Tuesday, 22 July 2025

M/s Faime Makers Pvt. Ltd Vs District Deputy Registrar - That principles of res judicata equally apply to quasi-judicial bodies. Whenever a judicial or quasi-judicial tribunal gives a finding on law or fact, its findings cannot be impeached collaterally or in a second round and are binding until reversed in appeal or revision or by way of writ proceedings. The characteristic attribute of a judicial act or decision is that it binds, whether right or wrong.

 SCI (2025.04.01) in M/s Faime Makers Pvt. Ltd Vs District Deputy Registrar [2025 INSC 423,CA NO…./2025@ SLP(C) NO.26654/2023],held that;

  • Once the said order has been accepted by the parties and has attained finality, the Competent Authority would not have  jurisdiction to entertain a second application contrary to the findings and directions given by the Competent Authority in the first order.

  • That principles of res judicata equally apply to quasi-judicial bodies. Whenever a judicial or quasi-judicial tribunal gives a finding on law or fact, its findings cannot be impeached collaterally or in a second round and are binding until reversed in appeal or revision or by way of writ proceedings. The characteristic attribute of a judicial act or decision is that it binds, whether right or wrong.

  • Thus, any error, either of fact or law, committed by such bodies cannot be controverted otherwise by way of an appeal or revision or a writ unless the erroneous determination relates to the jurisdictional matter of that body.

  •  In Abdul Kuddus (supra), this Court held that the opinion by the Foreigners Tribunal is a quasi-judicial order. Therefore, it would be incorrect to hold that the opinion of the Tribunal and/or the consequential order passed by the Registering Authority would not operate as res judicata. Further, it was established that any quasi-judicial Authority would not ordinarily have the power to unilaterally take a contrary view taken by a coordinate or predecessor authority at an early point in time.

Excerpts of the Order;

# 1. Leave granted.

# 2. The appellant has assailed the correctness of the judgment and order dated 10.11.2023, passed by the High Court of Bombay, whereby the appellant’s Writ Petition No. 8186 of 2022, assailing the correctness of the order dated 05.10.2021 passed by the District Deputy Registrar, Co-operative Societies, Mumbai/ Competent Authority, was dismissed. By the order dated 05.10.2021, the competent authority had allowed Application No. 101 of 2021, filed by Prakash Apartment Co-operative Housing Society Limited (respondent No.2-Society) under Section 5/11 of the Maharashtra Ownership of Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963 [Hereinafter referred to as the “1963 Act”], directing the execution and registration of a unilateral deed of assignment with respect to 1321.36 square meter area of land and the building situated thereon along with 198.20 square meter on the recreational ground in the name of respondent No.2-Society.


# 3. Briefly stated, the facts relevant for the present controversy are as follows:

3.1. The subject land of the dispute comprises Survey No. 22, Hissa No. 1, corresponding to

C.T.S. No. 75/B, admeasuring 1,321.36 square meters, along with 198.20 square meters in the Recreational Ground, totalling 1,519.56 square meters, out of a larger parcel of 2,752.9 square meters, situated at Bandivali Hill Road, Jogeshwari (West), Mumbai – 400102, within the Village Bandivali, Taluka Andheri.

3.2. The larger property, which includes the subject land, was transferred to Byramjee Jeejeebhoy Private Limited (hereinafter, "BJPL") through a Deed of Conveyance dated 24.07.1951, executed between Nanabhoy Byramjee Jeejeebhoy and BJPL

3.3. On 29.10.1952, BJPL, as the lessor, executed an Indenture of Lease in favour of Ramkishor Singh Kunjbihari (respondent No.3) as the lessee. Subsequently, respondent No.3 granted development rights over the leased land to M/s Prakash Builders (respondent No. 4).

3.4. Respondent No.4 constructed an unauthorized building on the land, without approved plans, comprising approximately 27 flats. These flats were sold to various purchasers, who later formed respondent No.2-Society.

3.5. On 07.07.2010, BJPL executed a Deed of Conveyance in favour of the appellant, whereby it sold its right, title, interest, and share in the larger property—including the subject land—to the appellant. Consequently, the appellant became the landowner as per the provisions of the 1963 Act.

