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Jayalakshmi Trading Co. v. Krishnamurthy

Madras High Court

Aug 1, 2005

Judgment

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Factual and Procedural Background

This is a revision concerning an order dated 19.2.2001 made in I.A. Nos. 16843 and 16486/2000 in O.S. No. 9054/1996 by the V Additional City Civil Court, Chennai. The Revision Petitioner is the Plaintiff, Jayalakshmi Trading Company.

The suit (originally C.S. No. 1040/1992 on the Original Side of the High Court of Madras, transferred and renumbered) was for recovery of Rs. 7,32,800/- (with subsequent interest) and for handing over constructed schedule properties to be sold and the sale proceeds adjusted towards the amount payable. The factual matrix as pleaded: the first defendant was owner of immovable property; defendants approached the plaintiff for finance to construct a multistoreyed building; defendants agreed to repay by constructing and selling flats; they executed promissory notes and, in security for the loan, deposited title-deeds and executed a Memorandum of Agreement (Ex.A-14) creating an equitable mortgage.

Trial proceeded with examination of the plaintiff's partner as PW-1 and marking of various documents Exs.A-1 to A-14. The defendants filed I.A. Nos. 16843 and 16846/2000 under Order 13 Rules 3 and 6 CPC read with Section 151 CPC to reject Exs.A-1 to A-14 as inadmissible evidence, specifically challenging Ex.A-14 (the Memorandum of Agreement) as creating a registrable charge and thus being inadmissible for want of registration. The trial court found Ex.A-14 to create a registrable charge and deleted it from evidence while confirming marking of Exs.A-11 to A-13. The Plaintiff (now Revision Petitioner) challenged that order by way of these revisions.

Legal Issues Presented

Whether the trial court was right in deleting Ex.A-14 from evidence?
At that stage of trial, whether the trial court was right in finding that Ex.A-14 is not a memorandum of Title-Deeds but creates a charge on the property which needs to be registered?
Whether the impugned order deleting Ex.A-14 from evidence suffers from material irregularity warranting interference?

Arguments of the Parties

Revision Petitioner / Plaintiff (Jayalakshmi Trading Company)

The documents were admitted after several adjournments and after the court allowed I.A. No. 4685/2000 permitting production of documents subject to proof and relevancy; therefore the trial court erred in later rejecting Ex.A-14.
The trial court should not have passed an elaborate order on admissibility at the evidence-taking stage; the proper course (as relied upon from AIR 2001 SC 1158) is to mark objected documents tentatively and decide admissibility at final judgment (except where the objection relates to stamp duty deficiencies).
Once evidence was recorded and documents were marked in the presence of junior counsel for defendants, defendants cannot later object to documents already admitted and marked.

