HARYANA FINANCIAL CORPORATIONversusGURCHARAN SINGH & ANR.

                      [2013] 12 S.C.R. 832


A            HARYANA FINANCIAL CORPORATION
                                 V.
                  GURCHARAN SINGH & ANR.
                (Civil Appeal No. 11028 of 2013)

                      DECEMBER 13, 2013
B
      [K.S. RADHAKRISHNAN AND C. NAGAPPAN, JJ.]

        Transfer of Property Act, 1882:

c      s.100 r!w s.59 - Charges - Undertaking given against
  loan that properties mentioned therein shall not be disposed
  of during the currency of the loan - Documents not registered
  - Held: A conjoint reading of s.100 with s.59 makes it clear
  that if by act of parties, any immovable property is made
  security for the payment of money to another and it does not
0
  amount to mortgage, then all the provisions which apply to a
  simple mortgage, as far as may be, apply to such charge -
   Consequently, in view of s. 59, when there is a mortgage other
  than a mortgage by deposit of title deeds, it can be effected
  only by a registered instrument - The mere undertaking that
E the party will not dispose of the properties mentioned in the
  said undertaking, during the currency of the loan, will not
  create any charge over those properties, unless charge is
   created by deposit of title deeds or through a registered
   document - A mere undertaking to create a mortgage is not
F sufficient to create an interest in an immovable property -
   In the instant case, no registered mortgage deed was
   executed by the first respondent and no title deed of the
   property was handed over by him to Corporation - Therefore,
   there is no error in the judgment of first appellate court as
G affirmed by High Court that the loan taken by first respondent
   was not subject to charge over the property covered by the
   decree in favour of second respondent.

        Respondent no. 1 gave a written undertaking dated
                                832
H
      HARYANA FINANCIAL CORPORATION v.                  833
             GURCHARAN SINGH
5.3.1994, as security against a loan obtained from the         A
appellant-Corporation, that he would not dispose of his
properties enumerated therein during the currency of the
loan. On his failure to repay the loan, the appellant took
over the hypothecated properties, sold the same and
appropriated the amount. Respondent no. 2, the wife of         B
respondent no. 1, filed Civil Suit no. 767 of 1995 seeking
a declaration that she was the absolute owner and in
possession of the properties mentioned in the
undertaking dated 5.3.1994. The suit was decreed against
respondent no. 1 on 3.2.1996. The appellant-Corporation        c
filed a suit seeking a declaration that the decree dated
3.2.1996 was null and void. The trial court held that the
decree in the suit filed by respondent no. 2 was a
collusive one'Obtained to defeat the undertaking dated
5.3.1994. However, the first appellant court allowed the       0
appeal of respondent no. 2 holding that the loan taken
by respondent no. 1 was n9t subject to charge over the
                             I   ~ -·

property covered by the decree in favour of respondent
no. 2. The High Court dismissed the appeal of the
Corporation.
                                                               E
    Dismissing the appeal, the Court

    HELD: 1.1. Section 100 of.Transfer of Property Act,
1872 clearly indicates the folloiNing types of charges : (i)
Charges created by act of parties; and (ii) Charges arising    F
by operation of law. An ordinary charge created under
the Transfer of Property Act is compulsorily registerable.
The first portion of s.100 lays down that where
immoveable property of one person is by act of parties
or operation of law made security for the payment of           G
money to another, and the transaction does not amount
to a mortgage, the latter person is said to have a charge
on the property; and all the provisions which apply to a
simple mortgage sh;ill, so far as may be, apply to such
charge. [para 9] [840-H; 841-A-C]
                                                               H
    834    SUPREME COURT REPORTS             [2013] 12 S.C.R.


