To understand whether mortgage by deposit of title deeds, requires registration relevant provisions of Transfer of Property Act, 1882 (TP Act) and Indian Registration Act, 1908 (Registration Act), are examined.

TP Act

Sec. 58(a) of TP Act defines mortgage as under:
58(a) A mortgage is the transfer of an interest in specific immoveable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability..

Sec.58(f) of TP Act provides:
58(f) Mortgage by deposit of title-deeds. Where a person in any of the following towns, namely, the towns of Calcutta, Madras and Bombay, and in any other town which the State Government concerned may, by notification in the Official Gazette, specify in this behalf, delivers to a creditor or his agent documents of title to immoveable property, with intent to create a security thereon, the transaction is called a mortgage by deposit of title -deeds.

Sec.59 of TP Act provides:
59. Mortgage when to be by assurance. Where the principal money secured is one hundred rupees or upwards, a mortgage other than a mortgage by deposit of title-deeds can be effected only by a registered instrument signed by the mortgagor and attested by at least two witnesses. Where the principal money secured is less than one hundred rupees, a mortgage may be effected either by a registered instrument signed and attested as aforesaid, or (except in the case of a simple mortgage) by delivery of the property.

A perusal of Sec.58(a), 58(f) and 59 of TP Act brings out following:

1. A mortgage (including by deposit of title deeds) entails transfer of interest in specific immovable property.
2. To constitute mortgage by deposit of title deeds, the requirement is that the documents of title of the property to be mortgaged are deposited by the mortgagor with the mortgagee with an intent to create security thereon. Existence of writing is not essential.
3. Mortgages other than mortgage by deposit of title deeds can be effected only by registered deed. Requirement for registered deed is not mandatory, in case of mortgage by deposit of title deeds.

Registration Act

Sec.17 of Registration Act to the extent relevant provides:
17. Documents of which registration is compulsory:

1. The following documents shall be registered, if the property to which they relate is situate in a district in which, and if they have been executed on or after the date on which, Act No. XVI of 1864, or the Indian Registration Act, 1866, or the Indian Registration Act, 1871, or the Indian Registration Act, 1877, or this Act came or comes into force, namely:

1. 
   
2. other non-testamentary instruments which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immovable property;
3. non-testamentary instruments which acknowledge the receipt or payment of any consideration on account of the creation, declaration, assignment, limitation or extinction of any such right, title or interest; and
4. "

A perusal of Sec.17 of Registration Act discloses:

1. Unlike TP Act, there is no express provision in Registration Act requiring registration of all mortgages including the one by deposit of title deeds.
2. However, non-testamentary instruments which purport or operate to create an interest in immovable property, need to be registered. Thus, even though law does not require the creation of mortgage by deposit of title deeds to be in writing or by a registered deed, in the event Parties execute a document purporting to create mortgage by deposit of title deeds (since entails transfer of an interest in immovable property), the same would require registration.
3. Further, if Parties execute a document acknowledging the receipt or payment of mortgage-money / money of which payment is secured, on account of mortgage, such document would require registration.

Judicial pronouncements
The Supreme Court in Rachpal Maharaj v. Bhagwandas Daruka and others 1950 SCC OnLine SC 13 ("Rachpal), considered if the following writing was compulsorily registrable under Sec.17 of Registration Act:

We write to put on record that to secure the repayment of the money already due to you from us on accounts of the business transactions between yourselves and ourselves and the money that may hereafter become due on account of such transactions we have this day deposited with you the following title deeds in Calcutta at your place of business at No. 7 Sambhu Mallick Lane, relating to our properties at Samastipur with intent to create an equitable mortgage on the said properties to secure all moneys including interest that may be found due and payable by us to you on account of the said transactions...."

Holding that the above writing did not require registration, the Court held thus:
4. When the debtor deposits with the creditor the title deeds of his property with intent to create a security, the law implies a contract between the parties to create a mortgage and no registered instrument is required under Section 59 as in other forms of mortgage. But if the parties choose to reduce the contract to writing, the implication is excluded by their express bargain, and the document will be the sole evidence of its terms. In such a case the deposit and the document both form integral parts of the transaction and are essential ingredients in the creation of the mortgage.

As the deposit alone is not intended to create the charge and the document, which constitutes the bargain regarding the security, is also necessary and operates to create the charge in conjunction with the deposit, it requires registration under section 17 of the Indian Registration Act, 1908, as a non-testamentary instrument creating an interest in immovable property, where the value of such property is one hundred rupees and upwards.

The time factor is not decisive. The document may be handed over to the creditor along with the title deeds and yet may not be registrable, as in Obla Sundarachariar v. Narayana Ayyar 58 I.A. 68 Or, it may be delivered at a later dated and nevertheless be registrable, as in Hari Sankar Paul v. Kedar Nath Saha 66 I.A. 184. The crucial question is:
Did the parties intend to reduce their bargain regarding the deposit of the title deeds to the form of a document ? If so, the document requires registration. If, on the other hand, its proper construction and the surrounding circumstances lead to the conclusion that the parties did not intend to do so, then, there being no express bargain, the contract to create the mortgage arises by implication of the law from the deposit itself with the requisite intention, and the document, being merely evidential does not require registration.

