Ponnuswamy vs V. Santhammal and Others

S.S. Subramani, J.—Defendant in O.S.No. 1203 of 1979, on the file of III Additional Subordinate Judge''s court, Coimbatore, is the

appellant.

The respondents, who are plaintiffs in the suit sought for the following reliefs against the defendant :

(a) for recovery of Rs. 21,050 with subsequent interest till date of payment to be deposited by the defendant within a date to be fixed by court;

(b) Ordering the sale of the properties mentioned in the schedule and adjust the sale proceeds towards the amount due to the plaintiffs;

(c) in case the sale proceeds are not sufficient to discharge the decree amount, granting a personal decree against the defendant,

(d) directing the defendant to pay the costs of the suit; and

(e) for such further and other reliefs as this Court may deem fit and proper under the circumstances of the case.

In the body of the plaint it is stated that on 29.5.1975, the defendant executed a promissory note for Rs. 15,000 in favour of one Kandaswami, the

husband of 1st plaintiff and father of plaintiffs 2 to 8 for valid consideration, agreeing to repay the same on demand with interest at 12% per annum.

It is also said that after execution the said promissory note, the defendant deposited the title deeds relating to his property on 1.6.1975, and a

memorandum to that effect was also executed on the same date in favour of the said Kandaswami at Coimbatore Town. The documents deposited

by the defendant were all produced along with the plaint. It is said that the defendant did not pay any amount either towards principal or interest.

Since the defendant was an agriculturist he was entitled to the benefits of various Acts passed by the Government of Tamil Nadu. After the death

of Kandaswami, the plaintiffs became entitled to claim the entire amount due from the defendant. A lawyer''s notice was issued, requesting the

defendant to pay the amount, but the same was not paid. It was under the above circumstances, the suit was filed for the reliefs stated above.

In the written statement filed by the defendant/appellant, it is said that he did not admit the execution of the promissory note. According to him,

the suit is not maintainable, without a succession certificate obtained u/s 214(l) of the Indian Succession Act. It was further contended by the

defendant that he borrowed from one Kandaswami a sum of Rs. 12,000 at the time when he was in dire need of funds and he was asked to sign in

stamped blank papers and also another blank paper. The late Kandasamy wanted to peruse the title deeds and for the said purpose the same was

handed over to him. The allegation that the title deeds were deposited with intent to create a mortgage is denied. It is also said that he has paid the

interest regularly for three years, for which also no receipt was given. It is further stated that the plaintiffs and Kandaswami had fabricated the

alleged promissory note and the memorandum which are not true or genuine and are unenforeceable.

The trial court took oral and documentary evidence after suggesting issues. On the side of the plaintiffs, Exs.A-1 to A-21 were marked and the

1st plaintiff was examined as P.W.1 On the side of the defendant, no document was produced, but he examined himself as D.W.1. After

considering the entire evidence on record, the trial court decreed the suit for an amount of Rs. 20,287.50 with costs, and the defendant was given

two months'' time to discharge the debt. It was also held that the suit was not barred by limitation. It was also found that the defendant has

deposited the title deeds with intent to create a mortgage and the amount was also borrowed by him. 5. The matter was taken in appeal before the

lower appellate court in A.S.No. 155 of 1983, on the file of the District Court, Coimbatore. The lower appellate court also confirmed the

judgment of the trial court and dismissed the appeal. The concurrent judgment is assailed in this second appeal on the following substantial

questions on law :

Whether the courts below were right in appreciation and interpretation of Ex.A-2 and holding that the same need not be registered and that by

virtue of Ex.A-2, an equitable mortgage is created?

Whether the courts below erred in ignoring the pleadings and the evidence of the plaintiffs in construing the effect of Ex.A-2?

Whether the courts below were right in granting decree in favour of the respondents in the absence of the succession certificate ignoring the

mandatory provisions of Section 214 of the Indian Succession Act?

In view of the concurrent finding of fact that the defendant has borrowed the amount and he has also deposited the title deeds, learned Counsel

for the appellant did not argue anything about the loan transaction. Counsel argued only the question of admissibility of the memorandum i.e.,

Ex.A-2 on the ground that it is unregistered. It is also contended that without a Succession Certificate, the plaintiffs are not entitled to any decree. I

will consider both these submissions in seriatim. Before going into the questions of law, it is better to extract the contents of Ex.A-2 :

It is admitted that the promissory note was executed on 29.5.1975, and the memorandum purported to have been executed on 1.6.1975. Ex.A-2

refers to the promissory note dated 29.5.1975. The English version of Ex.A-2 is as follows :

On 29.5.1975, I have executed a promissory note for Rs. 15,000 and towards principal and interest, I have already agreed that I will give security

of my property which belongs to me and is in my possession situate at Nanjundapuram Village, Coimbatore Taluk, having an area of 5.88 acres,

and I have handed over to you the documents pertaining to the properties at your house."" There are no other details.