A      1.2. A conjoint reading of s.100 with s.59 of the TP
  Act makes it clear that if by act of parties, any immovable
  property is made security for the payment of money to
  another and it does not amount to mortgage, then all the
  provisions which apply to a simple mortgage, as far as
B may be, apply to such charge. Consequently, in view of
  s.59 of the TP Act, when there is a mortgage other than
  a mortgage by deposit of the title deeds, it can be effected
  only by a registered instrument. So far as the instant case
  is concerned, no registered mortgage deed was executed
c by the first respondent and no title deed of the property
  was handed over by him to the Corporation. A mere
  undertaking to create a mortgage is not sufficient to
  create an interest in any immovable property. In Bank of
  India, this Court has held that without a transfer of
  interest, there is no question of there being a mortgage
0
  and that mere undertaking is not sufficient to create a
  charge. [para 11 and 13] [841-G-H; 842-A-C, H; 843-A-B]

       Bank of India v. Abhay D. Narottam and others (2005)
  11 SCC 520; and K. Muthuswami Gounder v. N. Palaniappa
                                       =
E Gounder 1998 (1) Suppl. SCR 206 (1998) 7 SCC 327 -
  relied on.

       J.K. (Bombay) Private Limited v. New Kaiser-I-Hind
  Spinning & Weaving Co. Ltd. & Others (1969) 2 SCR 866 -
F referred to.

       1.3. This Court, therefore, holds that the mere
  undertaking that the party will not dispose of the
  properties mentioned in the said undertaking, during the
  currency of the loan, will not create any charge over those
G properties, unless charge is created by deposit of title
  deeds or through a registered document. Even if the
  purpose of the decree obtained in Civil Suit No.767 of
  1995 between ·t!:le respondents was fraudulent and
  collusive one so as to defeat the undertaking made on
H 5.3.1994, that would not confer any charge over the
      HARYANA FINANCIAL CORPORATION v.                 835
             GURCHARAN SINGH
properties, unless the undertaking is registered.             A
Therefore, there is no error in the judgment of the lower
appellate court which was affirmed by the High Court,
that tile roan taken by the first respondent was not
subJecl  to change over the property covered by the
decree in favour of second respondent. [para 3 and 13]        B
[836-G-H; 837-A; 843-B·D]

     S.P. Cherana/varaya Naidu (dead) by LRs. v. Jagannath
                                                   =
(dead}° by LRs and others 1993·(3) Suppl. SCR 422 (1994)
1 SCC 1 and Badami (deceased) by her LR v. Bhali (2012)
11 SCC 574; M.L. Abdul Jabbar Sahib v. M. V. Venkata Sastri   C
                                    =
& Sons & Ors. 1969 (3) SCR 513 (1969) 1 SCC 573 - cited.
                    Case Law Reference:
    1993 (3) Suppl. SCR 422 cited                 para 4
                                                              D
    (2012) 11 sec 574               cited         para 4
    1969 (3) SCR 513                cited         para 4
    1998 (1) Suppl. SCR 206 relied on             para 5
                                                              E
    (2005) 11 sec 520               relied on     para 5
    (1969) 2 SCR 866                referred to   para 7

    CIVIL APPELLATE JURISDICTION : Civil Appeal No.
11028 of 2013.                                                F

    From the Judgment and Order dated 09.01.2006 of the
High Court of Punjab and Haryana at Chandigarh in RS.A. No.
44 of 2006.
    Amit Dayal for the Appellant.                             G
    Gagan Gupta for the Respondents.

    The Judgment of the Court was delivered by

    K.S. RADHAKRISHNAN, J. 1. Leave granted.                  H
    836     SUPREME COURT REPORTS               [2013] 12 S.C.R.


A       2. Mis Amrit Steel Industries, Jagadhari, a proprietorship
  concern of which the first respondent is the sole proprietor, had
  obtained a loan of Rs.5,05,750/- on 15.9.1994 from the
  Appellant, Haryana Financial Corporation, by entering into
  hypothecation of machinery, fixture, as well as, personal
B guarantee bond dated 15.9.1994. The first respondent also
  gave a written undertaking dated 5.3.1994 that he would not
  dispose of his properties during the currency of the loan. The
  first respondent failed to repay the loan. Consequently, the
  Corporation took over the hypothecated property and sold the
C same and appropriated the amount. In the meantime, the
  second respondent, the wife of the first respondent filed Civil
  Suit No. 767 of 1995 against the first respondent before the
  Court of Civil Judge (Jr. Divn.), Jagadhari, seeking a
  declaration that she is the absolute owner and in possession
D of the properties mentioned in the undertaking dated 5.3.1994.
  The suit was decreed on 3.2.1996 as against the first
   respondent.

