An equitable mortgage by deposit of title deeds is valid without a written agreement and does not require registration.

JUDGMENT : This second appeal is sought to be preferred against the decree and judgment of the learned District Judge of Ramanathapuram at Madurai in A. S. No. 274 of 1957, confirming the decree and judgment of the learned Subordinate Judge of Sivaganga in O. S. No. 30 of 1957.

2. The case for the plaintiff Lakshmanan Chettiar is: He is carrying on business under the name and style of Lakshmi and Co. in Madurai Town to which provisions of S. 58 (f) of the Transfer of Property Act have been extended The first defendant Kadambaiya Chettiar of Aruppukottai Town was one of his constituents. The first defendant wanted the plaintiff to supply him goods on credit. In Madurai there is a widespread practice amongst merchants to create equitable mortgages by deposit of title deeds by way of security as against the supply of goods on credit. On 7-10-1953 clothes of the value of Rs. 3000/- were purchased on credit by the first defendant from the plaintiffs shop. On 10-10-1953, according to the plaintiff, the first defendant and his wife Veerammal, the second defendant, deposited title deeds with the plaintiff with an intent to create an equitable mortgage for the value of goods supplied on credit and for subsequent amounts that would be due to the plaintiff on dealings. Certain payments were made on account.

In fact subsequently goods of the value of Rs. 6000/- odd have been supplied on credit by the plaintiff. The plaintiff then learnt that the husband and wife (defendants 1 and 2) had colluded and created a usufructuary mortgage in favour of the third defendant Sankaralinga Mooppanar, after obtaining an encumbrance certificate through the first defendants clerk Soundiah and giving registration copies of title deeds to the mortgagee, third defendant. The usufructuary mortgage Ex. B 5 in favour of the third defendant is for Rs. 2500/-. The original title deeds are produced in Court by the plaintiff. The plaintiff filed the suit out of which this second appeal arises, for recovery of Rs. 6000/- and is seeking a preliminary mortgage decree on the foot of this equitable mortgage.

3. The defence was : The husband and wife, defendants 1 and 2, did not deposit the title deeds with the plaintiff. In the reply notice Ex. A13 the defendants 2 and 3 alleged that the husband had double-crossed his wife and created the equitable mortgage to defraud her and that she was going to take criminal and civil proceedings against him. In the written statement the case was that the title deeds and other documents relating to properties in Aruppukottai, had been entrusted with a clerk of the plaintiff for safe custody, that when the documents were returned, the fact that these relevant documents also were not returned was not noticed, that when subsequently the plaintiff sent a notice demanding the amount claimed in suit the fraud practised by the plaintiff came to light, that the equitable mortgage by deposit of title deeds was not for any specific amount fixing the maximum and therefore vitiates the transaction and that there is neither writing nor registration for the creation of this equitable mortgage and the usual memorandum or accompanying promissory note is not forthcoming in this case, and that the subsequent usufructuary mortgage in favour of the third defendant by the second defendant is a bona fide transaction.

4. Both the Courts came to the conclusion that the delivery of the title deeds was made personally by the husband (first defendant) on behalf of himself and his wife, that the delivery of the documents was to a creditor, that the documents were title deeds relating to immovable properties in regard to which an equitable mortgage could be created, that the delivery was with intent to create a security thereon, that no maximum amount for the security need be fixed, and that the story of the defendants about the husband double-crossing the wife or about the title deeds and other documents being entrusted to the plaintiffs clerk P.W. 1 and