SVKMs NMIMS

School of Law, Mumbai

Synopsis Submitted
On
MORTGAGE BY DEPOSIT OF TITLE
DEEDS
In compliance to partial fulfillment of the marking
scheme, for Trimester 7 of 2016-2017, in the subject of
Property Law
Submitted
To
Professor Isha Khurana
for evaluation

ARNAV DAS
A026
BBA LLB (H)

INDEX
SR.NO
1.
2.
3.
4.
5.
6.

PARTICULARS
ABBREVIATIONS
TABLE OF CASES
INTRODUCTION
CASE ANALYSIS
CONCLUSION
BIBLIOGRAPHY

ABBREVIATIONS
1. Cr.P.C.
2. P.W.
3. C.P.C.
4. V.
5. S.
6. U/S
7. IPC
8. AIR
9. SCC
10. SC
11. ILR
12. SLP
13. Cr.L.J
14. Bom.
15. Q.
16. SCR
17. r/w

- Criminal Procedure Code

- Prosecution Witness
- Civil Procedure Code
- Versus
- Section
- Under Section
- Indian Penal Code
- All India Reporter
- Supreme Court Cases
- Supreme Court
- Indian Law Reporter
- Special Leave Petition
- Criminal Law Journal
- Bombay
- Queen
- Supreme Court Reporter
-Read with

INTRODUCTION

A mortgage is the transfer of an interest in specific immovable property for the

purpose of securing the payment of money advanced or to be advanced by way of
loan, an existing or future debt, or the performance of an engagement, which may
give rise to a pecuniary liability.
The transferor is called a mortgagor, the transferee a mortgagee; the principal
money and interest of which payment is secured for the time being are called the
mortgage-money, and the instrument (if any) by which the transfer is effected is
called a mortgage-deed.
CREATION OF MORTGAGE
Where the principle money secured is one hundred rupees or upwards, a mortgage
otherwise than a mortgage by deposit by title deeds can be effected only by a
registered instrument signed by the mortgagor and attested by at least two
witnesses. When the principle money secured is less than one hundred rupees,
mortgage may be effected either by a registered instrument signed by the
mortgagor and attested as aforesaid, or (except in the case of a simple mortgage) by
delivery of the property.
Type of mortgages
SIMPLE MORTGAGE
Where, without delivering possession of the mortgaged property, the mortgagor
binds himself personally to pay the mortgage-money, and agrees, expressly or
impliedly that in the event of his failing to pay according to his contract, the
mortgagee shall have a right to cause the mortgaged property to be sold and the
proceeds of sale to be applied, so far as may be necessary, in payment of the
mortgage-money, the transaction is called a simple mortgage and the mortgagee a
simple mortgagee.

MORTGAGE BY CONDITIONAL SALE

Where, the mortgagor ostensibly sells the mortgaged property1.

On condition that on default of payment of the mortgage-money on a

certain date the sale shall become absolute, or;

2.

On condition that on such payment being made the sale shall become void,
or;

3.

On condition that on such payment being made the buyer shall transfer the
property to the seller,
The transaction is called a mortgage by conditional sale and the mortgagee a
mortgagee by conditional sale:
PROVIDED that no such transaction shall be deemed to be a mortgage, unless the
condition is embodied in the document, which effects or purports to effect the sale.
USUFRUCTUARY MORTGAGE
Where the mortgagor delivers possession, or expressly or by implication binds
himself to deliver possession of the mortgaged property to the mortgagee and
authorizes him to retain such possession until payment of the mortgage money, and
to receive the rents and profits accruing from the property or any part of such rents
and profits and to appropriate the same in lieu of interest or partly in payment of
the mortgage money, partly in lieu of interest and partly in payment of the
mortgage money, the transaction is called a usufructuary mortgage and the
mortgagee a usufructuary mortgagee.
ENGLISH MORTGAGE

Where the mortgagor binds himself to repay the mortgage money on a certain date,
and transfers the mortgaged property absolutely to the mortgagee, but subject to a
proviso that he will re-transfer it to the mortgagor upon payment of the mortgage
money as agreed, the transaction is called an English mortgage.

