P.M.A. Muthiah Chetty vs P.V. Kothandaramaswami Naidu

Abdur Rahim, Offg. C.J.

In this case the whole question is, whether Mr. Justice Kuma-raswami Sastri is right in refusing to admit in evidence a letter, dated 17th

February 1911, written by the 2nd defendant to the 1st defendant when the former deposited the title-deeds of his house with the latter in order to

cover certain liabilities which he might incur in the course of business. The document is neither stamped nor registered and the learned Judge

refused to take it in evidence on both these grounds. If the letter merely stated the terms on which the equitable mortgage was effected, I should be

inclined to hold that it did not require any registration and should only be stamped on the basis of an agreement under Article 5 of the Stamp Act. It

is the deposit of the title-deeds that creates an equitable mortgage and a letter or a writing which contains evidence of the transaction cannot be

said to create or declare any right or interest in Immovable property within the meaning of Section 17, Clause (b) of the Registration Act. In this

connection, therefore, I agree with the ruling to this effect in Kedarnath Dutt v. Sham Lall Khettry 11 B.L.R. 405; Oo Noung v. Moung Htoon Oo

13 C.K 322 and Gokul Dass v. Eastern Mortgage and Agency Co. 10 C.W.N. 276 : 4 C.L.J. 102. But the real difficulty in the way of the

appellant is that the letter goes much farther, purporting in fact to create a simple mortgage. It says: I hereby give you full authority to make use of

this property in any manner you will think best and pay yourself up of these amounts and if there should be any balance still left unpaid, you shall be

at liberty to proceed on me personally and on the rest of my other properties to recoup all the short balances"". This satisfies all the requirements of

a simple mortgage, and could not be construed to be a recital of a mere equitable mortgage, for an equitable mortgage would not entitle the

mortgagee to any personal remedy. On this ground alone, it must be held that the letter in question requires registration u/s 17 of the Act and being

unregistered is inadmissible in evidence. If the letter be put aside, there is no other evidence that the title deeds were handed over for the purpose

of creating an equitable mortgage. The appeal will be dismissed with costs.

Seshagiri Aiyar, J.

The 2nd defendant in this case is said to have mortgaged the properties in suit by depositing then title-deeds with the 1st defendant. The 1st

defendant sub-mortgaged them with the plaintiff. There is no dispute now about the latter transaction. The question decided by the learned Judge

and argued before us relates to the validity of the transaction between the 1st and 2nd defendants.

The plaint in paragraph No. 7 refers to a deposit of title-deeds, without more, on the 17th February 1911. To prove this deposit, a letter

admittedly written by the 2nd defendant to the 1st defendant was sought to be put in evidence. The learned Judge rejected it as inadmissible. Upon

this a witness was examined to prove the deposit. This witness only says, ""The title-deeds were handed over after the letter was signed by

Kothandarama Swami Naidu"". No question was put him as to the purpose for which the deposit was made. The deposition as it stands is not

enough to establish that an equitable mortgage was created u/s 59 of the Transfer of Property Act. Mr. A. Krishnaswami Aiyar admitted as much.

It is clear that the learned Judge did not shut out any evidence. Consequently, if the letter is not admissible in evidence, the judgment of the learned

Judge must be upheld, as there is no independent evidence to prove the mortgage. The learned Judge held that the letter required both stamp and

registration. In his view, the letter is an agreement to which Article 6 of the Stamp Act applies. I am unable to agree. The learned Judge found that

as the document does not ""secure any amount"" Section 26 of the Stamp Act is a bar to its admissibility. If the document does not secure any

amount, Article 6 cannot apply and it must come under the residuary Article 5. Even otherwise, I do not think that Section 26 refers to

admissibility. It rather deals with the quantum of interest allowable in a suit when the document is sued on and accepted as evidence. I do not think

that Article 6 has any application.

Mr. T. Rangachariar argues that the letter is a mortgage to which Article 40 applies. In the first place, if this document is held to contain an

agreement relating to the deposit of title-deeds, Article 40 cannot apply, because a reading of Articles 6 and 40 makes it clear that agreements of

this kind are not to be regarded as mortgages. There is good reason for this position. As Mr. Krishnaswami Aiyar pointed out, a mortgage by the

deposit of title-deeds is not created by the writing which accompanies, precedes or is contemporaneous with the deposit. The essence of the

transaction is the deposit. (Section 59 of the Transfer of Property Act.) It is that that creates the mortgage. It may be that the letter or agreement

executed with reference to it contains the terms of the contract. But such a document would not per se have the effect of creating the mortgage. I

am, therefore, inclined to think that the letter in question does not constitute an equitable mortgage. The learned Vakil for the respondent suggested

that the letter, even if by itself it did not create a right, must be deemed to have declared the subsisting right, and that consequently by the operation

of Section 17 of the Registration Act, registration is compulsory. The answer to this is, that the declaration mentioned in Section 17 must, by its

own force, have the legal consequences contemplated by the parties, and should not simply be a statement of what has been effected.

Jeevarathnammal v. N. Varada Pillai 332 Ind. Cas. 11 : 3 L.W. 1 : (1916) 1 M.W.N. 17. Consequently, the declarations contained in the letter, if

the letter itself does not constitute the mortgage, would not attract the provisions of Section 17.

While I am thus far clear that the letter is not covered by Article 6 or 40 of the Stamp Act and as such is not required to be registered u/s 17 of

the Registration Act, I am compelled to hold that it is a simple mortgage. All the elements constituting a simple mortgage are in it. It refers to a loan

to be secured; the properties are definite; the charge on the properties is mentioned: and a present and subsequent personal liability is

contemplated. Consequently as the property on which this mortgage is charged is more than Rs. 100 in value, the document is inadmissible for

want of both stamp and registration. In the view that I have taken, if there had been independent evidence of the equitable mortgage, the plaintiff

would have succeeded. Section 92 of the Evidence Act will be no bar to the reception of oral evidence, because the transaction alleged and sought

to be proved is an equitable mortgage, whereas the letter in question does not evidence any such mortgage or its terms. In my opinion, this letter

indicates altogether a separate transaction.

I have not referred to any of the cases, for the simple reason that the question whether a letter of this kind can by itself create an equitable

mortgage was not considered in the cases cited before us. There is clear authority, which I am prepared to follow, that if the letter made a bare

reference to the factum of deposit and to the creation thereby of the equitable mortgage, no question of stamp or -registration would arise.

Kedarnath Butt v. Sham Lall Khettry 11 B.L.R. 405 and Oo Noting v. Moung Htoon Oo 13 C.k 322. In Behram Bashid Irani v. Sorabji Rustamji

Elavia 23 Ind. Cas. 140 and Swami Chetty C.B. v. S.T. Ethirajulu Naidu (1916) 2 M.W.N. 84 the point whether the document was capable of

creating an equitable mortgage per se was not considered. We have the authority of the Judicial Committee in Pranjivandas Jagjivandas Mehta v.

Chan Mah Phee 35 Ind. Cas. 190 : 31 M.L.J. 155 : 4 L.W. 69 : 18 Bom. L.R. 664 that it is the deposit without more that creates the mortgage,

although the extent of the property covered by the deposit may depend upon the writing which defines the quantum, of the property deposited.

Section 59 of the Transfer of Property Act is clear on the point.

I, therefore, feel constrained to hold that the plaintiff has failed to prove the mortgage set up. The decision of the learned Judge is right. This

appeal must be dismissed with costs.