11 February 1964
Supreme Court


Case number: Appeal (civil) 407 of 1962






DATE OF JUDGMENT: 11/02/1964


CITATION:  1965 AIR  430            1964 SCR  (6) 727

ACT: Mortgage-Mortgage  by  deposit of title  deeds--No  document executed  on  the day of deposit-Can intention  be  inferred from a deed subsequently executed and registered-Transfer of Property Act (Act No.  IV of 1882), s. 58(f).

HEADNOTE: The  plaintiff-appellant filed a suit to enforce a  mortgage by  deposit of title deeds.  The case of the  plaintiff  was that on 10th May, 1947, the 1st defendant deposited with the plaintiff at Madras other title deeds and papers relating to his  half share in items specified in Schedule ’B’  attached to the plaint with intent to create a security over the same in  respect of advances made by the plaintiff.   Before  the 10th  May,  1947,  the  1st  defendant  borrowed  from   the plaintiff  from  time to time Rs. 16,500/- on  7  promissory notes.   ’Me case of the plaintiff further was that the  1st defendant  executed  a memorandum of  agreement,  dated  5th July, 1947, in which the equitable mortgage thus created and the  amount borrowed by him till then were acknowledged  and he had undertaken to repay the said sum of Rs. 16,500/- with interest.   This  memorandum  of  agreement  had  been  duly registered.   This  suit was for recovery of  the  principal amount  of  Rs.  16,500/- and  interest  thereon.   The  1st defendant  did  not file any written statement  denying  the said   allegations.    The  3rd  defendant   (a   subsequent mortgagee),  the only contesting defendant, filed a  written statement  wherein he put the plaintiff to strict  proof  of the fact that the sums claimed in the plaint were due to him from  the  1st  defendant  and of  the  fact  that  the  1st defendant  effected a mortgage in his favour by  deposit  of title  deeds.  The Trial Court held that the  1st  defendant had  no intention to create a mortgage by deposit  of  title deeds  on  May  10, 1947.  On appeal  the  HIgh  Court  also affirmed  the finding of the trial Court.  The question  for consideration  was  whether on 10th May, 1947, there  was  a loan  and  whether  the  1st  defendant  delivered  to   the appellant  the documents of title of B  Schedule  properties with the intent to create a security thereon. Held:(i)  Under  the Transfer of the  Property  Act,  a mortgage  by deposit of title deeds is one of the  forms  of mortgages  whereunder  there is a transfer  of  interest  in



specific  immovable  property for the  purpose  of  securing payment of money advanced or to be advanced by way of  loan. Therefore, such a mortgage of property takes effect  against a  mortgage  deed subsequently executed  and  registered  in respect  of  the same property under Section  58(f)  of  the Transfer  of  Property  Act.   The  three  requisites  of  a mortgage  by  deposit  of title deeds are,  (i)  debt,  (ii) deposit  of  title deeds, and (iii) an  intention  than  the deeds  shall be security for the debt.  Whether there is  an intention that the deeds shall be security for the debt is a question of fact in each case.  The 728 said  fact  will  have to be decided on  the  basis  of  the evidence.   There  is no presumption of law  that  the  mere deposit  of title deeds constitutes a mortgage, for no  such presumption has been laid down either in the Evidence Act or in  the Transfer of Property Act.  But a court  may  presume under  section  114 of the Evidence Act that  under  certain circumstances a loan and a deposit of title deeds constitute a  mortgage.   But  that is really an inference  as  to  the existence of one fact from the existence of some other  fact or  facts.   Nor the fact that at the time the  title  deeds were deposited there was an intention to execute a  mortgage deed  in  itself  negatives, or is  inconsistent  with,  the intention to create a mortgage by deposit of title deeds  to be  in  force till the mortgage deed was executed.   On  the facts  of  this case the intention to create a  mortgage  by deposit  of  title deeds can be inferred from  the  document dated  5th July, 1947 which was subsequently registered  and in which the deposit of title deeds on May 10, 1947 was duly acknowledged. Norris  v.  Wilkinson, (1806) 33 ER. 73, Keys  V.  Williams, (1838)51  Revised Reports, 339, Whitbread, Ex Parte,  (1912) 34 E.R. 496, In     re. Beetham, Ex Parte Broderick,  (1886) 18 Q.B.D. 380, Dayal Jairaj v.     Jivraj  Ratansi,   (1875) I.L.R.  1 Bom. 237, Jaitha Bhima v. Haji Abdul Vyad  Cosman, (1886)  I.L.R. 10 Bom. 634, Behram Bashid Irani  v.  Sorabji Rustomji Elavia, (1914) I.L.R. 38 Bom. 372 and  V.E.R.M.A.R. Chettyar  v.  Ma  Joo Teen, (1933)  I.L.R.  11.  Rang.  239, discussed. (ii)Physical  delivery  of documents by the debtor  to  the creditor  is not the only mode of deposit.  There may  be  a constructive  deposit.   A court will have to  ascertain  in each  case whether in substance there is a delivery  of  the title deeds by the debtor to the creditor.  If the  creditor was  already in possession of the title deeds, it  would  be hypertechnical to insist upon the formality of the  creditor delivering the title deeds to the debtor, and the debtor re- delivering them to the creditor.  What would be necessary in these  circumstances is whether the parties agreed to  treat the documents in the possession of the creditor or his agent as  delivery to him for the purpose of the transaction.   In the   present  case  the  plaintiff-the  mortgagee-had   the physical possession of the title deeds at Madras on May  10, 1947.   On  the  facts  of this case,  though  the  form  of physical delivery of title-deeds had not been gone  through, on  May  10, 1947, there was constructive  delivery  of  the title deeds coupled with the intention to create a  mortgage by  deposit  of title deeds.  Such  delivery  satisfied  the condition laid down by s. 58(f) of the Transfer of  Property Act. (Iii)There  is nothing unusual in this conduct  of  the parties either.  If there was a mortgage by deposit of title deeds  at  an earlier stage, even though there was  at  that time  an  agreement to execute a formal document  later  on,



there  would be nothing out of the way in the  parties,  for their own reasons, giving up the idea of executing a  formal document   and   being   satisfied   with   the   memorandum acknowledging the earlier form of security.                             729

