AI Structured Summary
Not yet generated for this judgment
Judgment
Srinivasan, J.—The only question in this Appeal is whether there is valid equitable mortgage in favour of the plaintiff, which is the Appellant.
There is no dispute that the title deeds relating to the suit properties were deposited with the plaintiff on 16.10.1975 with an intent to create a
security for the loans obtained by the defendants from the plaintiff. The contention put forward by the defendants in the course of evidence is that
the deposit was made in Kovilpatti and not in Tirunelveli and therefore, there could not be any equitable mortgage by deposit of title deeds.
Kovilpatti is not one of the notified towns. Such a contention was not put forward in the written statement. The trial court has rightly disbelieved the
case advanced by the defendants in the evidence. The plaintiff''s evidence clearly proves that the deposit of title deeds was made at Tirunelveli,
which is one of the notified towns. Hence, there was deposit of title deeds with a view to create an equitable mortgage. It is then contended that
the two letters which evidence the deposit of title deeds require registration and as they are not registered, there is no valid equitable mortgage
which can be enforced in a court 01 law. The trial court accepted that contention and granted only a money decree in favour of the plaintiff. Ex. A-
26 is the letter written by the first defendant to the Manager of the plaintiff bank at Tirunelveli Junction on 17.10.1975. The relevant portion of the
letter reads thus:
This is to place on record that to secure the facility/s referred to above granted to me, at your Kovilpatti Branch, I/We have already deposited with
you at Tirunelveli Junction on 16.10.1975 the title deeds relating to my/our properties (situated at Kumararethinapuram) and as described in
Schedule ""A"" herewith attached with intent to create an equitable mortgage by deposit of title deeds for which you have agreed in respect of
properties fully described in the Schedule B herewith attached on the said properties together with all structures and machinery standing thereon
and to be put up in future to secure the said facility/s due and owing to me, to you inclusive of renewals thereof from time to time together with
interest thereon and/or any other monies that may become due and payable from time to time by me to you and/or any liability arising out of the
aforesaid facility/s granted and undertaken by you in that behalf and payable by me/to you as also such other and further liability up to a sum of Rs.
2,00,000/- (Rupees two lakhs only) which may be advanced to me in future by you.
Ex. A-27 is a similar letter written by the second defendant on the same day relating to his properties and the title deeds deposited by him. The
language of the letter is ad idem with that of Ex. A-26.
The letters by themselves do not purport or operate to create, declare, assign, limit or extinguish any right, title or interest in the immovable
properties referred to therein. A document shall be registered if it falls under Clause (b) of Section 17(1) of the Registration Act. In the present
case, we have extracted the operative portions of the letters. The remaining parts of the letter are only schedules containing the description of the
documents deposited and description of the properties to which they relate.
Section 58(f) of the Transfer of Property Act defines a mortgage by deposit of title deeds, as follows:
Where a person in any of the following towns, namely, the towns of Calcutta, Madras and Bombay, and in any other town which the State
Government concerned may, by notification in the Official Gazette, specify in this behalf, delivers to a creditor or his agent documents of title to the
immovable property, with intent to create a security thereon, the transaction is called a mortgage by deposit of title deeds.
Section 59 provides that where the principal money secured is one hundred rupees or upwards, a mortgage other than a mortgage by deposit of
title deeds, can be effected only by a registered instrument signed by the mortgagor and attested by at least two witnesses. Thus, a mortgage by
deposit of title deeds is excepted from the operation of Section 59 of the Transfer of Property Act.
The Supreme Court had occasion to consider the provisions of Section 58(f) and Section 59 of the Transfer of Property Act in United Bank of
India Ltd. v. Messrs. Kakharam Sonaram & Co. and others (AIR 1965 SC 1591). The relevant portion in the judgment is in the following terms:
(3) The letter written by Lakharam-Ex. 7(a) - on August 9, 1945 reads as follows:
I nearby authorise my son Mr. Babulal Ram to deposit with you on my behalf at your Calcutta Office, the following title deeds with a view to
create an equitable mortgage on the said properties to make your advances in the A/c of Messrs. Lekharam Sonaram and Co., Giridih, better
secured. I hereby further declare that I am the sole owner of the Giridih property as per schedule below and am legally joining heir with my sons
dealing in the name of Messrs Lekharam Sonaram and Co. of the Malho property as described in the schedule below. I hereby further declare that
both the properties described in the schedule are free from all encumbrances and (sic) else has any claim, right or title to the properties. And I
hereby declare that the deposit will give you a (sic) legal title over my said properties as mortgager until all the obligations of the Messrs. Lekharam
Sonaram and Co. with your Giridih branch are duty satisfied.
Particulars of Properties
Giridih Property
Malho Property
(4) On August 10, 1945, Sonaram. Defendant No. 3, brother of Defendant No. 4, addressed a letter (Ex. 7(b)) to the plaintiff bank to the
following effect.