3.6. On 06.09.2012, the legal heirs of the late Ramkishor Singh (respondent No. 3) filed a suit against the appellant and BJPL. The dispute was eventually settled through Consent Terms, wherein the parties agreed to divide the larger property into two portions.

3.7. Pursuant to the Consent Terms, a Deed of Surrender of Leasehold Rights was executed on 30.12.2012 between the appellant and respondent No.3. Through this deed, the appellant surrendered 3,596 square meters of land from the larger property in favour of respondent No.3, while respondent No.3 relinquished his leasehold rights over 2,786 square meters in favour of the appellant. As a result, the appellant became the owner of 2,768 square meters of land within the larger property.

3.8. The respondent No.2-Society applied for a Unilateral Certificate of Deemed Conveyance

under Section 11 of the 1963 Act before the Competent Authority which was registered as

Application No.53 of 2020. 

3.9. By an order dated 22.02.2021, the Competent Authority dismissed the respondent No.2-

Society’s application, observing that the Society was eligible to seek the relief of unilateral conveyance of assignment of leasehold rights. The application was also rejected due to legal uncertainties and complications regarding the identity of the land's promoter and on account of transfers. The order directed that the parties should first seek appropriate relief from a competent Civil Court, following which the Society was granted liberty to file a fresh application. This order attained finality as it was not assailed before any superior forum/Court.

3.10. Despite the Registrar's directive, the respondent No.2-Society did not approach the Civil Court to resolve the legal complications. Instead, on 24.03.2021, it submitted a fresh application to the Competent Authority, seeking a Unilateral Assignment of Leasehold Rights which was registered as Application No.101 of 2021.

3.11. On 05.10.2021, the Competent Authority passed an order granting the unilateral assignment of leasehold rights in favour of the respondent No.2-Society.

3.12. Aggrieved by this order, the appellant challenged it by filing Writ Petition No. 8186 of 2022 before the High Court of Bombay and by the impugned order dated 10.11.2023, the High Court dismissed the appellant’s writ petition, leading to the present appeal.


# 4. We have heard Shri Dama Seshadri Naidu, learned senior counsel appearing for the appellant and learned counsel appearing for respondent No.2- Society as also the intervenors.


# 5. Mr. Naidu, learned senior counsel appearing for the appellant made the following submissions: 

(i). The Competent Authority had dismissed the first application filed by the respondent No.2- Society under Section 11 of the 1963 Act by order dated 22.02.2021, on the finding that the issues involved were complicated and the respondent No. 2-Society ought to get the same sorted out by a competent Civil Court and only thereafter apply afresh. A further finding recorded was that no conveyance of sale could  be directed. However, only conveyance of assignment of leasehold rights could be granted, but that too after sorting out of the issues. The said order dated 22.02.2021 was never assailed by the respondent No.2-Society. Respondent No.2-Society thereafter did not take any steps to approach the appropriate forum for sorting out or resolving out the issues mentioned in the order dated 22.02.2021 and instead, within a month, it moved a second application before the Competent Authority on 24.03.2021, registered as Application No. 101 of 2021, seeking relief for the unilateral assignment of leasehold rights in favour of respondent No.2-Society. The submission was that the second application was not maintainable without the issues being resolved by the competent Civil Court as directed in the order dated 22.02.2021. The second application for leasehold rights could have been filed only after the issues resolved by the competent Civil Court. The second application was thus barred by the principle of res judicata, and the Competent Authority, while allowing the second application, committed a serious error in entertaining the same.

(ii). The Competent Authority is a statutory authority and would fall within the category of quasi-judicial authority as it decides the application as per the statutory provisions after providing due opportunity of hearing to the concerned parties, as such until and unless specifically provided by Statute, it would not have power of review. The order dated 05.10.2021, passed by the Competent Authority allowing Application No. 101 of 2021, clearly amounted to a review of the first order dated 22.02.2021. No power was vested in the said authority by the Statute i.e. the 1963 Act as such was without jurisdiction or authority of

law.

