05 May 1950
Supreme Court


Case number: Appeal (civil) 67 of 1949






DATE OF JUDGMENT: 05/05/1950


CITATION:  1950 AIR  272            1950 SCR  548  CITATOR INFO :  R          1965 SC1591  (7,9)  E          1970 SC 659  (8,23)  F          1971 SC 613  (17,18)

ACT:     Indian  Registration Act (XVI of 1908), s.  17--Transfer of  Property  Act  (IV of 1882), s.  58  (f)--Memorandum  of deposit of title deeds--When compulsorily registrable.

HEADNOTE:     The  question whether a memorandum of deposit  of  title deeds  is compulsorily registrable under section 17  of  the Indian Registration Act, 1908, as an instrument creating  an interest  in  immoveable property, depends  on  whether  the parties  intended  to  reduce their  bargain  regarding  the deposit  to  the  form of a document . If  so  the  document requires  registration.  If, on the other hand,  its  proper construction  and the surrounding circumstances lead to  the conclusion  that the parties did not intend to do so,  there being  no express bargain, the contract to create the  mort- gage  arises  by  implication of the law  from  the  deposit itself  with  the  requisite intention,  and  the  document, being merely evidential does not require registration.   The time factor is not decisive.    Where accounts relating to the appellant’s dealings  with the respondents were taken on a certain date and the  appel- lant  gave certain title deeds to the respondents for  being held  as security for the amounts then found due  and  which may  become due, and on  the same day the appellant  gave  a memorandum  to the respondents in the form of a  letter  ad- dressed to the respondents which stated: "We write to put on record that to secure the repayment of the money already due to  you  from  us on account of  the  business  transactions between  yourselves  and ourselves and the  money  that  may hereafter become due on account of such transactions we have this day deposited with you the following title deeds relat- ing to our properties at...with intent to create an  equita- ble  mortgage  on the said properties to secure  all  moneys including  interest that may be found due  ...." Held that the parties did not intend to create charge by the execution   of  the  document,  but  merely  to   record   a



transaction  which  had already been  concluded  and   under which  rights and liabilities had already been  created  and the document did not require registration. 549     Obla Sundarachariar v. Narayana Ayyar  (53 I. A, 68) and Hari  Sankar Paul v. Kedar Nath Saha (66 I.A. 184)  referred to.

JUDGMENT:     APPEAL (Civil Appeal No., LXVII of 1949) from a Judgment and  Decree of the High Court of Judicature at  Patna  dated the 11th March, 1947, in F.A. No. 218 of 1944. The  material facts appear from the judgment.     Shiva Prasad Sinha (Sri Kishan, with him) for the appel- lant. B.K.  Saran for the 1st respondent. Respondents 2 to 13  did not enter appearance.     1950. May 5.  The judgment of the Court was delivered by     PATANJALI  SASTRI J.--This appeal arises out of  a  suit brought  by the respondents against the appellant and  other members of his joint family to enforce a mortgage alleged to have been created by the appellant by deposit of title deeds on the 23rd October, 1936, at Calcutta.     The  short  point  for determination in  the  appeal  is whether the memorandum signed and delivered by the appellant on 23rd October, 1936, and relied upon by the respondents as evidencing  the  creation of the mortgage  was  compulsorily registrable under section 17     of  the Indian Registration Act, 1908, and,  not  having been  registered, was inadmissible in evidence to prove  the mortgage.  The Subordinate Judge of Darbhanga who tried  the suit,  and the High Court at Patna on appeal, held that  the document did not require registration and was admissible  in evidence, and accordingly decreed the suit.     The  question  turns on the proper construction  of  the memorandum  and the circumstances under which it was  deliv- ered  to the respondents.  According to the evidence of  the respondents’   witnesses  which  has been  accepted  by  the Courts  below,  the  accounts relating  to  the  appellant’s dealings  were  examined on the 23rd October,  1936,  and  a large  sum  was found due to the  respondents  who  demanded payment.   The appellant thereupon brought and gave  certain documents, being 550 title  deeds relating to immovable properties  belonging  to his  family, for the purpose of being held as  security  for the amounts then due and to become due on further  dealings. A draft of the memorandum was thereafter prepared which  the appellant  took  with him to be shown to his lawyer  and  he returned  in the afternoon, and signed and delivered  it  to the  respondents.   All this took place  in  Calcutta.   The memorandum  is  in  the form of a letter  addressed  to  the respondents’ firm and is in the following terms:   "  We write to put on record that to secure the  repayment of  the money already due to you from us on account  of  the business  transactions between yourselves and ourselves  and the  money that may hereafter become due on account of  such transactions we have this day deposited with you the follow- ing title deeds in Calcutta at your place of business at No. 7 Sambhu Mallick Lane, relating to our properties at  Samas- tipur  with intent to  create  an  equitable mortgage on the said  properties  to secure  all moneys  including  interest that may be found due and payable by us to you on account of



