PUNJAB & SIND BANK LTD Vs. SURJIT KAUR

JUDGEMENT

(1.) Daljit Singh defendant-respondents received a loan of Rs. 6,000/- on 3.8.1970 from the plaintiff-appellant Punjab and Sind Bank Ltd. for the purchase of tubewell etc. He also agreed to pay interest at the rate of 5% over and above the rate of Reserve Bank subject to a minimum of 10% per annum. He executed a promissory note and an agreement of hypothecation. Besides this, he created an equitable mortgage of his land in favour of the Bank by deposition the title deeds. Thereafter, the defendant Daljit Singh sold the hypothecated property as well as the mortgaged land to Surjit Kaur, Arjan Singh and Makhan Singh defendants Nos.2 to 4. Since the loan was not returned to the bank, the latter filed a suit for recovery of Rs. 6151.49 against all the four defendants. The amount was sought to be realised from the sale of the hypothecated property as well as of the mortgaged land with the condition that in case of any short fall, the amount was to be realised from the defendant Daljit Singh personally.

(2.) Only Surjit Kaur defendant No.2 contested the suit. The trial Court accepted the plaintiff's claim and decreed the suit. Surjit Kaur defendant filed an appeal which was partially accepted by the Additional District Judge, Ludhiana. Although the decretal amount was allowed to be recovered from the hypothecated property but it was held that the bank will not be entitled to recover the amount from the mortgaged land. The reason given was that the document Ex.P.16 executed by Daljit Singh defendant regarding the mortgage of the land required compulsory registration and since it had not been registered, the mortgage of the land was not valid. The decree of the trial Court was modified accordingly. Against this judgment and decree of the lower appellate Court, the Punjab and Sind Bank has filed the instant second appeal.

(3.) The sole point for consideration in this appeal is whether the document Ex. P.16 required compulsory registration. In this document Daljit Singh defendant mentioned that he had already deposited the documents of title of the property the details of which were given therein. Section 58(f), Transfer of Property Act, envisages a form of mortgage by deposit of title-deeds. According to this provision, where a person delivers to a creditor documents of title to immovable property, with intent to create a security thereon, the transaction is called a mortgage by deposit of title-deeds. It is then provided in section 59 of the Act that where the principal money secured is one hundred rupees or upwards, a mortgage, other than a mortgage by deposit of title-deeds, can be effected only by a registered instrument. Clearly, therefore, a transaction of mortgage by deposit of title-deeds is not compulsorily registrable. This form of mortgage is also known as an equitable mortgage. It was held in Punjab & Sind Bank Ltd. v. Jaswant Singh, 1937 AIR(Lah) 135, that for creating an equitable mortgage all that is necessary is a loan coupled with deposit of the deeds relating to the property to be mortgaged, with intention to create a charge on the property. No writing is necessary. But if parties choose to put their agreement with respect to the transaction in writing, that document will exclude all other evidence unless registered. However, a memorandum signed by the mortgagor in relation to equitable mortgage by deposit of documents of title does not require compulsory registration unless the memorandum on its face embodies such terms and is signed and delivered at such time and place and in such circumstances as to lead legitimately to the conclusion that, so far as deposit is concerned, it constitutes agreement between the parties. It was held that a document not constituting the bargain between the parties but which is an evidence of past transaction does not require registration. This view was reiterated by this Court in Sham Lal v. Punjab National Bank, 1961 AIR(P&H) 81, and it was held that the firmly settled rule is that if the document per se creates an equitable mortgage it requires registration, but if it merely recites a completed transaction, it does not require registration and it is immaterial whether the creation of the mortgage and the preparation of the memorandum reciting the factum of the completed equitable mortgage with the list of the properties mortgaged may have simultaneously come about. The Supreme Court put a seal of approval on this view in D.D. Seal v. R.L. Phumra, 1970 AIR(SC) 659. It was held that in order to require registration the document must contain all the essentials of the transaction and one essential is that the title-deeds must be deposited by virtue of the instrument or acknowledge an earlier deposit of title-deeds and say further that the title-deeds shall be held as security on the said mortgage.