(iii). Even on merits, the Competent Authority erred in granting the relief for unilateral assignment of leasehold rights, as the constructions made were not authorised, and no commencement certificate for raising the construction of building in question was ever obtained, and as such no benefit could be extended to the respondent No.2-Society under Section 11 of the 1963 Act for the inaction of the builder in transferring the ownership rights in favour of the members of the respondent No.2-Society.

(iv). It was next submitted that even assuming for the sake of argument that unilateral assignment of leasehold rights could be extended to the respondent No.2-Society, there was no justification for granting the same for an area of 1,361 square meter, whereas the building in question was situtate, enclosed within a boundary wall, covering only 870 square meters.

(v). The High Court committed a manifest error by not correctly reading the first order of the

Competent Authority dated 22.02.2021. The High Court went on the premise that the first order dated 22.02.2021 was little vague and confusing. Which was not correct in as much the first order of 22.02.2021 was very clear that the respondent No.2-Society needed to get the complications resolved by the competent Civil Court and only thereafter apply afresh for

assignment of leasehold rights. 

(vi). On such submissions, it was prayed that the appeal deserves to be allowed, the impugned orders deserve to be set aside, and the application No. 101 of 2021, filed by respondent No.2-Society under Section 11 of the 1963 Act before the Competent Authority, deserves to be rejected.


# 6. On the other hand, learned counsel for the respondent No.2-Society has made the following submissions:

(i). The High Court correctly appreciated and interpreted the first order dated 22.02.2021 to record a finding that the said order granted unconditional liberty to the respondent No.2- Society to file a fresh application for the assignment of leasehold rights.

(ii). It was next submitted that the second order dated 05.10.2021 would not amount to a review, as it was dealing with an application seeking a distinct relief from the first application, and in view of the liberty granted, there was no question of any review. The second application was to be dealt with on its own merits, independent of the first order rejecting the first application.

(iii). It was also submitted that the issue relating to the demarcation of boundary, with respect to the building in question covering only 870 square meter was although raised before the High Court but was completely unsubstantiated, as no supporting documents were filed in that regard. The report of the City Survey Officer which was subsequent to the judgement of the High Court cannot be looked into or relied upon by this Court in this appeal.


# 7. Having considered these submissions and having perused the order dated 22.02.2021, we have no hesitation to hold that there was no unconditional liberty granted to respondent No.2-Society to apply for the unilateral assignment of leasehold rights. The order dated 22.02.2021 is very clear that complications had arisen because of various transactions inter se parties at different points of time. The relevant facts have already been noted in the earlier part of this judgment.


# 8. The relevant extract of the order dated 22.02.2021, whereby the application was dismissed for the reasons given therein, with liberty to apply afresh after sorting out the issues, is reproduced hereunder:

  • “…Therefore, the petitioner has to appeal to the appropriate court in this regard. As there is a legal complication in this case, the authority will not be able to make a human transfer in the name of the applicant society. Due to this, the applicant society should only demand assignment of leasehold claim and also the competent court should resolve the legal issues related to the transfer of the name of the respondent No.3 of the rate of income. It is not possible to transfer the leasehold right of the said property in the name of the applicant Society unless these matters are settled. Therefore, I am convinced that after the settlement of these matters, the applicant should be allowed to re-apply for the human transfer of the leasehold rights of the said property and the application submitted by the applicant Society should be rejected.”


# 9. A plain reading of the above findings of the Competent Authority in its order dated 22.02.2021 leaves no manner of doubt that respondent No.2- Society could approach the Competent Authority afresh for the unilateral assignment of leasehold rights only after getting the complications sorted out before the appropriate Court. The order clearly indicates that the competent authority could not grant leasehold rights under the existing set of facts until and unless the complications were sorted out. 


# 10. There is no explanation from the side of respondent No.2-Society with respect to the above findings of the Competent Authority recorded in the order dated 22.02.2021, as to why the same was not challenged before a superior forum. Once the said order has been accepted by the parties and has attained finality, the Competent Authority would not have  jurisdiction to entertain a second application contrary to the findings and directions given by the Competent Authority in the first order. 


