State of Haryana and Ors. vs. Navir Singh and Anr.
State of Punjab and Ors. vs. Pagro Foods Ltd. and Ors.
Before: Supreme Court of India
Date of Judgment: October 7, 2013
The facts in both the cases being similar, these cases were heard jointly by the Court.
Punjab National Bank (“PNB”) sanctioned a term loan and working capital facility to UltraTech Private (“UT”). Pursuant to this, original title-deeds in respect certain immovable properties belonging to Narvir Singh and Rajinder Kaur were deposited with the Bank by the borrower as ‘mortgage by deposit of title-deeds’. A request for mutation on the basis of mortgage effected was made by the Bank which was resisted by the Respondent on the ground that no entry can be made as the instrument of deposit of title-deeds is compulsorily registrable Under Section 17(1)(c) of the Registration Act.
Whether creation of mortgage by way of deposit of title deeds would require compulsory registration under Section 58(f) of the Transfer of Property Act?
Section 58(f) of the Transfer of Property Act, 1882–
“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 immovable property, with intent to create a security thereon, the transaction is called a mortgage by deposit of title-deeds.”
Section 59 of Transfer of Property Act, 1882
“Mortgage when to be by assurance –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 signed by the mortgagor and attested by at least two witnesses…”
Letter dated 29th March, 2007 of the Finance Commissioner inter alia makes “instrument of deposit of title-deeds compulsorily registrable under Section 17(1) (c) of the Registration Act.”
- Mortgage by way of deposit of title deeds to the creditor with the intent to create a security thereon can be effected by the debtor and no instrument is required to be drawn for this purpose.
- The parties may choose to draw a memorandum showing deposit of the title-deeds. In such a case also registration will not be required. However, in a case where memorandum recorded in writing creates right, liability or extinguishes them, the registration would be required to that effect.
- The letter of the Finance Commissioner would apply in cases where the instrument of deposit of title-deeds incorporates terms and conditions in addition to what flow from the mortgage by deposit of title-deeds. However, in such a situation, there has to be an instrument which is an integral part of the transaction regarding the mortgage by deposit of title-deeds. A document merely recording a transaction which is already concluded and which does not create any rights and liabilities does not require registration.
- When the borrower and the creditor choose to reduce the contract in writing and if such a document is the sole evidence of terms between them, the document shall form integral part of the transaction and same shall require registration Under Section 17 of the Registration Act.
Laying down the above points, the Apex Court in this case noted that there was nothing to show existence of any instrument which has created or extinguished any right or liability. Only, the original deeds have been deposited with the bank. Thus, the Supreme Court concluded that the charge of mortgage can be entered into revenue record in respect of mortgage by deposit of title-deeds and for that, instrument of mortgage is not necessary.