        3. The Corporation then filed Civil Suit No.167 of 2003 in
E the Court of Additional Civil Judge (Senior Division), Jagadhari,
  against the Respondents seeking a declaration that the decree
  dated 3.2.1996 was null and void. The Corporation also
  submitted that the decree was obtained by fraud to defeat the
  personal undertaking executed by the first respondent on
F 5.3.1994 in favour of the Corporation. The Court decreed the
  suit holding that the decree passed in Civil Suit No 767of1995
  is a collusive one obtained to defeat the undertaking created
  by the first respondent on 5.3.1994 in favour of the Corporation.
  The second respondent filed Civil Appeal No.34 of 2005 in the
G Court of Additional District Judge, Yamunanagar. The Additional
   District Judge, however, allowed the Appeal vide judgment
  dated 30.8.2005 holding that the loan taken by the first
  respondent was not subject to charge over the property covered
   by the decree in Civil Suit No. 767 of 1995 and that the
H Appellant had no locus standi to challenge the decree suffered
     H..iRYANA FINANCIAL CORPORATION v.                       837
  GURCHARAN SINGH [K.S. RADHAKRISHNAN, J.]
by the first respondent in favour of the second respondent. The      A
Corporation aggrieved by the aforesaid judgment filed RSA
No.44 of 2006 before the Punjab and Haryana High Court, which
was dismissed by the High Court on 9.1.2006. Aggrieved by
the same, the Corporation has filed the present Appeal.
                                                                     B
     4. Shri Amit Dayal, learned counsel appearing for the
Corporation, submitted that the High Court has committed an
error in sustaining the order passed by the Additional District
Judge after having found that the decree obtained by the
second respondent against the first respondent in Civil Suit         c
No.167 of 2003 was a collusive one. Learned counsel
submitted that apparently such a decree was obtained without
any contest by the first respondent, only to defeat the
undertaking given to the Corporation on 5.3.1994. Learned
counsel also placed reliance on the judgments of this Court in       0
S.P. Cheranalvaraya Naidu (dead) by LRs. v. Jagannath
(dead) by LRs and others [(1994) 1 SCC 1] and Badami
(deceased) by her LR v. Bhali [(2012) 11 SCC 574] and
submitted. that the Court cannot grant relief to a party who has
obtained a fraudulent decree and who has come to the Court           E
with unclean hands. Learned counsel also placed reliance on
the judgment of this Court in M.L. Abdul Jabbar Sahib v. M. V.
Venkata Sastri & Sons & Ors. [(1969) 1 SCC 573] and
submitted that even if the undertaking dated 5.3.1994 was not
registered, still the first respondent is bound by the undertaking
                                                                     F
and the Corporation can always proceed against the properties
referred to in the said undertaking.

      5. Shri Gagan Gupta, learned Advocate appearing for the
Respondents, submitted that the High Court has rightly affirmed
the judgment of the lower Appellate Court after having noticed       G
that the undertaking dated 5.3.1994 has not created any charge
over the properties mentioned therein. Consequently, the
Corporation cannot proceed against the properties mentioned
in the undertaking. Learned counsel submitted that without
transfer of interest in the properties in question by a registered   H
    838      SUPREME COURT REPORTS              [2013) 12 S.C.R.

A document, no charge could be created in those properties and
  hence the Corporation cannot proceed against those properties
  on the basis of mere undertaking dated 5.3.1994. In support
  of this contention, reliance was placed on the judgments of this
  Court in K. Muthuswami Gounder v. N. Palaniappa Gounder
B ((1998) 7 SCC 327) and Bank of India v. Abhay D. Narottam
  and others ((2005) 11 sec 520).

