Sections 76-77 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
When a lender takes possession of a mortgaged property, section 76 puts nine duties on him, from managing it prudently to keeping accounts. Section 77 says when some of those duties fall away because the parties agreed that the income would be taken in place of interest. This is explained as per the text of the Act consulted.
A mortgagee in possession must (a) manage prudently, (b) make every reasonable effort to collect rents and profits, (c) pay revenue, public charges and rent out of the income, (d) make necessary repairs he can pay for from the income, (e) commit no destructive act, (f) apply fire insurance money to reinstatement or, if the mortgagor so directs, to the debt, (g) keep accounts and give copies, (h) debit receipts against the debt, and (i) account from the date of tender or deposit. If he fails, he may be debited with the loss.
Source note and the repealed sections
The text consulted is a publisher's print of the Act showing amendments up to the Transfer of Property (Amendment) Act, 2002 (3 of 2003); later amendments should be checked. Sections 74 and 75 are printed only as headings with repeal notes and are not explained here. The note under section 74 reads "Transfer of Property (Amendment) Act, 1920 (20 of 1929), section 39", while section 75 reads "1929 (20 of 1929)"; the mismatch is flagged and the notes are quoted as printed.
These duties are the counterpart of the lender's rights in our article on sections 70 to 73. For disputes about accounts or management by a lender in possession, our legal dispute resolution service can help.
When section 76 applies
The section begins: "When, during the continuance of the mortgage, the mortgagees take possession of the mortgaged property" and then continues "he must". The mix of plural and singular is a printing slip; read it as "the mortgagee takes possession". The duties apply in the absence of a contract to the contrary where the clause says so.
The nine duties
| Clause | Duty of the mortgagee in possession |
|---|---|
| (a) | Manage the property as a person of ordinary prudence would manage it if it were his own |
| (b) | Make every reasonable effort to collect the rents and profits |
| (c) | In the absence of a contract to the contrary, pay out of the income the Government revenue, all other charges of a public nature and all rent accruing due during the possession, and any arrears of rent in default of which the property may be summarily sold |
| (d) | In the absence of a contract to the contrary, make necessary repairs he can pay for out of the rents and profits, after deducting the payments in (c) and the interest on the principal |
| (e) | Not commit any act destructive or permanently injurious to the property |
| (f) | If he has insured against fire and a loss occurs, apply any money actually received under the policy, so far as necessary, in reinstating the property, or, if the mortgagor so directs, in reduction or discharge of the mortgage-money |
| (g) | Keep clear, full and accurate accounts of all sums received and spent, and at any time during the mortgage give the mortgagor, at his request and cost, true copies of the accounts and vouchers |
| (h) | Debit his receipts (or a fair occupation-rent if he lives in the property himself) against him, after deducting properly incurred management and collection expenses and the payments in (c) and (d) with interest, first in reduction of interest due, then of the mortgage-money; the surplus, if any, goes to the mortgagor |
| (i) | When the mortgagor tenders or deposits the amount due, account for his receipts from the date of the tender, or from the earliest time he could take the money out of Court, and not deduct expenses incurred after that |
In clause (h), the copy reads "in reduction to discharge of the mortgage-money" (reading as "or"), and has "[ *]" for omitted words after "interest" and in clause (i); these are printing features, not changes in meaning.
Loss occasioned by his default
If the mortgagee fails to perform any of the duties in the section, he may, when accounts are taken in pursuance of a decree made under this Chapter, be debited with the loss, if any, occasioned by such failure. The text ties this to the taking of accounts under a decree; it does not give a separate right to damages.
Section 77: receipts in lieu of interest
Section 76, clauses (b), (d), (g) and (h) do not apply 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, be taken in lieu of interest on the principal money, or in lieu of such interest and defined portions of the principal.
| If the contract says receipts are taken in lieu of interest | Clauses (b), (d), (g), (h) | Other clauses of section 76 |
|---|---|---|
| Yes, while the mortgagee is in possession | Do not apply | Still apply |
| No such contract | Apply | Apply |
This is common in usufructuary mortgages, where the lender enjoys the property in return for the interest. Look at the kinds of mortgage in our article on Section 58.
A worked example
Deepak mortgages a rented shop to Lata, who takes possession and collects the rent. Lata must manage the shop prudently and make every reasonable effort to collect rent. From the rent she pays the municipal charges and any rent due on the shop, then repairs she can afford, and she records every receipt and expense. When Deepak asks for the accounts, she must provide true copies, with vouchers, at his request and cost. If fire damages the shop and the insurance pays out, she must use the money to reinstate the shop or, if Deepak so directs, to reduce the debt. When Deepak deposits the full amount due, Lata accounts for rents from the date of the deposit or the earliest time she could take the money out, and cannot deduct later expenses.
If Deepak and Lata had agreed that the rent would be taken in place of interest, Lata would not have to follow (b), (d), (g) or (h) while she stays in possession.
Practical points
- Borrowers: ask for the accounts in writing; you bear the cost of the copies.
- Lenders: keep every voucher; the accounts decide how much is still due.
- After a tender or deposit: stop deducting new expenses, as clause (i) says.
- Read the deed for any agreement that receipts are in lieu of interest, which switches off four clauses.
- Redemption steps are covered in our article on Section 60.
Need help with a lender in possession or an account dispute?
If a lender holds your property and the accounts are unclear, or you are a lender who wants to document your management properly, our legal dispute resolution team can go through the mortgage-deed and the records.
Key takeaways
- Section 76 sets nine duties on a mortgagee in possession.
- The standard is a person of ordinary prudence managing his own property, with every reasonable effort to collect the income.
- Income pays public charges first, then repairs he can afford, with receipts debited against the debt.
- Accounts must be kept and true copies given on request, at the mortgagor's cost.
- Failure can be charged to the mortgagee when accounts are taken under a decree.
- Section 77 switches off clauses (b), (d), (g) and (h) where receipts are agreed to be in lieu of interest.
Read next
- Sections 70 to 73: rights of a mortgagee in possession
- Sections 78 and 79: priority between mortgagees
- Section 58: kinds of mortgage
- Mortgage types: simple, English, usufructuary
Disclaimer: Based on a publisher's print of the Transfer of Property Act, 1882 showing amendments up to the Transfer of Property (Amendment) Act, 2002 (3 of 2003), as consulted on 2 October 2026. State amendments, later amendments, stamp duty and registration charges are not covered and should be checked. This article is general information, not legal advice; check the official text before acting.