Patna High Court
Rangabati vs United Bank Of India Ltd. And Anr. on 11 April, 1960
Equivalent citations: AIR1961PAT158, AIR 1961 PATNA 158
JUDGMENT Raj Kishore Prasad, J.
1. This appeal by defendant 2, the wife of defendant 1, arises out of a mortgage suit, which has been decreed by the court below.
2. Two points have been pressed, on behalf of the appellant, in support of the appeal first, that the deed of gift dated the 16th July, 1947, executed by defendant 1 in favour of defendant 2 (Ext. B) is a real transaction, and not a sham transaction as held by the court below; and, second, that the letter (Ext. 1-c), of the 2nd February, 1948, was the real contract evidencing its terms between the plaintiff and defendant 1, and, as it is not registered no equitable mortgage was created thereunder.
3. In order to decide these two questions, it is necessary to state the material facts, having bearing on them which are as below :
4. The plaintiff is a bank which had monetary transactions with defendant 1 from before. At the request of defendant 1, he was allowed cash credit loan by way of overdraft against approved shares. As a result of the overdraft, defendant 1 executed a handnote (Ext. 2) for rupees two lakhs. On the 16th July, 1947, defendant 1 executed the impugned deed of gift in favour of his wife, defendant 2, in respect of his land and houses standing thereon, in the town of Ranchi. On the 31-1-1948, the debit balance due to the plaintiff from defendant 1 was Rs. 121,813-2-2.
On 2-2-1948, according to the case of the plaintiff, as the value of the security given in deposit by defendant 1 to the plaintiff fell short of the outstanding debt due from defendant 1, he was asked to give additional security; and, therefore, ho deposited the title deeds, in respect of the property situated in the town of Ranchi, at Calcutta. Subsequently, it was alleged by the plaintiff, defendant 1 sent a letter also the same day (Ext. 1-c). As in spite of the sale of the security in deposit with the plaintiff the money due from defendant 1 was not satisfied, the plaintiff brought the present suit for recovery of its dues.
After the institution of the suit, when the plaintiff learnt about the impugned deed of gift (Ext. B), the plaint was amended and defendant 2 was added as a party. The plaintiff asserted that this deed of gift (Ext. B) was fictitious, and, defendant 1 never intended to transfer, nor, did this document actually transfer the ownership or possession to defendant 2 and, that it was created to defeat the claim of the plaintiff.
5. The suit was contested by defendants 1 and 2 both. The defence of defendant 1 was that he bad) gifted the disputed property to his wife on 16-7-1947, (Ext. B), and, therefore, he had no subsisting night, title or interest in the disputed property on 2-2-1948, in respect of which he could validly create an equitable mortgage, and that the letter (Ext. 1-c) was virtually a mortgage deed, and, as it was unregistered, it was inadmissible in evidence. The defence of defendant 2 was the same. She further pleaded that the building which was standing on the land had been constructed by her after its gift by her husband to her out of her own funds.
6. The court below, after a consideration of the evidence of both sides, held that the deed of gift was a sham transaction, and, therefore, it did not affect the right of the plaintiff to get a mortgage decree against this property also. The learned Judge of the court below further held that an equitable mortgage was created, and, that Ext. 1-c did not require registration as contended by the defendants. He, therefore, decreed the plaintiff's suit and passed a preliminary decree.
7. Defendant 1 has. not come up in appeal against the said decree. It is only his wife, defendant 2, who has appealed against that part of the decree which affects her property covered by her impugned deed of gift (Ext. B).
8. AS regards the first question as to whether the deed of gift (Ext. B) is a sham or a real transaction, the main contention on behalf of the appellant was that as defendant 1 had sufficient security at the time when the deed of gift was executed there could be no motive for him to execute a fictitious document. It was further argued that the onus to prove that Ext. B was not a real, but, a sham transaction, was on the plaintiff, and there being no evidence on its behalf, the mere fact that the defendants did not produce the papers which were with them, or that some witnesses were not examined on their behalf was not a ground for not accepting the deed of gift (Ext. B) as a real transaction.
It was also submitted that in such a situation it was not open to the plaintiff to take advantage of the weaknesses or omissions on the part of the defendants, and, therefore, in the absence of any evidence on behalf of the plaintiff, the suit against defendant 2 ought to have been, and should be, dismissed, and, the property covered by her deed of gift (Ext. B) should be held not liable for the mortgage debt, and, released from mortgage liability.
