first party agrees that the second party shall have the use and occupation of the said plot of land and the said buildings pending completion of the sale thereof by the confirming party to the second party and/or vacation of the same by the second party as provided hereinafter.
(4-B) That if the conveyance/sale/transfer of the lease-hold rights in the said plot of land and the proprietary rights in the buildings thereon is not made or effected by the Confirming party in favour of the second party by presentation and acceptance for registration by the District Registrar/Sub- Registrar of the requisite conveyance/sale/ transfer deed within 4 months from the 11th day of July, 1962, the permission given by the first party to the second party to use and occupy and said plot of land and the buildings thereon shall stand revoked and the second party shall vacate and deliver vacant possession to the first party of the said plot of land and the buildings thereon within 30 days of the expiry of the said period of 4 months: Provided that in such an event the second party shall pay to the first party compensation for use and occupation of the said plot and the buildings thereon at the rate of Rs. 7,000 (Rupees seven thousand only) per month for the duration of the second party's occupation thereof and the first party shall be at liberty to adjust the deposit of Rs. 28,000 (Rupees twenty eight thousand only) mentioned above against such compensation.
(4-C) That if conveyance/sale/transfer of the leasehold rights in the said plot of land and the proprietary rights in the buildings thereon is not completed within aforesaid period of 4 months and the second party fails to vacate and deliver vacant possession to the first party within 30 days of the expiry of the said 4 months the second party shall in such event pay to the first party in addition the compensation mentioned in the preceding sub-clause further compensation for use and occupation of the said properties at the rate of Rs. 1,000 (Rupees one thousand only), per day from the expiry of the aforesaid' period of 30 days and so long as the second party continues in occupation of the said properties: Provided that nothing herein shall in any manner prejudice the first party's rights to take appropriate action or proceedings for ejectment of the second party from the said properties."
Mr. Pirzada, urged that in view of the clear stipulations made in clauses (4-b) and (4-c) of Exh. 9 which provided that in the event of non-performance of the agreement within 4 months of its execution the possession of -the mortgaged property was to revert back to the respondent within a further period of 30 days and in the event of failure by Messrs Rizvi Traders Limited, to hand over possession of the mortgaged property to the respondent the latter was entitled to realise use and occupation charges at the rate of Rs. 1,000 per day from the former, made the position of respondent as a mortgagee---in-possession and any failure on their part to give effect to this provision made them liable to account for the failure as provided under section 76 of the Transfer of Property Act. It is urged by Mr. Pirzada, that by virtue of the above provisions in the agreement (Exh. 9) the property went totally out of management and control of the appellant and for all purposes the possession vested with the respondent from 11th July, 1962 onward. Mr. Arfin learned counsel for the respondent on the other hand contended that in order to make a person a mortgagee-in- possession it must be shown that possession has been delivered to him in pursuance of the mortgage and that it must also be shown that the rent and profit accruing from the mortgaged property has been agreed to be applied towards the discharge of mortgaged debt. In the absence of proof of these two conditions, it is contended by Mr. Arfin, the respondent could not be held to be a mortgagee-in-possession and their possession over the property, if any, in these circumstances could at best be that of the agent on behalf of principal for which the principal will have to proceed separately against the agent. Mr. Arfin, also contended that the possession of the property at the time of creation of mortgage in favour of respondent was admittedly with the appellant and therefore the provision in Exh. 9, providing that the possession of the property will be delivered back to respondent by Messrs Rizvi Traders Limited, if the agreement was not performed, could not make the possession of respondent over the property persuant to mortgage bond. Mr. Pirzada, the learned counsel for appellant relied upon the cases of Kishundayal Bhagat v. Mahablr Bhagat 58 1 C 291, Suratsingh v. Nomanbhai AIR 1961 Bom. 43 and Mahant Ram Kishan Das v. Badri Bishal AIR 1937 All. 337in support of his contention that in the circumstances of the present case the respondents were the mortgagee-in-possession. After careful examination of the above cases we are of the view that the provisions of section 76 of the Transfer of Property Act are not limited to cases where a mortgagee is entitled to claim possession on the basis of the terms of the mortgage bond. The opening words of section' 76 are wide enough to include a mortgagee who may not be entitled to claim possession of the mortgaged property on the basis of the covenant contained in the mortgage bond but has obtained possession of the same for any other reason as a mortgage and will be liable to fulfil the obligations contained in section 76 of the, Transfer of Property Act. In the case before us it is true that at the time of execution of the mortgage by the appellant in favour of the respondent the possession remained with the appellant. However, on 11th July, 1962' when agreement Exh. 9 was executed the position was substantially changed. The permission given by the respondent to Messrs Rizvi Traders Limited, under the agreement Exh. 9 to the use and occupation of the mortgage: property by the latter was in capacity as a mortgagee of the property. The further provision in paragraph 4-b of the said agreement providing that in the event of non-execution of the sale deed by the appellant in favour of Messrs. Rizvi Traders Limited within a period of four months, the vacant and peaceful possession of the property was to be given to the respondent and in the event of non-delivery of the possession within the period mentioned in the agreement the respondents were entitled to realize use and occupation charges from Messrs Rizvi Traders Limited, at the rate of Rs. 1,000 per day, made it absolutely clear that from the date of Exh. 9 the possession of the property came over. To respondent and therefore for all practical purpose they became the "mortgagee-in-possession" from the date of execution of Exh.
