1. This appeal arises out of a suit upon an equitable mortgage. It appears that the defendant No. 1 had mortgaged certain properties to the plaintiff under two successive mortgage-bonds, and delivered to him the title deeds of the property. Subsequently on the 25th February 1914 she took a loan of Rs. 1,500 upon the security of the title deeds, executing a promissory note for the said amount. A letter was written by her on the same date to the plaintiff which ran as follows: 'Dear Sir, For re-payment of the sum of Rs. 1,500 with interest I have borrowed from you on a pro-note of date, I hereby put on record that the title-deeds re my premises No. 1, Garpar Road, already deposited with you shall be held as collateral security.'
2. The question for consideration was whether the transaction constituted a valid equitable mortgage. The Court of first instance held that the letter not being registered was inadmissible in evidence and dismissed the suit. On appeal the learned District Judge held that it did not require registration, that an equitable mortgage was created and accordingly decreed the suit. The defendant No. 2, who is the subsequent purchaser of the property and who contested the suit, has appealed to this Court.
3. The question whether there was an equitable mortgage depends upon the question whether the letter constituted the contract of mortgage, or whether there was a mortgage independently of it and the letter was merely a memorandum of facts from which the contract might be inferred. As stated in Sir Rash Behari Ghose's Law of Mortgage, 4th Edition, page 155: 'Where the memorandum accompanying an equitable mortgage does not embody the contract between the parties but is a mere record of certain facts, an equitable mortgage may be established by the mere deposit of title deeds and the advance of money on such deposit, notwithstanding the provisions of the Registration Act.'
4. Our attention has been drawn by the learned Pleader for the appellant to the statements of the plaintiff in his deposition which run as follows: 'Again in 1914 she needed money and borrowed Rs. 1,500 on executing the promissory note in question. Simultaneously with the promissory note in question a letter passed from her am-mukhtear showing that the title deeds which remained in deposit with me would remain as security for re-payment of the loan. The memorandum was written after the promissory note and after that I made the payment of Rs. 1,500. Narain said to me that the title-deeds which were left with you with the mortgages would remain with you. I am giving you a promissory note and a letter saying that you will be able to keep in deposit the title deeds and you advance Rs. 1,500; no I agree to the proposal. After that he wrote the promissory note, took the money, Rs. 1,500, from me and wrote the memorandum and went away.'
5. The payment of the amount, therefore, was made subsequent to the letter and under the circumstances it cannot be said that there was a complete contract of mortgage before the latter was passed. It is true that in the letter it is stated that 'I hereby put on record that the title-deeds already deposited with you shall be held as collateral security,' and it is contended on behalf of the respondent that the words put on record show that it is merely a memorandum of what had taken place. But the title-deeds were with the plaintiff, and it was by the letter that the defendant No. 1 agreed that the title-deeds already deposited should be held as collateral security, and the plaintiff himself states that 'the memorandum was written after the promissory note, and after that I made the payment of Rs. 1,500.'
6. In the case of Kadarnath Dutt v. Sham Lull Khettry 20 W.R. 150 : 11 B.L.R. 405 upon which reliance was placed on behalf of the respondent, the plaintiff made an advance of money to B on the deposit of the title-deeds of property belonging to the latter, which title-deeds were obtained by plaintiff in the morning on an agreement which was not then reduced to writing. In the evening a writing was made over to plaintiff in which B promised to pay him a sum specified with interest for value received in cash. It bore an endorsement depositing as collateral security the title deeds in question by way of equitable mortgage. Plaintiff sued for a declaration that he held a valid equitable mortgage and for an account to be taken, It was objected that the memorandum endorsed on the promissory note ought to have bean registered. Couch, C.J., referring to the letter observed: 'If this memorandum was of such a nature that it could be treated as the contract for the mortgage, and what the parties considered to be the. only repository and appropriate evidence of their agreement, it would be the instrument by which the equitable mortgage was created and would come within Section 17 of the Registration Act. But it was not a writing of that character. As I have said, the equitable mortgage was created by the agreement which was evidenced by the loan and the deposit of the title-deeds.... But as regards the contract between the parties if there had been no memorandum at all on the promissory note, there would have been a complete equitable mortgage.... It is not by the memorandum that the Court takes the agreement for the mortgage to be proved, but by the deposit of the deeds. This is no more than a piece of evidence showing the fact of the deposit which might be proved by any other evidence. The memorandum need rot have been produced.'
7. In the present case, as pointed out above, it was by the letter that the title-deeds were deposited, and the money was paid after the letter was written. There was, therefore, no mortgage created before the letter was written.
8. This case appears to be somewhat similar to the ease of Dwarkanath Mitter v. Sarat Kumari Dasi 7 B.L.R.O.C. 55. There the defendant deposited certain title deeds with the plaintiff as Security for money due on a bond executed by the defendant in favour of the plaintiff. The deeds were sent with a letter . from the defendant to the plaintiff's attorneys: 'I have the pleasure of handing to you the title-deeds of a house No. 56. lower Circular Road, as a collateral security for the Rs. 20,000 which falls due this day. Please accept them from my manager.' Phear, J., observed: 'I cannot separate this letter from the transaction of the deposit of the title-deeds. It explains why the deeds are deposited, and states that the deposit is made as a collateral security of Rs. 20,000. This is not a case in which the charge. on land is implied from the deposit of the deeds themselves, neither is it a case where the charge or the equitable mortgage is made expressly by parol. But it if, as I understand the plaint itself, a case where the basis of the plaintiff's claim is a written document signed by the owner of the property, and it appears to me that the document, and nothing else, creates the charge. It is, therefore, such a document as ought to be registered under the terms of the Registration Act, and cannot be admitted in evidence unless it is registered.'
9. It is true that in the letter in the present case it was stated 'I put on record that the title-deeds...shall be held as collateral security.' But without the letter or verbal communication there would have been nothing to attach the debt to the deposit of the deeds and the money itself was paid after the letter.
10. In these circumstances, we think that the Subordinate Judge was right. The order of the lower Appellate Court must accordingly be set aside, and that of the Court of first instance restored with costs.