By Duvva Pavan Kumar* & C. Suman Reddy**

Mortgage is a transfer of an interest in a specific immovable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt or the performance of an agreement, which may give rise to a pecuniary liability.

The person borrowing and transferring his interest in an immovable property to the lender is the mortgagor. The lender is the mortgagee and the funds lent against which the property is used as security is the mortgage money. The instrument by which the transfer is effected is called a mortgage-deed.

All mortgages other than a mortgage by deposit of title deeds can be effected by a registered instrument signed by a mortgagor and attested by at least two witnesses.

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 deeds1.

To create a valid mortgage by deposit of title deeds, there must be a delivery of the title deeds relating to the immovable property by the debtor to a creditor or his agent with the intention of creating a security thereon. Thus, if there is a debt and if title deeds are deposited by the debtor with an intention that the title deeds shall be security for the debt, then by the mere fact of deposit of those title deeds, a mortgage comes into being.

A mortgage by deposit of title deed does not require registration. Sometimes, a memorandum accompanies the deposit of title deeds. This paper examines the circumstances under which a memorandum accompanying the deposit of title deeds requires registration.

As far back as in 1873, this question came to be considered by the Calcutta High Court in Kedarnath Dutt v. Shamlal Khetry2. In that case the court held that a memorandum is not the indumenta by which the equitable mortgage is created, nor is it the evidence of the contract, and, therefore, it does not come under Section 17 of the Registration Act. However, if the memorandum is such that it could be treated as a contract for the mortgage it would be the instrument by which the mortgage was created and would come within Section 17 of the Registration Act.

No memorandum can be within Section 17 of the Registration Act unless on its face it 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 the deposit is concerned, it constitutes the agreement between the parties3.

When a debtor deposits with the creditor the title deeds of his property with intent to create a security, the law implies a contract between the parties to create a mortgage, and no registered instrument is required under Section 59 as in other form of mortgage. But if the parties choose to reduce the contract to writing, the implication is excluded by their express bargain, and the document will be the sole evidence of its terms. In such a case, the deposit and the document both form integral parts of the transaction and are essential ingredients in the creation of the mortgage. As the deposit alone is not intended to create the charge and the document, which constitutes the bargain regarding the security, is also necessary and operates to create the charge in conjunction with the deposit, it requires registration under Section 17, Registration Act, 1908 as non-testamentary instrument creating an interest in immovable property4.

If the document is 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 recoded a past transaction there would be no need for registration of the letter for a valid equitable mortgage. However, where 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 equitable mortgage by deposit of title deeds5.

In order to require registration, the document must contain all the essentials of the transaction and one essential is that the tide deeds must be deposited by virtue of the instrument or acknowledge an earlier deposit of title deeds and further the title deeds shall be held as security on the said mortgage6.

Though a mortgage by deposit of title deeds can be created by a mere deposit of title deeds without any written contract between the parties, but once the bargain or contract is reduced to writing, it must be registered7.

One telling principle which has emerged from the ratio of the decisions, however, is that if there is evidence, either extrovert or introvert, which would compel a Court to hold that under a single bargain the borrowing and the deposit of title deeds were effected and that the intention is made clear and public only in such a contemporaneous transaction, then a memorandum evidencing such a bargain needs registration. It may be that the memorandum contains a recital as to the quantum of the amount borrowed. That would not make the memorandum any the less a non-registrable one, provided it is an independent transaction and not the sole bargain to evidence the deposit of title deeds. The only important feature on which the Court should pay its concentrated attention is that the deposit of title deeds should have taken place earlier than the time of the writing of the memorandum. If such a dissociation in point of time is apparent from the memorandum itself, or if it could be discovered from the totality of the facts and appreciation of the surrounding circumstances, then the plaintiff can successfully pilot his case on the foot of an equitable mortgage and obtain a mortgage decree. If, however, the Court is not satisfied about the earlier deposit of title deeds, but if the memorandum projected is the only piece of evidence whereby the equitable mortgage is created, then notwithstanding the nicety of expressions used therein, the Court has to hold that such a memorandum is not admissible in evidence for want of registration8.


The real test to find out whether a memorandum recording handing over title deeds requires registration or not is to ascertain whether the memorandum represents the bargain between the parties9. The question, therefore, which must be posed is, did the parties intend to reduce their bargain regarding the deposit of title deeds to the form of a document? If so, the document requires registration. If, on the other hand, its proper construction and the surrounding circumstances lead to the conclusion that the parties did not intend to do so, then there being no express bargain, the contract to create the mortgage arises by implication of the law from the deposit itself with the requisite intention, and the document, being merely evidential does not require registration.

A mere statement that the deposit is made by way of security for the repayment of the loan cannot be read as a contract which is arrived at by the document itself. The document, therefore, cannot be read as recording an agreement between the parties. It is at best evidence of the fact that the title deeds have been deposited with the plaintiff10. The question whether a document in question was agreed by the parties as a part of the arrangement to create a mortgage by deposit of title deeds has to be decided on the facts of each case.

V year NALSAR, University of Law, Hyderabad.

V year NALSAR, University of Law, Hyderabad.

1 Section 58(f) of the Transfer of Property Act, 1882.

2 (1873) 2k Suth WR 150. The relevant letter in the case before the Supreme Court read as follows-

"For the repayment of the loan of Rs. 1,200 and the interest due thereon of the within note of hand, I hereby deposit with Shamial Khetry, as a collateral security by way of equitable mortgage title, deeds of my property".

3 Obla Sundarachariar v. Narayana Ayyer, AIR 1931 PC 36.

4 Rachpal v. Bhagwandas, AIR 1950 SC 272..

5 Indersain v. Md. Raza Gowher, AIR 1962 Mad 258.

6 D. D. Seal v. R. L Phumra , AIR 1970 SC 659.

7 Bhavanarayana v. Venkitaratnam, AIR 1971 Andh Pra 359.

8 Alagappan v. Kalyansundara Iyer, AIR 1977 Mad 238.

9 Modem Housing Construction v. Alagappa Textiles, (1972) 2 Mad U 319.

10 H.C. Nanjappa v. M.F.C. Industries (P) Ltd., 1986 Madras.

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.