# L.R. 5 H. L. 321, 341 and S11bramonian & Anr v. Lutchman & Ors

- **Citation:** [1971] Supp. 1 S.C.R. 209
- **Court:** Supreme Court of India
- **Decided:** 1971-03-25
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/l-r-5-h-l-321-341-and-s11bramonian-anr-v-lutchman-ors-5514
- **Pages:** 14

## Headnote

VEERAMACHINENI GANGADBARA RAO
"·
ANDHRA BANK LTD. & ORS.
March 25, 1971
[K. S. HEGDE AND A. N. GR.OVER, JI.]
Indian Registration Act, 1908, s. 17-Mortgage by deposit of title
deeds-Document evidencing mortgage when must be registered-Docuntent
which itself does not create contract but is only memorandum of contract
already entered into need not be registered-Further evidence to prove
tcrins of agreement not barred by ss. 91 & 92 Evidence Act, 1872.
The respondent Bank gave a loan to Godavari Sugars Refiners Ltd.,
of which defendants 1 to 3, as partners, were managing agents. Subsequently the bank filed a suit for the recovery of the loan. The appellant, a
brother of defendant No. I, was impleaded as defendant No. 4 and Godavari Sugars as defendant No. S. The suit was decreed and the decree ivas
upheld by the High Court. Only Def!ndant No. 4 appealed to this Court.
The decree against the appellant was passed on the basis of Exh. 1-6, o
document which was signed by Defendants 1 & 4 and in which it was
recorded that the title deeds Exbs. A-7 and Exh. A-8 had been deposited
with the respondent bank as security for money due.
According to the
appollant the said title deeds bad been deposited by him as security for a
loan given to him by the bank in his individual capacity, and that the
signature of defendant no. 1 had been appended to Exh. A-6 only because
he had an interest in one of the properties covered by Exhs. A-7 and A-8.
HELD : If the parties intend to reduce their bargain regarding the deposit of title deeds to the form of a document the document requires registration. If on the other hand its proper construction and the surrounding ~ircumstances lead to the conclusion that the parties did not intend
to do so, then, there being no express bargain the contract to create a mortgage arises by implication of the law from the deposit itself \\"ith the requisite int$ntion, and the document being merely evidential does not require registration. [220H-221A]
Rachpal Maharaj v. Bhagwandas Daruka & Ors .. [1950] S.C.R. 548,
• l'<mjivandas Mehta v. Chan Ma Phee, L.R. 43 I.A. 123, Shaw v. Foster,
(!Sn) L.R. 5 H. L. 321, 341 and S11bramonian & Anr v. Lutchman & Ors.,
50 I.A. 77, applied.
The language of Ex. ·A-6 was undoubtedly wide and if it governed the
agreement between the parties then there could be no doubt that the suit
debts were also secured by the deposit of title deeds A-7 and A-8. But
Ex. A-6 could not be considered a contract governing the rights of the
parties because: (a) it was incomplete inasmuch as certain unnecessary
\\"ords which were meant to be struck' out were not actually struck out; (b)
while according to the plaintiff the appellant agreed to secure the debt due
from the first defendant to the Bank in consideration of the Bank not proceeding against defendants 1 to 3, no such term was found in Ex. A-6;
(c) from the recitals of Ex A-6 it was seen that the memorandum in question was intended to 'put on record' the terms already agreed upon. If
the parties intended that the document should embody the contract between
them it would have been necessary to register the same under s. 17 of
the Registration ~ct, 1908. [220A-D]
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Exhibit A-6. was not .1iegistered.
If. that dq~ument was considered as
a contract of mortgage between the Bank arid· tne depositors; the san1e
not having been registered it was inadmissible in evidence. If on the other
hand that document was considered as a mere memorandum evidencing the
deposit of title deeds in pursuance of an cEμ"lier contrac,t then the correct·
ness of the recitals therein could be gone into without being inhibited by
ss. 91 and 92 of the Evidence Act. Whichever view was taken the plaintilI"s
case must fail. On an overall consideration of the evidence and probabilities
of the case it was established that Exhs. A·7 and A·S were not deposited
with the Bank to secure the debts due from defen

## Text

VEERAMACHINENI GANGADBARA RAO
"·
ANDHRA BANK LTD. & ORS.
March 25, 1971
[K. S. HEGDE AND A. N. GR.OVER, JI.]