Respondents / Defendants

Ex.A-14 is not merely a memorandum recording deposit of title-deeds but represents the bargain/contract and is a partition/charge document which requires registration; therefore it is inadmissible for want of registration and stamp duty.
Exs.A-11 to A-13 form part of Ex.A-14 and are therefore irrelevant if Ex.A-14 is inadmissible.
The court has power to reconsider and exclude a document that was incorrectly admitted; the order rejecting admissibility for want of registration is not revisable under Section 115 CPC (relying on Mahboob Alam v. Nasira Begum).
Relied on a number of decisions to show that where the memorandum constitutes the bargain or is contemporaneous with advances and deposit, registration is necessary.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
AIR 2001 SC 1158 — Bipin Shantilal Panchal v. State of Gujarat and another	The Supreme Court endorsed a practice of tentatively marking objected documents during evidence and deciding admissibility at final judgment; exception that objections relating to deficiency of stamp duty must be decided before proceeding further.	The court relied on the procedural guidance to hold that ordinarily Ex.A-14 should have been marked subject to objection and decided at the conclusion of trial. The court noted the stamp-duty/registration exception but found that the nature of Ex.A-14 (whether constituting the bargain) is a matter for full trial and evidence and therefore should not have been finally excluded at that stage.
AIR 1977 Rajasthan 189 — Mehaboob (Mahboob) Alam and another v. Nasira Begum and others	Held that an order of the trial court holding a document to be compulsorily registrable and thus inadmissible does not affect the court's jurisdiction and therefore may not be revisable under Section 115 CPC; construction of a document is part of court proceedings.	The court distinguished this authority: here the very nature of the document (whether it is merely a memorandum of deposit or a contract requiring registration) was in dispute and to be decided on evidence; thus the finding in the present case could not be treated as merely incidental and non-revisable in the same way.
AIR 1950 SC 272 — Rachpal v. Bhagwandas	When title-deeds are deposited with intention to create security, law implies a mortgage (Section 59 TPA); but if parties reduce bargain to writing that document may be the sole evidence and could require registration under Section 17 Registration Act.	Used to articulate the governing test: whether parties intended to reduce their bargain to writing (in which case registration may be required) or whether the deposit operated by implication as equitable mortgage without need for registration.
AIR 1965 SC 1591 — United Bank of India Ltd. v. Lekharam Sonaram	Similar principle that deposit of title-deeds implies mortgage unless parties intended the written memorandum to be the repository of bargain (which would then require registration under Section 17).	Applied along with Rachpal to frame the question whether Ex.A-14 was merely evidential or constituted the bargain requiring registration.
AIR 1960 SC 301 — Bhaskar Woman Joshi v. Narayan Rambilas	Where there is ambiguity in a document, extrinsic evidence may be admitted to ascertain the parties' intention; construction of deed to be viewed with surrounding circumstances.	Relied upon to show that the construction of Ex.A-14 and intention of parties must be determined on evidence and cannot be conclusively resolved by preliminary hearing of arguments alone.
AIR 1938 Calcutta 308 — Kedar Nath Saha & Others v. Sri Hari Sankar Paul and another	Principles on when registration of a memorandum is necessary, particularly where deposit preceded memorandum or parties reenact mortgage in writing.	Cited to demonstrate that registration is not always required if deposit and security were completed before the memorandum; the court said these factual questions require full evidence.
(1939) 50 L.W. 33 / AIR 1939 PC 167 — Sri Hari Shankar Paul and another v. Kedar Nath Saha and others	Similar to Kedar Nath Saha: on the effect of a written memorandum vis-à-vis prior deposit and whether registration is needed.	Referred to in support of the proposition that registration depends on whether the parties intended the writing to be the bargain, a question of fact.
AIR 1970 SC 659 — Deb Dutt Seal v. Ramal Lal Phumra and others	Set out various propositions about deposit of title-deeds and memoranda (e.g., consider facts as a whole; form and text relevant but not conclusive; contemporaneity is a strong indication; if memorandum lacks necessary terms registration not needed).	The court extracted and applied the enumerated positions (paragraphs (a)-(f) in the opinion) to reason that Ex.A-14's character cannot be determined conclusively before evidence is led.
AIR 1971 A.P. 359 — Kakaparthv Bhavanarayana v. Official Receiver	Authority cited in the context of documents, evidence and registration principles.	Included among authorities the court considered while summarizing legal positions; court regarded these as principles that inform but do not decide the present preliminary question without evidence.
Indian Bank, Hyderabad v. Anomula Seshagiri Rao & Sons Company — AIR 1971 (1) AWR 31	Authority on related principles concerning memorandum and registration.	Placed among the decisions read to derive positions; used to show consistency of principles requiring factual determination.
Veeramachineni Gangadhra Rao v. Andhra Bank Limited — 1971 SCR 209	Authority on construction of documents and registration issues.	Referred to as part of the body of authorities supporting the legal framework; court treated it as illustrating principles to be applied after evidence is adduced.
2001 (1) CTC 112 — A.C. Lakshmipathy & Another v. A.M. Chakarapani Reddiar	State practice and principles regarding documents, deposit of title-deeds and registration (cited with other authorities).	Counted among decisions surveyed to extract governing positions; used as part of contextual authorities rather than as basis for a preliminary ruling in this case.

Court's Reasoning and Analysis

The court's analysis proceeded by identifying Ex.A-14 (Memorandum of Agreement / Memorandum of Title-Deeds) as the crucial document and summarising its recitals. The court noted relevant statutory provisions and legal principles expressly cited in the opinion:

Section 59, Transfer of Property Act — deposit of title-deeds with intention to create security gives rise to an equitable mortgage by implication of law.
Section 17, Registration Act — if the parties intended the written memorandum to be the bargain (i.e., the document constitutes the contract), registration is required where value exceeds the statutory threshold.
Section 91, Indian Evidence Act — parol evidence is prohibited as to terms of a written contract, but extrinsic evidence may be permitted to determine the nature of the contract and parties' intention where the document is ambiguous.

