REPORTABLE

2025 INSC 243

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 1565 of 2025

(@SPECIAL LEAVE PETITION (C) NO. 11557/2019)

THE COSMOS CO. OPERATIVE BANK LTD. …

APPELLANT(S)

VERSUS

CENTRAL BANK OF INDIA & ORS. …

RESPONDENT(S)

JUDGMENT
J.B. PARDIWALA, J.:

For the convenience of exposition, this judgment is divided into the following

parts: -

INDEX
A. FACTUAL MATRIX....................................................................................2
B. SUBMISSIONS OF THE PARTIES...........................................................8
i. Submissions on behalf of the appellant Cosmos Co. Operative Bank............................8
ii. Submissions on behalf of the respondent no.1; Central Bank of India.........................10
C. ISSUE FOR CONSIDERATION..............................................................11
D. ANALYSIS..................................................................................................12
i. Relevant Provisions.......................................................................................................12
ii. Concept of Equitable Mortgage....................................................................................24
iii. Nature of an Equitable Mortgage..................................................................................31
iv. Distinction between Mortgage by Deposit of Title Deeds under the English Law and
under the Transfer Of Property Act, 1882.....................................................................41
E. CONCLUSION...........................................................................................58

Civil Appeal No. 1565 of 2025 Page 1 of 59

1. Leave granted.

2. This appeal arises from the judgment and order passed by the High Court of

Judicature at Bombay (Civil Appellate Jurisdiction) dated 12.12.2018 in

Writ Petition No.11324 of 2015, by which the writ petition filed by the ap-

pellant herein seeking to challenge the order passed by the (Debt Recovery

Appellate Tribunal) (for short, the “DRAT") dated 28.08.2015 in Appeal

No. 41 of 2007 came to be rejected thereby affirming the order passed by

the DRAT.

A. FACTUAL MATRIX

3. The facts giving rise to this appeal may be summarised as under: -

(a) We take notice of the fact that the respondent nos. 2, 3 and 4 respect-

ively, are the original borrowers. However, the respondent No.4 has

passed away and therefore his name came to be deleted from the array of

parties vide order dated 4.12.2020.

(b)The original borrowers on the strength of one unregistered agreement of

sale availed loan facility from the Central Bank of India i.e. the respond-

ent No. 1 to the tune of Rs.30,00,000/- approximately. What was offered

by way of security was a flat which the original borrowers proposed to

purchase from the developer and all that they had on the day and date

when they went before the bank to avail the loan was an unregistered

agreement of sale.

Civil Appeal No. 1565 of 2025 Page 2 of 59

 (c) It is not in dispute that the Central Bank on the strength of an unre-

gistered agreement of sale sanctioned the loan creating a charge over the

flat.

(d)Since the borrowers defaulted in the repayment of the loan, the Central

Bank initiated proceedings for the recovery of the requisite amount be-

fore the Debt Recovery Tribunal-I, Mumbai (in short "the DRT"). The

DRT Mumbai adjudicated the Original Application No. 74 of 2002 and

held the borrowers jointly and severally liable to pay an amount of

₹43,15,405.56 paisa with interest thereon @15% per annum from the

date of filing of the O.A. till its payment.

(e) The relevant observations made by the DRT, Mumbai in Para 8 reads

thus: -

"8. In application affidavit of the applicant state that the Defendant No.
2 with intention to create mortgage deposited title deeds of her flat No.
C-28, Sahyadari Apartment, L.T. Road, Borivali West, Bombay-400092
as security of the loan. sanctioned to Defendant No. l. To prove this fact
the Applicant's side rely on Exh. 53, which is an unregistered
memorandum. It being unregistered document itself is not sufficient to
create the mortgage. The applicants state further on 04.02.1993, the
Defendant No. 2 again attended Applicants office and re-
deposited the title deeds of her flat on the enhanced, revised loan. The
applicant's case about mortgage is based on the title deeds, the
documents produced by Defendants to create the mortgage. That was
primary evidence. It was not produced. Memorandum, Exh. 53 affidavit
and pleading of applicant cannot take place. The applicant do not state
or explain why that primary, basic evidence is not brought before the
Tribunal. Unless these documents are on record, it cannot be
assessed/ascertained whether those documents were sufficient to create
mortgage or not. In all the circumstances, I hold the applicant failed in
proving the Defendant No. 2 mortgaged her flat as a security of the loan
given by the Applicants.”

(f) The operative part of the order passed by the DRT reads thus: -

Civil Appeal No. 1565 of 2025 Page 3 of 59

 "A) The Defendant No. 2 and 3 shall jointly and severally pay the
amount of Rs. 43,15,405.56 ps (Rupees Forty Three Lacs Fifteen
Thousand Four Hundred Five and Paise Fifty Six only) to the Applicant
with interest thereon @ 15% p.a. from the date of filing of this
application till the payment.
B) The defendant No. 2 shall pay the Applicant, the amount of Rs.
5,70,787.21 ps. (Rupees Five Lacs Seventy Thousand Seven Hundred
Eight Seven and Paise Twenty One Only) as dues of Overdraft Accounts,
Rs. 4,08,157.25 ps. (Rupees Four Lacs Eight Hundred One Hundred
Fifty Seven and Paise Twenty Five only) as due of Short Term Loan
Account, Rs. 2,25,498.45 ps. (Rupees Two Lacs Twenty Five Thousand
Four Hundred Ninety Eight and Paise Forty Five only) as dues of
Working Capital Loan with interest thereon @ 15% p.a.
C) The Applicant will be entitled to recover this amount from the
hypothecation created by the defendants as mentioned in the application
of the defendants fail to pay the above amount.”

D) The defendants No. 2 & 3 shall pay cost of this Application to the
applicant and to bear their own costs".

(g) The Central Bank of India had to file an appeal before the DRAT be-

cause of the observations made by the DRT in its order as contained in

para 8 referred to above.

(h)The order passed by the DRAT, allowing the appeal filed by the Central

Bank reads thus: -

“1. This appeal has been filed by the plaintiffs /appellant herein being
aggrieved by the order dated 30/11/2006 passed by the learned Presiding
Officer, DRT-I, Mumbai in O.A. No. 74 of 2002, whereby the learned
Presiding Officer directed the defendant nos. 2 and 3 to jointly and
severally pay the amount of Rs.43,15,405.56 ps. to the applicant with
interest thereon @15% p.a. from the date of filing of the application till
its payment. Further directed the defendant No. 2 to pay the amount of
Rs.5,70,787.21 ps. as dues of Overdraft Accounts, Rs. 4,08,157.25 ps. as
dues of Short Term Loan Account and Rs.2,25,498.45 ps. as dues of
Working Capital Loan with interest thereon @15% p.a.

2. The ld. counsel for the appellant raised two grounds namely the
description made by the defendant no.1 is not correct one and second
ground is that the original title deeds have not been produced before this
court. Hence he prayed that the appeal has to be allowed against the
defendant no.1 alone. The suit has been dismissed against the defendant
no.1. Anyhow the suit against the defendant nos. 2 and 3 has been
decreed.

Civil Appeal No. 1565 of 2025 Page 4 of 59

 3. The contention of the ld. counsel for the appellant is that the defendant
no.1 is real borrower and is sued in his personal capacity as proprietor
of M/s. Ajanta Industries which is evident from Para No. 2. Hence he
prayed that the appeal has to be allowed.

4. The contention of the respondent is that the mortgage has not been
proved before the DRT. Hence the suit has been rightly dismissed.
Thereafter respondent no. 4 has advanced the loan to the respondent no.
1 and thereafter the property is sold to the third person. Hence he prayed
that the appeal has to be dismissed.

5. From the perusal it is seen that it has been mentioned that the
respondent no.1 was sued in his personal and individual capacity as
proprietor of M/s. Ajanta Industries as clearly set out in Para No.2.
Hence as per Order 30 Rule 10 he has been properly described, hence
the finding in this regard given by the DRT has to be set aside and in turn
is set aside.
6. The next contention is that the original documents have not been
produced before the trial court is not in dispute. Now it has been
produced before this court which pertains to the mortgaged property and
original agreement are now brought on record and is taken on record. It
is pertinent to note that the original title deeds are with the appellants
and mortgage is not denied by the guarantor. It is also clear that
respondent no.4 do not have title deeds pertaining to the property and
their alleged mortgage is very much subsequent to the mortgage of
appellants. Hence, I am of the view that it can be accepted that the
appellant bank has valid and subsisting mortgage in its favour and in
turn mortgage is admitted and finding given by the DRT in this regard
has to be set aside and the O.A. against the defendant no.1 also decreed
and allowed as all parties are properly sued and joined.

7. The appeal is allowed.

8. Subsequent to sale by respondent no. 4 in favor of third party and
amount of deposit is concerned, this point is left open to agitate before
the appropriate forum."

(i) While the proceedings before the DRAT were pending in the form of ap-

peal filed by the Central Bank of India, the appellant bank herein had to

intervene, and they were also heard on the question as to which bank had

the first charge over the security interest created by the original borrow-

ers.

Civil Appeal No. 1565 of 2025 Page 5 of 59

 (j) The appellant bank herein being dissatisfied with the order passed by the

DRAT referred to above challenged the same by filing a writ petition be-

fore the High Court. The High court proceeded on the footing that the

DRAT was right in recording a finding that the mortgage of the flat in

question created in favour of the appellant bank herein was subsequent

in point of time and besides the same, the appellant bank had no valid

title deeds with them at the time of sanctioning the loan in favour of the

original borrowers.

(k)In short, the finding of fact recorded by the High Court in its impugned

judgment is that the flat was mortgaged with the Central Bank of India

on 31.10.1989, whereas the mortgage claimed by the appellant Bank

herein was of October, 1998.

(l) The High Court observing as aforesaid, rejected the writ petition filed by

the appellant herein. The relevant observations made by the High Court

in its impugned judgment read thus: -

“6. By the impugned order, therefore, the DRAT had arrived at a clear
finding of fact that the mortgage of the said flat to the Petitioner-Cosmos
Bank is 'subsequent' to the mortgage of the Respondent-Central Bank
apart from the fact that the Petitioner-Cosmos Bank did not have title
deeds pertaining to the said flat. This finding was arrived at by DRAT as
the said flat was mortgaged to the Respondent-Central Bank on 31-10-
1989, whereas the mortgage claimed by the Petitioner-Cosmos Bank was
of October 1998.

7. It is brought out in the Affidavit-in-Reply of the Respondent-Central

Bank that the Respondent-Central Bank had Initially filed a suit against
the borrower/guarantors (Respondents Nos.2 to 4 herein) in this Court
on 5 September 1994. By an interim order dated 20-10-1994, this Court
had appointed a Court Receiver in respect of the said flat.

