# The Cosmos Co. Operative Bank Ltd v. Central Bank of India & Ors

- **Citation:** 2025 INSC 243
- **Court:** Supreme Court of India
- **Decided:** 2025-02-04
- **Case number:** Civil Appeal No. 1565 of 2025
- **Bench:** J.B. Pardiwala, R. Mahadevan
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/the-cosmos-co-operative-bank-ltd-v-central-bank-of-india-ors-38224
- **Pages:** 51

## Headnote

Whether 'equitable mortgages' are recognized in India under the
nomenclature of 'charge' in terms of Section 100 of the Transfer
of Property Act, 1882 (TPA); Who holds a valid mortgage over the
property-the Appellant (Cosmos Co. Operative Bank Ltd.) or the
Respondent No.1 (Central Bank of India).
Headnotes†
Transfer of Property Act, 1882 - Sections 58, 100 - Equitable
mortgage - Equitable mortgages are recognized in India as
a 'charge' under Section 100 of the TPA - Charge created by
equitable mortgage will be enforceable against third parties as
far as possible in terms of the procedure applicable to a simple
mortgage, except against bona fide transferees without notice -
Equitable mortgages can be enforced in equity but remain a
right in personam, not in rem, unless properly registered:
Held: Equitable mortgages are recognized in India as a 'charge'
under Section 100 of TPA - Concept of equitable mortgage is a
creation of the doctrine of equity, and its absence from the Act, 1882
does not negate its validity, as it serves to uphold the principles of
fair-play, good conscience, and justice - Enforceable against the
mortgagor but not against bona fide transferees without notice -
If a transaction does not amount to a mortgage but constitutes a
preliminary step towards mortgage creation, three recourses are
available to the lender (1) Claim that the transaction amounts to
an equitable mortgage as it was intended to create present or
immediate security; (2) Claim that part-performance of the contract
has occurred, justifying relief to perfect the mortgage by executing
further documentation; (3) Bring a suit for recovery of money, relying
on the initial intention of the parties to create security - Appeal
allowed, High Court order set aside. [Paras 56-61]
* Author
1092
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Transfer of Property Act, 1882 - Sections 58, 100 - Valid
mortgage - Priority of charge - the Appellant had the first
valid charge over the mortgaged property as it held the share
certificate of ownership - High Court and DRAT erred in holding
that the Respondent No. 1 held the first charge:
Held: The first valid charge over the mortgaged property is with the
Appellant (Cosmos Co. Operative Bank Ltd.), not the Respondent
(Central Bank of India) - When the original borrowers deposited
with the appellant bank, the share certificate of ownership to the
said Flat, on that very day and date, a legal charge is said to have
been created on the flat in favour of the appellant bank, whereas,
when it comes to the respondent no. 1 bank no such charge on the
flat was created, rather what was created was only an equitable
mortgage, though prior in time - This distinction is particularly
important, because even if the agreements to sale deposited with
the respondent no. 1 bank were registered and thereby, giving
public notice of their existence, still the appellant bank by virtue
of possession of the actual title deeds to the said Flat in the form
of the share certificate of ownership would be accorded priority in
charge for the sole reason that the charge created by it is a legal
mortgage in terms of Section 58 of the Act, 1882 - Appeal allowed,
High Court order set aside. [Paras 47, 52, 67, 68]

## Text

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[2025] 2 S.C.R. 1091 : 2025 INSC 243
The Cosmos Co. Operative Bank Ltd.
v.
Central Bank of India & Ors.
(Civil Appeal No. 1565 of 2025)
4 February 2025
[J.B. Pardiwala* and R. Mahadevan, JJ.]
Issue for Consideration
Whether 'equitable mortgages' are recognized in India under the
nomenclature of 'charge' in terms of Section 100 of the Transfer
of Property Act, 1882 (TPA); Who holds a valid mortgage over the
property-the Appellant (Cosmos Co. Operative Bank Ltd.) or the
Respondent No.1 (Central Bank of India).