# 11. It has been settled by this Court that the principle of res judicata applies to and binds quasi-judicial authorities. This Court in Ujjam Bai vs. State of U.P. [1962 SCC OnLine SC 8] has taken the view that principles of res judicata equally apply to quasi-judicial bodies. Whenever a judicial or quasi-judicial tribunal gives a finding on law or fact, its findings cannot be impeached collaterally or in a second round and are binding until reversed in appeal or revision or by way of writ proceedings. The characteristic attribute of a judicial act or decision is that it binds, whether right or wrong. Thus, any error, either of fact or law, committed by such bodies cannot be controverted otherwise by way of an appeal or revision or a writ unless the erroneous determination relates to the jurisdictional matter of that body.


# 12. This position has been further reinforced in Abdul Kuddus vs. Union of India and others [(2019) 6 SCC 604] which relies upon Ujjam Bai (supra). In Abdul Kuddus (supra), this Court held that the opinion by the Foreigners Tribunal is a quasi-judicial order. Therefore, it would be incorrect to hold that the opinion of the Tribunal and/or the consequential order passed by the Registering Authority would not operate as res judicata. Further, it was established that any quasijudicial Authority would not ordinarily have the power to unilaterally take a contrary view taken by a coordinate or predecessor authority at an early point in time.


# 13. From the foregoing discussion, it is evident that once a Competent Authority (quasi-judicial in nature) settles an issue, that determination attains finality unless it is set aside in accordance with law.


# 14. In our opinion, the High Court erred in giving a different interpretation to the above text of the firstorder dated 22.02.2021. The High Court had extracted the above findings, conclusions, and directions in its impugned order but still moves on to hold that unconditional liberty was given to respondent No.2-Society, which in our opinion, was not correct.


# 15. Without further burdening this order by entering into the other issues, we are satisfied that the impugned order cannot be sustained. The second application filed by the respondent No.2-Society under Section 11 of the 1963 Act before the Competent Authority, being Application No. 101 of 2021, deserves to be dismissed. However, the liberty granted in the first order of the Competent Authority dated 22.02.2021, while rejecting Application No. 53 of 2020, would still be available to the respondent No.2-Society but only after getting the complications resolved/sorted out before the appropriate Court/Forum.


# 16. Accordingly, the appeal is allowed, impugned order of the High Court is set aside, the writ petition would stand allowed, and the order dated 05.10.2021 passed by the Competent Authority is quashed.


# 17. In view of the above findings, the Contempt Petition (C) No. 684 of 2024 would not require any further consideration. It is accordingly disposed of.


# 18. Pending applications, if any, stand disposed of.

--------------------------------------------------------- 


Sunday, 20 July 2025

M/s Sonali Power Equipments Pvt. Ltd vs Chairman, Maharashtra State Electricity Board Mumbai & Ors.- The Limitation Act does not apply to conciliation proceedings under Section 18(2) of the MSMED Act. A time-barred claim can be referred to conciliation as the expiry of limitation period does not extinguish the right to recover the amount, including through a settlement agreement that can be arrived at through the conciliatory process.

 SCI (2025.07.17) in M/s Sonali Power Equipments Pvt. Ltd vs Chairman, Maharashtra State Electricity Board Mumbai & Ors. [2025 INSC 864, Civil Appeal Nos.9524-9532 Of 2025 Arising out of SLP (C) NOS. 6912-6920 OF 2024] held that;

  • i. The Limitation Act does not apply to conciliation proceedings under Section 18(2) of the MSMED Act. A time-barred claim can be referred to conciliation as the expiry of limitation period does not extinguish the right to recover the amount, including through a settlement agreement that can be arrived at through the conciliatory process.

  • ii. The Limitation Act applies to arbitration proceedings under Section 18(3) of the MSMED Act. The applicability of the provisions of ACA to such arbitrations is determined as per Section 18(3) and other provisions of the MSMED Act, as these are special laws, rather than by Section 2(4) of the ACA, which is under a general law. This is in addition to the reasoning provided in Silpi Industries (supra). Further, the extension of the limitation period on the basis of disclosure under Section 22 of the MSMED Act must be examined on a case-to-case basis.

