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Case Number

Appeal No. 438 of 1965

Attorney(S)

For the Appellant: G. Bhaskar Rao, P. Ramachandra Reddi, A. Chandra Reddi, S. Parvatha Rao, Advocates.

Judges

Obul Reddi
Ramachandra Raju, JJ.

Acts

1951.(Signed) Sonti Venkataratnam/7-11-19514. Section 58(f) of the Transfer of Property Act
Sec. 17 of the Indian Registration Act 1908
Sec. 17 of the Indian Registration Act.9.
Sec. 17 of the Indian Registration Act
Sec. 49 of the Indian Registration Act
Sec. 91 of the Evidence Act.

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Smart Summary

Judgment Summary — Ramachandra Raju, J.

Factual and Procedural Background

This appeal arises from a suit brought by the plaintiff (appellant) to enforce an equitable mortgage said to have been created by the late Sonti Venkataratnam (father of respondents 2 to 5). The narrow legal question was whether Exhibit A-7, a typed letter dated 7-11-1951 signed and delivered by Sonti Venkataratnam and relied upon by the plaintiff as evidence of the mortgage, was a document compulsorily registrable under Section 17 of the Indian Registration Act. The learned Subordinate Judge found that Ex. A-7 required registration, was not registered, and hence was inadmissible in evidence; on that basis the lower court dismissed the suit. The plaintiff appealed against that decision.

Material factual chronology relevant to the dispute (as set out in the opinion):

1948: Sonti Venkataratnam borrowed Rs. 10,000 and executed promissory note Ex. A-1.
1949: He borrowed a further sum and executed promissory note Ex. A-2.
1950: A renewal promissory note Ex. A-3 was executed.
4-5-1951: Renewal produced Ex. A-4 (Rs. 13,500), executed jointly by Sonti Venkataratnam and Tumu Subba Rao.
13-8-1951: Ex. A-5 promissory note for Rs. 1,800 executed, also by both debtors.
According to the plaintiff, when pressed for repayment of debts under Exs. A-4 and A-5, Sonti Venkataratnam deposited a title deed (Ex. A-6) as security and executed Ex. A-7 on 7-11-1951 evidencing that deposit. The full text of Ex. A-7 (the typed letter) is reproduced in the opinion and contains, among other things, the words "I now deposit the title deed ..." and "I executed this document of security in your favour."
The defendants alleged (in their written statements) that Ex. A-7 itself constituted the contract of mortgage and thus was an integral document requiring registration; in response the plaintiff amended the plaint (paragraph 3(a)) to allege that the title deed was deposited in the morning of 7-11-1951 and that Ex. A-7 was signed and delivered in the evening only to record that earlier deposit.

Legal Issues Presented

Whether Exhibit A-7, the typed letter of 7-11-1951 relied on by the plaintiff as evidencing the creation of an equitable mortgage by deposit of title deeds, is a document which constitutes the contract or bargain between the parties and therefore was compulsorily registrable under Section 17 of the Indian Registration Act.
If Ex. A-7 was a registrable document but remained unregistered, whether it was inadmissible in evidence under Section 49 of the Registration Act and consequently the mortgage could not be proved (including by oral evidence) under Section 91 of the Evidence Act.

Arguments of the Parties

Appellant's (Plaintiff's) Arguments

The plaintiff's pleaded case (as amended in paragraph 3(a) of the plaint) asserted that the title deed was deposited with the plaintiff in the morning of 7-11-1951 with a definite intention to create security for the earlier promissory notes and that Ex. A-7 was executed and delivered in the evening of the same day merely to record the earlier deposit.
The plaintiff's original description of Ex. A-7 in the list of documents annexed to the plaint characterized it as a "letter executed as Mortgage by deposit of title in favour of the plaintiff", and the plaintiff thereafter advanced the "earlier deposit" narrative to meet the defendants' written statement plea that the letter itself constituted the contract.

