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TMI Blog2024 (8) TMI 1393X X X X Extracts X X X X X X X X Extracts X X X X ..... de. 3.2. Order dated 12.07.2018 (hereinafter referred to as the "Second Impugned Order") passed by the same Division Bench, whereby Civil Miscellaneous Petition Hereinafter abbreviated to "CMP" No.10107 of 2017 in OSA No.189 of 2011 filed by the appellant seeking to "set aside" the First Impugned Order and restore the main appeal for fresh hearing, was dismissed. BRIEF FACTS: 4. The respondent (defendant in the suit) and his wife are engaged in business of building materials. As per the appellant (plaintiff in the suit), the respondent approached him in February, 1995 seeking a loan for his business. The appellant advanced a loan of Rs.10,00,000/- (Rupees Ten Lakhs) to the respondent on the security of his properties. 5. Since the respondent could not pay Stamp Duty on the Mortgage Deed, it was agreed between the parties that the said sum be split into two registered mortgages and the balance in four promissory notes. Accordingly, the respondent executed the following: i) Mortgage Deed dated 16.03.1995 for Rs.1,00,000/- (Rupees One Lakh) agreeing to repay the same together with interest at 36% per annum Hereinafter abbreviated to "p.a."; ii) Mortgage Deed dated 17.04.1995 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the circumstances of the case and render justice." (sic) 9. The Single Judge, after perusing the evidence on record and hearing the parties, passed judgment dated 01.04.2010 holding that the respondent-defendant had agreed to "create equitable mortgage by depositing the title deeds". Finding thus, the Single Judge decreed the suit. Aggrieved, the respondent filed an intra-court appeal being OSA No.189 of 2011 along with Miscellaneous Petition Hereinafter abbreviated to "MP" No.1 of 2011, which was an application seeking condonation of delay of 176 days. The appellant through his advocate, Mr. V. Manohar received notice and filed a counter-affidavit opposing the said condonation of delay application. On 18.04.2011, the Division Bench was pleased to condone the delay, subject to payment of cost of Rs.1,000/- (Rupees One Thousand) to the appellant. 10. The Division Bench vide the First Impugned Order allowed the appeal, holding that the appellant had failed to prove that there was a mortgage executed by the respondent. It is to be noted that none appeared for the appellant in the appeal. Subsequently, the appellant filed CMP No.10107 of 2017 in OSA No.189 of 2011, praying therein t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pay interest in the Agreement. The Agreement had to be read in conjunction with various promissory notes and documents evidencing the mortgage and repayment of the loan with interest. Learned counsel contended that the Division Bench erred in holding that there was no prayer for grant of a personal decree against the respondent. It was submitted that the prayer clause of the plaint would show to the contrary. 14. On the Second Impugned Order, learned counsel for the appellant submitted that the Division Bench went wrong in not appreciating that the appellant had never authorized his counsel to represent him in the OSA and his vakalatnama was confined to the MP filed by the respondent seeking condonation of delay of 176 days. The MP was allowed by the Division Bench vide order dated 18.04.2011. Thereafter, the appellant, claims learned counsel, was not served with any notice in the OSA. The appellant submits that he was neither informed by his counsel, Mr. V. Manohar or by the Registry of the High Court about the status of the appeal. 15. It was further submitted that the Division Bench gravely erred in holding that the vakalatnama was given to Mr. V. Manohar for appearing in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Three Lakhs Ninety Six Thousand) was arrived at. While the cause of action pleaded in the suit makes reference only to the Agreement, the appellant makes a claim in respect of the mortgages dated 16.03.1995 and 17.04.1995, while also reserving the right to take separate action. Thus, it was submitted that the appellant has not put forth any specific case but has attempted to intermingle the mortgages and/or promissory notes with the Agreement. It was submitted that the mortgages dated 16.03.1995 and 17.04.1995 as also the promissory notes have been merged to arrive at the figure of Rs.11,00,000/- (Rupees Eleven Lakhs), which is being claimed as due from the respondent. It was further submitted that the promissory notes have not been exhibited in the suit. 19. Learned Senior counsel also pointed out that in respect of the two mortgages dated 16.03.1995 and 17.04.1995, the High Court in Second Appeal Hereinafter abbreviated to "SA" No.1235 of 2014 (which emanated from a suit for redemption filed by the respondent) passed an interim