1965 (2) TMI 125 - SC - Indian Laws

Supreme Court Grants Mortgage Decree with Interest and Costs

United Bank of India Ltd. Versus Lekharam Sonaram and Co. and Ors.

The Supreme Court overruled the High Court's decision and granted the plaintiff a mortgage decree for the amount claimed in the plaint along with interest ... - Issues Involved:1. Whether the documents (Exhibits 7(a), 7(b), and 12) constituted an equitable mortgage requiring registration under Section 17 of the Registration Act.2. Whether the High Court's interpretation of the documents was correct.3. Whether the plaintiff was entitled to a mortgage decree.Issue-wise Detailed Analysis:1. Equitable Mortgage and Registration Requirement:The main question presented for determination in this case was whether the view taken by the High Court as to the legal effect of these documents-exhibits 7(a), 7(b), and 12-was correct. A mortgage by deposit of title deeds is a form of mortgage recognized by Section 58(f) of the Transfer of Property Act, which provides that it may be effected in certain towns (including Calcutta) where a person 'delivers to a creditor or his agent documents of title to immovable property with intent to create a security thereon.' When the debtor deposits with the creditor title deeds of his property with an 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 classes of mortgage. However, 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 integral parts of the transaction and are essential ingredients in the creation of the mortgage. 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 evidence at all, and the transaction itself cannot be proved by oral evidence either.2. Interpretation of the Documents:The trial court considered that exhibits 7(a) and 7(b) were not merely a record of past transactions but created an equitable mortgage and, therefore, required registration under Section 17 of the Registration Act. The High Court expressed the view that exhibits 7(b) and 12 were not of much consequence and exhibit 7(a) was the material document to be construed in the case. The High Court took the view that exhibit 7(a) written by Lekharam, defendant No. 2, was meant to be an integral part of the transaction and was not intended to be mere evidence for the deposit of the title deeds. The High Court accordingly held that the plaintiff was not entitled to a mortgage decree and therefore dismissed the appeal.Applying the principle to the present case, the Supreme Court considered that the letter at exhibit 7(a) was not meant to be an integral part of the transaction between the parties. The letter does not mention what was the principal amount borrowed or to be borrowed. Neither does it refer to the rate of interest for the loan. It is important to notice that the letter does not mention details of title deeds which are to be deposited with the plaintiff-bank. The Supreme Court was, therefore, of the opinion that the view of the High Court with regard to the construction of exhibit 7(a) was erroneous and the document was not intended to be an integral part of the transaction and did not, by itself, operate to create an interest in the immovable property. It follows, therefore, that the document-exhibit 7(a)-did not require registration under Section 17 of the Indian Registration Act.3. Entitlement to Mortgage Decree:On behalf of the respondents, it was argued in the alternative that exhibits 7(b) and 12 were integral parts of the transaction and would require registration. The Supreme Court was unable to accept this argument as correct. The letter written by Sonaram-exhibit 7(b)-is not of much consequence, for it does not contain the material particulars of the loan and does not mention details of title deeds intended to be deposited with the plaintiff-bank. The letter suggests that the transaction was not finally completed as Babulal Ram-defendant No. 4-was authorized in the letter 'to negotiate further in this respect.' As regards exhibit 12, the Supreme Court found that it recorded a transaction which had already been concluded and under which rights and liabilities had already been agreed upon. Exhibit 12 is written not by Lekharam-the karta of the joint family-but by Babulal Ram. It recites that he had deposited the title deeds with an intent to create an equitable mortgage 'upon all my rights, title and interest in the said properties.' The language of exhibit 12 is identical in material respects with the language of the document construed by the court in Rachpal Mahraj v. Bhagwandas Daruka, and is covered by the decision in that case.For the reasons expressed, the Supreme Court held that the view taken by the High Court must be overruled and the plaintiff must be granted a mortgage decree for the amount of Rs. 31,000 odd, as claimed in the plaint together with interest at 6 percent per annum from the institution of the suit and costs. The plaintiff is accordingly granted the usual mortgage decree under Order 34, Rule 4, Civil Procedure Code, and it should be stated in the decree that if the defendants do not pay the amount within the period of six months from this date, the mortgaged properties described in the schedule to the plaint would be sold for the satisfaction of the amount owing to the plaintiff.The appeal was accordingly allowed with costs.