ORDER
K. Gnanaprakasam, J. (Chairperson)
1. The 6th defendant in the O.A. viz., M. Rafiq Deen is the appellant.
2. Brief facts of the case are as follows:
The 1st defendant in the O.A. viz., M/s. Vensons & Vensons, had obtained loan from the respondent Bank and they have executed security document on 1.2.1992 and one T.S. Ramesh stood guarantee for the repayment of the loan amount by the defendants 1 to 4 and had executed a continuing guarantee dated 1.2.1992 in favour of the respondent Bank. The 5th defendant is the legal heir of the deceased T.S. Ramesh. As the borrowers have not repaid the loan, O.A. 674/2001 was instituted for recovery of Rs. 16,53,855/- together with interest @ 17.85% per annum from the date of application till the date of realisation and the same was allowed by order dated 12.1.2005.
The appellant who is the 6th defendant in the O.A., in his reply statement had stated that one T.S. Ramesh was the owner of Item-3 of the property and to oblige his friends S. Lakshmanan, he gave his property as security to the Indian Overseas Bank and also executed an equitable mortgage in favour of I.O.B. by deposit of title deeds. Ramesh offered to sell the property to discharge the loan due to the Indian Overseas Bank and the appellant came forward to purchase and his offer was accepted for Rs. 4,60,000/- and for getting the original documents of title deeds for verification, Ramesh required a sum of Rs. 1,63,738.35 p out of the sale consideration to pay to the Indian Overseas Bank to clear the mortgage and the said amount was paid by the appellant by way of pay order dated 30.10.1990 and cash of Rs. 36,261.65 p was also paid and in total Rs. 2,00,000/- was paid as advance to Ramesh. The balance of sale consideration of Rs. 2,60,000/- was paid by pay order dated 16.4.1991 and Ramesh had executed the sale deeds in favour of the appellant and two others on 16.4.1991 and Ramesh had executed the sale deeds in favour of the appellant and two others on 16.4.1991 and 25.6.1991. The appellant had verified the Encumbrance Certificate for the properties from 1.1.1975 to 12.12.1991 and there was no encumbrance. The appellant, after purchase applied for encumbrance from 1.1.1990 to 9.2.1999 and there was no encumbrance except the sale deeds in favour of the appellant and his brothers and brothers’ wives. The appellant got back all the original documents of title deeds from the Indian Overseas Bank. While so, on 2.1.1998, appellant saw a Public Notice in the Hindu, issued by the respondent Bank mentioning about the mortgage alleged to have been executed by T.S. Ramesh on account of M/s. Vensons & Vensons and the appellant filed its objection on 1.2.1997 and also satisfied the respondent Bank about the genuineness of the objections. The appellant claims that he is a bonafide purchaser for value without notice of encumbrance and prayed for the dismissal of the O.A.
O.A. was decreed in favour of the respondent Bank and Clause ‘C’ of the decree states that the sale in favour of the appellant is subject to the mortgage in favour of the respondent Bank and the same is questioned in the appeal.
3. The point for consideration is whether the mortgage in favour of the respondent Bank after the sale of the property to the appellant is valid and binding upon the appellant.
4. The learned Advocate for the appellant has submitted that his vendor T.S. Ramesh did not at all mortgage the property in favour of the respondent Bank and there, was only an agreement to mortgage dated 2.1.1991 (Ex. A-10), which is not at all a deed of mortgage. In fact, in the said agreement it is stated that, “It has been agreed by and between the parties hereto that the guarantor should create in favour of the Bank as cover for his guarantee a Mortgage by Deposit of Title Deeds.” Further recitals in the agreement is pointed out, which stated that, “The said Mortgage by Deposit of Title Deeds shall be created by the Guarantor for the purpose of securing payment to the Bank.” As such, there was only an agreement to mortgage as on 2.1.1991 and there was no mortgage at all. It is further pointed out that the respondent Bank had indicated about the sanction of the loan by their letter dated 16.12.1991 (Ex. A2) wherein it is stated, “We are pleased to sanction the following limits.” Under the terms and conditions stated in the said letter, Clause-5 states, “Simple mortgage of land and building owned by Sri. T.S. Ramesh situated at D.N. 35, Mambalam Road, T. Nagar.” Clause-6 says, “Guarantee of Sri. T.S. Ramesh as well as all the partners of the firm.” The Bank by its letter dated 13.2.1993 (Ex. A-20) addressed to the 1st defendant had stated that, “Memorandum of mortgage will be done within a week.” To the said letter, M/s. Vensons & Vensons replied on 26.2.1993 (Ex. A-21) wherein they stated. “We do understand that it was lapse on our part to complete the Memorandum of Mortgage formalities of the collateral security given to you to avail this DPG Scheme and hence we request you to kindly release this DPG Scheme immediately on submission to you Memorandum of Mortgage of the property.” By relying upon these documents, it is argued on behalf of the appellant that his