The question whether such a memorandum requires registration had come of reconsideration in various decisions. In one of the very early

decisions reported in Kedar Nath Dutt v. Shamlal Khettay (1973)11 BenL.R. 405, which is referred to in most of the subsequent decisions of the

Supreme Court, this question was considered. At page 412 of the reports, it has been held thus :

The rule with regard to writings is that oral proof cannot be substituted for the written evidence of any contract which the parties have put into

writing. And the reason is that the writing is tacitly considered by the parties themselves as the only repository, and the appropriate evidence, of

their agreement. If this memorandum was of such a nature that it could be treated as the contract for the mortgage and what the parties considered

to be the only repository and appropriate evidence of their agreement, it could be the instrument by which the equitable mortgage was created, and

would came within Section 17 of the Registration Act. But it was not a writing of that character. As I have said, the equitable mortgage was

created by the agreement which was evidenced by the loan and the deposit of the title-deeds : the promissory note, whether given either at the

same time or some hours afterwards, in pursuance of the understanding between the parties, was evidence of the terms upon which the loan was

made, viz., that the interest should be at the rate of 24 per cent. But as regards the contract between the parties, if there had been no memorandum

at all on the promissory note, there would have been a complete equitable mortgage. When we consider what the memorandum is, we find it is not

the contract for the mortgage, not the agreement to give a mortgage for the Rs. 1,200 but nothing more than a statement by Woomachurn Banerjee

of the fact from which the agreement is inferred. It is an admission by him that he had deposited the deeds upon the advance of the money for

which the promissory note was given. It is not by the memorandum that the court takes the agreement for the mortgage to be proved, but by the

deposit of the deeds, and this is not more than a piece of evidence showing the fact of the deposit which might be proved by any other evidence.

The Bench thereafter said that ''a memorandum was purely an evidence of fact, from which a contract could be inferred, and therefore, do not

require registration.

In M. Subramanian and Anr. v. M.L.R.M. Lutchman and Ors. L.R. 50 LA. 1 : 14 M.L.J. 503 : AIR 1923 P.C. 50 of the reports their

Lordships referred to an earlier decision in Paranjivandas Mehta v. Chan Ma Phee ILR (1916) Cal. 806, wherein the Privy Council had laid down

the law thus :

The law upon this subject is beyond any doubt : (1) where titles are handed over with nothing said except that they are to be security, the law

supposes that the scope of the security is the scope of th title. (2) Where, however, titles are handed over accompanied by a bargain that bargain

must rule. (3) Lastly, when the bargain is a written bargain it, and it alone, must determine What is the scope and extent of security.

In the words of Lord Cairns in the leading case of Shaw v. Faster, 1872 L.R. 5 H.L. 321, although it is a well-established rule of equity that a

deposit of a document of title without more, without writing, or without word of mouth, will create in equity a charge upon the property referred to,

I apprehend that general rule will not apply when you have a deposit accompanied by an actual written charge. In that case you must refer to the

terms of the written document, and any implication that might be raised, supposing there was no document, is put out of the case and reduced to

silence by the documents by which alone you must be governed.

The above principle was followed in that case. On facts it was held that registration is required, since the bargain was on the basis of the written

instrument and without the production of the written instrument, the plaintiff is not entitled to succeed. The memorandum that came up for

consideration in that case reads thus :

We hand you herewith title deeds relating to Fifth Class Ltd. Nos. 78, 79 and 80, Block E, each measureing 25 by 50 with building there on

belonging to Saleman Ahmed Sedat, also his promissory note for rupees sixty-three thousand (Rs. 63,000) due to us, this please hold as security

against advances made to us; we also hand you second mortgage executed in our favour by C. Ranga Swamy Mudaliar on 1st Class Lt. No. 6 in

Block F1. On this we had advanced Rs. 32,000. Please also hold this as further security against advances made to us. We promise not to deal

with same till your amount due to you is fully paid and satisfied.