ANOMALOUS MORTGAGE
A mortgage, which is not a simple mortgage, a mortgage by conditional sale, an
usufructuary mortgage, an English mortgage or a mortgage by deposit of title deeds
within the meaning of section 58 is called an anomalous mortgage.
MORTGAGE BY DEPOSIT OF TITLE DEEDS/EQUITABLE MORTGAGE
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 immovable property, with intent to create
a security thereon, the transaction is called a mortgage by deposit of title deeds.
In English law, deposit of title deeds is called as equitable mortgages. It is so
called, because in the absence of any legally executed document, merely on basis
of possession of title deeds by mortgagee, the equity would ensure the return of the
money.
To create a valid mortgage by deposit of title deeds, there must be a delivery of the
title deeds relating to an immovable property by the debtor to a creditor or his agent
in a notified town with the intention to create a security thereon.
Essentials of deposit of title deeds
Section 58(f) of the Transfer of Property Act deals with deposit of title deeds. This
is a type of recognized modes of mortgage, especially to meet the urgent financial
needs. A person delivers to the creditor or his agent, documents of title of
immovable property with an intention to create security for the amounts borrowed,

is called deposit of title deeds. Accordingly the essentials of the deposit of title
deeds are debt, deposit of title deeds and intention to create a security.
Where the title deeds are to be delivered?
The title deeds are to be delivered to the creditor or his agent at specified towns.
The State Government notifies the places where the documents are to be deposited
with the creditor, and documents should be deposited only in such places. The
place need not necessarily be the place where property is located. Originally this
facility was available only in Kolkata, Mumbai and Chennai. At present it is
extended to all important commercial centers. The property might be situated in
Mysore, but title deeds may be deposited in Bangalore with the creditor.

Existence of debt
The purpose of depositing the title deeds is to secure the amount borrowed. The
debt may be existing or future debt or may be even borrowed earlier. One may
deposit the title deeds to borrow in future also. But the determining factor is debt.

What are the documents to be deposited?

The title deeds of the property that is the documents, which establishes the title of
the property to the owner have to be deposited with the creditor. The sale deed, gift
deed, partition deed great certificate are some of the documents, which establishes
the title.
What is meant by intention to create the security?
The borrower should have intention, which is willingness to create a security to the
amount borrowed against the property. That intention is very important, mere
holding of the documents is not sufficient but must be supported by bonafide
intention.

Is it necessary to obtain any letter about deposit of title deeds?

As per the Transfer of Property Act, there is no need to have any written document
witnessing the deposit. But to be practical, to establish the intention it is always

advisable to reduce the deposit in writing. The borrower may deliver the
documents with a covering letter.
Whether this mode of mortgage attracts Stamp Duty and Registration?
As the deposit may be made orally it does not attract Stamp Duty and Registration.
Even the covering letter, which merely records the intention of the party and
deposit, does not attract any Stamp Duty and Registration. But if such letter contain
references to any terms of contract; amount of loan, rate of interest, repayment
period etc., it attracts Stamp Duty and Registration. It should always be noted that
the date of deposit should not coincide with date of loan. However many States
have made the Registration of Covering letter compulsory.

RESEARCH QUESTIONS

Whether creation of mortgage by depositing title deeds would require

compulsory registration under section 58(f) of the Transfer of Property

Act?
What is the right available to mortgagor against mortgagee?
What are the rights and liabilities of mortgagee?

