Transfer of Property Act, 1882 / Chapter IV / Mortgages

Section 66: Waste by mortgagor in possession

Section 66 of the Transfer of Property Act, 1882 explains when a mortgagor who remains in possession may allow deterioration and when destructive or permanently injurious acts are prohibited because they endanger the mortgagee's security.

Complete text of Section 66

Meaning of waste by a mortgagor in possession

Under Section 58, a mortgage is the transfer of an interest in specific immovable property to secure a loan or another qualifying monetary obligation. The mortgagor is the person creating the mortgage; the mortgagee holds the secured interest. A mortgagor in possession continues to possess the property despite its being mortgaged.

Waste describes conduct that damages or diminishes the property. Section 66 distinguishes mere deterioration, for which the mortgagor is not liable to the mortgagee under this provision, from a positive act that is destructive or permanently injurious. Such an act is prohibited when the security is already insufficient or the act would make it insufficient. The section does not impose a general duty to prevent every instance of ordinary deterioration.

Explanation: when is mortgage security insufficient?

The Explanation uses a statutory margin above the amount for the time being due on the mortgage. For property other than buildings, its value must exceed the outstanding amount by one-third; for property consisting of buildings, it must exceed that amount by one-half. If the applicable margin is not exceeded, the security is insufficient for Section 66.

For illustration, if the mortgage amount currently due is Rs. 9,00,000, the value must exceed Rs. 12,00,000 for property other than buildings, or exceed Rs. 13,50,000 where the property consists of buildings. Equality with the stated figure is not enough because the statute uses the word exceeds. These figures illustrate the test, not a prescribed valuation method.

Practical application

Where the mortgage security is already insufficient, a mortgagor's deliberate removal of an essential structural component that permanently damages a building may fall within the prohibition. Similarly, an act that reduces previously adequate security below the statutory threshold may be prohibited if it is destructive or permanently injurious. By contrast, ordinary wear, ageing or deterioration alone does not automatically create liability under Section 66. The actual effect on the property and security depends on evidence and the mortgage terms.

Related provisions and official source

For the rights and obligations of the parties, see Section 65 (implied contracts by mortgagor), Section 65A (power to lease) and Section 76 (mortgagee in possession). The official legislation is available from India Code: Transfer of Property Act, 1882. Any applicable State amendments and other contractual or legal duties should also be considered.