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Judgment
A. Raman, J.—This appeal is directed against the judgment and decree passed by the Additional District Judge, Tirunelveli in A.S.No. 126
on 1982 on 16.7.1983.
The plaintiff filed the suit for recovery of a sum of Rs. 19,842.15 on the following allegations. The defendant obtained a loan of Rs. 15,000 from
the plaintiffs Bank on 10.6.1977 agreeing to pay interest at 16% with quarterly rests. The defendant also executed promissory note as security for
the same on 10.6.1977. He also executed a letter of undertaking agreeing to pay the said sum in 30 monthly equal instalments. It was further
agreed that the defendants should pay the interest as fixed by the Bank from time to time and pay penal interest at 3% over the scheduled rate in
default. On 10.6.1977 the defendant deposited with the plaintiff at Thachanallur the title deeds with intent to create an equitable mortgage over the
properties set out in the plaint. On 11.6.1977 confirming the deposit of the title deeds the defendant also wrote a letter to the plaintiff. Thus the
equitable mortgage has been created over the scheduled property. As the defendant was irregular in payment, the plaintiff sent a notice on
17.1.1978. The defendant sent his reply requesting for time. Therefore the suit.
The defendant filed a written statement putting forth the following contentions:- The suit is not maintainable. The allegation that the defendant
agreed to pay interest at 16% and he further agreed to pay interest as fixed by the bank and penal interest at 3% over the scheduled rate of interest
is not true. The defendant did not create nor intended to create an equitable mortgage. He did not deposit the title deeds. He did not writ any letter
confirming the deposit of title deeds. There is no equitable mortgage created at all nor subsisting. The defendant no doubt borrowed Rs. 15,000
from the plaintiff promising to repay the sum in instalments. There is no other transaction. The signature of the defendant were obtained. The
defendant does not know English. He did not sign the papers on the date mentioned in the plaint, or in the document. If at all the plaintiff has got
any right, it is only to collect the amount due and not more than that. The claim is premature. There is no valid agreement for payment of interest of
16%. The amount claimed is not correct. The plaintiff is entitled to only 6% of simple interest. The plaintiff''s claim for compound interest is not
tenable in law. The interest claimed is exhorbitant and prohibited by law. The plaintiff has no locus standi to issue the defendant. The allegation that
the defendant gave a letter on 10.6.1977 stating the details of the documents deposited is not correct. It is only a memorandum whereby the
equitable mortgage is created. The said mortgage has been hit by provisions of the Registration Act.
The plaintiff in his reply statement pleaded as follows:-
The defendant applied to the plaintiff bank for loan on 28.1.1977 and 12.5.1977. But the applications were approved on 26.5.1977. One of the
conditions of the loan is that if one instalment is not paid, the entire amount with interest would become due. The terms of the loan were all
considered and settled and approved by the parties. The undertaking letter of deposit of title deeds was made by the defendant in pursuance of the
terms and conditions. The suit transaction is not hit by the Registration Act.
Before the Ist Additional Sub Judge, Tirunelveli, who conducted the trial on behalf of the plaintiff Swaminatha Mudaliar was examined as P.W.-
l. On the defendants side, no witness was examined. ExsA-1 to A-19 were marked. The first Additional Sub Judge, who conducted the trial of the
suit by his judgment dated 30.9.1981 decreed the suit with costs. Aggrieved by the same, the defendant preferred an appeal in A.S.No. 126 of
1982 to the District Court, Tirunelveli and the Second Additional District Judge by his judgment dated 16.7.1983 dismissed the appeal and
confirmed the judgment and decree of the trial court. Hence the second appeal by the defendant.
At the time when the second appeal was admitted the following substantial question of law was framed for consideration:-
Whether the courts below are right in holding that Ex.A-8 is not hit by Section 17 of the Registration Act?
The point:- Though several contentions were raised in the trial court and in the lower appellate court rightly the defendant confined his
submissions with regard to Ex.A-8 and did not choose to raise any other contention. Ex.A-8 according to the counsel for the appellant is a
document that is compulsorily registerable and therefore as it is not registered it is hit by the provisions of Section 17 of the Indian Registration Act.