REGISTRATION- MORTGAGE BY
DEPOSIT OF TITLE DEEDS
When borrower and the creditor choose to reduce a contract in writing as the sole
evidence of terms between them, It since becoming integral part of the transaction,
shall require registration under Section 17 of the Registration Act.
Mortgage by deposit of title deeds whether requires compulsory registration?
The above discussion came up in the wake of question as to 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?
In the case of mortgage by deposit of title-deeds the immovable property is handed
to the creditor by the borrower and documents stands as security. Entire transaction
may be recorded in a memorandum but such memorandum would not be construed
as an instrument of mortgage but merely evidential and thus not requiring
registration, unless the memorandum includes terms and conditions pertaining to
deposit in the form of a document, creates right, liability or extinguishes, which
will require registration under Section 17(1)(c) of the Registration Act. Thus what
is to be understood is that a document merely recording a transaction which is
already concluded and which does not create any rights and liabilities do not
require registration.
As in the instant case, the original deeds were deposited with the bank, 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. Since mortgage
by deposit of title deeds does not require registration, no payment towards
registration fee and stamp duty is necessary.
Mortgage is a transfer of an interest in a specific immovable property for the
purpose of securing the payment of money advanced or to be advanced by way of

loan, an existing or future debt or the performance of an agreement, which may

give rise to a pecuniary liability.
The person borrowing and transferring his interest in an immovable property to the
lender is the mortgagor. The lender is the mortgagee and the funds lent against
which the property is used as security is the mortgage money. The instrument by
which the transfer is effected is called a mortgage-deed.
A registered instrument signed by a mortgagor and attested by at least two
witnesses can affect all mortgages other than a 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 immovable property, with intent to create
a security thereon, the transaction is called a mortgage by deposit of title deeds1.
To create a valid mortgage by deposit of title deeds, there must be a delivery of the
title deeds relating to the immovable property by the debtor to a creditor or his
agent with the intention of creating a security thereon. Thus, if there is a debt and if
title deeds are deposited by the debtor with an intention that the title deeds shall be
security for the debt, then by the mere fact of deposit of those title deeds, a
mortgage comes into being.
A mortgage by deposit of title deed does not require registration. Sometimes, a
memorandum accompanies the deposit of title deeds. This paper examines the
circumstances under which a memorandum accompanying the deposit of title deeds
requires registration.
As far back as in 1873, this question came to be considered by the Calcutta High
Court in Kedarnath Dutt v. Shamlal Khetry2. In that case the court held that a
memorandum is not the indumenta by which the equitable mortgage is created, nor
is it the evidence of the contract, and, therefore, it does not come under Section 17
of the Registration Act. However, if the memorandum is such that it could be

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treated as a contract for the mortgage it would be the instrument by which the
mortgage was created and would come within Section 17 of the Registration Act.
No memorandum can be within Section 17 of the Registration Act unless on its
face it embodies such terms and is signed and delivered at such time and place and
in such circumstances as to lead legitimately to the conclusion that so far as the
deposit is concerned, it constitutes the agreement between the parties3.
When a 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 Section 59 as in other
form 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 Section 17, Registration Act, 1908 as non-testamentary
instrument creating an interest in immovable property4.
If the document is deposited before the execution of the writing reciting it, that is,
if the documents had been handed over to the creditor as security for the loan and
the writing or letter merely recoded a past transaction there would be no need for
registration of the letter for a valid equitable mortgage. However, where there was
no past transaction of actual deposit of title deeds before the execution of the letter
relied on, and the letter is the only evidence of the mortgage and the only document
by which the mortgage was created, the letter has to be registered and if it is not
registered, it cannot be admitted in evidence to prove a valid equitable mortgage by
deposit of title deeds5.
In order to require registration, the document must contain all the essentials of the
transaction and one essential is that the tide deeds must be deposited by virtue of
the instrument or acknowledge an earlier deposit of title deeds and further the title
deeds shall be held as security on the said mortgage6.
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Though a mortgage by deposit of title deeds can be created by a mere deposit of