Key steps in the court's reasoning:

The court observed that Ex.A-14 contains recitals stating the title-deeds were deposited "with a view to create an equitable mortgage" and that they are to be kept until monies are repaid and treated as a continuing guarantee, among other clauses. These recitals were material to the trial court's conclusion that Ex.A-14 created a charge requiring registration.
The court distilled the controlling legal test from cited authorities: whether the parties intended to reduce the bargain to writing (making the writing the repository of the bargain and thus registrable), or whether the deposit and the prior transaction gave rise to an equitable mortgage by implication (in which case registration of the memorandum may not be necessary). Authorities such as Rachpal v. Bhagwandas and United Bank of India were used to frame this test.
The court emphasized that these are questions of mixed law and fact (and of intention) which require full trial evidence — oral, documentary and circumstantial — to determine contemporaneity of loan and deposit, whether the memorandum merely records a past transaction or constitutes the terms of a bargain, and whether the parties intended the writing to be definitive. The court repeatedly stressed that mere recitals and oral argument at an initial stage are insufficient to reach a final conclusion.
The court considered the Supreme Court's procedural guidance in Bipin Shantilal Panchal that, generally, objected documents may be tentatively marked and the objections decided at final judgment (except stamp-duty/registration deficiency objections which should be decided earlier). The respondents had relied on the stamp/registration exception in Bipin to justify the trial court's immediate decision; the present court held that the exception does not dictate exclusion in all cases where registration is urged, because where the nature of the document itself is disputed, the question should be determined after evidence is adduced.
The court reviewed the authorities (including Deb Dutt Seal and others) and summarized the propositions (e.g., the facts and circumstances attendant on deposit and memorandum must be considered as a whole, contemporaneity is a strong indication but not conclusive, form and text are important but not decisive). The court noted that many of these authorities involved conclusions reached after full trial or on appeal, not at an interlocutory preliminary stage.
Concluding that the trial court erred by determining that Ex.A-14 constituted the bargain and needed registration at the interim stage, the court held that the impugned order suffered from material irregularity. The court therefore set aside the deletion of Ex.A-14 and directed that Ex.A-14 be marked as an exhibit subject to the defendants' objection, with the objection to be decided at the time of final disposal of the suit after evidence.

The court expressly refrained from expressing any final opinion on whether Ex.A-14 requires registration; that is left to be determined at trial upon full evidence.

Holding and Implications

Holding:

REVISIONS ALLOWED; ORDER SET ASIDE

More specifically, the High Court set aside the order dated 19.2.2001 made in I.A. Nos. 16843 and 16486/2000 in O.S. No. 9054/1996 and allowed the revisions. The court ordered Ex.A-14 to be marked as an exhibit (marked "Ex.A-14") subject to the objections raised by the defendants, with those objections to be decided at the time of final disposal of the suit. CMP No. 14230/2001 was dismissed as unnecessary and there was no order as to costs.

Implications:

Direct effect on the parties: Ex.A-14, previously deleted from evidence by the trial court, must now be marked and received as evidence subject to objection; the admissibility and the question whether it requires registration will be decided at the conclusion of the trial based on evidence.
Procedure for trial court: The V Additional Judge was directed to admit and mark Ex.A-14 subject to objection and to proceed to dispose of the suit expeditiously in accordance with law, determining the intention of the parties and the registration objection at final disposal.
Broader precedent or law: The court did not pronounce a final legal conclusion on whether Ex.A-14 required registration; rather it applied established authorities to hold that the preliminary exclusion was premature. The opinion emphasizes that questions of contemporaneity, intention and whether a memorandum constitutes the bargain are questions of fact and mixed law and fact to be decided on evidence. The court explicitly stated it is not expressing any conclusive opinion on whether Ex.A-14 needs registration.

VCJ/VCS

Show all summary ...

These revisions are preferred against the order dated 19.2.2001, made in I.A Nos. 16843 and 16486/2000 in O.S No. 9054/1996, by the V Additional City Civil Court, Chennai, allowing the applications filed under Or. 13, R. 3 and 6 CPC r/w Sec. 151 CPC, deleting Ex.A.14 Plaintiff Jayalakshmi Trading Company is the Revision Petitioner.

2. C.S No. 1040/1992 Original Side, High Court Madras. Transferred to the City Civil Court, Chennai and renumbered as O.S No. 954/1996: —

The first Defendant is the absolute owner of the property bearing Door No. 4, 111 Street, Balaji Nagar, Madras-14. The Defendants 1 and 3 approached the Plaintiff for financial loan for promoting multistoreyed building in the above said property. The Defendants agreed to pay the interest regularly and they offered to pay the money back by constructing and selling flats to the prospective purchasers. Borrowing a sum of Rs. 5,00,000/- the Defendants have executed Promissory Notes on various dates. In security for the loan, the Defendants have also executed a Memorandum of Agreement on 12.02.1990 in favour of Plaintiff and deposited the Title-Deeds creating equitable mortgage over the above said property. The Defendants are liable to pay Rs. 7,32,800/-. Hence the Plaintiff has filed the suit for recovery of Rs. 7,32,800/- with subsequent interest and hand over the constructed plaint schedule properties to be sold and to adjust the sale proceeds towards the amount payable.