Respondents' (Defendants') Arguments

The defendants contended in their written statements that Ex. A-7 was not merely a memorandum recording a prior oral deposit but was itself the integral document constituting the contract of mortgage (i.e., the bargain reduced to writing).
On that footing they argued that Ex. A-7 required registration under Section 17 of the Indian Registration Act and, being unregistered, was inadmissible in evidence under Section 49; consequently the plaintiff could not rely on Ex. A-7 to prove the mortgage.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
M. Subramanyam v. M.L.R.M. Lutchaman, A.I.R. 1923 P.C. 50	The Privy Council held that a memorandum may be of such a nature that it is itself the contract for a mortgage and thus falls within Section 17 of the Registration Act (i.e., it can operate as the instrument creating the equitable mortgage and requires registration).	The court cited this decision as an example where a written memorandum was treated as the contract itself. It used the decision to show that if Ex. A-7 embodied the bargain between the parties (as in M. Subramanyam), then Ex. A-7 would be registrable under Section 17.
Sundarachariar v. Narayana Ayyar, A.I.R. 1931 P.C. 36	The Privy Council held that a memorandum which merely records the particulars of deeds delivered as security and does not embody the terms of the agreement is not itself the agreement and does not require registration.	The court relied on this authority to contrast situations where a written memorandum is merely evidential of an earlier deposit and therefore not an integral part of the mortgage-creating transaction. The opinion distinguished Ex. A-7 from the facts of this case because, here, there was no earlier agreement shown.
Rachpal Mahataj v. Bhagwanada Daruka, A.I.R. 1950 S.C. 272	The Supreme Court held that a letter which purports only to record a transaction concluded orally (i.e., it is evidential of an earlier bargain and not the bargain itself) is not intended to be the basis of rights and liabilities and therefore does not reduce the bargain to writing for purposes of registration.	The court invoked this decision to demonstrate that where the written document merely records a prior oral agreement (and was not intended to be the contract itself), registration is not required. The court then distinguished Ex. A-7 on the ground that, unlike the letter in Rachpal Mahataj, Ex. A-7 contained language indicating that it itself effected the deposit ("I now deposit ...", "I executed this document of security in your favour") and no earlier agreement was shown.
United Bank of India Ltd. v. Lakharam Sonaram & Co. (Supreme Court — reported in the opinion without a formal citation)	The Supreme Court held that an authorisation/letter which merely authorised deposit of title deeds on the debtor's behalf and did not itself operate to create an interest in immovable property was not an integral part of the mortgage transaction and therefore did not require registration under Section 17.	The court cited this authority as an example where a document was held not to be an integral part of the mortgage; it used the case to show the distinction that where the writing is only an authorisation (and not the operative bargain), registration is not required. The opinion distinguished Ex. A-7 because that document contained operative statements indicating that the deposit and the security were effected by the letter itself.

Court's Reasoning and Analysis

The court's analysis proceeded in a structured way, applying statutory principles and precedents to the facts:

Legal framework: The court explained that a mortgage by deposit of title deeds is recognised by Section 58(f) of the Transfer of Property Act, and such a mortgage may be created by mere delivery of title deeds (i.e., by deposit) without any writing. However, if the parties choose to reduce the bargain to writing, that document which creates an interest in immovable property becomes registrable under Section 17 of the Indian Registration Act (for instruments of value Rs.100 and above). An unregistered registrable instrument cannot be used in evidence under Section 49 of the Registration Act, and the transaction cannot be proved by oral evidence in view of Section 91 of the Evidence Act.
Precedent synthesis: The court reviewed authorities where the central question was whether a document accompanying or recording a deposit of title deeds was the operative agreement (requiring registration) or only an evidential record of an earlier oral bargain (not requiring registration). Decisions of the Privy Council and the Supreme Court were examined to show both sides of this legal distinction.
Application to Ex. A-7 — absence of prior agreement: The court observed that, unlike some precedent cases where there was an earlier oral agreement to deposit the deeds (and the subsequent writing was merely a record), there was no evidence here that any earlier promise or agreement to deposit the title deeds existed independently of Ex. A-7. Thus the factual pattern resembled authorities where the writing itself might be the bargain (as in M. Subramanyam).
Textual indications in Ex. A-7: The court highlighted language in Ex. A-7 such as "I now deposit the title deed ..." and "I executed this document of security in your favour", concluding that these expressions pointed to Ex. A-7 itself effecting the deposit and embodying the contract of mortgage rather than merely recording a prior deposit. The court contrasted this with the wording in cases like United Bank and Rachpal Mahataj where the writing was merely authorisation or a record of a previously concluded oral transaction.
Evaluation of the plaintiff's amended pleading: The court noted that the plaintiff's allegation in the amended plaint (paragraph 3(a)) that the title deed was deposited in the morning and the typed memorandum was executed in the evening to record that earlier deposit appeared to be an afterthought made to meet the defendants' plea. The court found no independent support in Ex. A-7 for the claim of an earlier deposit; rather, the language of Ex. A-7 undermined that theory.
Conclusion from the combined factual and legal assessment: Because Ex. A-7 embodied the bargain creating the security (and there was no evidence of a prior deposit independent of the writing), Ex. A-7 was a document creating an interest in immovable property and therefore required registration under Section 17. Ex. A-7 was not registered; consequently it was inadmissible in evidence under Section 49 and the transaction could not be proved by oral evidence under Section 91. The plaintiff therefore could not obtain a decree based on the alleged equitable mortgage. Moreover, the cause of action on the promissory notes was time-barred, so no decree for recovery of the debt could be given.

