OBLA SUNDARACHARIAR vs NARAYANNA AYYAR

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1931 Supreme(SC) 4

PRIVY COUNCIL [ON APPEAL FROM THEEAST INDIES]
LORD TOMLIN, LORD MACMILLAN, SIR JOHN WALLIS SIR LANCELOT SANDERSON, AND SIR GEORGE LOWNDES.
OBLA SUNDARACHARIAR - Appellant
Versus
NARAYANNA AYYAR - Respondents
On Appeal from the High Court at Madras.
Decided On : Jan. 13. 1931.

Advocates:
Solicitor for appellants : H. S. L. Polak.
Solicitors for respondents: Douglas Grant & Dold.

Important Points

A memorandum that merely lists title deeds deposited as security, without embodying the terms of the agreement, is a record of the transaction and not the instrument creating the mortgage; therefore, it does not require registration under the Indian Registration Act.

Subject

Civil Law - Property Law

Act Referred

ANDHRA PRADESH RULES FRAMED UNDER REGISTRATION ACT: S.17

Headnote

(A) Indian Registration Act, 1908 - Sections 17 and 49 - Transfer of Property Act - Section 59 - Mortgage by deposit of title deeds - Admissibility of unregistered memorandum - A memorandum that merely records the particulars of title deeds delivered as security, without embodying the terms of the agreement, does not purport or operate to create, declare, assign, limit or extinguish any right, title or interest in immovable property - Such a document does not require registration under Section 17 and is admissible in evidence under Section 49. (Paras 18-22)

(B) Equitable Mortgage - Creation - Where a mortgage is created by the delivery of title deeds in a town where such a practice is legally recognized, the mortgage is constituted by the act of deposit and payment of money - A written record of the deeds deposited is evidence of the transaction and not the instrument of mortgage itself, unless it embodies the bargain between the parties. (Paras 24-27)

Facts of the case:
A joint family firm deposited title deeds of several properties with a money-lender to secure a loan. Along with the deeds, the manager provided a promissory note and a memorandum listing the deeds delivered as security. The memorandum was not registered. The suit for enforcement of the mortgage was challenged on the ground that the unregistered memorandum rendered the mortgage inadmissible in evidence under the law governing registration of documents.

Findings of Court:
The memorandum was merely a written record of the particulars of the deeds subject to an agreement constituted by the act of deposit and payment of money. It did not embody the terms of the agreement and therefore did not require registration.

Issues: Whether a memorandum listing title deeds deposited as security is an instrument that purports or operates to create an interest in immovable property, thereby requiring registration under Section 17 of the Indian Registration Act.

Ratio Decidendi: A document that simply lists the title deeds deposited as security, without stating the terms of the agreement or the nature of the obligation, is a record of the deposit rather than the instrument creating the security. Since the mortgage was created by the act of deposit (permitted by law in certain towns), the memorandum is evidence of the transaction and not the contract itself; thus, it does not fall within the scope of Section 17 of the Registration Act.

Result: Appeal dismissed.

Legal Category Hierarchy

Judgement

Appeal (No. 59 of 1930) by special leave from a decree of the High Court at Madras (October 26, 1928) affirming a decree of the Subordinate Judge of Dindigul (November 3, 1923).

The plaintiff, since deceased, and represented by the respondents, brought a suit to enforce by sale a mortgage by deposit of documents of title alleged to have been made at Madras.

The sole question arising upon the appeal was whether or not a memorandum signed by the agent for the mortgagees and handed to the mortgagor was a document which by s. 17 of the Indian Registration Act required registration and was therefore by s. 49 inadmissible in evidence in the absence of registration.

The facts appear from the judgment of the Judicial Committee.

The High Court (Madhavan Nair and Jackson JJ.), affirming the Subordinate Judge, held that the memorandum was not within s. 17 and was admissible in evidence ; the usual mortgage decree was made with liberty to apply under Order xxxiv. for a personal decree if the sum realized was insufficient to discharge the debt.

1930. Dec. 5, 8. Upjohn K.C, and Narasimham for the appellants.

Dunne K.C. and Dube for the respondents.

[Reference was made to Subrarmonian v. .Dutchman (( 1922) L. R. 50. I..A. 77.) ; Kedarnath Dutt v. Shamloll Khettry (( 1873) 11 Ben. L. R. (O. C. J.) 405.) ; Pramjivandas Mehta v. Chan Ma Phee (( 1916) L. R. 431. A. 122.) ; and Shaw v. Foster (( 1872) L. R. 5 H. L. 321.) ; also to Chegamull v. Govindaswami ( 1928 A. I. R. (Mad.) 972.), referred to in the judgment of the High Court.]

Jan. 13. The judgment of their Lordships was delivered by

LORD TOMLIN. The suit out of which this appeal arises was instituted in 1921 in the Court of the Subordinate Judge at Madura by one Samoo Battar, a money-lender doing business in Palghat, Madras, and other places. He claimed in effect to enforce an equitable mortgage by deposit of title-deeds to secure Rs.60,000 and interest and to recover a personal judgment for the amount of the mortgage debt so far as the security should prove insufficient.

The defendants to the suit were the members of a joint family firm trading at Madura. The present appellants, who are assignees of the interest of the joint family firm in the property comprised in the title deeds in question, were brought into the suit as additional defendants.

On November 3, 1923, the Subordinate Judge made the usual mortgage decree for the amount claimed and costs with a direction for sale in default of payment and with liberty for the plaintiff if the proceeds of sale of the property proved insufficient to apply for a supplemental decree against the family properties of the members of the joint family firm and also against the members of the joint family firm personally.

The present appellants appealed to the High Court, and on October 26, 1928, the High Court dismissed the appeal with costs.

The appellants obtained special leave to appeal to His Majesty in Council. The respondents to the appeal are the legal representatives of the plaintiff who is dead.

The question raised by the appeal is whether there is any mortgage capable of legal proof having regard to the fact that there was a written memorandum relating to the matter which was not registered under the Indian Registration Act (XVI. of 1908).

The facts are to be gathered from the documents and the evidence of witnesses called by the plaintiff. No evidence was adduced by the defendants.

The story is in substance as follows —

The joint family firm owed the plaintiff Rs.36,809.0.10, and wanted a further advance so as to make up a total debt of Rs.60,000. Their manager, Krishnaswami Ayyar, entered into negotiations with the plaintiff through the plaintiffs son and eventually came to Madras to deal with the matter. Security was demanded. The deeds of two properties were offered but rejected as inadequate. Then the deeds of three additional properties were offered. The five properties were considered adequate security. The transaction was

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