Hubert Peyoli v. Santhavilasathu Kesavan Sivadasan And Another

This appeal is directed against the judgment and decree delivered by the additional Sub Judge, Quilon in O.S No. 286/82. The plaintiff is the appellant and the defendants are the respondents in this appeal. The plaintiff filed the suit for recovery of money on the following grounds: On 17-11-1971 the defendants/respondents received a sum of Rs. 15,000/- from the plaintiff/appellant agreeing to pay the same on demand with interest at 12% per annum and executed a promissory note. As a further security for the same amount, they executed a memo of deposit of title deed relating to the plaint schedule property. The defendants made the payment of Rs. 900/- only in six instalments. Thereafter no amount was paid. As on 18-2-75 the date of the termination of the chides between the defendants and the plaintiff, an amount of Rs. 10,250/- was due to the plaintiff for which with interest the suit was filed. The plaintiff never agreed that the loan amount can be repaid by remitting the chity instalments. The above contentions of the plaintiff were resisted by the defendants on the ground that the suit is barred by limitation. The plaintiff represented that as soon as the 3rd instalment is paid after subscribing 10 numbers of chities having a value of Rs. 5,000/- each, a loan of Rs. 25,000/- will be paid to the first defendant and the loan amount will be adjusted in the chity instalments paid. Believing the above representation of the plaintiff, he subscribed 10 numbers of the chitty. But, when the loan was ‘demanded after remitting the three instalments, the plaintiff failed to advance the loan. After the chity instalments were remitted the plaintiff advanced the loan of Rs. 15,000/- only to the first defendant. As additional security for the amount a promissory note was executed. Thereafter, the first defendant remitted the chitty instalments in all the 10 numbers of the chity after 15 instalments. The defendants settled the transaction by remitting Rs. 15,000/- including ‘Veetha Palisa’. The entire transaction among them was settled. As a security for realisation of the loan amount, in case the chity instalments are defaulted, the defendants deposited the title deeds relating to their property. The documents were not returned after settling the transaction. It was agreed that the balance loan of Rs. 10,000/- will be advanced soon and the plaintiff also failed to advance that amount. Chity instalments were not remitted further because the plaintiff concern was closed. The plaintiff is bound to pay interest for the chity instalments of Rs. 15,000/- deposited by the defendants. Hence the suit is liable to be dismissed.

2. On both the sides, evidence were let in. The trial court on examining the evidence dismissed the suit. The above judgment and decree are being challenged in this appeal. The question that was urged before me for consideration is whether Ext. A2 dated 17-11-71 create separate mortgage to secure the loan advanced under Ext. A1 promissory note, the same dated. If so, whether A2 requires registration. The learned counsel appearing for the appellant submitted that the appellant was a foreman of a chitty transaction, in which the first defendant/first respondent joined as a subscriber in 10 numbers of chitties each valued at Rs. 5,000/-. On payment of three instalments in all the 10 chitties a sum of Rs. 15,000/- was advanced to the respondent for which Ext. A1 promissory note was executed on 17-11-71. As an additional security, on the same date of Ext. A1, Ext. A2 memorandum was executed by the first respondent/defendant in favour of the appellant. Thus, Ext. A2 is not creating a mortgage and therefore it needs no registration. Hence, the dismissal of the suit by the Trial Court on that main ground cannot be sustained and that has to be reversed.

3. As against the above submission of the learned counsel for the appellant, it was the contention of the learned counsel for the respondents that a mere reading of Ext. A2 would evince that the intentions of the parties were to create a separate mortgage in order to secure the loan amount advanced under Ext. A1. In other words, it is a separate transaction of mortgage and therefore it requires registration. In case Ext. A2 is pot a mortgage and it is only an additional security for the loan advanced in Ext. A1 as urged by the other side, the appellant ought to have come with the suit for recovery of the money within the period of limitation (namely three years from the date of Ext. A1). The above conduct in not filing the suit within the time prescribed would further signify the intention of the parties that Ext. A2 is nothing but a mortgage. It is also the submission of the learned counsel for the respondent that it was agreed by both the parties that on payment of three instalments in all the 10 chities an amount of Rs. 25,000/- had to be advanced by the appellant to the respondent. But, however instead of Rs. 25,000/- the appellant advanced only Rs. 15,000/- for which alone Ext. A1 promissory note was executed. And Ext. A2 only as a separate transaction to secure the amount advanced under Ext. A1 was executed by the first respondent and therefore it necessarily requires registration. In the absence of the registration of Ext. A2, it loses its legal effect of a mortgage enforceable in law. Both the learned counsel also placed before me the following number of judgments of this Court as well as the Apex Court. On account of the above divergent sub-missions of both the sides in respect of Ext. A2, now let me discuss the position of law on this aspect mainly on the basis of the settled principle laid down by the Apex Court, by this Court as well as by the High Court of Madras. Section 58(f) of the Transfer of Property Act reads as follows:—

“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.”

