SADIQ ALI and 2 others vs NATIONAL BANK OF PAKISTAN and 2 others
This appeal arises from a dispute over the validity of a mortgage by deposit of title deeds claimed by the respondent-Bank against properties purchased by the appellants. The core legal question was whether a valid mortgage by deposit of title deeds is created when the Bank fails to obtain the original title deeds, relying instead on an affidavit and copies provided by the judgment-debtor. The Court held that the Bank's claim to a mortgage was legally unfounded regarding properties where it did not possess the original title deeds. The Court determined that the Bank, having been defrauded by the judgment-debtor, must bear the consequences of its failure to secure the original documents. Consequently, the Court ruled that the appellants, as bona fide purchasers for valuable consideration who held the original title deeds, were entitled to the properties. The principle laid down is that a mortgage by deposit of title deeds requires the actual possession of the original title deeds by the mortgagee; reliance on secondary documentation or affidavits in the absence of originals does not create a valid mortgage against bona fide third-party purchasers.
- Does a mortgage by deposit of title deeds exist if the mortgagee bank fails to obtain the original title deeds?
- Can a bank claim a mortgage by deposit of title deeds based solely on an affidavit and copies of deeds provided by the mortgagor?
- Who bears the loss when a bank is defrauded by a judgment-debtor regarding the creation of a mortgage on properties subsequently sold to a bona fide purchaser?
' JAWWAD S. KHAWAJA, J.---The contentions of learned counsel for the appellants have been noted in the order, dated 15-10-2001. The same, therefore, need not be repeated. Today, learned counsel for the respondent-Bank has conceded that the respondent-Bank is in possession of the original title deed, only in respect of property bearing No, B-VII-15-S-2. Mool Raj Bagh, Gujranwala. As for the other two properties, although the Bank claims to be a mortgagee by deposit of title deeds, the original deeds are not available with the Bank. The original title deeds in respect of the other properties are with the appellants. Who as bona fide purchasers for valuable consideration, acquired title in the same from Nazir Ahmad judgment-debtor, who is respondent No,2 in the present appeal.
2. Learned counsel for the Bank argued that Nazir Ahmad had submitted an affidavit alongwith attested copies of deed and a power of attorney to the Bank in respect of the remaining two properties. On this basis, it was contended a mortgage by deposit of title deeds stood created in favour of the Bank. This contention is not legally well-founded. It was for the Bank to obtain the original title deeds. It is obvious that the title deeds were not lost as had been stated by Nazir Ahmad to the Bank. In this view of the matter, it appears the respondent-Bank was defrauded by Nazir Ahmad. The Bank has to bear the consequences of such fraud and not the appellant, who is a bona fide purchaser of the properties for valuable consideration and also holds original title deeds of the said properties.
3. In the above circumstances, the Bank can only assert its security rights as mortgagee in respect of Property No, B-VII-15-S-2, Mool Raj Bagh, Gujranwala. The appeal of Sadiq Ali appellant in respect of the remaining two properties is accepted and as a consequence, his objection petition to the extent of the said two properties is allowed.
4. This appeal partially succeeds and is disposed of in ID the above terms.