Law of Registration
REG 073 Mortgage Deed and Deposit of Title Deeds
The Mortgage Deed and the Deposit of Title Deeds: Registered Mortgage Against Equitable Mortgage, and the Memorandum That Decides Between Them
Indian law recognises six kinds of mortgage, and Section 59 of the Transfer of Property Act, 1882 prescribes one mode for five of them and excepts the sixth. Where the principal money secured is one hundred rupees or more, a mortgage can be effected only by a registered instrument signed by the mortgagor and attested by at least two witnesses, except a mortgage by deposit of title deeds, which is created by the act of deposit itself and needs no instrument at all. That exception is what produces the two securities this note compares, the registered mortgage and the equitable mortgage, and the entire practical difficulty of the subject lies in what happens when the parties, having made a deposit, nevertheless write something down.
The rule and its exception, and the writing that decides which side of the line a security falls
1. The Rule and the Exception
Sections 58 and 59, Transfer of Property Act, 1882, in substance 58(a). Mortgage defined. A mortgage is the transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability. 58(f). Mortgage by deposit of title deeds. Where a person in any of the towns of Calcutta, Madras and Bombay, and in any other town which the State Government concerned may, by notification in the Official Gazette, specify in this behalf, delivers to a creditor or his agent documents of title to immovable property, with intent to create a security thereon, the transaction is called a mortgage by deposit of title deeds. 59. Mortgage when to be by assurance. Where the principal money secured is one hundred rupees or upwards, a mortgage, other than a mortgage by deposit of title deeds, can be effected only by a registered instrument signed by the mortgagor and attested by at least two witnesses. Where the principal money secured is less than one hundred rupees, a mortgage may be effected either by a registered instrument signed and attested as aforesaid, or, except in the case of a simple mortgage, by delivery of the property. |
- Five kinds require the instrument: simple, by conditional sale, usufructuary, English and anomalous, under Section 58(b) to (e) and (g).
- One does not: the mortgage by deposit of title deeds under Section 58(f), which Section 59 excepts in terms.
- The threshold is on the principal money secured, not on the value of the property mortgaged.
- A simple mortgage can never be made by delivery of the property, even below the threshold, because a simple mortgage is by definition one in which possession is not delivered.
- Both are mortgages for every other purpose. The mortgagee has the remedies of a mortgagee and the mortgagor the right of redemption under Section 60, and the equitable mortgage is not a lesser species of security.
2. The Three Ingredients of a Deposit
1. A debt, existing or to be advanced. There must be something for the security to secure.
2. A deposit of the documents of title to immovable property, with the creditor or his agent. The deeds need not be all of them, provided what is deposited is material evidence of title, and the deposit must be a real handing over.
3. An intention that the deeds shall be security for the debt. This is the essential element, it may be proved from the circumstances of the deposit, and it need not be in writing.
- It operates only in a notified town. The three Presidency towns are named in the section, and the State Government may notify others. Whether a given town is notified is a question of the State notification, and it must be checked.
- The deposit must be in the notified town, though the property may be elsewhere; this is the ordinary reading of the section, and it is why the place of deposit is recited in bank documents.
- No writing, no attestation and no registration are required, and none of them can be insisted on.
- Priority runs from the date of the deposit, subject to the rules of notice and to Sections 48 and 50 of the Registration Act.
3. The Two Compared
Mortgage by registered deed | Mortgage by deposit of title deeds | |
How it is created | By the instrument: simple, conditional sale, usufructuary, English or anomalous | By the act of delivering the title deeds with intent to secure |
A writing | Essential | Not necessary at all |
Attestation | Two witnesses, Section 59 | Not applicable |
Registration | Compulsory, Section 17(1)(b) | Expressly excepted by Section 59 |
Where available | Anywhere | Only in a town notified by the State Government |
What must be proved | Execution of the deed | A debt, a deposit of the title deeds, and an intention that they be security |
Public notice | Constructive notice from the date of registration | None. The security appears on no register and a search will not disclose it |
Speed and cost | Slower; full mortgage duty and the registration fee | Immediate; no conveyance scale duty |
Stamp duty | Under the mortgage article, ad valorem | Nominal, or under a separate article for the memorandum where the State provides one |
The principal risk | None once registered, subject to priority | Proving the deposit and the intention, and the memorandum trap |
Discharge | A registered deed of release or reconveyance; or a receipt endorsed on the deed, exempt under Section 17(2)(xi) | Return of the title deeds, with a letter of discharge |
4. The Memorandum: Where the Security Is Won or Lost
In practice the lender almost always asks the borrower to sign something. Whether that writing needs registration is the question this branch of the law is really about, and the answer is the same test that governs partitions and family arrangements: does the document create the security, or does it merely record a security already created by the deposit?
