advocatemmmohan

My photo

ADVOCATEMMMOHAN -  Practicing both IN CIVIL, CRIMINAL AND FAMILY LAWS,Etc.,

WELCOME TO LEGAL WORLD

WELCOME TO MY LEGAL WORLD - FOR KNOWLEDGE IN LAW & FOR LEGAL OPINIONS - SHARE THIS

Thursday, October 10, 2013

Deposit of Title Deeds - Registration when requires ? - Mutation of entry in Revenue records about mortgage when arises = STATE OF HARYANA & ORS. Vs. NAVIR SINGH & ANR published in judis.nic.in/supremecourt/filename=40878

Mutation of entry of deposit of title deeds in revenue records when not covered by State Govt. Notification , can not be changed;
As per sec.59 of T.P.Act Deposit of title deeds evidenced with separate memorandum requires no Registration  =

 Deposit of title deeds when required to be registered =
 whether mortgage by deposit  of
title-deeds is required to be done by an instrument at all.
 In our  opinion,
it may be effected in  specified  town  by  the  debtor  delivering  to  his creditor documents of title  to  immoveable  property  with  the  intent  to create a security thereon. No instrument is required to be  drawn  for  this purpose. However, the parties may choose to have a memorandum prepared  only
showing deposit of the title-deeds. In such a case also registration is  not required. But in a case in which the memorandum recorded in writing  createsright, liability or extinguishes those, same requires registration.  In  our opinion, the letter of the Finance Commissioner would apply in  cases  where
the instrument of deposit of title-deeds incorporates terms  and  conditions in addition to what flow from the mortgage by deposit of  title-deeds.   But in that case there has to be an instrument which is an integral part of  the transaction regarding the mortgage by deposit of  title-deeds.   A  document
merely recording a transaction which is already  concluded  and  which  does not create  any  rights  and  liabilities  does  not  require  registration.
Nothing has been brought on record  to  show  existence  of  any  instrument which has created or extinguished any right or liability.  
In  the  case  in
hand, the original deeds have just been deposited with  the  bank.   In  the
face of it, we are of opinion that the charge of  mortgage  can  be  entered into revenue record in respect of mortgage by  deposit  of  title-deeds  and for that, instrument of mortgage is not necessary.  Mortgage by  deposit  of
title-deeds further does not require registration. Hence,  the  question  of payment of registration fee and stamp  duty  does  not  arise.   
By  way  of
abundant caution and at the cost of repetition   we  may,  however,  observe
that when the borrower and the creditor choose to  reduce  the  contract  in
writing and if such a document is the sole evidence of terms  between  them,
the document shall form integral part of  the  transaction  and  same  shall
require registration  under  Section  17  of  the  Registration  Act.   From
conspectus of what we have observed above, we do not find any error  in  the
judgment of the High Court.

By the impugned order, the High  Court  had  directed  the  appellants
herein to enter mutation in favour of Punjab National  Bank  in  respect  of
the properties mortgaged  by  deposit  of  title-deeds.   
Mutatin of entry in revenue records under sec. 58 (f) - not possible due to notification as the place is not covered =
According  to  the
appellants, the properties mortgaged by deposit of title-deeds are  situated
in the village Matab Garh  in  the  District  of  Ludhiana  and  at  village
Dallomajra, Tahsil and District Fatehgarh Sahib  and  village  Sadhugarh  in
the District Sirhind.

      It is the stand of the appellants that deposit of the title-deeds  are
not in relation to the properties situated  in  the  towns  specified  under
Section 58(f) or in the towns notified by the State Government in  terms  of
Section 58 of the  Transfer  of  Property  Act.   

This aspect of the matter has not been considered by  the  High  Court
in the impugned judgment. 
As the same goes to the root  of  the  matter,  we
have no option than to set aside the impugned order  and  remit  the  matter
back for its fresh consideration in accordance with law in the light of  the
observation made above.

      In the result, we allow this appeal, set aside the  impugned  judgment
of the High Court and remit the matter back to  the  High  Court  for  fresh
consideration in accordance with law.

                                                                REPORTABLE


                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL NO.9030 OF 2013
            (@ SPECIAL LEAVE PETITION (CIVIL) NO. 18323 OF 2008)


STATE OF HARYANA & OTHERS                    … APPELLANTS

                                   VERSUS


NAVIR SINGH AND ANOTHER                      …RESPONDENTS

                                    WITH



                        CIVIL APPEAL NO.9049 OF 2013
             (@ SPECIAL LEAVE PETITION (CIVIL) NO. 924 OF 2009)


STATE OF PUNJAB & OTHERS                     … APPELLANTS


                                   VERSUS


PAGRO FOODS LTD. & OTHERS                    …RESPONDENTS




                               J U D G M E N T



CHANDRAMAULI KR. PRASAD, J.


