1. This is a reference by the Board of Revenue, U. P., as the Chief Controlling Revenue Authority, under Section 57 of the, Indian Stamp Act as amended by the U. P. Stamp (Amendment) Act, 1962 (hereafter referred to as the Act). The question for decision relates to the charge-ability of stamp duty on a document dated November 18, 1964 executed by one Sri Padarh Chand Jain of Agra, and it has arisen in the following circumstances.
2. Sri Padam Chand Jain, who is the sole proprietor of Prem Electric Press, Agra, executed the document in question on November 18, 1964 in favour of the State Bank of India, Agra (hereafter referred to as the Bank), with a view to obtain overdraft facility up to a maximum limit of Rs. 1,75,000 at any one time. The executant treated the document as a memorandum of agreement relating to deposit of title deeds and he, therefore, stamped the same with a duty of Rs. 504 under Article 6 (1) of Schedule 1-B to the Act. When the document was presented for registration, the Sub-Registrar, Agra, held that it was a deed of simple mortgage on which a stamp duty of Rs. 3,937.50 P. was payable under Article 40 (b) of the same Schedule to the Act. He, therefore, impounded the document and forwarded it to the Collector for necessary action under Section 38(2) of the Act. The Collector who was doubtful as to the true nature of the document referred the case to the Board of Revenue under Section 56(2) of the Act. The Board, in its turn, referred the case to this Court, as already noted for decision under Section 57 of the Act. The question referred to this Court is as follows:
'Whether the document under reference is a memorandum of agreement relating to deposit of title deeds within the meaning of Article 6 (1), Schedule I-B of the U. P. Stamp (Amendment) Act, 1962 or a mortgage deed within the definition of that term in Section 2(17) of the Stamp Act and chargeable accordingly with a duty of Rs. 3,937.50 under Article 40 (b), Schedule I-B ibid.'
Section 2(17) of the Act defines 'mortgage-deed' as follows:
' 'Mortgage-deed' includes every instrument whereby, for the purpose of securing money advanced, or to be advanced, by way of loan, or an existing or future debt, or the performance of an engagement, one person transfers, or creates to, or in favour of, another, a right over or in respect of specified property;'
The essentials of a 'mortgage deed' as defined in Section 2(17) of the Act are: (1) that the instrument must be executed for the purpose of securing a loan or debt or to ensure the performance of an engagement, (2) the mortgagor must transfer or create a right to specified property in favour of the mortgagee, and (3) the transfer or creation of such right must be in accordance with law. The definition of mortgage in Section 58(a) of the Transfer of Property Act is as follows:
'A mortgage is the transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced or to be advanced by way of loan and existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability.'
According to this definition, a mortgage is the transfer of an interest in immovable property by way of security for a loan or a debt or the performance of an engagement which may give rise to a pecuniary liability.
3. It would be noticed that the connotation of mortgage involved in the definition given in Section 2(17) of the Act is much wider; in the first place, it is not restricted to immovable property and, therefore, it includes pawn or pledge of movables, and secondly, it is not restricted to transfer of an interest or right to property; it also includes a charge which creates a right to property, that is, a jus ad rem, as distinguished for a jus in rem created by a mortgage under the Transfer of Property Act.
4. The levy of stamp duty on any instrument which answers the definition of a 'mortgage-deed' will be governed by the provisions of the Indian Stamp Act and not by the Transfer of Property Act. When a statute creates a special liability, the special definition of any term given in such a statute must supersede and prevail over the ordinary connotation of that term, in which it is understood at common law.
5. A 'mortgage-deed' within the definition given in Section 2(17) of the Act is dutiable under Article 40 of Schedule I-B to the Act. The class of instruments dutiable as 'mortgage-deed' under Article 40 have been divided into two categories depending upon whether or not possession of the property comprised in such deed has been given to the mortgagee or agreed to be given. The material part of Article 40 of the Act is reproduced below:
'40.Mortgage-Deed, not being an agreement relating to deposit of titledeeds, Pawn or Pledge (No, 6), Bottomry Bond (No. 16), Mortgage of a Crop (No. 41), Respondent Bond(No. 56) or Security Bond (No. 57)-
(a) When possession of the property or any part ofthe property comprised in such deedis given by the mortgagor or agreed to be given;
The same duty as conveyance (No. 23) for a consideration equal to the amount securedby such deed.
(b) when possession is not given or agreed to begiven as aforesaid.
The same duty as a Bond(No. 15) for the amount securedby such deed.'
