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1964 SCC OnLine SC 120 : (1964) 6 SCR 727 : AIR 1965 SC 430

In the Supreme Court of India

(BEFORE K. SUBBA RAO AND J.R. MUDHOLKAR, JJ.)

K.J. NATHAN … Appellant;

Versus
S.V. MARUTHI RAO AND OTHER … Respondent.
Civil Appeal No. 407 of 1962*, decided on February 11, 1964
Advocates who appeared in this case:
R. Ramamurthi Aiyar, T.S. Rangarajan and R. Gopalakrishnan,
Advocates, for the Appellant;
V.S. Venkataraman, M.R. Krishna Pallai and M.S.K. lyengar,
Advocates, for Respondents No. 3.
The Judgment of the Court was delivered by
K. 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.
2. 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 OS 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 1
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 mortgagee; Defendant 4
was the subsequent purchaser of one of the plaint-schedule properties;
and Defendants 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.
3. As the only contesting party before us is the 3rd defendant (3rd
respondent herein), it is not necessary to notice the defences raised by
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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 15,000 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.
4. 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 9157-5-0 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 7565-2-0 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-objections 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 3000 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 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 decree amount. The
plaintiff has preferred the present appeal against the decree of the High
Court.
5. 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.
6. Learned counsel for the contesting 3rd respondent argues that the
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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 if
the oral and documentary 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, 1959 and that, of 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.
7. 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.
8. 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 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 England an equitable mortgage can
be created either, (1) by actual deposit of title deeds, in which case
parol 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 Edn. Vol. 2, 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
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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 Section 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 Edn.,
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 the very fact of the
deposit.”
1
In Norris v. Wilkinson 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.”
These passages indicate that an intention to create a mortgage deed in
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the future is not inconsistent with the intention to create in present a

mortgage by deposit of title deed s. Both may co-exist. In Keys v.
2
Williams it was held that an agreement to grant a mortgage for money
already advanced and a deposit of deeds for the purpose of preparing
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 equitable mortgage if the requisite conditions for
creating thereof are satisfied. The decision in Whitbread, Ex Parte3
throws some light on the legal requirements of delivery of title deed s.
There, the petitioner claimed a lien, as an equitable mortgage, by
deposit in 1808 of the lease of a public house as a collateral security for
£1000, lent to the lessee on his promissory note, and a subsequent”
advance of £100 made in January 1810. One of the points mooted was
whether the subsequent advance of £100 was also charged on the
property covered by the document. The learned Chancellor in that
context made the following observation:
“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 £100
was advanced, it was upon the security of the deposit.”
The said observations emphasize the substance of the transaction
rather than the form. It implies that a debtor, who has already effected
a mortgage by deposit of titledeeds in respect of an earlier advance,
need not go through the formality of receiving back the said documents
from the creditor and formally redelivering 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 In re Beetham Ex Parte
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Broderick4 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 bankruptcy. 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 it is said that though the manager of the bank
with the consent 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
appeall is found in the judgment of Lord Esher, MR at pp. 768-69 of the
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 he shown that there has been performance or part-
performance of the oral 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.”
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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.
9. Now let us consider some of the Indian decisions cited at the Bar.
In Dayal Jairaj v. Jivraj Ratansi5 the plaintiff 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 enabling 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
defendant. The Court held that there was an equitable mortgage 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 whether amounts were lent
before or after the deposit of title deed s. In Jaitha Bhima v. Haji Abdul
6
Vyad Oosman 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 due 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
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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 if to secure a fresh loan yet
to be made.”
Then the learned Judge cited the following passage from the judgment
2
in Key v. Williams :
“Certainly, if before the money was advanced, the deeds had been
deposited with a view to prepare a future mortgage, such 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.
7
Sorabji Rustomji Elavia 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 situated 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 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 deed. 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
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circumstances from the very deposit of title deeds. An elaborate

