Deposit of title of loan is repayable on demand

This situation involves a mortgage by deposit of title deeds, also known as an equitable mortgage, which is governed by Section 58(f) of the Transfer of Property Act, 1882.

Here's a breakdown of the key legal implications based on your descripttion:

🧾 What Does “Deposit of Title Deeds” Mean? It creates a charge on the property by handing over the title deeds to the lender. It does not require registration with the sub-registrar. It is valid only if there is intent to create a security for the loan.

🔐 Can the Lender Take Possession Without the Principal’s Signature? No, the lender cannot take possession or ownership of the land without due legal process. Even if the loan is “repayable on demand,” the lender must: Issue a demand notice for repayment. If unpaid, initiate legal proceedings (e.g., under SARFAESI Act if applicable or through civil court). Obtain a court order or follow statutory procedure to take possession.

📜 Will the Title Be Transferred Automatically? Absolutely not. The deposit of title deeds does not transfer ownership. The title remains with the borrower unless: A registered sale deed is executed. The property is sold through auction or foreclosure following legal procedure.

🧾 Sale Agreement Mentioned in EC A sale agreement for ₹1 crore with ₹50 lakh advance and 11-month validity: Does not transfer ownership unless followed by a registered sale deed. If the agreement lapses or is not executed, the buyer cannot claim title.

⚖️ Legal Safeguards The borrower retains the right to redeem the property until actual sale. The lender must give reasonable notice before any sale. Courts have held that mere possession of title deeds does not confer ownership2.