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Lesson Id 201012
Version 1/30122017

Creation of Equitable Mortgage

For creation of Mortgage by deposit of title deeds, the Mortgagor is required to deposit his original title
deeds of immovable property (with complete chain of Title papers and connecting documents) with
the creditor bank's branch at the notified place with the intention to create security thereon against the
debt. The transaction of mortgage is complete once the original title deeds are deposited

Property to be Mortgaged (other than normal property)

1. Mortgage of the part of the Building(s) constructed on the land belonging to third party having
proportionate share in land is also transferred in favour of the purchaser and can create
mortgage after some formalities.
2. Mortgage of the Building constructed on an un- partitioned land belonging to more than one
person, should be accepted for mortgage after partition only.

Collateral Security to secure loans & advances by obtaining Third Party property:
Third party who is no way connected with the borrowers, offering his personal immovable property as
collateral security. In such situation, following additional precautions should be observed:-
1. A detailed inquiry should be made about the property, owner (proposed mortgagor), his
credentials and the reasons for offering his property as collateral security to loans granted to
the borrower.
2. A registered letter should be sent to the title of the person offering the property as security
stating therein that the title deed of the property offered by him as security will be accepted.
3. The attested photograph of the proposed mortgagor as well as proposed mortgaged property
must be obtained.
4. A public notice is to be given in the local newspaper to the effect that the property mentioned
in the notice has been offered as security for the advance facility granted to the borrower (with
description of the borrower) and in case any person has any objection, he should submit to the
bank his objection within 10 days from the date of the notice.

Identity & Credentials of Mortgagors & Other actions to be taken by the Branch Managers
1. Identity and credentials of mortgagors should be verified by the branch official based upon
local enquiry.
2. Photographs of the mortgagor preferably attested by the persons known to the bank along
with the information like Address, Age, Telephone No., Mobile No, copy of Voter Identity Card,
driving license, Passport (if any), Ration Card, PAN Card etc.
3. Latest Photograph of the property and all information should be collected and kept on record.
4. The Branch official(s) must visit the property proposed to be mortgage, to ascertain/ obtain all
the necessary particulars and eye estimation of the reasonableness of the valuation made by
the valuer and its genuineness.
5. The Branch Manager should examine whether the persons creating the mortgage has the
lawful capacity for creating such mortgage.
6. A declaration by way of affidavit from the mortgagor swearing, inter-alia that property is free
from encumbrances should be obtained.
7. Latest tax receipt both from the Municipality and Revenue Authority should be obtained in
original.
8. The agreement to sale between buyer and seller should be obtained. Wherever possible, the
tripartite agreement among seller of the property, borrower and bank should additionally be
taken to bind the contracting parties
9. Applying for credit facilities to construct a house on own plot, a copy of the sanctioned plan by
the competent authority in the name of the person applying for such credit facility must be
obtained and an undertaking to be obtained that he shall not violate the sanctioned plan and
construction shall be strictly as per the sanctioned plan.
10. The Registration of equitable mortgage should be made where it is applicable.
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11. The details of every mortgage/charge created in favour of the Bank in all borrowal accounts
and asset reconstruction or creation of security interest is to be filed, with the Central Registry
within 30 days after the date of such transaction or creation of security
12. In case of a Company, it is necessary to check that Memorandum and Articles of Association
of the Company/the Limited Liability Partnership permits taking of loan and creation of such
mortgage and/or giving any guarantee
13. In case of the Partnership property, all the partners should agree and give their consent for
creating equitable mortgage and title deeds should be deposited by all of them. If all the
Partners of the Firm cannot attend the Bank's Office, they must authorise one or more of them
to attend and deposit the title deeds.
14. Numbers on Stamp Papers etc.-
i. Nos. of Stamp Papers and their date of issue should be verified.
ii. The nos. of Stamp Papers recorded in the certified copy should be verified with that of
original deed.
iii. The Signature of the ‘Presenter’ of the deed should be verified and tallied with that of
the Original title deed.
iv. In order to check the frauds on title documents (in doubtful cases), branches are
required to check it from the concerned registry office and match it with the original title
deed submitted to the branch.