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 407 of 1962. Appeal  from the judgment and decree dated January 31,  1957 of the Madras High Court in Appeal No. 969/1952. R.Mamamurthi  Aiyar,  T.  S. Rangaraian  and  R.  Gopala- krishnan, for the appellant. V.S.  Venkataraman,  M. R. Krishna Pillai and  M.  S.  K. lyengar, for the respondent No. 3. February 11, 1964.  The Judgment of the Court was  delivered by SUBBA  RAO,  J.-This appeal on a certificate issued  by  the High Court of Judicature at Madras is preferred against  the judgment  and decree of the said High Court modifying  those of  the Subordinate Judge, Tanjore, in a suit filed  by  the appellant to enforce a mortgage by deposit of title deeds. The facts are as follows.  The first defendant borrowed from the  plaintiff from time to time on seven promissory  notes. The plaintiff, alleging that the first defendant had created a  mortgage  by  deposit of title deeds  in  his  favour  in respect of his half share in the properties specified in  B- Schedule, instituted O.S. No. 45 of 1951 in the Court of the Subordinate Judge, Tanjore, for enforcing the said  mortgage against the said properties.  The suit was for recovery of a sum  of Rs. 20,435-15-0, made up of principal amount of  Rs. 16,500/-  and  interest thereon.  To that suit  six  persons were  made  defendants:  defendant  I  was  the   mortgagor; defendant  2 was the subsequent purchaser of several of  the items   of  the  suit  properties  subject  to   plaintiff’s mortgage; defendant 3 was the subsequent morgagee; defendant 4 was the subsequent purchaser of one of the plaint-schedule properties; and defendant 5 and 6 were sister and brother of the  1st  defendant.  The plaintiff also alleged that  in  a partition  ,effected  between  the  1st  defendant  and  his brother  properties described in the C Schedule  annexed  to the  plaint  were  ,allotted  to  the  1st  defendant.   He, therefore,  asked  in the alternative that  the  C  Schedule properties should be sold for the realization of the  amount due to him from the 1st defendant. 730 As the only contesting party before us is the 3rd  defendant (3rd  respondent herein), it is not necessary to notice  the defences raised by defendants other than the 3rd  defendant. The  3rd  defendant  alleged  that  the  1st  defendant  had executed  a  security bond in his favour for a  sum  of  Rs. 15,0001-  on  October 10, 1947 and that, being a  bona  fide purchaser  for value, he had priority over  the  plaintiff’s security,  even  if it were true.  He put the  plaintiff  to strict proof of the fact that the sum claimed in the  plaint under several promissory notes was owing to him and also  of the  fact that the 1st defendant effected a mortgage of  the suit  properties by deposit of title deeds in favour of  the plaintiff. The learned Subordinate Judge held that the suit loans  were true,  that the mortgage by deposit of title deeds was  also true, but the plaintiff had a valid mortgage only of items 1 and 4 of the C Schedule in respect of a sum of Rs. 9,157-5-0 with  interest  at 6 per cent. per annum thereon.   On  that



finding, he gave a decree in favour of the plaintiff against defendants  1  to 3 for the said amount with a  charge  over items 1 and 4 of the C Schedule properties, and he also gave a  decree  in  favour  of the plaintiff for  a  sum  of  Rs. 7,565-2-0  with  further interest at 6 per cent.  per  annum from  July  5, 1947, against the 1st  defendant  personally. The plaintiff preferred an appeal against the decree of  the Subordinate  Judge, insofar as it went against him, and  the 3rd defendant filed cross-objection in respect of that  part of  the decree which went against him.  A Division Bench  of the Madras High Court, which heard the appeal and the cross- objections,  held  that the 1st defendant did not  effect  a mortgage  by  deposit  of title deeds on May  10,  1947,  in favour of the plaintiff for the entire suit claim, but  that he  effected such a mortgage in favour of the  plaintiff  on January  25, 1947, for a sum of Rs. 3,000 /  in  respect  of two of the plaint-schedule items described in Ex.  A-8.   On that  finding,  the  High Court modified  the  judgment  and decree of the Subordinate Judge by restricting the  mortgage decree given to the plaintiff to the amounts covered by  the first three promissory notes and interest thereon and to one half of the properties described in Ex.  A-8 and by giving a money  decree  against  the 1st  defendant  for  the  entire balance of the                             731 decree  amount.   The plaintiff has  preferred  the  present appeal against the decree of the High Court. Learned  counsel  for the appellant contends, (1)  that  the finding of both the lower courts that no mortgage by deposit of title deeds was effected for the entire plaint claim  was vitiated  by  the fact that they had ignored  Ex.   A-19,  a registered agreement entered into between the plaintiff  and the 1st defendant on July 5, 1947, wherein the said fact was clearly  and unambiguously recorded; and (2) that,  even  if such  a mortgage was not effected on May 10, 1947, Ex.  A-19 proprio vigore effected such a mortgage to come into  effect at any rate from the date of the execution of the agreement. Learned  counsel  for the contesting 3rd  respondent  argues that  the  definite case of the plaintiff was  that  such  a mortgage  was effected only on May 10, 1947, and  that  both the Courts below on a consideration of the oral and documen- tary  evidence concurrently found that no  such  transaction was  effected on that date and that, therefore,  this  Court should  not  interfere  with such a  finding  of  fact.   He further contends that in Ex.  A-19 the parties only recorded that  a mortgage by deposit of title deeds was  effected  on May 10, 1947 and that, if that fact was not true, Ex.   A-19 could not be of any help to the plaintiff.  If there was  no mortgage  on May 10, 1947, the argument proceeds, Ex.   A-19 by  its own force could not create a mortgage by deposit  of title deeds on July 5, 1947, as in terms it only referred to a  mortgage alleged to have been effected on May  10,  1947. That  apart, it is argued that as a mortgage by  deposit  of title  deeds could only be effected at Madras and  that,  as one of the important ingredients of such a mortgage is  that the delivery of the said title deeds to the creditor  should have been given at Madras, no such mortgage could have  been effected in law in the present case, as the delivery of  the title  deeds was given by the bank to the representative  of the plaintiff at Kumbakonam. Before  we advert to the arguments advanced in the  case  it would  be  convenient at this stage to notice  the  relevant aspects  of  the law pertaining to mortgage  by  deposit  of title deeds. 732