Civil Appeal No. 1565 of 2025 Page 6 of 59

 8. It would thus be evident that at the time of sanction and grant of the
Loan by the Petitioner-Cosmos Bank i.e. sometime in November 1998,
the said flat was in custodia legis as the Court Receiver was appointed in
the year 1994. In these circumstances, there appears to be substance in
this submission of the learned Counsel for the Respondent-Central. Bank
that the validity of the mortgage of the said flat in favour of the
Petitioner-Cosmos Bank was even otherwise questionable. The suit
which was filed in this Court was ultimately transferred to DRT only in
the year 2002 and numbered as O.A.No. 74 of 2002. Before this Court,
the Petitioner-Cosmos Bank have essentially relied upon the Share
Certificate which was as a matter of fact issued by the Society only in the
year 1989 (as the Society itself was formed in the year 1986-87) and
Agreement for Sale dated 7-12-1978 (which is subsequent to Agreement
for Sale dated 09-11-1978 relied upon by the Respondent-Central Bank).
Both the Agreements are unregistered. It Is not even pleaded by the
Petitioner-Cosmos Bank in the present Petition that the documents of
title deeds relied upon by the Respondent-Central Bank were not credible
or that the mortgage of the said flat in favour of the Respondent-Central
Bank was not valid. In any event, it can be hardly disputed that the
mortgage in favour of the Respondent- Central Bank was prior in point
of time. In the circumstances, in our view, the DRAT rightly held in the
impugned order that the alleged mortgage of the Petitioner-Cosmos
Bank was subsequent in point of time to the mortgage of the Respondent-
Central Bank.

9. In view of the aforesaid discussion, we are unable to find fault with the
impugned order of the DRAT. The Petition is, accordingly, dismissed. The
Recovery Officer, DRT may now pass appropriate orders as regards the
distribution of the sale proceeds of the said flat which has been deposited
in the DRT.”

4. In such circumstances referred to above, the appellant bank is here before

this Court with the present appeal.

B. SUBMISSIONS OF THE PARTIES

Civil Appeal No. 1565 of 2025 Page 7 of 59

 i. Submissions on behalf of the appellant Cosmos Co. Operative
Bank.

5. The learned counsel appearing for the appellant bank vehemently submitted

that the High Court committed an egregious error in rejecting the writ peti-

tion filed by his client and thereby affirming an equally egregious order

passed by the DRAT.

6. He would submit that indisputably the first mortgage was created in favour

of the Central Bank of India, but the said mortgage was invalid or rather

having no force in law. According to him any bank, while sanctioning the

loan would ensure that what is being offered by way of security is some-

thing valid. In such circumstances, when an unregistered agreement of sale

was offered as a title deed, it was of no value as it is a settled law that agree-

ment of sale does not confer any right title or interest. Far from being a re-

gistered agreement of sale, in the case on hand, what was offered by way of

security to the Central Bank was an unregistered agreement of sale.

7. In the aforesaid context, the learned counsel first invited the attention of this

Court to Section 54 of the Transfer of Property Act, 1884 (for short, the

“Act, 1884”) which defines the terms sale. Thereafter he invited the atten-

tion of this Court to Section 58 of the Act, 1884 which defines the term

"Mortgage”, “mortgagor”, “mortgagee”, “mortgage-money” and “mort-

gage-deed”.

Civil Appeal No. 1565 of 2025 Page 8 of 59

8. He laid much emphasis on sub-section (a) of Section 58, which explains

what is mortgage. Thereafter, he invited the attention of the Court to Section

100 of the Act, 1884 which explains what is “charge”.

9. The learned counsel thereafter invited the attention of this Court to certain

provisions of the Maharashtra Ownership Flats (Regulation of the promo-

tion of construction, sale, management and transfer) Act, 1963 (for short the

"Act 1963") more particularly Section(s) 4, 4A and 11 therein, respectively.

10.He thereafter invited the attention of this Court to few provisions of the Ma-

harashtra Apartment Ownership Act 1970 (for short the “Act, 1970”) more

particularly the preamble to the Act and Sections 2, 4 and 5 respectively.

11.To fortify his submissions more particularly the principal contention that the

respondent no. 1 Bank cannot be said to have the first charge over the mort-

gaged property, he relied on few decisions of this Court, which are as under:

-
i. Suraj Lamp & Industries (P) Ltd. (2) through Director v. State of
Haryana and Another reported in (2012) 1 SCC 656 more particu-
larly paras 16 and 19 respectively therein.
ii. Bank of India v. Abhay D. Narottam and Others reported in
(2005) 11 SCC 520 more particularly the observations made in paras
9 and 11 respectively therein.
iii. Anita Enterprises and Anr. v. Belfer Coop. Housing Society Ltd.
and Ors. reported in (2008) 1 SCC 285 more particularly the obser-
vations made in para 41 therein.
iv. Dattatreya Shanker Mote and Ors. v. Anand Chintaman Datar
and Ors. reported in (1974) 2 SCC 799 more particularly the obser-
vations made in para 67 therein."

Civil Appeal No. 1565 of 2025 Page 9 of 59

12.In such circumstances referred to above, the learned counsel prayed that

there being merit in his appeal, the same may be allowed and the impugned

order passed by the High Court may be set aside.

ii. Submissions on behalf of the respondent no.1; Central Bank of In-

dia.

13.On the other hand, the learned counsel appearing for the Central Bank of In-

dia submitted that no error not to speak of any error of law could be said to

have been committed by the High Court in passing the impugned order. He

would submit that indisputably the first charge over the mortgaged property

is that of the Central Bank.

14.At this stage, we must record that the learned counsel wanted to place few

additional documents on record to make good his case that the view taken

by the High Court is correct. However, considering the fact that this litiga-

tion is pending past almost 10 years, we declined such request.

15.We requested the learned counsel to proceed on the basis of the material on

record and make good his case that the impugned order passed by the High

Court needs no interference.

16.He would submit that there are concurrent findings recorded by the DRAT

and by the High Court in so far as the validity of the mortgage is concerned

and also which bank has the first charge over the mortgaged property.

Civil Appeal No. 1565 of 2025 Page 10 of 59

17.In such circumstances, referred to above, the learned counsel would submit

that there being no merit in this appeal, the same may be dismissed.

C. ISSUE FOR CONSIDERATION

18.Having heard the learned counsel appearing for the parties and having gone

through the materials on record, the only question that falls for our consid-

eration is whether the High Court committed any error in passing the im-

pugned order.

D. ANALYSIS

i. Relevant Provisions
19.Before adverting to the rival submissions canvassed on either side, we must

look into the few provisions of the law relevant for the purpose of deciding

the present appeal which are as follows: -

SECTION(S) 58 AND 100 OF THE ACT, 1884.

“58. “Mortgage”, “mortgagor”, “mortgagee”, “mortgage-money”

and “mortgage-deed” defined.—
(a) A mortgage is the transfer of an interest in specific immoveable
property for the purpose of securing the payment of money
advanced or to be advanced by way of loan, an existing or future
debt, or the performance of an engagement which may give rise to
a pecuniary liability. The transferor is called a mortgagor, the
transferee a mortgagee; the principal money and interest of which
payment is secured for the time being arc called the mortgage-
money, and the instrument (if any) by which the transfer is effected
is called a mortgage-deed.

(b) Simple mortgage.— Where, without delivering possession of the

Civil Appeal No. 1565 of 2025 Page 11 of 59

 mortgaged property, the mortgagor binds himself personally to pay
the mortgage-money, and agrees, expressly or impliedly, that, in the
event of his failing to pay according to his contract, the mortgagee
shall have a right to cause the mortgaged property to be sold and
the proceeds of sale to be applied, so far as may be necessary, in
payment of the mortgage-money, the transaction is called a simple
mortgage and the mortgagee a simple mortgagee.

(c) Mortgage by conditional sale.— Where the mortgagor

ostensibly sells the mortgaged property— on condition that on
default of payment of the mortgage-money on a certain date the
sale shall become absolute, or on condition that on such payment
being made the sale shall become void, or on condition that on
such payment being made the buyer shall transfer the property to
the seller, the transaction is called a mortgage by conditional sale
and the mortgagee a mortgagee by conditional sale:

Provided that no such transaction shall be deemed to be a

mortgage, unless the condition is embodied in the document which
effects or purports to effect the sale.

(d) Usufructuary mortgage.— Where the mortgagor delivers

possession or expressly or by implication binds himself to deliver
possession of the mortgaged property to the mortgagee, and
authorises him to retain such possession until payment of the
mortgage-money, and to receive the rents and profits accruing from
the property or any part of such rents and profits and to
appropriate the same in lieu of interest, or in payment of the
mortgage -money, or partly in lieu of interest or partly in payment
of the mortgage-money, the transaction is called an usufructuary
mortgage and the mortgagee an usufructuary mortgagee.

(e) English mortgage.— Where the mortgagor binds himself to re-

pay the mortgage-money on a certain date, and transfers the
mortgaged property absolutely to the mortgagee, but subject to a
proviso that he will re-transfer it to the mortgagor upon payment of
the mortgage-money as agreed, the transaction is called an English
mortgage.

(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.

Civil Appeal No. 1565 of 2025 Page 12 of 59

 (g) Anomalous mortgage.—A mortgage which is not a simple
mortgage, a mortgage by conditional sale, an usufructuary
mortgage, an English mortgage or a mortgage by deposit of title-
deeds within the meaning of this section is called an anomalous
mortgage.”

“100. Charges.—
Where immoveable property of one person is by act of parties or
operation of law made security for the payment of money to
another, and the transaction does not amount to a mortgage, the
latter person is said to have a charge on the property; and all the
provisions hereinbefore contained which apply to a simple
mortgage shall, so far as may be, apply to such charge. Nothing in
this section applies to the charge of a trustee on the trust property
for expenses properly incurred in the execution of his trust, 5 [and,
save as otherwise expressly provided by any law for the time being
in force, no charge shall be enforced against any property in the
hands of a person to whom such property has been transferred for
consideration and without notice of the charge.”

SECTIONS 4, 4A AND 11 RESPECTIVELY OF THE ACT,

1963

“4. Promoter before accepting advance payment or deposit to

enter into agreement and agreement to be registered. –

(1) Notwithstanding anything contained in any other law, a

promoter who intends to construct or constructs a block or building
of flats, all or some of which are to be taken or are taken on
ownership basis, shall, before, he accepts any sum of money as
advance payment or deposit, which shall not be more than 20 per
cent. of the sale price enter into a written agreement for sale with
each of such persons who are to take or have taken such flats, and
the agreement shall be registered under the Registration Act, 1908
(hereinafter in this section referred to as "the Registration Act")
and such agreement shall be in the prescribed form.”

