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1964 Supreme(SC) 38

SUPREME COURT OF INDIA
K. SUBBA RAO AND J.R. MUDHOLKAR, JJ.
K. J. Nathan, Appellant
Versus
S. V. Maruthi Rao and others, Respondents.
Civil Appeal No. 407 of 1962.
Advocates appeared
M/s. R. Ramamurthi Aiyar, T. S. Ringarajan and R. Gopalakrishnan, Advocates, for Appellant; M/s. V. S. Venkataraman, M. R. Krishna Pallai and M. S. K. Iyengar, Advocates for Respondent No. 3.

Advocates:
M.R.Krishna Pillai, M.S.K.AIYANGAR, R.GOPAL KRISHNAN, R.RAMAMURTHI IYER, T.S.RANGARAJAN, V.S.Venkataraman

Subject

Property Law - MORTGAGE

Act Referred

ANDHRA PRADESH RULES FRAMED UNDER REGISTRATION ACT : S.47
CONSTITUTION OF INDIA : Art.133
TRANSFER OF PROPERTY ACT : S.58(1)

Headnote

AGREEMENT CREATING MORTGAGE BY DEPOSIT OF TITLE DEED EXECUTED ON 5-7-1947 BUT REGISTERED AT A LATER DATE — HELD AGREEMENT WOULD TAKE EFFECT FROM THE DATE OF EXECUTION UNDER THE PROVISIONS OF THIS SECTION AND WOULD PREVAIL OVER SUBSEQUENT MORTGAGE EXECUTED IN FAVOUR OF THIRD PERSON - Mortgage by deposit of title deeds – essential - Equitable mortgage in english law

       

       – Mode of deposit may be physical or constructive there must be a delivery of documents of title of immovable property such delivery must be made to a creditor or his agent – such delivery must be made with intent to create a security thereon – K.L. Nathan v. S.V. Maruthi, AIR 1965 SC 430.

       

Legal Category Hierarchy

  • property law
    • mortgages
      • mortgage by deposit of title deeds (Para 7, 8, 9, 10, 12, 13, 16, 17)
    • registration of instruments (Para 15, 19)
  • civil procedure
    • judicial proceedings
      • appeal (Para 1, 4, 20)
      • decree (Para 4, 20)
  • evidence
    • documentary evidence (Para 15)
    • oral evidence (Para 15, 16)

Table of Contents

1. What are the essential requisites of a mortgage by deposit of title deeds under Section 58(f) of the Transfer of Property Act?

A mortgage by deposit of title deeds requires three essentials: debt, deposit of documents of title to immovable property, and intention that the deeds shall be security for the debt. Physical delivery is not the only mode; constructive delivery also satisfies the requirement. (Para 7 , 8 , 9 , 10 , 12 , 13 )

2. Can constructive delivery of title deeds constitute a valid deposit for creating a mortgage by deposit of title deeds?

Yes. Where the creditor already has physical possession of the title deeds, the debtor's instruction to the creditor or his agent to hold the documents as security constitutes constructive delivery, which is sufficient under the law. (Para 16 , 17 )

3. Can a registered memorandum of agreement acknowledging a mortgage by deposit of title deeds create such a mortgage even if no mortgage was previously effected?

Yes. If on the date of the agreement the title deeds were in the creditor's possession and the debtor expressed intention to treat them as security for the debt, all requisites of a mortgage by deposit of title deeds are satisfied. (Para 15 )

4. Does delivery of title deeds to the creditor's agent at a location outside the specified towns invalidate a mortgage by deposit of title deeds?

No. Delivery to the creditor's agent at another location, followed by the creditor taking possession at a specified town, does not invalidate the mortgage. The substance of the transaction — constructive delivery coupled with intention — satisfies Section 58(f) of the Transfer of Property Act. (Para 6 , 17 )

Judgment

SUBBA RAO, J:

This appeal on a certificate issued by the High Court of Judicature at Madras is preferred against the judgment and decree of the said High Court modifying those of the Subordinate Judge, Tanjore, in a suit filed by the appellant to enforce a mortgage by deposit of title deeds.

2. The facts are as follows: The first defendant borrowed from the plaintiff from time to time on seven promissory notes. The plaintiff, alleging that the first defendant had created a mortgage by deposit of title deeds in his favour in respect of his half share in the properties specified in B-Schedule, instituted O.S. No. 45 of 1951 in the Court of the Subordinate Judge, Tanjore, for enforcing the said mortgage against the said properties. The suit was for recovery of a sum of Rs. 20,435-15-0 made up of principal amount of Rs. 16,500/- and interest thereon. To that suit six persons were made defendants: defendant 1 was the mortgagor; defendant 2 was the subsequent purchaser of several of the items of the suit properties subject to plaintiff s mortgage; defendant 3 was the subsequent mortgagee defendant 4 was the subsequent purchaser of one of the plaint-schedule properties; and defendants 5 and 6 were sister and brother of the 1st defendant. The plaintiff also alleged that in a partition effected between the 1st defendant and his brother properties described in the C Schedule annexed to the plaint were allotted to the 1st defendant. He, therefore, asked in the alternative that the C Schedule properties should be sold for the realization of the amount due to him from the 1st defendant.

3. As the only contesting party before us is the 3rd defendant (3rd respondent herein), it is not necessary to notice the defence raised by defendants other than the 3rd defendant. The 3rd defendant alleged that the 1st defendant had executed a security bond in his favour for a sum of Rs. 15,000/- on October 10, 1947 and that, being a bona fide purchaser for value, he had priority over the plaintiff s security, even if it were true. He put the plaintiff to strict proof of the fact that the sum claimed in the plaint under several promissory notes was owing to him and also of the fact that the 1st defendant effected a mortgage of the suit properties by deposit of title deeds in favour of the plaintiff.

4. The learned Subordinate Judge held that the suit loans were true, that the mortgage by deposit of title deeds was also true, but the plaintiff had a valid mortgage only of items 1 and 4 of the C Schedule in respect of a sum of Rs. 9,157-5-0 with interest at 6 per cent per annum thereon. On the finding he gave a decree in favour of the plaintiff against defendants 1 to 3 for the said amount with a charge over items 1 and 4 of the C Schedule properties; and he also gave a decree in favour of the plaintiff for a sum of Rs. 7,565-2-0 with further interest at 6 per cent per annum from July 5, 1947, against the 1st defendant personally. The plaintiff preferred an appeal against the decree of the Subordinate Judge; in so far as it went against him, and the 3rd defendant filed cross-objections in respect of that part of the decree which went against him. A Division Bench of the Madras High Court, which heard the appeal and the cross-objections, held that the 1st defendant did not effect a mortgage by deposit of title deeds on May 10, 1947, in favour of the plaintiff for the entire suit claim, but that he effected such a mortgage in favour of the plaintiff on January 25, 1947, for a sum of Rs. 3,000/- in respect of two of the plaint-schedule items described in Ex. A-8. On that finding, the High Court modified the judgment and decree of the Subordinate Judge by restricting the mortgage decree given to the plaintiff to the amounts covered by the first three promissory notes and interest thereon and to one half of the properties described in Ex. A-8 and by giving a money decree against the 1st defendant for the entire balance of the decree amount. The plaintiff has

















































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