K.KANNAN - (1.) THE writ petition challenges the act of taking possession by the State Finance Corporation of the property belonging to the petitioner in purported exercise of powers under S. 29 of the State Financial Corporation Act. The petition was filed when the property had been alleged to have been put in auction and before the confirmation of sale. A Bench of this Court, while ordering notice to the respondents had directed on September 26, 2008 that the sale would not be confirmed. The case addresses the right of question of whether the memorandum of deposit of title deed in the manner drafted required registration and whether the effect of non-registration renders invalid the mortgage. The second contention is that the petitioner is but a surety for the loan advanced by the 1st respondent-Corporation to the second respondent and hence the power of the Corporation to take possession of the assets under S. 29 of the Act does not extend to the property of the surety. In this judgment for the reasons stated herein, I find that the first objection regarding the need for registration as contended by the petitioner is not tenable. The second objection is sustained and hence the writ petition is directed to be allowed with certain observations. Hereon, the facts, reasons and the position of law that this case bristles with.
(2.) THE 2nd respondent has entered into a term loan agreement dated 2-11-1998 with the 1 st respondent for a term loan agreement with respondent No. 1 for running a factory. He has executed a hypothecation deed on the present and future movable and immovable assets of the property, apart from a document of mortgage. A collateral security by deposit of title deeds have been made by the petitioner to secure the loan for the 2nd respondent and a memorandum has been executed on 12-1-1999. The enforceability of the document as without consideration is stated in the petition. The contention is hollow and was not pressed at the time of arguments. The term 'consideration' as defined under S. 2(d) of the Contract Act makes possible the enforceability of a debt even against a stranger to consideration, so long as the detriment suffered by the promissor is for the benefit obtained to another person:The collateral security offered by the surety for the benefit obtained by the principal-debtor is sufficient consideration to make it enforceable.
(3.) A mortgage is created by mere deposit of title deeds in notified towns without having to execute any document. Section 58(f) of the Transfer of Property Act defines an equitable mortgage as follows : 58(f) Mortgage by deposit of title deeds.- Where a person in any of the following towns, namely, 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. ;