3. Trial commenced in the suit. Exs.A-1 to A-8 were marked. Partner of the Plaintiff firm was examined as PW-1. He was further examined on 14.09.2000 and on the subsequent dates, Exs.A-9 to A-14 were marked. Exs.A-9 to A-13 are the Documents of Title. Ex.A-14 is the Memorandum of Agreement.

4. I.A Nos. 16843 and 16846/2000: — These applications were filed under Or. 13 R. 3 and 6 CPC r/w Sec. 151 CPC to reject Exs.A-1 to A-14 as inadmissible in evidence. According to the Defendants - D-15 and D-4 to D-12, the documents are inadmissible in evidence. The suit was filed on the strength of deposit of Title-Deeds made by the Defendants and the same is also supported by a Memorandum of Agreement. The Plaintiff was examined in part; he filed an application for condonation of delay in I.A No. 4685/2000 to deposit the Title-Deeds and the original Registration Certificate of the Firm. The same was allowed on 04.07.2000 According to the Defendants, Ex.A-14 is not a memorandum merely recording the deposit of Title-Deeds. It represents bargain of contract between the parties and the same has been reduced to writing and the document by itself is a partition document, which needs registration and the same is inadmissible in evidence. Exs.A.11 to A.13 are the Title-Deeds which form part of Ex.A-14 and hence those documents are irrelevant and the same cannot be marked. These applications have been filed for setting aside the marking of documents Exs.A.11 to A.14

5. Resisting the application, the Plaintiff Firm has filed the counter statement contending that the suit was filed for recovery of money on the basis of equitable mortgage. When the order of injunction was in force, the Defendants - D-15 and D-4 to D-12 have purchased the property and had their sale-deeds executed at their own risk and responsibility. Knowing fully well the legal implications, they purchased the property during the pendency of proceedings. Respondents have been examined in part and at that time, Application I.A No. 4685/2000 was filed and the Court had allowed the application permitting the Petitioner to produce the document subject to proof and relevancy. The Defendants cannot prevent the Plaintiff from adducing oral evidence regarding deposit of Title-Deeds. Ex.A-14 is the Memorandum for deposit of Title-Deeds, which is admissible in evidence. According to the Plaintiff, once the evidence has been recorded and the documents marked in the presence of junior counsel appearing for the Defendants, the Defendants cannot raise any objection on the documents which have already been admitted and marked.

6. Upon consideration of the averments in the affidavit and in the counter statement, the lower court found that the Court has got power to delete the document which has already been admitted in evidence. Finding that Ex.A-14 creates a charge over the property which needs to be registered and Ex.A-14 is inadmissible in evidence for want of registration and further finding that the document already admitted in evidence could be challenged at any point of time, the learned Judge has allowed the application in part, finding that Ex.A-14 is not admissible in evidence and ordered its marking as Ex.A-14, deleted from the evidence. The marking of document Exs.A-11 to A-13 has been confirmed.

7. Aggrieved over the order of the V Additional Judge, Plaintiff/Revision Petitioner has preferred these revisions. The learned Senior Counsel, Mr. S.V Jayaraman, appearing of the Revision Petitioner/Plaintiff has submitted that the documents have been admitted after granting number of adjournments. It is submitted that the trial Court erred in passing elaborate order regarding the admissibility of the document in the initial stages when the trial is at progress. In support of his contention, the learned Senior Counsel has relied upon AIR 2001 SC 1158 [Bipin Shantilal Punchal v. State of Gujarat and another]. It is further contended that the lower court having admitted the documents, ought not to have later reconsidered the matter rejecting Ex.A-14. It is the further contention that the going into the question of admissibility of the document ought to have been relegated to the final stage of hearing arguments and pronouncing the Judgment.

8. Opposing the marking of Ex. A-11, the learned counsel for the Respondents/Defendants has contended that Ex.A-14 creates a right/creating charge and the document requires to be registered. Submitting that the document Ex.A-14 cannot be looked into for any purpose for want of stamp duty and registration, the learned counsel for the Respondents has relied upon a number of decisions. It is the further contention that Ex.A-14 is not a mere Memorandum of Title-Deeds, but a document creating right and charge which needs to be registered. It is further submitted that the Court has got power to reconsider the document which has already been incorrectly admitted. Placing reliance upon AIR 1977 Rajasthan 189 [Mehaboob Alam and another v. Nasira Begum and others], it is submitted that questioning the marking of the document, revision is not maintainable.

9. Upon consideration of the contention of both parties, the impugned order and other materials on record, the following points arise for consideration in these revisions:

(i) Whether the trial court was right in deleting Ex.A-14 from evidence?

(ii) At that stage of trial, whether the trial court was right in finding that Ex.A-14 is not a memorandum of Title-Deeds but creates a charge on the property which need to be registered?

(iii) Whether the impugned order deleting Ex.A-14 from evidence suffers from material irregularity warranting interference?

