Equitable mortgage and reserved secured-creditor rights upheld despite participation in winding-up sale and proof of debt.

An equitable mortgage may be established by deposit of title deeds where the surrounding documents and conduct show an intention to create security, even if the documents are not title deeds in the strict sense; the bank was therefore treated as a secured creditor over the charged assets. A secured creditor does not lose its security by participating in a winding-up sale and lodging a proof of debt, provided it expressly reserves rights to payment from the sale proceeds; there was no waiver or surrender of security on these facts. The exact amount due required further accounting, and the sale proceeds attributable to non-mortgaged land had to be segregated for separate treatment.

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Issues: (i) whether the bank had proved a mortgage by deposit of title deeds and other security over the company's assets and thus established its status as a secured creditor; (ii) whether the bank, by participating in the winding-up sale and filing proof of debt, had surrendered, waived, or relinquished its security; (iii) what amount was due to the bank and to what extent its claim could be satisfied out of the sale proceeds.

Issue (i): whether the bank had proved a mortgage by deposit of title deeds and other security over the company's assets and thus established its status as a secured creditor.

Analysis: The evidence showed a series of loan and security documents, including hypothecation arrangements for movables and title-deed deposits for immovable property, with the company repeatedly confirming the security. The deposit of title deeds was treated as an equitable mortgage because the controlling element was the intention to create security, not the form of the document. Documents evidencing title, though not themselves title deeds in the strict sense, were sufficient where they bona fide related to the property and were deposited as security.

Conclusion: The bank proved its security and was a secured creditor in respect of the charged assets.

Issue (ii): whether the bank, by participating in the winding-up sale and filing proof of debt, had surrendered, waived, or relinquished its security.

Analysis: The bank consistently reserved its rights while allowing the assets to be sold for the benefit of the winding-up process. A waiver or surrender of security requires an intentional relinquishment of a known right. Mere consent to sale of the secured property, coupled with an express claim to payment from the proceeds, did not amount to abandonment of the security. The insolvency provisions relied upon by the objectors did not compel a contrary result, because the bank did not relinquish its security for the general benefit of creditors.

Conclusion: The bank had not waived, surrendered, or relinquished its security.

Issue (iii): what amount was due to the bank and to what extent its claim could be satisfied out of the sale proceeds.

Analysis: The exact amount due could not be finally fixed on the material available because the accounting basis and the question of interest on interest were insufficiently established. The court also found that the mortgage covered only the portion of land evidenced by the title documents, not the entire extent sold, so the proceeds attributable to unsecured land had to be segregated. The official liquidator was therefore directed to make a provisional payment, ascertain the exact entitlement, and keep the non-mortgaged portion of the sale proceeds in a separate account.

Conclusion: The bank was entitled to preferential payment as a secured creditor, but its claim required further adjudication for exact quantification and segregation of unsecured sale proceeds.

Final Conclusion: The bank succeeded on the core questions of security and priority, and the application was allowed with directions to the official liquidator to make provisional payment, segregate the unsecured portion of the sale proceeds, and determine the exact balance payable in accordance with law.

Ratio Decidendi: An equitable mortgage is proved by the intention to create security through deposit of title deeds, and a secured creditor does not lose that security by consenting to sale of the charged assets if the consent is coupled with an express reservation of rights to payment from the proceeds.

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