Section  58(f)  of the Transfer of Property  Act  defines  a mortgage by deposit of title deeds thus:               "Where a person in any of the following towns,               namely,  the  towns of  Calcutta,  Madras  and               Bombay.............. delivers to a creditor or               his  agent  documents of  title  to  immovable               property,  with  intent to create  a  security               thereon, the transaction is called a  mortgage               by deposit of title deeds." Under this definition the essential requisites of a mortgage by  deposit  of title deeds are, (i) debt, (ii)  deposit  of title deeds, and (iii) an intention that the deeds shall  be security  for  the debt.  Though such a  mortgage  is  often described  as an equitable mortgage, there is  an  essential distinction  between an equitable mortgage as understood  in English  law  and  the mortgage by deposit  of  title  deeds recognised under the Transfer of Property Act in India.   In En-land an equitable mortgage can be created either, (1)  by actual deposit of title-deeds, in which case parole evidence is  admissible  to show the meaning of the deposit  and  the extent  of  the  security created, or (2)  if  there  be  no deposit  of  title-deeds, then by a memorandum  in  writing, purporting,  to  create a security for money  advanced:  see White and Tudor’s Leading Cases in Equity, 9th edition, Vol. 2,  at  p.  77.  In either case it does not  operate  as  an actual  conveyance  though  it  is  enforceable  in  equity; whereas  under  the Transfer of Property Act a  mortgage  by deposit  of  title deeds is one of the modes of  creating  a legal mortgage whereunder there will be transfer of interest in   the   property  mortgaged  to  the   mortgagee.    This distinction  will have to be borne in mind  in  appreciating the  scope of the English decisions cited at the Bar.   This distinction  is  also the basis for the view  that  for  the purpose  of  priority  it stood on the  same  footing  as  a mortgage by deed.  Indeed a proviso has been added to s.  48 of  the  Registration Act by Amending Act 21  of  1929.   It says:               "Provided that a mortgage by deposit of  title               deeds as defined in section 58 of the Transfer               of  Property  Act,  1882,  shall  take  effect               against    any   mortgage-deed    subsequently               executed  and registered which relates to  the               same property."                             733 Therefore,  under the law of India a mortgage by deposit  of title-deeds, though it is limited to specific cities, is  on a par with any other legal mortgage.  The text-books and the cases  cited  at  the  Bar give  some  valuable  guides  for ascertaining the intention of parties and also the nature of delivery   of   the  documents  of   title   requisite   for constituting  such a mortgage Fisher in his book on The  Law of Mortgage., 2nd edition, p. 32, suggests how the intention to create such a security could be established.  He says:               "The  intent to create such a security may  be               established  by  written documents,  alone  or               coupled with parol evidence; by parol evidence               only  that  the  deposit was made  by  way  of               security;  or  by  the mere  inference  of  an               agreement  drawn  from t he very fact  of  the               deposit." In  Norris  v. Wilkinson(1) the Master of the Rolls  in  the context of that case where documents ’were delivered to  the Attorney  of  the creditor for the purpose of  enabling  the attorney  to draw a mortgage which it was alleged  that  the debtor had agreed to give, made the following observations:



             "It is clear, that these deeds, if voluntarily               delivered at all, were not delivered by way of               deposit,  in the sense in which that word  has               been  used in the cases : i.e., as  a  present               and  immediate  security; but  were  delivered               only for the purpose of enabling the  attorney               to  draw  the mortgage, which it  is  alleged,               Wilkinson the father had agreed to give."               The learned Master of the Rolls  distinguished               the cases cited before him thus:               "Now in all the cases, that have been referred               to.  the  deeds  were  delivered  by  way   of               deposit.   Such  deposit was  indeed  held  to               imply   an  obligation  to  execute  a   legal               conveyance,  whenever it should  be  required.               But  the primary intention was to  execute  an               immediate  pledge; with an implied  engagement               to  do all, that might be necessary to  render               the pledge effectual for its purpose."--- (1)  (1806) 33 E.R. 73, 76. 734 These  passages  indicate  that an  intention  to  create  a mortgage  deed  in the future is not inconsistent  with  the intention  to create in presenting a mortgage by deposit  of title-deeds.  Both may co-exist.  In Keys v. Williams(1)  it was  held  that an agreement to grant a mortgage  for  money already  advanced and a deposit of deeds for the purpose  of preparing a mortgage, was, in itself, an equitable  mortgage by  deposit.  Though the facts of the case do not appear  in the  report,  this  decision indicates that  the  fact  that deposit  of  title-deeds  was  given  for  the  purpose   of preparing  a  mortgage  does not  in  itself  without  more, exclude  the  inference to create an equitable  mortgage  if the.   requisite   conditions  for  creating   thereof   are satisfied.   The decision in Whitbread, Ex  Parte(2)  throws some  light on the legal requirements of delivery of  title- deeds.   There,  the  petitioner  claimed  a  lien,  as   an equitable  mortgagee, by deposit in 1808 of the lease  of  a public-house as a collateral security for pound 1,000,  lent to  the  lessee  on his promissory note,  and  a  subsequent advance  of  pound  100 made in January 1810.   One  of  the points  mooted was whether the subsequent advance  of  pound 100  was  also  charged  on  the  property  covered  by  the document.   The learned Chancellor in that context made  the following observations :               "If  the  original  bargain did  not  look  to               future advances, no subsequent advance can  be               a charge, unless the subsequent transaction is               equivalent to the original transaction.  If it               is  equivalent to a re-delivery of  the  deed,               receiving it back as a security for both sums,               that  will do; as it cannot depend  upon  that               mere form : but I shall require them to  swear               expressly, that when the sum of pound 100  was               advanced,  it  was upon the  security  of  the               deposit." The said observations emphasize the substance of the  trans- action rather than the form.  It implies that a debtor,  who has already affected a mortgage by deposit of title-deeds in respect  of  an  earlier advance, need not  go  through  the forma- (1)  (1838) 51 Revised Reports, 339. (2)  (1812) 34 E.R. 496.                             735 lity of receiving back the said documents from the  creditor