Headnotes†
Transfer of Property Act, 1882 - Sections 58, 100 - Equitable
mortgage - Equitable mortgages are recognized in India as
a 'charge' under Section 100 of the TPA - Charge created by
equitable mortgage will be enforceable against third parties as
far as possible in terms of the procedure applicable to a simple
mortgage, except against bona fide transferees without notice -
Equitable mortgages can be enforced in equity but remain a
right in personam, not in rem, unless properly registered:
Held: Equitable mortgages are recognized in India as a 'charge'
under Section 100 of TPA - Concept of equitable mortgage is a
creation of the doctrine of equity, and its absence from the Act, 1882
does not negate its validity, as it serves to uphold the principles of
fair-play, good conscience, and justice - Enforceable against the
mortgagor but not against bona fide transferees without notice -
If a transaction does not amount to a mortgage but constitutes a
preliminary step towards mortgage creation, three recourses are
available to the lender (1) Claim that the transaction amounts to
an equitable mortgage as it was intended to create present or
immediate security; (2) Claim that part-performance of the contract
has occurred, justifying relief to perfect the mortgage by executing
further documentation; (3) Bring a suit for recovery of money, relying
on the initial intention of the parties to create security - Appeal
allowed, High Court order set aside. [Paras 56-61]
* Author
1092
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Transfer of Property Act, 1882 - Sections 58, 100 - Valid
mortgage - Priority of charge - the Appellant had the first
valid charge over the mortgaged property as it held the share
certificate of ownership - High Court and DRAT erred in holding
that the Respondent No. 1 held the first charge:
Held: The first valid charge over the mortgaged property is with the
Appellant (Cosmos Co. Operative Bank Ltd.), not the Respondent
(Central Bank of India) - When the original borrowers deposited
with the appellant bank, the share certificate of ownership to the
said Flat, on that very day and date, a legal charge is said to have
been created on the flat in favour of the appellant bank, whereas,
when it comes to the respondent no. 1 bank no such charge on the
flat was created, rather what was created was only an equitable
mortgage, though prior in time - This distinction is particularly
important, because even if the agreements to sale deposited with
the respondent no. 1 bank were registered and thereby, giving
public notice of their existence, still the appellant bank by virtue
of possession of the actual title deeds to the said Flat in the form
of the share certificate of ownership would be accorded priority in
charge for the sole reason that the charge created by it is a legal
mortgage in terms of Section 58 of the Act, 1882 - Appeal allowed,
High Court order set aside. [Paras 47, 52, 67, 68]
Case Law Cited
Kedar Lal v. Hari Lal [1952] SCR 179 : AIR 1952 SC 47; K.J.
Nathan v. S.V. Maruthi Rao [1964] 6 SCR 727; Suraj Lamp &
Industries (P) Ltd. (2) through Director v. State of Haryana & Anr.
[2011] 11 SCR 848 : (2012) 1 SCC 656; Bank of India v. Abhay D.
Narottam & Ors. (2005) 11 SCC 520; Anita Enterprises & Anr. v.
Belfer Coop. Housing Society Ltd. & Ors. [2007] 12 SCR 1 : (2008)
1 SCC 285 - relied upon.
J.K. (Bombay) (P) Ltd. v. New Kaiser-I-Hind Spinning & Weaving
Co. Ltd. & Ors. [1969] 2 SCR 866 : (1970) 1 SCC 556; Haryana
Financial Corporation v. Jagdamba Oil Mills [2002] 1 SCR 621 :
(2002) 3 SCC 496; Ram Baran Prasad v. Ram Mohit Hazra [1967]
1 SCR 293 : AIR 1967 SC 744; Shakeel Ahmed v. Syed Akhlaq
Hussain [2023] 15 SCR 590 : 2023 SCC OnLine SC 1526 -
referred to.
Russell v. Russell [1783] 28 E.R. 1121 - referred to.
[2025] 2 S.C.R.
1093
The Cosmos Co. Operative Bank Ltd. v. Central Bank of India & Ors.
List of Acts
Transfer of Property Act, 1882; Maharashtra Ownership Flats
(Regulation of the promotion of construction, sale, management and
transfer) Act, 1963; Maharashtra Apartment Ownership Act, 1970.
List of Keywords
Equitable mortgage; Charge; Simple mortgage; Debt recovery; Title
deeds; Enforceability; Right in personam; Transfer of Property Act;
Debt Recovery Tribunal.
Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1565 of 2025
From the Judgment and Order dated 12.12.2018 of the High Court
of Judicature at Bombay in WP No. 11324 of 2015
Appearances for Parties
Advs. for the Appellant:
Ninad Laud, Ivo Dcosta, Guruprasad Naik, Ms. Ishani Shekhar,
Sahil Tagotra.
Advs. for the Respondents:
Krishan Kumar, Seemant K Garg, Nitin Pal, Nitin Mishra, Ms. Mitali
Gupta, Hargun Singh Kalra.
Judgment / Order of the Supreme Court
Judgment
J.B. Pardiwala, J.
For the convenience of exposition, this judgment is divided into the
following parts: -
INDEX*
A.
FACTUAL MATRIX ...........................................................
2
B.
SUBMISSIONS OF THE PARTIES ..................................
8
i.
Submissions on behalf of the appellant Cosmos Co.
Operative Bank .........................................................
8
* Ed. Note: Pagination as per the original Judgment.
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ii.
Submissions on behalf of the respondent no.1; Central
Bank of India .............................................................