Holding and Implications

Holding: The appeal is DISMISSED. The learned Subordinate Judge's dismissal of the suit was affirmed.

Implications and immediate consequences:

The court held that Exhibit A-7 constituted the contract of mortgage by deposit of title deeds and therefore required registration under Section 17 of the Indian Registration Act. Because Ex. A-7 was not registered it was inadmissible in evidence under Section 49 of the Registration Act and the transaction could not be proved by oral evidence under Section 91 of the Evidence Act.
As a direct consequence the plaintiff could not obtain a decree to enforce the alleged equitable mortgage. The promissory notes were also barred by limitation, so the plaintiff could not recover the debt by alternate means.
The court did not state or record any broader novel principle or new precedent; it resolved the appeal by applying established statutory rules and prior authorities to the particular facts of the case and affirmed the lower court's order dismissing the suit (with costs).

This summary is based exclusively on material contained in the provided opinion and does not add information beyond the text of the judgment.

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Kakaraparthy Bhavanarayana v. The Official Receiver, Krishna, Representing The Estate Of Sonti Venkataratnam, Chilakalapudi, Masulipatnam And Others.

Ramachandra Raju, J.:— This appeal arises out of a suit brought by the appellant against the respondents to enforce an equitable mortgage alleged to have been created by the late Sonti Venkataratnam, the father of respondents 2 to 5. The short point for determination in the appeal is whether Ex. A-7 styled as a letter signed and delivered by Sonti Venkatartnam on 7-11-1951 and relied upon by the appellant as evidencing the creation of the mortgage was compulsorily registerable under Sec. 17 of the Indian Registration Act not having been registered was inadmissible in evidence to prove the mortgage. The learned Subordinate Judge who tried the suit held that the document required registration and was therefore inadmissible in evidence and accordingly dismissed the suit. Aggrieved by the said decision of the lower court the plaintiff preferred this appeal.

2. On the pleas taken by the defendants the lower court also framed some more issues and gave findings and the correctness of those findings is not now questioned before us.

3. In order to properly appreciate the question involved a few facts may be stated; late Sonti Venkataratnam used to borrow moneys from the plaintiff and was executing promissory notes from time to time. In the first instance he borrowed a sum of Rs. 10,000/- in the year 1948 and executed Ex. A-1 promissory note. Later he borrowed some more amount in the year 1949 and executed the promissory note, Ex. A-2. In renewal of these two promissory notes a fresh promissory note was executed in the year 1950 as per Ex. A-3. In renewal of Ex. A-3 he executed a fresh promissory note on 4th May, 1951 (Ex. A-4, for Rs. 13, 500/-). On 13th August, 1951 he borrowed a further sum of Rs. 1800/- and executed Ex. A-5 promissory note. These latter two promissory notes were executed not only by Sonti Venkataratnam but also by one Tumu Subba Rao. According to the case of the plaintiff when Sonti Venkataratnam was pressed for repayment of the debt due under Exs. A-4 and A-5 he deposited Ex. A-6 title deed as security for payment of the debt and also executed Ex. A-7 letter evidencing the deposit. It is convenient to extract here Ex. A-7 because the entire question depends upon its proper construction having regard to the surrounding circumstances, It is as follows:—

Sri Kakaraparti Bhavanarayana Sastri garu, Vijayawada letter executed by Sonti Venkataratnam son of Kotaih, of Bezawada.

Myself and Tumu Subbarao borrowed Rs. 13, 500/- on 4-5-51 and Rs. 1,800/- on 13-8-1951 on two promissory notes executed by us jointly in your favour at 12 per cent compound interest.

I now deposit the title deed of Sonti Venkatratnam among us relating to 1390 sq. yards of site in Municipal Ward No. 22, Revenue Ward, 9, Block No. 18 T.S No. 781 A, dt. 5.2.1948 as a collateral security for the payment of the money due on the two promissory notes referred to above inclusive of interests I executed this document of security in your favour after assuring you that I never created any charge or encumbrance on the property covered by the title deed dt. 5-2-1948.

Executed this 7th day of November 1951.

