Memorandum of Deposit explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
A mortgage by deposit of title deeds, known in English law as an equitable mortgage, is created by handing over the documents of title to the lender with the intention of creating security. No deed of mortgage is needed to create it, and no written acknowledgment is required, but lenders keep a written record so that the transaction and the secured amount can be proved. That record is the memorandum of deposit. This article gives a specimen and explains when a memorandum records a deposit and when it becomes the document that creates the security.
Under section 58(f) of the Transfer of Property Act, 1882, where a person in the towns named in the section (and any other town the State Government notifies) delivers documents of title to immovable property to a creditor or his agent with intent to create a security, the transaction is a mortgage by deposit of title deeds. The memorandum should record the date and place of delivery, the deeds deposited, the intent to secure, and the debt secured; whether it must be registered depends on whether it merely records an earlier deposit or itself creates the security. Neither ownership nor possession passes to the lender.
When you need a memorandum of deposit
Lenders, banks and commercial enterprises use equitable mortgages because they save time and documentation, can reduce the cost of creating security, and keep the transaction private. Typical uses include working-capital and term loans against a factory, shop or house where the borrower hands over the title deeds at the lender's branch. For a company the borrowing and security may also need shareholder approval under the Companies Act, 2013, and the memorandum should be supported by a board resolution.
Its characteristics:
- delivery of title documents with intent to create security;
- delivery in a town the section names or one the State Government has notified;
- the intent must be present when the deposit is made;
- the deposit may be made through an authorised agent or nominee;
- present and future advances may be covered if the memorandum says so;
- neither ownership nor possession passes to the mortgagee.
If you want a lender-ready record and checklist, our loan documentation support team can prepare it. For the other kinds of mortgage see what is a charge, mortgage, hypothecation and pledge.
Specimen memorandum
MEMORANDUM OF DEPOSIT OF TITLE DEEDS This Memorandum is made on at BY , (the Mortgagor) IN FAVOUR OF , ] (the Mortgagee). 1. Purpose. The Mortgagor has obtained / will obtain from the Mortgagee of under the sanction letter dated (the Facility), and creates this security for the repayment of all amounts owing to the Mortgagee under the Facility, with interest and charges. 2. Deposit. On , at the of the Mortgagee at , the Mortgagor deposited with the Mortgagee the documents of title listed in the Schedule relating to the property described in the Schedule (the Property), with the intention of creating an equitable mortgage over the Property to secure the amounts stated in clause 1. 3. Amounts secured. The deposit secures the principal sum of , interest at , costs, charges and expenses, . 4. Declaration of title. The Mortgagor declares that the documents deposited are all the title documents in its possession and control, that it holds good and marketable title to the Property, and that the Property is clear of all encumbrances, charges and claims except . 5. Undertakings. The Mortgagor shall keep the Property insured and in repair, shall pay all taxes and charges on it, shall not transfer or encumber it without the Mortgagee's written consent, and shall do any act the Mortgagee reasonably requires to perfect the security. 6. Remedies. On default, the Mortgagee may enforce the security by suit in accordance with law, and the Mortgagor shall be liable for all costs of enforcement. 7. Release. On payment in full of the amounts secured, the Mortgagee shall return the documents and release the Property. 8. Costs. Stamp duty and related charges shall be borne by . Signed by the Mortgagor at on the date written above. Received the documents listed in the Schedule: Witnesses: 1. 2. SCHEDULE OF TITLE DEEDS DEPOSITED Sr. No. | Document | Date | Parties | Registration particulars | Original or copy | | | | | SCHEDULE OF PROPERTY
Clause-by-clause explanation
| Clause | What it does | Drafting tip |
|---|---|---|
| Parties | Identify mortgagor and lender | Use the lender's branch where the deposit was made |
| 1 Purpose | Links the deposit to the facility | Refer to the sanction letter by date |
| 2 Deposit | Records delivery and the intention to secure | State the date and place; place matters for section 58(f) |
| 3 Amounts secured | Fixes the debt and whether future advances are covered | Say clearly if future advances are covered |
| 4 Declaration | Title and no encumbrances | Cross-check with the title search report |
| 5 Undertakings | Protects the security | Include insurance and no further charge |
| 6 Remedies | Enforcement by suit | Do not promise a sale without court |
| 7 Release | Return of deeds on payment | Record the date and the receipt |
| Schedules | List the deeds and the property | List every document by date and parties |
The law behind it
Section 58(f) defines the mortgage by deposit of title-deeds as set out in the summary above: delivery of documents of title to immovable property to a creditor or his agent, by a person in any of the towns named in the section or in any other town notified by the State Government, with intent to create a security. See the explanation of the six kinds of mortgage.
Section 59. A mortgage other than one by deposit of title-deeds, where the principal money secured is one hundred rupees or upwards, can be effected only by a registered instrument signed by the mortgagor and attested by at least two witnesses. A deposit of title deeds is therefore outside that rule: the requirement of a registered instrument does not apply to it merely as a mortgage by deposit.
Registration Act, 1908, section 17. Instruments that themselves create, declare, assign, limit or extinguish a right, title or interest in immovable property of the value of one hundred rupees and upwards are compulsorily registrable. A memorandum that only records a deposit already made does not create the security, but a document that is drafted so as to create the mortgage may fall within section 17(1)(b). Draft it as a record of an earlier or simultaneous deposit, and take advice on registration before you sign. See documents compulsorily registrable under section 17.
Stamp duty, registration and execution
Whether a memorandum is chargeable with stamp duty, and in what amount, is fixed by the Stamp Act and Schedule of the State where it is executed. Our article on Schedule I, Article 6, deposit of title deeds, pawn or pledge explains the entry, and the State-wise overview gives the general position; no amount is quoted here. Execution: the mortgagor delivers the original documents, an officer of the lender acknowledges receipt on the memorandum and the schedule, the schedule is signed on each page, and both keep a copy. Retain the lender's receipt.
Common mistakes
- No evidence of intent to create security, so the deposit looks like safe custody.
- Handing over copies instead of original title deeds.
- A deposit made outside a town covered by section 58(f), without confirming the notification.
- Not listing each document in the Schedule.
- Silence on whether future advances are secured.
- Describing a document as creating the mortgage and then not registering it where registration is required.
- Not recording the date and place of the deposit.
- Overlooking board and shareholder approvals for a company borrower.
Need help with an equitable mortgage?
The deposit, the intent and the record must line up for the security to hold. Our loan documentation support team prepares the memorandum, the schedule of deeds and the supporting resolutions.
Key takeaways
- An equitable mortgage is created by delivering title deeds with intent to create security.
- Section 58(f) names the towns and allows notified towns.
- A memorandum records the deposit and the debt secured; draft with registration in mind.
- Stamp duty is fixed by State law; no amount is given here.
- List every document in the schedule and keep the lender's receipt.
Read next
- English mortgage deed: format
- Deed of reconveyance of mortgaged property
- Stamp duty on a mortgage deed
- Types of mortgage under the Transfer of Property Act
Disclaimer: This specimen is a general model for information. Every document must be adapted to its facts and to the law, rules and forms in force when it is signed or filed; stamp duty, registration and court fees depend on the State and the forum. This article is general information, not legal advice; check the official text before acting.