In Focus

Mortgage by deposit of Title Deeds

By Gajanan Khergamker

It is an established rule of equity that the deposit of a document of title without more, without writing or without word of mouth, will create, in equity a charge upon the property referred to.

However, this general rule won’t apply when you have a deposit accompanied by an actual written charge. In such a situation, one must have to refer to the terms of the written document and any implication that might be raised, supposing there was no document, is offset by the document by which alone one must be governed.

The privy council held that:
Where titles are handed over with noting said except that they are to be security, that law supposes that the scope of the security is the scope of the title
Where, however, titles are handed over accompanied by a bargain, that bargain must rule
When the bargain is the written bargain, it, and it alone, must determine what is the scope and extent of security.

The Supreme Court held that where the parties to the contract of mortgage by deposit of the title deeds choose to reduce the contract to writing, the document will be the sole evidence of its terms. The deposit and the document form the integral parts of the transaction and are essential ingredients in the creation of the mortgage. The document which constitute the bargain regarding securing require registration under section 17 of the Indian Registration Act, as a non-testamentary document creating an interest in immovable property, where the value of this character is not registered, it cannot be used in the evidence at all and the transaction itself cannot be proved by oral evidence either.

Also, whether a memorandum of title deeds is compulsorily registerable under section 17 of the Indian Registration Act, 1908 depends on whether the parties intended to reduce their bargain regarding the deposit to the form of a document, if so, the document required registration. If, on the other hand, its property construction and the surrounding circumstances lead to the conclusion that the parties did not intend to do so, there being no express bargain, the document being merely evidential did not require registration.

To avail a legal service, an expert opinion or an appointment with Solicitor and Property Law Expert Gajanan Khergamker, call 8080441593