STATE OF HARYANA & OTHERSversusNAVIR SINGH AND ANOTHER

                     [2013] 9 S.C.R. 949


              STATE OF HARYANA & OTHERS                            A
                               v.
               NAVIR SINGH AND ANOTHER
            (Civil Appeal No. 9030 of 2013 etc.)
                     OCTOBER 07, 2013
                                                                   B
     [CHANDRAMAULI KR. PRASAD AND KURIAN
                 JOSEPH, JJ.]

     TRANSFER OF PROPERTY ACT, 1872:
                                                                   c
      ss.59 and 58(f) - Mortgage and mortgage by deposit of
title deeds - Discussed.

    s. 58(f) - Mortgage by deposit of title deeds - Held: Charge
of mortgage can be entered into revenue record in respect of
mortgage by deposit of title-deeds and for that, instrument of     D
mortgage is not necessary.

     REGISTRATION ACT, 1908:.

       s. 17(1)(c) - Registration of instrument creating interest - E
Mortgage by deposit of title deeds - Held: When debtor
deposits with creditor title-deeds of property for the purpose
of security, it becomes mortgage in terms of s. 58(f) of
Transfer of Property Act and no registered instrument is
required uls. 59 thereof, as in other classes of mortgage -
Mortgage by deposit of title-deeds may be effected in F
specified towns by debtor delivering to his creditor documents
of title to immovable property with intent to create a security
thereon - No instrument is required to be drawn for this
purpose - However, parties may choose to have a
memorandum prepared only showing deposit of title-deeds - G
In such a case also registration is not required and, therefore,
payment of registration fee and stamp duty is not required -
Letter of Finance Commissioner would apply in cases where

                              949                                  H
    950      SUPREME COURT REPORTS               [2013] 9 S.C.R.


A   the instrument of deposit of title-deeds incorporates terms and
    conditions in addition to what flows from the mortgage by
    deposit of title-deeds - Transfer of Property Act, 1872 ·- ss.
    5B(f) and 59 - Letter dated 29.3.2007 issued by Finance
    Commissioner.
B     The instant appeals arose from the orders of the High
  Court directing entry of charge in the revenue records on
  the basis of mortgage created by deposit of title-deeds.
  The question for consideration before the Court was:
  "whether 'charge' of mortgage can be entered in the
C revenue record in respect of a mortgage effected by
  deposit of title-deeds without its registration and
  payment of registration fee and stamp duty".

          Disposing of the appeals, the Court
D
          HELD: 1.1 Section 17(1)(c) of the Registration Act,
    1908 provides that a non-testamentary instrument which
    acknowledges the receipt or payment of any
    consideration on account of the creation, declaration,
    assignment, limitation or extension of any such right, title
E   or interest, requires compulsory registration. Mortgage,
    inter alia, means transfer of interest in the specific
    immovable property for the purpose of securing the
    money advanced by way of loan. Mortgage by deposit of
    title-deeds is sanctioned by law uls. 58(f) of the Transfer
F   of Property Act in specified towns. Mortgage by deposit
    of title-deeds acknowledges the receipt and transfer of
    interest. Section 59 of the Transfer of Property Act
    mandates that every mortgage other than a mortgage by
    deposit of title-deeds can be effected only by a registered
G   instrument. In the face of it, when the debtor deposits with
    the creditor title-deeds of the property for the purpose of
    security, it becomes mortgage in terms of s. 58(f) of the
    Transfer of Property Act and no registered instrument is
    required u/s. 59 thereof, as in other classes of mortgage.
H   [Para 14) [956-F-H; 957-A)
       STATE OF HARYANA v. NAVIR SINGH.               951


     1.2 The essence of mortgage by deposit of title-deeds A,·
is handing over by a borrower to the creditor title-deeds
of immovable property with the intention that those
documents shall constitute security, enabling the creditor
to recover the money lent. After the deposit of the title-
d eeds the creditor and borrower may record the B
transaction in a memorandum but such a memorandum
would not be an instrument of mortgage. A memorandum
reducing other terms and conditions with regard to the
deposit in the form of a document, however, shall require
registration u/s. 17(1)(c) of the Registration Act, but in a c
case in which such a document does not incorporate any
term and condition, it is merely evidential and does not
require registration. [Para 14] [957-B-D]

   Rachpal Mahraj v. Bhagwandas Daruka 1950 SCR 548
=AIR 1950 SC 272 - relied on.                               0

    United Bank of India v. Mis. Lekharam Sonaram & Co.
AIR 1965 SC 1591 - referred to.

