Transfer of Property Act, 1882 / Chapter IV / Mortgages
Section 63A: Improvements to mortgaged property
Section 63A governs improvements made to mortgaged property while it is in the possession of the mortgagee. It explains when the mortgagor receives those improvements on redemption without payment and when necessary expenditure must be reimbursed.
Complete statutory text of Section 63A
63A. Improvements to mortgaged property
(1) Where mortgaged property in possession of the mortgagee has, during the continuance of the mortgage, been improved, the mortgagor, upon redemption, shall, in the absence of a contract to the contrary, be entitled to the improvement; and the mortgagor shall not, save only in cases provided for in sub-section (2), be liable to pay the cost thereof.
(2) Where any such improvement was effected at the cost of the mortgagee and was necessary to preserve the property from destruction or deterioration or was necessary to prevent the security from becoming insufficient, or was made in compliance with the lawful order of any public servant or public authority, the mortgagor shall, in the absence of a contract to the contrary, be liable to pay the proper cost thereof as an addition to the principal money with interest at the same rate as is payable on the principal, or, where no such rate is fixed, at the rate of nine per cent per annum, and the profits, if any, accruing by reason of the improvement shall be credited to the mortgagor.
Meaning of improvements to mortgaged property
A mortgage is the transfer of an interest in specific immovable property to secure payment of a loan or performance of a qualifying pecuniary obligation under Section 58. The mortgagor provides the security and the mortgagee receives the secured interest. Redemption is the exercise of the right to discharge the mortgage and recover the property or related interests under Section 60.
An improvement is an alteration or addition that improves the mortgaged property, such as a structural repair or protective work. Section 63A applies where the mortgagee is in possession and the improvement occurs during the mortgage. Under subsection (1), unless the parties have contracted otherwise, the mortgagor ordinarily receives the improvement on redemption without paying for it.
When the mortgagor must pay for improvements
Subsection (2) is a limited exception. If the mortgagee paid for the improvement, the mortgagor must reimburse its proper cost, subject to any contrary contract, where the work was necessary to preserve the property from destruction or deterioration, necessary to prevent the security from becoming insufficient, or performed to comply with a lawful order of a public servant or public authority. Voluntary or merely decorative enhancements do not automatically qualify for reimbursement.
Interest on expenses and credit for profits
Qualifying proper costs are added to the principal mortgage money. Interest is payable at the rate applicable to the principal; if no rate is fixed, the statutory rate is nine per cent per annum. Any profits resulting from the improvement must be credited to the mortgagor. Both the cost and the profits should be accounted for when determining the sum payable on redemption.
Illustration
Suppose a mortgagee in possession spends money to repair a dangerously damaged retaining wall to prevent the mortgaged building from deteriorating. If the expenditure is necessary and reasonable, subsection (2) may allow recovery of the proper cost with the prescribed interest. If the mortgagee instead adds an ornamental feature merely for convenience, the mortgagor will generally be entitled to it on redemption without reimbursing that expense, absent a contrary contract.
Related provisions and official legal text
Read Section 63 (accession to mortgaged property), Section 62 (recovery of possession) and Section 76 (duties of a mortgagee in possession). Consult the India Code official Transfer of Property Act, 1882 for the Act and any applicable amendments; State-specific amendments and the terms of the mortgage may also require examination.