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PATNA HIGH COURT
S.C.Misra and S.C.Prasad JJ.
United Bank Of India
Versus
Lekharam Sonaram & Co.And Ors.
Appeal from Original Decree No. 371 of 1950 ;
Decided On : MARCH 12, 1958
EQUITABLE MORTGAGE - DEPOSIT OF TITLE DEEDS - REGISTRATION - LETTERS OF AUTHORITY AND INTENT - INTERPRETATION - MORTGAGE DECREE.
Fact of the Case:
The appellants, Bengal Central Bank, filed a suit for a mortgage decree against the respondents, Lekharam Sonaram and Co., for an amount of Rs. 31,000 and odd, alleging that the respondents had created an equitable mortgage on their properties by depositing title deeds with the appellants in Calcutta. The respondents denied the existence of a valid mortgage, claiming that the letters of authority and intent (Exhibits 7a, 7b, and 12) required registration and were not registered.
Finding of the Court:
The court found that the respondents were joint, that defendant No. 2 was the karta, that the transactions were binding on the respondents, that the payments on the cheques by the appellants were binding on the respondents, that the three letters were genuine and had been signed by defendants NOS. 2, 3 and 4, respectively. However, the court held that the letters required registration, as they contained the terms of agreement regarding the mortgage and, therefore, for want of registration no valid mortgage had been created.
Issues: 1. Whether the letters of authority and intent (Exhibits 7a, 7b, and 12) created an equitable mortgage. 2. Whether the letters required registration under the Registration Act, 1908. 3. Whether the appellants were entitled to a mortgage decree against the respondents.
Ratio Decidendi: 1. The court held that the letters of authority and intent (Exhibits 7a, 7b, and 12) created an equitable mortgage, as they contained the terms of agreement regarding the mortgage and were intended to be an integral part of the transaction. 2. The court held that the letters required registration under Section 17 of the Registration Act, 1908, as they were non-testamentary instruments creating an interest in immovable property valued at one hundred rupees and upwards. 3. The court held that the appellants were not entitled to a mortgage decree against the respondents, as the letters creating the mortgage were not registered.
Final Decision: The appeal was dismissed with costs.
S.C.Prasad, J.
1. This is an appeal directed against the judgment of the Subordinate Judge of Hazaribagh decreeing the suit of the appellants which they had filed on the basis of an equitable mortgage alleged to have been created by the respondents on the 11th August, 1945 to secure advances made by the appellants to the respondents up to the limit of Rupees one lac as over draft from them to enable the respondents to carry on their business of mica. It was alleged that this mortgage was created by deposit of two title deeds on the aforesaid date at Calcutta by defendant No. 4 with the letter of authority dated 9-8-1945 (Exhibit 7a) addressed by defendant No. 2 to the Bank authorising defendant No. 4 to deposit the title deeds with a view to create an equitable mortgage on the properties, the subject-matters of those title deeds, to make the advances by the Bank in the account of Messrs Lekharam Sonaram and Co. of Giridih, defendant-respondent no. 1, secure, declaring that he was "the sole owner of the Giridih Property as per schedule below", that the properties of the title deeds to be deposited were free from all incumbrances, nobody else having any claim, right or title to them. There was also the declaration as follows:-
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"And I hereby declare that the deposit will give you a valid title over my said properties as mortgagee until all the obligations of Messrs. Lekharam Sonaram and Co. with your Giridih branch are duly satisfied."
2. It appears that on 10-8-1945 Sonaram, defendant No. 3, brother of defendant No. 4, addressed a letter to the manager of the appellants authorising defendant No. 4, his younger brother, to deliver the title deeds to the manager for deposit and to negotiate further in this respect. This letter is Exhibit 7(b). On the 11-3-1945, a letter (Exhibit 12) was written by Babulal Ram, defendant No. 4, addressed to the manager of the Bank mentioning that he was placing on record that he had that day deposited with the manager at the Head Office of the appellants at 86 Clive Street, Calcutta, the documents of title relating to his Giridih properties with the intent to create an equitable mortgage upon all "my rights, title and interest in the said properties to secure due repayment on demand of all moneys now owing or which shall at any time hereafter be owing from me or from M/s Lekharam Sonaram and Co. either singly or jointly or otherwise to Bengal Central Bank Limited, whether on balance of account or by discount or otherwise in respect in any manner whatsoever and including interest with monthly rests commission and other Banking charges and any law costs incurred in connection with the account. I do hereby put on record that the properties mentioned below are free from all encumbrances". Then there is a schedule of the documents, i.e. the two title deeds, one of 17-9-1927 and the other of 13-12-1937.
3. It was alleged by the appellants that the defendants were members of a joint Hindu Mitakshara family of which defendant No. 2 was the karta and manager. These defendants had several firms dealing in mica and also in cloth and for that purpose they had got a sanction for an over-draft account with the appellants Branch Office at Giridih up to the limit of Rupees one lac and had operated on this account from the 2-6-1944 to 27-11-1948 with shifting balances. During the course of the transactions on the 25-6-1947 the defendants were alleged to have executed a deed of hypothecation of debts and assets for overdraft up to Rupees one lac as a security for payment to the appellants on demand of the balance of the over-draft account with interests at 6 % per annum. The other documents executed by the defendants on that date were renewals of the pronote, the letter of lien, letter of continuity and deed of hypothecation of goods by executing fresh documents as a collateral security for the overdraft. On 24-6-1944, the defendants respondents had executed a deed of hypothecation of their stock of mica.
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