C.A.NO.9030  OF 2013 (@SLP (CIVIL) NO.18323 OF 2008)

      The petitioners, aggrieved by the order of the  High  Court  directing
entry of charge in the revenue records on the basis of mortgage  created  by
deposit of title-deeds, have preferred this special leave petition.


      Delay condoned.


      Leave granted.


      Shorn of unnecessary details, facts giving rise to the present  appeal
are that one M/s. Ultra Tech  Private,  a  company  incorporated  under  the
Companies Act, was sanctioned a term loan  of  Rs.  425  lakhs  and  working
capital facility of Rs.99 lakhs by the  Punjab  National  Bank  (hereinafter
referred to as the Bank).  As agreed by the Bank,  original  title-deeds  in
respect of 19 Marlas of land belonging to Narvir  Singh  and  31  Marlas  of
land owned by Rajinder Kaur were deposited with the Bank  by  the  borrower.
In this way mortgage by deposit of title-deeds took place.
It  is  not  in
dispute that this transaction had taken  place  in  a  town  notified  under
Section 58(f) of the Transfer of  Property  Act.   The  Bank  wrote  to  the
Tahsildar, Panchkula for mutation on  the  basis  of  mortgage  effected  by
deposit of the title-deeds.  When nothing was done,  the  land  owner  filed
writ petition before the High Court inter alia praying for mutation  on  the
basis of mortgage aforesaid.


      The respondents resisted mutation inter alia on  the  ground  that  no
entry  can  be  made  as  the  instrument  of  deposit  of  title-deeds   is
compulsorily registrable under Section 17(1)(c) of the Registration Act  and
for that, they relied on a letter dated 29th  March,  2007  of  the  Finance
Commissioner and Principal Secretary to  Government,  the  relevant  portion
whereof reads as under:


              “xxx             xxx              xxx




           2. It is clarified that the  instrument  of  deposit  of  title-
              deed/Equitable Mortgage  is  compulsorily  registrable  under
              Section  17(1)(c)  of  the  Indian  Registration  Act,  1908.
              Registration fee is payable  under  Article  1(1)(b)  in  the
              table of Registration Fees Notification dated 06th  November,
              2006.  Article 6 of the schedule I-A of the Indian Stamp Act,
              1899 provides for rate  of  Stamp  Duty  (SD)  chargeable  on
              deposit of title-deeds/equitable mortgage.




                  xxx          xxx            xxx“


      According to the  respondents,  in  the  absence  of  registration  as
aforesaid and payment of registration fee and stamp  duty,  the  prayer  for
mutation cannot be allowed.


      The High Court considered the objection and negatived the same in  the
following words:


           “We are of the view that an equitable  mortgage  is  created  by
           deposit of title-deeds and not through any  written  instrument.
           Simple pledge of the title-deeds to the bank as Security creates
           an equitable mortgage, therefore, there is never  an  instrument
           of deposit of  title-deed/equitable  mortgage.   The  petitioner
           simply went to the bank and handed over the title-deeds of their
           respective properties.  This act was enough to create a mortgage
           as envisaged under Section 58(f) of  the  Transfer  of  Property
           Act.  Quite often a memorandum is drawn up regarding the handing
           over of the title-deeds but this memorandum is simply a  written
           record  of  the  pledge.   The  memorandum  itself  is  not   an
           instrument of mortgage………..”






      Mr. B.S. Mor, Additional Advocate  General  appearing  for  the  State
submits that mortgage by deposit of title-deeds requires registration  under
Section 17(1)(c) of the Registration Act, 1908. Further it mandates  payment
of fee  as  prescribed  under  article  1(1)(b)  of  the  Registration  Fees
notification dated 6th November, 2006. In addition, payment  of  stamp  duty
as per Article 6 of the Indian Stamp Act  is  also  required.  According  to
Mr. Mor in the absence of all these the mortgage by deposit  of  title-deeds
cannot form the basis of mutation.

      Mr. Harikesh Singh, learned counsel  appearing  for  the  respondents,
however, submits that mortgage by deposit of title-deeds does not  need  any
registered instrument.  Hence, there is no question of deposit  of  any  fee
thereon. According to him, it also does not require payment  of  duty  under
the Stamp Act.

      An application for impleadment has been filed by the  Bank  for  being
impleaded as a party to the proceedings, which was  allowed  by  this  Court
vide order dated 12th July, 2010.  The  Bank  is  represented  by  Mr.Rajesh
Kumar, Advocate for M/s. Mitter & Mitter, Advocates.

