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Sai 13 November 2022

Deposit of title of loan is repayable on demand

In EC it's refelecting that deposit of title deeds if loan is repayable on demand. It is also mentioned that sale agreement has made with 1 crore and advance is mentioned has 50 lakhs and the validity is mentioned as 11 months. The land has been pledged for money. Can a lender be able to acquire or take position of the land without the principal signature ? Will the title be transferred to the lender automatically ?

1 Replies

Rama chary Rachakonda (Secunderabad/Telangana state Highcourt practice watsapp no.9989324294 ) 23 July 2025

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.

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