Property - Mortgage - Transfer of Property Act, 1882 _on the basis of allotment letter and in absence of any execution and registration of sale deed

Matter on subjected issue has been referred to larger bench for consideration.

Below is relevant notes on the matter on subjected as published by Manupatra

Property - Mortgage - Transfer of Property Act, 1882 - State Government allotted land to company for setting up of industrial unit - Company paid 50 % of total cost of allotted land - State Government permitted company to mortgage half of the allotted land to secure financial assistance for the project - Company mortgaged the land in favour of appellant bank - Later respondent purported to cancel a part of land allotted to company on ground that it was disputed property - Appellant Bank intended to enforce its charge on the property which had been created - Whether in absence of any execution and registration of sale deed by the State or respondent No. 1 in favour of the company any interest in the land could be created - Matter referred to larger bench for consideration.

Below is relevant portion of the judgment:

The principal question, which, therefore, requires consideration is as to whether for satisfying the requirements of Section58(f) of the Transfer of Property Act, it was necessary to deposit documents showing complete title or good title and whether all the documents of title to the property were required to be deposited. A' fortiori the question which would arise for consideration is as to whether in all such cases, the property should have been acquired by reason of a registered document.

Para 30. There cannot be any doubt whatsoever that in absence of a registered deed of sale, the title to the land does not pass, but then what would not be conveyed is the title of the estate and not the allotment and possession itself.

Para 31. It would, therefore, appear that there is no clear authority on the question as to whether in absence of any title deed in terms whereof the mortgagee obtained title by reason of a registered deed can be a subject- matter of mortgage. Section 58 of the Transfer of Property Act does not speak of mortgage of an owner's interest. If any interest in property can be created by reason of a transaction or otherwise which does not require registration, in our opinion, it may not be necessary to have a full title before such a mortgage is created by deposit of title deeds. A person may acquire title to a property irrespective of the nature thereof by several modes e.g. a lease of land which does not require registration; (ii) by partition of a joint family property by way of family settlement, which does not require registration.

Para 32. In a case of this nature where valuable right is created which may or may not confer an assignable right, the question requires clear determination having regard to the equitable principle in mind, and would have far reaching consequences, as a large number of banks and financial institution advance a huge amount only on the basis of allotment letters. If such allotment letters are to be totally ignored, the same may deter the banks in making advances which would in effect and substance create a state of instability.

Court : Supreme Court

Civil Appeal Nos. 7824-7828 and 7833-37 of 2004

Decided On: 30.08.2007 

titled as  Syndicate Bank v/s Estate Officer and Manager, A.P.I.I.C. Ltd. and Ors.

Citation: AIR2007SC3169, 2007(6)ALD53(SC), 2007 (69) ALR 175, 2007 (4) AWC 4011 (SC), (2007)5CompLJ98(SC), (2007)8SCC361, [2007]10SCR619, 2007(2)UJ1090