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Deposit of Title Deeds – Registration when requires ? – Mutation of entry in Revenue records about mortgage when arises = STATE OF HARYANA & ORS. Vs. NAVIR SINGH & ANR published in judis.nic.in/supremecourt/filename=40878

Mutation of entry of deposit of title deeds in revenue records when not covered by State Govt.

 

English: The supreme court of india. Taken abo...

English: The supreme court of india. Taken about 170 m from the main building outside the perimeter wall (Photo credit: Wikipedia)

 

Notification , can not be changed;

 

As per sec.59 of T.P.Act Deposit of title deeds evidenced with separate memorandum requires no Registration  =

 

 

 

Deposit of title deeds when required to be registered =

 

 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 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  createsright, 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  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.

 

 

 

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.   

 

Mutatin of entry in revenue records under sec. 58 (f) – not possible due to notification as the place is not covered =

 

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 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.   

 

 

 

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 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.

 

 

 

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

 

 

 

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 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.

 

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 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 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.

 
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 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 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
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 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.

 
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 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 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.

 
———————–
18

 

 

 

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