The court affirmed that a legal mortgage takes precedence over an equitable mortgage when valid title deeds are present, emphasizing the importance of intention in mortgage creation.

JUDGMENT :

J.B. PARDIWALA, J.:

For the convenience of exposition, this judgment is divided into the following parts: -

1. Leave granted.

2. This appeal arises from the judgment and order passed by the High Court of Judicature at Bombay (Civil Appellate Jurisdiction) dated 12.12.2018 in Writ Petition No.11324 of 2015, by which the writ petition filed by the appellant herein seeking to challenge the order passed by the (Debt Recovery Appellate Tribunal) (for short, the “DRAT") dated 28.08.2015 in Appeal No. 41 of 2007 came to be rejected thereby affirming the order passed by the DRAT.

A. FACTUAL MATRIX

3. The facts giving rise to this appeal may be summarised as under: -

(a) We take notice of the fact that the respondent nos. 2, 3 and 4 respectively, are the original borrowers. However, the respondent No.4 has passed away and therefore his name came to be deleted from the array of parties vide order dated 4.12.2020.

(b) The original borrowers on the strength of one unregistered agreement of sale availed loan facility from the Central Bank of India i.e. the respondent No. 1 to the tune of Rs.30,00,000/- approximately. What was offered by way of security was a flat which the original borrowers proposed to purchase from the developer and all that they had on the day and date when they went before the bank to avail the loan was an unregistered agreement of sale.

(c) It is not in dispute that the Central Bank on the strength of an unregistered agreement of sale sanctioned the loan creating a charge over the flat.

(d) Since the borrowers defaulted in the repayment of the loan, the Central Bank initiated proceedings for the recovery of the requisite amount before the Debt Recovery Tribunal-I, Mumbai (in short "the DRT"). The DRT Mumbai adjudicated the Original Application No. 74 of 2002 and held the borrowers jointly and severally liable to pay an amount of Rs.43,15,405.56 paisa with interest thereon @15% per annum from the date of filing of the O.A. till its payment.

(e) The relevant observations made by the DRT, Mumbai in Para 8 reads thus: -

"8. In application affidavit of the applicant state that the Defendant No. 2 with intention to create mortgage deposited title deeds of her flat No. C-28, Sahyadari Apartment, L.T. Road, Borivali West, Bombay-400092 as security of the loan. sanctioned to Defendant No. l. To prove this fact the Applicant's side rely on Exh. 53, which is an unregistered memorandum. It being unregistered document itself is not sufficient to create the mortgage. The applicants state further on 04.02.1993, the Defendant No. 2 again attended Applicants office and redeposited the title deeds of her flat on the enhanced, revised loan. The applicant's case about mortgage is based on the title deeds, the documents produc