Equitable Mortgage Loopholes How a Defect in the Title Deed Deposit Can Stall a DRT Case?
It is possible that a bank will inform you that your home, retail outlet, industrial unit etc. has been mortgaged to them in due course. However, how will this play out if there is some ambiguity with respect to the relevant documentation?
There can be substantial implications for the course of a bank's recovery action where a deficiency exists in respect of the deposit of the title deeds. This could go on to impact the existence of the bank's charge, and/or the ability of certain steps to proceed.
This is one area that should be considered where a customer receives notice of possession and sale of their property.
An "equitable mortgage" (often referred to in India as a 'mortgage by deposit of title deeds') arises under s.58(f) of the Transfer of Property Act, 1882.
Notably, no distinct instrument need be executed and registered to give rise to such a facility, subject to certain pre-conditions being satisfied.
These include: the existence (or proposed existence) of a debt; handing over of the relevant title deeds to the lender or their nominee; and the requisite intent.
Any shortfall with regard to these conditions will require analysis.
BK Singh Advocate can advise on all aspects of DRT and SARFAESI actions, and other issues relating to mortgages and banks' recovery operations.
By way of example, suppose a businessman in the Delhi-NCR region takes a facility secured by the title deeds of his family home. After a number of years, he falls into arrears and the bank commences an action.
Upon review of the documentation, issues may surface in relation to: the identity of the party who deposited the deeds; if that party was entitled to grant a security; and the position evidenced from the documents deposited.
Clearly each of these points would require detailed scrutiny.
Of course, the borrower will not be able to rely upon a bare assertion that the mortgage is flawed. There needs to be evidence of this from the documentary record and applicable law.
DRT Advocates can therefore assist their clients with these types of queries and advise of the potential courses of action open to them.
Why Do Equitable Mortgage Disputes Matter in India in 2026?
Banks commonly take charge on freehold properties to support home finance, commercial, term and short-term borrowings.
Freehold assets located across Delhi (including Ghaziabad, Noida, Gurugram), Mumbai, Hyderabad, Bengaluru and other key trading hubs will often form the basis of large bank facilities.
On default, the lending institution will typically commence actions or seek to realize its charges pursuant to the provisions of the SARFAESI Act 2002.
If there is a dispute surrounding a charged asset, this can give rise to complications for the borrower, sureties, fellow owners and relatives.
As an illustration, the family of a person may learn that their common property has been pledged. This will require analysis of the position of the pledgor and what title he could lawfully charge.
Alternatively, a company may find that the properties forming part of the charge are subject to competing claims, missing elements in the relevant papers or differences from the original title chain.
The firm BK Singh Advocate can determine if such issues relate to the validity and quantum of a bank's security, or its process to recover.
It is important to appreciate that all such cases will not lie before a DRT.
Quick Facts About Equitable Mortgage and DRT Proceedings
- Governing law: s. 58(f) of the Transfer of Property Act 1882.
- Requirements: Existence of a debt, deposit of title deeds and desire to create a charge.
- Statutory conditions as to specified/notified area(s).
- No need for a further separate registration of a mortgage deed.
- Enforcement by banks: Banks having a 'secured' debt can invoke provisions of the SARFAESI Act 2002.
- Recourse to DRT: Under s. 17, a person can approach the DRT against actions taken under s. 13(4) if qualified, within 45 days.
- Consequences of invalidity of mortgage: Will not affect the debtor's obligation to repay the principal sum.
What Is an Equitable Mortgage Under Indian Law?
A mortgage by deposit of title deeds (an 'equitable' mortgage) arises where title deeds over land are handed over to a lender or the lender's nominee to secure a sum due, as per Section 58(f).
Simply having certain documents in the custody of the bank will not give rise to this type of mortgage.
There must be other indicia that would establish the requisite form of security.
As noted above, this applies only in respect of certain designated towns under the Act, or any further town(s) declared by the appropriate State Government.
It has been held that whether there was an intention to create a security will depend upon the facts of the case.
Accordingly, it may well fall to BK Singh Advocate to review the title documents, evidence of deposits etc., to consider if a material point has arisen.
Which Defects in Title Deed Deposit Can Affect a Mortgage?
Many irregularities in documentation will not prevent the validity of a mortgage. They will only be of concern where they relate to some fundamental legal provision, or impact the nature of the charge created.
1. Question over the deposit of title deeds
For a mortgage by deposit of title deeds to be effective, the requisite titles must be deposited (s. 58(f) TPA).
Where there is a challenge to the fact of deposit, various pieces of documentary evidence may need to be considered.
This could include any banking statements, letters or other related documents.
An advocate at BK Singh can consider these documents to provide an opinion.
2. Lack of necessary intention to grant a mortgage
Even if titles are in the hands of the lender, this alone is insufficient to show that they were deposited to create a mortgage.
