D.P. Wadhwa, J.
(1) The appellant, Ishwar Das Malhotra, filed a suit for recovery of Rs. 17.500.00 based on the mortgage of two properties. Dhanwant Singh, defendant No. 1 (respondent No. 1 herein) was the person stated to have taken loans from the plaintiff-appellant on the basis of these mortgages while defendants-respondents Nos. 2 to 5 were the persons who had allegedly purchased the mortgaged properties subsequently. The suit of Malhotra was decreed but only against defendant No. I, Dhanwant Singh, and his suit as against defendants Nos. 2 to 5 was dismissed with costs. It was held that Dhanwant Singh was not competent to mortgage one property and as regards the other property no mortgage was enforceable. Malhotra was also awarded interest at the rate of 6% per annum and not at 7% per annum as claimed by him. Aggrieved, Malhotra has appealed to (his court.
(2) The two mortgaged properties are .'(1) house No. J-6/87 Rajouri Garden, New Delhi, and (2) house No. j-7/24, Rajouri Garden, New Delhi. At the relevant time property No. J-6/87 was a plot of land and was owned by Dhanwant Singh who, by a sale deed dated 11-3-1966, sold the same to Smt. Indrawati, respondent-defendant No. 2. The sale deed was registered on 17-3-1966. Smt. Indrawati constructed a single storeyed house thereon and sold the same to respondents-defendants Nos. 3 and 4, namely, Smt. Basant Kaur and Smt. Harbans Kaur, respectively by a sale deed dated 10-10-1966. Incidentally, it may be noted, during the pendency of the present appeal Smt. Basant Kaur died and her legal heirs were brought on record. Reference to Smt. Basant Kaur would thereforee, mean reference to her legal representatives.
(3) Property No. J-7/24, at that time was a single store) ed house and ' was owned by Smt. Indrawati. She sold this house along with the plot to Dhanwant Singh on 11-3-1966, and the sale deed was also registered on the same date. Dhanwant Singh, in turn, sold this property to Harjeet Singh Dhanjal, respondent-defendant No. 5 by a sale deed dated 5-6-1975.
(4) The case of Malhotra is that on 18-5-1966 Dhanwant Singh took a loan of Rs. 8500.00 with interest at the rate of 7% per annum from him and executed a pronote and also deposited title deeds of the aforesaid two properties with him 'as security for repayment of the amount'. Later on the same date, Dhanwant Singh also gave a memorandum in writing regarding deposit of the title deeds to Malhotra. This memorandum is Ex. P-2 and is the subject matter of considerable controversy between the parties. Dhanwant Singh took a further loan of Rs. 4500.00 from Malhotra on 20-5-1967 and executed a pronote for Rs. 13,000.00 which include the loan of Rs. 8500.00 which had been advanced to him by Malhotra earlier. The title deeds were agreed to be kept as security for this loan of Rs. 4500.00 as well Again on 4-5-1971 Dhanwant Singh took yet another loan of Rs. 3000.00 from Malhotra and executed a consolidated pronote of Rs. 16.000.00 and allowed the title deeds to be kept with the plaintiff as security for this loan as well. It was stated by Malhotra that Dhanwant Singh bad paid him interest up to 3-5-1971 and he also received a further sum of Rs. 3900.00 from Dhanwant Singh as interest on different occasions. A sum of Rs. 1500.00 towards interest remained due to Malhotra from defendant Dhanwant Singh on the date of the institution of the suit apart from the principal amount of Rs. 16000.00 .