(lA) The agreement to be prescribed and sub-section (1) shall

contain inter alia the particulars as specified in clause (a); and to
such agreement there shall be attached the copies of the documents
specified in clause (b),-

(a) particulars,-

(i) if the building is to be constructed, the liability of the

Civil Appeal No. 1565 of 2025 Page 13 of 59

 promoter to construct it according to the plans and
specifications approved by the local authority where such
approval is required under any law for the time being in force;

(ii) the date by which the possession of the flat is to be handed

over to the purchaser;

(iii) the extent of the carpet area of the flat including the area of
the balconies which should be shown separately;

(iv) the price of the flat including the proportionate price of the
common areas and facilities which should be shown separately,
to be paid by the purchaser of flat; and the intervals at which
instalments thereof may be paid;

(v) the precise nature of organisation to be constituted of the

persons who have taken or are to take the flats;

(vi) the nature, extent and description of limited common areas

and facilities;

(vii) the nature, extent and description of limited common areas

and facilities, if any;

(viii) percentage of undivided interest in the common areas and

facilities appertaining to the flat agreed to be sold;

(ix) statement of the use of which the flat is intended and

restriction of its use, if any;

(x) percentage of undivided interests in the limited common

areas and facilities, if any, appertaining to the flat agreed to be
sold;

(b) copies of documents,-

(i) the certificate by an Attorney at law or Advocate under clause

(a) of sub-section (2) of section 3;

(ii) Property Card or extract of village Forms VI or VII and XII

or any other relevant revenue record showing the nature of the
title of the promoter to the land on which the flats are
constructed or are to be constructed;

(iii) the plans and specifications of the flat as approved by the

concerned local authority.

Civil Appeal No. 1565 of 2025 Page 14 of 59

 (2) Any agreement for sale entered into under sub-section (1) shall
be presented by the promoter or by any other person competent to
do so under section 32 of the Registration Act, at the proper
registration office for registration, within the time allowed under
sections 23 to 26 (both inclusive) to the said Act and execution
thereof shall be admitted before the registering officer by the
person executing the document or his representative, assign or
agent as laid down in sections 34 and 35 of the said Act also within
the time aforesaid:

Provided that, where any agreement for sale is entered into, or is

purported to be entered into, under sub-section (1), at any time
before the commencement of the Maharashtra Ownership Flats
(Regulation of the promotion of construction, sale, management
and transfer) (Amendment and Validating Provisions) Act, 1983,
and such agreement was not presented for registration or was
presented for registration but its execution was not admitted before
the registration officer by the person concerned, before the
commencement of the said Act, then such document may be
presented at the proper registration office for registration, and its
execution may be admitted, by any of the persons concerned
referred to above in this sub-section, on or before the 31st
December 1984, and the registering officer shall accept such
document for registration, and register it under the Registration
Act, as if it were presented, and its execution was admitted, within
the time laid down in the Registration Act:

Provided further that, on presenting a document for registration as

aforesaid if the person executing such document or his
representative, assign or agent does not appear before the
registering officer and admit the execution of the document, the
registering officer shall cause a summons to be issued under
section 36 of the Registration Act requiring the executant to appear
at the registration office, either in person or by duly authorised
agent, at a time fixed in the summons. If the executant fails to
appear in compliance with the summons, the execution on the
document shall be deemed to be admitted by him and the
registering officer may proceed to register the document
accordingly. If the executant appears before the registering officer
as required by the summons but denies execution of the document,
the registering officer shall, after giving him a reasonable
opportunity of being heard, if satisfied that the document has been
executed by him, proceed to register the document accordingly.

Civil Appeal No. 1565 of 2025 Page 15 of 59

 4A. Effect of non-registration of agreement required to be
registered under section 4.-
Where an agreement for sale entered into under sub-section (1) of
section 4, whether entered into before or after the commencement
of the Maharashtra Ownership Flats (Regulation of the promotion
of construction, sale, Management and transfer) (Amendment and
Validating Provisions) Act, 1983, remains unregistered for any
reason, then notwithstanding anything contained in any law for the
time being in force, or in any judgement, decree or order of any
Court, it may be received as evidence of a contract in a suit for
specific performance under Chapter II of the Specific Relief Act,
1963, or as evidence of part performance of a contract for the
purposes of section 53A of the Transfer of Property Act, 1882, or as
evidence of any collateral transaction not required to be effected by
registered instrument.

xxx xxx xxx

11.Promoter to convey title, etc., and execute documents,

according to agreement-
(1) A promoter shall take all necessary steps to complete his title
and convey to the organisation of persons, who take flats, which is
registered either as a co-operative society or as a company as
aforesaid or to an association of flat takers or apartment owners,
his right, title and interest in the land and building, and execute all
relevant documents therefor in accordance with the agreement
executed under section 4 and if no period for the execution of the
conveyance is agreed upon, he shall execute the conveyance within
the prescribed period and also deliver all documents of title
relating to the property which may be in his possession or power.

(2) It shall be the duty of the promoter to file with the Competent
Authority, within the prescribed period, a copy of the conveyance
executed by him under sub-section (1).

(3) If the promoter fails to execute the conveyance in favour of the

Cooperative society formed under section 10 or, as the case may
be, the Company or the association of apartment owners, as
provided by sub-section (1), within the prescribed period, the
members of such Co-operative society or, as the case may be, the
Company or the association of apartment owners may, make an
application, in writing, to the concerned Competent Authority
accompanied by the true copies of the registered agreements for
sale, executed with the promoter by each individual member of the
society or the Company or the association, who have purchased the

Civil Appeal No. 1565 of 2025 Page 16 of 59

 flats and all other relevant documents (including the occupation
certificate, if any), for issuing a certificate that such society, or as
the case may be, Company or association, is entitled to have an
unilateral deemed conveyance, executed in their favour and to have
it registered.

(4) The Competent Authority, on receiving such application, within

reasonable time and in any case not later than six months, after
making such enquiry as deemed necessary and after verifying the
authenticity of the documents submitted and after giving the
promoter a reasonable opportunity of being heard, on being
satisfied that it is a fit case for issuing such certificate, shall issue a
certificate to the Sub-Registrar or any other appropriate
Registration Officer under the Registration Act, 1908, certifying
that it is a fit case for enforcing unilateral execution, of conveyance
deed conveying the right, title and interest of the promoter in the
land and building in favour of the applicant, as deemed
conveyance.

(5) On submission by such society or as the case may be, the

Company or the association of apartment owners, to the Sub-
Registrar or the concerned appropriate Registration Officer
appointed under the Registration Act, 1908, the certificate issued
by the Competent Authority alongwith the unilateral instrument of
conveyance, the Sub-Registrar or the concerned appropriate
registration Officer shall, notwithstanding anything contained in
the Registration Act, 1908, issue summons to the promoter to show
cause why, such unilateral instrument should not be registered as
'deemed conveyance' and after giving the promoter and the
applicants a reasonable opportunity of being heard, may on being
satisfied that it was fit case for unilateral conveyance, register that
instrument as, 'deemed conveyance’.”

SECTIONS 2, 4 AND 5 RESPECTIVELY OF THE ACT, 1970

“2. Application of the Act. -

This Act applies only to property, the sole owner or all of the
owners of which submit the same to the provisions of this Act by
duly executing and registering a Declaration as hereinafter
provided : Provided that, no property shall be submitted to the
provisions of this Act, unless it is used or proposed to be used for
residence, office, practice of any profession or for carrying on any
occupation, trade or business or for any other type of independent
use :

Civil Appeal No. 1565 of 2025 Page 17 of 59

 xxx xxx xxx

4. Status of apartments. –
Subject to the provisions of the second proviso to section 2 of this
Act, each apartment, together with its undivided interest in the
common areas and facilities, appurtenant to such apartment, shall
for all purposes constitute heritable and transferable immoveable
property within the meaning of any law for the time being in force
in the State;

and accordingly, an apartment owner may transfer his apartment

and the percentage of undivided interest in the common areas and
facilities appurtenant to such apartment by way of sale, mortgage,
lease, gift, exchange or in any other manner whatsoever in the
same manner, to the same extent and subject to the same rights,
privileges, obligations, liabilities, investigations, legal proceedings,
remedies and to penalty, forfeiture and punishment as any other
immoveable property, or make a bequest of the same under the
laws applicable to the transfer and succession of immoveable
property.

5. Ownership of apartments. –
(1) Each apartment owner shall be entitled to the exclusive
ownership and possession of his apartment in accordance with the
Declaration executed and registered as required by section 2 of this
Act.

(2) Each apartment owner shall execute a Deed of Apartment in

relation to his apartment in the manner prescribed for the
purpose.”

20.Without any doubt in our mind, we say that the High Court fell in error

more particularly, in view of, what has been observed in para 8 of the im-

pugned order. The law is very well settled as explained by this Court in

Suraj Lamp (supra) that a contract of sale i.e. an agreement of sale does not

itself create any interest in or charge on any property. This is evident on

Civil Appeal No. 1565 of 2025 Page 18 of 59

 plain reading of Section 54 of the Act, 1884 which we have referred to

above.

21.In the aforesaid context, the decision of this Court in Abhay D. Narottam

(supra) is also relevant more particularly the observations made in para 11

therein. Paras 9 and 11 read thus: -

"9. It is not necessary for us to determine the import of Section

125 of the Companies Act as we are of the opinion that the ap-
peal must be dismissed on a much more basic ground. “Mort-
gage” has been defined in Section 58(a) of the Transfer of Prop-
erty Act, 1882 as a transfer of an interest in specific immovable
property for the purpose of securing the payment of money ad-
vanced or to be advanced by way of loan, etc. Without a transfer
of interest there is no question of there being a mortgage. The
same principle would apply to a charge under Section 100 of the
Transfer of Property Act. Section 100 provides that all the provi-
sions which apply to a simple mortgage shall, so far as may be,
apply to such charge. The definition of simple mortgage in Sec-
tion 58(b) of the Act merely speaks of the procedure and de-
scribes that species of mortgage.

xxx xxx xxx

11. As far as the flat is concerned, it needs no authority to say

that a contract for sale of immovable property does not of itself
create any interest in or charge over such property. This is
provided in Section 54 of the Act and is well-settled law. In this
case, the agreement for sale which was deposited by Respondent
2 with the appellant Bank was not an agreement by which Re-
spondent 2 agreed to sell the property to a third party, but an
agreement to sell the flat to Respondent 2. No interest was cre-
ated in favour of Respondent 2 by virtue of this agreement for
sale which could have been transferred by way of security to the
appellant Bank. There is as such no question of the appellant
Bank having any charge over such non-existent interest."

(Emphasis supplied)

Civil Appeal No. 1565 of 2025 Page 19 of 59

22.The observations referred to above are directly applicable to the facts of the

present case.