9-10. (His Lordship examined the documentary and oral evidence and held that the plaintiff had satisfactorily proved that the impugned deed of gift (Ext. B) was a sham transaction. His Lordship then continued.)
11. In a case like the present where both sides have adduced evidence, the question of onus is not very important. As observed by the Supreme Court in Paras Nath Thakur v. Smt. Mohani Dasi, AIR 1959 SC 1204, the onus of proof loses much of its importance when both parties have adduced their evidence. In an earlier case also it was observed by the Supreme Court in Moran Mar Basselios Catholicos v. Thukalan Paulo Avira, AIR 1959 SC 31 that the question of onus of proof at the end of the case when both parties have adduced their evidence is not of very great importance and the court has to come to a decision on a consideration of all materials. The argument, therefore, based on mere onus of proof is devoid of merit.
12. There is another reason also why this contention must be rejected. The court below rightly laid emphasis on the non-production of important documents and non-examination of important witnesses by the defendants as a circumstance against them. On the question of non-production of documents by a party in possession of them, the Supreme Court, in Hiralal v. Badkulal, AIR 1953 SC 225, quoted with approval the observations of the Privy Council in Murugesam Pillai v. Gnana Sambandha Pandara Sannadhi, AIR 1917 PC 6 : 44 Ind App 98, which, in my opinion, appositely apply here. Their Lordships of the Privy Council said :
"A practice has grown up in Indian procedure of those in possession of important documents or information lying by, trusting to the abstract doctrine of the onus of proof, failing, accordingly to furnish to the Courts the best material for its decision. With regard to third parties this may be right enough; they have no responsibility for the conduct of the suit; but with regard to the parties to the suit it is in their Lordships' opinion, an inversion of sound practice for those desiring to rely upon a certain state of facts to withhold from the Court the written evidence in their possession which would throw light upon the proposition."
The above observations, in my opinion, apply a fortiori here also. On the evidence of defendant 2, as well as of her husband (D.W.I), and, her witness D.W.2, there are several important documents and papers in her possession or in possession of her landlord, which, if produced, or got produced, would have thrown considerable light upon the question at issue. But these documents have been withheld from the court. There are material witnesses too, who, if examined, could assist the court in its decision, but) none has been examined in the case.
13. The appellant, therefore, cannot be heard to say, relying upon the abstract doctrine of onus of proof, that it was no part of her duty to produce the important documents in her possession or to examine the material witnesses under her control, unless called upon to do so.
14. On the evidence and the facts and circumstances on the record, there is no doubt that defendant 1 purported to gift his property in dispute to his wife, defendant 2, without intending that] his title should cease or pass to her. Such an alleged transfer which docs not result in the vesting of title in the transferee, the transferor continuing to retain the title, notwithstanding the execution of the transfer deed, is a sham transaction, as held by the Supreme Court in Sree Meenakshi Mills Ltd., Madurai v. Commissioner of Income-tax, Madras, (S) AIR 1957 SC 49.
15. For the reasons given above, therefore, I would hold, in agreement with the Court below, that Ext. B was not a real transaction, but a sham transaction, and under it there was no transfer of ownership or possession at all, and that defendant 1 never intended to transfer, nor, did he transfer, the property covered by Ext. B, to his wife, defendant 2.
16. As regards the second question about the equitable mortgage, the argument, on behalf of the appellant is really based on Ext. 1-c. Ext. 1-c is a letter written by defendant 1 to the plaintiff on 2-2-1948.
17. The relevant portion of Ext. 1-c is in the following terms :
"xx xx x This is to place on record that I have this day deposited with you at your Burrabazar Branch 20/1 Maharshi Debendra Road, Calcutta, the under noted documents of title relating to my property at Ranchi with intent to create an equitable mortgage upon all my rights, title and interest in the said property to secure due repayment on demand of all moneys now owning or which shall at any time hereafter be owning from Nabo Kumar Mullick... to the Bank whether on balance of account or by discount or otherwise in respect in any manner whatsoever and including interest with monthly rests, commission and other Banking charges and any law costs incurred in connection with the account I do hereby put on record that the property mentioned is free From all encumbrances.
Yours faithfully, (Sd). Nabo Kumar Mullick 2-2-48 (Sd.) N. K. Mullick.
Schedule of documents. One sale deed from Rangtoo Uraon to Nabo Kumar Mallick son of late Baidyanath Mallick Dated 27-11-45, property at Ranchi."