10
C.
ISSUE FOR CONSIDERATION .......................................
11
D.
ANALYSIS ........................................................................
12
i.
Relevant Provisions ..................................................
12
ii.
Concept of Equitable Mortgage ...............................
24
iii.
Nature of an Equitable Mortgage .............................
31
iv.
Distinction between Mortgage by Deposit of Title
Deeds under the English Law and under the Transfer
Of Property Act, 1882 ...............................................
41
E.
CONCLUSION ..................................................................
58
1.
Leave granted.
2.
This appeal arises from the judgment and order passed by the
High Court of Judicature at Bombay (Civil Appellate Jurisdiction)
dated 12.12.2018 in Writ Petition No.11324 of 2015, by which the
writ petition filed by the appellant herein seeking to challenge the
order passed by the (Debt Recovery Appellate Tribunal) (for short,
the "DRAT") dated 28.08.2015 in Appeal No. 41 of 2007 came to be
rejected thereby affirming the order passed by the DRAT.
A.
FACTUAL MATRIX
3.
The facts giving rise to this appeal may be summarised as under: -
(a) We take notice of the fact that the respondent nos. 2, 3 and 4
respectively, are the original borrowers. However, the respondent
No.4 has passed away and therefore his name came to be
deleted from the array of parties vide order dated 4.12.2020.
(b) The original borrowers on the strength of one unregistered
agreement of sale availed loan facility from the Central Bank
of India i.e. the respondent No. 1 to the tune of Rs.30,00,000/-
approximately. What was offered by way of security was a flat
which the original borrowers proposed to purchase from the
developer and all that they had on the day and date when they
[2025] 2 S.C.R.
1095
The Cosmos Co. Operative Bank Ltd. v. Central Bank of India & Ors.
went before the bank to avail the loan was an unregistered
agreement of sale.
(c)
It is not in dispute that the Central Bank on the strength of an
unregistered agreement of sale sanctioned the loan creating
a charge over the flat.
(d) Since the borrowers defaulted in the repayment of the loan,
the Central Bank initiated proceedings for the recovery of the
requisite amount before the Debt Recovery Tribunal-I, Mumbai
(in short "the DRT"). The DRT Mumbai adjudicated the Original
Application No. 74 of 2002 and held the borrowers jointly and
severally liable to pay an amount of ₹43,15,405.56 paisa with
interest thereon @15% per annum from the date of filing of the
O.A. till its payment.
(e) The relevant observations made by the DRT, Mumbai in Para 8
reads thus: -
"8. In application affidavit of the applicant state that
the Defendant No. 2 with intention to create mortgage
deposited title deeds of her flat No. C-28, Sahyadari
Apartment, L.T. Road, Borivali West, Bombay-400092
as security of the loan. sanctioned to Defendant
No. l. To prove this fact the Applicant's side rely on
Exh. 53, which is an unregistered memorandum. It
being unregistered document itself is not sufficient
to create the mortgage. The applicants state further
on 04.02.1993, the Defendant No. 2 again attended
Applicants office and re-deposited the title deeds
of her flat on the enhanced, revised loan. The
applicant's case about mortgage is based on the title
deeds, the documents produced by Defendants to
create the mortgage. That was primary evidence. It
was not produced. Memorandum, Exh. 53 affidavit
and pleading of applicant cannot take place. The
applicant do not state or explain why that primary,
basic evidence is not brought before the Tribunal.
Unless these documents are on record, it cannot
be assessed/ascertained whether those documents
were sufficient to create mortgage or not. In all the
circumstances, I hold the applicant failed in proving
1096
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the Defendant No. 2 mortgaged her flat as a security
of the loan given by the Applicants."
(f)
The operative part of the order passed by the DRT reads thus: -
"A) The Defendant No. 2 and 3 shall jointly and
severally pay the amount of Rs. 43,15,405.56 ps
(Rupees Forty Three Lacs Fifteen Thousand Four
Hundred Five and Paise Fifty Six only) to the Applicant
with interest thereon @ 15% p.a. from the date of
filing of this application till the payment.
B) The defendant No. 2 shall pay the Applicant, the
amount of Rs. 5,70,787.21 ps. (Rupees Five Lacs
Seventy Thousand Seven Hundred Eight Seven
and Paise Twenty One Only) as dues of Overdraft
Accounts, Rs. 4,08,157.25 ps. (Rupees Four Lacs
Eight Hundred One Hundred Fifty Seven and Paise
Twenty Five only) as due of Short Term Loan Account,
Rs. 2,25,498.45 ps. (Rupees Two Lacs Twenty Five
Thousand Four Hundred Ninety Eight and Paise
Forty Five only) as dues of Working Capital Loan
with interest thereon @ 15% p.a.
