1950

M<g 5

548 SUPREME COURT REPORTS

RACHPAL MAHRAJ

"·

BHAGW ANDAS. DARUKA

and OTHERS

[SHRI HARILAL KANIA c. J., PATANJALI SASTRI

and DAs J J.]

(1950]

Indian Registration Act (XVI of 1908), s. 17-Transfer of

Property Act (IV of 1882), s. 58 (f)-Memorandum of deposit

of title deeds-When compulsorily registrable.

The question whether a memorandum of deposit of title

deeds

is compulsorily registrable under section 17 of the Indian

Registration Act, 1908, as an instrument creating an interest in

immoveable property, depends on whether the parties intended to

reduce their bargain regarding the

deposit to the form of a

document. If

so, the document requires registration. If, on the

other hand, its proper construction and the surrounding

circun1-

stances lead to the conclusion that the oarties did not intend to

do so, there being no express bargain; the contract to create

the

mortg~ge arises by implication of the law from the deposit

itself

with the requisite intention, and the document, being

merely evidential does not require registration. The time factor

is

not decisive.

Where accounts relating to the appeilant's dealings with the

respondents were taken

on a certain date and the appellant gave

certain title

dee9s to the respondents for being held as security

for the

amounts then found due and \.vhich may become due, and

on the satne day the appellant

gave a memorandum to the

respondents in the form of a letter addressed to tlie respondents

\.Vhich stated : "We write to put on record that to secure the

repay1nent

of the money already due to

you from us on account

of the business transactions bet\veen yourselves and ourselves

and the monev that mav hereafter beco1ne due on account of

such · transactio~s we have this day deposited with you the

following title deeds relating to

our properties at ...... with i11tent to

create

an equitable mortgage on the said properties to

secure

all moneys including interest that may be found due .... " ·

Held that the parties <lid not intend to create a charge by

the • execution of the document, but merelv to record a transaction

which had already been concluded and under which rights

and liabilities had already been created and the document did

not require registration. '

S.C.R. SUPREME COURT REPORTS 549

Obla Sundarachariar v. Narayana Ayyar (58 I. A. 68) and

Hari Sank,_ar Paul v. Kedar Nath Saha (66 I. A. 184) referred to.

APPEAL (Civil Appeal No. LXVII of 1949 from a

Judgment and Decree of the

High Court of Judicature

at Patna dated the 11th March,

1947, in F. A. No. 218

of 1944. The material facts appear from the judgment.

Shiva Prasad Sinha (Sri Kishan, with him) for the

appellant.

B. K.

Saran for the 1st respondent.

Respondents

2 to 13 did not enter appearance.

1950. May 5. The

jtidgrµent of the Court was

delivered by

19"50

Rach pa!,

Mahraj

v.

Bha.~wandas

DarUka

And Others

PATANJALI SASTRI J.-This appeal arises out of Pataiyali Sn,tri ].

a suit brought by the respondents against the appel-

lant

and other members of 11is joint family to enforce

a mortgage alleged to have been created by the

a11pel-

lant by deposit of title deeds on the 23rd October, 1936,

at Calcutta.

The short point for determination in the appeal 1s

whether the memorandum signed and delivered by

the appellant on 23rd October, 1936, and relied upon

by the respondents as evidencing the

cre:.ll ion of tne

mortgage was compulsorily registrable under section 17

of the Indian Registration Act, 1903, and, not ha1ing

been registered, was inadmissible in evidence to prove

the mortgage. The Subordinate Judge of Darbha!1ga

who tried the suit, and the High Court at Patna on

appeal, held that the document did not require registra­

tion 1md was admissible in evidence, and accordingly

<lecrcnl the suit.

The question turns on the proper construction ot

die memorandum and the circumstances under ·which

it was delivered to the respondents. Accorrling to the

evidence of the respondents' witnesses which has been

accepted

by the

Courts below, the accounts relating to

the appellant's dealings were examined on the 23rd

October, 1936, and a large sum was found due to the

respondents

who deman<lcJ

payment. The appelhnt

thereupon brought aml gave certain documents, being

1950

Rach pal

Mahraj

v.

Bhagwandas

Daruka

And Others

Patanjali Sastri ].

550 SUPREME COURT REPORTS [1950]

title deeds relating to immovable properties belonging

to

his family, for the purpose of being held as security

for the amounts then due and to become due on

further dealings. A

draft of the memorandum was

thereafter prepared which the appellant took with

him to

be shown to his lawyer and he returned in the

afternoon, and signed and delivered it to the respond­

ents. All this took place in Calcutta.

The

memo­

randum is in the form of a letter addressed to the

respondents' firm and

is in the following terms :

"We write to put on record that to secure the re­

payment of the money already due to you from us on

account of the business . transactions between your­

selves and ourselves and the money that may here­

after become due on account of such transactions

we have this day deposited with you the following title

deeds in Calcutta at your . place

of business at No. 7

Sambhu Mullick Lane, relating to our properties at

Samastipur with intent to create an. equitable

mortgage on the said properties to secure all moneys

including interest that may

be found due and payable

by us

to you on account of the said transactions ........

"

A mortgage by deposit of title deeds is a form of

mortgage recognised by section

58 (f) of the Transfer

of Property 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 tg create a secu­

rity 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

regis­

tered instrument is required under Section 59 as in

other forms of mortgage. But if the parties choo,se to

reduce the contract to writing, the implication is exclud­

ed 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

...

