G.L. Chopra, J.
1. The New Bank of India Limited, respondent, instituted a suit for recovery of Rs. 19,186713/-against Naranjan Singh and his son Avtarjit Singh Jaspal on the basis of a pronote and an overdraft current account, Rs. 12,941727- being due on the first and Rs. 6,245/11/- on the second account, including interest at the rate of 6 per cent., per annum on the first and 7 1/2 per cent., per annum on the second.
The pronote dated 29-10-1946 in the amount of Rs. 11,0007- was executed by the two defendants, but the overdraft account was in the name of Naranjan Singh alone. It is alleged that at the time of executing the pronote on 29-10-1946, Naranjan Singh, defendant No. 1, deposited the title deeds of his property known as 'Dove Villa', Simla, with the plaintiff Bank as security, by way of equitable mortgage, for repayment of the said loan.
It Is further alleged that on 12-12-1946, Narajan Singh created a further charge on the same property for the amount due on the overdraft current account. On 12-3-1949, Naranjan Singh mortgaged this property for a sum of Rs. 7,000/- with M/s. Dwarka Das Jagan Nath, appellants. The subsequent mortgagees were impleaded as defendants No. 3 and a prayer for recovery of the amount by sale of the mortgaged property was made.
Defendants Nos. 1 and 2, the debtors, admitted their liability in the amount due on the pronote but denied the one claimed on the overdraft account. While admitting that the title-deeds were deposited with the Bank as alleged, on 29-10-1946, the defendants denied to have created any charge with respect to either of the accounts on the said property.
The letter dated 12-12-1946, in respect of the overdraft account was alleged to be inadmissible in evidence for want of registration. Defendants No 3 also denied the charge in favour of the plaintiff and further pleaded that the same could not take priority over the mortgage in their favour. Naranjan Singh defendant died during the pendency of the suit. His sons, Avtarjit Singh Jaspal and Madanjit Singh and Mrs. Naranjan Singh were impleaded as his legal representatives.
2. On all the points in issue, the trial Court found in favour of the plaintiff and decreed the suit for the entire amount with costs. Since the principal debtors were displaced persons, they were allowed time for payment of the decretal amount till the end of March, 1952. Thereafter the plaintiff was at liberty to realise the amount by sale of the mortgaged property.
Future interest at the rate of 6 per cent., per annum was also allowed. Defendants No. 3 alone have now come in appeal and the dispute is confined to the alleged charge of the plaintiff's dues on the property mortgaged with the appellants.
3. In support of their case, the plaintiff-Bank, so far as the pronote account is concerned,relied upon two letters Exhibits P. 4 and P. 5. These were written by Naranjan Singh defendant on one & the same date, viz., 30-10-1946. It shall be remembered that the pronote was executed a day earlier, viz., on 29-10-1946. The two letters were addressed to the Manager of the Bank at Lahore. The relevant portion of Exhibit P. 5 says:
'Please acknowledge receipt of the following title deeds, deposited by me with you, in connection with an advance of Rs. 11,000/- made to me by the Bank on 29-10-1946, jointly with S. A. S. Jaspal.'
Exhibit P. 4 is in the following terms: 'With reference to an advance of Rs. 11,000/- made to me by the Bank on 29-10-1946, jointly with S. A. S. Jaspal against the deposit of the title deeds of my houses and premises known as 'Dove villa' with attached piece of land measuring about 1713 sq. yards, situated below main Railway Station Simla, I hereby declare that there are no other title deeds in respect of the above property with me or lodged with anybody else excepting those deposited with you. I further declare that the above property is free from all sorts of encumbrances and that I am the sole owner of the property.'
4. 'Dove villa', Simla, was purchased by Naranjan Singh defendant for Rs. 22,500/- from Mrs. S.M. Millet by a registered deed dated 30-8-1944. This sale deed along with some other connected documents was handed over to the plaintiff Bank by Naranjan Singh. In 'the list of title deeds' contained in Exhibit P. 5, the date of the sale deed was given as 30-8-1946.
All other particulars of the property and as regards its sale in favour of Naranjan Singh were correctly mentioned. Mention of the year '1946', instead of '1944', appears to be only a typographical mistake. The same mistake (giving the year as 1946 instead of 1944) was made in the date of the power of attorney mentioned at No. 1 (b) of the list in Exhibit P. 5. Appellant's objection as regards identity of the property can therefore be readily rejected.