Excerpts of the Order;

# 26. Section 18(2) of the MSMED Act provides that conciliation must be conducted as per Sections 65 to 81 of the ACA. On perusing these provisions of the ACA, as well as the provisions of the MSMED Act, it is clear that there is no provision that extends the applicability of the Limitation Act to conciliation proceedings. Further, neither Section 29(2) nor any other provision of the Limitation Act has the effect of extending its application to conciliation proceedings. On the other hand, it is a settled position that the Limitation Act only applies suits, appeals, and applications filed before courts.[M.P. Steel Corpn. v. CCE, (2015) 7 SCC 58, paras 11-32.] Conciliation being an out-of- court and non-adjudicatory process of dispute resolution, the Limitation Act cannot be extended to it.


# 31. There is yet another reason why time-barred claims must not be excluded from conciliation under the MSMED Act. It is a settled position of law that the statute of limitation only bars the remedy, but does not extinguish the underlying right, which in this case is the right to recover the unpaid amount and interest thereon. The right to recover of the creditor/supplier and the corresponding liability of the debtor/buyer to repay the amount subsists even after the expiry of the limitation period. The creditor can recover a time-barred debt, other than through remedies through a court of law, such as by adjusting payments from the debtor made without direction on how it must be appropriated,[41] recovering the amount from a surety/ guarantee, or enforcing lien or security.[42] Further, the parties may also enter into a contract for repayment of a timebarred debt, which is recognised under Section 25(3) of the Contract Act.[43]


# 33. For the foregoing reasons, we conclude that neither the Limitation Act applies to conciliation proceedings under Section 18(2) nor are time-barred claims excluded from such conciliation. The supplier’s right to recover the principal amount and interest thereon subsists even after the expiry of the limitation period, and he may recover the same through a settlement agreement arrived at through conciliation by the Facilitation Council under Section 18(2). In case such settlement is not reached between the parties and the conciliation proceedings are terminated for this reason, the matter must be referred to arbitration as per Section 18(3), which we will deal with presently.


# 51. On considering the statutory provisions of the MSMED Act, the ACA, and the Limitation Act, the precedents of this Court, and on the basis of the above reasoning, we have answered the issues arising in the present appeals as follows:

  • i. The Limitation Act does not apply to conciliation proceedings under Section 18(2) of the MSMED Act. A time-barred claim can be referred to conciliation as the expiry of limitation period does not extinguish the right to recover the amount, including through a settlement agreement that can be arrived at through the conciliatory process.

  • ii. The Limitation Act applies to arbitration proceedings under Section 18(3) of the MSMED Act. The applicability of the provisions of ACA to such arbitrations is determined as per Section 18(3) and other provisions of the MSMED Act, as these are special laws, rather than by Section 2(4) of the ACA, which is under a general law. This is in addition to the reasoning provided in Silpi Industries (supra). Further, the extension of the limitation period on the basis of disclosure under Section 22 of the MSMED Act must be examined on a case-to-case basis.


Footnotes;

[41] See Section 60 of the Contract Act, which allows the debtor to apply such payment, at his discretion, to any lawful debt actually due and payable to him from the debtor, whether or not its recovery is time-barred under limitation law.

 

[42] Bombay Dyeing & Mfg. Co. Ltd. v. State of Bombay, AIR 1958 SC 328, para 12; Punjab National Bank v. Surendra Prasad Sinha, 1993 Supp (1) SCC 499. para 5; Prem Cottex v. Uttar Haryana Bijli Vitran Nigam Ltd., (2021) 20 SCC 200, para 13.

 

[43] Section 25(3) of the Contract Act reads:

  • “25. Agreement without consideration, void, unless it is in writing and registered, or is a promise to compensate for something done or is a promise to pay a debt barred by limitation law.—An agreement made without consideration is void, unless—

  • ***

  • (3) it is a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits. In any of these cases, such an agreement is a contract.”

--------------------------------------------------------- 


Tuesday, 17 June 2025

Dr. Vichitra Narayan Pathak Vs. Suraksha Realty Ltd. & Anr. - That is to say 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.