10. The crucial document is Ex.A-14 Agreement/Memorandum of Title-Deeds. Exs.A-9 to A-13 are the Documents of title. The details of the above documents are as follows: —

Ex.A-9 - Certificate of Registration of Plaintiff Firm, issued by the Registrar of Firms.

Ex.A-10 - Encumbrance Certificate

Ex.A-11 - Power of Attorney issued by D-1 to D-3

Ex.A-12 - Payment of receipt issued by first Defendant to third party

Ex.A-13 - Sale Deed Ex.A-14 - Memorandum of Agreement

11. The above documents - Exs.A-9 to A-14 were not filed along with the plaint. When the trial commenced, I.A No. 4685 of 2000 was filed under Or. 13 R. 2 CPC to receive the documents. The documents Exs.A-9 to A-13 were marked. Later agreement/Memorandum of Title-Deeds Ex.A-14 was marked. Submitting that regarding the admissibility of Ex.A-14, objections could be raised by cross examining PW-1, the learned Senior counsel has submitted that the Supreme Court has disapproved the practice of passing elaborate order regarding the admissibility of the documents. It is submitted that the proper course would have been to admit the document subject to objection and determine the objection regarding the admissibility or otherwise at the final stage. In support of his contention, the learned Senior Counsel has relied upon AIR 2001 SC 1158 (Bipin Shantilal Panchal v. State of Gujarat and another) where the Supreme Court held thus

“When so recast, the practice which can be a better substitute is this: Whenever an objection is raised during evidence taking stage regarding the admissibility of any material or item of oral evidence the trial Court can make a note of such objection and mark the objected document tentatively as an exhibit in the case (or record the objected part of the oral evidence) subject to such objections to be decided at the last stage in the final Judgment. If the Court finds at the final stage that the objection so raised is sustainable the Judge or Magistrate can keep such evidence excluded from consideration. In our view there is no illegality in adopting such a course. [However we make it clear that if the objection relates to deficiency of stamp duty of a document the Court has to decide the objection before proceeding further]. For all other objections the procedure suggested above can be followed.

14. The above procedure, if followed, will have two advantages. First is that the time in the trial Court, during evidence taking stage, would not be wasted on account of raising such objections and the Court can continue to examine the witnesses. The witnesses need not wait for long hours, if not days. Second is that the superior Court, when the same objection is re-canvassed and reconsidered in appeal or revision against the final Judgment of the trial court can determine the correctness of the view taken by the trial court regarding that objection, without bothering to remit the case to the trial court again for fresh disposal. We may also point out that this measure would not cause any prejudice to the parties to the litigation and would not add to their misery or expenses.”

12. In the above decision, the Supreme Court has made it clear that if the objection relates to deficiency of stamp duty on a document, the Court has to decide the objection before proceeding further. The learned counsel for the Respondents lays emphasis upon that observation of the Supreme Court and contended that when objection has been raised regarding the stamp duty payable on Ex.A-14.Registration of the document, the Court has rightly determined the objection on its admissibility before proceeding with the trial The learned counsel for the Respondents has further submitted that the impugned order does not suffer from any impropriety calling for interference.

13. Whether Ex.A-14 is a Memorandum for deposit of Title-Deeds or whether it contains terms of the bargain relating to the transaction, which is inadmissible in evidence is the crucial question arising for consideration. Defendants 1 and 2 borrowed the amount/secured financial assistance, from the Plaintiff company to put up multi-storyed construction over the lands. The first Defendant was the absolute owner of the property and the second Defendant was the Agreement Holder and Power of Attorney holder. In security for the finance, Defendants 1 and 2 have deposited their Title-Deeds and the property at Door No. 4, III Street, Balaji Nagar Madras 14. The documents of title have been deposited with a view to create a equitable mortgage over the suit property for the amount already borrowed or to be borrowed. For better appreciation of the contentious points urged in these revisions, we may usefully refer to the recitals in Ex.A-14:

“In view of the above, today we are herewith depositing the Title-Deeds of our property No. 4, III Street, Balaji Nagar, Madras 600 014, (more fully described in the schedule) with a view to create an equitable mortgage over the said property for the amounts already borrowed or to be borrowed. Whenever there is necessity for funds for construction purposes, we will be borrowing from you and repay as per the mutual understanding and you can keep the Documents deposited already with you until all your monies are repaid along with interest without any upper limit and this is treated as continuing Guarantee. Any shortfall will be compensated from and other resources belonging to us.

Even the Second of us borrow from you without First of us signature, we undertake to hold responsible for all the amounts borrowed from you.

As and when funds come we will be repaying you. The main source of funds will be out of Registration of undivided share of the land and the advances from the prospective buyers towards the construction of superstructure. The maximum duration required is one year.

