G.R. Krishna vs S.K. Venkatachalam and Others

Bellie, J.—The plaintiff who lost his case for recovery of a sum of Rs. 18,705 in the trial Court is the appellant in this appeal.

His case is as follows:

The first defendant was due to the plaintiff a sum of Rs.15,000 and in respect thereof he executed a promissory note Ex.A.4 in favour of the

plaintiff on 1.12.1971 repayable with interest thereon at 12 per cent per annum. On the same day with intent to create a security for the said debt

the first defendant deposited title deed of the properties, Ex. Al--Registration copy of a Partition deed, with the plaintiff at Coimbatore and he also

gave a memorandum in writing Ex.A.5 detailing the particulars of the document deposited. Inspite of demands the first defendant failed to pay the

amount. The second defendant obtained a decree against the first defendant on the foot of an alleged mortgage in O.S. No. 211 of 1973 and the

third defendant has purchased the property from the first defendant on 21.11.1973 and therefore these two defendants have been impleaded.

The first defendant in his written statement admitted execution of a promissory note in favour of the plaintiff as alleged but contended that it is not

supported by consideration. He pleaded that on 22.11.1970 he had executed two promissory notes, one for Rs.25,000 in favour of the plaintiff

and another for Rs. 10,000 in favour of the plaintiff''s son and the plaintiff told the first defendant that for those two promissory notes a balance of

Rs.10,000 was outstanding and for that outstanding he insisted that the first defendant must execute a promissory note for Rs.15,000 and then only

the said two promissory notes would be returned. Upon this the first defendant executed the suit promissory note for Rs.15,000 and on

22.12.1971 he issued a cheque for Rs.10,000 which the plaintiff has realised and thus the entire amount due to the plaintiff has been discharged. It

is further contended that the suit promissory note is not enforceable in law because no Refugee Relief Stamp has been affixed as required in law.

Then it is denied that the first defendant deposited his title deed with the plaintiff and gave a memorandum as alleged. It is then pleaded that the

plaintiff and the first defendant were carrying on a partnership business and in connection with that the plaintiff got from the first defendant blank

papers with first defendant''s signatures and with one such paper the plaintiff has created the alleged memorandum.

The second defendant in his written statement would contend that the first defendant was a subscriber to a chit conducted by it and on 1.8.1970

he received the chit prize of Rs.23,750 and for due payment of the remaining 38 instalments the first defendant executed a promissory note and on

19.5.1972 in security for payment of the amount due he deposited title deed of the properties with a memorandum. As the amount was not paid

the second defendant filed a suit O.S. No. 211 of 1973 and obtained a preliminary decree. It further contended that the alleged suit mortgage is

not a genuine transaction and it is the result of collusion between the plaintiff and the first defendant to defraud this defendant of its decree amount.

The case of the third defendant is that she purchased the property on 21.11.1973 for Rs.24,500, and the alleged transaction between the

plaintiff and the first defendant is a fraudulent one and unenforceable. In any event this defendant is a bona-fide purchaser for value without notice

of the defect in the title and thus she cannot be made liable for the alleged suit claim. She further contended that she effected improvements in the

suit property to the value of Rs.21,000.

The trial Court on the above pleadings and on consideration of the evidence adduced held that the suit promissory note is supported by

consideration but it however further held that since it has not been affixed with Refugee Relief Stamp as required under law it is not enforceable.

The trial Court further held that the first defendant did not deposit Ex.A.1 deed creating a mortgage and Ex.A.S memorandum is not a genuine and

true one. On these main findings the trial Court dismissed the suit.

In this appeal Mr. K.M. Santhanagopalan, learned Counsel for the appellant-plaintiff submits that (i) the suit is on a mortgage and though the

trial Court has found that the promissory note is inadmissible in evidence since it has not been properly stamped the trial Court has found that it is

supported by consideration of Rs.15,000 and thus there is proof that a sum of Rs.15,000 was due from the first defendant to the plaintiff. He

further submits that (ii) the trial Court grievously erred in holding that Ex.A.5 memorandum is not a true and genuine one when there is clear

evidence to show that the first defendant executed that document and therefore the first defendant has created an equitable mortgage by depositing

his title deed Ex.A.1.

As regards the first contention there is no doubt that the suit is on a mortgage. This is amply clear from a reading of the plaint The plaintiff has

clearly stated that the first defendant for the debt of Rs.15,000 executed a promissory note and on the same day be deposited titled deed of his

properties and executed a memorandum giving particulars of the title deed, and the particulars of the mortgage has been given in the plaint, and a

preliminary decree on mortgage has been prayed for. The suit is not on a promissory note and therefore it is immaterial that the promissory note

Ex.A.4 is unenforceable. The trial Court has held that the promissory note is supported by consideration. As regards this finding I find no reason to

differ from that. In this written statement it is admitted by the first defendant that he executed a promissory note for Rs.15,000 but it was only for

an old debt of Rs.10,000. According to the defendant though there was an old debt of Rs.10,000 only since the plaintiff insisted that the first

defendant must execute a promissory note for Rs.15,000 he did so. But apart from this contention there is no reliable evidence in proof that even

though there was an old debt of Rs.10,000 only the first defendant executed the promissory note Ex.A.4 for Rs.15,000. Strangely having said so

the first defendant would say that the promissory note is not supported by consideration. It is rather meaningless. Then he would say in the written

statement that even that Rs.10,000 has been discharged. For that too there is no evidence at all. Therefore the finding of the trial Court that the

promissory note was supported by consideration is quite correct.