C) The Applicant will be entitled to recover this amount
from the hypothecation created by the defendants as
mentioned in the application of the defendants fail to
pay the above amount."
D) The defendants No. 2 & 3 shall pay cost of this
Application to the applicant and to bear their own
costs".
(g) The Central Bank of India had to file an appeal before the DRAT
because of the observations made by the DRT in its order as
contained in para 8 referred to above.
(h) The order passed by the DRAT, allowing the appeal filed by
the Central Bank reads thus: -
"1. This appeal has been filed by the plaintiffs /
appellant herein being aggrieved by the order dated
30/11/2006 passed by the learned Presiding Officer,
DRT-I, Mumbai in O.A. No. 74 of 2002, whereby the
learned Presiding Officer directed the defendant nos.
[2025] 2 S.C.R.
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The Cosmos Co. Operative Bank Ltd. v. Central Bank of India & Ors.
2 and 3 to jointly and severally pay the amount of
Rs.43,15,405.56 ps. to the applicant with interest
thereon @15% p.a. from the date of filing of the
application till its payment. Further directed the
defendant No. 2 to pay the amount of Rs.5,70,787.21
ps. as dues of Overdraft Accounts, Rs. 4,08,157.25
ps. as dues of Short Term Loan Account and
Rs.2,25,498.45 ps. as dues of Working Capital Loan
with interest thereon @15% p.a.
2. The ld. counsel for the appellant raised two grounds
namely the description made by the defendant no.1
is not correct one and second ground is that the
original title deeds have not been produced before
this court. Hence he prayed that the appeal has to
be allowed against the defendant no.1 alone. The
suit has been dismissed against the defendant no.1.
Anyhow the suit against the defendant nos. 2 and 3
has been decreed.
3. The contention of the ld. counsel for the appellant
is that the defendant no.1 is real borrower and is
sued in his personal capacity as proprietor of M/s.
Ajanta Industries which is evident from Para No. 2.
Hence he prayed that the appeal has to be allowed.
4. The contention of the respondent is that the mortgage
has not been proved before the DRT. Hence the suit
has been rightly dismissed. Thereafter respondent
no. 4 has advanced the loan to the respondent no. 1
and thereafter the property is sold to the third person.
Hence he prayed that the appeal has to be dismissed.
5. From the perusal it is seen that it has been
mentioned that the respondent no.1 was sued in
his personal and individual capacity as proprietor of
M/s. Ajanta Industries as clearly set out in Para No.2.
Hence as per Order 30 Rule 10 he has been properly
described, hence the finding in this regard given by
the DRT has to be set aside and in turn is set aside.
6. The next contention is that the original documents
have not been produced before the trial court is not in
1098
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dispute. Now it has been produced before this court
which pertains to the mortgaged property and original
agreement are now brought on record and is taken on
record. It is pertinent to note that the original title deeds
are with the appellants and mortgage is not denied
by the guarantor. It is also clear that respondent no.4
do not have title deeds pertaining to the property and
their alleged mortgage is very much subsequent to
the mortgage of appellants. Hence, I am of the view
that it can be accepted that the appellant bank has
valid and subsisting mortgage in its favour and in turn
mortgage is admitted and finding given by the DRT in
this regard has to be set aside and the O.A. against
the defendant no.1 also decreed and allowed as all
parties are properly sued and joined.
7. The appeal is allowed.
8. Subsequent to sale by respondent no. 4 in favor
of third party and amount of deposit is concerned,
this point is left open to agitate before the appropriate
forum."
(i)
While the proceedings before the DRAT were pending in the
form of appeal filed by the Central Bank of India, the appellant
bank herein had to intervene, and they were also heard on the
question as to which bank had the first charge over the security
interest created by the original borrowers.
(j)
The appellant bank herein being dissatisfied with the order
passed by the DRAT referred to above challenged the same
by filing a writ petition before the High Court. The High court
proceeded on the footing that the DRAT was right in recording
a finding that the mortgage of the flat in question created in
favour of the appellant bank herein was subsequent in point of
time and besides the same, the appellant bank had no valid title
deeds with them at the time of sanctioning the loan in favour
of the original borrowers.
(k)
In short, the finding of fact recorded by the High Court in its
impugned judgment is that the flat was mortgaged with the
Central Bank of India on 31.10.1989, whereas the mortgage
claimed by the appellant Bank herein was of October, 1998.
[2025] 2 S.C.R.
1099
The Cosmos Co. Operative Bank Ltd. v. Central Bank of India & Ors.