Both the above decisions came up for consideration in the decision reported in AIR 1931 36 (Privy Council) wherein it has been held thus :

That the memorandum was not other than a written record of the particulars of deeds the subject of an agreement constituted in fact by the act of

deposit and the payment of the money, and that it neither purported nor operated to create or declare any right, title or interest in the property

included in the deeds, with the result that it did not require registration. Even if it was a condition of the advance that the memorandum was to be

given, the fact that the memorandum was prepared, signed and handed over to the mortgagee before the advance of the balance of the money to

be secured by the deposit could not alter the nature and meaning of the document. It was and remained a list of the documents deposited and

nothing more. It did not embody the terms of the agreement between the parties and did not require registration.

All the three decisions referred to above came up for consideration in the decision reported in AIR 1939 167 (Privy Council) wherein the Law

declared was thus :

Where the parties processing to create a mortgage by deposit of title deeds contemporaneously enter into a contractual agreement in writing which

evidences the deposit and contains all the essentials of the transaction, expressly conferring a power of sale on the mortgagee and in the fact

purports to be an instrument not merely evidencing the transaction already completed but by itself effective to create an interest in the property in

favour of the mortgagees, such a document requires to be compulsorily registered.

The first case by the Supreme Court on this point is reported in Rachpal Mahraj Vs. Bhagwandas Daruka and Others, . Paragraph 4 of the

judgment is relevant for our purpose, which reads thus :

A mortgage by deposit of title deeds is a form of mortgage recognised by Section 58 (f), Transfer of Property Act, which provides that it may

be effected in certain towns (including Calcutta) by a person delivering to his creditor or his agent documents of title to immovable property with

intent to create a security thereon.'' That is to say, when the debtor, deposits with the creditor the title deeds of his property with intent to create a

security, the law implies a contract between the parties to create a mortgage, and no registered instrument is required u/s 59 as in other forms of

mortgage. But if the parties choose to reduce the contract to writing the implication is excluded by their express bargain, and the document will be

the sole evidence of its terms. In such a case the deposit and the document both form integral parts of the transaction and are essential ingredients

in the creation of the mortgage. As the deposit alone is not intended to create the charge and the document, which constitutes the bargain regarding

the security, is also necessary and operate to create the charge in conjunction with the deposit, it requires registration u/s 17, Registration Act,

1908, as a non-testamentary instrument creating an interest in immovable property, where the value of such property is one hundred rupees and

towards. The time factor is not decisive, the document may be handed over to the creditor along with the title deeds and yet may not be

registerable, as in AIR 1931 36 (Privy Council) Or, it may be delivered at a later date and nevertheless he registrable as in AIR 1939 167 (Privy

Council) . The crucial question is, did the parties intend to reduce their bargain regarding the deposit of the title deeds to the form of a document?

If so, the document requires 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, then, there being no express bargain, the contract to create the mortgage arises by implication of the law

from the deposit itself with the requisite intention, and the document, being merely evidential does not require registration.

In United Bank of India Ltd. Vs. Lekharam Sonaram and Co. and Others, , their Lordships held thus :

When the debtor deposits with the creditor title deeds of his property with an intent to create a security the law implies a contract between the

parties to create a mortgage and no registered instrument is required u/s 59 as in other classes of mortgage. It is essential to bear in mind that the

essence of a mortgage by deposit of title deeds is the actual handing over by a borrower to the vendor of documents of title to immovable property

with the intention that those documents shall constitute a security which will enable the creditor ultimately to recover the money which he has lent.

But if the parties choose to reduce the contract to writing, this implication of law is excluded by their express bargain and the document will be the

sole evidence of its terms. In such a case the deposit and the document both form integral parts of the transaction and are essential ingredients into

creation of the mortgage. It follows that in such a case the documents which constitutes the bargain regarding security requires registration u/s 17 of

the Indian Registration Act, 1908, as a non-testamentary instrument creating an interest in immovable property, where the value of such property is

one hundred rupees and upwards. If a document of this character is not registered it cannot be used in evidence at all and the transaction itself

cannot be proved by oral evidence either.

Where the letter in question did not mention details of title deeds, which were to be deposited with the Bank and neither mentioned what was the

principal amount borrowed or to he borrowed not it referred to rate of interest for the loan, the letter was not intended to be an integral part of the

transaction between the parties and did not by itself operate to create an interest in the immovable property and, therefore, it did not require

registration.

In Deb Dutta Seal Vs. Ramanlal Phumra and Others, , all the decisions referred to above were considered and insofar as Kedaranth Dutta''s

case, 11 Beg.I.R. 405 is concerned, their Lordships did not approve the Law declared therein in full. Regarding Kedarnath Dutta''s case, after

extracting the relevant passage of the memorandum that came up for consideration in that case, the Calcutta High Court has in an early portion of

the judgment held :

When we consider what the memorandum is, we find it is not the contract for the mortgage, not the agreement to give a mortgage for the Rs.