The letter specifically mentions the sale deed to be the one relating to 'Dove villa', Simla, and gives all its details correctly. The sale deed actually delivered related to the property subsequently mortgaged with the appellant.
5. Mr. M.C. Sud, learned counsel for the appellant, next contends that the letters Exhibits P. 4 and P. 5 required registration under Section 17(1)(b) of the Indian Registration Act, for they purported to create or declare a right or interest of the value of more than rupees one hundred in the immovable property. It is further submitted that in case these letters are thrown out as inadmissible, there remains nothing to prove the intention that the title deeds were deposited for the purpose of creating a charge on the property. The requisites of an equitable mortgage are:
(i) a debt
(ii) deposit of title deeds, and
(iii) an intention that the deeds shall be security for the debt.
Existence of the first two essentials is not denied in this case. If the two letters be held to have been rightly admitted in evidence, there can be no serious dispute that the third requisite too is fully satisfied. In Ex. P. 5, the defendant acknowledged that the title deeds were deposited' in connection with an advance of Rs. 11,000/-' made to him by the Bank on 29-10-1946.
Exhibit P. 4 declared that the property, the title deeds of which were deposited with the Bank, was free from any encumbrances and that the advance of Rs. 11,000/- was made by the Bank 'against the deposit of title deeds'. The intention of creating an equitable mortgage by deposit of the title deeds is abundantly clear.
6. The defendants have not even suggested that there was, or could possibly be, any other object for depositing the title deeds with the Bank, on the day the advance was made and the pronote executed. The evidence and the circumstances leave no doubt that it was with no other intention than to create a charge on the property to which the title deeds related.
7. As regards admissibility of the letters Exhibits P. 4 and P. 5, it has to be seen whether they, or either of them constitute the contract of mortgage or they merely contain a statement of facts from which the contract of mortgage, already completed by the deposit of title-deeds, can be inferred. It is only in the former case that the letters would be regarded as transferring interest in the property and would require registration. I have no doubt in my mind that the letters fall under the latter category.
The letters individually or taken together, as suggested by Mr. Sud, cannot be regarded as repositories of the contract of mortgage. Their contents and the surrounding circumstances strongly lead to the inference that the parties did not intend to reduce their bargain to the form of a document. The letters do not constitute the agreement between the parties, nor do they contain the terms of the contract.
Exhibit P. 5 merely gives the list and particulars of the documents which were delivered, 'in connection with' the money advanced by the Bank, a day earlier. Exhibit P. 4 contains a declaration that there were no other documents, excepting those deposited with the Bank, and that the property to which those documents related was free from all sorts of encumbrances. The most that can be said is that the letters purported to acknowledge or record the transaction which had been completed a day earlier end by which an equitable charge was created.
The letters do appear to have been obtained with a view to obviate the possibility of a plea that the documents were deposited for some purpose other than the one of creating security. As laid down by their Lordships of the Supreme Court in Rachhpal Mahraj v. Bhagwandas Daruka, AIR 1950 SC 272 (A), a document recording a past transaction and got executed with that intent does not, by itself, create the charge and become compulsorily registerable. The memorandum in the form of a letter addressed to the creditor in that case was in the following terms:
'We write to put on record that to secure the repayment of the money already due to you from us on account of the business transactions between yourselves and ourselves and the money that may hereafter become due on account of such transactions we have this day deposited with you the following title deeds in Calcutta at your place of business at No. 7, Sambhu Mullick Lane, relating to our properties at Samastipur with intent to create an equitable mortgage on the said properties to secure all moneys including interest that may be found due and payable by us to you on account of the said transactions ......
8. On the question of admissibility of the above document, their Lordships observe:
'Turning now to the memorandum before us, it is clear, on the face of it, that the parties did not intend thereby to create the charge. The document purports only to record a transaction which had been concluded and under which the rights and liabilities had been orally agreed upon, NO doubt it was taken by the respondents to show that the title deeds of the appellant's properties were deposited with them as security for the moneys advanced by them, and to obviate a possible plea that the deeds were left with them for other purposes, as indeed as contended by the appellant in his written statement, taking advantage of the non-registration of the memorandum in question.
But that is far from intending to reduce the bargain to writing and make the document the basis of the rights and liabilities of the parties. In agreement with the High Court, we are of opinion, that the memorandum delivered by the appellant along with the title deeds deposited with the respondent? did not require registration and was properly admitted in evidence to prove the creation of the charge.'