Delivery of document of title alone is sufficient to create an equitable mortgage under the above Section. There is no necessity to execute any document. In case, a document was executed for that purpose of creating a mortgage under Section 58(f) of the Transfer of Property Act, no doubt it requires registration. In a case, Watesa Mudaliar v. Munuswami Naidu (reported 1965 (1) MLJ 179), a single bench of the Madras High Court has said that for creating an equitable mortgage, there must be a debt, there must be a deposit of title deeds and that intention of the parties should be that the title deeds were deposited only for the purpose of giving security of the property covered by the title deed. The Supreme Court in United Bank of India v. Lekharam & Co., (reported at AIR 1965 SC 1591) has laid down the following principles (at page 1594):

“applying the principle to the present case, we consider that the letter at Ext. 7(a) was not meant to be an integral part of the transaction between the parties. The letter does not mention what was the principal amount borrowed or to be borrowed. Neither does it refer to the rate of interest for the loan. It is important to notice that the letter does not mention details of title deeds which are to be deposited with the plaintiff-bank. We are, therefore of the opinion that the view of the High Court with regard to the construction of Ex. 7(a) is arreneous and the document was not intended to be an integral part of the transaction and did not by itself, operate to create an interest in the immovable property. It follows, therefore, that the document Ex. 7(a) did not require registration under S. 17 of the Indian Registration Act;

A Division Bench of the Madras High Court in Indersain v. MD. Raza Gowher reported at 1961 (2) MLJ 328: AIR 1962 Mad 258 has laid down the following principle:

“In the case of an equitable mortgage, if the documents had been deposited before the execution of the writing reciting it, that is, if the documents had been handed over to the creditor as security for the loan and the writing or letter merely recorded a past transaction, there would be no need for registration of the letter for a valid equitable mortgage. Where, however, there was no past transaction of actual deposit of title deeds before the execution of the letter relied on, and the letter is the only evidence of the mortgage and the only document by which the mortgage was created, the letter has to be registered and if it is not registered, it cannot be admitted in evidence to prove a valid acquitable mortgage by deposit of title deeds:

A Single Bench of this Court in Sudarsan Trading Company v. V. Sankar (reported at 1979 (1) ILR Kerala 710) has laid down that if the title deeds were handed over, accompanied by evidence by written agreement, then that bargain must rule and being written bargain it must be registered. In this case, Ext. A5 is not real, the bargain between the parties. It only requires an earlier deposit of title deeds and therefore the same need not be registered.

4. The above decision of the Madras High Court as well as the decision of this Court are quite obvious that when the memorandum or letter was executed on the date of the deposit or delivery of the title deeds, that needs registration. And after the delivery of the title deed, any letter or memorandum was executed endorsing the earlier deposit of title which already created a mortgage that letter needs no registration. In the instant case before me, it is quite clear that Ext. A2 was executed on the same date on which the document was delivered. Therefore, as per the above principle laid down by the Madras High Court and by this Court in the above decisions, it is quite obvious that Ext. A2 at the outset needs registration. The Supreme Court in the above decision is so clear that when the amount of debt and the interest are specifically mentioned and also the document contains the terms, that creates a mortgage which necessarily requires registration. No doubt in Ext. A2, the interest is not stated. By the non-mention of interest alone, it is not proper to conclude that the remaining portions of the document do not satisfy the requirements needed for creating a mortgage. At pages 387 and 388 of the Mullar's Transfer of Property Act, 7th Edition, a detailed discussion has been made regarding the registration of the deed while the documents of title were deposited or delivered on the basis of the settled proposition of law. When I once again examined the entire evidence available on record, as well as the judgment of the Court below on the footing of the settled law referred to above, I have no hesitation to Conclude that the parties had the intention of creating a separate mortgage in Ext. A2 for the purpose of securing the amount advanced under Ext. A1 promissory note. When that be so. Ext. A2 requires registration. In this context, it is also pertinent to refer to the submission of the learned counsel for the respondents that if really Ext. A2 is not a deed of mortgage, then the appellant ought to have filed the suit on the basis of Ext. A1 promissory note within a period of limitation. But, non-filing of such suit by the appellant is a clear indication that the parties had intention of executing a mortgage under Ext. A2. That submission of the learned Counsel for the respondents is fortified by the evidence on record, as well as the circumstances of the case. Therefore, on account of the foregoing reasons, Ext. A2, being a mortgage when not registered, is not enforceable in law and therefore the appellant has to necessarily fail in this suit. The findings and conclusions arrived at by the lower Court in respect of this transaction are perfectly correct and proper and they need no interference by this Court.

In the result, the appeal stands dismissed, confirming the judgment and decree of the Trial Court. The parties are directed to bear their own costs.

Appeal dismissed.