Summary guidelines on Mortgage by deposit of Title Deeds

1. Laminated title deed(s) should not be accepted as security under any circumstances.
2. Certified copies of title deeds should not be accepted for creation of equitable mortgage.
3. Obtain invariably certified copy of the original title/chain of title provided by the mortgagor and
compare same with the certified copies so as to ascertain their genuineness and that of the
transaction of the properties covered under those title deeds
4. Obtain an up-to-date Municipal / Panchayat Tax Receipts, Revenue Receipts, Income-Tax
clearance Certificate under Section 281 (1) (ii) of the Income-Tax Act 1961, Land Ceiling
clearance Certificate etc. issued by the Competent Authority, wherever applicable.
5. In case of a lease hold property, the original registered lease deed should be examined to
ensure that there is no onerous clause affecting the interests of Bank and to find out whether
prior permission of the lessor is required and also to find out the unexpired period of the lease.
If such permission is necessary, the written consent of the lessor to mortgage the property to
the bank should be obtained.
6. A perpetual lease is generally considered as good title for mortgage of the lease hold rights.
But in genuine cases, a lease deed for lesser period (not be less than 25 years) may also be
accepted and sufficient unexpired lease period should be available for repayment of loan.
7. A mere license letter/agreement or allotment letter or an agreement to lease should not be
accepted for creation of equitable mortgage.
8. The property situated in cantonment area may not be considered as good security by way of
equitable mortgage.
9. If the property proposed to be mortgaged or a part of it belongs to a person(s) other than the
borrower(s), the personal and continuing guarantee of such person(s) should also be obtained
before deposit of title deed by such person(s).
10. Equitable mortgage can be created only in a notified town/area.
11. If any property owned by the Mohammaden is offered as security by way of equitable
mortgage, the concerned owner (Whether borrower/guarantor) give an affidavit duly sworn in
before 1"' class Magistrate. [Annexure-17 (earlier Adv.95)].
12. In case of HUF property, an Affidavit by the Karta and all major coparceners sworn in before
the 1st Class Magistrate. [Annexure-18 (earlier Adv.96)]

Creation of Equitable Mortgage under Other than notified town/area.

1. If the branch is in an area outside the notified town, the Branch Manager may after satisfying
himself about genuineness of the title deeds, valuation of property, lawyer's non-encumbrance
certificate, declaration on affidavit by the owner borrower/ guarantor etc., request the owner of
the property to deposit the title deeds in one of the bank's branches situated in a Notified
town/area.
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2. The Branch Manager should address a letter to a nearest branch of the bank in a notified area
requesting that branch to accept the deposit of title deed by the proposed mortgagor on its
behalf (as an Agent).
3. Branch in the Notified Area should complete all formalities related to creation of mortgage and
advise the same to the lending branch along with the copies of all these documents.
4. The mortgaged property should be insured against fire, earthquake risks in joint names of the
bank and the party at the party's cost.
5. All expenses in connection with the mortgage, expenses, on stamps etc. should be borne by
the mortgagor/owner.

Documentation and other formalities:

The following documents should be taken and suggested formalities should be completed:
1. Lawyer's Search Report (Annexure-1).
2. Valuation Report (Annexure-2)
3. Declaration on Affidavit (duly notarized) of the Mortgagor (Borrower/Guarantor as the case
may be) (Annexures-5 & 6).
4. Original title deeds (with complete chain of title) and other connected documents as suggested
by the bank's lawyer.
5. Title deed should be entered into Security Register in chronological order with signature (s) of
the Branch Manager.
6. Recital (Annexures-9 to 12, as appropriate) has to be signed by the Branch Manager and
another Officer and it should be entered into the Recital Register in chronological Order.
Note:-
i. The Mortgagor's signature should not be taken on the Recital.
ii. No receipt of title deed should be given to the mortgagor/owner.
7. Enhancement of loan/limit, supplemental recital should be obtained and signed by the Branch
Manager and witnessed by two officers/ employee (in absence of officer) (Annexures-13 to
16).
8. A letter from the mortgagor issued on subsequent date (1 or 2 days after deposit of Title
Deeds) confirming the fact of having deposited the title deeds with the bank. (Annexure-7).
9. Letter confirming deposit of title deeds to be stamped as per the Stamp Act applicable in the
concerned State. (Annexures-5 to 8).
10. Enhancement of loan/limit, the supplemental stamped letter of confirming deposit of title deeds
(Annexure-8).
11. Letter from the mortgagor does not require registration with Sub-registrar.
12. In case of ownership Flat/Apartments purchased/to be purchased from the builders/
promoters/ co- operative housing society/Govt. development Authority where title deeds are
not readily available for mortgage, the following additional documents should also be obtained.
i. Irrevocable Power of Attorney executed by the Borrower/Mortgagor in favour of the
bank [Annexure-19J.]
ii. Tripartite Agreement among Borrower, Promoter/Govt. Authority/Co-op. Housing
Society and the Bank (Annexure-20).
iii. Letter of undertaking to be obtained from the Builder/Promoter/Govt.-Authority/Co-op.
Housing Society etc. (Annexures 21 to 23.)
Note:-
1. For avoiding the frauds, the Identification of property by way of physical verification through
Branch officials is essential before creation of Mortgage.
2. All annexures are available in manual on mortgage.

References:

S. No. Particulars
1. Manual on Mortgages available on intranet in Legal Department.