Case: State Of Haryana  Vs. Navir Singh

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 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 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 petition before the High Court inter alia praying for mutation on the basis of mortgage aforesaid.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) of the Registration Act and for that, they relied on a letter dated 29th March, 2007 of the Finance Commissioner and Principal Secretary toAPPEAL NO.9049 OF 2013 (@SLP (C) NO.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 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.

Court's reasoning:
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 create a security thereon. No instrument is required to be drawn for this purpose. However, the parties may choose to have a 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 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 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 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 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 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 Highaspect 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 observation made above.