Equitable mortgage by certified copies remains valid, but gross neglect can postpone a prior mortgagee under property law.

An equitable mortgage can be created by deposit of certified copies of title deeds, and the use of copies instead of originals does not by itself invalidate the prior mortgage. Section 78 of the Transfer of Property Act may nevertheless postpone a prior mortgagee where that mortgagee's fraud, misrepresentation, or gross neglect enables a later lender to advance money on the same security. On the stated facts, accepting certified copies without adequate verification and failing to promptly inquire about the missing originals was treated as gross neglect, so the prior mortgagee was postponed in favour of the subsequent mortgagee.

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Issues: (i) Whether an equitable mortgage could validly be created by deposit of certified copies of title deeds. (ii) Whether the prior mortgagee was liable to be postponed to the subsequent mortgagee under Section 78 of the Transfer of Property Act on the ground of gross neglect.

Issue (i): Whether an equitable mortgage could validly be created by deposit of certified copies of title deeds.

Analysis: The legal position was treated as settled that there is no embargo on creation of an equitable mortgage merely because certified copies of title deeds were deposited instead of originals. The existence of a valid prior mortgage was therefore not denied on that ground.

Conclusion: The equitable mortgage in favour of the prior mortgagee was valid.

Issue (ii): Whether the prior mortgagee was liable to be postponed to the subsequent mortgagee under Section 78 of the Transfer of Property Act on the ground of gross neglect.

Analysis: Section 78 postpones a prior mortgagee where, through fraud, misrepresentation, or gross neglect of that mortgagee, another person has been induced to advance money on the same security. On the facts, the prior mortgagee accepted certified copies without adequate verification, made no immediate inquiry about the missing originals, and obtained an affidavit only later. These circumstances were held sufficient to support an inference of gross neglect, and the conclusion on that point was treated as a mixed question of fact and law not warranting interference in writ jurisdiction.

Conclusion: The prior mortgagee was rightly postponed in favour of the subsequent mortgagee.

Final Conclusion: The challenge to the appellate order failed, and the writ petition stood dismissed.

Ratio Decidendi: A prior mortgagee may be postponed under Section 78 when its own gross neglect in accepting title documents without ordinary prudence enables another party to advance money on the same property.

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