5. The two latest pronouncements of the Privy Council, to which reference has been made, aptly illustrate cases falling on either side of the line. In Obla Sundarachariar v. Narayana Ayyar 58 I.A. 68 a signed memorandum was delivered to the mortgagee along with the title deeds of certain properties deposited as security. The memorandum stated "As agreed upon in person, I have delivered to you the under-mentioned documents as security," and listed the title deeds deposited. It was held that the memorandum was no more than a mere record of the particulars of the deeds and did not require registration. The criterion applied was :

"No such memorandum can be within the section (section 17 of the Registration Act) unless on its face it embodies such terms and is signed and delivered at such time and place and in such circumstances as to lead legitimately to the conclusion that, so far as the deposit is concerned, it constitutes the agreement between the parties."

In Hari Sankar Paul v. Kedar Nath Saha 66 I.A. 184 the title deeds were deposited accompanied by a memorandum when part of the advance arranged for was made. Some days later when the balance was advanced, another memorandum was delivered superseding the earlier one, and this was a formal document stating the essential terms of the transaction "hereby agreed" and referred to the moneys "hereby secured". It also conferred an express power to sale on the mortgagee. Lord Macmillan, after reviewing the earlier decisions of the Board, held that the document required registration, observing,

"where, as here, the parties, professing to create a mortgage by a deposit of title deeds contemporaneously enter into a contractual agreement, in writing, which is made an integral part of the transaction, and is itself an operative instrument and not merely evidential, such a document must, under the statute, be registered."

6. Turning now to the memorandum before us, it is clear, on the face of it, that the parties did not intend thereby to create the charge. The document purports only to record a transaction which had been concluded and under which the rights and liabilities had been orally agreed upon. No doubt it was taken by the respondents to show that the title deeds of the appellant's properties were deposited with them as security for the moneys advanced by them, and to obviate a possible plea that the deeds were left with them for other purposes, as indeed was contended by the appellant in his written statement, taking advantage of the non-registration of the memorandum in question. But that is far from intending to reduce the bargain to writing and make the document the basis of the rights and liabilities of the parties. In agreement with the High Court, we are of opinion, that the memorandum delivered by the appellant along with the title deeds deposited with the respondents did not require registration ."

In another case in United Bank of India v. Lekharam Sonaram & Co. AIR 1965 SC 1591 ("Lekharam"), Supreme Court considered the effect of the following writing:

This is to place on record that I have this day deposited with you at your head office at Clive Street, Calcutta, the undernoted documents of title relating to my properties, viz., Giridih Malho properties as described in the title deeds with intent to create an equitable mortgage upon all my rights, title and interest in the said properties to secure due repayment on demand of all moneys now owing or which shall at any time hereafter be owing from me or from M/s. Lekharam Sonaram & Co. either singly or jointly or otherwise to Bengal Central Bank Limited, whether on balance of account or by discount or otherwise in respect in any manner whatsoever and including interest with monthly rests, commissions and other banking charges and any law costs incurred in connection with the account. I do hereby put on record that the properties mentioned below are free from all encumbrances

The court held:
7. It is essential to bear in mind that the essence of a mortgage by deposit of title deeds is the actual handing over by a borrower to the lender of documents of title to immovable property with the intention that those documents shall constitute a security which will enable the creditor ultimately to recover the money which he has lent. But if the parties choose to reduce the contract to writing, this implication of law is excluded by their express bargain, and the document will be the sole evidence of its terms. In such a case the deposit and the document both form integral parts of the transaction and are essential ingredients in the creation of the mortgage. It follows that in such a case the document which constitutes the bargain regarding security requires registration under Section 17 of the Registration Act, 1908, as a non-testamentary instrument creating an interest in immovable property, where the value of such property is one hundred rupees and upwards. If a document of this character is not registered it cannot be used in the evidence at all and the transaction itself cannot be proved by oral evidence either.

2. As regards exhibit 12 also, it is not possible to accept the argument of the respondents that it created a charge for the reason that the language in exhibit 12 suggests that it recorded a transaction which had already been concluded and under which rights and liabilities had already been agreed upon. It is also significant that exhibit 12 is written not by Lekharam--the karta of the joint family--but by Babulal Ram. It recites that he had deposited the title deeds with an intent to create an equitable mortgage " upon all my rights, title and interest in the said properties ". The language of exhibit 12 is identical in material respects with the language of the document construed by this court in Rachpal Mahraj v. Bhagwandas Daruka, [1950] S.C.R. 548 and is covered by the decision in that case. We accordingly reject the argument addressed by the learned counsel for the respondents on this aspect of the case."