The interest is paid monthly and any interest arrears will carry stipulated interest on the outstanding interest arrears. We will further undertake to pay your interest correctly by 5th of next month. This is the fist charge we are creating over the said property and there is no other Charge, Lien, Encumbrance, Court Proceedings, Maintenance Charge etc., except the one we have created against your over the said property. We will not further encumber the property without written permission. Whatever superstructure that comes over the property also comes under this understanding. We assure you that we will not do any act which will deteriorate in the value of the property.

Undivided share of land will be registered to the prospective buyers with your consent and knowledge and pass on the whole amounts relating to the Registration.

We are fully competent to execute this Document with our full understanding and meaning and effect of this document. We will keep the property in proper fit condition and pay Taxes etc. regularly.

Any violation of the above conditions, you are at liberty to take suitable action to recover your monies.

14. When Title-Deeds are deposited with intention to create a security, the law implies the creation of a mortgage, and no registered instrument is necessary under Sec. 59 of the Transfer of Property Act. But if the parties choose to reduce the contract to writing, the document will be the sole evidence of its terms and the deposit and the document together form an integral part of the transaction. As the deposit alone cannot create a mortgage, the document which constitutes the bargain regarding the security requires registration under Section 17, Registration Act, where the value of the property is Rs. 100/- or upwards. The crucial question is: did the parties intend to reduce their bargain to the form of a document? If so, it requires registration. If, on the other hand, proper construction and the surrounding circumstances lead to the conclusion that the parties did not intend to do so, then there being no express bar-j gain, the mortgage arises by implication of the law from the deposit itself with the requisite intention, the document being merely evidential does not require registration Rachpal v. Bhagwandas [AIR 1950 SC 272]; United Bank of India Ltd. v. Lekharam Sonaram [AIR 1965 SC 1591].

15. In the light of the above principle, now the crucial point is by writing Ex.A-14, did the parties intend to reduce the bargain regarding the deposit of Title-Deeds to the form of a document? If the memorandum is in the nature of a forwarding letter or an acknowledgment of the fact that the mortgagor has deposited the deed of title as security against the Promissory Note, which has been executed much earlier, registration is not necessary. In other words, if the memorandum merely records a past transaction and includes money to be advanced in future, the document may not require registration. If the memorandum merely records past transaction of loan, the equitable mortgage does not require to be registered. But if the memorandum constitutes a contract, the writing requires to be registered.

16. A mortgage could be executed not only for security debt which had already arisen, but also as security for payment of money to be advanced. The following aspects emerge from Ex.A.14: —

1. the Defendants have deposited their Title-Deeds as security for the finance;

2. in view of providing security, they have deposited their Title-Deeds with intention to create equitable mortgage.

17. The stamp paper of Ex.A-14 is dated 10.02.1990 Ex.A.14 was written on 12.02.1990 Even prior to Ex.A.14, an amount of Rs. 70,000/- + Rs. 30,000/- had already been advanced to the Defendants, for which the Defendants have executed two promissory notes on 10.02.1990 In Ex.A.14, the Defendants have made clear that the security in Ex.A.14 shall hold good for all monies to be advanced in future and that the same is to be treated as a continuing guarantee. Thus Ex.A.14 seems to be the Memorandum of Title-Deeds with intention to create equitable mortgage for the loan already advanced and to be advanced in future. The Defendants have borrowed the amount from the Plaintiff on Promissory Notes as noted below:

1.10.02.1990 Rs. 70,000/- Repayable with interest at 36% p.a

2. 10.02.1990 Rs. 30,000/- -do-

3. 12.02.1990 Rs. 2,00,000/- -do-

4. 12.02.1990 Rs. 50,000/- -do-

5. 27.03.1991 Rs. 50,000/- -do-

6. 28.03.1991 Rs. 50,000/- -do-

7. 30.03.1991 Rs. 50,000/- -do-

Whether Ex.A.14 is a Memorandum of Title-Deeds for the above said loan is the crux of the matter.

18. Only if the loan and deposit of Title-Deeds are contemporaneous or form integral part of the transaction, Ex.A.14 needs registration under Section 17 of the Registration Act. Merely by the recitals in Ex.A.14 and upon hearing the arguments advanced on behalf of the parties, the Court cannot come to the conclusion that whether Ex.A.14 is an equitable mortgage reducing the terms of bargain into writing. Likewise, merely upon hearing the arguments and by a reading of Ex.A.14, the Court cannot arrive at a proper conclusion whether loan and the deposit of Title-Deeds are contemporaneous requiring registration or otherwise.