(5) A perusal, of the facts narrated above would show that property No. J-6/87, bad already been sold by Dhanwant Singh to Smt. Indrawati when Dhanwant Singh is stated to have deposited the title deeds of this property with the plaintiff Malhotra. Since Dhanwant Singh was not having any legal title to this property, he could not create any mortgage by means of deposit of title deeds of this property or otherwise. Malhotra has alleged that there was a collusion between Dhanwant Singh and Smt. Indrawati. Otherwise, he claimed, there was no occasion for Smt. Indrawati to hand over the title deeds of this property to Dhanwant Singh for the purpose of creating the mortgage. In support of this submission Malhotra refers to the fact that the sale deeds in respect of both the properties were executed on the same date, i.e. 11-3-1966, by which Smt. Indrawati sold her property (No. J-7/24) to Dhanwant Singh and Dhanwant Singh sold his property (No. J-6/87) to Smt. Indrawati Smt. however, denied any such collusion. Apart from making a bald averment in the plaint no evidence has been led to prove the alleged collusion between Dhanwant Singh and Smt. Indrawati. The collusion having not been proved, the question of there being any mortgage by deposit of title deeds in respect of property No. J-6/87 does not arise. Smt. Indrawati cannot, thereforee, be held liable for the loan raised by Dhanwant Singh from Malhotra and property No. J-6/87 could not be the subject matter of any mortgage. Similarly, defendants Smt. Basant Kaur and Smt. Harbans Kaur, who subsequently purchased property No. J-6/87 from Smt. Indrawati, also cannot be made liable. In fact, Mr. Bharat Inder Singh, learned counsel for the appellant, was himself not very enthusiastic about the mortgage being enforced in respect of property No. J-6/87, and we did not think it necessary to call upon counsel for defendants Nos. 2, 3 and 4 to address any argument on this point.
(6) That 'takes us to the determination of the contest between the plaintiff Malhotra and Dhanwant Singh and Harjeet Singh Dhanjal in respect of property No. J-7/24. Dhanwant Singh admits the raising of loan but denies that he ever executed any mortgage by deposit of title deeds. Harjeet Singh Dhanjal who is the subsequent purchaser of this property states that he is bona fide purchaser for value of this property from Dhanwant Singh and that when he bought it he was not having any notice of any mortgage and, on the other hand, assurance were given to him by Dhanwant Singh that the property was free from all encumbrances and that the (Harjeet Singh Dhanjal) also made independent inquiries to find out if the property was encumbered According to Harjeet Singh Dhanjal, there was no equitable mortgage in respect of this property and that it was only Dhanwant Singh who could be personally liable.
(7) At the time when Dhanwant Singh took the loan of Rs. 8500.00 from Malhotra a memorandum (Ex. P-2) evidencing deposit of title deeds was written by him to Malhotra. It will be appropriate to reproduce the said memorandum:
'SHRI Ishwar Dass Malhotra, 3918, Near Jagat Cinema, Delhi. I have already created an equitable mortgage to you for Rs. 8500.00 (Eight thousand five hundred only) together with interest @7/o P.A. from 18-5-1966 till payment in full in respect of property- Single storey house built on plot No. J-7/24 area 146 square yards and plot No. 87 Block-1-6, 1 0 yards free hold plot in Abadi of Rajouri Gardens area of village Tatarpur, Delhi State and deposited the deeds as follows :- (A) Sale deed for Rs. 22000.00 dated 11-3-1966 by Smt. Indrawati in my favor registered vide No. 1591 Bahi No. 1 Volume 464 pages 131 to 133 on 17-3-1966. (B) .Sale deed for Rs. IOOGO.00 dated 12-4-1965 by Supreme Enterprise; (P) Ltd. Gokhale Market, Delhi in favor of Shrimati Indrawati registered vide No. 1429 Addl. Book No. 1 Volume 377 page; 111 to 113 on 19-4-1965. (C) (Illegible) sanctioned by Mc Delhi vide orders dated 26-7-1965. (D) Gift deed dated 12-2-1965 for Rs. 3600.00 of 1/2 Plot No. 87 Block-J-6 (J6/87) by S. Tripat Singh in my favor. (E) Sale deed dated 9-2-1958 for Rs. 1257.62 by Dlf infavor of myself and S. Tripat Singh. Dhanwant Singh 18-5-1966 '
(8) At the time when the loan of Rs. 4500.00 was taken on 20-5-1967' Dhanwant Singh wrote receipt Ex. P-6 which is as under :-