and formally re-delivering them to the creditor as  security for further advances taken by him.  It would comply with the requirements  of  law if there was clear evidence  that  the documents already deposited with the creditor would also  be charged  by way of deposit of title-deeds in respect of  the further  advances.  The doctrine accepted by  this  decision may,  for  convenience  of reference, be  described  as  the doctrine of constructive delivery.  Learned counsel for  the respondent  attempted to confine the scope of this  decision to  a  case of further advances on the  basis  of  documents already  deposited with the creditor in respect  of  earlier advances.   It is true that the principle was enunciated  in the  context  of  the  said  facts,  but  it  is  of   wider application.   In our view, the same principle will have  to be invoked wherever documents of title have already been  in the possession of creditor at the time when the debtor seeks to  create  a  mortgage by deposit of  title-deeds.   In  re Beetham,  Ex  Parte  Broderick(1) the  facts  were-A,  being indebted  to  a banking company in respect of  an  overdrawn account, wrote to the directors promising to give them, when required,  security over his reversionary interest  in  one- fifth share of a farm, to come into possession on the  death of the life tenant; but no formal security was ever executed in  accordance  with this promise.  After the death  of  the life  tenant the deeds of the farm came into the  possession of A’s brother, the manager of the bank-, for the purpose of paying  the succession duty.  As regards A’s  share  therein the  brother  claimed to hold them for the  banking  company with the consent of A as security for the overdrawn account. There  was no memorandum of the deposit in the  bank  books, nor was the usual printed form of deposit of title-deeds  by way   of  security  made  use  of  with  reference  to   the transaction.   A subsequently became bankrupt.  The  Queen’s Bench  held that the banking company had no valid  equitable mortgage  on  the bankrupt’s share in the farm and  that  it could  not  hold the rents as against his trustee  in  bank- ruptcy.   On appeal the Court of Appeal confirmed  the  said decision  of the Queen’s Bench.  It is contended  that  this decision negatives the doctrine of constructive deposit. for (1)  (1886) 18 Q.B.D. 380. 736 it is said that though the manager of the bank with the con- sent  of A, held the title-deeds as security for  the  bank, the Court did not accept that fact for holding there was  an equitable mortgage.  In our view, this decision does not lay down  any  such  proposition.   The  main  reason  for   the aforesaid conclusion of the Court of Appeal is found in  the judgment  of Lord Esher, M. R. at pp. 768-769 of  ’,he  said Report.  After considering the facts of the case, the Master of the Rolls proceeded to state:               "If this be so, there was nothing but the oral               promise  of  the  bankrupt to  give  the  bank               security,  and that is not enough  to  satisfy               the  Statute of Frauds.  In order to take  the               case out of the statute it must be shown  that               there has been performance or part performance               of the rat promise...........               But nothing more was done with the deeds; they               were  left  in precisely  the  same  position.               Nothing was done, except that the one  brother               said  something, and the other said  something               in reply.  Was this such a part performance of               the  original  oral promise as will  take  the               case out of the statute?"               His Lordship concluded:



             "I  take  that proposition to amount  to  this               that where there is a mere oral promise to  do               something, and nothing takes place  afterwards               but the speaking of more words by the parties-               when nothing more is done in fact-there is  no               part   performance  which  can   exclude   the               application of the Statute of Frauds.  " The  entire  judgment was based upon the  doctrine  of  part performance  and  the Court of Appeal held  that  the  facts established did not constitute part performance of the  oral agreement.  The doctrine of constructive deposit was neither raised nor touched upon in that case. Now  let us consider some of the Indian decisions  cited  at the  Bar.   In  Dayal  Jairaj  v.  Jivraj  Ratansi(1),   the plaintiff (1)  (1857) I.L.R. 1 Bom. 237. 737 had  advanced  to the 1st defendant Rs.  38,000/-,  and  had agreed  to  advance  Rs. 27,000/- more,  the  whole  of  Rs. 65,000/- to be secured by a mortgage of the 1st  defendant’s immovable  property.  The 1st defendant had  deposited  with the plaintiff the title-deeds of his immovable property, for the purpose of enabling him to get a mortgage deed prepared, and  had agreed to execute such mortgage deed on payment  to him  by  the  plaintiff the balance of  the  amount  of  Rs. 65,000/-.  The title--deeds were afterwards returned by  the plaintiff to the 1st defendant for the purpose of enenabling him  to clear up certain doubts as to his title to  some  of the premises comprised in the deeds, but the said deeds were neither subsequently returned by the 1st defendant, nor were others  deposited in lieu thereof.  The balance of  the  Rs. 65.000/-  was not paid by the plaintiff to the 1st  defedant The  Court held that there was an equitable mortagag of  the said  property to secure the sum of Rs. 38,000,/-  The  fact that  the  title-deeds  were deposited for  the  purpose  of executing  a mortgage deed, which did not fructify. did  not in  any way preclude the Court from holding on the facts  of the  case  that  a mortgage by deposit  of  title-deeds  was created in respect of the amount that had already been  paid to  the  debtor.   The  court  relied  upon  the   principle enunciated by earlier English decisions based upon the  fact wither  amounts were lent before or after the deposit of  In Jaitha  Bhima  v. Haji Abdul Vyad Cosman(1) the  facts  were these:  The plaintiff consented to lend Rs. 10,000/- to  the defendant.  The latter deposited with him on April 2,  1883, the  title-deeds of a certain property.  On  receiving  them the plaintiff told the defendant that he would take them  to his attorney, have a deed drawn and then advance the  money. The defendant applied to the plaintiff for the money  before the deed was prepared, but the plaintiff refused, saying, he would  not advance the money until he was satisfied  by  his attorney,  and the deed had been prepared.  At the time  the deeds  were  handed  over to the  plaintiff,  there  was  no existing  debt date by the defendant to the  plaintiff.   On April  6, 1885, the mortgage-deed was executed, and  on  the same  day  the money was advanced by the  plaintiff  to  the defendant.   The  mortgage-deed  was  not  registered.   The plaintiff filed a suit for a declaration (1) (1886) I.L.R.  10 Bom. 634. 134-469 B.C.-47. 738 that he was entitled to an equitable mortgage upon the  said property  and for the sale thereof.  The court held that  on the  facts  no  equitable mortgage was  created.   From  the aforesaid  narration of facts it would be obvious  that  the



