Equitable mortgage by deposit of title deeds prevails over revenue recovery claims where no statutory priority exists.

An equitable mortgage by deposit of title deeds is valid where the borrower deposits the deeds with an intention to create security, and no registered mortgage deed is required unless one is executed. On the facts, the borrower confirmed the deposit with that intention, so the bank became mortgagee from the date of deposit. The revenue authorities' claim to sell the same property for recovery of dues did not override the bank's prior secured interest, because the recovery provisions invoked contained no specific statutory priority in favour of the State over a secured creditor. The bank's mortgage was upheld and the impugned orders were quashed.

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Issues: Whether the petitioner-bank's equitable mortgage created by deposit of title deeds had priority over the revenue authorities' claim to sell the same property for recovery of dues, and whether absence of a registered mortgage deed defeated the bank's secured interest.

Analysis: A mortgage by deposit of title deeds is valid when there is an intention to create security and the title deeds are deposited with that intent; registration is not required unless a mortgage deed is executed. The materials showed that the title deeds were deposited with the bank and the borrower confirmed the deposit with the intention to create a mortgage. The bank therefore became the mortgagee from the date of deposit. The claim of priority based on crown debt could not override the bank's prior secured interest, since the recovery provisions invoked by the respondents did not contain a specific statutory priority over a secured creditor. The decision recognising governmental priority under a different statutory regime was distinguished, because the present enactment did not create such precedence.

Conclusion: The bank's equitable mortgage was valid and enforceable, and it had priority over the respondents' claim. The impugned orders were unsustainable and were quashed.

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