Indian Registration Act, 1908, s. 17-Mortgage by deposit of title
deeds-Document evidencing mortgage when must be registered-Docuntent
which itself does not create contract but is only memorandum of contract
already entered into need not be registered-Further evidence to prove
tcrins of agreement not barred by ss. 91 & 92 Evidence Act, 1872.
The respondent Bank gave a loan to Godavari Sugars Refiners Ltd.,
of which defendants 1 to 3, as partners, were managing agents. Subsequently the bank filed a suit for the recovery of the loan. The appellant, a
brother of defendant No. I, was impleaded as defendant No. 4 and Godavari Sugars as defendant No. S. The suit was decreed and the decree ivas
upheld by the High Court. Only Def!ndant No. 4 appealed to this Court.
The decree against the appellant was passed on the basis of Exh. 1-6, o
document which was signed by Defendants 1 & 4 and in which it was
recorded that the title deeds Exbs. A-7 and Exh. A-8 had been deposited
with the respondent bank as security for money due.
According to the
appollant the said title deeds bad been deposited by him as security for a
loan given to him by the bank in his individual capacity, and that the
signature of defendant no. 1 had been appended to Exh. A-6 only because
he had an interest in one of the properties covered by Exhs. A-7 and A-8.
HELD : If the parties intend to reduce their bargain regarding the deposit of title deeds to the form of a document the document requires registration. If on the other hand its proper construction and the surrounding ~ircumstances lead to the conclusion that the parties did not intend
to do so, then, there being no express bargain the contract to create a mortgage arises by implication of the law from the deposit itself \\"ith the requisite int$ntion, and the document being merely evidential does not require registration. [220H-221A]
Rachpal Maharaj v. Bhagwandas Daruka & Ors .. [1950] S.C.R. 548,
• l'<mjivandas Mehta v. Chan Ma Phee, L.R. 43 I.A. 123, Shaw v. Foster,
(!Sn) L.R. 5 H. L. 321, 341 and S11bramonian & Anr v. Lutchman & Ors.,
50 I.A. 77, applied.
The language of Ex. ·A-6 was undoubtedly wide and if it governed the
agreement between the parties then there could be no doubt that the suit
debts were also secured by the deposit of title deeds A-7 and A-8. But
Ex. A-6 could not be considered a contract governing the rights of the
parties because: (a) it was incomplete inasmuch as certain unnecessary
\\"ords which were meant to be struck' out were not actually struck out; (b)
while according to the plaintiff the appellant agreed to secure the debt due
from the first defendant to the Bank in consideration of the Bank not proceeding against defendants 1 to 3, no such term was found in Ex. A-6;
(c) from the recitals of Ex A-6 it was seen that the memorandum in question was intended to 'put on record' the terms already agreed upon. If
the parties intended that the document should embody the contract between
them it would have been necessary to register the same under s. 17 of
the Registration ~ct, 1908. [220A-D]
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Exhibit A-6. was not .1iegistered.
If. that dq~ument was considered as
a contract of mortgage between the Bank arid· tne depositors; the san1e
not having been registered it was inadmissible in evidence. If on the other
hand that document was considered as a mere memorandum evidencing the
deposit of title deeds in pursuance of an cEμ"lier contrac,t then the correct·
ness of the recitals therein could be gone into without being inhibited by
ss. 91 and 92 of the Evidence Act. Whichever view was taken the plaintilI"s
case must fail. On an overall consideration of the evidence and probabilities
of the case it was established that Exhs. A·7 and A·S were not deposited
with the Bank to secure the debts due from defendant No. I to the Bank.
(222C-E]
The appeal must accordingly be allowed.
Ov!L APPELLATE JURISDICTION: Civil Appeal No. 786 of
1966.
Appeal by special leave from the judgment and order dated
June 9, 1964 of the Andhra Pradesh High Court in Appeal
No. 96 of 1969.
K. R. Chaudhuri, for the appellant.
D
B. V. Subramanyam, A. Subba Rao'for A. V. Rangam, for
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respondent No. I.
The Judgment of the Court was delivered by
Hegde, J.-The 4th defendant in Original Suit No. 200 of
1954 in the court of Subordinate Judge, Vijayawada is the
appellant in this appeal by special leave.
That was a suit instituted by the Andhra Bank Ltd., the contesting respondent in
this appeal. The suit was to recover the loans advanced to the
Godavari Sugars Refiners Ltd., defendant No. 5 in the suit.