plaintiff lent the money immediately before the execution of the document indicating thereby that it was paid under  that document.   Farran, J., who delivered the  judgment,  relied upon the following passage from Seton on Decrees, p. 1131:               "If  deeds  be  delivered to  enable  a  legal               mortgage  for securing an existing debt to  be               prepared, there is an equitable mortgage until               the  legal mortgage is completed; secus is  to               secure a fresh loan yet to be made."               Then  the  learned Judge cited  the  following               passage   from   the  judgment  in   Keys   v.               Williams(1):               "Certainly, if, before the money was advanced,               the  deeds had been deposited with a  view  to               prepare a future mortgage, such a  transaction               could  not  be  considered  as  an   equitable               mortgage by deposit; but it is otherwise where               there is a present advance, and the deeds  are               deposited  under a promise to  forbear  suing,               although  they may be deposited only  for  the               purpose of preparing a mortgage deed.  In such               case  the  deeds are given in as part  of  the               security,  and  become pledged from  the  very               nature of the transaction." These  two passages also indicate that the fact that  title- deeds  were deposited for the purpose of preparing a  future mortgage  is in itself not decisive of the question  whether such  a mortgage was effected or not.  A Division  Bench  of The  Bombay  High Court in Behram Bashid  Irani  v.  Sorabji Rusfomji  Elavia(2)  held  that in that case  there  was  no evidence,  whatever of intention to connect the  deposit  of title-deeds with the debt.  The plaintiff therein  deposited with  the  defendant in Bombay title-deeds of  his  property situate at Nasik and borrowed a sum from the defendant.   He also   executed  a  document  but  that  was  held   to   be inadmissible for want of registration.  There was no other (1)  (1838) 51 R.V. Rep. 339. (2)  (1914) I.L.R. 38 Bom. 372, 374.                             739 evidence to show under what circumstances the documents were deposited.  Beaman, J., made the following observations:               "The  doctrine thus created, amounted at  that               time  to very much what the law now is,  as  I               have  just expressed it, although the  learned               Chancellor,  I  think, lent  strongly  to  the               supposed  legal presumption arising  from  the               fact  of indebtedness and the  contemporaneous               or  subsequent deposit of  title-deeds.   Then               for  the better part of a century, the  Courts               in England virtually adopted this  presumption               as  a  presumption  of law  and  the  need  of               proving    intention    almost    disappeared.               Latterly,  however,  the  legal  doctrine   in               England  veered in the opposite direction  and               the  Courts  began  to insist  more  and  more               strongly  upon  the proof of  intention  as  a               question  of fact, and that has been  embodied               in our own statute law and that is the law  we               have to administer." This  decision  only negatives the presumption of  law,  but does  not  exclude  the presumption of fact  of  a  mortgage arising under certain circumstances from the very deposit of titledeeds.  An elaborate discussion of the subject is found in  V.E.R.M.A.R. Chettyar Firm v. Ma Joo Teen(1).  The  main question  decided  in  that case was,  what  did  the  terms



"documents  of title" and "title-deeds" denote?   The  Court held that they denoted such a document or documents as  show a  prima  facie or apparent title in the  depositor  to  the property or to some interest therein.  But what is  relevant for  the present purpose is that the learned Chief  Justice, who  spoke  for  the Court, after  considering  the  leading judgments on the subject, observed:               "If  the form of the documents of  title  that               have  been delivered to the creditor  is  such               that from the deposit of such documents  alone               the  Court would be entitled to conclude  that               the   documents   were  deposited   with   the               intention  of  creating  a  security  for  the               repayment of the debt, prima               (1)   (1933) I.L.R. 11 Rang. 239, 253.               740               facie  a  mortgage by deposit  of  title-deeds               would be proved; although, of course, such  an               inference would not be irrebuttable, and would               not be drawn if the weight of the evidence  as               a whole told against it." The  learned  Chief Justice accepted the principle  that  if title-deeds, as defined by him, were deposited and the money was  lent, prima facie an inference of a mortgage  could  be drawn, though such an inference could be displaced by  other evidence.  It is not necessary to pursue the matter further. The foregoing discussion may be summarized thus: tinder  the Transfer  of Property Act a mortagage by deposit  of  title- deeds is one of the forms of mortgages whereunder there is a transfer of interest in specific immovable property for  the purpose  of  securing  payment of money advanced  or  to  be advanced  by  way of loan.  Therefore, such  a  mortgaae  of property  takes effect against a mortgage deed  subsequently executed  and  registered in respect of the  same  property. The  three  requisites for such a mortality are,  (1)  debt, (ii) deposit of title-deeds; and (iii) an intention that the deeds  shall be security for the debt.  Whether there is  an intention that the deeds shall be security for the debt is a question  of fact in each case.  The said fact will have  to be  decided just like any other fact on presumptions and  on oral,  documentary or circumstantial evidence.  There is  no presumption  of  law that the mere  deposit  of  title-deeds constitutes  a  mortgage, for no such presumption  has  been laid  down either in the Evidence Act or in the Transfer  of property  Act.  But a court may presume under s. 114 of  the Evidence  Act that under certain circumstances a loan and  a deposit  of titledeeds constitute a mortgage.  But  that  is really an inference as to the existence of one fact from the existence of some other fact or facts.  Nor the fact that at the  time  the  titledeeds  were  deposited  there  was,  an intention to execute a mortgage deed in itself negatives, or is inconsistent with. the intention to create a mortgage  by deposit of title-deeds to be in force till the mortgage deed was  executed.   The  decision of English  courts  making  a distinction between the debt preceding the deposit and  that following  it  can  at best to only a guide;  but  the  said distinction itself cannot be con-                             741 sidered  to  be  a rule of law  for  application  under  all circumstances.  Physical delivery of documents by the debtor to the creditor is not the only mode of deposit.  There  may be  a constructive deposit.  A court will have to  ascertain in  each  case whether in substance there is a  delivery  of title-deeds by the debtor to the creditor.If the creditor was  already in possession of the title-deeds,it   would



