IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE KURIAN JOSEPH & THE HONOURABLE MR. JUSTICE P.R.RAMACHANDRA MENON THURSDAY, THE 29TH JANUARY 2009 / 9TH MAGHA 1930 AFA.No. 26 of 1999 -------------------- ( AGAINST THE JUDGEMENT IN AS.77/1989 Dated 22/05/1998 O.S. No. 286 of 1983 OF THE SUB COURT, KOLLAM.) APPELLANT/APPELLANT/PLAINTIFF: ------------------------------------- HUBERT PEYOLI, PROPRIETOR, PEYOLI AND COMPANY, KALOOR, ELAMKULAM VILLAGE, ERNAKULAM, NOW RESIDING AT 'PEYOLI HOUSE', MAMANGALAM, KOCHI - 25 BY ADV. SRI.O.RAMACHANDRAN NAMBIAR ADV. SRI.K.S.BABU ADV. SMT.N.SUDHA RESPONDENTS/RESPONDENTS/RESPONDENTS: ---------------------------------------------------- 1. SANTHAVILASATHU KESAVAN SIVADASAN, KAILASATHU HOUSE, AYATHIL CHERI, VAKKEVILA VILLAGE, QUILON TALUK. 2. SANTHAMMA, W/O. SANTHAVILASATHU KESAVAN SIVADASAN, KAILASATHU HOUSE, AYATHIL CHERI, VAKKEVILA VILLAGE, QUILON TALUK. BY ADV. SRI.V.N.ACHUTHA KURUP (SR.) ADV. SRI.B.S.SWATHY KUMAR ADV. SRI.K.HARILAL ADV. SRI.BINDU SREEKUMAR THIS APPEAL FROM FIRST APPEAL HAVING BEEN FINALLY HEARD ON 29/01/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: KURIAN JOSEPH & P.R. RAMACHANDRA MENON, JJ. ........................................................................ A.F.A. No. 26 OF 1999 ......................................................................... Dated this the 29th January, 2009 J U D G M E N T Ramachandra Menon, J. : Sustainability of the judgment and decree passed by the Addl. Sub Court, Kollam in O.S.No. 286 of 1983, dismissing the suit as barred by limitation and also after arriving at a finding that Ext. A2 for establishing creation of a mortgage by deposit of title deeds cannot be looked into for want of registration, was subjected to challenge in A.S.No. 77 of 1989 before this court . The finding of the trial court was confirmed by the learned single Judge. The above judgment and decree dated 22.05.1998 in A.S.No.77 of 1989 has been subjected to further challenge in this appeal. 2. With regard to the factual matrix, it is to be noted that the suit was filed by the appellant/plaintiff for realisation of the amount due from the respondents/defendants contending that A.F.A. No. 26 OF 1999 2 the amount was given to the respondents/defendants on the strength of a pronote executed on 17.11.1971 and on further deposit of title deeds with intend to create an equitable mortgage as a measure of additional security. 3. The suit was resisted by the defendants on many a ground. Though the execution of the pronote and the receipt of Rs.15,000/- was admitted therein, it was contended by the respondents/defendants that the suit was barred by limitation; that the amount due to the plaintiff had already been repaid; that the memorandum dated 17.11.1971 as to the deposit of title deeds was never executed with an intend to create equitable mortgage with regard to the above transaction and further that there was no valid creation of an equitable mortgage. 4. During the course of trial, it was brought to light that Ext. A2 memorandum as to the deposit of title deeds was not a registered one and hence it could not be looked into for establishing the transaction. The trial court arrived at a finding that Ext.A1 pronote having been executed as early as A.F.A. No. 26 OF 1999 3 17.11.1971, the suit filed in the year 1983 was barred by limitation and no personal decree was possible. The contention of the appellant/plaintiff that Ext. A2 memorandum was only a record in respect of an equitable mortgage created already, ie., in respect of a past transaction, and hence, did not require registration was answered in the negative. Though the plea put forth by the defendants that the amount borrowed had already been repaid was held against them, the suit was dismissed as barred by limitation. 5. Referring to the materials on records, the relevant provisions of law and also the well settled decisions of the apex court, the trial court observed that Ext.A2 was an independent document by which an equitable mortgage was created and that it had to be registered since the same had been reduced to writing. The above finding and reasoning have been upheld by the learned single Judge of this court while dismissing A.S.No. 77 of 1989, the sustainability of which is questioned by the plaintiff/appellant. 6. Section 17 of the Indian Registration Act, 1908, which A.F.A. No. 26 OF 1999 4 deals with the cases of the documents which are liable to be registered compulsorily is extracted below: ........“17. Documents of which registration is compulsory.-(1) The following documents shall be registered, if the property to which they relate is situate in a district in which, and if they have been executed on or after the date on which, Act No.XVI of 1864, or the Indian Registration Act, 1866, or the Indian Registration Act, 1871, or the Indian Registration Act, 1877, or this Act came or comes into force, namely:- (a) instruments of gift of immovable property; (b) other non-testamentary instruments which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immovable property; xx xx xx xx xx xx xx ” A.F.A. No. 26 OF 1999 5 7. The effect of non-registration of documents which are otherwise liable to be registered compulsorily has been dealt with in Section 49 of the Registration Act. By virtue of Section 49 of the Registration Act, it is provided that no document required by section 17 or by any provision of the Transfer of Property Act, 1882 (4 of 1882) to be registered shall- (a) affect any immovable property comprised therein, or (b) confer any power to adopt, or (c) be received as evidence of any transaction affecting such property or conferring such power unless it has been registered. 