IMPORTANT POINT
The court established that for an equitable mortgage by deposit of title deeds to be valid, the deposit must occur in a notified area as specified in Section 58(f) of the Transfer of Property Act, and the burden of proof lies with the plaintiff to establish this fact.

JUDGMENT :

PRAYER: Appeal Suit filed under Section 96 of C.P.C., against the Judgment and Decree dated 20.01.2005, made in O.S.No.5 of 2003 on the file of the learned Additional District Judge, Pondicherry at Karaikal. The Appeal Suit is filed as against the Judgment and Decree dated 20.01.2005, made in O.S.No.5 of 2003 by the learned Additional District Judge, Pondicherry at Karaikal, thereby dismissed the suit for recovery of mortgage amount.

2. The appellant is the plaintiff and the respondents are the defendants. For the sake of convenience, the parties are referred to as per their ranking in the trial Court.

3. The plaintiff filed suit for recovery of mortgage amount against the defendants. The case of the plaintiff is that, the first defendant had borrowed loan of Rs.25,000/- and agreed to repay the said amount with interest at the rate of 24% per annum. The first defendant with an intention to create an equitable mortgage over the suit schedule properties, made deposit of title deed at the plaintiff's residence in Karaikal. The first defendant also handed over a letter of memorandum to her evidencing the deposit of title deed as security for the loan. However, the first defendant failed to discharge her debt and as such the plaintiff caused legal notice. On verification of encumbrance certificate, the plaintiff found that the first defendant sold some of the items of the mortgaged properties to the second defendant by the registered sale deed. Therefore, the purchaser of the property subject to mortgage is also liable to discharge the loan amount. Hence, the suit.

4. Resisting the same, the first defendant filed written statement stating that the suit itself barred by limitation. The deposit of title deed at Thiruvettakudy village is not notified area and therefore, the suit itself liable to be dismissed. He also denies the very execution of deposit of title deeds. The alleged agreement constitutes a contract indicating the reason for deposit of title deeds and it requires registration and also stamp duty. The husband of the plaintiff had given some amount in order to reciprocate the help given for getting the advance amount from Green Park land owners at Thiruvettakudy with whom the plaintiff's husband had entered into an agreement. The said amount was given to the first defendant's father for meeting out the legal expenditure for the cases involved by the plaintiff's husband.

5. The second defendant filed written statement stating that the suit itself collusive one between the plaintiff and the first defendant. The memorandum of deposit of title deed is not in accordance with law. As far as the second defendant is concerned, he is a bonafide purchaser of the suit property for the valid sale consideration. Therefore, the plaint is not entitled any claim as against the second defendant.

6. On completion of pleadings, the trial Court framed the following issues :-

(i) Whether the first defendant has not created any equitable mortgage in favour of the plaintiff by deposit of title deeds of the suit properties for the borrowal of Rs.25,000/-on 02.01.1991?

(ii) Whether the village Thiruvettakudy is not notified Town as per Section 58(f) of Transfer of Property Act?

(iii) Whether the Memorandum of Agreement is to be stamped and registered under law?

(iv) Whether the first defendant had signed in blank stamped paper and blank paper for the sum of Rs.25,000/- received by his father from the plaintiff's husband in connection with the return of advance amount from the Green Park land owners?

(v) Whether the plaintiff is not entitled to claim the rate of interest as calculated in the plaint and whether the claim of such interest is not legally permissible?

(vi) Whether the suit is barred by law of limitation?

(vii) Whether the second defendant as purchaser of the suit properties is bound to discharge the suit amount?

(viii) Whether the plaintiff is entitled for a judgment and preliminary decree against the defendants as prayed for?

(ix) To what