Mortgage by deposit of title deeds upheld where intention to create security and constructive delivery were proved, giving priority over later mortgage.

A mortgage by deposit of title deeds is valid where debt, deposit, and an intention to treat the deeds as security coexist, even if the parties also contemplated a later formal mortgage. The Court accepted that the registered memorandum of 5 July 1947 expressly recorded the borrower's intention to create security, and the surrounding oral and documentary evidence supported that recital. It further recognised constructive delivery where the creditor already held the deeds as the debtor's agent and then began holding them as mortgagee. On that basis, the mortgage in favour of the plaintiff was upheld and given priority over the subsequent mortgage.

---

---

Issues: Whether a valid mortgage by deposit of title deeds was created in favour of the plaintiff, either on 10 May 1947 or on 5 July 1947, and whether it prevailed over the subsequent mortgage claimed by the contesting respondent.

Analysis: A mortgage by deposit of title deeds requires debt, deposit of title deeds, and an intention that the deeds stand as security. The Court held that the existence of an intention to execute a formal mortgage later does not negate an immediate mortgage by deposit if the contemporaneous documents and circumstances show that the title deeds were treated as security. The registered memorandum of 5 July 1947 contained an express acknowledgment that the borrower had deposited the title deeds with intent to create security. The surrounding oral and documentary evidence was held to be consistent with that acknowledgment, and the Court accepted that delivery could be constructive where the creditor already held the deeds as the debtor's agent and then began to hold them as mortgagee. The Court also held that, even if the mortgage had not been completed on 10 May 1947, the memorandum took effect from its date of execution under the Registration Act and showed the requisite intention while the deeds remained with the creditor.

Conclusion: A valid mortgage by deposit of title deeds was created in favour of the plaintiff, and it had priority over the subsequent mortgage in favour of the third defendant. The appellant succeeded.

Ratio Decidendi: Where debt, possession of title deeds, and an intention to treat them as security coexist, a mortgage by deposit of title deeds is valid even if the parties contemplated a future formal mortgage, and constructive delivery is sufficient when the creditor already holds the deeds and then holds them as mortgagee.

---