The suit was decreed against all the defendants and that decree
was affirmed by the High Court in appeal. The decree against
the other defendants has become final.
The only question fhat
arises for decision in this appeal is whether the decree against
the appellant is sustainable. The High Court rested the decree
against the appellant only on the basis of Ex. A-6 a letter given
by defendants l, 4 and another to the Masulipatam branch of
the plaintiff bank while depositing Exhs. A-7 and A-8.
In order
to decide the correctness· of the decree, it is necessary to refer
to the material facts as found by the trial court and the High
Court and which are no more in dispute.
Defendants 1 to 3 were the partners of a company known
as Aid Co. Ltd. (defendant No. 6).
That company was the
managing agents of defendant No. 5, the Godavari Sugars Refiners Ltd. which will hereinafter be referred as Godavari Sugars.
The first defendant was the Managing Director of the Aid Co.
Ltd. On January 29, 1952, the first defendant made an appli-
GANGADHARA •• ANDHRA BANK (Hegde, J.)
cation on behalf of Godavari Sugars to the Andhra Bank Ltd.
(which will hereinafter be referred to as the 'Bank') for a loan
of three to four Jakhs of rupees under the keyloan and cash
credit account and on the guarantee and co-obligation of defen'
dants 1 to 3 in their personal capacity also.
The Managing
Director and the General Manager recommended that application to the Board of Directors upto a limit of Rs.
1,25,000.
Before the sanction of the Board of Directors was obtained, the
first defendant requested the Managing Director to sanction Rs.
50,000 tentatively as
there was urgent need.
The Managing
Director sanctioned a sum of Rs. 50,000 in anticipation of the
loan to be granted in pursuance of th~ application (Eit, A3) made
by the first defendant on January 29, 1952.
The Managing
Director authorised the agent of Bhimavaram branch to obtain
the necessary documents signed by defendants 1 to 3 in their
personal capacity as well as the first defendant as the Managing
Director of the managing agents and on behalf of
Godavari
Sugars.
A pronote and the cash credit agreement relating
to
that loan were handed over to the agent of Bhimavaram branch
on April 24, 1952 after the same were executed by defendants
1 to 3.
Thereafter defendant 1 drew from
the
Bhimavaram
branch Rs. 20.100 on April 25, 1952 and Rs. 9,000 on April
25, 1952. But he deposited a sum of Rs. 8,100 on April 25.
1952. Thus a sum of Rs. 21,000 was due to the bank under
the Joan in question on April 26, 1952.
On that date the Board
of Directors sanctioned the Joan asked for under Ex. A·3 upto
a limit of Rs. 1,25,000.
Sometime thereafter the authorities
of the Bank learnt that on a creditor's winding up petition a
provisional liquidator for the Godavari Sugars had been appointed
by the High Court of Madras without objection from defendants
i to 3 on April 18, 1952. That fact had not been brought to
the notice of the Bank authorities by defendants 1 to 3 when the
advances were made on the 25th and 26th of April 1952. After
coming to know of that fact, the Manager and the Managing
Director of the Bank pressed defendants I to 3 to repay the
amount drawn. But they were advised by Satyanarain Chowdary,
the father-in-law of the first defendant (2nd defendant is the wife
of the first defendant and the third defendant his mother-in-law)
to plead before the High Court that the Bank was a pledgee of
the articles pledged for the keyloan and as such had a lien over
the pledged goods in respect of the advances made. The Bank
accordingly moved the High Court claiming a lien over the goods
pledged but that claim was rejected by the High Court. In connection with the proceedings before the High Court the Bank
incurred an expenditure of Rs. 1548-10-6.
The claim against
defendants 1 to 3 is based on the above facts. That claim has
been decreed as mentioned earlier. The decree to that extent has
become final.
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Now coming to the claim against the appellant which is the
only claim material for our present purpose, the facts disclosing
the cause of action against him as set out in the plaint paragraph
9 are as follows :
"The defendants 1 and 4 requested the· plaintiff·
bank to refrain from taking legal action at that time
(after the bank's claim was rejected by the High Court)
and give them time.