      Another application for impleadment (I.A. No.  3  of  2011)  has  been
filed by Shankar Twine Products Pvt. Ltd. through its Director.   We  reject
this petition giving liberty to it to take recourse to such other remedy  as
is available to it before the court of competent jurisdiction.

       In  view  of  rival  submissions,  the  question  which   falls   for
consideration is whether ‘charge’ of mortgage can be entered in the  revenue
record in respect  of  a  mortgage  effected  by  deposit  of    title-deeds
without its registration and payment of registration fee and stamp duty.

      Mortgage by deposit of title-deeds is sanctioned by law under  Section
58(f) of the Transfer of Property Act in  specified  towns,  same  reads  as
follows:


           "58. “Mortgage”, “mortgagor”, “mortgagee”, “mortgage-money”  and
           “mortgage-deed” defined.—


           (a)   xxx        xxx              xxx


           (e) xxx          xxx              xxx


           (f) Mortgage by deposit of title-deeds.—Where a person in any of
           the following towns, namely, the towns of Calcutta, Madras,  and
           Bombay, and  in  any  other  town  which  the  State  Government
           concerned may, by notification in the Official Gazette,  specify
           in this behalf, delivers to a creditor or his agent documents of
           title to immoveable property, with intent to create  a  security
           thereon, the transaction is called  a  mortgage  by  deposit  of
           title-deeds.”


      Mortgage inter  alia  means  transfer  of  interest  in  the  specific
immovable property for the purpose of securing the money advanced by way  of
loan.  Section 17(1)(c)  of  the  Registration  Act  provides  that  a  non-
testamentary instrument which acknowledges the receipt  or  payment  of  any
consideration  on  account  of  the   creation,   declaration,   assignment,
limitation or extension of any  such  right,  title  or  interest,  requires
compulsory registration.
Mortgage by deposit of  title-deeds  in  terms  of
Section 58(f) of the  Transfer  of  Property  Act  surely  acknowledges  the
receipt and transfer of interest and, therefore, one may  contend  that  its
registration  is  compulsory.   However,  Section  59  of  the  Transfer  of
Property Act mandates that every mortgage other than a mortgage  by  deposit
of title-deeds can be effected only by  a  registered  instrument.   In  the
face of it, in our opinion, when  the  debtor  deposits  with  the  creditor
title-deeds of  the  property  for  the  purpose  of  security,  it  becomes
mortgage in terms of Section 58(f) of the Transfer of Property  Act  and  no
registered instrument is required under  Section  59  thereof  as  in  other
classes of mortgage.
The essence of mortgage by deposit of  title-deeds  is
handing over  by  a  borrower  to  the  creditor  title-deeds  of  immovable
property with the intention that those documents shall constitute  security,
enabling the creditor to recover the money lent.  After the deposit  of  the
title-deeds the creditor and  borrower  may  record  the  transaction  in  a
memorandum but such a memorandum would not be an instrument of mortgage.   A
memorandum reducing other terms and conditions with regard  to  the  deposit
in the form  of  a  document,  however,  shall  require  registration  under
Section 17(1)c) of the Registration Act, but in  a  case  in  which  such  a
document  does  not  incorporate  any  term  and  condition,  it  is  merely
evidential and does not require registration.


      This Court had the occasion to consider this question in the  case  of
Rachpal v. Bhagwandas, AIR 37 1950 SC 272, and the  statement  of  law  made
therein supports the view we have taken, which would  be  evident  from  the
following passage of the judgment:


           “4. A mortgage by deposit of title-deeds is a form  of  mortgage
           recognized by S. 58(f), T.P. 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 S.59 as
           in other forms of mortgage.  But if the parties choose to reduce
           the contract to writing, the implication 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 constitutes the bargain regarding the  security,  is  also
           necessary and operates to create the charge in conjunction  with
           the deposit, it requires registration under  S.17,  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 upwards.  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……”






      This Court while relying on the aforesaid  judgment  in  the  case  of
United Bank of India v.  M/s.  Lekharam  Sonaram  &  Co.,AIR  1965  SC  1591
reiterated as follows:


            “7. …………It is essential to bear in mind that the essence  of  a
           mortgage by deposit of title-deeds is the actual handing over by
           a borrower to the lender of  documents  of  title  to  immovable
           property  with  the  intention  that   those   documents   shall
           constitute a security which will enable the creditor  ultimately
           to recover the money which he  has  lent.  But  if  the  parties
           choose to reduce the contract to writing,  this  implication  of
           law 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.  It
           follows that in such a case the document which  constitutes  the
           bargain regarding security 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 upwards.  If  a
           document of this character is not registered it cannot  be  used
           in the evidence at all and  the  transaction  itself  cannot  be
           proved by oral evidence either…….”


