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  REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.9030 OF 2013

(@ SPECIAL LEAVE PETITION (CIVIL) NO. 18323 OF 2008)

STATE OF HARYANA & OTHERS      … APPELLANTS VERSUS

NAVIR SINGH AND ANOTHER      …RESPONDENTS WITH

CIVIL APPEAL NO.9049 OF 2013 (@ SPECIAL LEAVE PETITION (CIVIL) NO. 924 OF 2009)

STATE OF PUNJAB & OTHERS      … APPELLANTS

VERSUS

PAGRO FOODS LTD. & OTHERS      …RESPONDENTS

J U D G M E N T

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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  

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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:

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“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  

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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.

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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 for being impleaded as a party to the  

proceedings, which was allowed by this Court vide  

order  dated  12th July,  2010.   The  Bank  is  

represented by Mr.Rajesh Kumar, Advocate for M/s.  

Mitter & Mitter, Advocates.

Another application for impleadment (I.A. No. 3  

of 2011) has been filed by Shankar Twine Products  

Pvt. Ltd. through its Director.  We reject this  

petition giving liberty to it to take recourse to  

such other remedy as is available to it before the  

court of competent jurisdiction.

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In  view  of  rival  submissions,  the  question  

which falls for consideration is whether ‘charge’  

of mortgage can be entered in the revenue record in  

respect  of  a  mortgage  effected  by  deposit  of  

title-deeds without its registration and payment of  

registration fee and stamp duty.  

Mortgage  by  deposit  of  title-deeds  is  

sanctioned  by  law  under  Section  58(f)  of  the  

Transfer of Property Act in specified towns, same  

reads as follows:

"58.  “Mortgage”,  “mortgagor”,  “mortgagee”,  “mortgage-money”  and  “mortgage-deed” defined.—

(a) xxx xxx xxx

(e) xxx xxx xxx

(f)  Mortgage  by  deposit  of  title- deeds.—Where a person in any of the  following towns, namely, the towns of  Calcutta, Madras, and Bombay, and in  any  other  town  which  the  State  Government  concerned  may,  by  notification in the Official Gazette,  specify in this behalf, delivers to a  creditor  or  his  agent  documents  of  title  to  immoveable  property,  with  

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intent to create a security thereon,  the transaction is called a mortgage  by deposit of title-deeds.”

Mortgage inter alia means transfer of interest  

in the specific immovable property for the purpose  

of  securing  the  money  advanced  by  way  of  loan.  

Section 17(1)(c) of the Registration Act provides  

that  a  non-testamentary  instrument  which  

acknowledges  the  receipt  or  payment  of  any  

consideration  on  account  of  the  creation,  

declaration, assignment, limitation or extension of  

any  such  right,  title  or  interest,  requires  

compulsory registration.  Mortgage by deposit of  

title-deeds  in  terms  of  Section  58(f)  of  the  

Transfer of Property Act surely acknowledges the  

receipt and transfer of interest and, therefore,  

one  may  contend  that  its  registration  is  

compulsory.  However, Section 59 of the Transfer of  

Property  Act  mandates  that  every  mortgage  other  

than a mortgage by deposit of title-deeds can be  

effected only by a registered instrument.  In the  

face  of  it,  in  our  opinion,  when  the  debtor  

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deposits  with  the  creditor  title-deeds  of  the  

property for the purpose of security, it becomes  

mortgage in terms of Section 58(f) of the Transfer  

of  Property  Act  and  no  registered  instrument  is  

required  under  Section  59  thereof  as  in  other  

classes of mortgage.  The essence of mortgage by  

deposit  of  title-deeds  is  handing  over  by  a  

borrower to the creditor title-deeds of immovable  

property with the intention that those documents  

shall constitute security, enabling the creditor to  

recover the money lent.  After the deposit of the  

title-deeds the creditor and borrower may record  

the  transaction  in  a  memorandum  but  such  a  

memorandum would not be an instrument of mortgage.  