6. The contention put forward on behalf of the Revenue is that the instrument in question is a mortgage deed, as defined in Section 2(17) of the Act, and dutiable under Article 40 (b) of Schedule I-B. On the other hand, the contention of Sri K. C. Agarwal appearing for applicant Padam Ghana Jain is that the instrument is an agreement relating to deposit of title deeds and the stamp duty specified in Article 6 (i) is payable thereon. Article 6 of Schedule I-B covers following instruments:
'6. Agreement relating to deposit of title deeds, pawn or pledge, that is to say, any instrument evidencing an agreement relating to-
(1) the deposit of title deeds of instruments constituting or being evidence of the title to any property whatever (other than a marketable security); or
(2) the pawn or pledge of movable property, where such deposit, pawn or pledge has been made by way of security for the repayment of money advanced or to be advanced by way of loan or an existing or future debt--.'
7. As regards the construction of the deed dated November 18, 1964, it was, as already stated, executed by the applicant with a view to obtain overdraft facility up to a maximum limit of Rs. 1,75,000, at any one time, on the basis of a cash credit agreement. The preamble to the deed reads as follows:
'Whereas (1) .....
(2) The Bank, at the request of the Borrower agreed to grant cash credit facilities up to a maximum limit of Rs. 1,75,000 (Rupees one Lac and seventy five thousand only) at any one time against the pledge of goods in the account of his said firm 'the Prem Electric Press (hereinafter referred to as said firm accounts) with the Bank upon having the repayment thereof as aforesaid and such other sums as are hereinafter mentioned and with interest payable thereon secured by a first mortgage by deposit of title-deeds of the said land and premises described in the said First Schedule hereto as collateral security.
(3) Pursuant to the hereinbefore recited agreement and as a collateral security for the said sum of Rs. 1,75,000 and such other sums with interest thereon as hereinaftermentioned the Borrower on the 18th November, 1964 deposited with the Branch of the State Bank of India at Chipitola, Agra the title deeds mentioned in the Second Schedule hereunder written relating to the said land and premises with intent to create a security thereon as hereinafter mentioned.'
Then follow the covenants by the borrower the material portion of which is reproduced below:
Now this indenture witnesseth as follows:
1. In pursuance of the said agreement and in consideration of the premises aforesaid the Borrowers hereby covenant with the Bank as follows:
(i) To repay to the Bank on demand the amount or amounts as may be due by the Borrower to the Bank under the said firm account up to a maximum of Rs. 1,75,000 at any one time and shall in the meantime pay interest on the amount or amounts for the time being due to the Bank at the rate of State Bank of India advance rate minimum 6 per cent p. a. on the cash credit account with monthly rates, which interest is to be debited to the said firm account.
(ii) To pay to the Bank on demand all law costs (including as between attorney and clients), charges and expenses which may be paid or incurred by the Bank in connection with these presents or in enforcing or fulfilment of the covenants and conditions of these presents with interest thereon at the rate of 6% p. a. from the time the said charges and expenses are paid by the Bank and until repayment the same shall be a charge upon the properties herein comprised.'
'And this indenture also witnesseth as follows:That the Borrowers doth hereby admit and acknowledge that in further pursuance of the said agreement and in consideration of the premises and Borrowers did on the 18-11-1964 deliver to and deposit with the Branch of State Bank of India, Chipitola, Agra the title deeds mentioned in the Second Schedule hereunder written relating to All That the land and premises more particularly described in the First Schedule hereto (hereinafter referred to as 'the said premises') with intent to create a First Mortgage by Deposit of Title Deeds on the said premises to secure the repayment by the Borrower tothe Bank of the amount or amounts for the time being due on the said firm account upto a maximum of Rs. 1,75,000 at any one time as aforesaid with all interests and costs in manner hereinbefore mentioned and all other moneys if any which at any time hereafter shall on any account be due and payable by the Borrower to the Bank and such law costs, charges and expenses as are hereinbefore mentioned in accordance with the covenants herein contained.'
8. The deed provides that if the borrower defaults in payment of the principal amount with interest thereon, owing to the Bank within seven days after demand, the moneys due to the Bank shall, at the option of the Bank immediately become payable by the borrower and in such event the Bank shall be at liberty to take steps for the realisation of the security.