(l)
The High Court observing as aforesaid, rejected the writ petition
filed by the appellant herein. The relevant observations made
by the High Court in its impugned judgment read thus: -
"6. By the impugned order, therefore, the DRAT had
arrived at a clear finding of fact that the mortgage
of the said flat to the Petitioner-Cosmos Bank is
'subsequent' to the mortgage of the RespondentCentral Bank apart from the fact that the PetitionerCosmos Bank did not have title deeds pertaining to
the said flat. This finding was arrived at by DRAT
as the said flat was mortgaged to the RespondentCentral Bank on 31-10-1989, whereas the mortgage
claimed by the Petitioner-Cosmos Bank was of
October 1998.
7. It is brought out in the Affidavit-in-Reply of the
Respondent-Central Bank that the RespondentCentral Bank had Initially filed a suit against the
borrower/guarantors (Respondents Nos.2 to 4 herein)
in this Court on 5 September 1994. By an interim
order dated 20-10-1994, this Court had appointed a
Court Receiver in respect of the said flat.
8. It would thus be evident that at the time of sanction
and grant of the Loan by the Petitioner-Cosmos
Bank i.e. sometime in November 1998, the said flat
was in custodia legis as the Court Receiver was
appointed in the year 1994. In these circumstances,
there appears to be substance in this submission
of the learned Counsel for the Respondent-Central.
Bank that the validity of the mortgage of the said flat
in favour of the Petitioner-Cosmos Bank was even
otherwise questionable. The suit which was filed in
this Court was ultimately transferred to DRT only in
the year 2002 and numbered as O.A.No. 74 of 2002.
Before this Court, the Petitioner-Cosmos Bank have
essentially relied upon the Share Certificate which was
as a matter of fact issued by the Society only in the
year 1989 (as the Society itself was formed in the year
1986-87) and Agreement for Sale dated 7-12-1978
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(which is subsequent to Agreement for Sale dated
09-11-1978 relied upon by the Respondent-Central
Bank). Both the Agreements are unregistered. It Is
not even pleaded by the Petitioner-Cosmos Bank in
the present Petition that the documents of title deeds
relied upon by the Respondent-Central Bank were not
credible or that the mortgage of the said flat in favour
of the Respondent-Central Bank was not valid. In any
event, it can be hardly disputed that the mortgage in
favour of the Respondent- Central Bank was prior
in point of time. In the circumstances, in our view,
the DRAT rightly held in the impugned order that the
alleged mortgage of the Petitioner-Cosmos Bank was
subsequent in point of time to the mortgage of the
Respondent-Central Bank.
9. In view of the aforesaid discussion, we are unable
to find fault with the impugned order of the DRAT.
The Petition is, accordingly, dismissed. The Recovery
Officer, DRT may now pass appropriate orders as
regards the distribution of the sale proceeds of the
said flat which has been deposited in the DRT."
4.
In such circumstances referred to above, the appellant bank is here
before this Court with the present appeal.
B.
SUBMISSIONS OF THE PARTIES
i.
Submissions on behalf of the appellant Cosmos Co.
Operative Bank.
5.
The learned counsel appearing for the appellant bank vehemently
submitted that the High Court committed an egregious error in
rejecting the writ petition filed by his client and thereby affirming an
equally egregious order passed by the DRAT.
6.
He would submit that indisputably the first mortgage was created
in favour of the Central Bank of India, but the said mortgage was
invalid or rather having no force in law. According to him any bank,
while sanctioning the loan would ensure that what is being offered by
way of security is something valid. In such circumstances, when an
unregistered agreement of sale was offered as a title deed, it was of
[2025] 2 S.C.R.
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The Cosmos Co. Operative Bank Ltd. v. Central Bank of India & Ors.
no value as it is a settled law that agreement of sale does not confer
any right title or interest. Far from being a registered agreement of
sale, in the case on hand, what was offered by way of security to
the Central Bank was an unregistered agreement of sale.
7.
In the aforesaid context, the learned counsel first invited the attention
of this Court to Section 54 of the Transfer of Property Act, 1884 (for
short, the "Act, 1884") which defines the terms sale. Thereafter he
invited the attention of this Court to Section 58 of the Act, 1884 which
defines the term "Mortgage", "mortgagor", "mortgagee", "mortgagemoney" and "mortgage-deed".
8.
He laid much emphasis on sub-section (a) of Section 58, which
explains what is mortgage. Thereafter, he invited the attention of the
Court to Section 100 of the Act, 1884 which explains what is "charge".
9.
The learned counsel thereafter invited the attention of this Court to
certain provisions of the Maharashtra Ownership Flats (Regulation
of the promotion of construction, sale, management and transfer)
Act, 1963 (for short the "Act 1963") more particularly Section(s) 4,
4A and 11 therein, respectively.
