Page 1 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

Page 2 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

2

Page 3 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 29

th

March, 2007 of the Finance

Commissioner and Principal Secretary to Government,

the relevant portion whereof reads as under:

3

Page 4 “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

06

th

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

4

Page 5 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 6

th

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.

5

Page 6 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 12

th

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.

6

Page 7 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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Page 8 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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Page 9 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.

9

Page 10 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

1

Page 11 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

1

Page 12 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 29

th

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

1

Page 13 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

1

Page 14 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.

1

Page 15 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

1

Page 16 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

1

Page 17 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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