Legal Question in Banking Law in India

An equitable mortgage was made by deposit of an agreement for sale under which the mortgager entered into possession. Sale in favour of the mortgager was completed shortly thereafter and the mortgager continued to overdraw from the mortgagee bank. The court held that the mortgage is rendered perfection and from the date the mortgager acquired title to the property by way of sale in his favour. It was observed that in order to create a valid equitable mortgage, it is not necessary that the whole or even the material of the documents of title to the property should be deposited nor that the document deposited should show a complete or good title; it is sufficient if the deed deposited bona fide relate to the property or are material evidence of title or are shown to have been deposited with the intention of creating a security thereof. Decide the case.

Asked on 4/01/13, 11:21 pm

5 Answers from Attorneys

J. Radhakrishnan independent Practice

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yes, there is a Madras High Court ruling to that effect. Once the sale deed is registered, the mortgagor is bound to deposit the same also. Otherwise, if the earlier deposit of title deeds memorandum is not registered, it is possible a person who takes the original sale deed as purchaser or mortgagee may successfully claim that the equitable mortgage created earlier by deposit of inchoate documents does not bind him.

Answered on 4/02/13, 8:41 pm

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