Therefore according to the counsel for the appellant; the plaintiff is at best entitled to only a simple money decree as no equitable mortgage was
created and hence the findings of the courts below that the document Ex.A-8 whereby the deposit of title deed was made and which created an
equitable mortgage is not a document that requires to be registered is not correct and hence the plaintiff is not entitled to a decree as prayed for. It
is therefore necessary to recapitulate the facts of this case in the order of things so that the moot point raised in the second appeal can be better
elucidated and decided. The defendant herein applied to the plaintiffs Bank for a loan of Rs, 15,000. The evidence of P.W.-l is to the effect that
the defendant applied on 28.1.1977 and 12.5.1977. The request of the defendant for grant of loan was considered by the Bank and the order of
sanction was passed on 26.5.1977 permitting the plaintiff to grant the loan. In pursuance of the order of sanction, the defendant executed an
undertaking to pay the amounts sanctioned and received as loan in 30 monthly instalments and also to pay the interest at quarterly rests. The
defendant also executed a promissory note for the sum of Rs. 15,000 granted as the loan. Ex.A-6 and Ex.A-7 are these two documents dated
10.6.1977. It is on the same day on 10.6.1977 the defendant is said to have executed the memorandum whereby the deposit of title deeds were
made by the defendant. Ex.A-9 is the registration copy of the Will dated 29.5.1925. Ex.A-10 is the registered sale deed dated 19.8.1964. Exs.A-
11 to A-13 are the encumbrance certificates submitted along with the memorandum of deposit of title deeds to the plaintiffs bank by the defendant.
On 11.6.1977, the defendant has written a letter under Ex.A-16 confirming the transactions and also the deposit of title deeds under Ex.A-8. In
the context of these facts it has to be decided whether the document relied upon by the appellant is one compulsorily registerable.
The Privy Counsel had an occasion to deal with such a case as we see from the ruling reported in Sundarachariar v. Narayana Ayyar 33 LW
The principle has been enunciated by the Privy Counsel in the following terms :-
(1) that an agreement embodied in a written document requiring registration u/s 17, Registration Act and not so registered could not be proved by
the written document or by oral evidence, yet where there was no written agreement there was no reason why the intent to create a security by
deposit of title deeds under the exception provided for in Section 59, Transfer of Property Act, should not be evidenced by written as well as by
oral evidence;
(2) that the memorandum did not embody the terms of the agreement between in parties but was merely the list of the documents deposited and
nothing more and hence it could not be held that the memorandum purported or operated to create or declare any right, title or interest in the
property and required to be registered u/s 17 of the Registration Act; and
(3) that while it should not be thought that the language of Lord Carson in Subramonian v. Lutchan 18 LW 446 that no memorandum relating to a
deposit of title deeds could be within Section 17, Registration Act, unless it embodied all the particulars of the transactions of which the deposit
formed part, it should be held that no such memorandum could be within the section unless on its face it embodied such terms and was signed and
delivered at such time and place and in such circumstances as to lead legitimately to the conclusion that so far as the deposit was concerned it
constituted the agreement between the parties.
Their Lordships have further observed as follows:-
Now this transaction took place in Madras and did not therefore require a registered instrument under Sections 59 of Transfer of Property Act, the
question which falls to be determined is whether the memorandum having regard to its true construction the circumstances in which it came into
existence and passed into the hands of the plaintiff is an instrument which purports or operates to create, declare assign, limit or extinguish, whether
in present or in future, any right, title or interest whether vested or contingent of the value of Rs. 100 and upwards to or in immovable property; If
the memorandum is considered in vacuo its meaning is plain. It records particulars of documents which, it states, have been delivered as security in
pursuance of an agreement reached in person. It does not state what were the terms of the agreement or indicate the nature of the matter for which
the deeds were deposited as security. So far as anything disclosed by the memorandum is concerned the security may have been for money lent or
to be lent or for the performance of some obligation the breach of which would sound in damages. 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. Upon this vies of the matter, apart from
authority, it would in their Lordships'' opinion be impossible to hold that the document purported or operated to create or declare any right, title or
interest in the property and required to be registered u/s 17 of the Registration Act.
The Supreme Court also considered the question whether the memorandum given along with title deeds is a document compulsorily registerable. In
the decision reported in Rachpal Mahraj Vs. Bhagwandas Daruka and Others, their Lordships observed as follows:-
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 sole evidence of its terms. In such a case the
deposit and the document both form integral part of the transaction and are essential ingredients in the creation of the mortgage. As the deposit
alone is not intended to create the change and the document, which constitutes the bargain regarding the security, is also necessary and operates to
create the charge in conjunction with the deposit, it requires registration u/s 17, Registration Act, as a non-testamentary instrument creating an
interest in immovable property, where the value of such property is one hundred rupees and upwards. The time factor is not decisive. The
document may be handed over to the creditor along with the title deeds and yet not be registerable, or it may be delivered at a later date and
nevertheless be registerable.