9. The memorandum under consideration in Sundarachariar v. Narayana Ayyar, AIR 1931 PC 36 (B), consisted of a list of the title-deeds which were deposited on the day the loan was obtained, and contained the following introductory words :
'As agreed upon in person I have delivered to you the undermentioned documents as security.'
The memorandum was written contemporaneously with the pronote on which the suit was based, and it also bore an attestation. As regards its admissibility, their Lordships arrived at the following conclusion:
'..... that the memorandum wasnot other than a written record of the particulars of deeds the subject of an agreement constituted in fact by the act of deposit and the payment of the money and that it neither purported nor operated to create or declare any right, title or interest in the property included in the deeds, with the result that it did not require registration.'
In Ralli Brothers, Karachi v. Punjab National Bank. Ltd. ILR 11 Lah 5G4 1 (AIR 1930 Lah 920) (C), no formal document embodying the terms of the contract between the parties was executed, but a list of the title deeds deposited with the creditor was contemporaneously drawn up and signed by the debtor. The list was headed with the following description :--
('List of title deeds deposited by Messrs. Mool Chand Mutsaddi Lal, with the Punjab National Bank, Limited. Delhi, as security of the promissory note for Rs. 2,00,000 (two lacs only) executedon 22-10-1919).'
It was held :
'The list merely shows that the documents included therein had been deposited by way of security. In other words, it is merely evidence of the purpose for which the deeds had been deposited with the Bank and nothing more.'
10. Punjab National Bank. Ltd. v. Official Receiver Kurnal, AIR 1940 Lah. 166 (D) is another decision of this Court in which it was held that where a document contains a mere list of documents deposited with the mortgagee when creating an equitable mortgage regarding certain property, the mere fact that it is stated in the heading of the list that the property was encumbered will obviously not be sufficient to turnit into a document embodying the agreement between the parties, and that such a document does not require registration.
A Division Bench of this Court in Firm Bishen Das Gobind Ram v. Sahukara Bank Ltd., Ludhiana, AIR 1941 Lah. 224 (B) had under consideration a document almost identical in terms to the one in question before us. The document stated :
'Please acknowledge receipt of the following title deeds deposited with you by us in connexion with the loan, cash credit overdraft ...... to beadvanced to us.'
Below this were given particulars of the title deeds. As regards the real character of the document, Tek Chand J. observes:
'It did not constitute the operative instrument; it did not contain the conditions of the transaction; it was merely a record of the title deeds that had been deposited as collateral security for the amount which the Bank had verbally agreed to advance in the cash credit account and, therefore, did not require registration.'
The case in contest is fully covered by this authority and I am in respectful agreement with the view expressed ........ therein. In fact, the matternow seems to have been finally concluded by the pronouncement of their Lordships in Rachpal Maharaj's case (A) referred to above.
11. The case relied upon by Mr. Sud are clearly distinguishable. They need not detain me long, since decision on the point in question must necessarily depend upon the facts of each case. In Hari Shankar Paul v. Kedan Nath Saha, AIR 1939 P. C. 167 (F), it was held that where the parties professing to create a mortgage by deposit of title deeds contemporaneously enter into a contractual agreement in writing which evidences the deposit and contains all the essentials of the transaction, expressly conferring a power of sale on the mortgagee, and which in fact purports to be an instrument not merely evidencing the transaction already completed but by itself effective to create an interest in the property in favour of the mortgagees, such a document requires to be compulsorily registered.
The document under consideration before their Lordships contained all the essentials of the transaction by which the security was created. Referring to the document their Lordships observe :
'It states that it is hereby agreed and declared between and by the parties that in consideration of the sums advanced the title deeds of the property shall be held as a security on the said property and refers to any proceeding which may be had for the protection of this security or for procuring payment of the moneys hereby secured. It then sets out all the details of the transaction and specifically confers a power of sale on the mortgagees.'
In Lal Ram Sarup v. Lala Shiv Dayal, AIR 1940 Lah, 285 (G), the document is reproduced at page 287 and with respect to it the learned Judge observes :
'This letter together with the title deeds was handed over to the plaintiff. In the face of the contents of this letter, it is idle for the appellant to contend that it contained merely a recital of an already completed equitable mortgage.
Not only were the writing of the letter and the deposit of title deeds contemporaneous transactions, but it is clear that the letter was the sole repository of the terms of the bargain.'