For all sums due till then and
owing thereafter on any account by the defendants 1
and 4 either individually or jointly with others, two
titles deeds (Exbs. A· 7 and A-8) were deposited with the
bank on 15-1-1953 at · Masulipatam thereby creating
Equitable Mortgage over the properties comprised therein
and situated within the jurisdiction of this Honourable
Court. In consideration of the above deposit, the plaintiff-bank refrained taking legal proceedings against the
defendants 1 to 3 for the amount due and loss occurred
to the plaintiff-bank and an overdraft account was also
sanctioned to the defendants 1 and 4. Thus the plaintiffbank bas got security over the properties shown in the
schedule covered by the two title deeds deposited with
the plaintiff-bank on 15-1-1953 at Masulipatam for the
suit debt, the particulars of which are detailed hereunder".
According to the plaint a mortgage by deposit of title deeds was
created in pursuance of the contract set out above. In this appeal
we are only concerned with the truth of that contract.
The appellant denied the allegations contained in para 9 of
the plaint. According to him he bad nothing to do with the
suit transactions and that be never requested the Bank to refrain
from taking legal action against defendants I to 3.
He went
further and averred in his written statement that he did not know
anything about the suit transactions till the Bank refused fo
return to him Exhs. A· 7 and A-8.
Dealing with the deposit of
Exhs. A· 7 and A-8, be averred that those documents were deposited
to create an Equitable Mortgage to secure an overdraft loan
of Rs. 25,000
borrowed by him and that deposit bas nothing
to do with the suit transactions.
The only question for decision is whether Exhs. A-7
and
A-8 were deposited to secure the suit debts. In order to decide
that question it is necessary to set out a few more facts. Defendants I and the appellant are divided brothers. The first defen·
dant was having bis business in Madras. The appellant was
having his business at Masulipatam.
Madras and Masulipatam
are quite far off from one another.
Both the appellant and
defendant No. 1 appear to have bad separate dealings witb the
GANGADHAllA •. ANDHltA BANE (Hegde, J.)
Bank even prior to the suit jransactions. We have earlier referred
to the loan application Exh. A-3 made by the first defendant
and the advances made. From the pronote as well as the cash
credit agreement referred to earlier, it appears that the loan was
made on the security of the good~ belonging to Godavari Sugars
as well as on the personal security of defendants 1 to 3. That
is also the basis on which the Board of Directors of the Bank
sanctioned the loan-see Exh. A-71. Neither in Exh. A-3 nor in
Exh. A-71 nor in any of the correspondence that passed between
the Bank and defendant No. l there is any reference to the fact
of appellant's either standing as a surety for the loans advanced
to the Godavari Sugars or his having given his property as security for that loan. It is also admitted that in the books of account
kept by the Bank, the Equitable Mortgage created by the deposit
of Exhs. A-7 and A-8 is not shown as a security for the advances
mentioned in the plaint. There is neither documentary evidence
nor reliable oral evidence to support the averments in para 9 of
the plaint. In none of the correspondence that passed between
the Bank and defendant No. 1 or that passed between the Bank
and the appellant, there is any mention of the fact that at the
instance of the appellant, the Bank had refrained from taking
action against defendants 1 to 3.
Nor is there any mention in
them that because of the deposit of A-7 and A-8 alongwith the
memorandum Ex. A-6 the Bank refrained from
taking action
against defendants 1 to 3. Neither the Manager nor the Managing
Director of the Bank who have been examined in support of
the Bank's claim spoke to the fact that they refrained from
taking action against defendants 1 to 3 at the instance of the
appellant or that they refrained from taking action against them
because of the equitable mortgage referred to earlier.
Three witnesses namely P. Ws. 1 to 3 were examined in
support of the plaintiff's case. Neither P.W. 1 nor P.W. 2 speaks
to the circumstances under which Ex. A-6 came to be executed.
P.W. 3, the Managing Director of the Bank deposed in his Chief
Examination as follows:
"D-4 applied for a "loan as per Ex. A-67. He met
me in that connection. D-1 also met me in that connection. D-4 represented that D-1 had commitments in regard
to Godavari Sugars, that he and D-1 wanted monies and
requested. me to get Ex. A.fJ7 be sanctioned representing
that they would deposit title deeds that would be additional security to safeguard the interest of the bank. I told
him that the loan of Rs. 50,000 could be Sanctioned if
he agreed to pay outright the amount due from D-1.
D-4 represented that might prejudice our claim before
the High Court as pledgee and that there would be
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deposit of title deeds he made a request ultimately to
sanction at least Rs. 25,000.
D-1 also represented that
title deeds would be deposited and requested that the loan
might be granted. Under Ex. A-67 loan of Rs. 25,000
was granted. D-1 and D-2 gave title deeds as security
for it. We did not take criminal action on the assurances
given by them.
