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Before Saleem Akhtar, J
STATE LIFE INSURANCE CORPORATION
OF PAKISTAN--Plaintiff
versus
S.U. DURRANI and another--Defendants
Suit No. 343 of 1981, decided on 7th May, 1987.
(a) Transfer of Property Act (IV oaf 1882)--
---S. 58-F--Equitable mortgage, connotation of--Equitable mortgage is a transaction in a town notified by Provincial Government whereby any person with intent to create security for the loan, delivers to the creditors, documents of title of immovable property--Essential requirement would be that such documents should be deposited which connect the depositor with the property showing his interest or title therein.
Robert v. Croft (1857) 53 ER 343; Jawala Das Govind Ram v. Thakar Das A I R 1936 Lah. 251; Mung Thaung v. M.M.K. Chettyar Firm A I R 1936 Rang. 366; 11 IC 783 and Surrendra Mohan v. Mohindra Nath A I R 1932 Cal. 589 ref.
(b) Transfer of Property Act (IV of 1882)--
---S. 58-F--Term "document of title", meaning and scope--Term "document of title" though not defined, yet includes such documents, which relate to the title of a person in respect of specific property.- [Words and phrases].
KLCT Chidambram Chettyar v. Aziz Mian and others A I R 1938 Rang. 149; Surindra Mohan Chaudhry v. Mohindarnath Benerji and others A I R 1932 Cal. 589; M/s. Eagle Star Insurance Co. Ltd. v. M/s. Usman & Sons Ltd. PLD 1969 Kar. 474; A. Hameed v. Akbar Bhoy P L D 1961 SC 1; Mohammad Azam v. Pakistan Employees Cooperative Housing Society, Karachi and others P L D 1973 Note 84 at p. 119; PLD 1969 Kar. 474 and PLD 1964 S C 108 ref.
(c) Transfer of Property Act (IV of 1882)--
---S. 58-F--Equitable mortgage--Transfer of documents of title, purpose of--By equitable mortgage, mortgagor, transfers possession of documents which create his title and renders him unable to deal with property--Document of title, however, should relate to his title in such property--Not necessary to deposit all the material documents but document deposited should relate to the property and be a material evidence of title.
(d) Negotiable Instruments Act (XXVI of 1881)--
---S. 4--Transfer of Property Act (IV of 1882), S. 58-F--Limitation Act (IX of 1908), S. 19--Loan secured on promissory note--Effect--Loan secured on promissory note and equitable mortgage is a legally created loan--Suit brought within three years from date of part payment of loan would be within limitation.
(e) Transfer of Property Act (IV of 1882)--
---S. 58-F--Civil Procedure Code (V of 1908), O. XXXIV, Rr. 2 & 4--Suit for recovery of loan--Statement of accounts filed in evidence not objected to by defendant--Effect--Where suit was based on mortgage and plaintiff had filed statement of account, in evidence, mere fact that such statement had not been filed with plaint, held, would not disentitle plaintiff from recovering the amount due thereon--Suit for recovery of loan based on statement of accounts produced and proved in evidence would be maintainable and plaintiff on proof thereof would be entitled to preliminary decree in terms of O. XXXI V , R . 4, C . P . C .
U. Niamat Molvi for Appellant.
S. Hamid Hussain for Respondent.
Date of hearing: 10th February, 1987.
Eastern Federal Union Insurance Co. Ltd., the predecessor-in- interest of the plaintiff advanced a loan of Rs.2,50,000 to the defendant No.l with interest @ 6% per annum. To secure the repayment of loan, the defendant No.l executed and signed three promissory notes and three receipts for Rs.200,000, Rs.37,750 and Rs.12,350. Further with intent to create an equitable mortgage the defendant No.l requested his bankers M/s. Standard Bank Ltd. the defendant No.2, to forward to Eastern Federal the title documents of his property bearing No. A-37 South Circular Avenue, Defence Officers Cooperative Housing Society, now known as Defence Officers Housing Authority. The defendant No.2 forwarded to Eastern Federal Union the original documents of title. The defendant No.l by his letter dated 3-11-1970 acknowledging the loan sent to the plaintiff fresh promissory note for Rs.2,50,000 replacing the three earlier promissory notes which were returned to the plaintiff No.l After adjustment of the payments made by the defendant No.l towards loan a sum of Rs.3, 34, 356 was due and payable as on 31-3-1981 which has not been paid inspite of notices. The plaintiff therefore, filed a suit under Order XXXIV, C.P.C. for preliminary decree and also for final decree and cost of the suit.
