a.manoharan (Advocate 94431 45884 advocatemanoharan@gmail.com) 04 June 2009

First Charge in Regd. Memorandum of Deposit of Title Deeds

Dear Experts ,
Please inform me whether the first charge can be created over the mortgaged property in Memorandum of Deposit of Title Deeds- even though Memorandum of Deposit of Title Deeds got Registered - as though in Registered Simple Mortgage . Any SC Judgement or any HC Judgement discused about this matter in detail. If available , please quote the same for expert's discussion.

Reply Follow

3 Replies

V.S.R.Deekshitulu (B.Sc, B.L) 05 June 2009

Mr Manoharan

Basically Mortgages are dealt with under Secs. 58 and 59 of TPAct. Section 58 deals with various kinds of mortgages, of which Mortgage by Deposit of title deeds is one. There is no priority spelt out in the said section as regards the mortgage, as to which is great or which is not. Even if the mortgage by deposit of title deeds is first, then it takes prority over all subsequent dealings on the property mortgage be it a further simple mortgage or sale or gift or any other conveyance. Simply because mortgage by depoist of title deed do not require registration(In A.P) it does not mean that a subsequent simple mortgage will over ride the prior mortgage by deposit of title deeds. If you go thro the section u will understand the same.

If possible see. 2007(3) ANDHRA LEGA LDECISIONS. P. 225. In this case the judgement of Apex court rendered in A.I.R. 1970 Supreme court at P. 659 was relied on. Give me your mail ID I will sent some more. Or your contact address so as to send the copies for youor records.

The Head notes of the above case says

Transfer of Property Act, 1982-Sections 58 and 59- Mortgage deed-Memorandum of Deposit of Title deeds-Distinctiion between- former brings about transaction of mortgage by itself where as later referes to what has already taken place-It's registration or lack of it would have absolutely no bearing on transaction since it has already come into existence.

a.manoharan (Advocate 94431 45884 advocatemanoharan@gmail.com) 05 June 2009

Dear Sir,

THANK YOU VERY MUCH FOR YOUR IMMEDIATE RESPONSE. Usually , in Tamilnadu, the stamp duty is 1/2% subject to the maximum of Rs 5000/= and registration charge is 1% subject to the maximum of Rs 5000/= . For Simple Mortgage the stamp duty is 1% subject to the maximum of Rs 20000/= and registration charge is 1% subject to the maximum of Rs 5000/=. If i give legal opinion to Bank to create Registered Simple Mortgage - at the instances of when no Original Partition Deed is available or Legal Heirship Certificate is not available Or only patta / Record of Rights available- Bank first creates Memorandum in their book and subsequently requested customer to Register the Memorandum of Deposit of title deeds entirely different format from Memorandum in their book . In these circumstances , what will be the position of Memorandum in their book and subsequentc Registered Memorandum of Deposit of title deeds entirely different from Memorandum in their book . Further , as they did not make Registered Simple Mortgage Deed , what will be the first charge of the Bank or getting personal decree against the customer if the borrower already got any loan and created any EM at any some other bank or financial institutions cheatingly with the help of any other Duplicate copy of Partition Deed or patta / Record of Rights as so many copies easily available . only to avoid fraud as a rule of prudent , in these circumstances , i give opinion to get Registered Simple Mortgage which is safer for bank. But, the Bank asks that when both are mortgages, why we should unncesarily spend more amount for registration. my opinion is that there is no first charge available when Memorandum of Deposit of Title Deeds got Registered as though in Registered Simple Mortgage . Is my view right ? Because as per SC, if reduced into writing , only the said clauses in that Mortgage Deed is applicable. If so, there is no specific word ' charge or first charge' the Registered Memorandum of Deposit of Title Deed, If my view is right , please inform me any SC Judgement or any HC Judgement discused about this matter in detail. If available , please quote the same for expert's discussion or directly to me. MY E MAIL ID : advocatemanoharan@gmail.com

V.S.R.Deekshitulu (B.Sc, B.L) 08 June 2009

Mr Manoharan

As I already told you the registration or non registration of a Mortgage by deposit of title deeds is of no consequence. If it is former in time, the same will prevail always and a later registered simple Mortgage will occupy the 2^nd place.

What is required in Memorandum of Deposit of title deed, is the intention of party depositing the tile deed to secure due payment of the amount due to any Bank or Financial institution. There need not be any words like 1^st charge etc. Even if such words are there, the mortgage will not have a priority, if it is found that there is already mortgage on the property.

The difference in wording in the Bank Format and the won got registered by the Bank will not have any bearing on the sustainability of the charge. This is purely internal affair of the Bank.

Naturally in case of partition deeds, in olden days there used to be only one registered. Of late depending upon the number of sharers duplicates, triplicates etc are taken so as to facilitate the sharers to obtain loan on the basis of the partition deed. In this case also there is chance for fraud. The reason being that there may be possibility for one brother or sharer to use the other copies and create mortgage in different banks in respect of the same property. Under such a circumstances what is to be advised while drafting a partition deed, is that which if the copies was given to the sharers must also be mentioned in the partition deed. I.e like “A” sharer is to be given the original, “B” sharer is given the Duplicate, “C’ the triplicate etc. This will help in avoiding the fraud as stated above.

In respect of opinion based on a public copy of a document, the same is always subject to any prior mortgage on the property, irrespective of any precaution which a lawyer may suggest, or any publication in paper or a declaration by the party, agreeing to face all penal consequences. Some unscrupulous elements, having had the original documents in their possession, may create a mortgage(EM) with a back date and in this case also we will not have a priority unless we can prove that the same is back dated.

The law did not say that EM cannot be created on public copies of documents. It only says that it is subject to all consequences. In this connection, Your attention is drawn to a decision in 1989(1) ANDHRA LAW TIMES.P. 217 and also 2002(1) ANDHRA LAW TIMES. 10.2(DN.OHC)

So my friend simply because you mention in the memorandum as “first charge”, the same cannot be applied universally and if it is proved that there is already a prior mortgage, then what ever we use in our memorandum will have no force, and be subject to the prior mortgage.