The other two cases Behram Rashid Irani v. Sorabji Rustomji, ILR 38 Bom. 372 : (AIR 1914 Bom 15) (H) and Pranjivandas Jagjivandas Mehta v. Chan Ma. Phee, ILR 43 Cal 895 : (AIR 1916 P. C. 115) (I) relied upon by Mr. Sud have no bearing to the point at issue.
12. In my view, the letters (Exs. p. 4 and P. 5) were no more than mere record of the past and completed transaction and, therefore, did not require registration. The intention that the title deeds were deposited as security of the loan is abundantly clear. The charge with respect to the amount due on the pronote account is thus fully established.
13. As regards the overdraft current account, the matters are, however, absolutely different. The account was opened with the plaintiff-Bank on 4-5-1946. On 12-12-1946, a sum of Its. 5,230/4/3, was due from Naranjan Singh defendant in this account. It is then that Naranjan Singh is said to have created a further charge for this amount on the property already equitably mortgaged.
The plaintiff's own case is that this additional charge was created by means of a letter (Exhibit P. 7) written that day by the defendant. The title deeds were already deposited with the Bank. The amount had fallen due. It is not even alleged that the letter was preceded by any oral agreement creating the charge between the parties. The letter, according to the plaintiff itself, is thus the sole repository of the contract between them. Exhibit P. 7 says :
'I am availing a temporary overdraft from time to time. As security against this I would request you to 'please note' your hen on the title deeds of houses and premises known as 'Dove Villa' with attached piece of land measuring 1713 Sq. Yards situated below main Railway Station, Simla pledged with you in pronote account for Rs. 11,000/- jointly with Mr. A.S. Jaspal.'
The statement 'please note your lien on the title deeds' was either intended to create a charge or it was not so intended. Obviously, the charge was to be on the property to which the title deeds related. If the statement intended to create a charge, the document would be creating an interest in the immovable property and would, therefore, require registration.
If it were not so intended, there remains nothing else for the plaintiff to prove the alleged charge. As already observed, it is on the basis of the letter alone that the plaintiff's case, as regards the charge, rests. The letter cannot, therefore, be regarded as a record of any past or completed transaction. It contains the bargain between the parties and if the bargain was to create a mortgage, the letter required registration.
Having not been registered, it is inadmissible in evidence and has to be left out of consideration. The plaintiff, therefore, cannot claim any charge on the property in dispute with respect to the amount due on the overdraft current account.
14. Chapter 3 of the Displaced Persons (Debts Adjustment) Act, No. 70 of 1951, (which came into force on 10-12-1951), relates to reliefs granted to displaced persons. Section 29, the first section in this Chapter, lays down inter alia that no interest shall accrue or be deemed to have accrued in respect of any debt owed by a displaced person, on and from the 15th day of August, 1947.
It is not disputed that the principal debtors in this case are displaced persons, in the Letters patent Appeals Nos. 6 and 7 of 1956, decided by us today, it has been held that the decree underconsideration is in respect of 'debt' as defined by Section 2(6) of the Act. That makes Section 29 applicable to the case. According to it, interest shall be deemed to have ceased to accrue after 15-8-1947.
No interest thereafter can, therefore, be allowed. Calculated at the rates claimed by the plaintiff, the interest up to that day on the pronote account comes to Rs. 540/- and that on the overdraft current account to Rs. 346/-. Thus, the total amount for which the plaintiff's suit can be decreed comes to Rs. 11,540/- plus Rs. 5,576/4/3, viz., Rs. 17,116/4/3.
Out of this amount, the plaintiff's charge on the mortgaged property shall extend to Rs. 11,540/- only; the plaintiff Bank shall be entitled to recover this amount by sale of the mortgaged property. The appellant shall have a second charge on the property in dispute. For the sake of clarification, it may be mentioned that the plaintiff Bank shall have no charge on the property in respect of the second item of the decretal amount and that A.S. Jaspal Singh respondent shall also not be personally liable for this amount, viz, Rs. 5,576/4/3.
The plaintiff Bank, shall not be entitled to any future interest on the decretal amount. The other directions contained in the decree under appeal shall stand.
15. In the result, the appeal is partly accepted and the decree modified accordingly. In view of the circumstances, of the case, I would leave the parties to bear their own costs in this appeal.
K.L. Gosain, J.
16. I agree.