      1.3 The letter dated 29th March, 2007 of the Finance E
Commissioner inter alia makes "instrument of deposit of
title-deeds compulsorily registrable u/s. 17(1)(c) of the
Registration Act." The said letter would apply in cases
where the instrument of deposit of title-deeds
incorporates terms and conditions in addition to what F
flows from the mortgage by deposit of title-deeds. But in
that case there has to be an instrument which is an
integral part of the transaction regarding the mortgage by
deposit of title-deeds. A document merely recording a
transaction which is already concluded and which does
not create any rights and liabilities does not require G
registration. Mortgage by deposit of title-deeds may be
effected in specified town by the debtor delivering to his
creditor documents of title to immoveable property with
the intent to create a security thereon. No instrument is
required to be drawn for this purpose. However, the H
     952      SUPREME COURT REPORTS               [2013] 9 S.C.R.


A    parties may choose to have a memorandum prepared
     only showing deposit of the title-deeds. In such a case
     also registration is not required. [Para 17] [959-B-F]

          1.4 In the case in hand, the original deeds have just
     been deposited with the bank. In the face of it, the charge
8
     of mortgage can be entered into revenue record in
     respect of mortgage by deposit of title-deeds and for that,
     instrument of mortgage is not necessary. Mortgage by
     deposit of title-deeds further does not require
     registration. Therefore, the question of payment of
C    registration fee and stamp duty does not arise. [Para 17)
     [959-G-H; 960-A]

          1.5 In C.A. No. 9049 of 2013, the properties mortgaged
     by deposit of title-deeds are stated as not situated in the
D    towns specified u/s. 58(f) nor in the towns notified by the
     State Government in terms of s. 58 of Transfer of Property
     Act. This aspect of the matter has not been considered
     by the High Court in the impugned judgment. As the
     same goes to the root of the matter, the impugned order
E    of the High Court is set aside and the matter is remitted
     back for its consideration afresh in accordance with law
     in the light of the observation made in the judgment. [Para
     21-24) [960-E-F-G; 961-B-D]
                          Case Law Reference:
F
           1950 SCR 548             relied on            para 15
           AIR 1965 SC 1591         referred to          para 16
         CIVIL APPELLATE JURISDICTION : Civil Appeal No.
G    9030 of 2013.

         From the Judgment and Order dated 30.08.2007 of the
     High Court of Punjab and Haryana at Chandigarh in CWP No.
     3533 of 2007.
,H
         STATE OF HARYANA v. NAVIR SINGH                    953


                             WITH                                   A
C.A. No. 9049 of 2013.

    B.S. Mor, Addi. AAG, Nikhil Nayyar AAG, Neeraj Mor,
Naresh Bakshi, Ashok Kumar Singh, Kuldip Singh for the
Appellants.                                                         B

     Rajesh Kumar, Anupama Dhruve, Sarv Mitter (for Mitter &
Mitter), Kamal Mohan Gupta, Ashok Kumar Singh, Jitendra
Kumar for the Respondents.

     The Judgment of the Court was delivered by                     c
     CHANDRAMAULI KR. PRASAD, J.
C.A.N0.9030 OF 2013 (@SLP (CIVIL) N0.18323 OF 2008)
     1. The petitioners, aggrieved by the order of the High         D
Court directing entry of charge in the revenue records on the
basis of mortgage created by deposit of title-deeds, have
preferred this special leave petition.
     2. Delay condoned.
                                                                    E
     3. Leave granted.
      4. Shorn of unnecessary details, facts giving rise to the
present appeal are that one M/s. Ultra Tech Private, a company
incorporated under the Companies Act, was sanctioned a term
loan of Rs. 425 lakhs and working capital facility of Rs.99 lakhs   F
by the Punjab National Bank (hereinafter referred to as the
Bank). As agreed by the Bank, original title-deeds in respect
of 19 Marlas of land belonging to Narvir Singh and 31 Marlas
of land owned by Rajinder Kaur were deposited with the Bank
by the borrower. In this way mortgage by deposit of title-deeds     G
took place. It is not in dispute that this transaction had taken
place in a town notified under Section 58(f) of the Transfer of
Property Act. The Bank wrote to the Tahsildar, Panchkula for
mutation on the basis of mortgage effected by deposit of the
title-deeds. When nothing was done, the land owner filed writ       H
    954       SUPREME COURT REPORTS                    [2013) 9 S.C.R.


