When, during the continuance of the mortgage, the mortgagee takes possession of the mortgaged property,—
(a) he must manage the property as a person of ordinary prudence would manage it if it were his own;
(b) he must use his best endeavours to collect the rents and profits thereof;
(c) he must, in the absence of a contract to the contrary, out of the income of the property, pay the Government-revenue, all other charges of a public nature and all rent accruing due in respect thereof during such possession, and any arrears of rent in default of payment of which the property may be summarily sold;
(d) he must, in the absence of a contract to the contrary, make such necessary repairs of the property as he can pay for out of the rents and profits thereof after deducting from such rents and profits the payments mentioned in clause (c) and the interest on the principal money;
(e) he must not commit any act which is destructive or permanently injurious to the property;
(f) where he has insured the whole or any part of the property against loss or damage by fire, he must, in case of such loss or damage, apply any money which he actually receives on the policy in reinstating the property, or, if the mortgagor so directs, in reduction or discharge of the mortgage-money;
(g) 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;
(h) 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, being paid to the mortgagor;
(i) when the mortgagor tenders, or deposits in manner hereinafter provided, the amount for the time being due on the mortgage, the mortgagee must, notwithstanding the provisions in the other clauses of this section, account for his receipts from the mortgaged property from the date of the tender or from the earliest date on which he could take such amount out of Court, as the case may be, and shall not be entitled to deduct any amount therefrom on account of any expenses incurred after such date, connection with the mortgaged property.
Loss occasioned by his default.—If the mortgagee fail to perform any of the duties imposed upon him by this 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.
Legal Commentary & Landmark Judgments: Section 76
Section 76 codifies the exhaustive statutory liabilities and accounting duties of a mortgagee in possession, requiring him to manage the property prudently, collect rents, pay public revenue, and maintain strict accounts.
In redemption suits, apply for appointment of a Court Commissioner to scrutinize the mortgagee's accounts; failure by the mortgagee to produce verified ledgers and receipts under Section 76(g) entitles the court to disallow disputed interest.