9. The fact that the respondent after 11th July, 1962, became entitled to realize use and occupation charges from Messrs Rizvi Traders Limited; and were entitled to claim vacant and peaceful possession of the property from them in the event of non-performance of agreement is sufficient to show that the effective control and management of the property from 11th' July, 1962 onward with that and therefore they became liable from that date as a mortgagee-in-possession under section 76 of the Transfer of Property Act. We are unable to agree with Mr. Arfin that the stipulation in the agreement Exh. 9 with regard to realization of use and occupation charges and handing over of vacant and peaceful possession of the mortgaged property to the respondent in the event of non- performance of the agreement was not in their capacity as a mortgagee but only as the agent of the appellant. The appellant are shown as "confirming party" in the agreement Exh. 9 while the respondent and Messrs Rizvi Traders Limited. Were described as "the first" and "second party" respectively. The following paragraph in the preamble of the agreement Exh. 9, clearly shows that it was executed by the respondent in their capacity as the mortagee of the property :--, "And whereas the Confirming party took a loan of Rs. 5,50,000 (Rupees five lakhs fifty thousand only) from the first party and in consider--ation of the said loan the confirming party has executed a mortgage deed on 30th June, 1962 registered in the office of the District Registrar, Kharachi in favour of the first party on the terms and conditions mentioned in the said mortgage deed."
After reading the agreement Exh. 9, we are firmly of the view that the respondent became a mortgagee-in-possession on 11th July, 1962 and from that date onward they were liable to account for as a mortgagee-in-possession as laid down in section 76 of the Transfer of Property Act. We are also unable to accept the contention, of Mr. Arfin that in the absence of provision in Exh. 9 providing that the income and profits arising from the property were to be applied towards the discharge of the mortgage debt the respondent could not be treated. As a mortgagee-in-possession. Mere fact that there was no agreement providing specifically that the income arising from the mortgaged property is to be applied towards the discharge of mortgage debt is not sufficient to hold that respondent was not the mortgagee-in-possession or that they were not liable as such. In our view in the absence of any agreement between the mortgagor and mortgagee providing for application of the income and profit arising from the mortgaged property towards discharge of interest and mortgage debt, the respondent's liability as a mortgagee-in-possession will be governed under clause (h) of section 76 of Transfer of Property Act. The agreement dated 11th July, 1962 (Exh. 9) clearly provided that in the event of non-execution of the conveyance deed by the appellant in favour of Messrs Rizvi Traders Limited, the vacant and peaceful possession of the mortgaged property. Was to be delivered back to the respondent within 30 days of the expiry of 4 months. It was also provided in the said agreement that in the event of failure by Messrs Rizvi Traders Limited to deliver pos--session of mortgaged property as aforesaid the respondent were entitled to realize a sum of Rs. 1,000 per day from Messrs Rizvi Traders Limited, after expiry of the period of 30 days. It is not disputed before us by the learned counsel for the respondent that respondent took no steps to realize the sum of Rs. 1,000 per day as use and occupation charges from Messrs Rizvi Traders Limited as provided in Exh.
9. It is however, contended by Mr. Arfin that as the agreement was not performed by the appellant and there was no instructions from the appellant to the respondent to realize the above amount the respondent could not take any steps in that regard. This con--tention of the learned counsel has no force. In view of the fact that the respondent was the mortgagee in possession it was their duty under section 76 of the Transfer of Property Act to realize the sum of Rs. 1,000 per day from Messrs Rizvi Traders Limited. The absence of instruction from the appellant in that regard could not have the effect of relieving the respondent from their statutory obligation created under section 76 of the Transfer of Property Act.
This section does not envisage that upon instruction from the mortgagor the mortgagee shall take steps to collect the rents and profits of the mortgaged property. We are therefore, of the view that failure on the part of respondent to realise the sum of Rs. 1,000 per day as provided under the agreement Exh. 9 amounted to clear breach of obligation on the part of respondent as mortgagee-in-possession for which they were liable to account for under the decree of the Court.
Mr. Arfin attempted to argue that provision contained in Exh. 9 for realization of the sum of Rs. 1,000 per day from Messrs Rizvi Traders Limited, were in the nature of penalty which could not be enforced under the law. We are unable to accept this contention of the learned counsel. The property which is subject-matter of the dispute is admittedly a plot of land with construction thereon measuring 9665 sq. Yds. The sum of Rs. 7,000 p.m. Agreed to be paid by Messrs Rizvi Traders Limited to that respondent during the period of 4 months when the agreement was to be performed was hardly sufficient to pay taxes, lease money and the interest on the mortgage debt.
In these circumstances and keeping in view the nature of the property and the amount reserved as use and occupation charges it cannot be said that the provision in the agreement providing for payment of the sum of Rs. 1,000 per day by' Messrs Rizvi Traders Limited, in the event of non delivery of vacant and peaceful possession was in the nature of a penalty. In any case, it was not for the respondent to decide themselves that stipula--tion made in the agreement was in the nature of a penalty which justified their action is not making any attempt to realise the same. They were duty bound as a mortgagee-in-possession to take all such steps as would have been taken by a man of ordinary prudence in respect of his own property to realise the rent and profits of the property, which they did not take. We, therefore, hold that the respondent are liable to account for the same at the time of taking of the account. We accordingly modify the order of learned Single Judge, to the extent that while accounts are taken, the respondent shall give credit in respect of the use and occupation charges at the rate of Rs. 1,000 per day to appellant which the respondent were bound to realize from Messrs Rizvi Traders Limited, in terms of agreement Exh.
9. We accordingly accept the appeal partially and modify the order of the learned Single Judge to the extent stated above but leave the parties to bear their respective costs of this appeal.