An equitable mortgage is created by deposit of title-deeds and does not require registration. A memorandum confirming the deposit of title-deeds is not an instrument of mortgage and does not require compulsory registration.

K.S.GAREWAL, J. - Narvir Singh and Rajinder Kaur have filed this petition seeking a direction to the Tehsildar, Panchkula and Halqa Patwari, Bhaisa Tiba to enter a mutation in the revenue record with regard to the equitable mortgage created by the petitioners in favour of the Punjab National Bank, by deposit of the title-deeds of their respective properties.

2. M/s Ultra Tech Private Limited (in the annexures attached with the petition name of the Company has been shown as M/s Ultra Drugs (P) Ltd.) is the company which has been sanctioned a term loan of Rs. 425 lacs and working capital facilities of Rs. 99 lacs by the Punjab National Bank, as per communication dated January 29, 2007 (Annexure P/2). The sanction letter also accepted the change in the Board of Directors and the change in the security offered by the Company. This letter reveals that equitable mortgages of 19 marlas of Narvir Singh's land and 31 marlas of Rajinder Kaur's land would be the securities offered by the borrowers. The petitioners deposited the original title deeds of their properties with the Bank on February 8, 2007. Thereafter, the Bank wrote to the Tehsildar, Panchkula on February 10, 2007 for entering the mutation on the basis of the two mortgages by deposit of title deeds to secure the loan amount of Rs. 525 lacs sanctioned by the Bank.

3. The petitioners grievance is that the mutations have not yet been entered in the revenue record. The stand of Tehsildar, Panchkula, in the written statement, is that the petitioners want the mutations on the basis of the mortgage by deposit of the title deeds without payment of registration fees, as per Section 17 (1) ( c) of the Registration Act 1908 read with Article 1 (1) (b) of the Registration Fees Notification dated November 6, 2006 and payment of stamp duty as per Article 6 of the Indian Stamps Act. According to the respondents, an instrument of deposit of title deed/equitable mortgage is compulsorily registrable under Section 17 (1) (c ) of the Registration Act, 1908. Therefore, the question of law involved in the present case is, whether a mutation can be entered in the revenue record in respect of an equitable mortgage by deposit of title-deeds without a deed of mortgage being executed by the mortgagor and without payment of registration fee ?

4. Mortgage by deposit of title-deeds is a type of mortgage described in Section 58 (f) of the Transfer of Property Act. There are other types of mortgages as well, like simple mortgage, mortgage by conditional sale, usufructuary mortgage, English mortgage and anomalous mortgage.

5. Learned counsel for the petitioners has referred to Rachpal Maharaj v. Bhagwandas Daruka and others AIR 1950 Supreme Court 272 in which it was held that when a debtor deposits with the creditor the title deeds of his property with an intent to create a security, law implies a contract between the parties to create a mortgage and no registered instrument is required under Section 59 of the Transfer of Property Act or in the form of a mortgage deed. Reference has also been made to State Bank of Mysore versus S.M. Essence Distilleries Pvt. Ltd. 1993 ISJ (Banking) 580. In this case a Division Bench of the Karnataka High Court was considering the case of creation of an equitable mortgage as collateral security for securing loan. The party which deposited the title-deed had also later executed a memorandum in favour of the bank confirming deposit of title-deeds. When the principal debtor did not re-pay the loan the bank filed a suit for recovery of the outstanding amount and also for a mortgage decree for sale of the mortgaged property. The suit filed by the bank was dismissed. In the appeal filed by the bank, question arose regarding whether an equitable mortgage by deposit of title-deeds and subsequent registration of a memorandum confirming the deposit of title-deeds under Section 58 (f) of the Transfer of Property Act, rendered the equitable mortgage invalid ? The Court held th