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1999 Supreme(Mad) 1431
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 by deposit of title deeds requires delivery of documents of title to the creditor or his agent, and the claimant must be a creditor or agent of the creditor at the time of the deposit.
Headnote:
EQUITABLE MORTGAGE - DEPOSIT OF TITLE DEEDS - SECTION 58(F) OF THE TRANSFER OF PROPERTY ACT - VALIDITY - REQUIREMENTS - DELIVERY OF DOCUMENTS TO CREDITOR OR AGENT - CLAIMANT NOT CREDITOR OR AGENT - NO VALID EQUITABLE MORTGAGE CREATED.
Fact of the Case:
The appellant claimed to be an equitable mortgagee of the insolvent's property based on a memorandum of deposit of title deeds executed in his favor. The appellant contended that the insolvent had borrowed money from various persons and executed promissory notes in their favor, and that the memorandum of deposit of title deeds was created to secure the repayment of these loans.
Finding of the Court:
The court found that the appellant was not a creditor or agent of the creditors at the time of the deposit of the title deeds by the insolvent, and therefore, the deposit did not amount to a mortgage as defined under Section 58(f) of the Transfer of Property Act. The court also found that the memorandum of agreement for deposit of title deeds did not clothe the appellant with the right to enforce the mortgage for recovery of moneys subsequently lent by others to the insolvent.
Issues: 1. Whether the appellant was a creditor or agent of the creditors at the time of the deposit of the title deeds by the insolvent? 2. Whether the memorandum of agreement for deposit of title deeds created a valid equitable mortgage in favor of the appellant?
Ratio Decidendi: 1. The court held that the appellant was not a creditor or agent of the creditors at the time of the deposit of the title deeds by the insolvent, as there was no documentary proof to establish such a relationship. 2. The court held that the memorandum of agreement for deposit of title deeds did not create a valid equitable mortgage in favor of the appellant, as it did not satisfy the requirements of Section 58(f) of the Transfer of Property Act, which requires delivery of documents of title to the creditor or his agent.
Final Decision: The court dismissed the appellant's claim, holding that he was not entitled to enforce his claim as an equitable mortgagee.
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. The learned Single Judge dismissed that application.
5. The original 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
