IMPORTANT POINT
Mutation cannot be effected In case of simple equitable mortgage. Only charge of mortgage can be entered in revenue records.

JUDGMENT

CHANDRAMAULI KR. PRASAD, J.

C.A.NO.9030 OF 2013 (@SLP (CIVIL) NO.18323 OF 2008)

The petitioners, aggrieved by the order of the High Court directing entry of charge in the revenue records on the basis of mortgage created by deposit of title-deeds, have preferred this special leave petition.

Delay condoned.

Leave granted.

Shorn of unnecessary details, facts giving rise to the present appeal are that one M/s. Ultra Tech Private, a company incorporated under the Companies Act, was sanctioned a term loan of Rs. 425 lakhs and working capital facility of Rs.99 lakhs by the Punjab National Bank (hereinafter referred to as the Bank). As agreed by the Bank, original title-deeds in respect of 19 Marlas of land belonging to Narvir Singh and 31 Marlas of land owned by Rajinder Kaur were deposited with the Bank by the borrower. In this way mortgage by deposit of title-deeds took place. It is not in dispute that this transaction had taken place in a town notified under Section 58(f) of the Transfer of Property Act. The Bank wrote to the Tahsildar, Panchkula for mutation on the basis of mortgage effected by deposit of the title-deeds. When nothing was done, the land owner filed writ petition before the High Court inter alia praying for mutation on the basis of mortgage aforesaid.

The respondents resisted mutation inter alia on the ground that no entry can be made as the instrument of deposit of title-deeds is compulsorily registrable under Section 17(1)(c) of the Registration Act and for that, they relied on a letter dated 29th March, 2007 of the Finance Commissioner and Principal Secretary to Government, the relevant portion whereof reads as under:

“xxx xxx xxx

2. It is clarified that the instrument of deposit of title- deed/Equitable Mortgage is compulsorily registrable under Section 17(1)(c) of the Indian Registration Act, 1908. Registration fee is payable under Article 1(1)(b) in the table of Registration Fees Notification dated 06th November, 2006. Article 6 of the schedule I-A of the Indian Stamp Act, 1899 provides for rate of Stamp Duty (SD) chargeable on deposit of title-deeds/equitable mortgage.

xxx xxx xxx“

According to the respondents, in the absence of registration as aforesaid and payment of registration fee and stamp duty, the prayer for mutation cannot be allowed.

The High Court considered the objection and negatived the same in the following words:

“We are of the view that an equitable mortgage is created by deposit of title-deeds and not through any written instrument. Simple pledge of the title-deeds to the bank as Security creates an equitable mortgage, therefore, there is never an instrument of deposit of title-deed/equitable mortgage. The petitioner simply went to the bank and handed over the title-deeds of their respective properties. This act was enough to create a mortgage as envisaged under Section 58(f) of the Transfer of Property Act. Quite often a memorandum is drawn up regarding the handing over of the title-deeds but this memorandum is simply a written record of the pledge. The memorandum itself is not an instrument of mortgage………..”

Mr. B.S. Mor, Additional Advocate General appearing for the State submits that mortgage by deposit of title-deeds requires registration under Section 17(1)(c) of the Registration Act, 1908. Further it mandates payment of fee as prescribed under article 1(1)(b) of the Registration Fees notification dated 6th November, 2006. In addition, payment of stamp duty as per Article 6 of the Indian Stamp Act is also required. According to Mr. Mor in the absence of all these the mortgage by deposit of title-deeds cannot form the basis of mutation.

Mr. Harikesh Singh, learned counsel appearing for the respondents, however, submits that mortgage by deposit of title-deeds does not need any registered instrument. Hence, there is no question of deposit of any fee thereon. According to him, it also does not require payment of duty under the Stamp Act.

An application for impleadment has been filed by the Bank