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1965 Supreme(AP) 109
Andhra Pradesh High Court
Judges : CHANDRASEKHARA SASTRI, GOPALRAO EKBOLE
CHAINVADI BALAIAH - Appellant
Versus
CENTRAL GOVERNMENT ETC - Respondent
Decided On : 06-17-65
A memorandum of deposit of title deeds that merely records a transaction completed on a previous day and does not purport to create any mortgage over immovable property does not require registration under Section 17 of the Indian Registration Act, 1908.
Headnote:
TRANSFER OF PROPERTY ACT, 1882 - SECTION 53 - MORTGAGE BY DEPOSIT OF TITLE DEEDS - REGISTRATION - INDIAN REGISTRATION ACT, 1908 - SECTIONS 17 AND 49 - ADMISSIBILITY OF MEMORANDUM OF DEPOSIT OF TITLE DEEDS - VALIDITY OF MORTGAGE - JURISDICTION OF COURT - DECREE BASED ON UNREGISTERED MEMORANDUM - VALIDITY.
Fact of the Case:
The Union of India filed a suit for a declaration that an equitable mortgage by deposit of title deeds executed by defendants 1 to 3 in favor of the 4th defendant is a sham, nominal, and void transaction and that the decree obtained thereon in O.S. No. 316 of 1953 is a fraudulent and collusive decree. The lower court held that the memorandum of deposit of title deeds required registration under the Indian Registration Act, 1908, and was inadmissible in evidence, rendering the mortgage invalid. The 4th defendant appealed.
Finding of the Court:
The court held that the memorandum of deposit of title deeds did not require registration under Section 17 of the Indian Registration Act, 1908, as it merely recorded the transaction that was completed on the previous day and did not purport to create any mortgage over immovable property. The court distinguished the case from a Privy Council decision where the document itself stated that the title deeds were handed over as security against advances and conferred an express power of sale on the mortgagee. The court also held that even if the memorandum required registration and there was no valid mortgage, the lower court erred in declaring the decree based on the memorandum to be invalid, as the court had jurisdiction over the subject matter and the parties and the decree had become final.
Issues: 1. Whether the equitable mortgage by defendants 1 to 3 in favor of the 4th defendant is a sham and nominal transaction, not supported by consideration, got up to defeat the claim of the plaintiff and is invalid in law as contended by the plaintiff? 2. Whether the decree obtained in O.S. No 316 of 1953 (Sub-Court, Nellore), was collusive and fraudulent one, an alleged by the plaintiff?
Ratio Decidendi: 1. The memorandum of deposit of title deeds did not require registration under Section 17 of the Indian Registration Act, 1908, as it merely recorded the transaction that was completed on the previous day and did not purport to create any mortgage over immovable property. 2. Even if the memorandum required registration and there was no valid mortgage, the lower court erred in declaring the decree based on the memorandum to be invalid, as the court had jurisdiction over the subject matter and the parties and the decree had become final.
Final Decision: The appeal was allowed, the judgment and decree of the lower court were set aside, and the plaintiff's suit was dismissed.
( 1 ) A. S. No. 188/59. This appeal arises out of O. S. No. 19/57 on the file of the Subordinate judge s Court, Nellore, which was filed by the Union of India, represented by the 1st Additional Income tax Officer. Nellore against four Defendants for a declaration that the equitable mortgage dited 1-4-1953 executed by Defendants 1 to 3 in favour of the 4th defendant in respect of the properties described in the schedule attached to the plaint, is a sham, nominal and void transaction and that the decree obtained thereon in O. S. No. 316 of 1953 is a fraudulent and collusive decree and that the further proceedings in execution of the decres cannot affect the priority of the Plaintiff in respect of the income-tax arrears of rs. 55, 298-15-0 for the assessment year 1951-52, the assessees being Defendants 1 to 3. The 1st Defendant is the father and Defendants 2 to 4 are his sons. The Plaintiff s case, as disclosed in the plaint, is shortly as follows : The 4th defendant, who is the eldest son of the 1st Defendant, got divided from the family in the year 1940 and was ever since carrying on business separately on his own account and in partnership with others. Defendants 1 to 3 were assessed to income-tax at Rs. 55,298-15-0 under Section 23 (4) of the Income-Tax act for the assessment: year 1951-52. The Order of assessment is dated 31-3-53: and it was served on the 1st Defendant on 5-8-53. Defendants 1 to 3 filed a writ Petition, W. P. No. 746/53 on 7-9-53 in the High Court of Madras for the issue of a Writ of Prohibition or other appropriate writ prohibiting the plaintiff from executing the order of assessment and collecting the tax. They also filed a Petition for stay and finally, an order was passed on 19-10-53 directins defendants 1 to 3 to pay the tax in 12 monthly instalments of Rs. 5000/-each beginning from 1-12-53. Again, the assesses filed a further application in the high Court offering to give adequate security for the tax and expressing inability to pay the instalments. Then, the Court passed a consent order that all the immoveble properties of defendants 1 to 3 will be attached and that the attachment will continue till the dispjsal of the writ petition. The Plaintiff was not informed of the existence of any encumbrance ovet the properties. But the 4th defendant filed O. S. No. 316/53 against defendants 1 to 3 praying for a preliminary mortgage decree for Rs. 84,142-3-6 alleging that tht said sum was due to him on the basis of a mortgage by deposit of title deed dated 1-4-53. The said suit was filed on 4-12-53. There was a preliminary decree on 20-1-1954, which was followed by a final decree dated 15-9-1954. The 4th defendant next sought to execute the final decree in the mortgage suit. It is further alleged in the plaint that the debt alleged to be due to the 4th Defenddant from Defendants 1 to 3 is a fictitious one and that the alleged transactions, which were carried on between defendants 1 to 3 and the 4th defendant were also fictitious. The alleged mortgage by daposit of title deeds is a bogus transaction created with a view to screen the properties of defendants 1 to 3 from being proceeded against for recovery of the income-tax, but there was really no debt owing by defendants I to 3 to the 4th deiendant. It is further alleged that on the foot of this sham and nominal mortgage, the 4th defendant filed a suit, O. S. No. 316/53 in the Subordinate Judge s Court. Nellors and obrained the fraudulent and collusive preliminary decree and final decree for a sum of Rs. 84,142-3-6. Oa thaae allegations,the plaintiff prayed for the declaration above referred to. Defendants 1 to 3 were ex parte. The 4 th defendant filed a written statement denying the allegations in the plaint. He asserted that the accounts between himself and defendants 1 to 3 were settled on 31-3-53 and it was found that a sum of Rs. 77. 925-7-2 was owing to the 4th defendant.
( 2 ) IN order to secure the repayment of the money alrea
