Equitable mortgage or mortgage by deposit of title deeds :

According to Section 58(f) of the Transfer of Property Act, ‘Where a person in any of the following towns, namely, the towns of Kolkata, Chennai and Mumbai 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 immoveable property, with intent to create a security thereon, the transaction is called a mortgage by deposit of title deeds,’.

Documents of title

Documents of title or title deed in case of mortgage by deposit of title deeds, shall be documents or instruments which relate to ownership of the mortgagor over the property. In other words, by virtue of a document or instrument, if a person has a right to peaceful possession and enjoyment of the immoveable property, then such a document or instrument is called the title deed. In the case of Syndicate Bank vs Modern Tile and City Works (1980 KL T 550); it was explained by the learned Judges that documents of title or deed means the legal instrument which proves the right of a person in a particular property.

Essential features of equitable mortgage

(i) Such a mortgage can be affected only in the towns notified by the State Government. However, the territorial restriction refers to the place where the title deeds are delivered and not to the situation of the property mortgaged.

(ii) To create this mortgage, there must be three ingredients i.e., a debt, a deposit of title deeds and an intention that the deeds shall be act as security for the debt.