 NCLAT (2025.05.30) in Dr. Vichitra Narayan Pathak Vs. Suraksha Realty Ltd. & Anr. [(2025) ibclaw.in 420 NCLAT, Company Appeal (AT) (Insolvency) No. 1017, 1018, 1060, 1061,1085, 1096, 1309 & 1310 of 2024] held that;

  • That is to say 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.

  • 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 of the Registration Act, 1908, as a non-testamentary instrument creating an interest in immovable property,

  • Whereas in India under the Act, 1882, more particularly under Section 58 sub-section (f) a statutory recognition has been given to the mode of creation of mortgage by deposit of title deeds. Such a mortgage by deposit of title deeds is for all purposes a ‘legal mortgage’ and not an equitable mort- gage

  • The banks, normally, maintain register of securities called Equitable Mortgage Register; wherein the entry of title deeds is taken in the form of memorandum signed by the Branch Manager alone, as a person accepting delivery of the documents as security. These formalities are done to establish three essential requisites of equitable mortgage, viz. (1) debit, (2) deposit of title deed and (iii) the intention that deed shall operate as security for the present or future debt.

  • But if the parties choose to reduce the contract to writing, this implication of law 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.

Excerpts of the Order;

# 34. Judgment of the Hon’ble Supreme Court in “Rachpal Mahraj vs. Bhagwandas Daruka and Others- 1950 SCC 195” has been relied by Arrow Engineering Ltd. In the above case, the Hon’ble Supreme Court had occasion to consider Section 58(f) and Section 59 of the Transfer of Property Act, 1882. In paragraph 5 of the judgment, the Hon’ble Supreme Court held that 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. Paragraph 5 of the judgment is as follows:-

  • “5. A mortgage by deposit of title deeds is a form of mortgage recognised by Section 58(f) of the Transfer of Property Act, 1882 which provides that it may be effected in certain towns (including Calcutta) by a person “delivering to his creditor or his agent documents of title to immovable property with intent to create a security thereon”. That is to say 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 of the Registration Act, 1908, as a non-testamentary instrument creating an interest in immovable property, where the value of such property is one hundred rupees and upwards. 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. Narayanna Ayyar [Obla Sundarachariar v. Narayanna Ayyar, (1930-31) 58 IA 68 : 1931 SCC OnLine PC 2] or, it may be delivered at a later date and nevertheless be registrable, as in Sir Hari Sankar Paul v. Kedar Nath Saha [Sir Hari Sankar Paul v. Kedar Nath Saha, (1938-39) 66 IA 184 : 1939 SCC OnLine PC 25]”.


# 35. It was further held in paragraph 6 of the judgment that the crucial question is did the parties intend to reduce their bargain regarding the deposit of the title deeds to the form of a document. It was further held that if the bargain has been reduced in writing, the document requires registration. In paragraph 6 of the judgment, following has been held:-

  • “6. The crucial question is: did the parties intend to reduce their bargain regarding the deposit of the title deeds to the form of a document? If so, the document requires registration. If, on 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.


# 36. In the case before the Hon’ble Supreme Court, the document had only recorded transaction in which case party did not intent to reduce the bargain to writing, hence, it was held that agreement did not require registration and could have been admitted in evidence to prove the creation of charge. When we apply the above ratio of the above judgment in the facts of the present case, it is clear that following two conclusions are irresistible:

  • (i) Corporate Debtor did not intend to create mortgage on the assets by deposit of title. Corporate Debtor only intended to keep the title deeds with escrow agent which was clear by the letter dated 26.12.2009.

  • (ii) The document contained the bargain. Both the parties reduced the bargain into writing i.e. MoU dated 26.12.2009, for creating any charge on the assets on the strength of the MoU, the said MoU requires restriction under Section 17 of the Registration Act, 1908.