Now even according to the first defendant himself he. gave Ex.A.1 certified copy of the partition deed to the plaintiff. However he would say

that this had been given at the time when himself and the plaintiff were doing joint business: As regards Ex.A.5 memorandum he would say that at

the time of their joint business the plaintiff had obtained from him his signatures in blank papers and he has made use of one of those papers for

creating Ex.A.5 memorandum. But on a careful scrutiny of Ex.A.5 it appears to me quite clear that it should have been executed by the first

defendant. Below the undisputed signature of the first defendant there is a date given and also the place ''Coimbatore'' has been mentioned. On

comparison I have no doubt whatsoever that only the first defendant should have written the word ''Coimbatore''. The date is in-between these

two. In the circumstances the first defendant only should have put the date. And on a comparison of the date with the signature and the word

''Coimbatore'' I am quite certain that the date also should have been put by the first defendant. The date in Ex.A.5 is 1.12.1971. This is the date of

the promissory note Ex.A.4 and according to the plaintiff on this date the first defendant deposited his title deed. Therefore the first defendant''s

plea that a blank paper signed by him has been made use of to prepare Ex.A.5 falls to the ground. From this it is manifest that Ex.A.1 registration

copy of the partition deed should have been deposited by the first defendant with the plaintiff creating a. mortgage on 1.12.1971 and not that it had

been given to the plaintiff at the time of their joint business.

But one important point that arises in this appeal is whether by depositing a certified copy of the title deed like Ex. A.1 a mortgage can be

created. The learned trial Court also has stated in its Judgment that a mortgage by deposit of title deeds, cannot be created by a registration copy

of the original title deed. The provision in the Transfer of Property Act which enables mortgage by deposit of title deeds is Section 58(f). As per

this section when a person delivers to the creditor or his agent documents of title to immovable property with intent to create a security thereof that

transaction is a mortgage by deposit of title deeds. Therefore there must be delivery of documents of title.

The question is: What is documents of title? Ordinarily any deed that vests title in a person is a document of title. Obviously that deed is original

deed. Therefore when the section says documents of title it must be understood to mean original documents of title and not copies of original

documents of title. It must be remembered that as per Section 58(f) a mortgage by deposit of title deeds can be created only in certain towns

specified therein. Thus it is a special provision for particular places. It appears to be intended for raising loans urgently to meet urgent requirements

especially by commercial people. In this circumstance the provision of Section 58(f) must be strictly construed. This is what Gokulakrishnan, J. (as

He then was) has said in his Judgment in Adaikappa Chettiar v. Official Assignee 1972 T.L.N.J. 589 and held that a mortgage by deposit of title

deeds cannot be created by depositing copy of a title deed. Of course he has also stated that ""when the originals are not available in stated

circumstances such as when it is lost or when it is not readily available to produce the copies can be accepted for the time being"". But the effect of

this also is that without original title deed mortgage cannot be created. If it is to be held that with a copy of a title deed a mortgage can be created

then there is no doubt that it may lead to fraudulent transactions. With many copies one can create many mortgages with many different people

without the knowledge of one of the mortgages with the other persons. Therefore I do not think that the legislators while enacting Section 58(0

would have thought that mortgage can be created by deposit of even a copy of a title deed.

True, if the original deed is lost one will not be able to create a mortgage if it is held that a copy of the title deed is not sufficient. That may be

so. When the original is lost the person who has lost it may have to suffer. It is not as if he cannot create any other mortgage like simple mortgage,

usufructuary mortgage etc. Therefore this argument cannot be countenanced. In Syndicate Bank v. Modern Tile and Clay Works 1980 K.L.T.

550 a Division Bench has observed that to hold that a copy of a deed of transfer is also a document of title for purposes of Section 58(f) of the

Transfer of Property Act would amount to giving facilities to the owner to misuse the provision. It was further held that a copy of the deed of

transfer is not ordinarily a document of title for the purposes of an equitable mortgage. But however it has been then observed that when the

original is lost, with sufficient safeguards a certified copy of document can be received as a document of title. But for the reasons stated above I am

unable to agree with this observation of the learned Judges.

