Equitable Mortgage

Transfer of Property Act, 1882 — Section 58(f)

Also called "mortgage by deposit of title deeds" under Section 58(f) of the Transfer of Property Act, 1882. Created by depositing original title deeds of property with a bank in a notified town, with the intention of creating a security interest. No formal written deed or registration is required — the deposit itself creates the mortgage. Widely used by banks for quick security creation.

In practice, the equitable mortgage, the mortgage by deposit of title deeds under Section 58(f) of the Transfer of Property Act, 1882, is the bank's quickest way to create security, because in a notified town the mere deposit of original title deeds with intent to secure the loan creates the charge, with no formal registered deed required. That speed is also its vulnerability. When the loan turns into an NPA and the bank moves under SARFAESI, the borrower frequently disputes whether the deeds were genuinely deposited and whether the requisite intention existed, since there is often no single registered instrument to point to. Banks therefore record the deposit through a memorandum, a board note, or correspondence to evidence date, place, and intent. Counsel enforcing such a mortgage must reconstruct that trail; counsel defending will test whether the town was notified and whether originals, not photocopies, were deposited. Well-advised lenders keep contemporaneous proof of the deposit so the security survives challenge at enforcement.