be hypertension to insist upon the formality ofthe creditor delivering the title-deeds to the debtor and thedebtor redelivering them to the creditor.  What would be  necessary in  those  circumstances is whether the  parties  agreed  to treat the documents in the possession of the creditor or his agent as delivery to him for the purpose of the transaction. With  this background we shall now proceed to  consider  the questions  that arise for consideration on the facts of  the present case. The  first  question  is whether there  was  a  mortgage  by deposit  of title-deeds of the B-Schedule properties on  May 10,  1947.  To put it in other words, whether on  that  date there  was a loan and whether the first defendant  delivered to  the  appellant  the documents  of  title  of  B-Schedule properties with the intent to create a security thereon. Learned  Subordinate Judge and, on appeal, the  High  Court. held  on  the  evidence that there was no  such  deposit  of title-deeds  with the requisite intention on May  10,  1947. Learned  counsel for the respondent pressed on us to  follow the  usual  practice of this Court of not  interfering  with concurrent  findings of fact.  But the question  whether  on facts found a transaction is a mortgage by deposit of title- deeds is a mixed question of fact and law.  That apart, both the courts in coming to the conclusion which they did missed the  importance of the impact of the terms of Ex.   A-19  on the question raised.  We, therefore, propose to consider the evidence on the said question afresh, along with Ex.  A-19. In para 5 of the plaint, after giving the particulars of the promissory  notes executed by the first defendant in  favour of the plaintiff, it is stated:               "On   10th  May  1947,  the  first   defendant               deposited  with the plaintiff at Madras  other               title deeds and               742               papers  relating  to his half-share  in  items               specified  in  ’B’  schedule  hereunder   with               intent  to create a security over the same  in               respect of advances made and to be made by the               plaintiff.   The first defendant  has  further               executed a memorandum of agreement, dated  5th               July  1947,  in which the  equitable  martgage               thus  created and the amount borrowed  by  him               till   then  were  acknowledged  and  he   has               undertaken to repay the said sum of Rs. 16,500               with interest at 6 per cent. per annum and  to               obtain  a  return  of  the  title  deeds               and  documents  deposited  by  him  with   the               plaintiff.   This memorandum of agreement  has               been duly registered and the same is  herewith               produced.    The  plaintiff  prays  that   its               contents  may  be read as part and  parcel  of               this plaint." There is, therefore, a clear averment in the plaint that  an equitable mortgage was created on May 10, 1947, and that was acknowledged  by the agreement dated July 5, 1947.  The  1st defendant  did  not file any written-statement  denying  the said  allegations.  The 3rd defendant, the  only  contesting defendant,  filed  a written-statement wherein  he  put  the plaintiff to strict proof of the fact that the sums  claimed in the plaint were due to him from the 1st defendant and  of the fact that the first defendant effected a mortgage in his favour  by deposit of title-deeds.  Before we  consider  the oral  evidence,  we  shall briefly  notice  the  documentary evidence in the case. Exhibit A-1 dated January 25, 1947, Ex.  A-9 dated  February



13,  1947,  Ex.  A-12 dated March 2, 1947, Ex.   A-14  dated April  7,  1947, Ex.  A-15 dated April 13,  1947,  Ex.   A17 dated  May 10, 1947, and Ex.  A- 1 8 dated July 4, 1947  are the promissory notes executed by the 1st defendant in favour of  the plaintiff.  The total of the amounts covered by  the said  promissory notes is Rs. 16,500/-.  It is not  disputed that  the  promissory notes were genuine and that  the  said amounts  were lent by the plaintiff to the 1st defendant  on the  dates the promissory notes bear.  On January 26,  1947, i.e., a day after the first promissory note was executed,  a list of tittle-deeds of the properties belonging to the  1st defendant in                             743 Tanjore  was given to the plaintiff as  collateral  security and  by way of equitable mortgage for the loan of Rs.  1,500 borrowed  under Ex.  A-1.  On April 7, 1947, the 1st  defen- dant  executed  an unregistered agreement in favour  of  the plaintiff whereunder, as the plaintiff agreed to lend to the 1st defendant a sum of Rs. 15,000/- to discharge his earlier indebtedness  and  also his indebtedness to  the  Kumbakonam Bank  and  to enable him to do business, the  1st  defendant agreed to execute a first mortgage of the Tanjore properties as  well as of the properties mortgaged to  ’the  Kumbakonam Bank.   He also undertook to bring all the title-deeds  from the Kumbakonam Bank and hand them over to the plaintiff  for preparing the mortgage deed.  This agreement shows that  the 1st defendant was willing to execute a mortgage deed of  his properties  to the plaintiff and with that object  undertook to bring the title-deeds and hand them over to the plaintiff for   preparing  the  mortgage  deed.   Pursuant   to   this agreement, the plaintiff on the same day advanced to the 1st defendant  a sum of Rs. 3,000/- under a promissory  note  of the  same date.  On April 13, 1947, the plaintiff  lent  an- other sum of Rs. 3,000/- under a promissory note to the  1st defendant.  The 1st defendant did not bring the title-deeds, but  by  a  letter  dated April 27,  1947,  (Ex.   B-2),  he authorised  the Managing Director of the Kumbakonam Bank  to hand  over  the  title-deeds  and  the  mortgage  deed  duly discharged  to  the plaintiff or his representative  on  his paying  the amount due by him to the Bank.  On May 5,  1947, the  plaintiff wrote a letter, Ex.  B-1, to  the  Kumbakonam Bank informing it that one S. Narayana Ayyar of Madras would discharge  the mortgage amount due to the Bank from the  1st defendant  and authorizing the Bank to deliver to  the  said Narayana Ayyar the cancelled mortgage deed and the  relative title-deeds.  The said Narayana Ayyar took the letter.   Ex. B-1,  to  the Bank, paid the amount due to it from  the  1st defendant  and  took the title-deeds on behalf  of  the  1st defendant  and  sent them on to the plaintiff at  Madras  by registered  post.   On  May  10,  1947,  the  1st  defendant executed  another promissory note, Ex.  A-17, for a  sum  of Rs.  7,100/-  in favour of the plaintiff in  regard  to  the amount paid by Narayana Ayyar to the Bank.  On July 4, 1947, the 1st defendant executed another promissory note, Ex.   A- 18,  in favour of the plaintiff for a sum of Rs.  400.   The total 744 of the amounts advanced up to that date by the plaintiff  to the 1st defendant was Rs. 16,500/-.  Ex.  A-19 dated July 5, 1947,  is  a  registered memorandum  of  agreement  executed between the plaintiff and the 1st defendant.  Though it  was executed on July 5, 1947, it was presented for  registration on  October 31, 1947 and was eventually registered  on  June 22,  1948.  It is not disputed that the said  agreement  was executed  on July 5, 1947.  Under s. 47 of the  Registration