We hereby authorise Mr. B.L. Gupta my younger brother, to deliver you the title deeds for depositing and to negotiate with you further in the
respect. We hope you will do the needful and obliged us.
Your Mr. Basak had been to our Office and assured us to allow us an extra O/D against our Mica stock, for another Rs. 40,000/-. We have
already ha(sic) the facility of a lakh for which we thank you, but (sic) is insufficient for the volume of our business.
We hope you will surely extend your favour (sic) make us one of your obliged clients.
Thanking you once more.
NB: Though Rs. 40,000/- will not serve (sic) purpose, we request Mr. Basak to increase it further At this, for the time being, he asked us to
manage with it and later on he will raise it further.
Yours faithfully
The Court held that the document was not part of the transaction as it does not represent concluded negotiations between the parties. While setting
out tests to determine whether (sic) particular document is a part of the transaction of mortgage and requires registration, the Court said as follows.
In AIR 1931 36 (Privy Council) the plaintiff had verbally agreed at Madras to make further advance to the defendants, making Rs. 60,000/- in all
upon the deposit of certain document of title. The defendant''s agent signed and handed to the plaintiff a memorandum stating ''As agreed upon in
person, I have delivered to you the under mentioned documents as security''- a list of the documents following, also a promissory note for Rs.
60,000/-. After examination of the documents, the agreed amount was handed (sic) to the plaintiff. It was held by the Judicial Committee that the
memorandum was not a document which required registration, even if the agreed advance was conditional upon it being given; and that, there
being no written agreement, the memorandum as well as oral evidence, was admissible in evidence to prove the intent to create a security by
deposit of the documents named. The same view was expressed by this Court in Rachpal Mahraj Vs. Bhagwandas Daruka and Others, in which it
was pointed out that the question whether a memorandum of deposit of title deeds is compulsorily registrable under S. 17 of the Indian Registration
Act, 1980 depends on whether the parties intended to reduce their bargain regarding the deposit to the form of a document. If so, the document
required registration, If on the other hand, its proper construction and the surrounding circumstances lead to the conclusion that the parties did not
intend to do so, there being no express bargain, the document being merely evidential did not require registration. In that case, accounts were
taken relating to the appellant''s dealings with the respondents on a certain date and the appellant gave certain title deeds to the respondents for
being held as security for the amounts then found due and which may become due, and on the same day the appellant gave a memorandum to the
respondents in the form of a letter addressed to the respondents which stated as follows:
We write to put on record that to secure the repayment of the money already due to you from us on account of the business transactions between
yourselves and ourselves and the money that may hereafter become due on account of such transactions, we have this day deposited with you the
following title deeds in Calcutta at your place of business at No. 7, Sambhu Mullick Lane, relating to our properties at Samastipur with intent to
create an equitable mortgage on the said properties to secure all moneys including interest that may be found due and payable by us to you on
account of the said transactions....
It was held by this Court that the parties did not intend to create a charge by the execution of the document, but merely to record a transaction
which had already been concluded and under which rights and liabilities had already been created and the document did not require registration.
The ruling will apply to the present case. It is argued by the Learned Counsel for the respondent that in this case, the two letters Exs. A-26 and
A-27 refer to the maximum liability of Rs. 2 lakhs and he submits that they contain the terms of the contract and therefore the documents require
registration. We are unable to accept this contention. We have already extracted the terms of the document. Nothing has been said about the rate
of interest or the amount actually borrowed and to be borrowed. Nor is there any reference to the method of repayment or time for repayment.
None of the terms of the contract find a place in the documents. Just because the maximum liability is mentioned, it does not mean that it is one of
the terms of the contract and that all the terms of contract find a place in the documents. Hence, there is no substance in the contention that the
documents require registration. Moreover, the documents clearly refer to the fact that the title deeds were deposited on 16.10.1975 with an
intention to create an equitable mortgage. That clearly shows that the mortgage was created even on 16.10.1975 and the transaction of mortgage
was completed by then. It is also seen from the evidence that the parties executed a promissory note on 18.10.1975. It is marked as Ex. A-1.
Thus, by no stretch of imagination, it can be contended that Exs. A-26 and A-27 contain all the terms of the transaction and therefore they require
registration.
We have no hesitation to hold that there is a valid equitable mortgage in favour of the plaintiff and it is entitled to a decree on the basis of a
mortgage. The judgment and decree of the trial court, in so far as they negative the prayer for the grant of mortgage decree in favour of the plaintiff,
are set aside. There will be a decree in the suit O.S. No. 244 of 1980 on the file of the Principal Subordinate Judge, Tuticorin as prayed for by the
plaintiff. The Appeal is allowed with costs.