The defendant No.l filed written statement in which it was pleaded that the suit is barred by limitation. It was further pleaded that he had not deposited the documents relating to title to the property, nor any equitable mortgage was created. It is further pleaded that at the relevant time neither the defendant had any marketable title in the property, nor any construction was raised thereupon. It was admitted that a loan of Rs.2,50,000 was advanced by the then Eastern Federal Union Insurance Company, but it had been repaid and that the promissory notes executed are illegal, and inadmissible in evidence, as all the stamps have not been cancelled. He further admitted that a fresh promissory note of Rs.2,50,000 was executed by him, but its legality and admissibility was denied. The defendant No.2 also filed its written statement stating that the title documents of the property were forwarded to the plaintiff at the request of the defendant No.1. On the basis of the pleadings the following consent issues were framed:-
(1) Whether the suit is not maintainable as prayed
(2) Whether the suit is barred by limitation
(3) Whether the loan was availed by defendant No.l against the security of the Demand Promissory Note or the mortgage of the property and if so, can the said documents or any one of them can be validly relied upon for the present suit
(4) Whether the defendant No.l at the relevant time possessed and deposited with the plaintiffs bank, the documents relating to the marketable title of the property sought to be sold by way of the present suit, and if not, what is the effect
(5) Whether the plaintiffs have made full adjustments of the payments received from defendant No.l till 31-3-1981 and if so, the effect of not filing the actual statement of accounts alongwith the plaint, at the time of institution of the suit
(6) Whether the plaintiffs are entitled to any relief, and if so, to what extent
(7) General
The plaintiff has examined one witness, but no witness has been examined by the defendants.
ISSUES NOS. 1, 3 AND 4:
It would be convenient to decide these issues together. The maintainability of the suit has been challenged on the ground that no equitable mortgage was created in favour of the plaintiff. From the evidence it is clear that on the instructions of the defendant No.l his bankers, the defendant No.2, had forwarded allotment order in favour of the defendant No.l in respect of the plot No.31-A South Circular Avenue, Defence Housing Authority. From the said letter Ex.6/9 it is clear that the defendant No.2 was holding the documents as security for the loan advanced to defendant No.l and on his instruction it was forwarded to the plaintiff as a security for the loan advanced to the defendant No.l. It was further stated that Standard Bank has a claim of Rs.37,750.41 and after its adjustment they will have no lien over this property. By this letter the allotment order dated 16-4-1966, application for House Building Advance dated 28-7-1966, copies of proposed building plan and drawing were forwarded by the defendant No.2. By letter dated 30-11-1970 the defendant No.l had informed the plaintiff that due to some disputes between the Defence Housing Society and K . M . C ., lease could not be obtained and he promised that no sooner it is obtained it would be deposited with the plaintiff by way of equitable mortgage. He also executed a promissory note for Rs.2,50,000 in lien of three previous promissory notes of the same amount which he had requested to be returned to him. The original allotment letter is also on record which has been produced by the plaintiff. The plaintiff has been writing to the defendant No.l to produce the lease deed, and other title documents for executing a mortgage deed, but it seems that it was never produced. The question therefore is, whether by depositing allotment order an equitable mortagage was created.
Section 58(f) of the Transfer of Property Act defines equitable mortagage as a transaction in town of Karachi or any other town which is notified by the Provincial Government whereby any person A with intent to create security for the loan delivers to the creditors documents of title of immovable property. In the present case it is established that the allotment order was deposited with intent to create security for the loan advanced by the plaintiff. The only question is, whether allotment order can be treated as a title document. The allotment order was issued by the Defence Housing Society and on the basis of this document lease would have been executed in favour of the plaintiff. The term "document of title" has not been defined, but it will include such documents which relate to the title of a person in respect of specific property. In this regard Mr. Niamat Moulvi, the learned counsel for the plaintiff has relied on KLCT Chidambran Chettyar v. Aziz Mian and others A I R 1938 Rangoon 149 where it was observed as follows:--------
"In our opinion the correct statement of the law is that in order to create a valid mortgage by deposit of title deeds under S.58 (f), T.P. Act, it is not necessary that the whole, or even the most material of the documents of title to the property should be deposited, nor that the documents deposited should show a complete or good title in the depositor. It is sufficient if the deeds deposited bona fide relate to the property or are material evidence of title or are shown to have been deposited with the intention of creating a security thereon".
The learned counsel has also referred to Surindra Mohan Chaudhry v. Mohindarnath Benerji and others, AIR 1932 Cal. 589 where relying on the judgment of the English Court it was observed that if some material documents of title to the property have been deposited although a complete title to the property is not established by the deposit of photostat copy, an equitable mortgage is created. Reference can be made to M/s. Eagle Star Insurance Co. Ltd. v. M/s. Usman & Sons Ltd., P L D 1969 Kar. 474 where extract from the record of rights was not treated as a title document. In A. Hameed v . Akbar Bhoy PLD 1961 S.C. 1 it was observed that income-tax certificate and custodian certificate were not title documents. In Mohammad Azam v. Pakistan Employees Cooperative Housing Society Kar. and others P L D 1973 Note 84 at page 119 relying on P L D 1969 Kar. 474 and P L D 1964 S.C. 108 where under a licence the Society allotted land to its members for construction of house and subsequently when the allotment was sought to be cancelled on the ground that it did not create any interest in the land, it was held that "if rights in land are given to a person for the purposes of raising construction of permanent nature, the presumption of law would be in favour of construing such transaction as a lease rather than a licence".
