TMI Blog1964 (2) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... operties. The suit was for recovery of a sum of ₹ 20,435-15-0, made up of principal amount of ₹ 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. 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 ₹ 15,0001- on October ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 formality 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 charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 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 transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties belonging to the 1st defendant in Tanjore was given to the plaintiff as collateral security and by way of equitable mortgage for the loan of ₹ 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 ₹ 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 ₹ 3,000/- under a promissory note of the same date. On April 13, 1947, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 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 not examined as a witness in this case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion 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 earl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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 pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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