This evidence is not consistent with the averments in plaint
paragraph 9 to which reference has been made earlier. It makes
out a new case.
Further from that evidence, it is .clear that
the deposit of title deeds Ex. A-7 and Ex. A-8 were made to
secure only the loan of Rs. 25,000 given
to
the appellant.
The uncontroverted evidence in this case clearly establishes that
the said loan was borrowed by the appellant for his own business.
Further in his cross-examination P.W. 3 deposed that "the deposit
of title deeds was niade in terms of Board's Resolution and as
agreed to between the parties''. The Board's Resolution granting
loan to the Godavari Sugars on the application of defendant
No. l does not either directly or indirectly refer to any mortgage
by deposit of title deeds or even to any security of immovable
property for the loan In question. The question of depositing
title deeds was not befote the Board when the loan was sanctioned to Godavari Sugars. But the loan granted to the appellant
as we shall presently s~ was on the basis of a mortgage by
deposit of title deeds.
Before considering the scope and effect of Ex. A-6, it is
necessary to refer to the cireumstances leading to the execution
of Ex. A-6. On October 15, 1'952 under Ex. A-67, the appellant
applied for a loan of Rs. 50,000.
Column ,four in that application refers to the purppse for which the loan was asked. The
answer given was "For business". Under column "Other additional guarantee or security", aJ1$Wer given was "On the security
of title deed i.e. sites possessed by me at Vijayawada Krishna
District which costs about one Lakh. at present-Market value".
In the covering letter the appellant stated ·
"Sir.
As desired above, I request for sanction of loan of
Rs. 50,000 on secured over-draft.
Being bound by your
previous Bank Rules and also bound by any changes in
them, we will clear the loan according to your current
Bank rate. Otherwise if we fail to clear the loan in time,
we will not only pay, as and when necessary, the penal
interest, but also agree to be hound by all the actions
taken against us.
GANGADHARA v. ANDHRA BANK (Hegde, J.)
215
Further changes in the particulars of the property
given in the list have been effected.
We have not made
any sort of alienations whatsoever on
this
property.
Until your loan is cleared, we are not going to make any
sort of alienations. If becomes necessary to do so, we
wilt do the same after obtaining your consent.
Be pleased to consider,
Sd/- Veeramacha11eni Gangadhara Rao
(In Telugu)".
This application was placed before the Board of Directors
on January 11, 1953. The relevant agenda for the Board's consideration reads as follows:
"Loans and Overdrafts :
3. To consider the application of Mr. Veeramachaneni Gangadhararao. Masulipatam, for a secured overdraft limit of Rs. 50,000 for one year at 7 % p.a. on the
co-obligation of Messrs. Kolli Surya Prakasa Rao and
Adusumilli Venkata Krishna Rao and on the mortgage
by deposit of title deeds relating to the applicant's sites
of the extent of about 2,662 sq. yds. at Vijayawada of
the approximate value of about Rs. One Lakh.
Resolution:
Sanctioned Rs. 25,000."
From the above facts it is clear that the loan of Rs. 25,000
granted to the appellant was a secured loan-secured by a mortgage
by deposit of title deeds in respect of his sites at Vijaywada. It
may be noted that neither the appellant nor his co-obligants are
shown to have had anything to do. with Godavari Sugars.
It
appears from the ~rds of the Bank that ·some of documents
deposited .were not originals. Therefore the
Bank found . it
necessary to have legal advice in the matter. According to the
appellant one of the items covered by Exh. A-7 was of the joillt
ownership of himself and his brother defendant No. l, hence
the officers of the Bank wanted defendant No. l also to join in
making the deposit of title deeds: but defendant No. l was at
that time in Madras; therefore a printed form was given to. him
for getting the signatures of defendant No. l; the place at which
defendant No. l was to sign in that form was marked in pencil;
I.hat form was sent to Madras with his clerk accompanied by a
bank official: defen9ant No. 1 's signatures were obtained; there-
•lfter the same was signed by him in the presence of the Bank's
agent at Masulipatam and given to the Bank's agent without
scoring out any of the words in the printed form. The appellant
does not appear to be familiar with English language. As could
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be seen in Ex. A-67, he has signed the same in Telugu. Ex. A-6,
a~ mentioned earlier, is in a printed form. That was a ready made
form which could be used for various purposes. It was an all
comprehensive form relating to the deposit of title deeds. It is
clear from the terms in that form that the parties were required
to strike out the unnecessary terms and conditions in that form.
