Mortgage by deposit of Title Deed.

Mortgage by Deposit of Title Deeds Mortgage by deposit of title deeds is called in English law as equitable mortgage. It is an oral transaction and no documents like Deed of Mortgage is required to be executed. No written acknowledgement is required for creating this mortgage. It is however, prudent to have a record of transaction to avoid difficulties to establish the creation of the mortgage. In this case, a 'Memorandum of Mortgage' by deposit of title deeds is prepared by the mortgagee to secure the specific mortgage money. The main characteristics of this type of mortgage are as under: Debt even time barred, present and future advances are covered under the equitable mortgage. In other types of mortgage, future advances are not covered. Delivery of title deeds is required to be made in Bombay, Madras and Calcutta and other specified towns to which the facility is extended by State Government from time to time through Gazette notification. It is not necessary for creation of mortgage that the property be located in the specified town or the company making deposit should have its registered office in that town. This deposit can be made by the company through its nominee or agent duly authorised or any other persons authorized by the Board of Directors/Shareholders as the case may be. Intent to create security by deposit of title deeds should be present at the time of such deposit in the mortgagor. Neither ownership nor possession of the property passes to the mortgagee under the equitable mortgage. Equitable mortgage is preferred by the lenders/banks/creditors/financial institutions as well as the commercial enterprises because of the inherent advantages viz. (a) to save time and avoid inconvenience of documentation, and registration; (b) to minimise cost of creating mortgage and cost of borrowed funds by saving stamp duty; (c) to maintain secrecy of the debt transaction; (d) section 180 of the Companies Act, 2013.