23.The observations made by this Court in Dattatreya Shanker Mote (supra),

more particularly, in para 67 also assumes significance. Para 67 reads thus: -

"67. The contention was that, although a charge may not be

described as “a transfer”, yet, the result of Section 100 of the
Act was to equate it with a simple mortgage which is a transfer
because Section 100 says: “all the provisions hereinbefore
contained which apply to a simple mortgage shall, so far as may
be, apply to such charge”. I think that, apart from the qualifying
words, “so far as may be”, used by Section 100 of the Act, a
condition essential to the applicability of Section 48 of the Act is
that there must be an actual transfer of property. Furthermore,
another condition for invoking Section 48 of the Act is that the
previous and the subsequently created rights “cannot all exist or
be exercised to their full extent together”. In the case before us,
this does not appear from facts found. In any case, the prior
right of the charge-holders could only obtain priority provided
other things are not unequal. This follows from words used
indicating that each of the two or more transactions must at
least be a “transfer”. Furthermore, the conditions of priority as
between the holder of a previous charge and a subsequent
simple mortgage are completely covered by Section 100 of the
Act. The principle underlying Section 48 is one expressed in the
maxim of Equity: “Qui prior est tempore potior est jure” (first in
time is stronger in right). This principle, applied to ranking
between rival equitable claims, is applied by Section 48 to
contending claims of otherwise equal legal validity. The effect of
Section 100 is that while a charge, which is not a “transfer” of
property, gets recognition as a legally enforceable claim, that
enforceability is subjected by the proviso to the requirements of a
prior notice in order to give it precedence over a legally valid
transfer of property. The rights of the appellants charge-holders
could only be exercised, on facts found, subject to the priority
obtained by the respondent mortgagee's rights. This clear result
of the law, as contained in Section 100 of the Act, cannot be
defeated by invoking either the terms of or the principles
underlying Section 48 of the Act read with the first part only of
Section 100 of the Act. If the respondent simple mortgagee
Oswal could not have claimed the benefit of the proviso to

Civil Appeal No. 1565 of 2025 Page 20 of 59

 Section 100, the first part of Section 100, read with Section 48 of
the Act, could have come to the aid of the appellants. But, on the
view adopted by me, this line of reasoning does not help the
unfortunate charge-holders at all.”

(Emphasis supplied)

24.The observations made by this Court in Anita Enterprises (supra) in para

41 are also relevant. The para 41 reads thus: -

“41. It appears to us that the status of a member in a tenant co-

partnership housing society is very peculiar. The ownership of the
land and building both vests in the society and the member has, for all
practical purposes, right of occupation in perpetuity after the full
value of the land and building and interest accrued thereon have been
paid by him. Although de jure he is not owner of the flat allotted to
him, but, in fact, he enjoys almost all the rights which an owner
enjoys, which includes right to transfer in case he fulfils the two
preconditions, namely, he occupies the property for a period of one
year and the transfer is made in favour of a person who is already a
member or a person whose application for membership has been
accepted by the society or whose appeal under Section 23 of the
Societies Act has been allowed by the Registrar or to a person who is
deemed to be a member under sub-section (1-A) of Section 23 of the
Societies Act. In case any of these two conditions is not fulfilled, a
member cannot be said to have any right of transfer. Thus, we
reiterate the law laid down by this Court in Sanwarmal [(1990) 2 SCC
288] that a member has more than a mere right to occupy the flat,
meaning thereby higher than tenant, which is not so in the case of a
tenant within the meaning of Section 5(11) of the Rent Act. This being
the position, we have no difficulty in coming to the conclusion that the
status of a member in the case of tenant co-partnership housing
society cannot be said to be that of a tenant within the meaning of
Section 5(11) of the Rent Act, as such there was no relationship of
landlord and tenant between the Society and the member.”
(Emphasis supplied)

25.The observations made by this Court in Suraj Lamp (supra) in paras 16 and

19 are also relevant. The paras 16 and 19 respectively read thus: -

“Scope of an agreement of sale

16. Section 54 of the TP Act makes it clear that a contract of

sale, that is, an agreement of sale does not, of itself, create any
interest in or charge on such property. This Court in Narandas

Civil Appeal No. 1565 of 2025 Page 21 of 59

 Karsondas v. S.A. Kamtam [(1977) 3 SCC 247] observed: (SCC
pp. 254-55, paras 32-33 & 37)

“32. A contract of sale does not of itself create any in-

terest in, or charge on, the property. This is expressly
declared in Section 54 of the Transfer of Property Act.
(See Ram Baran Prasad v. Ram Mohit Hazra [AIR
1967 SC 744 : (1967) 1 SCR 293] .) The fiduciary
character of the personal obligation created by a con-
tract for sale is recognised in Section 3 of the Specific
Relief Act, 1963, and in Section 91 of the Trusts Act.
The personal obligation created by a contract of sale
is described in Section 40 of the Transfer of Property
Act as an obligation arising out of contract and an-
nexed to the ownership of property, but not amounting
to an interest or easement therein.

33. In India, the word ‘transfer’ is defined with refer-

ence to the word ‘convey’. … The word ‘conveys’ in
Section 5 of the Transfer of Property Act is used in the
wider sense of conveying ownership.

***

37. … that only on execution of conveyance,

ownership passes from one party to another….”

xxx xxx xxx

19. Any contract of sale (agreement to sell) which is not a

registered deed of conveyance (deed of sale) would fall short of
the requirements of Sections 54 and 55 of the TP Act and will not
confer any title nor transfer any interest in an immovable
property (except to the limited right granted under Section 53-A
of the TP Act). According to the TP Act, an agreement of sale,
whether with possession or without possession, is not a
conveyance. Section 54 of the TP Act enacts that sale of
immovable property can be made only by a registered instrument
and an agreement of sale does not create any interest or charge
on its subject-matter.”

(Emphasis supplied)

Civil Appeal No. 1565 of 2025 Page 22 of 59

26.Suraj Lamp (supra) later came to be referred to and relied upon by this

Court in Shakeel Ahmed v. Syed Akhlaq Hussain reported in 2023 SCC

OnLine SC 1526 wherein the Court after referring to its earlier judgment

held that the person relying upon the customary documents cannot claim to

be the owner of the immovable property and consequently not maintain any

claims against a third-party. The relevant paras read as under: -

“10. Having considered the submissions at the outset, it is to be em-
phasized that irrespective of what was decided in the case of Suraj
Lamps and Industries (supra) the fact remains that no title could be
transferred with respect to immovable properties on the basis of an
unregistered Agreement to Sell or on the basis of an unregistered Gen-
eral Power of Attorney. The Registration Act, 1908 clearly provides
that a document which requires compulsory registration under the
Act, would not confer any right, much less a legally enforceable right
to approach a Court of Law on its basis. Even if these documents i.e.
the Agreement to Sell and the Power of Attorney were registered, still
it could not be said that the respondent would have acquired title over
the property in question. At best, on the basis of the registered agree-
ment to sell, he could have claimed relief of specific performance in
appropriate proceedings. In this regard, reference may be made to
sections 17 and 49 of the Registration Act and section 54 of the Trans-
fer of Property Act, 1882.

11. Law is well settled that no right, title or interest in immovable

property can be conferred without a registered document. Even the
judgment of this Court in the case of Suraj Lamps & Indus-
tries (supra) lays down the same proposition. Reference may also be
made to the following judgments of this Court:

(i). Ameer Minhaj v. Deirdre Elizabeth (Wright) Issar (2018) 7 SCC

639

(ii). Balram Singh v. Kelo Devi Civil Appeal No. 6733 of 2022

(iii). Paul Rubber Industries Private Limited v. Amit Chand Mitra

SLP(C) No. 15774 of 2022.

12. The embargo put on registration of documents would not override

the statutory provision so as to confer title on the basis of unregistered
documents with respect to immovable property. Once this is the settled
position, the respondent could not have maintained the suit for pos-
session and mesne profits against the appellant, who was admittedly

Civil Appeal No. 1565 of 2025 Page 23 of 59

 in possession of the property in question whether as an owner or a li-
censee.

13. The argument advanced on behalf of the respondent that the judg-
ment in Suraj Lamps & Industries (supra) would be prospective is
also misplaced. The requirement of compulsory registration and effect
on non-registration emanates from the statutes, in particular the Re-
gistration Act and the Transfer of Property Act. The ratio in Suraj
Lamps & Industries (supra) only approves the provisions in the two
enactments. Earlier judgments of this Court have taken the same
view.”

iii. Concept of Equitable Mortgage.

27.The question whether Central Bank of India i.e., the respondent no. 1 herein

had a valid mortgage or not can be looked at from one another angle. It is an

undisputed fact that the original borrowers herein whilst availing the loan

facility from the respondent no. 1 bank herein had offered the said flat in

question as a security, and pursuant to the same had willingly deposited the

agreement of sale in respect of the same with the respondent no. 1 bank.

28.Although, indisputably as discussed in the foregoing paragraphs the said

agreement to sale can by no means be treated as title deeds to the said flat

and as such would not constitute a mortgage in terms of Section 58 of the

Act, 1884, yet could it be said that there was no charge created on the said

flat at all by the original borrowers? Could it be argued that the failure to

deposit the share certificate to the said flat at the time of availing the loan

for whatsoever reasons by a necessary implication nullifies the charge that

was intended or sought to be created over the said flat in favour of the ap-

pellant bank herein, merely because the agreement to sale in itself does not

Civil Appeal No. 1565 of 2025 Page 24 of 59

 purport any title even though the intention of the parties was to create a

charge over the flat? The answer to the same has to be an emphatic “No”.

29.Before we proceed to explain the aforesaid, it would be apposite for us to

understand the concept of “Equitable Mortgage”. Under the English Law,

broadly there are two kinds of mortgages; (i) a legal mortgage and (ii) an

equitable mortgage. A ‘legal mortgage’ entails creation of a charge by way

of conveyance of a proprietary interest over the property or security in fa-

vour of the lender in accordance with the formalities set out under the Law

of Property Act, 1925. This is typically effectuated through execution of a

deed of charge or a mortgage deed simpliciter. While such conveyance need

not involve transfer of the title or ownership in itself nor is the conveyance

required to be physical or actual and may be symbolic in nature where the

borrower or mortgagor continues to retain possession or even title of the

mortgaged property; however, the de jure effect of such conveyance must

be in the nature of vesting the lender with an enforceable right to take pos-

session, to foreclose or to sell the property in the event of default. Thus, the

legal effect of the deed of charge or mortgage must convey certain enforce-

able rights in favour of the lender or mortgagor over the mortgaged property

even though the title or ownership may not be transferred.

30.However, there may be instances where the parties agree to mortgage a

property as security, but no formal charge or conveyance of any proprietary

interest in the said property has taken place, still the same may be recog-

Civil Appeal No. 1565 of 2025 Page 25 of 59

 nized as a mortgage. This is popularly understood as an ‘equitable mort-

gage’ where although under the law the formalities required for creating a

legal charge or mortgage over a property are patently absent, yet the said

property would be in equity deemed to have been mortgaged and as such

may be apportioned or appropriated by the lender on the strength of mere

intention of the parties to create a mortgage. In other words, where under

the law no mortgage or charge is said to have been created over a property

i.e., no conveyance of a right or interest over the subject property has been

effected, yet if the intention of parties to create a mortgage is clear, equity

would demand that such intention is not only respected but given some ef-

fect to and the said property be deemed to have been mortgaged so as to en-

able the lender to assert its rights over the same, it is known as an ‘equitable

mortgage’.