9. On reading these terms it is obvious that the document in question evidences an agreement between the applicant and the Bank relating to over-draft facility in respect of a maximum sum of Rs. 1,75,000/-against the pledge of goods in the account of the firm 'Prem Electric Press' which is referred to in the deed as 'the said firm account'. The pledge of goods in the said firm account was, apparently, intended to be the primary security for the over-drawal, if any. The deed also records an agreement relating to 'a first mortgage by deposit of title deeds in respect or the land and premises specified in the first schedule as collateral security for the said amount. As stated in the deed, the title deeds had already been deposited with the Branch of the State Bank of India at Chipitola, Agra. The deed, however, does not purport to create any charge on the specified properties to secure the sum of Rs. 1,75,000/-. The reason is obvious: a mortgage by deposit of title deeds effectuates transfer of a right to the properties and creation, separately, of a charge thereon becomes unnecessary. (See K. J. Nathan v. S. V. Maruthi Kao, AIR 1965 SC 430). The averment in the statement of the case submitted by the Board of Revenue to the effect that
'the document does not restrict itself merely to the deposit of title deeds as security but burdens the immovable property with a charge to secure cash credit facility to the extent of Rs. 1,75,000/-'
is misconceived. It is true, no doubt, that under the terms of the deed, if any legal expenses are paid or incurred by the Bank in enforcing the terms of the agreement, then, until repayment, the same shall be a charge upon the properties specified in the schedule to the deed, but this charge would arise in future, if at all, when any such legal expenses are incurred by the Bank. As laid down in Section 17 of the Act, all instruments chargeable with duty must be stamped either before or at the time of execution. In the present case, when thedeed was executed, no charge was created on the properties in respect of an ascertained or an ascertainable sum of money and, hence, the stipulation in point may be regarded as a surplusage in determining the chargeability of the deed to stamp duty.
10. To sum up, the deed evidences an agreement pledging goods and also an agreement purporting to create a first mortgage, by deposit of title deeds. It is not therefore, chargeable under Article 40 in view of the clear terms of that Article which excludes an agreement relating to deposit of title deeds and a pledge. The instrument is, clearly, chargeable under Article 6 of the Act.
11. In the view I have taken of the chargeability of the document under reference it is not necessary to decide the contentions of Sri K. C. Agarwal, as regards the invalidity of the document for want of attestation and otherwise.
12. In my opinion, therefore the answer to the question under reference should be that the deed dated November 18, 1964 is chargeable under Article 6 (1) and not under Article 40 (b) of Schedule I-B of the Act.
13. Applicant Padam Chand Jain shall get Rs. 200 as costs of this reference from the Chief Controlling Revenue Authority. Counsel's fee is assessed at the same amount.
14. I agree with my brother Mukherjee that the deed executed by Padmchand Jain on November 18, 1964, in favour of the State Bank of India is chargeable to duty under Article 6 (1) of Schedule I-B of the Indian Stamp Act as amended by the U. P. Stamp (Amendment) Act, 1962 and not under Article 40 (b) of the Schedule.
15. Upon a perusal of the terms of the deed it appears that it is not a mortgage deed falling under Article 40. The deed specifically recites that as a collateral security for the sum of Rs. 1,75,000 the borrower, on November 18, 1964, deposited with the State Bank of India the title deeds relating to the immovable property 'with intent to create a security thereon'. There is no provision thereafter in the deed expressly charging or mortgaging the property for payment of the sum of Rs. 1,75,000. Clause (I) (1) (i) following paragraph 3, recites that the borrowers covenant with the Bank to repay to the Bank on demand the amount falling due by the borrower to the Bank up to the maximum of Rs. 1,75,000 but there is no provision here which can be said 'in proprio vigore' to burden the property for payment of that amount. Clause (I) (1) (ii) refers to law costs, charges and expenses which may be paid or incurred by the Bank in connection with the transaction, and it is in respect of these that a charge is contemplated thereunder upon the property. Upon a fair reading of the entire deed, it seems to me impossible to hold that any suchcharge has been created under the deed in respect of the amount of Rs. 1,75,000. As the case before the Board, and also before us, proceeded on the basis that the question referred is confirmed to the amount of Rs. 1,75,000, it does not appear necessary to me to consider the effect of Clause (I) (1) (ii).
16. I agree that the applicant is entitled to his costs which should be assessed at Rs. 200 and that counsel's fee should be assessed in the same figure.
17. I have had the advantage of perusing the opinions prepared by my learned brothers Pathak and Mukherjee, JJ. I agree with them that the deed executed by the applicant Padam Chand Jain in favour of the State Bank of India, Agra on 18-11-64 is chargeable to duty under Article 6 (1) of Schedule I-B of the Indian Stamp Act as amended by the U. P. (Amendment) Act, 1962 and not under Article 40 (b) of the said Schedule. I further agree to the proposed order as to costs.
BY THE COURT
18. Our answer to the question under reference is that the deed executed by the applicant Padam Chand Jain on 18-11-64 in favour of the State Bank of India, Agra is chargeable to duty under Article 6 (1) of Schedule I-B of the Indian Stamp Act as amended by the U. P. Stamp (Amendment) Act, 1962 and not under Article 40 (b) of that Schedule.
19. The applicant Padara Chand Jain will get his costs of this reference, assessed at Rs. 200, from the Chief Controlling Revenue Authority. U. P. Counsel's fee is also assessed at the same amount.