M. Anantanarayanan, C.J.
1. On the 29th of October, 1957, a document, which purports to be a memorandum of mortgage by deposit of title deeds, came into existence as between the Jawahar Mills Ltd., Salem, and the Indian Overseas Bank Limited. The document was presented for registration on 30th October, 1957, and it bore stamps under Article 6 of Schedule I of the Stamp Act. The question referred to us for decision is, whether this is an agreement relating to the deposit of title deeds, pawn or pledge, falling under Article 6(2)(a) of Schedule I, or is a mortgage deed falling under Article 40(b) of the same Schedule, of the Stamp Act.
2. Before proceeding to the details of the recitals in this document, which has two Schedules of properties attached, namely, Schedule ' A' and Schedule ' B '; it may be useful to briefly refer to certain relevant provisions of the Stamp Act, 1899, the Registration Act and the Transfer of Property Act. Section 2(17) of the Stamp Act is an inclusive definition of a deed of mortgage, and, by its terms.
includes every instrument whereby, for the purpose of securing money advanced, or to be advanced by way of loan, or an existing or future debt, or for the performance of an engagement, one person transfers, or creates, to, or in favour of, another a right over or in respect of specified; property.
Article 6 of Schedule I is entitled ' Agreement relating to deposit of title deeds-pawn or pledge ' and Article 6(2)(a) would be the relevant category, if the agreement in the present instance dated 29th October, 1957, is not to be construed as one falling under Article 40(b) of Schedule I. Article 40(b) of Schedule I relates to a mortgage deed, not being an agreement relating to deposit of title deeds, pawn or pledge (Article 6), when possession is not given or agreed to be given by the mortgagor. Section 17 of the Registration Act sets forth the categories of documents in respect of which registration is compulsory. Section 58 of the Transfer of Property Act deals with kinds of mortgages recognised by law, and under Section 58 (f), a mortgage could be created by deposit of title deeds with regard to immoveable property, in specified towns, it is not in dispute that Salem town has been notified, as a town in which such a transaction could validly take place. Under Section 8 of the Transfer of Property Act, and the relevance of this will be later apparent, where the property transferred is machinery attached to the earth, the moveable parts thereof will also be included within the scope of the transfer as an essential incident. Under Section 70 of the same Act, if, after the date of mortgage, any accession is made to the mortgaged property, the mortgagee will ordinarily be entitled to it, in the absence of a contract to the contrary.
3. The question whether a particular document should be construed as a mortgage falling within Article 40 of Schedule I, or is merely an agreement or memorandum of the terms of a mortgage created by deposit of title deeds falling under Article 6(2)(a), came up before a Special Bench of the Bombay High Court in In re Indian Stamp Act : AIR1954Bom462 . In other words, the precise question which now concerns us arose for determination on the facts of that case. Delivering the judgment of the Bench, Ghagla,C.J. referred to the definition of mortgage deed in Section 2(17), that we have set forth earlier. He then pointed out that the Stamp Act, per se, made no distinction between a legal and an equitable mortgage. But the Legislature made a special provision in Article 6, which relates to that class of documents which should be interpreted, as an agreement or memorandum of mortgage by the deposit of title deeds, and not a deed of mortgage in its own right. The principle of differentiation between the two categories was expressed by the Bench in the following words:
In other words, if the document merely contains the bargain between the parties with regard to the deposit of title deeds, then although it creates an interest in immoveable property and although it is a mortgage deed, still by reason of the provisions of Article 6 the duty payable is less than the duty which would have been payable if it had been a mortgage deed in the larger sense of the term. It is clear that what was intended by Article 6 was a document which should merely contain the bargain between the parties with regard to the deposit of title deeds and, may be, conditions subsidiary or ancillary to the deposit of title deeds. But if we have a document which contains all the provisions which one would normally find in a mortgage deed, then the mere fact that the document also contains the bargain with regard to the deposit of title deeds would not make it an agreement for the deposit of title deeds.
4. We may now turn to certain other decisions which have a bearing on the main argument, by virtue of the operation of Section 92 of the Evidence Act. In Pranjivandas Jagjivandas Mehta v. Chan Ma Phee (1916) 31 M.L.J. 155 : I.L.R. 43 Cal. 895 (P.C.) the Judicial Committee was concerned with the precise implication of a mortgage created by the delivery of title deeds of property. Obviously, the charge could be created by such a delivery Simpliciter, with nothing else agreed upon between the parties, or reduced to writing; in such a case, it is a presumption of law that the scope of the security is the scope of the documents of title. Where, however, the title-deeds are handed over accompanied by a bargain, the terms of that bargain govern the rights of parties with regard to the scope of the security. If the terms are reduced to writing, that memorandum, and that alone, ' must determine what is the scope and extent of the security.' The dicta of Lord Cairns in the leading case of Sham v. Foster (1872) L.R.E. & IndAp 321 were cited to the effect that a bare deposit of the documents of title, without more, will, in equity, create a charge on the property referred to, but that where there is an actual written charge, the terms alone will govern the scope of the security. In Subramanian v. Lutchman (1923) 44 M.L.J. 602 : I.L.R. 50 Cal. 338 (P.C) The Privy Council reiterated that such an agreement must be registered to prove a mortgage, and that where the terms are thus to be found in a registered document, 'oral proof of the mortgage is inadmissible'. In the language of Couch, C.J., in another case ' the reason is that the writing is tacitly considered by the parties themselves as the only repository and the appropriate evidence of their agreement.'