31.The concept or doctrine of ‘equitable mortgage’ owes its origin to the Eng-

lish case of Russel v. Russel reported in [1783] 28 E.R. 1121 wherein the

High Court of Chancery speaking through Lord Thurlow held that where

there is delivery of title by the borrower to the lender for the purpose of

availing a loan, although such deposit may not constitute a valid mortgage,

but the courts in granting specific performance to the lender to create a se-

curity or lien over the property would effectively be “supplying the legal

formalities necessary to create nothing but a mortgage though one in

equity”. He explained that the court in permitting the lender to create a se-

Civil Appeal No. 1565 of 2025 Page 26 of 59

 curity over the property on the strength of the title deeds lying with it is not

per se performance of a contract but rather its execution and hence for all

purposes would be a mortgage inter se the borrower and the lender in

equity. He lastly elaborated that the further grant of relief to execute such a

contract which is not a valid mortgage but nevertheless being converted into

one is grounded on it being already being a contract part performed. [See;

J.B. White & Tudor in Equitable Mortgage and Leading Cases in Equity, 9 th

Ed. (Sweet & Maxwell (1928)]

32.Thus, the underlying distinction between a legal mortgage and an equitable

mortgage under the English Law is that in the former, there is conveyance

or transfer of some proprietary interest in the mortgaged property in accord-

ance with the statute or law whereas in the latter the formalities required for

a legal mortgage are not fully satisfied, but the parties' intentions to create a

mortgage are clear as result of which it is deemed as a mortgage.

33.The rationale behind the existence of the concept of an ‘equitable mortgage’

was elaborated upon by Sir William Holdsworth in A History of English

Law. He explained that the evolution of equitable mortgage is based on the

principle that a mortgage at its core is essentially nothing more than a ‘secu-

rity’. It is not intended as a mechanism of transferring either ownership or

any vested interest in the strict sense but rather only a means for providing a

security. He elaborated how ‘equitable mortgages’ of today’s time is a re-

flection of the practicalities of the then mercantile system of the time where

Civil Appeal No. 1565 of 2025 Page 27 of 59

 due to the commercial exigencies and need for quick financial arrangements

led the community to resort to the informal practice of extending loans and

creating security by mere deposit of titles or a promissory note to repay

solely on a ‘mutual understanding’ between the parties, without any actual

agreement or memorandum and without following the cumbersome formal-

ities of any transfer of conveyance of proprietary rights as required under a

traditional or legal mortgage.

34.The aforesaid may be better understood through the well-known maxim of

‘Quod fieri debuit pro facto censetur’ which means that ‘what ought to have

been done is considered as done’. Edward Henry Turner Snell in his book

on The Principles of Equity explained that the role of equity in law is only

one i.e. to rectify the injustice arising out of the rigidities of the law, to in-

tervene and ensure that substantive justice prevails over mere formalities or

hyper technicalities, even when strict legal requirements have not been met.

Snell articulated that equity operates as a "court of conscience" tempering

the harshness of the law and fulfilling its enduring mission to deliver fair-

ness and justice where the rigid application of legal rules would otherwise

result in inequity. In the context of mortgages, take a situation where there

is no express document or deed to evince that a charge was created over the

subject property and the parties at the time of availing the loan merely

agreed that they would create a mortgage in the event of default. In the eyes

of law, it would be said that no mortgage has been created whatsoever, yet

Civil Appeal No. 1565 of 2025 Page 28 of 59

 the understanding between the parties to later create a mortgage at the time

whilst advancing the loan shows the ab initio intention to create a charge

and treat the subject property as a security or a collateral for the sum so ad-

vanced. Under the general principle of law, the recourse that would ordinar-

ily be available to the lender in the aforesaid situation would be to seek spe-

cific performance of the said agreement (oral or written) to create a mort-

gage on the strength that there has been part performance of the agreement

i.e., loan has been advanced and thus, charge should now be permitted to be

created, and thereafter proceed to exercise its rights after the said mortgage

is created. But a “court of conscience” would instead of subjecting the

lender to the rigmarole of the law, will directly give effect to the true sum

and substance of the intention of the parties and thereby give to the very

agreement itself the effect of creating a mortgage in ‘equity’ and enable the

lender to exercise its rights as he would be entitled to if the agreement had

been performed.

35.Thus, where a borrower willingly parts away with any title deed or a docu-

ment or a promissory note or an undertaking in respect of a property by de-

positing it with the lender for the purpose of availing any credit facility and

upon such deposit, the loan is so advanced by the lender, fairness, good con-

science and justice or in other words ‘equity’ would demand that some

meaningful significance be given to such act or conduct of the parties, as

generally such act of depositing documents against loans is more often than

Civil Appeal No. 1565 of 2025 Page 29 of 59

 not for no other purpose but to create a mortgage. Thus, a “court of con-

science” would give effect to the intention of the parties in the form of an

‘equitable mortgage’ even if there is no formal agreement or a shred of doc-

ument expressly providing that such deposit is for the purpose of creating a

charge OR if the documents so deposited do not necessarily have the effect

of transferring or conveyancing any title or interest in the subject property

to the lender.

iv. Nature of an Equitable Mortgage.

36.Having understood the concept of ‘equitable mortgage’, it would now be

apposite to understand the ways in which an equitable mortgage may be cre-

ated and its nature. Under the English Law, the two primary ways for creat-

ing an ‘equitable mortgage’ is either (i) by deposit of the original title

deeds to the subject property with the lender or where the original title

deeds are retained by the borrower then (ii) by way of a memorandum of

understanding or an agreement simpliciter recording the intention of

the parties to create a charge over the subject property.

37.In the case on hand, the original borrowers had availed loan facilities from

both, the appellant bank and the respondent no. 1 bank herein by deposit of

certain documents in respect of the said Flat. For availing the loan facility

from the respondent no. 1 bank, the original borrowers deposited two unre-

gistered agreement to sale dated 15.10.1973 and 09.11.1978 respectively in

Civil Appeal No. 1565 of 2025 Page 30 of 59

 relation to the said Flat all the way back in 1989. Whereas, whilst availing

the loan facility from the appellant bank herein in the year 1998 the original

borrowers deposited one another unregistered agreement to sale dated

07.12.1978 in respect of the said flat which is subsequent in time along with

a share certificate of ownership of the said Flat dated 14.09.1989 that was

issued by the concerned cooperative housing society.

38.Indisputably, when the loan was granted to the original borrowers, the share

certificate of ownership being the sole document for conveyance of title had

not been issued by the concerned housing society. In such a scenario, could

it be said that in order to create a mortgage by deposit of title deeds, the re-

spondent no. 1 bank was required to take or collect all documents and deeds

of title to the said Flat in its possession, more particularly when the title

deed or share certificate of ownership was not in existence at that time?

39.The High Court of Chancery in Robberts v. Croft reported in 44 E.R. 887

and a catena of other decisions have emphatically answered the aforesaid

question in a negative. It has been held that “[...] It is not necessary, to cre-

ate an equitable mortgage, that all the title deeds, or even all the material

title deeds, should be deposited. It is sufficient if the deeds deposited are

material evidence of title.”

40.In fact, the English Courts have gone to the extent of saying that the title

deeds are not the only documents a deposit of which may create an equit-

able charge upon the subject property, and that even a promissory note or an

Civil Appeal No. 1565 of 2025 Page 31 of 59

 agreement for purchase of the subject property can create an equitable mort-

gage. [See; Ex parte Warner, reported in [1812] 19 Ves Jr 202; Lacon v.

Allen reported in [1856] 3 Drew. 579]. Samuel Miller in The Law of Equit-

able Mortgages explained the aforesaid with a illustration that take a case

where the owner has lost an important deed or where the deeds which have

been deposited while purporting title to the property contain no reference to

any other material deeds, or a situation where there exists no possible way

for the lender to ascertain whether any other deeds or documents are actu-

ally outstanding, should the lender be deprived of the benefit of the deposit

of the other documents even if the intention of parties to create a mortgage

is clear? In his opinion, the principle underlying the doctrine of ‘equitable

mortgages’ is premised to mitigate these very hardships or technicalities that

often emerge in transactions of such nature from coming in the way of cre-

ation and enforcement of mortgages. He added, to hold otherwise, would be

nothing but an unfaithful dilution of the doctrine of equitable mortgages and

by extension the concept of ‘equity’ based justice. This is because for decid-

ing a question of an equitable mortgage, the court is not required to look for

deposit of a valid legal title, because no passing or transfer of title is in-

volved in the first place in equitable mortgage unlike a legal mortgage,

rather what the courts look for is a transaction in the nature of a contract

whereby the interests of the borrower embraced in the subject property may

be later subjected and made liable for the debt.

Civil Appeal No. 1565 of 2025 Page 32 of 59

41.Even though, the High Court of Chancery speaking through Lord Eldon in

the case of In Re: Rice reported in [1819] 36 E.R. 632 argued against the

idea of extending the doctrine of ‘equitable mortgage’ to instances of de-

posit of ‘part-deeds’ to discourage the act of scrupulous borrowers of ob-

taining loans from multiple creditors by dividing and depositing different

deeds with each of them, the position under the English Law has continued

to remain the same i.e., part deposits of title would be sufficient to create an

equitable mortgage and that there is neither any requirement that the mort-

gagee or the lender should be required to acquire every title deed, nor is

there any requirement that the documents so deposited show a good title to

the vested property. [See; Robberts (supra). What is required is that the

deeds or documents so deposited materially evinces the intention of the

parties to create a charge over the subject property and the mortgagor as-

sures itself that he has acquired all available titles or documents.

42.The Court of Chancery speaking through Lord Eldon in Knight v. Knight

reported in (1840) 3 Beav 148 held that “equity looks to the intent rather

than the form”. Thus, even if the document that was deposited with the

lender falls short, it would still be enforceable in equity provided the inten-

tion of the parties to do so is as clear as a noon day. In the case at hand,

even though what was deposited with the respondent no. 1 bank herein was

nothing but an unregistered agreement to sale having no legal effect of con-

Civil Appeal No. 1565 of 2025 Page 33 of 59

 veyance or transfer of the said flat or any right therein in favour of the bank,

the undisputed factum that the said agreement to sale was deposited by the

original borrowers herein so as to offer the said flat as security would tan-

tamount to an equitable mortgage. Moreover, since at the time of availing

the loan, the share certificate of ownership to the said Flat was yet to be is-

sued, it could be said that the respondent no. 1 bank had all the documents

to the said Flat that it could have at that time possibly taken in possession,

and we even proceed on the footing that the respondent no. 1 bank might

have undertaken all the necessary steps to assure itself that there were no

other material documents to be taken possession of at the time of extending

the loan.