18. The sale deed referred to above is Ext. 4 fn the suit. The argument, on behalf of the appellant, was that this letter (Ext. 1-c) is the real contract between the parties, and, not the deposit of the title deed Ext. 4 at Calcutta, and that the equitable mortgage claimed to be created was reaily under Ext. 1-c, but as Ext. 1-c is admittedly unregistered, it could not in law create an equitable mortgage. In support of this contention strong reliance was placed on a decision of the Privy Council in Hari Sankar Paul v. Kedar Nath Saha, 66 Ind App 184 : AIR 1939 PC 167. But, in my opinion, the above case has absolutely no application to the facts of the present case as I shall presently show hereinafter.
19. In order to decide the question raised, it is necessary first to appreciate what is an equitable mortgage and how it is created.
20. A mortgage by deposit of title deeds has been defined in Section 58(f) of the Transfer of Property Act in these words :
"58. xx xx x
(f) Where a person in any of the following towns, namely, the towns of Calcutta, Madras and Bombay, and in any other town which the Provincial Government concerned may, by notification in the official Gazette, specify in this behalf, delivers to a creditor or his agent documents of title to immov able property, with intent to create a security there on, the transaction is called a mortgage by deposit of title deeds.
XX X XX"
21. A mortgage by deposit of title deeds is called in English law an equitable mortgage. It is a well established 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 : per Lord Cairns in Shaw v. Foster, (1872) 5 HL 321 (340). But that general rule will not apply when there is a deposit accompanied by an actual written charge. In such a case, the terms of the written document must alone be referred to, and any implication that might be raised, supposing there was no dtocument, is put out of the case and reduced to silence by the document by which alone the parties must be governed : per Lord Carson in Subramonian v. Lulchman, 50 Ind App 77 (83): (AIR 1923 PC 50 at P. 53).
22. The requisites of an equitable mortgage, I therefore, are :
(i) a debt, (ii) a deposit of title deeds, and (iii) an intention that the deeds shall be security for the debt. The intention that the title deeds deposited shall be the security for the debt is the essence of the transaction.
23. A mortgage by deposit of title deeds does not, however, require any writing, and, being an oral transaction is not affected by the law of registration, but it is usual for the deposit to be accompanied by a memorandum in writing. If this writing is the contract of mortgage so that it creates the mortgage, it must he registered But, registration is not necessary if the mortgage is complete without the writing, and the writing is merely a statement that the mortgage has been effected or a statement of facts from which the contract of mortgage can be inferred.
24. The rule with regard to writings 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 and 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 bo the instrument by which the equitable mortgage was created, and would come within Section 17 of the Registration Act; per Couch C. J., in Kedarnath Dutt v. Shamlall Khattry, 11 Beng. L. R. 405, which passage was quoted with approval by Lord Carson in 50 Ind App 77 : (AIR 1923 PC 50).
25. The law upon the subject is beyond any doubt: (i) Where title deeds 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 : (ii) Where, however, title-deeds are handed over accompanied by a bargain, that bargain must rule, and (iii) When the bargain is a written bargain, it, and it alone, must determine what is the scope and extent of security : Pranjivandas Mehta v. Chan Ma Phee, 43 Ind App 122 (125) : (AIR 1916 PC 115 at p. 116).
26. In the present case, what is to be determined is, Did the letter, Ext. 1 (c), constitute the bargain between the parties, or, was it merely a record of an already completed transaction ? Upon an answer to this question will depend the answer to the point raised in the Appeal.
27. Under Section 17 of the Indian Registration Act, registration is required of (a) instruments of gift of immovable property, and (b) other non-testamentary instruments which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future any right, title or interest, whether vested or contingent of the value of Rs. 100/- and upwards in immovable property,
28. By Section 49 of the ssme Act it is provided that no documents required by Section 17 to be registered shall (a) affect any immovable property comprised therein, (b) confer any power to adopt; or (c) be received as evidence of any transaction affecting such property or conferring such power; unless it has been registered.
29. It is necessary also to bear in mind Section 59 of the Transfer of Property Act which provides that where the principal money secured is Rs. 100/- or upwards a mortgage can be effected only by a registered instrument signed by the mortgagor and attested by at least two witnesses, but that nothing an the section now Being cited shall be deemed to render invalid mortgages made in the town of Calcutta and certain other towns therein mentioned by delivery to a creditor or his agent of documents of title to immovable property with intent to create a security therein. Now this transaction took place in Calcutta and did not therefore require a registered instrument under Section 59 of the Transfer of Property Act,
30. The question which, however, falls to bo determined is, whether the letter, Ext. 1 (c), regarding to its true construction and the circumstances in which it came into existence and passed into the hands of the plaintiff, is an instrument which purports or operates to create, declare, assign, limit or extinguish, whether in present or in future any right, title or interest whether vested or contingent of the value of Rs. 100 and upwards to or on immovable property?