title deeds without any written contract between the parties, but once the bargain or
contract is reduced to writing, it must be registered7.
One telling principle which has emerged from the ratio of the decisions, however,
is that if there is evidence, either extrovert or introvert, which would compel a
Court to hold that under a single bargain the borrowing and the deposit of title
deeds were effected and that the intention is made clear and public only in such a
contemporaneous transaction, then a memorandum evidencing such a bargain
needs registration. It may be that the memorandum contains a recital as to the
quantum of the amount borrowed. That would not make the memorandum any the
less a non-registrable one, provided it is an independent transaction and not the sole
bargain to evidence the deposit of title deeds. The only important feature on which
the Court should pay its concentrated attention is that the deposit of title deeds
should have taken place earlier than the time of the writing of the memorandum. If
such a dissociation in point of time is apparent from the memorandum itself, or if it
could be discovered from the totality of the facts and appreciation of the
surrounding circumstances, then the plaintiff can successfully pilot his case on the
foot of an equitable mortgage and obtain a mortgage decree. If, however, the Court
is not satisfied about the earlier deposit of title deeds, but if the memorandum
projected is the only piece of evidence whereby the equitable mortgage is created,
then notwithstanding the nicety of expressions used therein, the Court has to hold
that such a memorandum is not admissible in evidence for want of registration

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RIGHT AVAILABLE TO
MORTGAGOR

Right of redemption:
This is a very important right of the mortgagor, which the law protects. Generally
law stands in favor of the weaker party and mortgagor being debtor; law safeguards
his right. Section 60 of Transfer of Property act deals with Right of Redemption
which is a right available to mortgagor to get back the (redeem) the property
mortgaged that is after any time, the principal amount has become due, on payment
of all the dues. The mortgager may demand from the mortgagee, the mortgage
deed, all the documents, and if the property had been delivered, to deliver the
possession of the property. The entire cost of this process is borne by the
mortgagor. He may also direct the mortgagee to deliver the deed; documents,
possession of the property so any third person. If the mortgage has been affected by
registered document, the redemption or re-conveyance deed also needs to be
registered.
This right of redemption is available before the mortgagee files a suit for
enforcement of mortgage.
Whether partial redemption is allowed?
The mortgage is indivisible Section 60 of the Transfer of property act does not
allow partial redemption, one of the mortgagors cannot redeem part of the
mortgaged property by paying the proportionate amount. If redeemed, the entire
property has to redeem. The only exception is that if the mortgagee is a creditor
himself and is responsible for breaking the integrity of the mortgage by allowing
the co-mortgagor to redeem partially or when he acquires the interest of one of the
co-mortgagors.

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What is clog on redemption?

Clog means obstruction. A mortgagor has the right to enjoy hold of the property as
he was entitled before the mortgage. If that right is prevented/restricted, such
conditions are called clogs. A term/condition in a mortgage transaction is treated as
clog, if it is unreasonable.

RIGHTS AND OF MORTGAGEE

The rights and liabilities of a mortgagee are as under:

1.

Right to foreclosure for sale

In the absence of a contract to the contrary, the mortgagee has, at any time after the
mortgage money has become due to him, and before a decree has been made for the
redemption of the mortgaged property, or the mortgage money has been paid or
deposited as hereinafter provided, a right to obtain from the Court a decree that the
mortgagor shall be absolutely debarred or his right to redeem the property, or a
decree that the property be sold.

This is a right available to the mortgagee. The relevant section is 67 of

Transfer of property act. This right can be exercised if there are no
contrary conditions in the mortgage deed and after the mortgaged money
has become due and before the mortgagor gets decree of redemption, or
mortgaged money has been paid, deposited. In simple terms the right can
be enforced on failure of the mortgagor to repay the money borrowed on
due date. The mortgagee may obtain a decree from the court, that the
mortgagor is prohibited from right to redeem the property or property be
sold. This is suit for foreclosure. However the remedy depends upon the
nature of the mortgage.

