Banking Law, Issues of Mortgage & Overdraft, Title-Deeds Custody, Two/Double Mortgages, Transfer of Property Act (4 of 1882), Sections 48, 58, 59, 78, 79 and Gross-Negligence

1. 1(c)2014 MD HAROON RASHEED, ADVOCATE
By,
MOHAMMED HAROON RASHEED
B.A.LL.B (Hons.), [BSW] & [LLM]
Advocate
Email ID: adv.mdharoon@gmail.com

2. Facts
 The defendant firm P.E. Guzdar & Co. mortgaged 42,
Chowringhee Road, Calcutta, to the National Bank of
India by delivery of the title deeds to secure an
overdraft in their current account with the bank.
 But later he asked the bank to give him back the title-
deed so that he may show it to intending purchaser.
2(c)2014 MD HAROON RASHEED, ADVOCATE

3.  He further said that only after selling the property he
can satisfy the debt of the bank.
 Believing on his words bank handed over the title-
deeds to him.
 Having regained possession of the title deeds, he
mortgaged the property in like manner to Lloyds Bank
to secure another loan.
3(c)2014 MD HAROON RASHEED, ADVOCATE

4. Issue
 The question is, which of the two mortgages in the
circumstances is entitled to priority?
4(c)2014 MD HAROON RASHEED, ADVOCATE

5. Analysis and law
 Transfer of Property Act (4 of 1882), Sections 48, 58,
59, 78, 79.
 Normally the intending purchaser goes to the creditor
having possession of title deeds , and confirm the title
by inspecting it.
 The bank is not supposed to handover the deed to
anyone till the time money is returned to the bank.
5(c)2014 MD HAROON RASHEED, ADVOCATE

6.  But the bank has committed gross-negligence by
returning the title-deed to the respondent.
 Thereby giving opportunity to induce another person
to advance money
6(c)2014 MD HAROON RASHEED, ADVOCATE

7. Judgment
 Therefore, the court held that under section 78 the
subsequent mortgagee i.e. Lloyds bank would get
priority over national bank.
7(c)2014 MD HAROON RASHEED, ADVOCATE

8. 8(c)2014 MD HAROON RASHEED, ADVOCATE