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Mis Label Art Press Vs. Indo European Machinery Co. P. Ltd. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtDelhi High Court
Decided On
Case NumberRegular First Appeal No. 346 of 1972
Judge
Reported in1973RLR347
ActsCode of Civil Procedure (CPC), 1908 - Order 41, Rule 5
AppellantMis Label Art Press
Respondentindo European Machinery Co. P. Ltd.
Advocates: R.L. Kohli and; O.P. Khanna, Advs
Cases ReferredGhulam Muhammad vs. The Crown A.I.R.
Excerpt:
civil - security bond - article 6 of schedule 2 to court fees act, article 40 of stamp act, section 17 of registration act and order 41 rule 5 of code of civil procedure, 1908 - decree passed in favor of appellants for certain amount - court stayed execution of decree on furnishing security for decretal amount - appellant contended that security bond invalid on ground of non-payment of stamp duty under article 40, for want of registration and that title-deeds of property must be deposited - under section 17 registration not required by court as it is neither juridical person nor transferee - security bond did not require any stamp duty under article 40 as it was not mortgage but required under article 57 as being uniform practice - it must bear court-fee stamp under article 6 of schedule..........security by mortgaging one of his two immovable properties for payment of the decretal amount. the security-bond was in accordance with form ii of appendix 'g' of the code of civil procedure. the plaintiff-decree-holder, on receiving notice of the security-bond raised objections to if and contended that the bond was invalid for want of payment of stamp duty livable on mortgage-deeds under article 40 of the stamp act and for want of registration and that the title-deeds of the property must bo deposited. (2) the objections were contested and the deputy registrar (3) questions 1 &2. i find that on these questions there has been a sharp divergence of opinion amongst the various high courts in the country. one view taken is that such a security bond is a step in judicial proceedings and.....
Judgment:

B.G. Misra, J.

(1) Regular First Appeal No. 346 of 1972 has been filed in this Court against the decree of the subordinate Judge dated 31st July, 1972 for payment of Rs. 36,000.00 besides costs and interest, in all amounting to Rs. 40,496-90. On 15lh September, 1972. this Court passed an order for the stay of execution of the decree conditional on furnishing security for the decretal amount to the satisfaction of the Deputy Registrar of this Court. On 25t.h September, 1972, the surety furnished security by mortgaging one of his two immovable properties for payment of the decretal amount. The security-bond was in accordance with Form Ii of Appendix 'G' of the Code of Civil Procedure. The plaintiff-decree-holder, on receiving notice of the security-bond raised objections to if and contended that the bond was invalid for want of payment of stamp duty livable on mortgage-deeds under Article 40 of the Stamp Act and for want of registration and that the title-deeds of the property must bo deposited.

(2) The objections were contested and the Deputy Registrar

(3) Questions 1 &2. I find that on these questions there has been a sharp divergence of opinion amongst the various High Courts in the country. One view taken is that such a security bond is a step in judicial proceedings and forms a part of the judicial record,nd, thereforee, requires neither a duty under the Stamp Act nor registration under the Registration Act. The other view is that it is not itself a step in judicial proceedings but it is only an instrument executed by a stranger to the suit and given to the Court and if immovable property be hypothecated, it must be stamped as a mortgage-deed under Article 40 of the stamp Act and it must also be registered under Clause (b) of Section 17 of the Registration Act since it creates rights is the immovable property worth more than Rs 100.00 and in the absence of registration, the document would not confer any rights in view of Section 49 of the Registration Act.

(4) For security in the matter of stay of execution under role 5 or 6 of Order 41 of the Code of Civil Procedure, Forms 2 and 3 of Appendix 'G' of the Code have been prescribed. The Form No. 2 after making the necessary recitals proceeds to state '1, of my free will, stand security to the extent of Rs... mortgaging the property specified in the schedule and that the defendant shall deal, act in accordance with the decree and shall be payable by him and if he shall fail therein, then any amount so payable shall be realised from the properties hereby mortgaged and if the proceeds of sale of the said property are Insufficient to pay the amount due, I, and my legal representatives will be personally liable to pay the balance'. Rule 3 of Order 48 prescribes that all forms given in the Appendix (with necessary variations) shall be used for the purposes therein mentioned and Section 121 of the Code gives statutory authority to the aforesaid rule. The result is that the prescribed form bad statutory force.