the said transactions  .......  " A  mortgage by deposit of title deeds is a form of  mortgage recognised  by  section  58 (f)  of  the  Transfer        of Property  Act  which  provides that it may  be  effected  in certain  towns (including Calcutta) by a person  "delivering to his creditor or his agent documents of title to immovable property with intent to create a security thereon." That  is to say, when the debtor deposits with the creditor the title deeds of his property with 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 forms of mortgage.  But if the  par- ties  choose to reduce the contract to writing,the  implica- tion 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.   As  the deposit alone is  not  intended  to create the charge and the document, which 551 constitutes  the  bargain regarding the  security,  is  also necessary  and operates to create the charge in  conjunction with the deposit, it 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  up- wards. The time factor is not decisive.  The document may be handed  over to the creditor along with the title deeds  and yet  may  not be registrable, as in Obla  Sundarachariar  v. Narayana Ayyar (1).  Or, it may be delivered at a later date and  nevertheless be registrable, as in Hari Sankar Paul  v. Kedar  Nath  Saha  (2).  The crucial question  is:  Did  the parties intend to reduce their bargain regarding the deposit of  the title deeds to the form of a document ? If  so,  the document requires registration.  If, on the other hand,  its proper  construction and the surrounding circumstances  lead to the conclusion that the parties did not intend to do  so, then, there being no express bargain, the contract to create the  mortgage  arises  by implication of the  law  from  the deposit  itself with the requisite intention, and the  docu- ment, being merely evidential does not require registration.     There are numerous decisions, some of them not  easy  to reconcile, where this question was considered with reference to  the  document concerned in the particular  case.  It  is unnecessary to review them, as the two latest pronouncements of  the  Privy Council, to which reference  has  been  made, aptly  illustrate cases falling on either side of the  line. In Obla Sundarachariar v. Narayana Ayyar (1) a signed  memo- randum  was delivered to the mortgagee along with the  title deeds  of  certain  properties deposited  as  security.  The memorandum stated’ ’As agreed upon in person, I have  deliv- ered to you the under-mentioned documents as security,"  and listed  the  title deeds deposited.  It was  held  that  the memorandum was no more than a mere record of the particulars of  the deeds and did not require registration.  The  crite- rion  applied  was: "No such memorandum can  be  within  the section  (section 17 of the Registration Act) unless on  its face   it   embodies   such   terms   (1)   58   I.A.    68. (2) 66 I.A.. 184. S52 and  is signed and delivered at such time and place  and  in such circumstances as to lead legitimately to the conclusion that, so far as the deposit is concerned, it constitutes the agreement  between  the parties."  In Hari  Sankar  Paul  v. Kedar Nath Saha (1) the title deeds were deposited  accompa-



nied  by a memorandum when part of the advance arranged  for was  made.  Some days later when the balance  was  advanced, another  memorandum  was delivered superseding  the  earlier one,  and this was a formal document stating  the  essential terms of the transaction "hereby agreed" and referred to the moneys "hereby secured".  It also conferred an express power of  sale on the mortgagee. Lord Macmillan,  after  reviewing the  earlier decisions of the Board, held that the  document required  registration,  observing,  "where,  as  here,  the parties  professing  to create a mortgage by  a  deposit  of title  deeds  contemporaneously  enter  into  a  contractual agreement, in writing, which is made an integral part of the transaction,  and is itself an operative instrument and  not merely evidential, such a document must, under the  statute, be registered."     Turning now to the memorandum before us, it is clear, on the  face of it, that the parties did not intend thereby  to create  the charge.  The document purports only to record  a transaction  which  had been concluded and under  which  the rights  and  liabilities had been orally  agreed  upon.   No doubt it was taken by the respondents to show that the title deeds of the appellant’s properties were deposited with them as security for the moneys advanced by them, and to  obviate a possible plea that the deeds were left with them for other purposes,  as indeed was contended by the appellant  in  his written statement, taking advantage of the  non-registration of the memorandum in question.  But that is far from intend- ing  to reduce the bargain to writing and make the  document 0the basis of the rights and liabilities of the parties.  In agreement with ,the High Court, we are of opinion,. that the memorandum  delivered by the appellant along with the  title deeds (1) 66 I.A. 184. 553 deposited,with the respondents did not require  registration and was properly admitted in evidence to prove the  creation of the charge. The appeal fails and is dismissed with costs. Appeal dismissed. Agent for the appellant: Tarachand Brijmohanlal.  Agent  for respondent No.1: S. P. Varma.