In Veeramachineni Gangadhara Rao vs. The Andhra Bank Ltd. and Ors. MANU/SC/0602/1971, Supreme Court reiterated:

17. Memorandum in question was intended to "put on record" the terms already agreed upon. That being the case, the document cannot be considered as a contract entered into between the parties. If the parties intended that it should embody the contract between them, it would have been necessary to register the same under Section 17 of the Registration Act, 1908. The crucial question is: Did the parties intend to reduce their bargain regarding the deposit of the title deeds to the form of a document? If so, the document requires registration. If on the other hand, its proper construction and the surrounding circumstances lead to the conclusion that the parties did not intend to do so, then, there being no express bargain, the contract to create the mortgage arises by implication of the law from the deposit itself with the requisite intention, and the document being merely evidential does not require registration.

In yet another case in State of Haryana and others v. Narvir Singh and another (2014) 1 SCC 105 (Narvir Singh), relying upon Rachpal and Lekharam, Supreme Court clarified the position as under:

11. A mortgage inter alia means transfer of interest in the specific immovable property for the purpose of securing the money advanced by way of loan. Section 17(1)(c) of the Registration Act provides that a non-testamentary instrument which acknowledges the receipt or payment of any consideration on account of the creation, declaration, assignment, limitation or extension of any such right, title or interest, requires compulsory registration. A mortgage by deposit of title deeds in terms of Section 58(f) of the Transfer of Property Act surely acknowledges the receipt and transfer of interest and, therefore, one may contend that its registration is compulsory.

However, Section 59 of the Transfer of Property Act mandates that every mortgage other than a mortgage by deposit of title deeds can be effected only by a registered instrument. In the face of it, in our opinion, when the debtor deposits with the creditor title deeds of the property for the purpose of security, it becomes a mortgage in terms of Section 58(f) of the Transfer of Property Act and no registered instrument is required under Section 59 thereof as in other classes of mortgage.

The essence of a mortgage by deposit of title deeds is the handing over, by a borrower to the creditor, the title deeds of immovable property with the intention that those documents shall constitute security, enabling the creditor to recover the money lent. After the deposit of the title deeds the creditor and borrower may record the transaction in a memorandum but such a memorandum would not be an instrument of mortgage.

A memorandum reducing other terms and conditions with regard to the deposit in the form of a document, however, shall require registration under Section 17(1)(c) of the Registration Act, but in a case in which such a document does not incorporate any term and condition, it is merely evidential and does not require registration.

14. Bearing in mind the principles aforesaid, we proceed to consider the facts of the present case:

14.1. It is relevant here to state that the letter dated 29-3-2007 of the Finance Commissioner inter alia makes the "instrument of deposit of title deeds compulsorily registrable under Section 17(1)(c) of the Registration Act". In such contingency, the registration fee and stamp duty would be leviable.

14.2. But the question is whether a mortgage by deposit of title deeds is required to be done by an instrument at all. In our opinion, it may be effected in a specified town by the debtor delivering to his creditor documents of title to immovable property with the intent to create a security thereon. No instrument is required to be drawn for this purpose. However, the parties may choose to have a memorandum prepared only showing deposit of the title deeds. In such a case also registration is not required. But in a case in which the memorandum recorded in writing creates rights, liabilities or extinguishes those, the same requires registration.

14.3. 

14.4. Nothing has been brought on record to show existence of any instrument which has created or extinguished any right or liability. In the case in hand, the original deeds have just been deposited with the Bank. In the face of it, we are of the opinion that the charge of mortgage can be entered into revenue record in respect of mortgage by deposit of the title deeds and for that, an instrument of mortgage is not necessary. A mortgage by deposit of the title deeds further does not require registration. Hence, the question of payment of registration fee and stamp duty does not arise.

14.5. By way of abundant caution and at the cost of repetition we may, however, observe that when the borrower and the creditor choose to reduce the contract into writing and if such a document is the sole evidence of the terms between them, the document shall form an integral part of the transaction and the same shall require registration under Section 17 of the Registration Act."

Summing up:
From the above discussion, the following position emerges:

1. A mortgage by deposit of title deeds can be created by conduct alone, without there being any writing or registered instrument.
    
2. However, if parties professing to create a mortgage by deposit of title deeds choose to have a writing and contemporaneously enter into a written agreement, which is made integral part of the transaction so that such document could be sole evidence of the terms of transaction and the said document is an operative instrument (for instance it states the essential terms of transaction "hereby agreed" and refer to the mortgage-money "hereby secured"), it requires registration.
    
3. Mere record of a transaction, that had been concluded and under which rights and liabilities had been orally agreed upon and when the writing does not purport to be the basis of rights and liabilities of the parties, would not require registration. Thus, mere record of particulars of deed that were deposited to create mortgage, would not require registration.
    
4. A writing that acknowledges receipt or payment of mortgage-money on account of creation of mortgage by deposit of title deeds would also require registration.