'RECEIVED the sum of Rs. 13000.00 (Rs. Thirteen thousand only) on a/c of pronote dated today as following :- Cheque No. 0441803 dated 18-5-1966 on the Bank of India Ltd. New Delhi vide pronote dated 18-5-1966 (for) Rs. Eight thousand and five hundred only (Rs. 8500.00 ). CbequeNo.C041821 dated 20-5-1967 on the Bank of India Ltd. New Delhi (Ajmer Gate Extension Branch) turn (Rs. Four thousand and five hundred only) Rs. 4500.CO. Delhi. Dhanwant Singh Dated 20-5-1967. 20-5-1967 '
(9) Again, at the time when loan of Rs.3000.00 was taken on 4-5-1971 Dhanwant Singh executed receipt Ex. P-8 which is as follows :
'RECEIVEDthe sum of Rs. sixteen thousand only (16000.00) on account of pronote dated today as following :- Rs. 13000.00 (Thirteen thousand) on a/c of Dhanwant Singh's equitable mortgage dated 20-5-1967. Rs. 3000.00 (Three thousand) cash received today. Total Rs. 16000.00- Delhi, Dhanwant Singh Dated 4-5-1971. 4-5-1971 '
(10) Reference may also be made to another document being letter dated 16-5-1970 which was written by Dhanwant Singh to Malhotra, the plaintiff. It is Ex. P-12. The relevant portion of this letter reads :-
'WITH reference to your letter, telegram and notice I hereby inform you that I have made the following payments towards interest of equitable mortgage deed of 20-5-1967 for Rs. 13000.00 in your favor and request you to wait for another three months for full payment. Interest will be paid regularly'-...'
(11) Various issues were framed by the trial court. The trial court held that there was an 'equitable mortgage' in respect of property No. J-7/24. It, however; held that the transfer of this property in favor of Harjeet Singh Dhanjal, defendant No. 5, was not subject to equitable mortgage in as much as he was a bona fide purchaser for value and had taken all reasonable care and had acted in good faith. The trial court negatived the contention of Dhanwant Singh that he had paid back the full amount of loan and interest to Malhotra. Accordingly, it passed a decree with costs for Rs. 17500.00 with interest at the rate of 6% per annum in favor of the plaintiff and against Dhanwant Singh defendant No. 1 only.
(12) The expression 'equitable mortgage' does not find mention in the Transfer of Property Act, 1882. S. 58(f) of the Act describes mortgage by deposit of title deeds. It is as good as any other mode of creating a legal mortgage where under there will be transfer of interest in the property mortgaged to the mortgages. The expression 'equitable mortgage' which is known in the English law is loosely used to mean a mortgage by deposit of title deeds. Rather it can be said that in India a mortgage by deposit of title deeds is commonly known as an equitable mortgage but its incidents are not the same as that of an equitable mortgage under the English law. In K.J. Nathan v S.V. Maruthi Rao and others : 6SCR727 , distinction between an equitable mortgage, as understood in the English law, and the mortgage, by deposit of title deeds has been brought out by the Supreme Court. Subha Rao J., (as his Lordship then was) speaking for the court, observed as under:-
'UNDER this definition (referring to S. 58(f) of the Transfer of Property Act) the essential requisites of mortgage by deposit of title deeds are, (i) debt, (ii) deposit of title deeds, and (iii) an intention that the deeds shall be security for the debt. Though such a mortgage is often described as an equitable mortgage, there is an essential distinction between an equitable mortgage as understood in English law and the mortgage by deposit of title deeds recognised under the Transfer of Property Act in India. In England an equitable mortgage can be created either, (l)by actual deposit of title-deeds, in which case parol evidence is admissible to show the meaning of the deposit and the extent of the security created, or (2) if there be no deposit of title-deeds, then by a memorandum in writing, purporting to create a security for money advanced : see White and Tudor's Leading Case in Equity, 9th Edition, Vol. 2 at p. 77. In either case it does not operate as an actual conveyance though it is enforceable in equity ; whereas under the Transfer of Property Act a mortgage by deposit of title deeds is one of the modes of creating a legal mortgage where under there will be transfer of interest in the property mortgaged to the mortgagee. This distinction will have to be borne in mind in appreciating the scope of the English decisions cited at the Bar. This distinction is also the basis for the view that for the purpose of priority it stood on the same footing as a mortgage by deed.'