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In the simple mortgage the foreclosure is not available. Remedy is either

proceed against the mortgagor personally or per sale of the property
mortgaged, so also in care of Usufructuary mortgage, where the
mortgagee is in possession of the property and continues to be so until the
debris repaid on full. In case of conditional sale, the mortgagee matures
into sale on the failure of the payment of the debt, so the mortgage may
foreclosure depriving the right of redemption. In English mortgage they
may bring a suit for sale of the property. In case of mortgage by deposit of
titles deeds, the remedy is sued for personal decrees or for sale of
the property. In anomalous mortgage, the remedy depends upon the terms
of mortgage.

Partial foreclosure:
Partial foreclosure is not a remedy under Section 67. The rule is that one of
the several mortgagees cannot foreclose or sell in respect of his share unless several
mortgagees have, with consent of the mortgagor, severed their interests under the
mortgage.[17] The reason of this rule is to protect the mortgagor from being
harassed by a multiplicity of suits where the severance of interest of the mortgagees
has taken place without the consent of the mortgagor.[18] Accordingly all the comortgagees must join together and file one suit in respect of the whole mortgage
money.
Subrogation:
Where redemption of mortgaged property is carried out by any person who has
interest in the mortgaged property other than the mortgagee, like subsequent
mortgagees, co- mortgagors, buyer of mortgaged property, surety of mortgaged
debt or creditor of mortgagor,[19] such person enters into the shoes of mortgagee.
He gets all the rights that the creditor (mortgagee) had against the principal debtor

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(mortgagor) including right to foreclosure, redemption or sale. This is known as

subrogation. However, the entire mortgage should be paid off by the person.
The person can enforce the security over the original debtor for reimbursement. A
person pays a mortgage to protect his/her own interest in the property or because
s/he is secondarily liable for the debt or for the discharge of the lien. However, if
the borrower used the proceeds of the loan to discharge a prior encumbrance, it is
not a sufficient reason to entitle the lender to subrogation. There should be ample
proof that the loan was made for that purpose.[21]
A co- mortgagor in possession, of excess share redeemed by him can enforce his
claim against non redeeming mortgagor by exercising rights if foreclosure or sale
as exercised by mortgagee under Section 67 of the Transfer of property Act but that
does not make him a mortgagee.[22] The remedy of redemption, foreclosure and
sale available to such co-mortgagor are the rights as a subrogee not as a mortgagee
reincarnate but by way of rights akin to those vesting in the mortgage.
Estoppel of right of foreclosure:
Where mortgagee has accepted the redemption amount and revalued amount and
right to redeem has been enforced, it cannot be interfered with. Mortgagee could
not approbate and reprobate, since mortgagee didnt challenge execution
proceedings during pendency of appeal in Supreme Court, the right of foreclosure
is lost by estoppel.

2.

Right to sue for mortgage money

The mortgagee has a right to sue for the mortgage money in the following cases and
no others, namely:
i.

Where the mortgagor binds himself to repay the same;

ii.

Where, by any cause other than the wrongful act or default of the mortgagor, or
mortgagee, the mortgaged property is wholly or partially destroyed or the
security is rendered insufficient within the meaning of section 66, and the

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mortgagee has given the mortgagor a reasonable opportunity of providing

further security enough to render the whole security sufficient, and the
mortgagor has failed to do so;
iii.

Where the mortgagee is deprived of the whole or part of his security

by or in consequence of the wrongful act or default of the mortgagor;

iv.

Where the mortgagee being entitled to possession of the mortgaged property,

the mortgagor fails to deliver the same to him, or to secure the possession
thereof to him without disturbance by the mortgagor or any person claiming
under a title superior to that of the mortgagor;

Provided that, in the case referred to in clause (a), a transferee from the mortgagor
from his legal representative shall not be liable to be sued for the mortgage money.

3.

Right of power of sale of mortgaged property, if any

Section 69(1), Transfer of Property Act provides that the mortgagee, or any person
acting on his behalf, subject to the provision of this section, have power to sell or
concur in selling the mortgaged property, or any part thereof in default of payment of
the mortgage money, without the intervention of the Court, in the following cases and
in no others, namely:

i.