order dated 25.08.2022, directing the respondent to pay the appellant a sum of Rs.10,00,000/- (Rupees Ten Lakhs), being the principal and interest on b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... factually incorrect. Another point not noted by the Division Bench is that the mortgage which took care of the return of Rs.8,50,000/- (Rupees Eight Lakhs Fifty Thousand), was never redeemed and initially, only re the two previous mortgages, the principal amount of Rs.1,50,000/- (Rupees One Lakh Fifty Thousand) was returned, without the agreed interest. As noted above, subsequent to the passing of the Impugned Orders, in SA No.1235 of 2014, interim Order dated 25.08.2022 had directed the respondent to pay the appellant a sum of Rs.10,00,000/- (Rupees Ten Lakhs), being the principal and interest on both the mortgages. This stood complied with and the SA was dismissed as having become infructuous on 24.01.2023. 23. However, the Agreement envisaged property worth Rs.9,00,000/- (Rupees Nine Lakhs) out of the total claimed due of Rs. 11,00,000/- (Rupees Eleven Lakhs), being registered in favour of the appellant or his nominee. The Agreement also stipulated that after redeeming the earlier/previous mortgages, the respondent would re-mortgage for the purpose of raising Rs.2,00,000/- (Rupees Two Lakhs). Thereafter, the said sum of Rs.2,00,000/- (Rupees Two Lakhs) would be paid to the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses such as best evidence, circumstantial evidence, corroborative evidence, derivative evidence, direct evidence, documentary evidence, hearsay evidence, indirect evidence, oral evidence, original evidence, presumptive evidence, primary evidence, real evidence, secondary evidence, substantive evidence, testimonial evidence, etc." (emphasis supplied) 25. However, we see in the facts at hand that there is no dispute qua execution of the Agreement. The respondent claims/pleads coercion etc. Arguendo, such was the case, what would assume relevance would be the steps taken immediately thereafter by the respondent. Admittedly, no steps whatsoever were taken, in law, by the respondent to resile from the Agreement or to revoke it for at least half a decade i.e., from the date of the Agreement till the suit came to be instituted. The respondent did not even lodge appropriate legal proceedings and hence, it does not lie in his mouth to take the plea that the Agreement was not signed voluntarily. If such coercion etc. had actually occurred, the respondent has no explanation to offer as to why he did not avail of any civil law remedy (to have the Agreement nullified or voided) or take rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ossession or expressly or by implication binds himself to deliver possession of the mortgaged property to the mortgagee, and authorises him to retain such possession until payment of the mortgagemoney, and to receive the rents and profits accruing from the property or any part of such rents and profits and to appropriate the same in lieu of interest, or in payment of the mortgage-money, or partly in lieu of interest or partly in payment of the mortgage-money, the transaction is called an usufructuary mortgage and the mortgagee an usufructuary mortgagee. (e) English mortgage.-Where the mortgagor binds himself to re-pay the mortgage-money on a certain date, and transfers the mortgaged property absolutely to the mortgagee, but subject to a proviso that he will re-transfer it to the mortgagor upon payment of the mortgage-money as agreed, the transaction is called an English mortgage. (f) Mortgage by deposit of title-deeds .-Where a person in any of the following towns, namely, the towns of Calcutta, Madras, and Bombay, and in any other town which the State Government concerned may, by notification in the Officia l Gazette , specify in this behalf, delivers to a creditor or his ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce. There is no presumption of law that the mere deposit of title deeds constitutes a mortgage, for no such presumption has been laid down either in the Evidence Act or in the Transfer of Property Act. But a court may presume under Section 114 of the Evidence Act that under certain circumstances a loan and a deposit of title deeds constitute a mortgage. But that is really an inference as to the existence of one fact from the existence of some other fact or facts. Nor the fact that at the time the title deeds were deposited there was an intention to execute a mortgage deed in itself negatives, or is inconsistent with, the intention to create a mortgage by deposit of title deeds to be in force till the mortgage deed was executed. The decisions of English Courts making a distinction between the debt preceding the deposit and that following it can at best be only a guide; but the said distinction itself cannot be considered to be a rule of law for application under