# 37. Counsel for the Suraksha Realty Limited has placed reliance on “Cosmos Co. Operative Bank Ltd. vs. Central Bank of India and Others- 2025 SCC OnLine SC 352” where the Hon’ble Supreme Court held that mortgage by deposit of title deeds is accepted as mortgage under the Transfer of Property Act, 1882. In the above case before the Hon’ble Supreme Court, original borrower while availing the loan facility from the Central Bank of India had deposited the sale deed and another unregistered agreement to sell. In the above context, the Hon’ble Supreme Court had occasion to consider the provisions of the Transfer of Property Act, 1882. In paragraphs 48 and 49, the Hon’ble Supreme Court held:-

  • “48. At this stage we must also address ourselves on one another important aspect where the High Court grossly erred whilst passing the impugned judgment and order. As discussed in the foregoing paragraphs of this judgment, the original borrower whilst availing the loan facility from the respondent no. 1 and appellant, had deposited with them two unregistered agreement to sale, and another unregistered agreement to sale along with the share certificate of ownership, respectively. Although both of the aforesaid transactions seek to create mortgage by deposit of documents or title, yet there lies a very fine but pertinent distinction between the two transactions. In respect of the loan advanced by the respondent no. 1 bank, only two unregistered agreements to sale were deposited which as discussed earlier do not purport any title as held in Suraj Lamps (supra) while with the appellant bank herein apart from one unregistered agreement to sale the share certificate of ownership had also been deposited which has the effect of conveyance of title.

  • 49. Under the English Law, whether the documents so deposited actually purport or transfer any title is immaterial for the purpose of creating an ‘equitable mortgage’ as long as the intention to do so is clearly discernible. The position in India however is quite different. This is because under the English Law, a mortgage created by deposit of title or documents is not construed as a legal mortgage and is only treated as an equitable mortgage. Whereas in India under the Act, 1882, more particularly under Section 58 sub-section (f) a statutory recognition has been given to the mode of creation of mortgage by deposit of title deeds. Such a mortgage by deposit of title deeds is for all purposes a ‘legal mortgage’ and not an equitable mort- gage.…………….” 


# 38. In paragraph 51, the Hon’ble Supreme Court has noticed the requisite for valid mortgage. Paragraph 51 is as follows:-

  • “51. Deposit of title deeds is one of the many forms of mortgages whereunder there is a transfer of interest in specific immovable property for the purpose of securing payment of money advanced or to be advanced by way of loan. The three requisites for a valid mortgage are, (i) debt; (ii) deposit of title deed; and (iii) an intention that the deed shall operate as security for the debt. In other words, when the debtor deposits with the creditor title deeds of his property with an 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 of the Act, 1882 as in other classes of mortgage. It is essential to bear in mind that the essence of a mortgage by deposit of title deeds is the actual handing over by a borrower to the lender of documents of title to immovable property with the intention that those documents shall constitute a security which will enable the creditor ultimately to recover the money which he has lent. Whether there is an intention that the deed shall be security for the debt is a question of fact to be decided in each case on its own merits. The said fact will have to be decided just like any other fact based on legal presumptions, oral, documentary and/or circumstantial evidence. Normally, title deeds are delivered to the bank along with a covering letter indicating therein an intention of delivering title deed i.e. to create security for the present or future liability. In turn, bank gives a letter to the person delivering title deeds indicating acceptance of the documents and/or title deeds by way of security either for the outstanding dues or for the loan to be advanced. The banks, normally, maintain register of securities called Equitable Mortgage Register; wherein the entry of title deeds is taken in the form of memorandum signed by the Branch Manager alone, as a person accepting delivery of the documents as security. These formalities are done to establish three essential requisites of equitable mortgage, viz. (1) debit, (2) deposit of title deed and (iii) the intention that deed shall operate as security for the present or future debt. But if the parties choose to reduce the contract to writing, this implication of law 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.


# 39. There can be no quarrel to the proposition laid down by the Hon’ble Supreme Court in the above case. The question to be considered is as to whether essential ingredients requisite as noticed above are fulfilled in the present case or not. We have already noticed that the deposit of title deeds by the debtor was not with intent to create a mortgage rights in the Corporate Debtor assets rather than the title documents were deposited with the escrow agent to keep with escrow agent till the obligation under MoU is fulfilled. The transaction when look into all attended circumstances and intent of the parties clearly indicate that there was no intent for creating mortgage.

---------------------------------------------------