Admittedly no term in Exh.
A-7 was
struck out.
According
to P.W. 1, the agent of the Bank, the appellant brought that
form at about 5- p.m. just when the Bank was about to close.
Therefore he did not strike out the unnecessary words in that
document. In this background, we have to see whether Exh. A-6
is only a memorandum in support of the deposit of Exhs. A-7
and A-8 to secure the loan advanced to the
appellant under
Exh. A-67 or whether the deposit of title deeds in question were
intended to secure that loan as well as all amounts due from
defendant No. I to the Bank. The loan advanced to the appellant
under Ex. A-67 has been admittedly discharged and the pronote
executed by him in that connection had been returned to him.
The loans granted to Godavari Sugars were disbursed
at the
Bhimavaram Branch of the Bank as could be gathered from plaint
paragraph 5. The loan sanctioned to the appellant was disbursed
at the Masulipatam branch. Exh. A-6, A-7 and A-8 were produced in the Masulipatam Branch. The Masulipatam
Branch
does not appear to have had anything to do with the loans
advanced to Godavari Sugars.
We have earlier mentioned that
in the accounts relating to the loan given to Godavari Sugars,
there is no mention as to the deposit of title deeds.
All
the
correspondence relating to the loans granted to Godavari Sugars
proceed on the basis that they were granted on the personal responsibility of the defendants I to 3 and Dn the pledge of the
goods belonging to that company-see Ex. A-3, loan application
Ex. A-2, agreement for cash credit on the security of pledged
goods, Ex. A-13, letter written to the agent, Bhimavaram Branch
by the General Manager of the Bank on April 15, 1952, Exh.
A-14 letter written by the General Manager to the Agent, Bhimavaram Branch on April 16, 1952, Ex. A-17, letter written by the
first defendant to the Bank on October 29, 1952. But the correspondence that passed between the appellant and the Bank shows
that the deposit of title deeds was made to secure
the loan
advanced to him under Ex. A-67. Under Ex. A-20;' the appellant
wrote to the Bank on October 15, 1952 as follows·:
"Dear Sir,
I have two sites at Bezwada worth about Rs. · l,00,000
and I propose to deposit Title Deeds of the same and
require a secured over-draft of Rs. 50,000 against the
same. My property statement is ·with you. I shall therefore be glad if you sanction the sanie at an early date ...... "
GANGADHAR.A v. ANDHR.A BANK (Hegde, J.)
211
To the same effect is the loan application made by him on
A
the same date. But an overdraft of Rs. 25,000 only was sanctioned.
On February 6, 1954, the appellant wrote to the Bank
that he had cleared the overdraft account of Rs. 25,000 but
he wanted a renewal of over-draft arrangement (Ex. A-22). He
sent a reminder in that connection on April l, 1954 ·(Ex. A-23).
As the Bank delayed in making available the over-draft facility
B
asked for, he wrote to the Bank on Septr.
20,
1954 under
Ex. A-25 as follows :
"Masulipatam
Dated 20-9-54.
V. Gangadhara Rao Chowdary
Managing Director,
Indian Industrial & Scientifii:; Co. Ltd.
C
To
Sir,
The General Manager,
The Andhra Bank Ltd.,
Masulipatam.
Sub: Over Draft Facility granted to me.
With reference to the ovei draft renewed by your
Board of Directors in the month of May 1954, for
Rs. 25,000 and which was not allowed to be drawn
by me, I specially request you to kindly facilitate for
my drawing an amount up to Rs. 15,000 from
the
over draft account, is due to the stoppage of this facility,
which I am enjoying since 4 years, my business is suffering
a lot and immediate investment is necessary to meet
urgent demands in my business of Scientific Apparatus
etc.
In this connection I confifl)l the discussion I had
with your Managing Director at my residence, requesting
me io mediate for the amicable settlement of the affair
of my brother, Sri V. Butchiyya Chowdary with your
bank regarding the keyloan account granted to Godavary
Sugars and Refiners Ltd.
· I shall be obliged for immediately allowing me to
draw the amount.
Thanking you.
Yours faithfully,
Sd I· Illegible."