A petition before the High Court inter alia praying for mutation on
  the basis of mortgage aforesaid.

           5. The respondents resisted mutation inter alia on the
    ground that no entry can be made as the instrument of deposit
    of title-deeds is compulsorily registrable under Section 17(1 )(c)
8
    of the Registration Act and for that, they relied on a letter dated
    29th March, 2007 of the Finance Commissioner and Principal
    Secretary to Government, the relevant portion whereof reads
    as under:
c               "xxxxxx                                     xxx
          2. It is clarified that the instrument of deposit of title-deed/
          Equitable Mortgage is compulsorily registrable under
          Section 17(1 )(c) of the Indian Registration Act, 1908.
D         Registration fee is payable under Article 1(1 )(b) in the
          table of Registration Fees Notification dated 06th
          November, 2006. Article 6 of the schedule I-A of the Indian
          Stamp Act, 1899 provides for rate of Stamp Duty (SD)
          chargeable on deposit of title-deeds/equitable mortgage.
E               )()()(                   )()()(            xxx''
         6. According to the respondents, in the absence of
    registration as aforesaid and payment of registration fee and
    stamp duty, the prayer for mutation cannot be allowed.
F
         7. The High Court considered the objection and negatived
    the same in the following words:

          "We are of the view that an equitable mortgage is created
          by deposit of title-deeds and not through any written
G         instrument. Simple pledge of the title-deeds to the bank
          as Security creates an equitable mortgage, therefore,
          there is never an instrument of deposit of title-deed/
          equitable mortgage. The petitioner simply went to the bank
          and handed over the title-deeds of their respective
H         properties. This act was enough to create a mortgage as
        STATE OF HARYANA v. NAVIR SINGH                     955
         [CHANDRAMAULI KR. PRASAD, J.]

    envisaged under Section 58(f) of the Transfer of Property      A
    Act. Quite often a memorandum is drawn up regarding the
    handing over of the title-deeds but this memorandum is
    simply a written record of the pledge. The memorandum
    itself is not an instrument of mortgage ........... "
                                                                  B
       8. Mr. B.S. Mor, Additional Advocate General appearing
for the State submits that mortgage by deposit of title-deeds
requires registration under Section 17(1 )(c) of the Registration
Act, 1908. Further it mandates payment of fee as prescribed
under article 1(1)(b) of the Registration Fees notification dated C
6th November, 2006. In addition, payment of stamp duty as per
Article 6 of the Indian Stamp Act is also required. According
to Mr. Mor in the absence of all these the mortgage by deposit
of title-deeds cannot form the basis of mutation.

      9. Mr. Harikesh Singh, learned counsel appearing for the D
respondents, however, submits that mortgage by deposit of
title-deeds does not need any registered instrument. Hence,
there is no question of deposit of any fee thereon. According
to him, it also does not require payment of duty under the Stamp
Act.                                                             E

     10. An application for impleadment has been filed by the
Bank for being impleaded as a party to the proceedings, which
was allowed by this Court vide order dated 12th July, 2010. The
Bank is represented by Mr.Rajesh Kumar, Advocate for M/s.          F
Mitter & Mitter, Advocates.

     11. Another application for impleadment (I.A. No. 3 of
2011) has been filed by Shankar Twine Products Pvt. Ltd.
through its Director. We reject this petition giving liberty to it to
take recourse to such other remedy as is available to it before G
the court of competent jurisdiction.

     12. In view of rival submissions, the question which falls
for consideration is whether 'charge' of mortgage can be
entered in the revenue record in respect of a mortgage effected    H
    956         SUPREME COURT REPORTS                  [2013] 9 S.C.R.


A   by deposit of title-deeds without its registration and payment
    of registration fee and stamp duty.