vendor T.S. Ramesh did not all execute the mortgage upto 26.2.1993, but whereas, the sale in favour of the appellant and others was as early as 16.4.1991 and as such the mortgage said to have been created by T.S. Ramesh in favour of the respondent Bank is not valid and binding upon the appellant. The Affidavit given by T.S. Ramesh dated 17.12.1990 (Ex. A-13) is a created one with ante date to subserve the sale deed executed in favour of the appellant. Though it is stated in the Affidavit that T.S. Ramesh had lost the original sale deed in the month of June, 1988 during shifting of his house, he had applied for the Registration copy of the sale deeds only on 18.7.1990, after two years. But no public notice was given about the loss of the original sale deeds in the year 1980 itself and it is, therefore, argued that this Affidavit has been procured with ante date to support the alleged mortgage said to have been executed by T.S. Ramesh in favour of the respondent Bank on 2.1.1991. Even under the Exh. A-10, under Clause-4 it is stated, “The Guarantor further undertakes to execute and complete a legal mortgage by written instrument at his costs, if and when required by the Bank.” But no legal mortgage was created in favour of the respondent Bank. That even in this agreement to mortgage, nowhere it is stated that T.S. Ramesh had lost his title deeds and he had produced only the Registration copy of the sale deeds. It is further pointed out that even at the time of filing of the O.A., the respondent Bank has not filed any valid equitable mortgage created by T.S. Ramesh. That in the list of documents shown in the O.A., Serial No. 13 dated 1.2.1992 is only a agreement of guarantee by the late T.S. Ramesh to the respondent Bank. Sl. No. 14 dated 17.12.1990 is an Affidavit by T.S Ramesh Sl. No. 15 is dated 2.1.1991, which is an agreement to mortgage by late T.S. Ramesh to the respondent Bank. Sl. No. 18 dated 12.1.1997 is a paper publication given by the respondent Bank, wherein it is stated that the property situated at Door No. 35 (New No. 33), Mambalam High Road, T. Nagar, Chennai-17, belonging to T.S. Ramesh is mortgaged to Allahabad Bank, Anna Nagar Branch, Madras, for advances made to M/s. Vensons & Vensons by depositing title deeds. The above mortgage is still in existence. Public are hereby warned not to have any dealings either by way of sale/lease/mortgage etc. without the permission in writing from the Manager, Allahabad Bank, Anna Nagar East, Chennai-600102. In the said publication, the Bank has indicated only about the mortgage created by late T.S. Ramesh. It is not known what was the circumstances which warranted the respondent Bank to issue a paper publication in the year 1997, in respect of the loan said to have been given in the year 1991. It is further submitted that the mortgage said to have been executed by late T.S. Ramesh in respect of the property purchased by the appellant and others, is not valid and binding upon the appellant and others.
5. The learned Advocate for the appellant had further strenuously argued that all the original documents of title deeds were with the Indian Overseas Bank and on the discharge of the loan to the Indian Overseas Bank by the appellant, through T.S. Ramesh by payment of advance on 31.10.1990, which amount was paid by way of Challan to Indian Overseas Bank, he got the original documents back and, therefore, the sale in favour of the appellant is true and valid and the appellant is a bonafide purchaser of the property for value without notice of any manner of encumbrance. Appellant had also obtained Encumbrance Certificate dated 19.12.1991 (Ex. B-7) for the period 1.1.1975 to 12.12.1991, Encumbrance Certificate dated 15.2.1999 (Ex. E-8) for the period 1.1.1990 to 9.2.1999 and they do not disclose any manner of encumbrance in respect of this property except the sale made by T.S. Ramesh in favour of the appellant and others.
6. The next contention of the appellant is that there is conclusive proof that no mortgage was created in favour of the respondent Bank. Mere agreement to execute mortgage in respect of immovable property will not constitute a mortgage or charge upon the property. The respondent Bank did not insist upon the original title deeds in respect of the property mortgaged, which shows negligence on the part of the Bank and no reason was attributed for non-furnishing of the original title deeds. The Affidavit of the mortgagor dated 17.12.1990, is a created one with ante date and that would not cure the defect. The very public notice given by the respondent Bank on 12.1.1997, long after the alleged mortgage would go to show that the respondent Bank was not at all diligent in getting a proper mortgage and only out of fear and also to cover up then error, publication was given and absolutely there is no relevance to give such a publication in the year 1997 in respect of the mortgage alleged to have been taken in the year 1991. It is, therefore, submitted that the sale in favour of the appellant is true and valid and there is absolutely no mortgage in favour of the respondent Bank and even if there is any mortgage, the same is not valid and binding upon the appellant.