19. Without much going into the details of Ex.A.14, it is to be noted that there are no recitals in Ex.A.14 showing terms of bargain. The deposit of Title-Deeds made by a letter stating that the Title-Deeds are deposited as security with intention to create equitable mortgage for the loan advanced and to be advanced in future. The parties are yet to come on trial. This Court is not expressing any opinion whether Ex.A.14 needs registration or not. Suffice it to point out the deposit of Title-Deeds appears to be only a security. The following questions of fact are to be determined only after the parties adduce evidence:

1. Whether the deposit of Title-Deeds was only a security?

2. Whether advancing loan and Ex.A.14 are integral part of the same transaction?

3. Whether Ex.A.14 contains terms of bargain?

20. The said facts and these questions will have to be decided just like any other facts on presumptions and assessment of oral, documentary or circumstantial evidence. There is no presumption of law that by mere execution of memorandum of deposit of Title-Deeds, the transaction and the Memorandum are contemporaneous with the advancement of loan. All that is a matter of evidence and assessment of evidence.

21. It may be argued that the transaction being reduced into writing, in view of Section 91 of the Indian Evidence Act, the parties cannot lead oral evidence in respect of the transaction. It is relevant to note that Section 91 of the Indian Evidence Act prohibits oral evidence only regarding the terms of the contract or other evidence relating to the terms of the contract. Section 91 of the Indian Evidence Act does not prohibit the parties to lead oral evidence in respect of the nature of the contract as well as the oral agreement entered into between the parties simultaneously along with the document. It is well settled that if there is ambiguity in the language employed and the recitals there on, the intention of the parties may be ascertained by adducing extrinsic evidence. In AIR 1960 SC 301, (Bhaskar Woman Joshi v. Narayan Rambilas) considering the construction of document, the Supreme Court has observed that

“The question in each case is one of determination of the real character of the transaction to be ascertained from the provisions of the deed viewed in the light of the surrounding circumstances. If the words are plain and unambiguous they must, in the light of the evidence of surrounding circumstances, be given their true legal effect. If If there is ambiguity in the language employed, the intention may be ascertained from the contents of the deed with such extrinsic evidence as may be, by law, be permitted to be adduced to show in what manner the language of the deed was related to existing facts”.

22. Thus, the construction of the document and the intention of the parties could be determined only when the parties adduce evidence. Only upon such adducing of evidence and in the light of the evidence adduced and the surrounding circumstances and the conduct of the parties, the Court could determine the nature of the transaction.

23. Whether the advancing of loan and execution of Ex.A.14 are contemporaneous or not is a mixed question of law and fact. Likewise, whether Ex.A.14 is merely a security creating equitable mortgage for the loans advanced or whether it contains terms of bargain is also a mixed question of law and fact. Merely by hearing the arguments advanced on behalf of the parties, the question of facts cannot be determined. When the parties are yet to go on trial and adduce evidence, the learned V Additional Judge erred in concluding that Ex.A.14 is an equitable mortgage forming integral part of the borrowal which needs to be registered. Such conclusion is not a matter of mere arguments. It is to be determined when the parties adduce oral and documentary evidence.

24. In Ex.A.14, parties have incorporated a clause that if the interest is in arrears, they undertake to pay the interest arrears correctly by fifth of next month. In Ex.A.14, in the relevant clauses, it is stated:

“This is the fist charge we are creating over the said property and there is no other Charge, Lien, Encumbrance, Court Proceedings, Maintenance Charge etc., except the one we have created against your over the said property. We will not further encumber the property without written permission. Whatever superstructure that comes over the property also comes under this understanding. We assure you that we will not do any act which will deteriorate in the value of the property.”

These recitals seem to have weighed substantially in the mind of the trial court, in forming an opinion that Ex.A.14 creates a charge/interest over the immovable property which needs to be registered. The appreciation of these recitals is a matter of evidence when the parties adduce evidence. It is to be noted that any equitable mortgage is charge over the mortgaged property. What the parties really intend by the above recitals is to be determined only after the conclusion of the trial. The finding of the learned Judge referring to the above recitals that Ex.A.14 has created a charge and needs to be registered cannot be countenanced. The document Ex.A.14 having been admitted in evidence ought not to have been deleted.

25. Contending that this is a case where the deposit of Title-Deeds had been made by the letter explaining why Title-Deeds are deposited and in such case, the document requires registration, the learned counsel for the Respondent has submitted that parties have reduced the bargain into writing and Ex.A.14 is compulsorily registrable.