Act  the said document would have legal effect from date  of execution  i.e., July 5, 1947.  Under that document the  1st defendant,  after  acknowledging that  between  January  25, 1947, and July 4, 1947, he had received from the plaintiff a sum of Rs. 16,500/- under various promissory notes  executed in favour of the plaintiff, proceeded to state:               "The   borrower  hereby  acknowledges   having               deposited  with the lender at Madras  on  25th               January  1947 the title deeds relating to  the               borrower’s undivided half share in items 17 to               2C  mentioned in the B schedule hereunder  and               also having deposited with the lender on  10th               May  1947  the title-deeds  and  other  papers               relating  to  the  borrower’s  undivided  half               share in items 1 to 16 mentioned in B schedule               hereunder  with interest to create a  security               over the deposit of title deeds." This  acknowledgment  is couched in  clear  and  unambiguous terms.  The 1st defendant acknowledges in express terms that a mortgage by deposit of title-deeds was effected on May 10, 1947.   If  there was no oral evidence adduced in  this  the said  documentary evidence prima facie would establish  that the  1st defendant borrowed a sum of Rs. 16.500/- from  time to  time  from  the plaintiff and  effected  a  mortgage  by deposit of title-deeds on May 10, 1947, as security for  the repayment of the said amount.  Exhibit A-19 contains a clear admission  by the 1st defendant that he effected a  mortgage by  deposit of title-deeds in favour of the  plaintiff.   As the  mortgage  deed  in  favour of  the  3rd  defendant  was executed  subsequent  to  Ex.  A-19, he  is  bound  by  that -admission,  unless  there  is sufficient  evidence  on  the record  to  explain  away  the  said  admission.   The   1st defendant.  who could explain the circumstances under  which Ex.  A-19 was executed was                             745 not examined as a witness in this case.  But it is said that the  evidence of P.Ws 1, 2 and 3 displaces  the  evidentiary value  of the recitals of the said document.  P.W. 1 is  the plaintiff. He says in his examination-in-chief:               "On  10th  May 1947 defendant I  and  Narayana               Ayyar  met my lawyer at Madras and I was  sent               for.   Exhibit A-17 is the  pro-note  executed               for  Rs. 7,100/- for the payment made  to  the               bank.  Defendant I then personally handed over               the  documents  to  me by way  of  deposit  of               titledeeds  as security for the  advance  made               and  to be made.  Defendant I did not  execute               any mortgage.  In July 1947, defendant I asked               for Rs. 400/- to buy stamps for the  mortgage.               1  paid Rs. 400/- under Exhibit A-18.  On  5th               July  1947 the memorandum, Exhibit  A-19,  was               executed  in  my lawyer’s  house.   My  lawyer               attested  the  document as  well  as  Narayana               Ayyar.   They saw defendant I sign  the  docu-               ment."               If this evidence is accepted, the  plaintiff’s               case will be established to the. hilt.  But in               the cross-examination he deposed:               "On   5th  July  1947,  the  agreement   about               executing  a simple mortgage was changed  into               one   of  equitable  mortgage.   Defendant   I               suggested it and I was advised to accept and I               accepted." Reliance is placed upon this statement to show that the idea of  effecting  an equitable mortgage dawned on  the  parties



only  on July 5, 1947, and. therefore. the case that sect  a mortgage was effected on May 10, 1947’, must be untrue.   We do  not see any inconsistency between the statement made  by the  plaintiff in the examination-in-chief and that made  in the  cross-examination.  What he stated in the  cross-exami- nation  is that though it was agreed earlier that  a  formal mortgage  deed  should  be executed, on July  5,  1947,  the parties,  for  one reason or other. were content to  have  a deed  of equitable mortgage.  It is too much to expect  this witness  to bear in mind the subtle distinction between  the execution of an equitable mortgage on July 5. 1947, and  the acknowledgment of an emitable mortgage that had already been effected.  In this statement he emphasized more on the 746 document  than on the contents of the document.   So  under- stood,  this  evidence does not run counter to  the  express recitals found in Ex.  A-19.  There is also nothing  unusual that on the advice of the advocate the formalities of actual delivery were complied with in the presence of the advocate. But  one  need not scrutinize the version  of  this  witness meticulously  in  that  regard, if  in  law  a  constructive delivery  would  be  as good as a  physical  delivery.   We, therefore, do not see in the evidence of P.W. 1 anything  to discountenance  the admission made by the 1st  defendant  in Ex.  A-19. P.W. 2. the advocate, also says in his evidence that he gave the  title-deeds to the 1st defendant and asked him to  hand them  over to P.W. 1 and to state that these  and  documents already  deposited would be security for the loans  advanced till  that  date.   There would be  nothing  unequal  if  an advocate,  who knew the technicalities of a mortgage by  de- posit  of title-deeds, advised his client to conform to  the formalities.   Even  if the  parties  accepted  constructive delivery,  the  evidence given by this witness  is  more  an embellishment  than  a conscious effort to depart  from  the truth.   As to what happened on July 4, 1947,  this  witness says that on that date the 1st defendant and Narayana  Ayyar came  to  him  and  suggested that  the  memorandum  may  be registered  instead of executing a simple mortgage  as  that would be cheaper.  There is nothing usual in this conduct of the  parties either.  If there was a mortgage by deposit  of title-deeds  at an earlier stage, even though there  was  at that  time an agreement to execute a formal  document  later on, there would be nothing out of the way in the parties for their  own reasons giving up the idea of executing a  formal document and being satisfied with a memorandum acknowledging the earlier form of security.  In the cross-examination this witness stated that till July 4, 1947, the idea was only  to make  a simple mortgage over the half-share covered  by  all the  title-deeds given to P.W. 1. This statement only  means that  till that date the parties had no idea of executing  a document  acknowledging the earlier mortgage by  deposit  of title-deeds, for they wanted a formal document.  This answer is in no way inconsistent with the statement of the advocate at the earlier stage that there was a mortgage by deposit of title-deeds  on  May 10. 1947.  So too, Narayana  Ayyar.  as P.W. 3, supports the evi- 747 dence of P.Ws. 1 and 2. He too in his cross-examination says that  it was only on July 4, 1947, the idea of executing  an equitable  mortgage was suggested by the 1st  defendant  and that  on  May  10,  1947, he did  not  suggest  to  the  1st defendant   to  execute  any  document.   Here  again,   his statement in the cross-examination would not be inconsistent with  that made by him in the examination-in-chief,  if  the