Where the mortgage is an English mortgage, and neither the

mortgagor nor the mortgagee is a Hindu, Mohammedan or Buddhist, or a member of
any other race, sect, tribe or class from time to time specified in this behalf, by the
State Government in the Official Gazette;

ii.

Where a power of sale without the intervention of the Court is

expressly conferred on the mortgagee by the mortgage deed, and the mortgagee is
the Government;

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iii.

Where a power of sale without the intervention of the Court is

expressly conferred on the mortgagee by the mortgage deed, and the mortgaged
property or any part thereof, was on the date of the execution of the mortgage deed,
situate within the towns of Calcutta, Madras, Bombay, or in any other town or area
which the State Government may by notification in the Official Gazette, specify in this
behalf.
No such power shall be exercised unless and until
i.

notice in writing requiring payment of the principal money has been served on
the mortgagor, or on one of several mortgagors, and default has been made in
payment of the principal money or of part thereof, for three months after such
service or;

ii.

some interest under the mortgage amounting at least to five hundred rupees, is
in arrear and unpaid for three months after becoming due.

4.

Right to appoint a receiver

Section 69A, Transfer of Property Act provides that a mortgagee having the right to
exercise a power of sale under section 69 shall, subject to the provisions of subsection (2), be entitled to appoint by writing signed by him or on his behalf, a receiver
of the income of the mortgaged property or any part thereof.

5. Right to accession to mortgaged property

If after the date of a mortgage, any accession is made to the mortgaged property, the
mortgagee, in the absence of a contract to the contrary, shall for the purposes of the
security, be entitled to such accession.

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6.

Right to the benefit of the renewed lease

Where the mortgaged property is a lease, and the mortgagor obtains a renewal of the
lease, the mortgagee, in the absence of a contract to the contrary, shall for the
purposes of the security be entitled to the new lease.

7.

Right of mortgagee in possession

A mortgagee may spend such money as is necessary.
i.

for the preservation of the mortgaged property from destruction, forfeiture or

sale;

ii.

for supporting the mortgagors title to the property;

iii.

for making his own title thereto good against the mortgagor; and

iv.

when the mortgaged property is a renewable leasehold, for the renewal of the
lease,

And may, in the absence of a contract to the contrary, add such money to the principal
money at the rate of interest payable on the principal, and, where no such rate is fixed,
at the rate of nine percent per annum.

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CONCLUSION
Equitable mortgage means mortgage by deposit of title deeds. Such mortgage had
been customary in India for hundreds of years. English jurisprudence does not
recognize this mortgage but English judges sitting in Indian courts recognized it
under the principle of equity. Hence the name equitable mortgage. It appears in
Transfer of Properties Act as mortgage by deposit of title deeds. It is now actually
legal mortgage but such is the force of habit / custom etc. that it is still called
equitable mortgage.
In English mortgage the mortgagor sells the property to the mortgagee
but mortgagee has the obligation to sell the property back to the mortgagor if the
debt secured by the mortgage is discharged as per its terms. In equitable mortgage
ownership is not transferred but just a property interest is transferred to the
mortgagor and hence the mortgagee cannot sell the property for realization of
unpaid dues without obtaining court's order.
This project analyses consequences and implications after the title deed of specific
immovable property is transferred. There are situations where people intend to
secure their loan or buy time to clear their debts, which is also included in the
project, wrt mortgage by depositing title deeds It also analyses the problems related
to mortgaging the title through real time examples and cases. It discusses the
meaning, scope and objectives by depositing title deeds of the specific immovable
property.
The project also discusses whether creation of mortgage by way of deposit of title
deeds would require compulsory registration under Section59 (f) of Transfer of
Property Act.
The project gives a detailed study of with the help of case laws, how the courts
have interpreted the provisions under section 58 of TPA, 1882 and what the present
scenario of mortgage by depositing title deeds is.

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BIBLIOGRAPHY

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