A memorandum reducing other terms and conditions  

with  regard  to  the  deposit  in  the  form  of  a  

document, however, shall require registration under  

Section 17(1)c) of the Registration Act, but in a  

case in which such a document does not incorporate  

any term and condition, it is merely evidential and  

does not require registration.   

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This Court had the occasion to consider this  

question in the case of Rachpal v. Bhagwandas, AIR  

37  1950  SC  272, and  the  statement  of  law  made  

therein  supports  the  view  we  have  taken,  which  

would be evident from the following passage of the  

judgment:

“4. A mortgage by deposit of title- deeds is a form of mortgage recognized  by S. 58(f), T.P. Act, which provides  that  it  may  be  effected  in  certain  towns (including Calcutta) by a person  “delivering  to  his  creditor  or  his  agent documents of title to immovable  property  with  intent  to  create  a  security thereon.”  That is to say,  when  the  debtor  deposits  with  the  creditor  the  title-deeds  of  his  property  with  intent  to  create  a  security, the law implies a contract  between  the  parties  to  create  a  mortgage, and no registered instrument  is  required  under  S.59  as  in  other  forms of mortgage.  But if the parties  choose  to  reduce  the  contract  to  writing,  the  implication  is  excluded  by  their  express  bargain,  and  the  document will be the sole evidence of  its terms.  In such a case the deposit  and  the  document  both  form  integral  parts  of  the  transaction  and  are  essential ingredients in the creation  of the mortgage.  As the deposit alone  is not intended to create the charge  and  the  document,  which  constitutes  

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the bargain regarding the security, is  also necessary and operates to create  the  charge  in  conjunction  with  the  deposit,  it  requires  registration  under S.17, Registration Act, 1908, as  a non-testamentary instrument creating  an  interest  in  immovable  property,  where the value of such property is  one hundred rupees and upwards.  The  time  factor  is  not  decisive.   The  document  may  be  handed  over  to  the  creditor  along  with  the  title-deeds  and yet may not be registrable……”

This  Court  while  relying  on  the  aforesaid  

judgment in the case of  United Bank of India v.  

M/s.  Lekharam  Sonaram  &  Co.,AIR  1965  SC  1591  

reiterated as follows:

“7. …………It is essential to bear in  mind that the essence of a mortgage by  deposit of title-deeds is the actual  handing  over  by  a  borrower  to  the  lender  of  documents  of  title  to  immovable property with the intention  that those documents shall constitute  a  security  which  will  enable  the  creditor  ultimately  to  recover  the  money which he has lent. But if the  parties choose to reduce the contract  to writing, this implication of law is  excluded by their express bargain, and  the document will be the sole evidence  of  its  terms.  In  such  a  case  the  deposit  and  the  document  both  form  

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integral parts of the transaction and  are  essential  ingredients  in  the  creation of the mortgage. It follows  that in such a case the document which  constitutes  the  bargain  regarding  security  requires  registration  under  Section 17 of the Indian Registration  Act,  1908,  as  a  non-testamentary  instrument  creating  an  interest  in  immovable property, where the value of  such  property  is  one  hundred  rupees  and  upwards.  If  a  document  of  this  character is not registered it cannot  be used in the evidence at all and the  transaction itself cannot be proved by  oral evidence either…….”  

Bearing in mind the principles aforesaid, we  

proceed to consider the facts of the present case.  

It is relevant here to state that letter dated  29th  

March, 2007 of the Finance Commissioner inter alia  

makes  “instrument  of  deposit  of  title-deeds  

compulsorily registrable under Section 17(1)(c) of  

the  Registration  Act.”  In  such  contingency,  

registration fee and stamp duty would be leviable.  