43.Thus, where ‘equitable mortgages’ have been created based on deposit of

part-deeds or documents purporting title or evincing intention of parties to

create an interest, all such deposits will be a valid mortgage in equity and

the charge that might have been created prior in time will assume priority

over any subsequent charges or mortgagors. However, since such a mort-

gage is an ‘equitable mortgage’ any rights flowing from such mortgages are

only of personal character and only rights in personam and as such will not

operate against any strangers or subsequent incumbrancers unaware of such

equitable mortgage. This stems from the rule that equity acts only in perso-

nam. The very basis for creation of an ‘equitable mortgage’ is the intention

of parties alone, and as such any action or remedy can be directed only

Civil Appeal No. 1565 of 2025 Page 34 of 59

 against the parties so involved. This is because, unlike a legal mortgage

where a ‘charge’ is created directly on the property itself and the title or any

proprietary interest therein is transferred to the lender thereby becoming a

right enforceable in rem in respect to the property, in case of an ‘equitable

mortgage’ no such charge is said to have been formally created on the prop-

erty nor any transfer or conveyance of interest has said to occur. Rather on

the contrary, the de jure title or ownership continues to vest with the ori-

ginal borrower and only the documents thereof is ordinarily retained by the

lender and as such the right of the lender in such a situation is being en-

forced through the party having title over the said property alone i.e., the

borrower and thus is only a right in personam. Edgar N. Durfee in The Lien

or Equitable Theory of the Mortgage explaining the aforesaid stated that, in

cases of equitable mortgage in the absence of any ‘conveyance’ or creation

of ‘charge’, the money so advanced against the subject property is only in

the form of a personal debt and hence a right in personam at best and the

right of the lender to apportion or appropriate the subject property for repay-

ment of loan only a right to take such an action rather than a right in the

property itself.

44.‘Equitable Mortgage’ being a right in personam will not affect successive

incumbrances and will not be enforceable against successive mortgagees if

the creation of such equitable charge was no disclosed to them. This is par-

ticularly because, ‘equitable mortgages’ are construed as ‘incomplete mort-

Civil Appeal No. 1565 of 2025 Page 35 of 59

 gages’ (as no actual charge is created nor any conveyance of title has taken

place) and thus no person can be permitted to derive any advantage from

any incomplete title who has on his own volition not done everything re-

quisite to complete its title. If a first mortgagee voluntarily either leaves the

title deeds with the mortgagor, or voluntarily accepts part-deeds and fails to

either secure the rest or assure himself of any outstanding deeds or docu-

ments, then the charge of such first mortgagee must be postponed to any

and all subsequent mortgagees, without notice of the charge of first mort-

gagee, because he due to his own gross negligence enabled the subsequent

incumbrances. Thus, even if multiple equitable mortgages are created, the

first charge will have priority, unless in case of fraud or gross negligence, or

a voluntary, distinct, and unjustifiable concurrence, on the part of the first

mortgagee in either (i) retaining the remaining deeds or (ii) failure to take

steps in putting everyone to notice, more particularly the subsequent incum-

brancers about the first equitable mortgage. Where the first mortgagor has

made bond fide inquiry for them and received a reasonable excuse for their

non-delivery, he shall not be postponed to a subsequent equitable mortgage

that may be created.

45.In India, the aforesaid has been recognized in Section 78 of the Act, 1882

which provides that where on account of any fraud, misrepresentation or

gross neglect of a prior mortgagee, another person has been induced to ad-

vance money on the security of the mortgaged property, the prior mortgagee

Civil Appeal No. 1565 of 2025 Page 36 of 59

 shall be postponed to the subsequent mortgagee. The said provision reads as

under: -
78. Postponement of prior mortgagee. —
Where, through the fraud, misrepresentation or gross neglect of
prior mortgagee, another person has been induced to advance
money on the security of the mortgaged property, the prior
mortgagee shall be postponed to the subsequent mortgagee.

46.It is in this very context, this Court in Suraj Lamps (supra) emphasized on

the need for registration of documents so as to give publicity and public ex-

posure to various transactions in respect of immovable properties and en-

able people to find out whether any particular property with which they are

concerned, has been subjected to any legal obligation or liability and who is

or are the person/s presently having right, title, and interest in the property.

The relevant observation reads as under: -

Advantages of Registration
10. In the earlier order dated 15.5.2009, the objects and benefits
of registration were explained and we extract them for ready ref-
erence: -

"The Registration Act, 1908, was enacted with the

intention of providing orderliness, discipline and
public notice in regard to transactions relating to
immovable property and protection from fraud and
forgery of documents of transfer. This is achieved by
requiring compulsory registration of certain types of
documents and providing for consequences of non-
registration.

Section 17 of the Registration Act clearly provides

that any document (other than testamentary instru-
ments) which purports or operates to create, de-
clare, assign, limit or extinguish whether in present
or in future "any right, title or interest" whether

Civil Appeal No. 1565 of 2025 Page 37 of 59

 vested or contingent of the value of Rs. 100 and up-
wards to or in immovable property.

Section 49 al the said Act provides that no document

required by Section 17 to be registered shall, affect
any immovable property comprised therein or re-
ceived as evidence of any transaction affected such
property, unless it has been registered. Registration
of a document gives notice to the world that such a
document has been executed.

Registration provides safety and security to transactions relating

to immovable property, even if the document is lost or destroyed.
It gives publicity and public exposure to documents thereby pre-
venting forgeries and frauds in regard to transactions and execu-
tion of documents. Registration provides information to people
who may deal with a property, as to the nature and extent of the
rights which persons may have, affecting that property. In other
words, it enables people to find out whether any particular prop-
erty with which they are concerned, has been subjected to any le-
gal obligation or liability and who is or are the person/s
presently having right, title, and interest in the property. It gives
solemnity of form and perpetuate documents which are of legal
importance or relevance by recording them, where people may
see the record and enquire and ascertain what the particulars
are and as far as land is concerned what obligations exist with
regard to them. It ensures that every person dealing with immov-
able property can rely with confidence upon the statements con-
tained in the registers (maintained under the said Act) as a full
and complete account of all transactions by which the title to the
property may be affected and secure extracts/copies duly certi-
fied."

(Emphasis supplied)

47.In the present case, it appears from the materials on record, that when the

loan was being advanced by the respondent no. 1 bank, a Memorandum of

Equitable Mortgage recording transfer / deposit of the agreement to sale in

respect of the said Flat was sought to be created, although the same has not

Civil Appeal No. 1565 of 2025 Page 38 of 59

 been placed on record. There are no correspondences or communications

between the respondent no. 1 bank or the original borrowers where the

share certificate of ownership was demanded, even though the Bank was

well aware that the conveyance of title where the subject Flat is situated

only takes place through such certificate and not by the agreement of sale in

terms of Section 11 of the Act, 1963 read with Section 4 of the Act, 1970.

Moreover, it appears that no steps were taken by the respondent no. 1 bank

to issue a public notice of equitable charge that was created in its favour, as

discernible from the fact that when the appellant bank upon inquiry was in-

formed by the concerned cooperative housing society that the said flat was

not subject to any prior encumbrances or charge. In such a scenario, the

equitable charge of the respondent no. 1 bank herein is liable to be post-

poned to the charge created in favour of the appellant bank herein in terms

of Section 78 of the Act, 1882, and the impugned order of the High Court is

liable to be set-aside on this ground alone.

v. Distinction between Mortgage by Deposit of Title Deeds under

the English Law and under the Transfer Of Property Act, 1882.

48.At this stage we must also address ourselves on one another important as-

pect where the High Court grossly erred whilst passing the impugned judg-

ment and order. As discussed in the foregoing paragraphs of this judgment,

the original borrower whilst availing the loan facility from the respondent

Civil Appeal No. 1565 of 2025 Page 39 of 59

 no. 1 and appellant, had deposited with them two unregistered agreement to

sale, and another unregistered agreement to sale along with the share certi-

ficate of ownership, respectively. Although both of the aforesaid transac-

tions seek to create mortgage by deposit of documents or title, yet there lies

a very fine but pertinent distinction between the two transactions. In respect

of the loan advanced by the respondent no. 1 bank, only two unregistered

agreements to sale were deposited which as discussed earlier do not purport

any title as held in Suraj Lamps (supra) while with the appellant bank

herein apart from one unregistered agreement to sale the share certificate of

ownership had also been deposited which has the effect of conveyance of

title.

49.Under the English Law, whether the documents so deposited actually pur-

port or transfer any title is immaterial for the purpose of creating an ‘equit-

able mortgage’ as long as the intention to do so is clearly discernible. The

position in India however is quite different. This is because under the Eng-

lish Law, a mortgage created by deposit of title or documents is not con-

strued as a legal mortgage and is only treated as an equitable mortgage.

Whereas in India under the Act, 1882, more particularly under Section 58

sub-section (f) a statutory recognition has been given to the mode of cre-

ation of mortgage by deposit of title deeds. Such a mortgage by deposit of

title deeds is for all purposes a ‘legal mortgage’ and not an equitable mort-

Civil Appeal No. 1565 of 2025 Page 40 of 59

 gage. At the cost of repetition, the said provision is once again reproduced

hereunder: -

“58. “Mortgage”, “mortgagor”, “mortgagee”, “mortgage-money”

and “mortgage-deed” defined.—
(a) A mortgage is the transfer of an interest in specific immoveable
property for the purpose of securing the payment of money
advanced or to be advanced by way of loan, an existing or future
debt, or the performance of an engagement which may give rise to
a pecuniary liability.

The transferor is called a mortgagor, the transferee a mortgagee;

the principal money and interest of which payment is secured for
the time being arc called the mortgage-money, and the instrument
(if any) by which the transfer is effected is called a mortgage-deed.

(b) Simple mortgage.— Where, without delivering possession of the

mortgaged property, the mortgagor binds himself personally to pay
the mortgage-money, and agrees, expressly or impliedly, that, in the
event of his failing to pay according to his contract, the mortgagee
shall have a right to cause the mortgaged property to be sold and
the proceeds of sale to be applied, so far as may be necessary, in
payment of the mortgage-money, the transaction is called a simple
mortgage and the mortgagee a simple mortgagee.

(c) Mortgage by conditional sale.— Where the mortgagor

ostensibly sells the mortgaged property— on condition that on
default of payment of the mortgage-money on a certain date the
sale shall become absolute, or on condition that on such payment
being made the sale shall become void, or on condition that on
such payment being made the buyer shall transfer the property to
the seller, the transaction is called a mortgage by conditional sale
and the mortgagee a mortgagee by conditional sale:

Provided that no such transaction shall be deemed to be a

mortgage, unless the condition is embodied in the document which
effects or purports to effect the sale.

