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1999 Supreme(Mad) 1444
High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE R. JAYASIMHA BABU & THE HONOURABLE MR.
JUSTICE A. SUBBULAKSHMY
Sirish Kumar Bros, by its partner sirish Kumar Baffna, carrying on business at No. 20,
strotten Muthiah Mudali st., Madras
Versus
The Official Assignee, High Court, Madras
O.S.A. No. 198 of 1997
Decided On : 30-11-1999
Mr.A.Venkatesan, Advocate for Appellant. Official Assignee for Respondent.
A valid equitable mortgage is created only when the delivery of documents of title is made to a creditor or his agent, as required under Section 58(f) of the Transfer of Property Act.
Headnote:
EQUITABLE MORTGAGE - DEPOSIT OF TITLE DEEDS - VALIDITY - REQUIREMENTS - SECTION 58(F) OF THE TRANSFER OF PROPERTY ACT - CLAIMANT NOT A CREDITOR OR AGENT OF CREDITOR - NO VALID EQUITABLE MORTGAGE CREATED.
Fact of the Case:
The appellant claimed to be an equitable mortgagee and sought to enforce his claim against the insolvent's properties. The appellant relied on a memorandum of deposit of title deeds executed by the insolvent in his favor. The Official Assignee rejected the claim, holding that there was no subsisting debt due from the insolvent in favor of the claimant as on the date of execution of the memorandum of deposit of title deeds. The appellant filed an application to set aside the order of the Official Assignee, which was dismissed by the learned Single Judge.
Finding of the Court:
The court found that the claimant was neither a creditor nor an agent of the creditor at the time the equitable mortgage was created. The court also found that the delivery of documents of title was not made to a creditor or his agent, as required under Section 58(f) of the Transfer of Property Act. Therefore, the court held that no valid equitable mortgage was created.
Issues: 1. Whether the claimant was a creditor or agent of the creditor at the time the equitable mortgage was created. 2. Whether the delivery of documents of title was made to a creditor or his agent, as required under Section 58(f) of the Transfer of Property Act.
Ratio Decidendi: The court held that the claimant was neither a creditor nor an agent of the creditor at the time the equitable mortgage was created. The court also found that the delivery of documents of title was not made to a creditor or his agent, as required under Section 58(f) of the Transfer of Property Act. Therefore, the court held that no valid equitable mortgage was created.
Final Decision: The court dismissed the appellant's appeal.
A. Subbulakshmy, J.
1. The appellant filed a Claim No. 203 of 1994 in I.P. No. 14 of 1993 alleging that the insolvent P.Savithri & P.Neeraja, partners of M/s.Shree Krishna Prasad & Co. and M/s.Padma Priya Trading Co. on the date of order of adjudication viz. 22. 93 were indebted for a sum of Rs. 3,62,309.80 further Rs. 2,00,000 was towards principal, Rs. 1,32,509.80 towards interest and Rs. 29,800 towards commission as shown by the amount on 13 promissory notes as mentioned herein:-
Principal Interest Commission
1. Promissory Note dated 16. 90 20,000 13,252 2,980
2. Promissory Note dated 16. 90 11,000 7,288 1,639
3. Promissory Note dated 16. 90 20,000 13,251 2,980
4. Promissory Note dated 16. 90 11,000 7,288 1,639
5. Promissory Note dated 16. 90 15,000 9.938.25 2,235
6. Promissory Note dated 16. 90 20,000 13,251 2,980
7. Promissory Note dated 16. 90 25,000 16,563.70 3,725
8. Promissory Note dated 16. 90 10,000 6,625.50 1,490
9. Promissory Note dated 14. 91 20,000 13,251 2,980
10. Promissory Note dated 10. 91 15,000 9,938.25 2,235
11. Promissory Note dated 10. 91 11,000 7,288 1,639
12. Promissory Note dated 10. 91 12,000 7,950.60 1,788
113. Promissory Note dated 20.1.92 10,000 6,625.50 1,490
According to the appellant equitable mortgage deed dated 16. 90 for Rs. 1,98,000 was created for that amount and the actual amount paid under the abovesaid pronotes was Rs. 2,00,000. No amount was received due on the abovesaid pronotes. Since the equitable mortgage has been created as security for the due amount, the petitioner is entitled to claim security over the properties under the equitable mortgage.
2. The Official Assignee who heard the claim petition rejected it holding that there was no subsisting debt due from the insolvent in favour of the claimant as on the date of execution of memorandum of deposit of title deeds.
3. The claimant filed Application No. 348 of 1996 in I.P. No. 14 of 1993 to set aside the order of the Official Assignee dated 27. 96.
4. Thelearned Single Judge dismissed that application.
5. Theoriginal side appeal is directed as against the order of the learned Single Judge in Application No. 348 of 1996.
6. In this appeal, the appellant contends that they are the agents of the financiers.
7. Point for consideration is whether the claimant/appellant can claim to be the equitable mortgage and whether he is entitled to the claim made by him.
.8. In I.P. No. 14 of 1993, Savithri and Neeraja were adjudicated as insolvents and their properties were ordered to be vested with the official assignee. The appellant preferred claim that mortgage by deposit of title deeds was created in his favour on 16. 90 by Savithri one of the insolvents along with the memorandum of deposit of title deeds. Much reliance is placed upon by the claimant on the memorandum of deposit of title deeds dated 16. 90 and the claimant/appellant contends that the appellant is an equitable mortgages and is entitled to derive the benefits on the equitable mortgage. In the memorandum of deposit of title deeds, it is recited that the borrower P.Savithri has already deposited the documents and title relating to her property listed thereunder with the finance broker/depositee with intent to create an equitable mortgage in favour of the finance broker/depositee over the property to which the documents relate to for the purpose of securing repayment to the depositees/financiers of all the amounts owing to the financiers under advance made and to be made to Mrs.P.Savithri by the depositee’s/financiers by way of loan under different promissory notes not exceeding Rs. 1,98,000. The properties described thereunder are the lands situate in Noombal Mathura Pallikuppam Village, Saidapet Taluk, Chingleput District. The claimant contends that the insovents P.Savithri and Neeraja partners of M/s.Shree Krishna Prasad & Co. and M/s.Padma Priya Trading Co. on the date of order of adjudication i. e., on 22. 93 were indebted in a sum of Rs.