1,200 but nothing more than a statement by Woomachurn Banerjee of the fact from which the agreement is inferred. It is an admission by him that

he had deposited the deeds upon the advance of the money for which the promissory note was given.

The Calcutta High Court has in the earlier portion further held that ""the memorandum did not require registration on the ground that this was not a

writing which the parties has made as the evidence of their contract, but only a writing which was evidence of the fact from which the contract was

to be inferred."" Regarding these two passages of the Calcutta High Court, the Hon''ble Supreme Court held that,

We are not concerned with the correct interpretation of that memorandum but if the decision lays down that even if a document on the face of it

and properly interpreted in the light of the circumstances does not disclose the creation of a mortgage, or in the words of the Privy Council in AIR

1939 167 (Privy Council) , even if the document itself is not an operative instrument and is merely evidential, it requires registration, the decision

cannot be approved.

Thereafter, their Lordship considered what are all the essentials of the transaction which should contain the document, which may require

registration. In paragraph 11 of the judgment it was said thus :

It seems to us that the document must contain all the essentials of the transaction and one essential is that the

Date.

Date of repayment.

Sum secured.

Nature of mortgage.

Subject matter of mortgage.

In that case the rate of interest was not mentioned, and the details of the properties were also not given. In paragraph 12 of the judgment, their

Lordships held thus :

Stress was also laid on the time element. Assuming that we are wrong in the interpretation that the deeds mentioned in the letter after being

shown to the father and approved, were handed back together, even then we are of the view that the document does not require registration

because it is not an operative instrument''. It does not contain all the essentials of the transaction. What is registrable under the Indian Registration

Act is a document and not a transaction.

The above view was approved by the majority, and His Lordship Mitter, J. did not accept the majority view.

If we consider Ex.A-2, on the basis of the above legal principle, I do not think that Ex.A-2 requires registration. The rate of interest is not

mentioned and it only evidences a concluded contract already entered into. The wordings are : definite, when i(sic)t ""I am handing over the

documents on the basis of the agreement, which I have already entered into."" On the basis of this document, no interest is created and no mortgage

is also created. This document is not a bargain, but only evidences the bargain already effected. The details of the properties were also not given,

though the description of documents are given. None of the essentials referred to in the decision reported in Deb Dutt Seal v. Raman Lal Phumpa

AIR 1970 S.C. 650 are contained in Ex.A-2 and therefore, it does not require registration. learned Counsel for the appellant submitted that

paragraph 2 of the plaint in contradicted by P.W.1 herself. On going by the evidence I do not find that such a contention raised by the counsel is

correct.

learned Counsel for the appellant relied on the decisions reported in Indersain v. Mohammed Rasa Gowher (1961) 2 M.L.J. 328 : 74 L.W.

707; Modern Housing Construction and Properties Ltd. v. The Alagappa Textiles, 85 L. W. 251 and Indian Bank Ltd., Hyderabad Vs. Anomula

Seshagiri Rao and Sons Co., Vijayawada and Others, . In Indersain v. Mohammed Raza Gowher and Anr., 74 L. W. 797, it was held thus :

Where an equitable mortgage is sought to be created by deposit of title deeds and a letter is written as the evidence thereof, if documents had been

deposited before the execution of that letter, that is, the documents had been handed over to the plaintiff as security for the suit loan and the letter

only recorded a past transaction, then there was no necessity for registration. Where there is no past transaction of actual deposit of title deeds

before the execution of the letter in question and the letter is the only evidence of the mortgage and the only document by which the mortgage was

created, it had to be registered , and not having been registered, it cannot be admitted in evidence to prove a valid equitable mortgage by deposit

of title deeds.

I do not think that the decision has any application to the facts of the present case. In Ex.A-2, it is clearly stated that the loan transaction was

earlier and the agreement was also prior to Ex.A-2 and it is not the bargain between the parties. Even without Ex.A-2, mortgage could be proved.

In Modern Housing Construction and Properties Ltd. represented by Director v. The Alagappa Textiles, 85 L.W. 251 on interpreting the

memorandum it has been held that it requires registration. But how far the said decision holds good after the decision reported in Deb Dutt Seal v.

Raman Lal Phumpa AIR 1970 S.C. 650 is doubtful, since the essentials as required in the said decisions are absent in the case reported in 85 L.