(d) Usufructuary mortgage.— Where the mortgagor delivers

possession or expressly or by implication binds himself to deliver
possession of the mortgaged property to the mortgagee, and
authorises him to retain such possession until payment of the
mortgage-money, and to receive the rents and profits accruing from
the property or any part of such rents and profits and to
appropriate the same in lieu of interest, or in payment of the

Civil Appeal No. 1565 of 2025 Page 41 of 59

 mortgage -money, or partly in lieu of interest or partly in payment
of the mortgage-money, the transaction is called an usufructuary
mortgage and the mortgagee an usufructuary mortgagee.

(e) English mortgage.— Where the mortgagor binds himself to re-

pay the mortgage-money on a certain date, and transfers the
mortgaged property absolutely to the mortgagee, but subject to a
proviso that he will re-transfer it to the mortgagor upon payment of
the mortgage-money as agreed, the transaction is called an English
mortgage.

(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.

(g) Anomalous mortgage.—A mortgage which is not a simple

mortgage, a mortgage by conditional sale, an usufructuary
mortgage, an English mortgage or a mortgage by deposit of title-
deeds within the meaning of this section is called an anomalous
mortgage.”

50.Section 58 sub-section (a) stipulates the general rule that mortgage is “the

transfer of an interest in specific immoveable” or as understood under the

English Law as a “legal mortgage”. Section 58 sub-section(s) (b) to (g) fur-

ther explains the different modes to create a mortgage under the Act, 1882.

What is particularly important to note is the fact that, the subsequent sub-

section(s) do not either expressly or impliedly stipulate that no transfer of

interest is taking place where mortgage is created in terms of the other

modes provided therein. There is also nothing in the entire Act, 1882 that

mortgage created by one particular mode under Section 58 would be subser-

vient to another. In such a scenario, any mortgage that happens to be created

Civil Appeal No. 1565 of 2025 Page 42 of 59

 in terms of the Act, 1882 more particularly Section 58 would for all pur-

poses be equal except in the consideration of priority of charge. Thus, while

mortgage by deposit of title deeds under the English Law is an equitable

mortgage and subservient to a legal mortgage, in India mortgage created by

such deposit is not subservient to an equitable mortgage as such mortgage is

in itself a legal mortgage.

51.Deposit of title deeds is one of the many 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.

The three requisites for a valid mortgage are, (i) debt; (ii) deposit of title

deed; and (iii) an intention that the deed shall operate as security for the

debt. In other words, when the debtor deposits with the creditor title deeds

of his property with an intent to create a security, the law implies a contract

between the parties to create a mortgage and no registered instrument is re-

quired under Section 59 of the Act, 1882 as in other classes of mortgage. 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. Whether there is an intention that the deed shall

be security for the debt is a question of fact to be decided in each case on its

own merits. The said fact will have to be decided just like any other fact

Civil Appeal No. 1565 of 2025 Page 43 of 59

 based on legal presumptions, oral, documentary and/or circumstantial evi-

dence. Normally, title deeds are delivered to the bank along with a covering

letter indicating therein an intention of delivering title deed i.e. to create se-

curity for the present or future liability. In turn, bank gives a letter to the

person delivering title deeds indicating acceptance of the documents and/or

title deeds by way of security either for the outstanding dues or for the loan

to be advanced. The banks, normally, maintain register of securities called

Equitable Mortgage Register; wherein the entry of title deeds is taken in the

form of memorandum signed by the Branch Manager alone, as a person ac-

cepting delivery of the documents as security. These formalities are done

to establish three essential requisites of equitable mortgage, viz. (1)

debit, (2) deposit of title deed and (iii) the intention that deed shall op-

erate as security for the present or future debt. 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.

52.Thus, when the original borrowers deposited with the appellant bank herein,

the share certificate of ownership to the said Flat, on that very day and date,

a legal charge is said to have been created on the flat in favour of the appel-

lant bank, whereas, when it comes to the respondent no. 1 bank no such

charge on the flat was created, rather what was created was only an equit-

Civil Appeal No. 1565 of 2025 Page 44 of 59

 able mortgage, though prior in time. This distinction is particularly import-

ant, because even if the agreements to sale deposited with the respondent

no. 1 bank were registered and thereby, giving public notice of their exist-

ence, still the appellant bank by virtue of possession of the actual title deeds

to the said Flat in the form of the share certificate of ownership would be

accorded priority in charge for the sole reason that the charge created by it

is a legal mortgage in terms of Section 58 of the Act, 1882. At this stage, we

may clarify that deposit of part-deeds of title would not constitute a mort-

gage in terms of Section 58 sub-section (e) of the Act, 1882 unlike English

Law, because under the latter such deposit is only an equitable mortgage

and thus, the strict rigidities may not be imposed or insisted upon whereas

in India mortgage by deposit of title deeds is a legal mortgage which in ef-

fect would defeat any equitable mortgage, and thus, the requirement to de-

posit all title deeds would have to mandatorily be required except those

deeds which despite best of efforts of the mortgagee could not have been

deposited or known to be outstanding.

53.The underlying reason behind why an equitable mortgage would be subser-

vient to a legal mortgage, even where proper notice was effectuated may be

understood in many different ways, we have already discussed one of them

in the foregoing paragraphs, particularly that the former does not create any

de jure charge or right in the subject property and rather is only a right in

personam, however, the short answer to the above is that equity cannot sup-

Civil Appeal No. 1565 of 2025 Page 45 of 59

 plant the law and can only supplement it. Thus, where the law is unambigu-

ous and clear, equity will always yield to the law. However, when it comes

to equitable mortgages, we may rephrase the above to only say that equity

will yield to the law only to the extent provided by the law. Thus, although

the legal mortgage would have assumed priority in charge, yet an equitable

mortgage may still be enforceable as secondary charge, provided the other

considerations such as notice of such mortgage is fulfilled.

54.This Court in K.J. Nathan v. S.V. Maruthi Rao reported in AIR 1965 SC

430 has explained the fine distinction between an equitable mortgage as un-

derstood in the English law and the mortgage by deposit of title deed. K.

Suba Rao J. (as His Lordship then was) speaking for Court observed as un-

der: -

“Under this definition (referring to section 58(f) of the Transfer

of Property Act) the essential requisites of mortgage by deposit
of title deeds are, (i) debt), (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 recognized 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 collateral
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 Case in Equity, 9th Edition, Vol. II, at p. 77. In either
case it does not operate as an actual conveyance though it is
enforceable in equity; whereas under the Transfer of Property
Act a mortgage by deposit of title deeds is one of the modes of
creating a legal mortgage whereunder there will be transfer of
interest in the property mortgaged to the mortgagee. This

Civil Appeal No. 1565 of 2025 Page 46 of 59

 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. […]”

(Emphasis supplied)

55.However, in order to obviate any confusion, we may clarify that the afore-

said observations in K.J. Nathan (supra) must not be understood to mean

that equitable mortgage has no valid basis or is not recognized in toto in In-

dia. Any act of the parties that evinces a clear intention of the parties to cre-

ate a mortgage though the same might not have been created in terms of

Section 58 of the Act, 1882, may still be a valid charge in terms of Section

100 of the Act, 1882. The said provision reads as under: -

“100. Charges.—
Where immoveable property of one person is by act of parties
or operation of law made security for the payment of money
to another, and the transaction does not amount to a mort-
gage, the latter person is said to have a charge on the prop-
erty; and all the provisions hereinbefore contained which ap-
ply to a simple mortgage shall, so far as may be, apply to
such charge.

Nothing in this section applies to the charge of a trustee on

the trust-property for expenses properly incurred in the exe-
cution of his trust, and, save as otherwise expressly provided
by any law for the time being in force, no charge shall be en-
forced against any property in the hands of a person to whom
such property has been transferred for consideration and
without notice of the charge.”

56.Section 100 of the Act, 1882 provides that where a transaction does not

amount to a mortgage i.e., not a mortgage in terms of Section 58 of the said

Act, the person to whom the immovable property is offered as a security

Civil Appeal No. 1565 of 2025 Page 47 of 59

 would still nevertheless be said to have a “charge” in terms of the said pro-

vision, and that all provisions under the Act, 1882 as applicable to simple

mortgage envisaged under Section 58 sub-section (b) of the said Act shall

apply to such “charge” insofar as possible. The key distinction is that any

mortgage which is not created in terms of Section 58 of the Act, 1882 i.e.,

all equitable mortgages are still nevertheless a “charge” to such property.

The expression “and all the provisions hereinbefore contained which apply

to a simple mortgage shall, so far as may be, apply to such charge” assumes

significance as it is not suggestive that such charge would be deemed a

simple mortgage, rather it only goes so far as to provide that the provisions

that apply to simple mortgage will also apply to such “charges” so far as

possible but by no means does it provide that such “charge” is to be treated

as a simple mortgage in terms of Section 58 of the Act, 1882 i.e., as a legal

mortgage. The last part of Section 100 of the Act, 1882 further statutorily

recognizes the in personam nature of such “charge” and provides that they

shall not be enforced against any person to whom such property or interest

therein has been transferred i.e., to whom it has been mortgaged in terms of

Section 58 of the said Act or any other bona-fide transferee who does not

have notice of the said charge. Thus, what may be discerned is that, ‘equit-

able mortgages’ are very much recognized in India under the nomenclature

of “charge” in terms of Section 100 of the Act, 1882, and the same will be

Civil Appeal No. 1565 of 2025 Page 48 of 59

 enforceable as far as possible in terms of the procedure and provisions

applicable to a simple mortgage except those without notice of such charge.

57.We are conscious of the decision of this Court in J.K. (Bombay) (P) Ltd. v.