      Bearing in mind the principles aforesaid, we proceed to  consider  the
facts of the present case.  It is relevant here to state that  letter  dated
29th March, 2007 of the Finance Commissioner inter  alia  makes  “instrument
of deposit of title-deeds compulsorily registrable  under  Section  17(1)(c)
of the Registration Act.” 
In such contingency, registration  fee  and  stamp
duty would be leviable.
But the question is
whether mortgage by deposit  of
title-deeds is required to be done by an instrument at all.
 In our  opinion,
it may be effected in  specified  town  by  the  debtor  delivering  to  his creditor documents of title  to  immoveable  property  with  the  intent  to create a security thereon. No instrument is required to be  drawn  for  this purpose. However, the parties may choose to have a memorandum prepared  only
showing deposit of the title-deeds. In such a case also registration is  not required. But in a case in which the memorandum recorded in writing  createsright, liability or extinguishes those, same requires registration.  In  our opinion, the letter of the Finance Commissioner would apply in  cases  where
the instrument of deposit of title-deeds incorporates terms  and  conditions in addition to what flow from the mortgage by deposit of  title-deeds.   But in that case there has to be an instrument which is an integral part of  the transaction regarding the mortgage by deposit of  title-deeds.   A  document
merely recording a transaction which is already  concluded  and  which  does not create  any  rights  and  liabilities  does  not  require  registration.
Nothing has been brought on record  to  show  existence  of  any  instrument which has created or extinguished any right or liability.  
In  the  case  in
hand, the original deeds have just been deposited with  the  bank.   In  the
face of it, we are of opinion that the charge of  mortgage  can  be  entered into revenue record in respect of mortgage by  deposit  of  title-deeds  and for that, instrument of mortgage is not necessary.  Mortgage by  deposit  of
title-deeds further does not require registration. Hence,  the  question  of payment of registration fee and stamp  duty  does  not  arise.  
By  way  of
abundant caution and at the cost of repetition   we  may,  however,  observe
that when the borrower and the creditor choose to  reduce  the  contract  in
writing and if such a document is the sole evidence of terms  between  them,
the document shall form integral part of  the  transaction  and  same  shall
require registration  under  Section  17  of  the  Registration  Act.   From
conspectus of what we have observed above, we do not find any error  in  the
judgment of the High Court.


      In the result, we do not find any  merit  in  the  appeal  and  it  is
dismissed accordingly but without any order as to costs.


CIVIL APPEAL NO.9049 OF 2013 (@SLP (C) NO. 924/2009)

      Delay condoned.

      Leave granted.

      By the impugned order, the High  Court  had  directed  the  appellants
herein to enter mutation in favour of Punjab National  Bank  in  respect  of
the properties mortgaged  by  deposit  of  title-deeds.  
According  to  the
appellants, the properties mortgaged by deposit of title-deeds are  situated
in the village Matab Garh  in  the  District  of  Ludhiana  and  at  village
Dallomajra, Tahsil and District Fatehgarh Sahib  and  village  Sadhugarh  in
the District Sirhind.

      It is the stand of the appellants that deposit of the title-deeds  are
not in relation to the properties situated  in  the  towns  specified  under
Section 58(f) or in the towns notified by the State Government in  terms  of
Section 58 of the  Transfer  of  Property  Act.  
In  this  connection,  our
attention has been drawn to the notification  dated  May  26,  2003  of  the
Government of Punjab in the Department of Revenue and  Rehabilitation,  same
reads as follows:

           “In exercise of the power conferred by clause (f) of Section  58
           of the Transfer of Property Act, 1882  (Central  Act  No.  4  of
           1882) and all other powers enabling  him  in  this  behalf,  the
           Governor of Punjab is  pleased  to  specify  Gobindgarh  in  the
           district Fatehgarh Sahib and Mohali in District  Roop  Nagar  in
           the State of Punjab as Towns for the purpose  of  the  aforesaid
           section of the said Act.”


      This aspect of the matter has not been considered by  the  High  Court
in the impugned judgment. 
As the same goes to the root  of  the  matter,  we
have no option than to set aside the impugned order  and  remit  the  matter
back for its fresh consideration in accordance with law in the light of  the
observation made above.

      In the result, we allow this appeal, set aside the  impugned  judgment
of the High Court and remit the matter back to  the  High  Court  for  fresh
consideration in accordance with law.


                                    ………..………..……………………………….J.
                                                   (CHANDRAMAULI KR. PRASAD)



                                                    ………………….………………………………….J.
                                                             (KURIAN JOSEPH)
NEW DELHI,
OCTOBER 7, 2013.


                           -----------------------
18


No comments:

Post a Comment

Note: Only a member of this blog may post a comment.