But the question is whether mortgage by deposit of  

title-deeds is required to be done by an instrument  

at  all.  In  our  opinion,  it  may  be  effected  in  

specified  town  by  the  debtor  delivering  to  his  

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creditor documents of title to immoveable property  

with the intent to create a security thereon. No  

instrument  is  required  to  be  drawn  for  this  

purpose. However, the parties may choose to have a  

memorandum  prepared  only  showing  deposit  of  the  

title-deeds. In such a case also registration is  

not required. But in a case in which the memorandum  

recorded  in  writing  creates  right,  liability  or  

extinguishes those, same requires registration.  In  

our opinion, the letter of the Finance Commissioner  

would  apply  in  cases  where  the  instrument  of  

deposit  of  title-deeds  incorporates  terms  and  

conditions  in  addition  to  what  flow  from  the  

mortgage by deposit of title-deeds.  But in that  

case there has to be an instrument which is an  

integral  part  of  the  transaction  regarding  the  

mortgage  by  deposit  of  title-deeds.   A  document  

merely  recording  a  transaction  which  is  already  

concluded and which does not create any rights and  

liabilities does not require registration.  Nothing  

has been brought on record to show existence of any  

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instrument which has created or extinguished any  

right  or  liability.   In  the  case  in  hand,  the  

original deeds have just been deposited with the  

bank.  In the face of it, we are of opinion that  

the charge of mortgage can be entered into revenue  

record in respect of mortgage by deposit of title-

deeds and for that, instrument of mortgage is not  

necessary.   Mortgage  by  deposit  of  title-deeds  

further does not require registration. Hence, the  

question of payment of registration fee and stamp  

duty does not arise.  By way of abundant caution  

and at the cost of repetition  we may, however,  

observe  that  when  the  borrower  and  the  creditor  

choose to reduce the contract in writing and if  

such  a  document  is  the  sole  evidence  of  terms  

between them, the document shall form integral part  

of  the  transaction  and  same  shall  require  

registration under Section 17 of the Registration  

Act.   From  conspectus  of  what  we  have  observed  

above, we do not find any error in the judgment of  

the High Court.

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In the result, we do not find any merit in the  

appeal and it is dismissed accordingly but without  

any order as to costs.

CIVIL APPEAL NO.9049 OF 2013 (@SLP (C) NO. 924/2009)

Delay condoned.

Leave granted.

By  the  impugned  order,  the  High  Court  had  

directed the appellants herein to enter mutation in  

favour of Punjab National Bank in respect of the  

properties  mortgaged  by  deposit  of  title-deeds.  

According  to  the  appellants,  the  properties  

mortgaged by deposit of title-deeds are situated in  

the village Matab Garh in the District of Ludhiana  

and  at  village  Dallomajra,  Tahsil  and  District  

Fatehgarh  Sahib  and  village  Sadhugarh  in  the  

District Sirhind.

It is the stand of the appellants that deposit  

of  the  title-deeds  are  not  in  relation  to  the  

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properties situated in the towns specified under  

Section 58(f) or in the towns notified by the State  

Government in terms of Section 58 of the Transfer  

of Property Act.  In this connection, our attention  

has been drawn to the notification dated May 26,  

2003 of the Government of Punjab in the Department  

of  Revenue  and  Rehabilitation,  same  reads  as  

follows:

“In exercise of the power conferred by  clause  (f)  of  Section  58  of  the  Transfer  of  Property  Act,  1882  (Central Act No. 4 of 1882) and all  other  powers  enabling  him  in  this  behalf,  the  Governor  of  Punjab  is  pleased to specify Gobindgarh in the  district Fatehgarh Sahib and Mohali in  District Roop Nagar in the State of  Punjab as Towns for the purpose of the  aforesaid section of the said Act.”  

This  aspect  of  the  matter  has  not  been  

considered  by  the  High  Court  in  the  impugned  

judgment.  As  the  same  goes  to  the  root  of  the  

matter, we have no option than to set aside the  

impugned order and remit the matter back for its  

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fresh consideration in accordance with law in the  

light of the observation made above.

In the result, we allow this appeal, set aside  

the impugned judgment of the High Court and remit  

the  matter  back  to  the  High  Court  for  fresh  

consideration in accordance with law.

 ………..………..……………………………….J. (CHANDRAMAULI KR. PRASAD)

………………….………………………………….J. (KURIAN JOSEPH)

NEW DELHI, OCTOBER 7, 2013.

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