        13. Mortgage by deposit of title-deeds is sanctioned by
    law under Section 58(f) of the Transfer of Property Act in
    specified towns, same reads as follows:
8
          "58. "Mortgage", "mortgagor", "mortgagee",
          "mortgage-money" and "mortgage-deed" defined.-

          (a)    xxx                     )()()(                   )()()(

c         (e) xxx                        )()()(                   )()()(


          (f) Mortgage by deposit of title-deeds.-Where a person
          in any of the following towns, namely, the towns of Calcutta,
          Madras, and Bombay, and in any other town which the
D         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 immoveable property,
          with intent to create a security thereon, the transaction is
          called a mortgage by deposit of title-deeds."
E
          14. Mortgage inter alia means transfer of interest in the
    specific immovable property for the purpose of securing the
    money advanced by way of loan. Section 17(1 )(c) of the
    Registration Act provides that a non-testamentary instrument
    which acknowledges the receipt or payment of any
F   consideration on account of the creation, declaration,
    assignment, limitation or extension of any such right, title or
    interest, requires compulsory registration. Mortgage by deposit
    of title-deeds in terms of Section 58(f) of the Transfer of
    Property Act surely acknowledges the receipt and transfer of
G   interest and, therefore, one may contend that its registration is
    compulsory. However, Section 59 of the Transfer of Property
    Act mandates that every mortgage other than a mortgage by
    deposit of title-deeds can be effected only by a registered
    instrument. In the face of it, in our opinion, when the debtor
H   deposits with the creditor title-deeds of the property for the
        STATE OF HARYANA v. NAVIR SINGH                       957
         [CHANDRAMAULI KR. PRASAD, J.]

purpose of security, it becomes mortgage in terms of Section          A
58(f) of the Transfer of Property Act and no registered
instrument is required under Section 59 thereof as in other
classes of mortgage. The essence of mortgage by deposit of
title-deeds is handing over by a borrower to the creditor title-
deeds of immovable property with the intention that those             B
documents shall constitute security, enabling the creditor to
recover the money lent. After the deposit of the title-deeds the
creditor and borrower may record the transaction in a
memorandum but such a memorandum would not be an
instrument of mortgage. A memorandum reducing other terms             c
and conditions with regard to the deposit in the form of a
document, however, shall require registration under Section
17(1 )c) of the Registration Act, but in a case in which such a
document does not incorporate any term and condition, it is
merely evidential and does not require registration.                  D
     15. This Court had the occasion to consider this question
in the case of Rachpa/ v. Bhagwandas, AIR 37 1950 SC 272,
and the statement of law made therein supports the view we
have taken, which would be evident from the following passage
of the judgment:                                                      E

    "4. A mortgage by deposit of title-deeds is a form of
    mortgage recognized by S. 58(f), T.P. Act, which provides
    that it may be effected in certain towns (including Calcutta)
    by a person "delivering to his creditor or his agent              F
    documents of title to immovable property with intent to
    create a security thereon." That is to say, when the 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                  G
    registered instrument is required under S.59 as in other
    forms 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
                                                                      H
    958       SUPREME COURT REPORTS                    [2013] 9 S.C.R.


A         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
B         charge in conjunction with the deposit, it requires
          registration under S.17, Registration Act, 1908, as a non-
          testamentary instrument creating an interest in immovable
          property, where the value of such property is one hundred
          rupees and upwards. The time factor is not decisive. The
c         document may be handed over to the creditor along with
          the title-deeds and yet may not be registrable ...... "

         16. This Court while relying on the aforesaid judgment in
    the case of United Bank of India v. Mis. Lekharam Sonaram
    & Co., AIR 1965 SC 1591 reiterated as follows:
0
          "7 ............. It is essential to bear in mind that the essence
          of a mortgage by deposit of title-deeds is the actual
          handing over by a borrower to the lender of documents of
          title to immovable property with the intention that those
E         documents shall constitute a security which will enable the
          creditor ultimately to recover the money which he has lent.
          But if the parties choose to reduce the contract to writing,
          this implication of law is excluded by their express bargain,
          and the document will be the sole evidence of its terms. In
F         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. It follows that
          in such a case the document which constitutes the bargain
          regarding security requires registration under Section 17
G         of the Indian Registration Act, 1908, as a non-testamentary
          instrument creating an interest in immovable property,
          where the value of such property is one hundred rupees
          and upwards. If a document of this character is not
          registered it cannot be used in the evidence at all and the
H
         STATE OF HARYANA v. NAVIR SINGH                       959
          [CHANDRAMAULI KR. PRASAD, J.]

     transaction itself cannot be proved by oral evidence              A
     either. ...... "