New Kaiser-I-Hind Spg. and Wvg. Co. Ltd. reported in 1968 SCC OnLine

SC 32 which held that an agreement to create a mortgage only gives rise to

perform such an agreement and does not amount to either a mortgage or a

charge and the decision in Haryana Financial Corpn. v. Gurcharan Singh

reported in (2014) 16 SCC 722 wherein it was held that since all provisions

applicable to a simple mortgage shall, as far as possible, also apply to a

charge, Section 59 of the Act, 1882 which requires a simple mortgage to be

compulsorily be registered would also be applicable and as such the cre-

ation of a charge under Section 100 of the Act, 1882 must be compulsorily

registered. However, a close reading of the decision in J.K. (Bombay) (P)

Ltd. (supra) will reveal that this Court never held that any agreement to

mortgage will be incapable of creating a charge in terms of Section 100 of

the Act, 1882, rather what was held is that only those agreement to mort-

gage where the intention to create a charge in praesenti is absent will be in-

capable of creating either a mortgage or a charge, but where such intention

of parties is there, the same will definitely tantamount to a ‘charge’ under

Section 100 of the Act, 1882 as held in ONGC Ltd. v. Official Liquidator

reported in (2015) 5 SCC 300. Similarly, the decision of Haryana Finan-

cial Corpn (supra) holding that registration in terms of Section 59 of the

Civil Appeal No. 1565 of 2025 Page 49 of 59

 Act, 1882 is mandatory in order to create a charge prima facie appears to be

incorrect in view of an earlier decision of a larger bench of this Court in

M.L. Abdul Jabbar Sahib v. M.V. Venkata Sastri & Sons reported in (1969)

1 SCC 573 which in clear terms held that the second part of Section

100 of the Act, 1882 does not attract the provisions of Section 59 of the

said Act and that a charge may be made without any writing and there is no

provision of law which require that such an instrument must be attested or

registered. We are also in agreement with the decision of M.L. Abdul Jab-

bar Sahib (supra) as to hold otherwise would result in absurd consequences

which could not have been intended by the legislature. We say so because, if

a charge can be made only by a registered instrument in accordance with

Section 59 of the Act, 1882, then the subsequent transferee will always have

notice of the said charge in view of Section 3 Explanation I which stipulates

that “where any transaction relating to immoveable property is required by

law to be and has been effected by a registered instrument, any person ac-

quiring such property or any part of, or share or interest in, such property

shall be deemed to have notice of such instrument as from the date of regis-

tration [...]”. This would effectively render the second part of Section 100

of the Act, 1882 which mandates requirement of notice to all subsequent

transferees before the enforcement of a ‘charge’ as otiose and redundant, as

the moment when such instrument is registered, notice is deemed to have

been made. The very idea behind stipulating the requirement of notice under

Civil Appeal No. 1565 of 2025 Page 50 of 59

 Section 100 of the Act, 1882 seems to be to save even those transactions

which are not registered and do not amount to a mortgage yet in equity may

still be enforceable provided the subsequent transferee has notice of such

charge. We do not intend to dwell any further on the decisions of this Court

in J.K. (Bombay) (P) Ltd. (supra) and Haryana Financial Corpn (supra) as

the present case does not require examining whether the respondent no. 1

bank could be said to have an enforceable charge against the appellant bank,

and even otherwise if an ‘equitable mortgage’ cannot be construed as a

‘charge’ in terms of Section 100 of the Act, 1882, the former may still be

permitted to be enforceable in the extant of equity in the peculiar facts of

each case. This is because the enforcement of an ‘equitable mortgage’ being

a by-product of the doctrine of equity is purely a matter of discretion that a

court of conscience may grant keeping in mind the principles of fair-play,

good conscience and justice. Where any ‘equitable mortgage’ is found to be

unenforceable, the same though neither a ‘legal mortgage’ nor a ‘charge’

may still nevertheless entitle a lender to seek other reliefs such as specific

performance of the contract or a suit for recovery on the strength of the ab

inito intention of the parties to create a security evident from such ‘equitable

mortgage’.

58.We are conscious of the decision of this Court in Kedar Lal v. Hari Lal re-

ported in AIR 1952 SC 47 wherein it was held that the whole of law of

mortgage in India, including the law of contribution arising out of a transac-

Civil Appeal No. 1565 of 2025 Page 51 of 59

 tion of mortgage, is now statutory and is embodied in the Act, 1882 read

with the Civil Procedure Code, 1908 and that the courts cannot travel be-

yond these provisions. The relevant observations read as under: -

“27. So far as Section 43 is concerned, I am not prepared to

apply it unless Sections 82 and 92 can be excluded. Both Sec-
tions 43 and 82 deal with the question of contribution. Sec-
tion 43 is a provision of the Contract Act dealing with con-
tracts generally. Section 82 applies to mortgages. As the
right to contribution here arises out of a mortgage, I am
clear that Section 82 must exclude Section 43 because when
there is a general law and a special law dealing with a par-
ticular matter, the special excludes the general. In my opin-
ion, the whole law of mortgage in India, including the law of
contribution arising out of a transaction of mortgage, is now
statutory and is embodied in the Transfer of Property Act
read with the Civil Procedure Code. I am clear we cannot
travel beyond these statutory provisions.”

59.However, a close reading of the aforesaid paragraph of Kedar Lal (supra)

would reveal that the observations were made in light of the question

whether Section 43 of the Indian Contract Act, 1882 which deals with right

to contribution would be applicable to such a right which is arising out of a

mortgage to the exclusion of Section 82 of the Act, 1882 which deals with

mortgages. It was in this context this Court held that when it comes to mort-

gages it will not be permissible to travel beyond the scheme of Act, 1882

and venture into the provisions contained in other laws.

60.However, this by no stretch means that the concept of equitable mortgage

has no place in the Indian jurisprudence. The concept of equitable mortgage

is purely a creation and by-product of the doctrine of equity, and thus, the

Civil Appeal No. 1565 of 2025 Page 52 of 59

 absence of any specific provision under the Act, 1882 providing for such a

mortgage will not run to the detriment of something which is essentially de-

signed to ensure that principles of fair-play, good conscience and justice en-

dure. There is no decision which either specifically excludes or outrightly

rejects the application of this doctrine. Rather, the subsequent decision of

this Court in K.J. Nathan (supra) it was specifically stated that although the

concept of equitable mortgage as evolved under the English Law cannot be

considered to be a rule of law, which as also discussed by us in the forego-

ing paragraphs is by-product of doctrine of equity and not the law of the

land, yet they may serve as a guide. The relevant observations read as un-

der: -
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 whereun-
der 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 mort-
gage deed subsequently executed and registered in re-
spect 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 secu-
rity 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 circum-
stantial 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 Evi-
dence 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 infer-

Civil Appeal No. 1565 of 2025 Page 53 of 59

 ence 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 exe-
cute a mortgage deed in itself negatives, or is inconsis-
tent with, the intention to create a mortgage by deposit of
title deeds to be in force till the mortgage deed was exe-
cuted. The decisions of English courts making a distinc-
tion between the debt preceding the deposit and that fol-
lowing it can at best be only a guide; but the said distinc-
tion itself cannot be considered to be a rule of law for ap-
plication 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 sub-
stance 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 credi-
tor. 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.”
(Emphasis supplied)
61.Thus, in such a situation where a transaction does not amount to a mortgage

but nevertheless can be construed as a preliminary step towards the prepara-

tion of a mortgage which will be security thereafter with nothing else done

for conveyance or transfer of title or interest, there three recourses may be

available to the lender: -

(i) He may simply claim that the transaction amounts to an equitable
mortgage as it was for the purpose of creating a present or immediate
security which a court of equity ought to consider; or
(ii) He may claim that there has been a sufficient part performance of the
contract, with attending circumstances which a court ought to relieve
by permitting the lender to ‘perfect its mortgage’ i.e., to take further

Civil Appeal No. 1565 of 2025 Page 54 of 59

 steps for the transfer of conveyance of title or interest in order to cre-
ate a mortgage; or
(iii) He may bring a suit for recovery of money and base his claim simply
on the ab initio intention of the parties to create a security in the first
place and the resultant part-performance of the contract insofar as the
loan was extended based on such promise or consideration of secu-
rity.

62.Before we close this judgment, we must look into the observations made by

the High Court in para 8 of its impugned order. In para 8 the High Court has

recorded that at the time of sanction and grant of the loan by the appellant-

bank herein i.e. sometime in November, 1998 the flat in question was in

custodia legis of the court receiver appointed in the year 1994. What

weighed with the High Court was the submission canvassed on behalf of the

Central Bank that the validity of the mortgaged flat in question in favour of

the appellant bank was also questionable. The reason why the High Court

said so is because both the agreements are unregistered. According to the

learned counsel appearing for the Central Bank, the agreement which appel-

lant bank accepted was also unregistered. Then both the banks are sailing in

the same boat. However, what seems to have been overlooked by the Cent-

ral Bank is the fact that when the borrowers approached the appellant bank

for loan they had a valid title deed i.e., the original share certificate issued

by the society. The issuance of the original share certificate was also con-

Civil Appeal No. 1565 of 2025 Page 55 of 59

 firmed by the society vide letter dated 13.11.1998, which forms a part of the

record.
63.The original share certificate which was produced before the appellant-bank

as availed Title deed assumes significance in view of the provisions of Sec-

tion 11 of the Act 1963, more particularly, sub-section (1) of Section 11 of

Act which reads thus: -

"11. Promoter to convey title, etc., and execute documents,

according to agreement.— (1) A promoter shall take all
necessary steps to complete his title and convey, to the
organisation of persons, who take flats, which is registered
either as a co-operative society or as a company as aforesaid, or
to an association flat-takers or apartment owners his right, title
and interest in the land and building, and execute all relevant
documents therefor in accordance with the agreement executed
under Section 4 and if no period for the execution of the
conveyance is agreed upon, he shall execute the conveyance
within the prescribed period and also deliver all documents of
title relating to the property which may be in his possession or
power."

(Emphasis supplied)

64.In para 8 of the impugned judgment, the High Court has recorded that the

appellant bank herein had sought to rely upon the original share certificate

issued by the Society as a valid piece of title deed. However, the High Court

got carried away by the fact that the first charge was that of the Central

Bank and not of the appellant bank, and failed to notice the distinction that

exists between an ‘equitable mortgage’ and a ‘legal mortgage’.

65.The proposition of law is that though the transaction evidenced by the prior

unregistered document is valid in itself, yet any title or interest created by it

is liable to be defeated under the rule of priority by a valid later and legal

Civil Appeal No. 1565 of 2025 Page 56 of 59

 sale or mortgage evidenced by a duly registered document. The reason is,

otherwise, no effect can be given to the rule which implies that the later re-

gistered title is intended to prevail against an earlier unregistered title. No

weight can, therefore, be attached to the contention that by a valid unre-

gistered agreement of sale, the vendor's title is exhausted, he has, after-

wards, nothing to sell, and the later registered sale deed gives nothing to the

predecessor. The fallacy in the contention lies in ignoring the reason of the

rule, namely that as between the registered and unregistered transactions,

the registered transaction creates the dominant right or title.

E. CONCLUSION

66.In view of the aforesaid, we have reached the conclusion that the impugned

order passed by the High Court is not correct and it deserves to be set aside.
67.In the result the appeal succeeds and is hereby allowed. The impugned Or-

der passed by the High Court is hereby set aside. Since, the respondent no. 1

had failed in bringing the factum of its ‘equitable mortgage’ to the notice of

the appellant bank, the respondent no. 1 bank is not entitled to enforce the

same qua the recovery proceeds of the appellant bank herein.

68.We are informed that an amount of Rs. 51 lakh is lying deposited with the

DRT maintained in an escrow account. The same now be disbursed along

with interest in favour of the appellant bank.

Civil Appeal No. 1565 of 2025 Page 57 of 59

69.We direct the Registry to send one copy each of this judgment to all the

High Courts with further request to each of the High Courts to forward the

judgment to the DRTs and DRAT benches.

70.Pending application(s), if any, stand disposed of.

.......................................................... J.
(J.B. Pardiwala)

.......................................................... J.
(R. Mahadevan)
New Delhi;
04th February, 2025

Civil Appeal No. 1565 of 2025 Page 58 of 59

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