31. If the letter, Ext. 1 (c), is considered in vacuo its meaning is plain. It records particulars of documents which it states have been delivered as security in pursuance of an agreement reached in person. It does not state what were the terms of the agreement or indicate the nature of the matter for which the deeds were deposited as security. So far as anything disclosed by the letter is concerned the security may have been for money lent or to be lent or for the performance of some obligation; the breach of which would sound in damages.
32. Considered in this light the letter, Ext. 1 (c), in my opinion, merely records particulars of deeds the subject of a deposit, 32a. Is there then anything in the circumstances connected with the creation of the letter, Ext. 1(c) or, in the way in which the parties dealt with it which permits or requires some other meaning or effect to be given to it ? The answer must be in the negative: Obla Sundarachariar v. Narayana Ayyar, 58 Ind App 68 : (AIR 1931 PC 36).
33. The above two decisions of the Privy Council were referred to in 66 Ind App 184: (AIR 1939 PC 167) relied upon by the appellant. In that case, it was laid down that where the parties, professing to create a mortgage by deposit of title deeds contemporaneously entered into a contractual agreement, in writing, which is made an integral part of the transaction and is itself an operative instrument and not merely evidential, such a document, to be admissible in evidence under Section 49 of the Indian Registration Act, 1908, must be registered under Section 17, Sub-section (1)(b) of that Act. The observation of Lord Tomlin that "no such memorandum can be within the section unless on its face it embodies such terms and is signed and delivered at such time and place and in such circumstances as to lead legitimately to the conclusion that so far as the deposit is concerned it constitutes the agreement between the parties"
was quoted with approval by Lord Macmillan in Sir Harishankar Paul's case, 66 Ind App 184: (AIR 1939 PC 167) (supra).
34. In that case, the title deeds were deposited accompanied by a memorandum, when part of the advance arranged for was made. Some days later, when tho balance was advanced, another memorandum was delivered superseding the earlier one and this was a formal document stating the essential terms of the transaction "hereby agreed" and referred] to the moneys "hereby secured". It also conferred an express power of sale on the mortgagee. In such circumstances, Lord Macmillan after reviewing the earlier decisions of the Board, held that the document required registration, observing that "Where, as here, the parties professing to create a mortgage by a deposit of the title deeds contemporaneously enter into a contractual agreement, in writing, which is made an integral part of the transaction, and is itself an operative instrument and not merely evidential, such a document must, under the statute, be registered."
35. In the present case, however, the facts are different : Here the title deed Ext. 4 was deposited by the defendant with the plaintiff orally unaccompanied by any letter or any document. Later, on the same day, the letter Ext. 1(c) in question was sent by defendant 1 to the plaintiff from home. Here it was not a case, as was the case in 66 Ind App 184: (AIR 1939 PC 167) (Supra), that the parties having previously purported to create a mortgage by delivery of the title deeds they proceeded to create it over again in writing.
In Hari Shankar Paul's case, 66 Ind App 184 : (AIR 1939 PC 167) (supra) the memoradum there did not merely evidence a transaction already completed but its language was operative and it was contractual in form and it embodied an agreement that the title deeds in question are to be held as security for the advances made and it spoke of the moneys "hereby secured" and, it not only contained all the terms on which the moneys were advanced but it expressly confirmed a power of sale. In that case the unit itself was based on that memorandum as the plaintiffs in their "concise statement" of their claim in the plaint stated that they were suing under that memorandum. Here all the above facts are absent.
36. The facts of Rachpal Maharaj v. Bhagwandas Daruka, AIR 1950 SC 272 are, however, very much similar. In that case also, the point for determination before the Supreme Court was whether the memorandum signed and delivered by the appellant of that appeal on 23-10-1936 and relied upon by the respondents of that appeal as evidencing the creation of the mortgage was compulsorily registrable under Section 17, Registration Act and not having been registered, was inadmissible in evidence to prove the mortgage. Patanjali Sastri, J., in pronouncing the decision of the Court, observed :
"When the debtor deposits with the creditor the 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 Section 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, and 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 Section 17, Registration Act, 1908, as a non-testamentary instrument creating an interest in immovable property, where She value of such property is one hundred rupees and upwards. The time factor is not decisive. The document may be handed over to the creditor along with the title deeds and yet may not be registrable, as in Obla Sundarachariar v. Narayana Ayyar, 58 Ind App 68 : (AIR 1931 PC 36), or, it may be delivered at a later date and nevertheless be registrable as in 66 Ind App 184: (AIR 1939 PC 167)".