        17. Bearing in mind the principles aforesaid, we proceed
·to consider the facts of the present case. It is relevant here to
 state that letter dated 29th March, 2007 of the Finance               B
 Commissioner inter alia makes "instrument of deposit of title-
 deeds compulsorily registrable under Section 17(1)(c) of the
 Registration Act." In such contingency, registration fee and
 stamp duty would be leviable. But the question is whether
 mortgage by deposit of title-deeds is required to be done by          C
 an instrument at all. In our opinion, it may be effected in
 specified town by the debtor delivering to his creditor
 documents of title to immoveable property with the intent to
 cr~ate a security thereon. No instrument is required to be drawn
 for this purpose. However, the parties may choose to have a
                                                                       0
 memorandum prepared only showing deposit of the title-deeds.
 In such a case also registration is not required. But in a case
 in which the memorandum recorded in writing creates right,
 liability or extinguishes those, same requires registration. In our
 opinion, the letter of the Finance Commissioner would apply
 in cases where the instrument of deposit of title-deeds               E
 incorporates terms and conditions in addition to what flow from
 the mortgage by deposit of title-deeds. But in that case there
 has to be an instrument which is an integral part of the
 transaction regarding the mortgage by deposit of title-deeds.
 A document merely recording a transaction which is already            F
 concluded and which does not create any rights and liabilities
 does not require registration. Nothing has been brought on
 record to show existence of any instrument which has created
 or extinguished any right or liability. In the case in hand, the
 original deeds have just been deposited with the bank. In the         G
 face of it, we are of opinion that the charge of mortgage can
 be entered into revenue record in respect of mortgage by
 deposit of title-deeds and for that, instrument of mortgage is
 not necessary. Mortgage by deposit of title-deeds further does
 not require registration. Hence, the question of payment of           H
    960       SUPREME COURT REPORTS                 [2013] 9 S.C.R.


A registration fee and stamp duty does not arise. By way of
  abundant caution and at the cost of repetition we may, however,
  observe that when the borrower and the creditor choose to
  reduce the contract in writing and if such a document is the sole
  evidence of terms between them, the document shall form
B integral part of the transaction and same shall require
  registration under Section 17 of the Registration Act. From
  conspectus of what we have observed above, we do not find
  any error in the judgment of the High Court.

        18. In the result, we do not find any merit in the appeal and
C it is dismissed accordingly but without any order as to costs.

    CIVIL APPEAL N0.9049 OF 2013 (@SLP (Cl NO. 924/2009)

          19. Delay condoned.
D         20. Leave granted.

       21. By the impugned order, the High Court had directed
  the appellants herein to enter mutation in favour of Punjab
  National Bank in respect of the properties mortgaged by
E deposit of title-deeds. According to the appellants, the
  properties mortgaged by deposit of title-deeds are situated in
  the village Matab Garh in the District of Ludhiana and at village
  Dallomajra, Tahsil and District Fatehgarh Sahib and village
  Sadhugarh in the District Sirhind.
F
       22. It is the stand of the appellants that deposit of the title-
  deeds are not in relation to the properties situated in the towns
  specified under Section 58(f) or in the towns notified by the
  State Government in terms of Section 58 of the Transfer of
  Property Act. In this connection, our attention has been drawn
G to the notification dated May 26, 2003 of the Government of
  Punjab in the Department of Revenue and Rehabilitation, same
  reads as follows:

          "In exercise of the power conferred by clause (f) of Section
H         58 of the Transfer of Property Act, 1882 (Central Act No.
          STATE OF HARYANA v. NAVIR SINGH                      961
           [CHANDRAMAULI KR. PRASAD, J.]

       4 of 1882) and all other powers enabling him in this behalf,   A
       the Governor of Punjab is pleased to specify Gobindgarh
       in the district Fatehgarh Sahib and Mohali in District Roop
       Nagar in the State of Punjab as Towns for the purpose of
       the aforesaid section of the said Act."
                                                                      B
     23. This aspect of the matter has not been considered by
the High Court in the impugned judgment. As the same goes
to the root of the matter, we have no option than to set aside
the impugned order and remit the matter back for its fresh
consideration in accordance with law in the light of the              c
observation made above.

     24. In the result, we allow this appeal, set aside the
impugned judgment of the High Court and remit the matter back
to the High Court for fresh consideration in accordance with
~                                                                     D
R.P.                                             Appeal allowed.