It will be necessary to look at the intention of the transacting parties. Titles may have been handed over e.g. as a first step in establishing their authenticity. This must then be viewed in light of the surrounding circumstances.
3. Defects in title or power
A party can seldom create a mortgage over land which they do not hold title to (or lack sufficient legal power over).
Such issues can feature in respect of: multiple owners; succession; companies; or deposits effected through third parties.
Each situation will turn on the position of title, powers and any other pertinent rules.
4. Memorandum of deposit
The lender may cause a note to be made of the title deeds having been deposited.
However, a mere memorandum of a past act of deposit may not carry the same legal consequences as, for example, a mortgage deed, or a document setting out key terms of the deal.
As a result, questions of compulsory registration may arise (see SC authorities interpreting the TPA and Registration Act).
5. Variations in description of the secured property
Any discrepancies between the description of the property, the title(s) and the apparent amount of the charge should be scrutinised.
There may be trivial omissions in the documentation, but the question is simply whether the titles and ancillary evidence suffice to identify the subject matter of the mortgage.
Can a Defective Equitable Mortgage Stall DRT Proceedings?
A flaw in the execution of the mortgage can impact the Bank's right to rely on a given asset as secured, and give rise to a claim for suitable relief (where the Court/Authority is seized).
However, it will not of itself lead to the DRT proceedings abating, nor preclude the Bank from effecting its recovery.
This is a key point to differentiate the question of attacking the security vs. the outstanding debt.
Eligible Banks and Financial Institutions have the option to file their recovery claims with the appropriate DRT under the RDB Act, 1993.
It may only go some way towards meeting the Bank's claim as to its secured debt.
An Advocate with BK Singh can look into any issues raised around the potential defect, including its effect on the Mortgage, SARFAESI action etc.
The position will depend upon the facts and law drawn out during the course of the proceedings.
What Legal Framework Governs Equitable Mortgage Disputes?
Transfer of Property Act, 1882
Under s. 58(f), a 'mortgage by deposit of title deeds' arises.
As per s. 59, this form will differ from other forms of mortgage that require execution of a registered instrument.
Consequently, ss. 58-59 will need to be considered on the facts.
SARFAESI Act, 2002
A number of conditions need to be satisfied for a financial institution (or other eligible party) to invoke its powers under the Act (s. 13).
Broadly speaking, s. 13(2) stipulates a period of 60 days.
Certain actions can be taken pursuant to s. 13(4). If these have been done, the aggrieved party can seek relief under s. 17 before the DRT.
Registration Act, 1908
Where a deed seeks to effect more than simply evidencing the title deeds deposited, there may be a requirement to register the instrument.
This will depend on the terms of the instrument and relevant legal principles.
Recovery of Debts and Bankruptcy Act, 1993
The RDBA prescribes the process through which certain debts can be recovered via the DRT.
As such, it is a separate route to the SARFAESI process.
Clients who wish to pursue their right of appeal should further consider: DRAT appeals under Section 18 of the SARFAESI Act.
Can a Borrower Challenge Bank Possession or Auction?
Any SARFAESI action which has been determined to be 'qualifying' can be contested before the appropriate DRT u/s 17.
If any defect in the security is found to be material to the issue, this will also be open for consideration.
BK Singh Advocate can look into the mortgaged documents, notice(s) issued and current status to determine if a viable course of action lies.
The DRT can evaluate the actions taken by the Secured Creditor in accordance with the provisions of the SARFAESI Act and Rules.
In appropriate cases, a request for interim orders may also be entertained.
Read more about interim stay applications before the DRT.
Borrowers facing an announced sale can also review the article about important checks after receiving an e-auction notice.
Can Every Mortgage Ownership Dispute Be Decided by DRT?
No. There are limits to the DRT's power over all such civil matters relating to property.
As noted above, s.17 of the SARFAESI Act is largely concerned with the various modes of enforcement permitted under the Act.
If there are antecedent issues of prior sales, rival title, etc. (or any other issue going back to a time before the Bank took possession), these would fall for adjudication by an appropriate Civil Court.
This was considered by the SC in Central Bank of India v. Prabha Jain [2025].
BK Singh Advocate can advise further as per the facts of your case.
Further details can be seen on tenant and third-party rights under SARFAESI.
What Documents Are Important in an Equitable Mortgage Dispute?
These will serve to explain the nature of the deal, chain of title and any securities in place.
They can include:
- Title deeds (originals and any certified copies)
- Sanction and executed facility letters
- MoD
- Bank confirmations and details of security created
- Evidence of title, succession, joint ownership etc.