8. Referring to the relevant provisions of law , viz., Section 17 of the Indian Registration Act, 1908 and Section 58 (f) of the Transfer of Property Act, 1882 , it was held by the Apex Court in Rachpal Mahraj vs. Bhagwandas Daruka and others ( AIR 1950 Supreme Court 272 ) as follows: “The question whether a memorandum of deposit of title deeds is compulsorily registrable under section 17 of the Indian Registration Act, A.F.A. No. 26 OF 1999 6 1908, as an instrument creating an interest in immovable property, depends on whether the parties intended to reduce their bargain regarding the deposit 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, 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.” 9. The mandate under Sections 58(f) and 59 of the Transfer of Property Act, 1882 with reference to Section 17 of the Indian Registration Act, 1908 was further highlighted by the Apex Court in the subsequent decision in United Bank of India Ltd. vs. Messrs. Lekharam Sonaram and Co. and others (AIR 1965 Supreme Court 1591 ) . The relevant paragraph (paragraph No.7) in the said decision is extracted below: A.F.A. No. 26 OF 1999 7 “when the debtor deposits with the creditor title deeds of his property with an intent to create a security the law implies a contract between the parties to create a mortgage and no registered instrument is required under S. 59 as in other classes of mortgage. 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 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 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 S.17 of the Indian Registration Act, 1908 as a non-testamentary instrument creating an A.F.A. No. 26 OF 1999 8 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 evidence at all and the transaction itself cannot be proved by oral evidence either. ” 10. The above legal position has been crystallized by virtue of subsequent decision of the Apex Court in Veeramachineni Gangadhara Rao vs. The Andhra Bank Ltd. and others ( AIR 1971 Supreme Court 1613) as well. 11. Smt. N. Sudha, the learned counsel for the appellant vehemently contended that Ext.A2 by itself did not intend to create any equitable mortgage and that it was only the record of a past transaction as to the creation of an equitable mortgage which hence needed no registration. Learned counsel also placed reliance on the decision reported in AIR 1931 Privy Council 36 (Sundarachariar vs. Narayana Ayyar) wherein a letter/document, depositing title deeds, was held as not liable to be registered, being the record of a past transaction. On going through the contents of the said document, as extracted in the A.F.A. No. 26 OF 1999 9 above decision and that of Ext.A2 involved in the present case, there is an ocean of difference, in so far as the intention of the parties is concerned. The contents of the memorandum involved in AIR 1931 Privy Council 36 (as extracted therein) are reproduced as given below: “Written to E.N. A. Samoo Battar by Krishnaswami Ayyar of S..V. Ramasami Ayyar and brothers. As agreed upon in person I have delivered to you the undermentioned documents as security”. 12. Obviously, the above letter/memorandum does not show the creation of an equitable mortgage by itself, but for showing the handing over of the title deeds as security as agreed earlier, i.e., in respect of a past transaction. But as regards Ext. A2, the context of execution is clearly discernible from it revealing the necessity felt to create an equitable mortgage by deposit of title deeds as an additional security in respect of the amount obtained under the pronote executed on the same date and that the relevant title deeds bearing Nos. 2363 of 1964, 4094 of 1966 and 1737 and 1738 of 1971 of A.F.A. No. 26 OF 1999 10 Eravipuram Sub Registry, (by virtue of which the executants started to enjoy the same with exclusive possession, absolute ownership and with clear and marketable title) were 'thereby deposited' executing the said document by subscribing their signature to the same. 13. It is very much clear from Ext. A2 that the parties wanted to reduce the bargain into writing and it was in the said circumstances, that the said document was executed by depositing the title deeds creating an equitable mortgage over the same. Ext.A2 being a self contained document, creating rights/charges over the property, makes it liable to be registered. 14. As regards the reliance sought to be placed by the appellant on the decision reported in AIR 1931 Privy Council 36 (cited supra), it is rather felt misconceived. There is absolutely no dispute with regard to the actual position of law, as discussed therein, where the finding that the document needed no registration, was rendered on the basis of the contents of the concerned document and the transaction, which is not A.F.A. No. 26 OF 1999 11 applicable to the case in hand. It is very much relevant to note that the above decision was considered and relied on by a Division Bench of this Court in Virdhachalam and another v. Chaldean Syrian Bank Ltd. & Others (1960 K.L.T. 442) reiterating the legal position. It has been observed by the Division Bench therein as follows: “The crucial question is : Did the parties intend to reduce their bargain regarding the deposit of the 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. “ 15. In the instant case, Ext. A2 is not a mere receipt or acknowledgment of the documents already deposited as security; A.F.A. No. 26 OF 1999 12 it is the document by which the mortgage by deposit of title deeds is created. But for Ext. A2, there is no evidence for such a transaction. In the above circumstances, there is absolutely no ground to interfere with the impugned verdicts. The appeal is dismissed accordingly. No order as to costs. KURIAN JOSEPH, JUDGE. P.R. RAMACHANDRA MENON, JUDGE. lk A.F.A. No. 26 OF 1999 13 KURIAN JOSEPH & P.R. RAMACHANDRA MENON, JJ. ................................................... A.F.A. No. 26 OF 1999 ................................................... Dated this the 29th January,2009 J U D G M E N T