LexTHE COSMOS CO. OPERATIVE BANK LTD. versus CENTRAL BANK OF INDIA & ORS.
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
[2025] 2 S.C.R. 1091 : 2025 INSC 243 The Cosmos Co. Operative Bank Ltd. v. Central Bank of India & Ors. (Civil Appeal No. 1565 of 2025) 4 February 2025 [J.B. Pardiwala* and R. Mahadevan, JJ.] Issue for Consideration Whether ‘equitable mortgages’ are recognized in India under the nomenclature of ‘charge’ in terms of Section 100 of the Transfer of Property Act, 1882 (TPA); Who holds a valid mortgage over the property—the Appellant (Cosmos Co. Operative Bank Ltd.) or the Respondent No.1 (Central Bank of India). Headnotes† Transfer of Property Act, 1882 – Sections 58, 100 – Equitable mortgage – Equitable mortgages are recognized in India as a ‘charge’ under Section 100 of the TPA – Charge created by equitable mortgage will be enforceable against third parties as far as possible in terms of the procedure applicable to a simple mortgage, except against bona fide transferees without notice – Equitable mortgages can be enforced in equity but remain a right in personam, not in rem, unless properly registered: Held: Equitable mortgages are recognized in India as a ‘charge’ under Section 100 of TPA – Concept of equitable mortgage is a creation of the doctrine of equity, and its absence from the Act, 1882 does not negate its validity, as it serves to uphold the principles of fair-play, good conscience, and justice – Enforceable against the mortgagor but not against bona fide transferees without notice – If a transaction does not amount to a mortgage but constitutes a preliminary step towards mortgage creation, three recourses are available to the lender (1) Claim that the transaction amounts to an equitable mortgage as it was intended to create present or immediate security; (2) Claim that part-performance of the contract has occurred, justifying relief to perfect the mortgage by executing further documentation; (3) Bring a suit for recovery of money, relying on the initial intention of the parties to create security – Appeal allowed, High Court order set aside. [Paras 56-61] * Author 1092 [2025] 2 S.C.R. Supreme Court Reports Transfer of Property Act, 1882 – Sections 58, 100 – Valid mortgage – Priority of charge – the Appellant had the first valid charge over the mortgaged property as it held the share certificate of ownership – High Court and DRAT erred in holding that the Respondent No. 1 held the first charge: Held: The first valid charge over the mortgaged property is with the Appellant (Cosmos Co. Operative Bank Ltd.), not the Respondent (Central Bank of India) – When the original borrowers deposited with the appellant bank, the share certificate of ownership to the said Flat, on that very day and date, a legal charge is said to have been created on the flat in favour of the appellant bank, whereas, when it comes to the respondent no. 1 bank no such charge on the flat was created, rather what was created was only an equitable mortgage, though prior in time – This distinction is particularly important, because even if the agreements to sale deposited with the respondent no. 1 bank were registered and thereby, giving public notice of their existence, still the appellant bank by virtue of possession of the actual title deeds to the said Flat in the form of the share certificate of ownership would be accorded priority in charge for the sole reason that the charge created by it is a legal mortgage in terms of Section 58 of the Act, 1882 – Appeal allowed, High Court order set aside. [Paras 47, 52, 67, 68] Case Law Cited Kedar Lal v. Hari Lal [1952] SCR 179 : AIR 1952 SC 47; K.J. Nathan v. S.V. Maruthi Rao [1964] 6 SCR 727; Suraj Lamp & Industries (P) Ltd. (2) through Director v. State of Haryana & Anr. [2011] 11 SCR 848 : (2012) 1 SCC 656; Bank of India v. Abhay D. Narottam & Ors. (2005) 11 SCC 520; Anita Enterprises & Anr. v. Belfer Coop. Housing Society Ltd. & Ors. [2007] 12 SCR 1 : (2008) 1 SCC 285 – relied upon. J.K. (Bombay) (P) Ltd. v. New Kaiser-I-Hind Spinning & Weaving Co. Ltd. & Ors. [1969] 2 SCR 866 : (1970) 1 SCC 556; Haryana Financial Corporation v. Jagdamba Oil Mills [2002] 1 SCR 621 : (2002) 3 SCC 496; Ram Baran Prasad v. Ram Mohit Hazra [1967] 1 SCR 293 : AIR 1967 SC 744; Shakeel Ahmed v. Syed Akhlaq Hussain [2023] 15 SCR 590 : 2023 SCC OnLine SC 1526 – referred to. Russell v. Russell [1783] 28 E.R. 1121 – referred to. [2025] 2 S.C.R. 1093 The Cosmos Co. Operative Bank Ltd. v. Central Bank of India & Ors. List of Acts Transfer of Property Act, 1882; M
Excerpt shown. Read the full judgment & AI analysis in Lexace.