- Corporate resolutions and POA (as necessary)
- SARFAESI notices for demand, taking of possession and sale
- DRT petition(s), response(s) and current order(s), if any
- Correspondence from the borrower, owner(s) and bank
BK Singh Advocate will consider this evidence to determine if there is any credible foundation to the alleged dispute.
Absence or discrepancies in some of these should only be viewed on a case-by-case basis.
When Should You Consult a DRT Lawyer?
It can be very beneficial to seek specialist advice where there is a link between the mortgage and a live banking recovery action.
By engaging at this early stage, key documentation and time-limits can be reviewed ahead of any enforcement step.
You may wish to take advice in circumstances where a bank asserts a charge over land in respect of which title or the granting of the mortgage is in issue, or on receiving a notice to vacate or sale by auction.
BK Singh Advocate may similarly be able to look into questions surrounding familial assets, guarantees and disputes relating to the security provided to support a commercial facility.
Once an action has been commenced by the bank, the form that your response will need to take will vary depending on the venue and position of the proceedings.
How Can DRT Advocates Help With Equitable Mortgage Disputes?
DRT Advocates provides legal advice on DRT matters, SARFAESI, properties mortgaged and other bank related disputes.
An experienced advocate such as BK Singh can look into the mortgage(s) in question, evaluate the security offered and identify any available legal recourse.
This can extend to analysis of any notices received, comment on their status, draft suitable applications and appear at the relevant court or tribunal (depending on the engagement).
Clients will need to make available all pertinent documentation, e.g. previous letters, contracts and any unfavorable documents.
Only then will it be possible to provide an objective view as to whether the dispute has merit or will be largely academic.
Frequently Asked Questions :
1. What will typically be the key point of contention in an action relating to an equitable mortgage?
As noted above, the focus will most commonly be on compliance with the provisions of S. 58(f). BK Singh Advocate will look at the facts and documentation relating to the existence of a debt, deposit of documents and desire to charge.
2. If some of the original title documents cannot be produced, will this render the mortgage void?
It may well not. This will turn on the documents which have been lodged as well as the surrounding evidence as to the nature of the arrangement entered into. That one (or more) original(s) cannot be produced is not necessarily determinative of the validity of a mortgage.
3. Does the mortgage have to be registered if it arises by way of deposit of title documents?
In general terms, no. Of course, if any further document(s) operate to give rise to an interest that must be registered, this could give rise to an issue.
4. Will the presence of any irregularity prevent the Bank from proceeding with an auction sale?
Depending on the nature of the irregularity and supporting materials, there may be scope to seek an injunction to restrain the sale. Any such application would lie before the appropriate authority.
5. If the Equitable Mortgage is held not to exist, does this discharge the Borrower from liability?
This will depend upon the circumstances. In many cases, notwithstanding the failure of the specific security, the Borrower will remain liable to repay the facility. The Bank will be entitled to pursue its alternative options.
6. May one of several registered owners contest the Bank's assertion of its security?
Yes, provided there are sufficient facts and documentation to suggest an entitlement on the part of the objector. Factors including the Register of Title, position of the other owner(s), authorization etc. will all be relevant.
7. Following service of a Secured Asset Recovery Act notice, can the Borrower apply to the DRT?
Normally, receipt of a s. 13(2) notice is not a precondition for invoking the provisions of s. 17. Nevertheless, the Borrower should consider raising representations with the Secured Creditor and take legal guidance as to his options.
8. Within what time frame must a person affected under the SARFAESI Act make an application?
Subject to certain exceptions, an applicant must lodge its Section 17 claim within 45 days of the relevant action being taken pursuant to S. 13(4). BK Singh Advocate will review the pertinent facts.
9. Can the dispute as to who holds the equitable mortgage be decided in a Civil Court?
If the matter raises issues which are capable of being adjudicated by a Civil Court and are not within the DRT's remit, then a suit may be filed. Again, this will turn on the issues raised by the pleadings.
10. Will BK Singh Advocate be able to accept instructions from outside their home base?
Yes. Depending on factors including location, ease of instruction, admissibility before local courts and commercial considerations, BK Singh Advocate can offer initial reviews and discussions with prospective instructing parties based in Delhi NCR, Mumbai, Hyderabad, Bengaluru and elsewhere.
Final Thoughts
Disputes around equitable mortgages can give rise to significant ramifications to the borrower, mortgagor or lender.
Depending on the nature of the defect (e.g. with respect to submission of title deeds, creation of charge or title), there could be issues in pursuing or defending an equitable mortgage.
However, simply raising a perceived defect will not invariably lead to the DRT proceedings being stayed, the loan written off or the sale of the property called in question.
This will turn on the documentary evidence and other factors as well as any applicable statutory relief.
BK Singh Advocate can advise on matters pertaining to disputes in equitable mortgages, SARFAESI and DRT action. Please contact DRT Advocates for a first meeting if you require further information on your situation.
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