(Signed) Sonti Venkataratnam/7-11-1951”

4. Section 58(f) of the Transfer of Property Act recognises a mortgage by deposit of title deeds as a form of mortgage. It provides that it may be effected by a person “delivering to his creditor or his agent documents of title to immovable property with intent to create a security thereon”. It means that when the debtor deposits with the creditor the title deeds of his property with a view to create security the law implies a contract between the parties to create a mortgage and no registered instrument is required. Under Sec. 59 as in other forms of mortgage; the parties can also choose to reduce the contract into writing in which case the deposit and the document both form integral parts of the transaction and as a document creating security requires registration under Sec. 17 of the Indian Registration Act 1908 as a non-testamentary instrument creating interest in immovable property, where the value is rupees one hundred and more. If a document of this nature is not registered — as provided under Sec. 49 of the Indian Registration Act it cannot be used in evidence at all and the transaction cannot be proved by oral evidence either in view of what was provided under Sec. 91 of the Evidence Act. That is how, though a mortgage by deposit of title deeds can be created by mere deposit of the title deeds without any written contract between the parties but once the contract or the bargain as it is called, between the parties is reduced to writing it cannot become effective unless the writing is registered. Therefore the question for consideration is whether the creation of the equitable mortgage by deposit of title deeds in question was made apart from and independent of the document Ex. A-7 or Ex A-7 itself forms the contract or bargain between the parties. There are a number of decisions where this question was considered with reference to the documents concerned in those cases. Some of the decisions of the Privy Council and the Supreme Court which are more relevant for our purpose and which were cited at the Bar may be examined.

5. In the decision M. Subramanyam v. M.L.R.M Lutchaman . A.I.R 1923 P.C 50. the document which their Lordships were considering is in the following terms.

…………………

Dear Sir,

We hand you herewith title deeds relating to fifth class lot No. 78, 79 and 80 Block E, each measuring 25 by 50 with building thereon belonging to Saleman Ahmed Seedst, also his promissory note for rupees sixty three thousand (Rs. 63,000) due to us this please hold as security against advance made to us; we also hand you second mortgage executed in our favour by C. Rangaswamy Moodaliar on 1st Class Lot No. 6 in Block F 1. On this we had advanced Rs. 32,000/-. Please also hold this as further security against advance made to us. We promise not to deal with the same till your amount due to you is fully paid and satisfied”.

It was held by the Privy Council that the memorandum is of such a nature that it can be treated as the contract for the mortgage which the parties considered to be the only repository and appropriate evidence of their agreement and therefore it could be the instrument by which the equitable mortgage was created and would come within Sec. 17 of the Registration Act.

In the decision Sundarachariar v. Narayana Ayyar a person at Madras gave a promissory note and on the same date gave a memorandum which contained a list of the title deeds with the introductory words “As agreed upon in person, I have delivered to you the under mentioned documents as security”. It was held by the Privy council that the memorandum was no other than a written record of the particulars of the deeds which were the subject of the deposit and did not embody the terms of the agreement between the parties and did not require registration.

In the decision Rachpal Mahataj v. Bhagwanada Daruka . A.I.R 1950 S.C 272. the memorandum was in the form of a letter and is in the following terms:—

“We write to, put on record that to secure the repayment of the money already due to you from us on account of the business transactions between yourselves and ourselves and the money that may hereafter become due on account of such transactions we have this day deposited with you the following title deeds in Calcutta at your place of business at No. 7 Sambhu Mullick Lane, relating to our properties at Samastipur with intent to create an equitable mortgage on the said properties to secure all moneys including interest that may be found due and payable by us to you on account of the said transactions……….”

6. In construing this document the Supreme Court observed that:—

The document purports only to record a transaction which had been concluded and under which the rights and liabilities had been orally agreed upon. No doubt it was taken by the respondents to show that the title deeds of the appellant's properties were deposited with them as security for the moneys advanced by them, and to obviate a possible plea that the deeds were left with them for other purposes as indeed was contended by the appellant in the written statement taking advantage of the non-registration of the memorandum in question. But that is far from intending to reduce the bargain to writing and make the document the basis of the rights and liabilities of the parties”.

7. In the decision United Bank of India Ltd. v. Lakharam Sonaram and Co. the relevant document which is Ex. 7(a) is as follows.—

“I hereby authorise my son Mr. Babulal Ram to deposit with you on my behalf at your Calcutta office the following title deeds with a view to create an equitable mortgage on the said properties to make your advances in the A/C of Messrs. Lakhram Sonaram & Co., Giridhi, better secured. I hereby further declare that I am the sole owner of the Giridhi property as per schedule below and I am legal joint heir with my sons dealing in the name of M/s. Lekhram Sonaram & Co., of the Malho Property as described in the schedule below. I hereby further declare that both the properties described in the schedule are free from all encumbrances and nobody else has any claim, right or title to the properties. And I hereby declare that the deposit will give you a valid legal title over my said properties as mortgagee untill all the obligations of the M/s. Lakharam sonaram & Co. with your Giridhi Branch are duly satisfied.