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Frpm this letter it is clear that the
Bank was
putting
pressure on the appellant to persuade his brother defendant No. 1
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to amicably settle the suit loans. That is also the evidence of
the appellant The allegation in this letter that the Managing
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Director was requesting the appellant to mediate for the amicable
settlement of the affairs of defendant 1 with the Bank regarding
suit loans does not appear to have been repudiated in any of
the letters written by the Managing Director to the
appellant.
Though the Board of Directors of the
Bank sanctioned
on
February 14, 1954, the renewal of the over-draft facility asked
for by the appellant the appellant was not permitted to utilise
that facility. The appellant's case is that the Managing Director
of the Bank was using that opportunity to put pressure on him
to see that defendant 1 discharged the suit loans.
Being fed
up with the delaying tactics of the Bank, the appellant withdrew
his loan application and asked the Bank to return his title deeds.
It is only at that stage that the Bank took up the position that
the title deeds deposited were also intended to secure the amounts
due from defendant 1 to the Bank.
The appellant repudiated
that claim. Then the Bank issued the lawyers' notice Ex. A-18
to all the defendants on April 5, 1954.
Therein it was stated
for the first time that the Bank refrained from proceeding against
defendants I to 3 in respect of the suit transactions at the instance·
of Satyanarayan Chowdary and the appellant and
those two
persons had agreed to indemnify the Bank any loss that may be·
caused due to those transactions.
Further suggestion in
that
notice is that in pursuance of that agreement Ex. A-7 and A-8'
were deposited under Ex. A-6. These allegations were repudiated'
by the appellant in his registered reply notice Ex. A-19
dated'
April 21, 1954.
From the above discussion it is clear that apart from Ex. A-6,.
there is absolutely no evidence to show that the deposit of Exhs.
A-7 and A-8 was intended to secure not merely the Joan advanced'
to the appellant under Ex. A-67 but also to secure the suit loans.
or other debts aue from defendant l to the
Bank. The oral
evidence of P.W. 3, the Managing Director is of no assistance·
as seen earlier. It does not connect the deposit of title deeds
Exhs. A-7 and A-8 with any of the debts due from defendant 1.
This leaves us with Ex. A-6, the printed form containing the·
terms and conditions under which Exhs. A-7 and A-8 were de--
posited. The material portion of that document reads as follows:·
"To
The Agent,
The Andhra Bank Ltd.,
Masulipatam.
H
Dear Sir,
I/We write to put on record that as already agreed
upon I/We have on 15-1-53 delivered by way of deposit
s.
No.
I.
2.
3.
4.
s.
GANGADHARA l'. ANDf!RA BANK (Hegde, J.)
at Masulipatam the following documents of title to immovable property with intent to secure the repayment to
the Bank of moneys that are now due or shall from time
to time or at any time be due from me/us either solely
or jointly with any other person or persons to the Bank
whether on balance of account or by discount or otherwise
in respect of Bills of Exchange, Promissory Notes, Cheques and other negotiable instruments or in any manner
whatsoever and including interest, commission and other
banking charges and any law costs incurred in connection
thereto.
LIST OF DOCUMENTS
Nature of Title
deed and date
Sale Deed D/ 4·2-49.
Rcaistration Extract of
S•le Deed D/ 30-12·36.
Encumbrance certificate
Ee. 574/52.
Encumbrance cet"tificate
No. Ee. SSS/52.
Nam• and Address :
Plan of (sic) in N. T. S.
No. 66~ Black No. 13
of Ward No. 9, Vijaya ..
wada Town.
Description of property and
Estimated
exact situation
value
Two plots of house site bearing
assessment No. 7 501 in ward No.
22 and bearing No. 216/2 N. T.
s. 663 Block No. 13 (sic) Ward
No. 9 measuring 0.28 (sic) and
the other 0.27 (sic)
House site measuring 1140 Sq. Yds.
bearing Town s. No. 599 in new
Ward No- 19 in Bezwada Town.
Yours faithfully
Sd./~l. Vecramanchaneni Oana:adhara Rao
2. v. Butehaigh Chowdary
3, Sri Krishna Prasad
beina minor by father
Vceramachaneni Gansadhara Rao
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As mentioned earlier this is a printed form.
No part of
that form had been struck out though the expressions "I" "Me"
found in that document are inconsistent with the other portions
of that document. We have earlier referred to the evidence of
the agent of the Masulipatam branch of the Bank (P. W. !)
that he did not strike out the unnecessary words in Ex. A-6 as
it was presented before him late in the evening.