10. He thereafter invited the attention of this Court to few provisions of
the Maharashtra Apartment Ownership Act 1970 (for short the "Act,
1970") more particularly the preamble to the Act and Sections 2, 4
and 5 respectively.
11. To fortify his submissions more particularly the principal contention
that the respondent no. 1 Bank cannot be said to have the first
charge over the mortgaged property, he relied on few decisions of
this Court, which are as under: -
i.
Suraj Lamp & Industries (P) Ltd. (2) through Director v.
State of Haryana and Another reported in (2012) 1 SCC 656
more particularly paras 16 and 19 respectively therein.
ii.
Bank of India v. Abhay D. Narottam and Others reported in
(2005) 11 SCC 520 more particularly the observations made
in paras 9 and 11 respectively therein.
iii.
Anita Enterprises and Anr. v. Belfer Coop. Housing Society
Ltd. and Ors. reported in (2008) 1 SCC 285 more particularly
the observations made in para 41 therein.
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iv.
Dattatreya Shanker Mote and Ors. v. Anand Chintaman Datar
and Ors. reported in (1974) 2 SCC 799 more particularly the
observations made in para 67 therein."
12. In such circumstances referred to above, the learned counsel prayed
that there being merit in his appeal, the same may be allowed and
the impugned order passed by the High Court may be set aside.
ii.
Submissions on behalf of the respondent no.1; Central
Bank of India.
13. On the other hand, the learned counsel appearing for the Central
Bank of India submitted that no error not to speak of any error of
law could be said to have been committed by the High Court in
passing the impugned order. He would submit that indisputably
the first charge over the mortgaged property is that of the Central
Bank.
14. At this stage, we must record that the learned counsel wanted to place
few additional documents on record to make good his case that the
view taken by the High Court is correct. However, considering the
fact that this litigation is pending past almost 10 years, we declined
such request.
15. We requested the learned counsel to proceed on the basis of the
material on record and make good his case that the impugned order
passed by the High Court needs no interference.
16. He would submit that there are concurrent findings recorded by the
DRAT and by the High Court in so far as the validity of the mortgage
is concerned and also which bank has the first charge over the
mortgaged property.
17. In such circumstances, referred to above, the learned counsel would
submit that there being no merit in this appeal, the same may be
dismissed.
C.
ISSUE FOR CONSIDERATION
18. Having heard the learned counsel appearing for the parties and
having gone through the materials on record, the only question that
falls for our consideration is whether the High Court committed any
error in passing the impugned order.
[2025] 2 S.C.R.
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The Cosmos Co. Operative Bank Ltd. v. Central Bank of India & Ors.
D.
ANALYSIS
i.
Relevant Provisions
19. Before adverting to the rival submissions canvassed on either side, we
must look into the few provisions of the law relevant for the purpose
of deciding the present appeal which are as follows: -
SECTION(S) 58 AND 100 OF THE ACT, 1884.
"58. "Mortgage", "mortgagor", "mortgagee", "mortgagemoney" and "mortgage-deed" defined.-
(a) A mortgage is the transfer of an interest in specific
immoveable property for the purpose of securing the
payment of money advanced or to be advanced by way
of loan, an existing or future debt, or the performance
of an engagement which may give rise to a pecuniary
liability. The transferor is called a mortgagor, the transferee
a mortgagee; the principal money and interest of which
payment is secured for the time being arc called the
mortgage-money, and the instrument (if any) by which the
transfer is effected is called a mortgage-deed.
(b) Simple mortgage.- Where, without delivering
possession of the mortgaged property, the mortgagor binds
himself personally to pay the mortgage-money, and agrees,
expressly or impliedly, that, in the event of his failing to
pay according to his contract, the mortgagee shall have a
right to cause the mortgaged property to be sold and the
proceeds of sale to be applied, so far as may be necessary,
in payment of the mortgage-money, the transaction is called
a simple mortgage and the mortgagee a simple mortgagee.
(c) Mortgage by conditional sale.- Where the mortgagor
ostensibly sells the mortgaged property- on condition that
on default of payment of the mortgage-money on a certain
date the sale shall become absolute, or on condition that on
such payment being made the sale shall become void, or
on condition that on such payment being made the buyer
shall transfer the property to the seller, the transaction is
called a mortgage by conditional sale and the mortgagee
a mortgagee by conditional sale:
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Provided that no such transaction shall be deemed to
be a mortgage, unless the condition is embodied in the
document which effects or purports to effect the sale.
(d) Usufructuary mortgage.- Where the mortgagor delivers
possession 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 mortgage-money, 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
Official Gazette, specify in this behalf, delivers to a creditor
or his agent documents of title to immoveable property,
with intent to create a security thereon, the transaction is
called a mortgage by deposit of title-deeds.