      6. We may, for the purpose of this case, extract the
  undertaking given by the first respondent in favour of the
C Corporation on 5.3.1994, which reads as follows :-

          "That the proprietor of the concern have the following
          means:-

     Name of the        Immovable & Personal        Net Worth
D    Proprietor/        Moveable    Liabilities
     Partner/           Property
     Director

     Gurcharan Singh       Assets & Liabilities     1,20,760.00
E                          Capital with Amrit Steel
                           Industries
                           Land & Building of        8, 14,000.00
                           Amrit Steel Industries

F                          Jewellery                 1,00,000.00
                           Cash & Bank Balance       1.00,000.00
                           Deposit with Malhotra     50,000.00
                           Timber
G
                                                    ~1.84,760.00

      LIABILITIES              NIL

      NET WORTH              11,84,760.00
H
     HARYANA FINANCIAL CORPORATION v.                       839
  GURCHARAN SINGH [K.S. RADHAKRISHNAN, J.]
                                                        Sd/-       A
                                                   DEPONENT

                        VERIFICATION

     I, Gurcharan Singh, the above named deponent do hereby
     verify contents of the above paras as true and correct to     8
     the best of my knowledge and belief and nothing has been
     concealed from ..

     Further confirm that the means as indicated above in the
     name shall not be disposed off during the currency of the     C
     loan.

                                                       Sci/-
                                                  DEPONENT

     PLACE : Yamuna Nagar                                          D
     Dated : 05/03/94"
     7. The above-mentioned undertaking dated 5.3.1994 was
submitted by the first respondent on a duly attested Stamp
Paper, but was not registered under the Registration Act. The      E
above-mentioned undertaking was given before the loan was
sanctioned to the first respondent on 15.9.1994. We also fully
endorse the view taken by the Courts below that the decree in
Civil Suit No. 767 of 1995 was obtained by the second
respondent as against the first respondent collusively to defeat   F
the undertaking given by the first respondent on 5.3.1994 in
favour of the Corporation. Still the question is whether the
undertaking dated 5.3.1994 has created any charge over the
properties mentioned therein in favour of the Corporation. This
Court in J.K. (Bombay) Private Limited v. New Kaiser-I-Hind        G
Spinning & Weaving Co. Ltd. & Others ((1969) 2 SCR 866],
explained the difference between the charge and the mortgage
as follows :-

                                                                   H
    840        SUPREME COURT REPORTS                 [2013] 12 S.C.R.


A         "While in the case of a charge there is no transfer of
          property or any interest therein, but only the creation of a
          right of payment out of the specified property, a mortgage
          effectuates transfer of property or an interest therein. No
          particular form of words is necessary to create a charge
B         and all that is necessary is that there must be a clear
          intention to make a property security for payment of money
          in praesnti."

       8. Section 100 of the Transfer of Property Act, 1882
C defines "charge" as follows :-

            "100. Charges.- Where immoveable property of one
            person is by act of parties or operation of law made
            security for the payment of money to another, and. the
            transaction does not amount to a mortgage, the latter
D           person is said to have a charge on the property; and all
            the provi~ions hereinbefore contained which apply to a
            simple mortgage shall, so far as may be, apply to such
            charge. Nothing in this section applies to the charge of a
            trustee on the trust- property for expenses properly incurred
E         . in the execution of his trust, and, save as otherwise
            expressly provided by any law for the time being in force,
            no charge shall be enforced against any property in the
            hands of a person to whom such property has been
            transferred for consideration and without notice of the
F           charge."

         The above-mentioned Section clearly indicates the
    following types of charges :

            (1)    Charges created by act of parties; and
G
            (2)    Charges arising by operation of law.