S.C.R. SUPREME COURT REPORTS 551

constitutes the bargain regarding the ~ecurity, is also

necessary arid operates to create the charge in conjunc­

tion with the deposit, it 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. The time

factor is

not decisive. The document may be handed over to

the creditor along with the

titl,e deeds and yet may not

be registrable, as in

Obla Sundarachariar v. Narayana

Ayyar (

1

)

Or, it may be delivered at a later dated and

nevertheless

be registrable, as in Hari

Sankar Paul v.

Kedar Nath Saha (

2

)

The crucial question is: Did

the parties intend

to reduce ·their bargain regarding

the deposit

of the title deeds to the form of a

docu­

ment ? If so, the document requires registration. If,

on the other hand, its proper construction and the

surrounding circumstances lead to the conclusion that

the parties did not intend ·to do so, t;Jien, there being

no

express bargain, the contract to create the mortgage

arises

by implication of the

. law from . the deposit itself

with the requisite intention, and the document, being

merely evidential

does not require registration.

There are numerous decisions, some of them not

easy to reconcile, where this question was considered

with reference

to the document concerned in the parti­cula:r case. It is unnecessary to review them, as the two

latest pronouncements of the Privy Council, to which

reference

has been made, aptly illustrate

cases falling

on either

side of the line. In

Obla Sundarachariar v.

Narayana Ayyar (

1

) a signed memorandum was deli­

vered to the mortgagee along with the title deeds of

cei:tain i;roperties deposited as security. The merrioran-.

dum stated "As agreed upon in person, I have delivered

to you the under-mentioned documents as security,"

and listed the title deeds deposited. It was held that

the memorandum

was no more than a mere record of

the

particulars of the deeds and did not require regis­

tration. The criterion. applied was : "No such memo­

randum can be within the section (section 17 of the Re­

gistration i\ct) unless on its face it embodies such terms

(

1

) 58 I.A. 68. (') 66 I.A 184.

1950

RochJal

Ma/irqj

v.

Bhagwandas

D41'11ko

And Othtrs

Patanjali Saslri J.

1950

Roehpal

MalrT'!f

v.

Blu1gwandas

DOTuka

And Others

PaJahjali Sastri J.

552 SUPREME COURT REPORTS [1950J

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 parties." In

Hari Sankar Paul v. Kedar Nath Saha (') the title

deeds were deposited accompanied by a memorandum

~ 'part of the advance arranged for was made.

So!lle days later when the balance was advanced,

another memorandum

was delivered superseding the

earlier one, and this was a formal document stating

the essential terms of the transaction

"hereby agreed"

and referred to the moneys "hereby secured". It also

conferred an express power of

sale on the mortgagee.

Lord Macmillan, after reviewing the eariler decisions

of the Board, held that the document required

registra­

tion, observing, "where, as here, the parties profess­

ing to create a mortgage by a deposit of title deeds

contemporaneously enter into a contractual agreement,

in writing, whiih

is made

· an integral part of the

transaction, and

is itself an operative instrument and

not merely evidential, such a document must. under

the statute,

be registered."

Turning now to the memorandum before us,

1t 1s

clear, on the face of it, that the parties did not

intend

thereby to create the charge. The document purports

only to record a transaction which had been concluded

and under which the rights and li~bilities had been

orally agreed upon. No doubt it was taken by

the

respondents to show that the title deeds of the

appel­

lant's properties were deposited with them as security

for the moneys advanced by them, and to obviate a

possible plea that the deeds were left with them for

other purposes,

as indeed was contended by the

appel­

lant in his written statement, taking. advantage of the

non-registration of the memorandum in question. But

that

is far from intending to reduce the bargain to

writing and make the document the basis of the rights

and liabilities of the parties.

In agreement with the

High Court,

we are of opinion, that the memorandum

delivered

by the appellant along with the title

deeds

('). 66 LA. 1~4.

,

$.c.R. SUPREME COURT REPORTS 553

deposited with the respondents did not require regis­

tration and was properly admitted in evidence to prove

the creation of the charge.

The appeal fails and is dismissed with costs.

Appeal dismissed.

Agent for the appellant: Tarachand Brijmohanlal.

Agent for respondent No. 1 : S. P. Varma.

I

THE NEW PIECEGOODS BAZAR CO., LTD.,

BOMBAY

ti.

THE COMMISSIONER OF INCOME-TAX,

BOMBAY

[SAIYID FAZL ALI, PATANJALI SASTRI,

MEHR CHAND MAHAJAN and

, MUKHERJEA JJ.]

Indian Income-tax Act (XI of 1922), s. 9(1) (iv)-Income from

pt"Operty-Computation-Deductions-"Annual charge .not being

capital charge"-"Annual charge" ·and '~capital .charge", mean-·

ittgi of-Charge for. municipal . property tax and urban immoveable

pro,,my tax-Whether deductible--City of Bombay Municipal Act,

1888, s. 212--,-Bombay Finance Act, I 932, s. 22.

The charge created in respect of municipal property tax by

s. 212 af the City of Bombay Municipal Act, 1888, is an "annual

charge not being a capital charge" within the meaning of s. 9 ( 1)

(it) of the Indian Income-tax Act, 1922, and the amount of such

charge should therefore be deducted in computing the income from

such property for the purposes of .s-9 of the Indian Income tax Act.

The charge in . respect of urban immoveable property tax

created by the Bombay Finance Act, 1932, is similar in character

and the amount of such charge should also be deducted_

Tl* expression "capital charge" in s. 9 (1) (iv) means a

charge created for a capital sum, that

is to say, a charge created to

secure the discharge

of a liability of a capital nature; and an

"annual charge" means a charge to secure an annual liability.

1950

R~

Mfl"'qj

v.

· Bliagwandas

Daruka

AtttJ Othm

P atanjali Sastri J.

1950

May26