In equitable mortgage document of tile is deposited with intent to create mortgage. It is therefore, necessary that such documents should be deposited which connect the depositor with the property showing his interest or title to it. In Robert v. Croft (1857) 53 ER 343 the mortgagor deposited all the title deeds "except that under which he had obtained the property and subsequently deposited this last deed with another person, it was held that the prior depository had valid title against the latter. It was observed as follows:-----
"I am of the opinion that it would drive the Court into question which would almost be insoluble, and render (231) equitable mortgage of no value, if it should be held that no equitable mortgage was good, unless the deeds deposited showed a good title in the depositor. In that case it would be as necessary for the lender to go through the title, in the case of an equitable as in that of a legal mortgage, and the difficulties would be greater, for a legal mortgagee may accept what title he pleases, but if the deposit do not constitute an equitable mortgage unless a good title be shown by the deeds deposited, the Court, and not the lender, must judge of the sufficiency of the title. If it is shown that the deeds deposited bona fide relate to the property that constitute a good equitable mortgage ".
Where all the documents of title were not deposited it was held in Jawala Das Govind Ram v. Thakar Das AIR 1936 Lah. 251 that in such cases clear evidence should be produced that a better document is not available. In Mung Thaung v. M.M.K. Chettyar Firm AIR 1936 Rang. 366 a registered mortgage deed was held to be the title document of mortgagee and he could create equitable mortgage of that interest by deposit of mortgage deed. Share certificates were also treated document of title in 11 I . C . 783. I n Surrendra Mohan v . Mohindra Nath AIR 1932 Cal. 589 deposit of original probate of a Will with the certified copy of the redemption certificate where the original had been lost was held to create a valid equitable mortgage. A perusal of these authorities makes it clear that as by equitable mortgage the mortgagor transfers the possession of documents which create his title and renders him unable to deal with the property, the document of title should be such document which relates to his title and property. It is not necessary that all the material documents should be deposited, it is sufficient if the documents deposited relates to the property and is material evidence of title.
In the present case, the allotment order was deposited with intent to create equitable mortgage. The allotment order proves the interest of the defendant No.l in the property. On the basis of the allotment, lease was to be executed. The allotment order was issued for constructing building and the defendant had applied for approval of the plan. In these circumstances, in my view a valid allotment order is a document of title and equitable mortgage was legally created by the defendant No.l.
The defendant No.l had executed receipts Ex.6/5 and 6/6. The promissory note was also executed for Rs.2,50,000 which bears no date, but it was enclosed with a letter dated 30-11-1970 Ex.6/8 therefore, this promissory note could not have been executed after 30-11-1970. The loan was therefore, secured on the promissory note as well as equitable mortgage of the property of the defendant No.l. Therefore, my finding is as follows:-
Issue No.l. In the affirmative.
Issue No.3. As above.
Issue No.4. In the affirmative.
ISSUE No.2.
The suit has been filed on 18-4-1981. The mortgage by deposit of title deed was created on 6-1-1968. The defendant No.l made part payment of Rs.29,63b.55 towards interest on 27-1-1970. The suit is, therefore, within time. My finding is in the negative.
ISSUE No.5.
The defendants have filed statement of account during evidence as Ex.6/15 without any objection. In this statement of account, the plaintiff has shown the amounts which were paid by the defendant No.l and have been adjusted. From the letter of the defendant No.l amount of Rs.29,630.55 seems to have been paid and it has been duly credited in the account. The defendant No.l has not produced any evidence to show that he had paid any other amount in addition to the amount shown by the plaintiff in the statement of account. The suit is based on mortgage, and the plaintiff has filed statement of account in evidence. Merely because it was not filed with the plaint, will not disentitle the plaintiff from recovering the amount G due to it. My finding is that full adjustment of payments received from the defendant No.l till 31-3-1981 has been made, and the suit is maintainable.
ISSUE N0.6.
In view of the finding on the above issues, the plaintiff is entitled to recover from the defendant No.l a sum of Rs.3,43,325 with interest @ 6% per annum from the date of the suit till recovery H with cost. A preliminary decree in terms of Order XXXIV, Rule 4, C.P.C. is passed in favour of the plaintiff. Suit against defendant No.2 is dismissed.
A.A./S-61/K Suit decreed.
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