(13) It will thus be seen that a mortgage by deposit of title deeds is like any other mortgage and there is a transfer of interest in the property mortgaged to the mortgagee. The question, thereforee, of the subsequent purchaser having bought the property subject to a mortgage by deposit of title deeds bona fide, with or without notice, is of no relevance. The subsequent purchaser cannot avoid the mortgage by leading evidence to show that he made all reasonable inquiries to find out if the property was subject to a mortgage by deposit of title deeds or not. S. 48 of the Transfer of Property Act does not admit of any such exception. According to this section, when a person purports to created, by transfer at different times, rights in or over the same immovable property, and such rights cannot all exist or be exercised to their full extent together, each later created right shall, in the absence of a special contract or reservation binding the earlier transferees, be subject to the rights previously created. Further, proviso to S. 48 of the Registration Act enacts that a mortgage by deposit of title deeds shall take effect as against any mortgage deed subsequently executed and registered relating to the same property. Thus, a -subsequent sale cannot have priority over a mortgage by deposit of title Seeds created before the sale. In my view, thereforee, the trial court fell in an error in holding that Harjeet Singh Dhanjal, the subsequent purchaser of the mortgaged property, was not liable on the ground that he took all reasonable care and acted in good faith.
(14) Before us the argument proceeded on a different line. It was argued by Mr. C.B. Thanai, learned counsel for Harjeet Singh Dhanjal, that the memorandum (Ex. P-2) was compulsorily registrable under S. 17 of the Registration Act and as the same was not registered, it was inadmissible in evidence and any oral evidence was barred under S. 91 of the Evidence Act. At the time when Ex. P-2 was put in evidence it was objected to on the ground of admissibility. The trial court has not touched this point in its judgment. It is a legal point, and a vexed one. The law relating to registration of a document, like in the instant case, is to be found inS.59 of the Transfer of Property Act and Ss. 17(b), 48 and 49 of the Registration Act.
(15) There have been quite a number of cases in the High Courts all over the country, some of which reached the Privy Council and the Supreme Court, in which a mortgage, alleged to have been effected by deposit of title deeds, has been accompanied by a written document, and in which a question has arisen as to whether that document was of such a character as to require registration. The decision in each case has turned upon the nature of the document in question. It is, thereforee, unnecessary to multiply the authorities, and it would be sufficient if reference is made to some of the cases decided by the Privy Council and the Supreme Court and also to one decision of this court.
(16) In M. Subramannian and another v. M.L.R.M. Lutchman and others AIR 1923 Pc 50, it was held that if the memorandum was of such a nature that it could be treated as the contract for the mortgage which the parties considered to be the only repository and appropriate evidence of their agreement, it would be the instrument by which equitable mortgage was creased and would come within Section 17 of the Registration Act. Lord Carson, speaking for the Board, observed :
'TURNING to the document itself, one is led to the same conclusion. 'We hand you herewith title deeds, etc......This please hold as security, etc.- .-Please also hold this as further security.' Their Lordships have no doubt thereforee that the memorandum in question was the bargain between the parties, and that without its production in evidence the plaintiff could establish no claim, and as it was unregistered it ought to have been rejected.'
In Rachpal Mahraj v. Bhagwandas Daruka and others : 1SCR548 , the Supreme Court dealt with the question of registration of the memorandum given along with the title deeds. Patanjali Sastri, J., (as his Lordship then was) who spoke for the court, stated the law as under :
'......WHENthe 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 registered instrument is required under section 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 document both form integral parts of the transaction and are essential ingredients in the creating 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 charge in conjunction with the deposit, it requires registration under section 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 document may be handed over to the creditor along with the title deeds and yet may not be registrable, .........'.