all circumstances. Physical delivery of documents by the debtor to the creditor is not the only mode of deposit. There may be a constructive deposit. A court will have to ascertain in each case whether in substance there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nion, when the debtor deposits with the creditor title deeds of the property for the purpose of security, it becomes a mortgage in terms of Section 58(f) of the Transfer of Property Act and no registered instrument is required under Section 59 thereof as in other classes of mortgage. The essence of a mortgage by deposit of title deeds is the handing over, by a borrower to the creditor, the title deeds of immovable property with the intention that those documents shall constitute security, enabling the creditor to recover the money lent. After the deposit of the title deeds the creditor and borrower may record the transaction in a memorandum but such a memorandum would not be an instrument of mortgage. A memorandum reducing other terms and conditions with regard to the deposit in the form of a document, however, shall require registration under Section 17(1)(c) of the Registration Act, but in a case in which such a document does not incorporate any term and condition, it is merely evidential and does not require registration. 12. This Court had the occasion to consider this question in Rachpal Mahra j v . Bhagwandas Daruka [1950 SCC 195: AIR 1950 SC 272] and the statement of law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egral parts of the transaction and are essential ingredients in the creation of the mortgage. It follows that in such a case the document which constitutes the bargain regarding security requires registration under Section 17 of the 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. If a document of this character is not registered it cannot be used in the evidence at all and the transaction itself cannot be proved by oral evidence either." xxx 14.2. But the question is whether a mortgage by deposit of title deeds is required to be done by an instrument at all. In our opinion, it may be effected in a specified town by the debtor delivering to his creditor documents of title to immovable 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 rights, liabilities or extinguishes those, the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs.11 lakhs in full and final settlement. There is nothing to show that a mortgage was created. Even in the evidence given by the respondent as P.W.1, it was his case that the parent document was handed over only as a security. Such being the evidence on record, the learned single Judge was not correct in giving a finding that mortgage was created and the title deed was given in furtherance of the mortgage. We are therefore of the view that there is no evidence adduced by the respondent to show that a mortgage deed was executed by the appellant and as such, he is entitled to a mortgage decree. ..." (sic) 30. Quite evidently, the Division Bench did not account for Section 58(f) of the Act. Indubitably, the respondent pleaded threat and coercion whilst executing/signing the Agreement, yet having accepted that he did sign the same in his own hand, the burden was on him to prove such threat/coercion. Looked at from any angle, the First Impugned Order suffers from legal errors, and cannot withstand the scrutiny of law. At the cost of repetition, it is to be stated that the Single Judge has rightly considered the factual prism and focused on the core issue without reference to fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Certified Copy of the Impugned Judgment(s) is allowed. I.A. No.180367/2019 for permission to file Additional Documents is allowed. 36. I.A. No.16203/2019 seeks condonation of delay in filing the petitions. There is a delay of 589 days in filing the petition against the First Impugned Order. The petition against the Second Impugned Order is also delayed by approximately 84 days. We are cognizant that the appellant had moved the Division Bench seeking a fresh hearing of the main appeal, which led to passing of the Second Impugned Order. In Collector, Land Acquisition, Anantnag v Mst Katiji, (1987) 2 SCC 107, the Court noted that it had been adopting a justifiably liberal approach in condoning delay and that "justice on merits" is to be preferred as against what "scuttles a decision on merits". Albeit, while reversing an order of the High Court therein condoning delay, principles to guide the consideration of an application for condonation of delay were culled out in Esha Bhattacharjee v Managing Committee of Raghunathpur Nafar Academy, (2013) 12 SCC 649. One of the factors taken note of therein was that substantial justice is paramount Para 21.3 of Esha Bhattacharjee (supra). 37. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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