The language of Ex. A-6 is undoubtedly wide and
if it
governs the agreement between the parties then there can be no
doubt that the suit debts are also secured by the deposit of title
deeds A-7 and A-8. In the first place Ex. A-6, for the reasons
already mentioned must be held to be an incomplete document.
Therefore it can not be considered as a contract between
the
parties. According to the plaintiff, the appellant agreed to secure
the debt due from the first defendant to the Bank in consideration
of the Bank not proceeding against defendants 1 to 3. No such
term is found in Exh. A-6.
From the recitals of Exh. A-6, it is seen that that memorandum
in question was intended to "put on record" the terms already
agreed upon. That being the case, the document cannot be
considered as a contract entered into between the parties. If tlie
parties intended that it should embody the contract between them,
it would have been necessary to register the same under s. 17 of
the Registration Act, 1908.
As observed by this Court in
Rachpal Maharaj v. Bhagwandas Daruka and ors.(') that "when
a debtor deposits with the creditor 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 s. 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 o--d 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 creation 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 s. 17 of the Indian
Registration Act, 1908, as a non-testamentary instrument, creating
an interest in immovable property, where the value of such property .Js one hundred rupees and
upwards."
Therefore the
crucial question is : Did the parties
intend to
reduce their
bargain regarding the deposit of the title deeds to the form of
a document? If so, the document requires registration. If on
ct> [t9sOJ s.c.R. 548.
OANGADHAllA ¥. ANDHRA BANli; (H tgdt, J,)
the other hand, its proper construction and the surrounding cir·
cumstances 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.
The' law relating to the nature of a memorandum filed along
with the deposit of title deeds or one filed thereafter bas come
up for consideration by courts in this country as well
as in
England. The decisions on the subject are numerous. We have
already referred to the decision of this Court in Rachpa/ Maharaj's
case ('). We shall now refer to two of the decisions of the
Judicial Committee. In Pr<injivandas Mehta v. Chan Ma Phee(')
dealing with the law on the subject Lord Shaw of Dunfermline
observed :
"The law upon this subject is beyond any doubt :
(!) Where titles of property are handed over with
nothing said except that they are to be security, the law
supposes that the scope of the security is the scope
of the title.
(2) Where however, titles are banded
over accompanied by a bargain, that bargain must rule.
(3) Lastly, when the bargain is a written bargain, it,
and it alone, must determine what is the scope and the
extent of the security. In the words of Lord Cairns in the
leading case of Shaw v. Foster ('), "Although it is a wellestablished rule of equity that a deposit of a document
of title, without more, without writing, or without word
of mouth will create in equity a charge upon the property
referred to, I apprehend that that general rule will not
apply where you have a deposit accompanied by an actual
written charge. In that case you must refer to the terms
of the written document, and any implication that might
be raised, supposing there were no document, is put out
of the case and reduced to silence by the document by
which alone you must be governed."
In Subramanian and anr. v. Lutchman' and ors.(') Lord
Carson speaking for the Judicial Committee stated the law thus:
"The law upon the subject admits of no doubt. In
the case of Kedarnath Dutt v. Sham/oil Kheltry (')
Couch C. J. ,:aid:
"The rule with regard to writings
(I) 119501 s.c.R.548.
(3) [1872] L.R. S H.L.321, 341.
(5) t I Ben. L.R.(O.C.J.)405.
(2) L.R.43 I.A.123.
(4) 50,I.A.77.
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is that oral proof cannot be substituted for the written
evidence of any contract which the parties have put
.into writing. And the reason is that the writing is tacitly
considered by the parties themselves as the only repository anci the appropriate evidence of their agreement.
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.fl
Exhibit A-6 is not registered. If that document is considered
as a cl'Jntract of mortgage between the Bank and the depositors,
the same having not been registered, it is inadmissible in evidence.
If on the C>thcr hand that document is considered as a mer~
memorandum evidencing the deposit of title deeds in pursuance
of an earlier contract then the correctness of the recitals therein
can be gone into without being inhibited by ss. 91 and 92 of
the Evidence Act. Whichever view is taken the plaintiff's case
must fail.
On an overall consideratioa of the evidence
and
the probabilities of the case, we are satisfied that Exhs. A-7 and
A-8 were not deposited with the Bank to secure the debts due from
defendant No. 1 to the Bank.
In the result this appeal is allowed, the decree and judgment
against the appellant is set aside and the suit against him is
dismissed with costs throughout
o.c
Appeal allowed.