Particulars of properties;

1. Giridhi property.

3. Malho property.”

8. Disagreeing with the High Court the Supreme Court held 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 and therefore the document does not require registration under Sec. 17 of the Indian Registration Act.

9. But in the case before us from Ex. A-7 it does not appear that there was any earlier agreement between the parties or even a promise by Sonti Venkataratnam to deposit the title deeds and as a consequence of which Ex. A-7 came to be written. There is nothing to show that the actual creation of the mortgage was different and apart from Ex. A-7. Added to this there are words in Ex. A-7. “I executed this document of security in your favour”. In the letter concerned in United Bank of India Ltd. v. Lekharam Sonaram & Co. it was merely stated that the debtor authorised his son to deposit with the creditor on his behalf the title deeds. It does not mention the details of the title deeds deposited with the Bank. As a matter of fact it is not a document created accompanying the deposit or constituting the deposit. It is only an authorisation letter. In Rachapal Maharaj v. Bhagwandas Daruka from the language used in the letter it is clear that the letter is not the integral part of the creation of the mortgage by deposit of title deeds and it was only written to record what for the security was created by the deposit of the title deeds. So also in the decision Sundarachariar v. Narayana Ayyar . A.I.R 1931 P.C 36. there was already an earlier agreement to deposit the title deeds and in pursuance of that agreement it was stated in the letter the debtor delivered the creditor the documents listed therein. Therefore it is a clear ease where the document itself is not an in integral part of the creation of the mortgage.

10. As already mentioned from the language used in Ex. A-7 it does not appear that the creation of the mortgage was apart and dissociated from the document. It is also significant to note that after the written statements were filed, by the defendants alleging that the letter itself constituted the contract of the mortgage as it was an integral part of the transaction and not merely the evidence of past or prior transaction of an equitable mortgage and requires to be registered and as it is not registered it is not admissible in evidence the plaintiff amended the plaint by adding a fresh paragraph as 3(a) which is as follows:—

“3(a). When the plaintiff demanded for repayment of the loans, late Sonti. Venkataratnam asked for further time and offered to deposit his title deeds as a security and accordingly he brought and kept the title deed as a security with the plaintiff in the morning of 7-11-1951 with a definite intention to keep the same in deposit with the plaintiff so as to serve as security for the repayment of the loans due under the prior promissory notes. Thus the mortgage by deposit of title deeds was created with the delivery of the document of title dated 5-2-1948 in the morning of 7-11-1951 itself. When the plaintiff asked late S. Venkataratnam to get a written statement executed stating that the title deed had been deposited with the plaintiff, late S. Venkataratnam brought the typed Memorandum signed and delivered the same to the plaintiff in the evening of the same day in the presence of his son and got it attested”.

11. It is also significant to note that in the list of documents originally attached to the plaint, Ex. A-7 letter with is item No. 3 was described as follows:—

“7-11-1951 letter executed as Mortgage by deposit of title in favour of the plaintiff”.

12. The stress in the above description is ours. It is obvious that the story as narrated in paragraph 3(a) of the plaint was put forward as a result of an after thought in order to meet the plea taken by the defendants in the written statement. There is nothing in Ex. A-7 to indicate that the deposit of the document took place at a different time and subsequently Ex. A-7 was brought into existence only to evidence the deposit made earlier. On the other hand the following words appear in Ex. A-7. “I now deposit the title deed”, which destroys the theory of an earlier deposit.

13. Here a deposit was made by a letter in which was mentioned why the document was deposited. There is nothing but the letter to connect the deposit with the debt. The latter does not show that it is merely evidential of something which either had already been done earlier or to be done in future.

14. Therefore, by Ex. A-7 the bargain was reduced into writing and it embodied the contract of the mortgage itself between the parties. If that is so, Ex. A-7 required registration and not having been registered it cannot be used in evidence at all and the transaction cannot also be proved by oral evidence either. Therefore the plaintiff cannot get a decree on the basis of the transaction. The suit on the promissory notes also having been barred by time the plaintiff cannot get any decree to recover the debt.

15. Under these circumstances the learned Subordinate Judge rightly dismissed the suit.

16. Therefore the appeal fails and is dismissed with costs.

17. Appeal dismissed.

Kakaraparthy Bhavana... v. The Official Receive...