former  statement  was understood to relate  to  Ex.   A-19. This  witness only meant to say that the idea  of  executing Ex.   A-19 dawned on the parties only on July 4, 1947.   The evidence  of  these three witnesses is consistent  with  the admission  made  by the first defendant in Ex.   A-19.   The evidentiary value of the recitals in Ex.  A-19 is in no  way displaced by the evidence of the said witnesses: indeed,  it supports   the   recitals   therein   in   toto.    In   the circumstances,  we  hold  that  on May  10,  1947,  the  1st defendant  deposited  the  title-deeds  with  the  plaintiff physically  as  security  for the amounts  advanced  by  the plaintiff to the 1st defendant up to that date.  Even if the evidence of the witnesses as regards the handing over of the documents  physically by the 1st defendant to the  plaintiff was  an  embellishment of what took place on that  date  and that  there  was only constructive delivery, we  think  that such delivery satisfied the condition laid down by s.  58(f) of the Transfer of Property Act. Even  so,  it is contended by learned counsel for  the  res- pondent  that  the delivery of the title-deeds  was  to  the appellant’s  representative, Narayana Ayyar,  at  Kumbakonam and, therefore, the mortgage by deposit of title-deeds, even if true, must be deemed to have been effected at  Kumbakonam and that under the law such a mortgage could not be effected at  Kumbakonam as it was not one of the places mentioned  in s.  58(f)  of the Transfer of Property  Act.   But  Narayana Ayyar,  as  P.W.  3,  stated in his  evidence  that  he  had authority  to  take  the title-deeds on behalf  of  the  1st defendant  and that, after having taken delivery of them  on his  behalf,  he  sent them to the plaintiff  at  Madras  by registered  post.  But whether Narayana Ayyar  received  the title-deeds  from the Bank as agent of the 1st defendant  or as  that of the plaintiff. it would not affect the  question to  be  decided in the present case.  We shall  assume  that Narayana  Ayyar  was the agent of the plaintiff.   But  mere delivery of title-deeds without the. 748 intention  to  create a mortgage by deposit  of  title-deeds would not constitute such a mortgage.  On May 5, 1947,  when the  title-deeds were received by the plaintiff through  his agent,  Narayana  Ayyar, at Kumbakonam, they  were  received only  for the purpose of preparing the mortgage  deed.   The plaintiff had the physical possession of the title-deeds  at Madras on May 10, 1947.  On that date the possession of  the titledeeds  by  the  plaintiff  was  as  agent  of  the  1st defendant.  He was not holding the said documents in his own right  on the basis of his title or interest  therein.   The agent’s possession was the possession of the 1st  defendant, the  principal.   On  May 10, 1947,  the  creditor  and  the debtor,  i.e., the plaintiff and the 1st defendant,  met  in the house of P.W. 2 and the 1st defendant agreed to  deposit the  said title-deeds already in the physical possession  of the plaintiff as his agent in order to hold them  thereafter as security for the moneys advanced.  From May 10, 1947, the plaintiff ceased to hold the titledeeds as agent of the  1st defendant  but  held  them  only as  a  mortgagee.   If  the plaintiff physically handed over the title-deeds to the  1st defendant and the 1st defendant immediately handed over  the same to the plaintiff with intention to mortgage them, it is conceded that a valid mortgage was created.  To insist  upon such  a formality is to ignore the ,substance for the  form. When  the principal tells the agent "from today you hold  my title-deeds  as security", in substance there is a  physical delivery.  For convenience of reference such a delivery  can be  described as constructive delivery of title-deeds.   The



law recognizes such a constructive delivery.  We, therefore, hold that, even on the assumption that the form of physical. delivery  had not been gone through  though we hold that  it was  so  effected  on May  10,  1947there  was  constructive delivery  of the title-deeds coupled with the  intention  to create a mortgage by deposit of titledeeds. The  last argument of learned counsel for the  appellant  is that even if there was no mortgage by deposit of  titledeeds on May 10, 1947, under Ex.  A-19 such a mortgage created  at any  rate from July 5, 1947.  It is true that ,he  ,document in  express  terms  says that the documents  of  title  were deposited  on  May  10, 1947, with  intention  to  create  a mortgage by deposit of title-deeds.  Assuming it was not so 749 done  on that date. can’ such an intention be inferred  from the  document  as on July 50 1947 ? Admittedly  on  July  5, 1947’.  the  title-deeds  were  in  the  possession  of  the plaintiff.  If on that date the 1st defendant had  expressed his  intention  ’that from that date he would  consider  the title-deeds as security for the loans already advanced,,  to him,’all  the necessary conditions of a mortgage by  deposit of  title-deeds  would be present, namely,  (i)  debt,  (ii) constructive delivery, and (iii)) intention.  The fact that% he  had such an intention, from an. earlier date  could  not make any difference’ in law, as the intention expressed  was a  continuing  one.  On July 5, 1947, according to  the  1st defendant, the mortgage  by deposit of’ title--deeds was  in existence  and,  therefore,  on that date  the,  said  three necessary  ingredients  of a mortgage by deposit  of  title- deeds were present.  We, therefore, hold that even if  there was  no mortgage by deposit of title-deeds on May 10,  1947, it was effected on July 5, 1947. If  the mortgage by deposit of title-deeds-was effected  on. May 10, 1947, or on July 5, 1947, the legal position wouldbe the  same, as the mortgage deed in favour of the 3rd  defen- dant was executed only on October 10, 1947.  Though Ex.   A- 19  was  registered on June 22, 1948, under s. 47  of  the.- Registration Act the agreement would take effect from July 5, 1947. It is not disputed that in the partition that was  effected’ between  the 1st defendant and his brother  the  properties. specified in ’C’ schedule were allotted to the share of  the 1st  defendant.  If so, the plaintiff would be  entitled  to have  a mortgage decree in respect of the  said  properties. In  the-result there will be a preliminary decree in  favour of the plaintiff for the recovery of the sum of Rs.  20,434- 15-0,  with interest at 6 per cent. per annum  thereon  till the  said  amount is paid The period of redemption  will  be three,,  months from today and in default the  ’C’  schedule properties  will  be sold for the realization of  the  same. Liberty  isreserved to the plaintiff to apply  for  personal decree  against  the  1st defendant in  case  there  is  any deficiency after the. hypothetic has been sold.  The  decree of the Subordinate Judge and of the High Court are set aside and there will be. a decree in the said terms.  The 1st  and 3rd   defendants  will  pay  the  costs  of  the   plaintiff throughout. Appeal allowed, 750