In the above decision the Supreme Court also referred to the decision in Sundarachariar v. Narayana Ayyar 33 LW 501 Privy council.
In the decision reported in United Bank of India Ltd. Vs. Lekharam Sonaram and Co. and Others, the Supreme Court had again to tackle the
same proposition. It was then held as follows:-
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 lender 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 in
the creation of the mortgage. It follows that in such a case the document 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 be borrowed nor 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.
The Supreme Court in this case has also referred to the rulings reported in AIR 1931 36 (Privy Council) and Rachpal Mahraj Vs. Bhagwandas
Daruka and Others, to which decisions I have already referred to.
The other decision on this point that is referred to is that reported in Nanjappa v. MF.C. Industries P. Ltd. 1987 (1) MLJ 180. It has been
observed by this court as follows:-
Whether the memorandum by itself constitutes a bargain between the parties or it constitutes evidence of the contract between the parties? It is not
the case of the defendant that there is an agreement between the parties that the mortgage was to take effect only on the execution of the
memorandum. The memorandum clearly and plainly appears to be something in the nature of a forwarding letter or acknowledging the fact that the
defendant has deposited the said deed of title as security which is obvious because according to the plaintiff, there is admittedly a promissory note
which has been executed much earlier and a sum of money was due on the basis of the said promissory note. The mere statement that a deposit is
made by way of security for the repayment of the loan cannot be read as a contract which is arrived at by the document itself. The document
therefore, cannot be read as a recording of an agreement between the parties, the agreement to create a mortgage by deposit of title deeds. It is at
best an evidence of the fact that the title deeds have been deposited with the plaintiff . The facts do not show that the memorandum accompanying
the title deeds are intended to be a contract of mortgage reduced to writing by the parties. It cannot be so read as meaning that the plaintiff and
defendant had agreed to reduce the transaction of mortgage to writing. The memorandum singed by the defendant cannot be construed as an
integral part of the transaction of mortgage or intended to create an interest in the subject matter of the mortgage.
Now with the position of law on this point enunciated by the Supreme Court, it is necessary for us to see whether in the facts and circumstances
Ex.A-8 can be construed a document requiring registration. In other words, we have to see whether the parties intended that the memorandum
should be an integral part of the agreement or whether it is merely a letter intimating the deposit of title deeds. To ascertain the intention of the
parties and also to arrive at a proper conclusion it is first of all necessary to refer to the terms of the document. Therefore a reference to the
Document Ex.A-8 is necessary to find out that the document Ex.A-8 which evidences the memorandum of deposit of title deeds contains the terms
of agreement between the parties. In other words whether the memorandum in question is the bargain between the parties can therefore be
construed. For, if the memorandum is of such nature that it is to be treated as a contract for mortgage and the parties intended it to be the
repository and appropriate evidence of their agreement, then the instrument by which the equitable mortgage was created would squarely fall within
Section 17 of the Registration Act. Therefore when the parties have chosen to reduce into writing, which is implication of law is executed by their
express bargain and therefore the terms alone will be the sole evidence. In such case the deposit and the document both form integral part of the
same transaction. Whether the document was intended to be form part of the same transaction can be also gathered from the terms and conditions
of the agreement.
The document reads as follows:-
List of documents of title deeds relating to the property mentioned hereunder belonging to me deposited by me on the 10th day of June 1977 at
Tirunelveli Town with the Manager, The South India Bank Ltd., (Tirunelveli) Tirunelveli Town as already agreed upon by way of security for the
debt due under pronote dated 10th June 1977 for Rs. 15,000 (Rs. fifteen thousands only) executed by me (Mr. T.V. Alwar S/o, Sri Vellaya
Naidu No. 2, Mangalakudyiruppu St., Thachanallur) to the South India Bank Ltd., (Tirunelvelly) Tirunelveli Town branch.
(1) Original Registered Sale Deed dated 19.8.1964 executed by Karuppayee Ammal in favour of Alwar Naidu.
(2) Copy of the Will dated 29.5.1925 made by Piramuthu Moopanar in favour of his daughter Karuppayee Ammal.