(g) Anomalous mortgage.-A mortgage which is not a
simple mortgage, a mortgage by conditional sale, an
usufructuary mortgage, an English mortgage or a mortgage
by deposit of title-deeds within the meaning of this section
is called an anomalous mortgage."
"100. Charges.-
Where immoveable property of one person is by act of
parties or operation of law made security for the payment
of money to another, and the transaction does not amount
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to a mortgage, the latter person is said to have a charge
on the property; and all the provisions hereinbefore
contained which apply to a simple mortgage shall, so far
as may be, apply to such charge. Nothing in this section
applies to the charge of a trustee on the trust property for
expenses properly incurred in the execution of his trust,
5 [and, save as otherwise expressly provided by any law
for the time being in force, no charge shall be enforced
against any property in the hands of a person to whom
such property has been transferred for consideration and
without notice of the charge."
SECTIONS 4, 4A AND 11 RESPECTIVELY OF THE ACT, 1963
"4. Promoter before accepting advance payment or
deposit to enter into agreement and agreement to be
registered. -
(1) Notwithstanding anything contained in any other law,
a promoter who intends to construct or constructs a block
or building of flats, all or some of which are to be taken or
are taken on ownership basis, shall, before, he accepts
any sum of money as advance payment or deposit, which
shall not be more than 20 per cent. of the sale price
enter into a written agreement for sale with each of such
persons who are to take or have taken such flats, and
the agreement shall be registered under the Registration
Act, 1908 (hereinafter in this section referred to as "the
Registration Act") and such agreement shall be in the
prescribed form."
(lA) The agreement to be prescribed and sub-section (1)
shall contain inter alia the particulars as specified in clause
(a); and to such agreement there shall be attached the
copies of the documents specified in clause (b),-
(a) particulars,-
(i) if the building is to be constructed, the liability of
the promoter to construct it according to the plans
and specifications approved by the local authority
where such approval is required under any law for
the time being in force;
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(ii) the date by which the possession of the flat is to
be handed over to the purchaser;
(iii) the extent of the carpet area of the flat including
the area of the balconies which should be shown
separately;
(iv) the price of the flat including the proportionate
price of the common areas and facilities which should
be shown separately, to be paid by the purchaser of
flat; and the intervals at which instalments thereof
may be paid;
(v) the precise nature of organisation to be constituted
of the persons who have taken or are to take the flats;
(vi) the nature, extent and description of limited
common areas and facilities;
(vii) the nature, extent and description of limited
common areas and facilities, if any;
(viii) percentage of undivided interest in the common
areas and facilities appertaining to the flat agreed
to be sold;
(ix) statement of the use of which the flat is intended
and restriction of its use, if any;
(x) percentage of undivided interests in the limited
common areas and facilities, if any, appertaining to
the flat agreed to be sold;
(b) copies of documents,-
(i) the certificate by an Attorney at law or Advocate
under clause (a) of sub-section (2) of section 3;
(ii) Property Card or extract of village Forms VI or
VII and XII or any other relevant revenue record
showing the nature of the title of the promoter to the
land on which the flats are constructed or are to be
constructed;
(iii) the plans and specifications of the flat as approved
by the concerned local authority.
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(2) Any agreement for sale entered into under subsection (1) shall be presented by the promoter or by any
other person competent to do so under section 32 of
the Registration Act, at the proper registration office for
registration, within the time allowed under sections 23 to 26
(both inclusive) to the said Act and execution thereof shall
be admitted before the registering officer by the person
executing the document or his representative, assign or
agent as laid down in sections 34 and 35 of the said Act
also within the time aforesaid:
Provided that, where any agreement for sale is entered
into, or is purported to be entered into, under subsection (1), at any time before the commencement of
the Maharashtra Ownership Flats (Regulation of the
promotion of construction, sale, management and transfer)
(Amendment and Validating Provisions) Act, 1983, and
such agreement was not presented for registration or was
presented for registration but its execution was not admitted
before the registration officer by the person concerned,
before the commencement of the said Act, then such
document may be presented at the proper registration
office for registration, and its execution may be admitted,
by any of the persons concerned referred to above in
this sub-section, on or before the 31st December 1984,
and the registering officer shall accept such document for
registration, and register it under the Registration Act, as if
it were presented, and its execution was admitted, within
the time laid down in the Registration Act:
Provided further that, on presenting a document for
registration as aforesaid if the person executing such
document or his representative, assign or agent does
not appear before the registering officer and admit the
execution of the document, the registering officer shall
cause a summons to be issued under section 36 of the
Registration Act requiring the executant to appear at the
registration office, either in person or by duly authorised
agent, at a time fixed in the summons. If the executant fails
to appear in compliance with the summons, the execution
on the document shall be deemed to be admitted by him
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and the registering officer may proceed to register the
document accordingly. If the executant appears before the
registering officer as required by the summons but denies
execution of the document, the registering officer shall,
after giving him a reasonable opportunity of being heard,
if satisfied that the document has been executed by him,
proceed to register the document accordingly.
