In Brief
Cosmos Co-Operative Bank sought to establish its priority mortgage over Central Bank of India in respect of an apartment offered as loan security. Central Bank's mortgage rested on an unregistered Agreement of Sale (1989); Cosmos's mortgage rested on a Share Certificate issued by the housing society (1998). The Supreme Court held that Cosmos's legal mortgage, backed by a valid title deed (Share Certificate), prevails over Central Bank's equitable mortgage created by an unregistered Agreement of Sale. The Court clarified that under India's Transfer of Property Act, a mortgage by deposit of title deeds is a legal mortgage, not merely equitable. Equitable mortgages (recognized as 'charges' under Section 100) are subordinate to legal mortgages and enforceable only against parties with notice. Since Central Bank failed to notify Cosmos of its equitable charge, it was postponed. The Court set aside the High Court's order and affirmed Cosmos's superior claim.
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