36a. The crucial question, therefore, is: Did the parties intend to reduce their bargin regarding the deposit of the title deeds to the form of a document ? If so, the document required registration. If, on the other hand, its proper construction and the surrounding circumstances 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.
37. In the Supreme Court case, it was, therefore, held that the memorandum under construction in that- case, although delivered along with the title deeds deposited with the respondents, did not require registration and was properly admitted in evidence to prove the creation of the charge inasmuch as the parties did not intend to reduce the bargain to writing and make the document under consideration the basis of the rights and liabilities of the parties.
38. The test, therefore, in such a case in order to find out whether a document is to be considered as a contract between the parties so as to require registration or not is whether the document in question is merely evidential, the transaction having already been completed, or whether it contains the actual terms of the contract itself ?
39. The document may be handed over to the creditor along with the title deeds and yet it may not be registrable or, it may be delivered at a later date, and, nevertheless, be registrable. The time factor is, therefore, not decisive.
40. Applying the above criterion, namely, Did the letter (Ext. 1/c) constitute the bargain between the parties or it is merely a record of an already completed transaction, to the instant case, on the evidence and the terms of the letter, Ext. 1 (c), it is clear, on the face of it, that the parties did not intend thereby to create a charge and that it purported only to recite a transaction which had already been concluded and under which the rights and liabilities of the parties had already been orally agreed upon.
It may be, as argued by the appellant, that this letter was taken by the respondent to show that the title deed of defendant 1's property was deposited for the money advanced by way of overdraft to obviate the possible plea that the deeds were left with the respondents for other purposes. But, that is far from intending to reduce the bargain to writing and make the letter the basis of the rights and liabilities of the parties.
41. It was, however, argued by Mr. Sarkar, who appeared for the appellant, that the deposit of the title deeds, in the present case, was contemporaneous with the letter, (Ext. 1/c), and, that this letter was written by defendant 1, because he was asked by the Bank to do so, as an evidence of the transaction between the parties, and therefore, Ext. l(c) was the real contract between the parties and as such it required registration. There is, however, no reliable evidence, except the uncorroborated statement of D.W. 1, to support this case of the appellant. (His Lordship considered his evidence and proceeded).
As mentioned before, even if the title deeds were deposited along with the letter Ext. 1(c) and both were contemporaneous as contended, it will not assist the appellant, when on reading Ext. 1 (c), it is clear enough that it merely records the particular of the deed, the subject of the deposit, and it was only a list of the documents already deposited, and nothing more, and it did not embody the terms of the agreement between the parties, and therefore, it cannot be taken as a document embodying the bargain between the parties.
42. A similar question came up for determination before a Division Bench of the Calcutta High Court also in Ram Ratan Das Bagri v. Mt. Sew Kumari Bibi, AIR 1938 Cal 823, in which it was held that in deciding whether a document is registrable or not, not only the terms of the document must be looked into but also the attending circumstances must be looked into. After a review of the decisions of the Privy Council, mentioned before, it was held there, as in the cases discussed above, that in deciding the question as to whether a document evidencing an equitable mortgage requires registration under Section 17 of the Registration Act, or not, the question to be considered is whether the document constituted the bargain between the parties or whether it was merely a record of an already completed transaction. In the former case the document would come within the purview of Section 17 and would require registration; but in the latter case it would not be a document which would create, etc. a right in immovable property, and would not require registration.
43. In my opinion, the present is governed by the principles laid down by the Supreme Court in the case noticed before. Considered in the light of the principles laid down there, the proper construction of Ext. 1 (c) is that it is nothing but a memorandum merely recording particulars of the title deeds deposited earlier with the plaintiff, and that it was merely a list of the documents already deposited and nothing more. It did not at all embody the terms of the agreement between the parties and, therefore, it did not require registration.
44. For these reasons, in my opinion, Ext. 1(c) did not require any registration at all. The fact that an equitable mortgage is created by simply depositing title deeds within the meaning of Section 58 (f) of the Transfer of Property Act is not disputed. It is clear, therefore, that the plaintiff had an equitable mortgage in its favour and on the basis of the same it was entitled to a decree against the property in suit and against the appellant also.
45. In the result, the appeal fails and is dismissed with costs.
U.N. Sinha, J.
46. I agree.