Mr. K.M. Santhanagopalan, learned Counsel for the appellant-plaintiff would however submit that Gokulakrishnan, J. in his judgment (referred

to above) has relied on a Judgment of Rangoon High Court in V.E.R.M.A.R. Chettiar Firm v. Majoo Teen AIR 1933 Ran 299 but that Judgment

has been overruled by a subsequent Division Bench Judgment in K.L.C.T. Chidambaram Chettiar v. Aziz Mean and Ors. AIR 1938 Ran 149. In

the Judgment V.E.R.M.A.R. Chettiar Firm v. Majoo Teen AIR 1933 Ran 299 it was held that a tax receipt is not a document of title within

Section 58(f) During the course of the Judgment it has been observed that,

...the document or documents of title deposited must not only relate to the mortgagor''s title to the property but must disclose an apparent title in

the mortgagor to the property or to some interest therein.

In the Division Bench ruling in K.L.C.T. Chidambaram Chettiar v. Aziz Meah and Ors. AIR 1938 Ran. 149 the learned Judges would state that

they dissent from that observation and then they proceeded to observe thus:

In our opinion the correct statement of the law is that in order to create a valid mortgage by deposit of title deeds u/s 58(f) T.P. Act, it is not

necessary that the whole, or even the most material of the documents of title to the property should be deposited, nor that the documents

deposited should show a complete or good title in the depositor. It is sufficient if the deeds deposited bona fide relate to the property or are

material evidence of title or are shown to have been deposited with the intention of creating a security thereon.

With great respect I am unable to see much difference between the observations made in V.E.R.M.A.R. Chettiar Firm v. Majoo Teen AIR 1933

Ran299 and in K.L.C.T. Chidambaram Chettiar v. Aziz Meah and Ors. AIR 1938 Ran 149. Whatever may be the case, it must be borne in mind

that neither of the cases dealt with a copy of title deed. As said above in V.E.R.MA.R. CheMiar Firm v, Majoo Teen AIR 1933 Ran299 the

document in question was a tax receipt and in K.L.C.T.Chidambaram Chettiar v. Aziz Meah and Ors. AIR 1938 Ran149 the documents which

were deposited were a deed of original Grant in favour of the mortgagor''s predecessors-in title and series of tax receipts.

Gokulakrishnan, J. has besides V.E.R.M.A.R. Chettiar Firm v. Majoo Teen AIR 1933 Ran 299 also relied on Ham Raj and Anr. v. Simla

Banking and Industrial Co. Ltd. and Ors. AIR 1935 Lab. 10. In that decision, upon the facts a mortgage executed by deposit of a copy of

document was not acceptable to the Court. Here it will be apposite to quote an observation by Lord Beibourne in Dixen v. Muckleston (189) 8

Ch 155 which observation has been quoted in V.E.R. M.A.R. Chettiar Firm v. Majoo Teen A.I.R.1933 Ran 299.

A man taking an equitable security with a deposit of deeds ought to look into the deeds....and ought to satisfy himself that they are not such as to

leave in the hands of the person with whom he is dealing the power of going afterwards to somebody else and dealing with him in like manner

under the appearance of a perfect title.

Mr. Santhanagopalan, next brings to my notice a Division Bench ruling of this Court in Angu Pillai and Others Vs. M.S.M. Kasiviswanathan

Chettiar and Others, . In this Judgment a hundi towards the purchase price of the property, an agreement by the previous owner to convey the

property, and a tax receipt were held sufficient documents of title within the meaning of Section 58(f) of the Transfer of Property Act. The Division

Bench in this case has relied on K.L.C.T. Chidambaram Chettiar v. Aziz Meah and Ors. AIR 1938 Ran149. But whether a copy of a title deed is

enough was not the question in that case. Therefore I do not think that the said Division Bench ruling of this Court will be applicable to our case.

Now adverting to the facts in the instant case, even if it is to be held that though ordinarily the original title deed must be deposited but

depending upon the circumstances such as original being lost some times copy of the title deed will be sufficient to create a mortgage, still in the

circumstances of this case Ex. Al copy of a partition deed cannot be held to be sufficient to create a mortgage. It is stated that the original was with

the elder brother of the first defendant and therefore copy was deposited. And it is. also stated that as per the recitals in the partition deed the

original must be with the elder brother. But what is recited in the document is that the original must be with the elder brother and whenever the

document is required by any other he (elder brother) must give it to him and then get back. From this recital in my view the first defendant could

have got the original from his elder brother for the purpose of creating a mortgage. In fact the first defendant has created a mortgage by depositing

the original with the second defendant. There is not even evidence to show that the elder brother refused to give the original document to the first

defendant for the purpose of creating a mortgage. For these reasons, even if Ex.A.1 was deposited for the purpose of creating a mortgage that will

not create a valid mortgage. Therefore the result is the plaintiff cannot get a decree. Thus the Judgment of the trial Court has to be confirmed.

Accordingly the appeal is dismissed. In the circumstances there will be no order as to costs.