4A. Effect of non-registration of agreement required
to be registered under section 4.-
Where an agreement for sale entered into under subsection (1) of section 4, whether entered into before or
after the commencement of the Maharashtra Ownership
Flats (Regulation of the promotion of construction, sale,
Management and transfer) (Amendment and Validating
Provisions) Act, 1983, remains unregistered for any reason,
then notwithstanding anything contained in any law for
the time being in force, or in any judgement, decree or
order of any Court, it may be received as evidence of a
contract in a suit for specific performance under Chapter
II of the Specific Relief Act, 1963, or as evidence of part
performance of a contract for the purposes of section 53A
of the Transfer of Property Act, 1882, or as evidence of
any collateral transaction not required to be effected by
registered instrument.
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11. Promoter to convey title, etc., and execute
documents, according to agreement-
(1) A promoter shall take all necessary steps to complete
his title and convey to the organisation of persons, who
take flats, which is registered either as a co-operative
society or as a company as aforesaid or to an association
of flat takers or apartment owners, his right, title and
interest in the land and building, and execute all relevant
documents therefor in accordance with the agreement
executed under section 4 and if no period for the execution
of the conveyance is agreed upon, he shall execute the
conveyance within the prescribed period and also deliver
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all documents of title relating to the property which may
be in his possession or power.
(2) It shall be the duty of the promoter to file with the
Competent Authority, within the prescribed period, a copy
of the conveyance executed by him under sub-section (1).
(3) If the promoter fails to execute the conveyance in
favour of the Cooperative society formed under section 10
or, as the case may be, the Company or the association
of apartment owners, as provided by sub-section (1),
within the prescribed period, the members of such Cooperative society or, as the case may be, the Company
or the association of apartment owners may, make an
application, in writing, to the concerned Competent
Authority accompanied by the true copies of the registered
agreements for sale, executed with the promoter by each
individual member of the society or the Company or the
association, who have purchased the flats and all other
relevant documents (including the occupation certificate,
if any), for issuing a certificate that such society, or as
the case may be, Company or association, is entitled to
have an unilateral deemed conveyance, executed in their
favour and to have it registered.
(4) The Competent Authority, on receiving such application,
within reasonable time and in any case not later than six
months, after making such enquiry as deemed necessary
and after verifying the authenticity of the documents
submitted and after giving the promoter a reasonable
opportunity of being heard, on being satisfied that it is a
fit case for issuing such certificate, shall issue a certificate
to the Sub-Registrar or any other appropriate Registration
Officer under the Registration Act, 1908, certifying that it is
a fit case for enforcing unilateral execution, of conveyance
deed conveying the right, title and interest of the promoter
in the land and building in favour of the applicant, as
deemed conveyance.
(5) On submission by such society or as the case may
be, the Company or the association of apartment owners,
to the Sub-Registrar or the concerned appropriate
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Registration Officer appointed under the Registration Act,
1908, the certificate issued by the Competent Authority
alongwith the unilateral instrument of conveyance, the
Sub-Registrar or the concerned appropriate registration
Officer shall, notwithstanding anything contained in the
Registration Act, 1908, issue summons to the promoter to
show cause why, such unilateral instrument should not be
registered as 'deemed conveyance' and after giving the
promoter and the applicants a reasonable opportunity of
being heard, may on being satisfied that it was fit case
for unilateral conveyance, register that instrument as,
'deemed conveyance'."
SECTIONS 2, 4 AND 5 RESPECTIVELY OF THE ACT,
1970
"2. Application of the Act. -
This Act applies only to property, the sole owner or all of
the owners of which submit the same to the provisions of
this Act by duly executing and registering a Declaration
as hereinafter provided : Provided that, no property shall
be submitted to the provisions of this Act, unless it is used
or proposed to be used for residence, office, practice of
any profession or for carrying on any occupation, trade
or business or for any other type of independent use :
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4. Status of apartments. -
Subject to the provisions of the second proviso to section
2 of this Act, each apartment, together with its undivided
interest in the common areas and facilities, appurtenant to
such apartment, shall for all purposes constitute heritable
and transferable immoveable property within the meaning
of any law for the time being in force in the State;
and accordingly, an apartment owner may transfer his
apartment and the percentage of undivided interest in the
common areas and facilities appurtenant to such apartment
by way of sale, mortgage, lease, gift, exchange or in any
other manner whatsoever in the same manner, to the
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