7. Per contra the Learned Advocate for the respondent would contend that one T.S. Ramesh, came forward to offer his property as a security for the borrowings of the defendants and he had sworn into an Affidavit on 17th day of December, 1990, wherein he had declared that he had purchased the property under the sale deed dated 7.5.1975 and he had lost original sale deed in the month of June, 1988, during shifting his house and he could not trace out the same and had applied for the certified copy of the sale deed on 18.7.1990 and got the same on 20.7.1990 and further declared that his property was free from all encumbrances and based upon the said Affidavit, he had entered into an agreement to mortgage of the property on 2nd January, 1991 (Ex. A-10) and along with the said agreement, he had furnished the certified copy of the sale deed dated 18.3.1955, certified copy of the sale deed dated 7.5.1975 and also Property Tax Demand Notice and four Encumbrance Certificates and they do not disclose any manner of encumbrance in respect of this property. It is further submitted that no registration is required to create an equitable mortgage and, therefore, the argument of the appellant that the equitable mortgage is not valid in law, is not sustainable. The respondent also relied upon the case of Ram Ratan Das Bagri and Ors. v.
Mt. Sew Kumari Bibi and Ors. AIR 1938 Calcutta 823, to support his submission wherein it is observed,
In deciding the question as to whether a document evidencing an equitable mortgage requires registration under Section 17 or not, the question to be considered is whether the document constituted the bargain between the parties or 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. For the purpose of considering whether the document is to be taken as embodying a bargain between the mortgagor and mortgagee or as merely evidencing a transaction which has already been completed, before the document was executed or delivered, not only the terms of the document must be looked into but also the attending circumstances.
8. The learned Advocate for the respondent further submitted that in order to create an equitable mortgage, the original documents of title are not required and in support of his submission, he relied upon the case of C. Rajagopal v. State Bank of Travancore, Karur Branch, Karur by its Manager, etc.
II (1995) BC 178 : 1995 I-Law Weekly 513,wherein it was held:
We are also unable to countenance the contention of the learned Counsel for the appellant that the mortgage created by the appellant only with a copy of the document, is not valid, in view of the number of pronouncements of our High Court and also of the Andhra Pradesh High Court. An identical question carae up for consideration before a Division Bench of our High Court reported in 1993(1) L.W. 456 M.A.V.R. Nataraja Nadar & Sons, etc. v. State Bank of India and 2 Ors. in which one of us, is a party (Abdul Hadi, J.). The Division Bench, on a consideration of the entire law on the subject and in the light of the pronouncements of the Supreme Court and of this Court and other High Courts, held that in order to create a valid mortgage, it is not necessary that the original documents of title to the property should be deposited. The Division Bench has also followed some of the earlier judgments of our High Court reported in AIR 1925 Madras 723 The Official Assignee of Madras v. Basudeva Doss Badrinarayan Dass and 1973(1) M.L.J. 334 No. 86 L.W. 96 Angu Pillai v. Kasi Viswanathan Chettiar, which in turn followed a Full Bench decision of the Rangoon High Court in Chidambaram Chettiar v. Aziz AIR 1938 Rangon 148. The Full Bench has reviewed the English and Indian authorities and has pointed out that in order to create a valid mortgage, it is not necessary that the whole, or even the most material of the documents of title to the property should be deposited, that the documents deposited should show a complete or good title in the depositors and it is sufficient if the deeds deposited bona fide relate to the property or are material evidence of title and shown to have been deposited with the intention of creating security thereon.
It is submitted that the mortgage executed in favour of the respondent Bank is supported by the Registration copy of documents of title deeds and the Encumbrance Certificates produced also do not disclose any manner of encumbrance and more particularly the sale in favour of the appellant does not figure as an encumbrance and, therefore, the mortgage in favour of the respondent Bank is valid and binding upon the appellant and the appellant’s right to the property is subject to the mortgage in favour of the respondent Bank as it has been rightly observed by the DRT and thereby argued in support of the order passed by the DRT.