        9. An ordinary charge created under the Transfer of
    Property Act is compulsorily registerable. The first portion of
    Section 100 of the TP Act lays down that where immoveable
H
     HARYANA FINANCIAL CORPORATION v.                        841
  GURCHARAN SINGH [K.S. RADHAKRISHNAN, J.]
property of one person is by act of parties or operation of law      A
made security for the payment of money to another, and the
transaction does not amount to a mortgage, the latter person
is said to have a charge on the property; and all the provisions
hereinbefore contained which apply to a simple mortgage shall,
so far as may be, apply to such charge. The words 'which apply       B
to a simple mortgage shall, so far as may be, apply to such
charge" in this Section were substituted by Section 53 of the
Transfer of Property (Amendment) Act, 1929, for the words "as
to a mortgagor shall, so far as may be, apply to the owner of
such property, and the provisions of Sections 81 and 82 shall,       C
so far as may be, apply to the persons having such charge."
Evidently, the effect of the amendment was that all the
provisions of the TP Act which apply to simple mortgages were
made applicable to charges.
                                                                     D
   10. Section 59 of the Transfer of Property Act refers to the
mode of transfer which reads as follows:-
    "59. Mortgage when to be by assurance.- Where the
    principal money secured is one hundred rupees or
    upwards, a mortgage other than a mortgage by deposit             E
    of title- deeds can be effected only by a registered
    instrument signed by the mortgagor and attested by at
    least two witnesses. Where the principal money secured
    is less than one hundred rupees, a mortgage may be
    effected either by a registered instrument signed and            F
    attested as aforesaid, or (except in the case of a simple
    mortgage) by delivery of the property."

     11. A conjoint reading of Section 100 with Section 59 of
the TP Act makes it clear that if by act of parties, any immovable   G
property is made security for the payment of money to another
and it does not amount to mortgage, then all the provisions
which apply to a simple mortgage, as far as may be, apply to
such charge. Consequently, in view of Section 59 of the TP Act
when there is a mortgage other than a mortgage by deposit of         H
    . 842       SUPREME COURT REPORTS                  [2013] 12 S.C.R.

A the title deeds, it can be effected only by a registered instrument.
  So far as the present case is concerned, no registered
  mortgage deed was executed by the first respondent and no
  title deed of the property was handed over by the first
  respondent to the Corporation. The mere undertaking that a
B person would not dispose of the properties mentioned, during
  the currency of the loan, would not confer any charge on the
  immovable properties mentioned therein. In other words, a
  mere undertaking to create a mortgage is not sufficient to
  create an interest in any immovable property. This legal position
C has been settled by various judgments of this Court. In K.
  Muthuswami Gounder (supra), this Court was dealing with the
  legal validity of a security bond by which parties undertook that
  they would not alienate the properties till the decree was
  discharged. Referring the said document, this Court held as
D follows:
            "17. The document, Exhibit A-6, security bond does not in
            substance offer suit property by way of security. Even
            giving the most liberal construction to the document, we
            cannot say that a charge as such has been created in
E           respect of the suit property for money to be decreed in the
            suit. All that it states is that in the event of a decree being
            passed not to alienate the property till the decree is
            discharged, which is a mere undertaking without creating
            a charge. Therefore, we agree with the finding of the High
F           Court that the document at Exhibit A-6 is not a charge. If
            that is so, the suit filed by the appellant has got to be
            dismissed."
            12. The Court held that the decree obtained in that suit was
G           a simple money decree and not a decree on a charge or
            mortgage with the result that the appellant who purchased
            the property in execution of that decree did not acquire the
            rights under the Security Bond,

            13.ln Bank of India (supra), this Court was examining the
H
    HARYANA FINANCIAL CORPORATION v.                       843
 GURCHARAN SINGH [K.S. RADHAKRISHNAN, J.]
scope of undertaking made for creating an equitable charge A
over a flat in favour of the Bank. This Court held that without a
transfer of interest, there is no question of there being a
mortgage and that mere undertaking is not sufficient to create
a charge. The ratio laid down by the above-mentioned judgment
 applies to the present case. In our view, the mere undertaking B
 that the party will not dispose of the properties mentioned in
 an undertaking, during the currency of the loan, will not create
 any charge over those properties, unless charge is created by
 deposit of title deeds or through a registered document. We
 also hold that even if the purpose of the decree obtained in Civil c
  Suit No.767of1995 between the respondents was fraudulent
  and collusive one so to defeat the undertaking made on
  5.3.1994, that would not confer any charge over the properties,
  unless the undertaking is registered. We, therefore, find no
  error in the judgment of the lower Appellate Court which was o
  affirmed by the High Court.

     14. In the result, the appeal fails and is accordingly
 dismissed. There will be no order as to costs.

 R.P.                                       Appeal dismissed.      E