In Sundarachariar v.Narayana Ayyar , dealing with a memorandum which consisted of a list of the title deeds and contained a recital that 'As agreed upon in person, I have delivered to you the undermentioned documents as security', the Privy Council held that it recorded particulars of documents which, it stated, had been delivered as security in pursuance of an agreement reached in person. It did not state what were the terms of the agreement nor did it indicate the nature of the matter for which the deeds were deposited as security. Since the memorandum in question did not embody the terms of the agreement between the parties, it was held, that it did not require registration. In Hari Shankar v. Kedar Nath , the Board was of the opinion that :
'.........WHERE,as here, the parties professing to create a mortgage by deposit of title deeds contemporaneously eater into a contractual agreement, in writing, which is made an integral part of the transaction and is itself an operative instrument and not merely evidential, such a document must under the statute be registered,'
In United Bank of India v. Lakharam S. & Co. AIR 1965 Sc 159 the Supreme Court examined the question as to whether the memorandum required registration. It held that:
'APPLYING the principle to the present case, we consider that the letter at Ex. 7(a) was not meant to be an integral part of the transaction between the parties. The letter does not mention what was the principal amount borrowed or to be borrowed. Neither does it refer to rate of interest for the loan. It is important to notice that the letter does not mention details of title deeds which are to be deposited with the plaintiff-bank. We are, thereforee, of the opinion that the view of the High Court with regard to the construction of Ex. 7(a) is erroneous and the document was not intended to be an integral part of the transaction and did not, by itself, operate to create an interest in the immovable property. It follows, thereforee, that the document-Ex. 7(a)-did not require registration under Section 17 of the Indian Registration Act.'
In V.G. Rao v. Andhra Bank : AIR1971SC1613 , Hegde, J., while dealing with the law relating to the nature of a memorandum given along with the deposit of title deeds or one filed thereafter, held as under :
'THEREFORE,the crucial question is : Did the parties intend to reduce their bargain regarding the deposit of the title deeds to the from 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.'
In Parkash Dev v. New Bank of India : AIR1968Delhi244 a Division Bench of this court held that where the memorandum itself constitutes the bargain, registration is necessary.
(17) The question which falls for determination is whether the memorandum (Ex. P-2), having regard to its true construction and the circumstances in which it came into existence and passed into the hands of Malhotra, is an instrument which purports or operates to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, in respect of the property sought to be mortgaged. The memorandum has been reproduced above. It is of the same date on which the loan was raised and a pronote (Ex. P-l) was written by Dhanwant Singh in favor of the plaintiff Malhotra. Though this memorandum refers to the creation of an equitable mortgage it gives the particulars of the bargain contract between the parties. Also, though it refers to a past transaction, if a reference is made to the statement of Malhotra, it shows that he admits that the pronote (Ex. P-1) and the memorandum (Ex. P-2) 'were written at one and the same time at my house'. The document was contemporaneously written and cannot be said to record a past transaction. Applying the principles enumerated in the decisions mentioned above, the memorandum (Ex. P-2) contains the terms of the contract between the parties. It mentions the amount of loan. rate of interest and details of the property in respect of which equitable mortgage' is stated to have been already created. In my view, the answer would be in the affirmative, and this documents required registration and is, thereforee, in admissible in evidence. This, however, does not conclude the matter.
(18) It is nobody's case that the documents, receipt Ex. P-6, receipt Ex- P-8 and letter Ex. P-12 required registration.