5. In Ashar Reza Khan v. Mohomed Mehli Hossein Khan I.L.R. Cal. 556 : L.R. 30 IndAp 71 the Judicial Committee had before them deeds of mortgage and of sale and a certificate of sale, of shares in a Zamindari. In the absence of words of exception or reservation, the documents were held to convey both the interests in the houses, on the land, and in the profits or rents derived from them. In Berumull Sowcar v. Velu Gramany : AIR1942Mad369 . Patanjali Sastri, J. observed that where a person erected a superstructure on the site of which he was a tenant, and subsequently purchased the site from the landlord, the deposit of title deeds, though relating only to the land, would clearly cover the house, and create an equitable mortgage of the entire property of both site and superstructure.
6. We can now proceed to follow the argument of learned Counsel for the Jawahar Mills Limited, Salem, Sri V. K. Thiruvenkatachari. His argument is that the principle of differentiation is not correctly stated in the Special Bench decision in In re Indian Stamp Act1, the passage from which was set forth by us earlier. The law permits a mortgage by the deposit of title deeds under Section 58(f) of the Transfer of Property Act, and this we have already seen. Such a mortgage could be created, as observed by the Judicial Committee, either by a bare deposit, or by a deposit accompanied by the terms of a bargain, or by a deposit with an agreement or memorandum of the terms, in writing, which must be necessarily registered, to be admissible in evidence. Where such a memorandum exists, no parole evidence is admissible on the terms of the bargain, because of the inhibiting force of Section 92 of the Evidence Act. This necessarily implies that the parties, in their own interest, should reduce all the terms to the writing of the agreement, including even minute particulars. For this reason, the dicta in In re Indian Stam Act : AIR1954Bom462 to the effect that the document should merely contain the bargain between the parties and perhaps conditions ancillary to the deposit, but no other terms, may not be the statement of the correct position at law. According to learned Counsel, since the parties are perfectly free to reduce every term of the bargain into writing and should indeed do so if they want to prove any term whatever, the dichotomy apparent in the Bombay decision may not be valid. Where the document purports to recite the terms of a mortgage by deposit of title deeds, however, extensive and minute it may be, it falls under Article 6 of Schedule I, and not under Article 40. The linked argument is that the mere fact that the documents of title handed over related only to the actual lands, as in Schedule ' B' in the present case, will not prove either that the scope of the security could not validly include the factory buildings on the lands and the machinery installed therein (Schedule A), or that the wider scope of Schedule ' A ' would imply that the document is a deed of mortgage falling under Article 40.
7. We have carefully considered this line of reasoning, and, in our view, it cannot avail the respondent--(The Jawahar Mills Limited) on the very strong facts of the present case. The document, in the present case, appears to us, beyond controversy, to be a document of a mortgage of properties in its own right, and not at all merely a memorandum of the terms of a bargain accompanying a mortgage by deposit of title deeds. Surely, one vital differentiating factor would be, the legal effect of the document, if we supposed that the title deeds were not actually deposited, or that some other title deeds not relevant to these properties had been deposited. It is here that we must refer to the explicit recitals of the present document, creating mortgage rights in favour of the mortgagee by its own terms of disposition, though the deposit of title deeds is referred to at the outset. The following passages, in our view, are conclusive on this vital aspect:
(1) That the properties hereby charged shall be and remain as continuing security for the balance from time to time due to the mortgagees.
(2) That the mortgagors do hereby declare and assure that the properties described in Schedule ' A ' hereto belong absolutely to them and that no other person has any manner of right, title or interest...and that there is no encumbrance or charge.
(3) That the mortgagors shall at all times during the continuance of the security hereby created....
(4) (If the mortgagors neglect or refuse to effect insurance as agreed upon) ' it shall be lawful for but not obligatory upon the mortgagees to pay such premia and to keep the mortgaged properties so insured by the mortgagees for such purpose shall be charged to...shall be secured upon the mortgaged properties'.
(5) That all moneys received under any insurance or any part of the property hereby mortgaged.
(6) That the mortgagors hereby undertake.
(7) Accelerating clause to the effect that 'on default of payment of any such quarterly interest the entire amount due under the mortgage hereby created shall become due and immediately payable
8. We have no doubt whatever that these recitals in the document create, by their own force, a mortgage, in favour of the Indian Overseas Bank Limited, in respect of all the properties of Schedules 'A' and ' B.' quite apart from the deposits of title deeds under Schedule ' B.' On the present facts, we are further not able to accept the argument of learned Counsel (Sri Thiruvenkatachari), based upon Section 8 of the Transfer of Property Act. Even if we concede that the properties referred to in Schedule ' B ' (lands), which details the deeds of title deposited, must be held to include the factory buildings thereon erected prior to the mortgage, it is extremely difficult to see how any presumption can be drawn that the mortgage, by deposit of title deeds would include the electrical machinery, transformers, switch gear, generating sets etc., minutely particularised in Schedule ' A'. There is absolutely nothing to show that these are not separable machines, and it is noteworthy that even future acquisitions are, under the document, to be include in the security. Thus, this is a far stronger case for the interpretation of the document as a document of mortgage in its own right, than the case discussed in In re Indian Stamp Act : AIR1954Bom462 Nor is learned Counsel for the respondent able to explain, or account for, the specific words of the document creating a security in favour of the mortgagee, as upon the document itself, and quite apart from a deposit of title deeds, or the terms of the bargain of such a deposit. We must, therefore, unhesitatingly answer the Reference to the effect that the document is a deed falling under Article 40(b) of Schedule I of the Stamp Act. Parties will bear their own costs.