(3) Encumbrance certificates (1) from 1.1.1963 to 30.11.1975; (2) 1.12.1975 to 19.9.1976 and (3) 20.9.1976 to 27.2.1977.
Schedule of Property
Rice Mill building bearing Door No. 59 (in S.No. 129/1) situate at Mathrai High Road, Thachanallur valued at Rs. 37,000.
The learned counsel for the appellant would contend that from the sanction order it is clear that it was a condition of the advance that the
memorandum has to be given and therefore it must be construed that it was a condition of the bargain and form integral part of the transaction and
hence it is a document falling squarely within Section 17 of the Indian Registration Act. But even if it is a condition of the advance that a
memorandum was to be given it does not alter the situation. Here the defendant has not taken the witness stand to speak to the circumstances
whereunder he executed the memorandum. He has not chosen to come forward to state that it was intended and was part of the bargain that the
execution of memorandum and deposit of title deeds and the deposit must be integral part of the transaction. When such a evidence has not been
adduced by the defendants we have to go only by the recitals in the memorandum. P.W.-l has also not stated anything on this aspect. But it is in
evidence that the advance was made already in the morning in pursuance of the promissory note and the undertaking was signed by the defendant,
on the date at about 4.00 p.m., the defendant executed the memorandum of deposit of title deeds and handed over the documents viz., A-8 to A-
14 with the Manager of the Bank. In such circumstances, the contention of the learned counsel for the appellant that merely because there was a
condition of the advance that the memorandum should be given, it does not alter the situation. The fact that the memorandum was prepared and
signed and handed over to the mortgagee even assuming it was before the advance of money which was to be secured by deposit of title deeds, it
cannot alter the nature and meaning of the document. Here, the document is at best a list setting out the title deeds that are handed over by the
mortgagor. The terms of the transaction are not set out. The terms of the agreement between the parties is not embodied. Therefore it is at best a
written record of the particulars of the deed and therefore it neither purport 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 the registration. The letter neither mention what was the principal amount
borrowed nor the amount to be borrowed. The rate of interest agreed between the parties for the loan is not mentioned. Therefore, it cannot be
contended that it was intended to be an integral part of the transaction between the parties and therefore it did not by itself create an interest in the
immovable properties and there is no need to register the same. In the decision reported in Rachpal Mahraj Vs. Bhagwandas Daruka and Others,
the memorandum runs 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 Mallick 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 ...
Here the Supreme Court construed the said memorandum as one which did not create any charge, but purport to record a transaction which has
been concluded and under which the rights and liabilities had been relied and agreed upon and that the transaction far from intending to reduce the
bargain to writing and make the document creating the rights and liabilities of the parties. Here in this case as I pointed out already it is simply
stated that as already agreed upon by way of security for the amount due by the defendant on the promissory note dated 10.6.1977 he has
deposited certain documents, the list of which are thus purport to be set out under this memorandum. In the Privy Council case to which I have
already referred to viz., that reported in Sundarachariar v. Narayana Ayyar, 33 LW 501 while construing a similar memorandum, the Privy Council
has held after referring to the decision reported in 1873 II B.L.R. 405 and that of the Chancery Division reported in 1972 (5) H.L. 321 : 42 Ch.
49 and Subramanian v. Lutchmanan 18 L.W. 446 held that the effect of such a memorandum is only at best a written record of particulars of
deeds and not than that. In the leading case in United Bank of India v. Lekhram Co., Ltd. AIR 1964 SC 1591 while construing the memorandum
of deposit of title deeds which contained more terms than what we find in the document in question their Lordships of the Supreme Court held that
this memorandum did not mention the principal amount borrowed or to be borrowed nor it did refer to the rate of interest and therefore the
document 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. Therefore, the cumulative effect of these circumstances would go to show that the document in question is at best only a list
of title deeds and that the document can never be said to form an integral part of the transaction nor it can be stated to evidence the bargain
between the parties. On the other hand, it is at best an instrument recording the particulars of document and nothing more. The document was not
intended to and did not operate to create any right in or over any property nor has the effect of creating any charge over the property and therefore
it is not a document which requires to be registered. Therefore it follows that the conclusion of the courts below that the document is admissible in
evidence and that is not hit by Section 17 of the Registration Act is a proper conclusion. Therefore, I find that there is no merit in this appeal.
In the result, this appeal is dismissed with costs confirming the judgments and decrees of the courts below.