A) ABSTRACT / HEADNOTE

This case addresses the nature of agreements under the Transfer of Property Act, 1882, specifically the creation of an equitable mortgage by the deposit of title deeds. The appellant, a creditor, filed a suit to recover a loan granted to the respondent against a security created via deposit of title deeds. The core question was whether the agreement constituted an equitable mortgage and if the Division Bench of the High Court erred in its interpretation. The Supreme Court analyzed the evidentiary value of the agreement, the obligations of the respondent, and the procedural lapses. The court upheld the Single Judge’s findings, restored the original mortgage decree, and reduced the rate of interest claimed by the appellant.

Keywords: Equitable mortgage, Deposit of title deeds, Loan repayment, Mortgage decree, Procedural lapse.

B) CASE DETAILS

i) Judgement Cause Title:
A.B. Govardhan v. P. Ragothaman

ii) Case Number:
Civil Appeal No(s). 9975-9976 of 2024

iii) Judgement Date:
29 August 2024

iv) Court:
Supreme Court of India

v) Quorum:
Hima Kohli and Ahsanuddin Amanullah, JJ.

vi) Author:
Justice Ahsanuddin Amanullah

vii) Citation:
[2024] 8 S.C.R. 1002

viii) Legal Provisions Involved:

• Section 58(f), Transfer of Property Act, 1882
• Section 59, Transfer of Property Act, 1882
• Section 17(1)(c), Registration Act, 1908

ix) Judgments Overruled:

• The Division Bench of the High Court judgment in OSA No. 189 of 2011.

x) Case is Related to Which Law Subjects:
Property Law, Civil Law, Contract Law

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The appellant advanced a loan of ₹10 lakhs to the respondent, secured by an agreement where the respondent deposited title deeds to his property. The agreement stated the intent to mortgage and outlined repayment conditions. When the respondent failed to repay, the appellant sought a mortgage decree. The Single Judge of the High Court upheld the mortgage but was overruled by a Division Bench, prompting the appellant to approach the Supreme Court.

D) FACTS OF THE CASE

1. The appellant lent ₹10,00,000 to the respondent for business purposes.
2. The loan security included a deposit of the title deeds for the respondent’s property, recorded in an agreement dated 24.06.2000.
3. The agreement stated that the respondent would execute a sale deed if demanded and repay the outstanding amount.
4. Upon default by the respondent, the appellant filed a civil suit for recovery and foreclosure of the mortgage.
5. The Single Judge ruled in favor of the appellant, confirming the agreement as an equitable mortgage under Section 58(f).
6. The Division Bench overturned this ruling, stating insufficient evidence of a mortgage, leading to the present appeal.

E) LEGAL ISSUES RAISED

i) Whether the agreement constituted an equitable mortgage under Section 58(f) of the Transfer of Property Act, 1882.
ii) Whether the Division Bench erred in interpreting the evidentiary requirements of a mortgage agreement.
iii) Whether the respondent fulfilled obligations to redeem the mortgage.

F) PETITIONER/APPELLANT’S ARGUMENTS

1. The appellant contended that the respondent had unequivocally deposited title deeds to secure the loan.
2. The agreement, Exhibit P-1, explicitly indicated an intent to create a security and complied with Section 58(f).
3. The respondent’s claims of coercion were unsupported by evidence.
4. The Division Bench failed to appreciate the evidence and erred in setting aside the Single Judge’s decree.

G) RESPONDENT’S ARGUMENTS

1. The respondent claimed the agreement was coercive and not voluntarily executed.
2. The agreement was a conditional arrangement to sell the property and did not constitute a mortgage.
3. The appellant’s claims were contradictory and included inconsistent calculations for the amount due.

H) RELATED LEGAL PROVISIONS

i) Section 58(f), Transfer of Property Act, 1882: Defines an equitable mortgage by deposit of title deeds.
ii) Section 59, Transfer of Property Act, 1882: Mandates registration of other types of mortgages.
iii) Section 17(1)(c), Registration Act, 1908: Requires registration of instruments creating interest in immovable property.

I) JUDGEMENT

a. Ratio Decidendi
The Supreme Court held that the agreement constituted an equitable mortgage under Section 58(f), as it fulfilled the criteria of debt, title deed deposit, and intent to secure the loan.

b. Obiter Dicta
The respondent’s failure to provide evidence of coercion and the procedural lapses in presenting a clear defense underscored the need for strict compliance with evidentiary standards in civil suits.

c. Guidelines

• Courts must prioritize the substance of agreements over technicalities.
• Deposits of title deeds with the intent to create security are sufficient for equitable mortgages.
• Interest rates in contracts should not be excessive or oppressive.

J) REFERENCES

a. Important Cases Referred

• State of Haryana v. Narvir Singh (2014) 1 SCC 105
• Syndicate Bank v. Estate Officer (2007) 8 SCC 361
• Kalyan Kumar Gogoi v. Ashutosh Agnihotri (2011) 2 SCC 532
• Esha Bhattacharjee v. Raghunathpur Nafar Academy (2013) 12 SCC 649

b. Important Statutes Referred

• Transfer of Property Act, 1882
• Registration Act, 1908