9. The fact that the property mortgaged originally belong to T.S. Ramesh and the said property was mortgaged to Indian Overseas Bank by Ramesh in order to help his friend S. Lakshmanan and in order to discharge the debt due to the Bank, Ramesh came forward to sell the property and the appellant and his relatives have offered to purchase the property, after going through the original documents of title deeds. Ramesh required Rs. 1,63,738.35 p to pay to Indian Overseas Bank to discharge the mortgage and accordingly apay order for a sum of Rs. 1,63,738.35 p was drawn in the name of Indian Overseas Bank on 31.10.1990 and a cash of Rs. 36,261.65 p was also paid and in total Rs. 2 lakh was paid as advance to Ramesh and he got discharge of the mortgage also, as per letter of Indian Overseas Bank dated 3.11.1990 (Ex. B-2) and after the payment of the balance of sale consideration of Rs. 2,60,000/-, the appellant got the sale deed in his favour and also on behalf of two others on 16.4.1991. The remaining extent of 1438 sq.ft. of land was also purchased for a sum of Rs. 3,55,000/- and the sale deed was taken in the name of the plaintiffs brother and others on 25.6.1991. The appellant had also established that he had verified the Encumbrance Certificate for both the properties for the period 1.1.1975 to 12.12.1991 (Exhs. B7 & B8) and they do not disclose any manner of encumbrance. After purchase, the appellant applied for encumbrance from 1.1.1990 to 9.2.1999 and the sale deeds in favour of the appellant and his brothers and others were reflected in those Encumbrance Certificate (Exhs. B-9 and B-10) and the appellant got all original documents of title deeds from the Indian Overseas Bank through Ramesh. The appellant came to know of the mortgage only when he happened to see the publication in the Hindu dated 12.1.1997 and he has submitted his objections to the respondent Bank and has shown all the documents of title deeds to the respondent Bank and it appears that it was satisfied about the claim of the appellant. It is also pertinent to note that the respondent Bank only on the strength of the Affidavit furnished by T.S. Ramesh (Ex. A-13) had agreed to accept his security and also said to have taken equitable mortgage from him. On going through the Affidavit furnished by Ramesh (Ex. A-13) and the agreement to Mortgage (Ex. A-10), it would not give any room for any doubt that Ramesh had not created mortgage by deposit of title deeds as it was stated in the agreement to mortgage and there was only a proposal to execute equitable mortgage by deposit of title deeds and there was no mortgage by deposit of title deeds at all as contended by the respondent Bank and the same is evident from Paras 1, 2 and 4 of Exh. A-10 agreement to mortgage. A close scrutiny of the encumbrance said to have been furnished by Ramesh to the respondent Bank, which are available from Pages 145 to 157 of the type-set of papers, Exh. A-1 6 is Encumbrance Certificate dated 24.3.1987 for the period 16.12.1964 to 23.3.1987, Exh. A-17 dated 18.7.1990 for the period 1.1.1976 to 16.7.1990 Exh. A-18 dated 24.12.1990for the period 1.7.1990 to 23.12.1990, do not reflect sale deed in favour of the appellant. It cannot be reflected also, because the sale in favour of the appellant and others were on and from 16.4.1991 and the Encumbrance Certificates relied upon by the respondent stop with the period 23.12.1990 and hence the sale deeds in favour of the appellant and others definitely would not reflect in those encumbrances. The respondent also produced another Encumbrance Certificate dated 11.10.1998 (Exh.A-19) for the period 1.1.1986 to 26.10, 1998. In that Encumbrance Certificate also, the sale in favour of the appellant and others are not reflected. This Certificate was obtained in the year 1998 and it is not known the purpose for which it was obtained in the year 1998, whereas the sale deed in favour of the appellant and others was in year 1991. Even otherwise, the respondent Bank failed to take note of the fact that T.S. Ramesh has not even given police complaint about the alleged loss of title deeds nor a public notice in any one of the newspapers either in English or in vernacular and even his affidavit does not disclose why he has not done so. Curiously enough, in the Affidavit it is stated that the original sale deeds were lost in the month of June, 1988 and he had obtained the copy from the Registrar’s Office in the year 1990. Even after having obtained an Affidavit from Ramesh, the Bank by way of abundant caution could have required Ramesh to give a complaint to the police or a paper publication inviting objections, if any, for creating mortgage in favour of the respondent Bank and the same was also not done for one reason or the other, which shows that the respondent Bank was either ready to oblige the borrower or not diligent in getting proper documents from the guarantor. But on the other hand, when the appellant and others came to know that T.S. Ramesh had mortgaged the property to, I.O.B., they got all the documents of title deeds from the Bank through Ramesh after discharge of the mortgage and also got the sale deed in their favour and those sale deeds were also prior to the alleged mortgage in favour of the respondent Bank and, it shows that the appellant and others have taken all care of a prudent man before getting the sale deed and, therefore, the sale deed in favour of the appellant and others do not suffer from any infirmity and cannot at all to be held that they are subject to the mortgage in favour of the respondent Bank. The learned Presiding Officer has not properly adverted to the real facts and also has not given any reason why the sale deeds in favour of the appellant and others, which are anterior in point of time than the mortgage in favour of the respondent Bank, was not accepted and hence the order passed by the DRT as against the appellant is liable to be set aside.
10. In the result, the appeal is allowed in part and the order and decree passed by the DRT-II, Chennai, dated 12.1.2005, against the appellant/6th defendant is set aside. No costs.