discussion of the subject is found in V.E.R.M.A.R. Chettyar Firm v. Ma
Joo Teen8. 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-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.
10. The foregoing discussion may be summarized thus : Under the
Transfer of 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.
The three requisites for such a mortgage are, (i) debt, (ii) deposit of
title deed; 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 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
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deeds to be in force till the mortgage deed was executed. The decisions
of English courts making a distinction between the debt preceding the
deposit and that following it can at best be only a guide; but the said
distinction itself cannot be considered 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 titledeeds, it
would be hypertechnical to insist upon the formality of the creditor
delivering the title deeds to the debtor and the debtor 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.
11. With this background we shall now proceed to consider the
questions that arise for consideration on the facts of the present case.
12. 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 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.
13. Learned Subordinate Judge and, on appeal, the High Court held
on the evidence 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.
14. 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 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 mortgage thus created and the amount borrowed by him
till then were acknowledged and he has undertaken to repay the said
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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.
15. 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. A-17 dated May 10, 1947, and Ex. A-18
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 title deeds of the properties 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 Rs 1,500 borrowed under
Ex. A-1. On April 7, 1947, the 1st defendant 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 3000 under a
promissory note of the same date. On April 13, 1947, the plaintiff lent
another sum of Rs 3000 under a promissory note to the 1st defendant.
The 1st defendant did not bring the title deeds, but by a letter dated
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April 27, 1947, (Ex. B-2), he authorized 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,
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
7100 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 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 Section 47 of the
Registration Act the said document would have legal effect from the
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 20 mentioned in
the B schedule here under and also having deposited with the lender
on 10th May 1947 the title deeds and other papers relating to the
borrower 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 case, 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
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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. But it is said that the evidence of
PWs 1, 2 and 3 displaces the evidentiary value of the recitals of the said
document. PW 1 is the plaintiff. He says in his examination-in-chief:
“On 10th May 1947 Defendant 1 and Narayana Ayyar met my
lawyer at Madras and I was sent for. Exhibit A-17 is the pro-note
executed for Rs 7100 for the payment made to the bank. Defendant
1 then personally handed over the documents to me by way of
deposit of title deeds as security for the advance made and to be
made. Defendant 1 did not execute any mortgage. In July 1947,
Defendant 1 asked for Rs 400 to buy stamps for the mortgage. I
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 1 sign
the document.”
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 1
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 such 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-examination 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 equitable mortgage that
had already been effected. In his statement he emphasized more on
the document than on the contents of the document. So understood
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
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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
PW 1 anything to discountenance the admission made by the 1st
defendant in Ex. A-19.
16. PW 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
PW 1 and to state that these and documents already deposited would
be security for the loans advanced till that date. There would be
nothing unusual if an advocate, who knew the techicalities of a
mortagage by deposit 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 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 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 PW 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 PW 3, supports
the evidence of PWs 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
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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 Section 58
(f) of the Transfer of Property Act.
17. Even so, it is contended by learned counsel for the respondent
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 deed s, 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 Section 58(f) of the Transfer of Property Act.
But Narayana Ayyar, as PW 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
plaintiff had the physical possession of the title deeds at Madras on May
10, 1947. On that date the possession of the title deeds 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 PW 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 title deeds as agent of the 1st defendant but hold 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
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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, 1947 —
there was constructive delivery of the title deeds coupled with the
intention to create a mortgage by deposit of title deeds.
18. The last argument of learned counsel for the appellant is that
even if there was no mortgage by deposit of title deeds on May 10,
1947, under Ex. A-19 such a mortgage was created at any rate from
July 5, 1947. It is true that the 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
done on that date, can such an intention be inferred from the document
as on July 5, 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.
19. If the mortgage by deposit of title deeds was effected on May
10, 1947, or on July 5, 1947, the legal position would be the same, as
the mortgage deed in favour of the 3rd defendant was executed only on
October 10, 1947. Though Ex. A-19 was registered on June 22, 1948,
under Section 47 of the Registration Act the agreement would take
effect from July 5, 1947.
20. 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 with
interest at 6 percent 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 is reserved to the plaintiff to apply for personal decree
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against the 1st defendant in case there is any deficiency after the
hypotheca has been sold. The decree of the Subordinate Judge and of
the High Court are set aside and there will he a decree in the said
terms. The 1st and 3rd defendants will pay the cost of the plaintiff
throughout.
———
*
Appeal from the Judgment and Decree dated 31st January, 1957 of the Madras High Court
in Appeal No. 969 of 1952.

1
(1806) 33 ER 73, 76

2
(1838) 51 Revised Reports, 339

3
(1812) 34 ER 496

4
[L.R.] 18 Q.B.D. 380

5
ILR (1875) 1 Bom 237

6
ILR (1886) 10 Bom 634

7
ILR (1914) 38 Bom 372, 374

8
ILR (1933) 11 Rang 239, 253

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