(19) The fact remains that the title deeds were with Malhotra. He has stated that when further loans were raised the same were done on the security of these documents of title Admittedly, it is not necessary that a memorandum in writing should pass while creating a mortgage by deposit of title deeds. Three things are requisite for such amortgage: (1) debt, (2) deposit of title deeds, and (3) an intention that deeds shall be security for the debt. In K.J. Nathan's case (Supra), the Supreme Court has held that physical delivery of document by the debtor to the creditor is not the only mode of deposit. There may be a constructive deposit. The court will have to ascertain in each case whether in substance there is delivery of title deeds by the debtor to the creditor If the credit or was already in possession of the title deeds, it would be hypertechnical to insist upon the formality of the creditor delivering the title deeds to the debtor, and the debtor delivering them back to the creditor. When the loan of Rs. 4500.00 was taken by Dhanwant Singh on 20-5-1967 a consolidated pronote of the previous loan of Rs. 8500.00 and the present loan of Rs. 4500.00 was executed. Similarly, when further loan of Rs. 3000 was taken on 4-5-1971, another consolidated pronote of Rs. 16000.00 was written by Dhanwant Singh in favor of Malhotra. The receipt dated 4-5-1971 refers to a sum of Rs. 13000.00 on account of 'equitable mortgage' created on 20-5-1967 for Rs. 3000.00 . This receipt is for a total amount of Rs. 16000.00 . The letter dated 16-5-1970 also refers to the 'equitable mortgage' of 20-5-1967 for Rs. 13000.00 .Malhotra has said in his statement that the subsequent amounts were advanced on the security of the title deeds already lying with him, and since he has not been cross examined on this point, his statement has to be believed, and it has to be held that there was a mortgage by deposit of title deeds for a sum of Rs. 7500.00 (comprising the two subsequent loans of Rs. 4500.00 and Rs. 3000.00 ) in respect of property No. J-7/24, Rajouri Garden, New Delhi. It follows, thereforee, also that Malhotra is entitled to interest at the rate of 7'% per annum on this amount of Rs. 7500.00 as was agreed to between him and Dhanwant Singh. This rate of interest is permissible under S. 5 of the Punjab Relief and Indebtedness Act, 1934, as extended to Delhi. The first loan of Rs. 8500.00 was advanced on 18-5-1966 when document Ex. P-2 was stated to have been executed. In the documents, Exs. P-6, P-8 and P-12, there is no reference to any 'equitable mortgage' of 18-5-1966. Since document Ex. P-2 has been held to be inadmissible in evidence the judgment of the trial court decreasing the suit of Malhotra to the extent of Rs. 8500.00 with interest against Dhanwant Singh has to be affirmed, though on a different ground. Now, since the principal amount of Rs. 16000.00 has been held to consist of two distinct transactions of Rs. 8500.00 (Ex. P-l) and Rs. 7509.00 (Ex. P-6 and P-8), it appear, fair that the claim of interest of Rs. 1500.00 in the suit is split up into two respective amount of Rs. 800.00 and Rs. 700.00 . Thus, for the amount of Rs. 9300.00 (Rs. 8500.00 plus Rs. 800.00 ), there is no mortgage, and only the amount of Rs. 8200.00 (Rs. 7500.00 plus Rs. 700.00 ) is secured by mortgage of property stated above.
(20) It was also submitted by the learned counsel for the appellant that while drawing up the decree the trial court has taken into consideration the certificates of fee filed by counsel for the defendants which fee certificates, according to the counsel, were submitted after the commencement of the argument, and ought not to have been allowed. This argument overlooks the relevant clauses 16 and 17 of Chapter 168 of Vol. I of the High Court Rules and Orders. According to clause 16, the fee certificate has to be filed before the final hearing. The import of the words 'before the commencement of the arguments' is thereforee not correct. Even otherwise, the court can always extend the time.
(21) For the reasons recorded above, it is held as under :-
(1)The appeal against defendants-respondents No. 2, 3 and 4 is dismissed with costs. (2) The judgment of the trial court decreasing the suit of the plaintiff to the extent of Rs. 9300.00 with costs against defendant respondent No. 1 only and also awarding interest at the rate of 6% per annum on the principal amount of Rs. 8500.00 from the date of the institution of the suit till realisation is affirmed. (3) The appeal against defendants-respondents Nos. 1 and 5 for the amount of Rs. 8200.00 is, however, allowed with costs, granting a mortgage decree for the amount of Rs. 8200.00 together with interest at the rate of 7% per annum on the principal amount of Rs. 7500.00 from the date of the institution of the suit till recovery. The plaintiff appellant is accordingly granted the usual mortgage decree under Order 34, Rule 4, of the Code of Civil Procedure, and it should be stated in the decree that if the defendants-respondents Nos. I and 5 do not pay the amount within a period of six months from today, the mortgaged property No. J-7/24, Rajouri Garden, New Delhi, as described in the plaint, would be sold for the satisfaction of the amount due to the plaintiff-appellant.
(22) The appeal is partly allowed.