W. 251. Even though that case was decided on 27.8.1971, I do not think that the decision of the Supreme Court in AIR 1970 S.C. 650 was

placed before the Division Bench. Indian Bank Ltd., Hyderabad Vs. Anomula Seshagiri Rao and Sons Co., Vijayawada and Others, , was also a

case interpreting a particular memorandum. While interpreting the memorandum in that case, a Division Bench of Andhra Pradesh High Court held

that the Letter itself explained why the title deeds are deposited and that was the bargain'' In that view it was held that registration was required. In

that case also I do not find that the decision of the Supreme Court in A.I.R 1970 S.C. 650 was brought to the notice of the Andhra Pradesh High

Court. None of the these decisions have bearing, in view of the decisions which I have already extracted, especially the decision reported in AIR

1970 S.C. 650. In that view, the finding of the Courts below that Ex.A-2 does not require registration is confirmed, and I hold that there is a valid

deposit of title deeds and a mortgage was created by the defendant and the same is evidenced by Ex.A-2.

The other question that requires consideration is whether succession certificate is necessary in such cases. Section 214(1) of the Indian

Succession Act says that no court shall pass a decree against a debtor of a deceased person for payment of his debt to a person claiming on

succession to be entitled to the effects of the deceased person or to any part thereof, except on the production by the person so claiming, a

succession certificate granted under part X and having the debt specified therein. Sanjiva Row''s Indian Succession Act, Sixth Edition, 1992, has

considered the question whether a succession certificate is necessary in a suit for enforcement of a mortgage. It is held thus at page 597 of the said

book :

The question whether a suit to enforce a mortgage is one to enforce payment of a debt within the meaning of Section 214 has been debated on

numerous occasions and the decisions thereon have been carefully considered in a judgment of the Rangoon High Court reported in Saw Ghone

Gye v. Hafiz Bibi AIR 1934 Rang. 369, wherein the conclusion was expressed that the section has reference only to suits to enforce payments of

simple debts and that suits to bring mortgage properties to sale are not within its purview because a mortgage suit is really a suit to realise an

interest in immovable property. A decree on chittham mortgage is not a decree for payment of debt and hence no succession certificate would be

necessary. Similarly, a final decree for the sale of mortgaged property is not a decree for payment of debt within the meaning of this section and the

execution will not be barred by the non-production of succession certificate.

For passing a preliminary decree or final decree for sale of the property or even execution of the decree thereof for the realisation of the mortgage

money in a suit for its execution instituted by the legal representatives of the mortgagee, they shall not be asked to produce a succession certificate

as required by Section 214 of the Indian Succession Act, 1925, as the debt defined in that section does not include a decree for the enforcement

of the mortgagee''s right as against the mortgaged property.

Paruk on ''The Indian Succession Act'' Eighth Edition, 1993 at page 535 has held thus :

A suit for account is not a suit for debt. A claim for liquidated damages is not a debt. A suit for recovery of money in pursuance of a lease given by

the mortgagee to the mortgagor is not a suit for debt and no certificate is necessary in a suit by the successor-in-interest of the mortgagee against

the mortgagor. A mortgage is not a debt and a suit to enforce mortgage is not a suit for debt and certificate is not necessary. A suit to recover

money due on a simple mortgage by sale of the mortgaged property is not a suit for recovery of a debt and no succession certificate is necessary,

but if a personal decree is prayed for against the mortgagor representation is necessary.

The High Court of Kerala had an occasion to consider in Aysha Beevi v, Abdul Karim 1971 K.L.T. 547, this question in detail and in that case, a

learned Judge of the Kerala High Court considered the decision of this Court in Palaniandi Pillai v. Veerammal, ILR 29 Mad. 77 and held that ''a

debt contemplated by Section 214 would not include a debt for enforcement of the mortgagee''s rights as against the mortgaged property as it is

hot a decree for debt.'' It was further held that ''the mere fact that the personal remedy is still available to the mortgagee would not make any

difference.'' It was finally held thus :

For passing a preliminary decree or final decree for sale of the property or even execution of the decree thereof for the realisation of the mortgage

money in a suit for its execution instituted by the legal representatives of the mortgagees, they shall not be asked to produce a succession certificate

as required by Section 214 of the Act as the debt defined in that section does not include a decree for the enforcement of the mortgagee''s right as

against the mortgaged property.

Applying the principles enunciated in the decisions cited supra, the finding of the courts below that succession certificate is not necessary in this

case is only to be confirmed.

In the result, the judgments and decrees of the courts below are confirmed and the second appeal is dismissed with costs.