📖 Rachpal Mahraj v. Bhagwandas Daruka, AIR 1950 SC 272 Facts. Title deeds were deposited with a creditor as security, and a writing was executed in connection with the deposit. The question was whether that writing was compulsorily registrable, and whether, being unregistered, the security failed. Held. The Supreme Court held that where the parties intend the writing to be the bargain between them, that is, where the document itself is the contract of mortgage and contains its terms, it is the source of the security and must be registered. But where the deposit of title deeds is itself the transaction, and the writing is merely evidence of, or a record of, that deposit, it does not require registration, because the mortgage was created by the deposit and not by the paper. Ratio. The enquiry is into the intention of the parties as gathered from the document and the circumstances: is the document the instrument of the bargain, or is the bargain the deposit and the document only its memorial? Only the former falls within Section 17(1)(b). |
A memorandum that only records | A memorandum that is the bargain |
States that the deeds have been deposited, and lists them | Sets out the terms: the sum, the rate of interest, the period, the remedies |
Refers to a deposit already made, on a stated date | Operates to create the security by its own force |
Creates nothing; the deposit created the mortgage | Creates a right in immovable property |
Not registrable | Compulsorily registrable, Section 17(1)(b) |
Admissible without registration | Inadmissible to prove the mortgage unless registered, Section 49 |
⚠ Getting it wrong destroys the security If the writing is held to be the bargain and it was not registered, the lender cannot prove the mortgage by that document, and Section 49 shuts it out as evidence of the transaction. He may be left with an unsecured debt, or with the difficult task of proving an oral deposit with intent to secure, independently of the very writing he himself drew. This is why lenders draw the memorandum in the narrowest possible terms, reciting only that the deeds were handed over on a stated date in a notified town with intent to create security, and keep the covenants, the rate and the remedies in a separate loan agreement that deals with the debt and not with the property. Some States have in any event made such memoranda chargeable with stamp duty or registrable by local amendment, so the State law must always be checked. |
5. Priority Between the Two
1. Section 48 of the Registration Act gives a registered document effect against any oral agreement or declaration relating to the same property, unless the oral agreement is accompanied by delivery of possession and amounts to a valid transfer.
2. Section 50 gives a registered document relating to immovable property priority over an unregistered document relating to the same property, subject to the exceptions there stated.
3. Section 47 carries the registered mortgage back to its date of execution, so priority between two registered mortgages is decided by the dates of execution and not by the order of registration.
4. An equitable mortgage appears on no register, so a searcher cannot find it and cannot be fixed with constructive notice of it under Explanation I to Section 3 of the Transfer of Property Act.
5. What protects the equitable mortgagee is possession of the title deeds. A later transferee who does not call for the originals, or who is told they are with a bank, is put on enquiry, and a purchaser who buys without seeing the originals is rarely treated as being without notice.
6. Section 78 of the Transfer of Property Act postpones a prior mortgagee whose fraud, misrepresentation or gross neglect induced a later mortgagee to advance.
7. Section 79 deals with a mortgage to secure uncertain amounts, and Section 93 prohibits tacking.
6. Why Banks Use the Equitable Mortgage
The advantage | The corresponding risk |
No registration, so no delay at the registration office | No public record, so a third party cannot discover the charge by a search |
No ad valorem mortgage duty, which on a large facility is a very large saving | Proof of the deposit and of the intention rests on evidence, which may be contested years later |
Created the moment the deeds change hands, which suits a facility drawn down in tranches | Available only in a notified town |
No attestation, and no executants to assemble | The memorandum trap, if the writing is drawn too fully |
Discharge is simple: the deeds go back | The borrower may claim the deeds were deposited for safe custody and not as security |
Suits corporate borrowing, where the charge is separately registered with the Registrar of Companies | For an individual borrower there is no such parallel register |
Two qualifications should be added. First, for a company, a charge created by deposit of title deeds is registrable with the Registrar of Companies under Chapter VI of the Companies Act, 2013, which supplies a measure of the publicity the land register does not. Second, the draft Registration Bill, 2025, published for consultation on 27 May 2025, proposes to make documents setting out the terms of a mortgage by deposit of title deeds compulsorily registrable, which would close the gap. The Bill has not been enacted and the present law stands.
7. Discharge and Release
The document | Effect | Registration |
A deed of release or reconveyance by the mortgagee | Extinguishes the mortgagee's interest in the immovable property | Compulsory, Section 17(1)(b) |
A receipt endorsed on the mortgage deed for payment of the mortgage money | Acknowledges payment; it is not an instrument of transfer | Exempt, Section 17(2)(xi) |
Return of the title deeds with a letter of discharge, on an equitable mortgage | The security ends with the deposit | Not applicable |
An acknowledgment that the mortgage money remains due | Extends limitation under Section 18 of the Limitation Act, 1963 | Not registrable; it creates no interest |
An assignment of the mortgage to a third party | Transfers an interest in immovable property | Compulsory, Section 17(1)(b) |
A decree in a redemption suit | Declares the redemption and directs reconveyance | Exempt as a decree of a court, Section 17(2)(vi) |
Section 60 of the Transfer of Property Act gives the mortgagor, on payment, the right to require the mortgagee to deliver the mortgage deed and all documents of title, and, where the mortgage was effected by a registered instrument, to execute and have registered an acknowledgment in writing that the right has been extinguished. That is why a release deed follows a registered mortgage and a simple return of deeds follows an equitable one.
8. The Position Stated Shortly
1. Section 59 requires a mortgage where the principal is one hundred rupees or more to be by a registered instrument attested by two witnesses, except a mortgage by deposit of title deeds.
2. The exception covers the mortgage by deposit of title deeds under Section 58(f), created by delivery of the deeds with intent to secure, in a notified town.
3. Its three ingredients are a debt, a deposit of the title deeds, and an intention that they be security.
4. No writing, attestation or registration is required for it, and none may be insisted on.
5. Both are mortgages for every other purpose, with the same remedies and the same right of redemption under Section 60.
6. Where a memorandum records a deposit already made, it needs no registration; where it is itself the bargain, it must be registered, Rachpal Mahraj v. Bhagwandas Daruka.
7. The memorandum should therefore be drawn as narrowly as possible, with the covenants kept in a separate loan agreement.
8. A registered mortgage gives constructive notice and takes priority under Sections 47, 48 and 50; an equitable mortgage appears on no register.
9. What protects the equitable mortgagee is possession of the title deeds, which puts a later transferee on enquiry.
10. A company's charge by deposit of title deeds is registrable with the Registrar of Companies under the Companies Act, 2013.
11. A release or reconveyance is registrable; a receipt endorsed on the mortgage deed is exempt under Section 17(2)(xi).