26. In support of his contention, the learned counsel for the Respondents relied upon:

AIR 1938 Calcutta 308 - Kedar Nath Saha & Others v. Sri Hari Sanakr Paul and another

AIR 1939 PC 167 = (1939) 50 L.W 33 - Sri Hari Shankar Paul and another v. Kedar Nath Saha and others

AIR 1970 SC 659 - Deb Dutt Seal v. Ramal Lal Phumra and others

AIR 1971 A.P 359 - Kakaparthv Bhavanarayana v. Official Receiver

AIR 1971 (1) AWR 31 - Indian Bank, Hyderabad v. Anomula Seshagiri Rao & Sons Company

1971 SCR 209 - Veeramachineni Gangadhrq Rao v. Andhra Bank Limited. Others

- and also -

2001 (1) CTC 112 - A.C Lakshmipathy & Another v. A.M Chakarapani Reddiar By a careful reading of the above decisions, the principles regarding the documents, evidence, mortgage by deposit of Title-Deeds, whether registration is essential or not, the following positions emerge [AIR 1970 SC 659]:

(a) The facts and circumstances attendant on the deposit of Title-Deeds and the execution of the memorandum must be considered as a whole;

(b) If the transaction of deposit of Title-Deeds with intent to create a security be completed before the parties have a memorandum, registration of the document is not required unless as in Hari Sankar Paul's case, 66 Ind App 184 = (AIR 1939 PC 167) the parties proceed to create a mortgage over again in writing.

(d) If the memorandum does not contain all the terms necessary to give it efficacy as a contract of mortgage no registration is necessary.

(e) If the evidence shows that the memorandum was executed with the intention that it should be the repository of the bargain between the parties then the document alone can be looked into. In the absence of registration, the bargain cannot be proved.

(f) The deposit of title deeds contemporaneously with the execution of the memorandum containing the terms of mortgage gives a strong indication of the document being considered as the bargain between the parties.

27. All the above decisions arise while hearing appeals or the second appeals, where such arguments have been raised and conclusions arrived at after the parties have adduced evidence and trial concluded. In this case, the parties are yet to go on trial. When that being so, at this initial stage, Ex.A.14 cannot be considered in the light of the above principles to conclude whether it requires registration or not.

28. Under Or. 13 R. 6 CPC, it is the Court's duty to exclude all the irrelevant or inadmissible documents. Even if the documents had already been admitted on proper objection, the Court may exclude irrelevant or inadmissible evidence.

29. Contending that the order holding that the document is inadmissible for want of stamp duty and registration is not revisable under Section 115 C.P.C, the learned counsel for the Respondents/Defendants relied upon the decision in AIR 1977, Rajasthan 189 (Mahboob Alam and another v. Smt Nasira Begum and others) in which, the Rajasthan High Court has held that:

“the order of the trial Court holding that the document in question was compulsorily registrable and that the same could not be received in evidence for want of registration, even if it may be erroneous, does not relate to the jurisdiction of that court, and therefore, the provisions of Sec. 115, C.P.C are not attracted to such an order. The question of construction of a document is a part of the proceedings of the Court and in case a mistake is committed by it in construing the document, the order passed by the trial Court in such matters may at best suffer from an error of law but the same has no concern with the jurisdiction of that court. The trial Court had jurisdiction to entertain the suit and to decide all questions raised therein. There is no error or irregularity in the exercise of jurisdiction nor there is a question of failure to exercise jurisdiction in the present case. If any error has crept in the decision of the trial Court on the aforesaid question, the same can be corrected in the appeal that may be filed against the decree, which will ultimately be passed in the suit. 1970 Raj. LW 320 (FB), Foll”.

The above case arose where the document was found to be compulsorily registrable. The case in hand stands on different footing where the nature of document itself is in dispute. The finding regarding the nature of document cannot be said to be incidental to the proceedings.

30. The admissibility on the ground whether Ex.A.14 requires registration or not is to be determined only at the time of conclusion of the trial, when the parties adduce elaborate oral and documentary evidence regarding the intention of the parties. The learned Judge was not right in finding that Ex.A-14 contains the terms of bargain which needs registration. The impugned order suffers from material irregularity and is to be set aside. It is ordered that Ex.A-14 is to be marked as exhibit, subject to the objection by the Defendants. The objection raised by the Defendants is to be determined at the time of disposal of the case.

31. For the reasons stated above, the order (dated 19.2.2001), made in I.A Nos. 16843 and 16486/2000 in O.S No. 9054/1996 on the file of the V Additional City Civil Court, Chennai is set aside and these revisions are allowed.

Consequently, CMP No. 14230/2001 is dismissed as unnecessary. In the circumstances of the case, there is no order as to costs.

32. The learned V Additional Judge, City Civil Court, Chennai is directed to admit Ex.A.14, mark the same ‘as Ex.A.14”, subject to objection and dispose of the suit O.S No. 9054/1996 expeditiously in accordance with law. The intention of the parties regarding creating equitable mortgage and the objection raised regarding Ex.A.14 is to be determined at the time of disposal of the suit.