(5) SECURITY-BOND given in pursuance of the order of the Court is enforceable by the Court under section 145 of the Code which provides that where a person becomes liable as a surety for purposes of any decree, the order may be executed against the surety to the extent be has made himself personally liable in the manner provided that such person shall be deemed to be party within the meaning of section 47 of the Code. This provision undoubtedly places the security-bond on the level of judicial proceedings and allows the Court to enforce it as its executable decree of its own by attachment, sale of the property and if necessary, by arrest of the surety by its own orders, without the necessity, for the Court to institute a regular suit for recovery of the amount from the surety. The provision exists for the benefit of the decree-holder who has already obtained a decree from the Court of first instance and who has been deprived of its fruits by the Court of appeal conditional on furnishing security. He will not relish the harassment of going through the procedure of another suit with its accompanying appeals and revisions in order to pursue his claim against the surety. The security has been furnished in pursuance of an order of the Court, and the bond, after execution is submitted to the Court and is scrutinised and accepted by it; The rule nisi granting stay is thereafter made absolute or the conditional order previously passed works itself out after the fulfillment of the condition. In my opinion, the security-bond is not at all complete or effective unless and until it is accepted by the Court. It is difficult to subscribe to the view that the security-bond would be effective or valid without such acceptance by the Court. As a matter of fact, the validity and efficiency is lent to the security bond only by the order of the Court, either passed by itself or by its nominee like the Registrar, to whom the judicial powers may have been delegated, and if the bond is not accepted, it has no legal effect.

(6) Moreover, the Court is not a juridical person and cannot hold or transfer or acquire any property and, thereforee, the statutory form does not lay down that the security-bonds should be executed in favor of the Court or for that matter, presiding officer of the Court. The bond is not executed or enforced as contract between the Court and the surety, nor does it amount to a contract between the surety and the decree-holder. The validity of the bond arises on the submission of the surety undertaking the obligation and placing his property under a charge and at the disposal of the Court for purpose of fulfillling the decree and the Court, in exercise of its judicial powers, accepts the same and enforce it in accordance with the provisions of law. As such, it must follow that the furnishing of a security bond is undoubtedly a step in the judicial proceedings and forms a part of the judicial order and records of the Court.

(7) In Raj Rabhuba Singh v. Jal Indar Bahadur Singh, 46 IA 228, the Judicial Committee while considering bond, observed that a separate suit was not necessary to be 351 filed to enforce it and no person is mentioned in the instrument as the beneficiary of the bond, nor had it been given in favor of any named officer. Then the Committee observed that the Court is not juridical person ; it cannot be sued, it cannot take the property and as it cannot take the property, it cannot assign the property, the bond created an unquestionable liablity and there must be some mode of enforcing it and that the only mode was by the Court making an order upon an application that the charged property of the surety be sold. The Judicial Committee of the Privy Council in Bindesri Naik Vs Gangasaran Suhu and others 25 IA 9, observed that the provisions of Section 17 of the Registration Act do rot apply to proper judicial proceedings, whether consisting of pleadings filed by the parties, or orders made by the Court. In Prailal Annee v. Lakshmi Annec and others, 26 IA 101, the Judicial Committee was dealing with a case of compromise but which had not been registered. The Committee observed that the compromise, in so far as it was submitted to and was acted upon judicially by the judge, was in itself a step of judicial procedure not' requiting registration and any order pronounced in terms of it constituted rest judicata, binding upon both the parties to the case who gave their consent.

(8) In Punjab, the matter has for a long time been settled by a Full Bench authority of the High Court of Lahore (Kasturi Lal vs. Govardhan Dass and others A I.R. 1934 Lah 138 ) The following question was referred to, the Full Bench, namely, whether a security bond executed in accordance with an order passed under Order 43, Rules 5 and 6 of the Code staying execution of the order pending decision of the appeal, whereby the surety hypothecates the immovable property for satisfaction of such decree as might be passed by the Appellate Court, which is duly accepted by the Court and execution stayed accordingly, required to be registered. The Full Bench answered the question in the negative and held that the bond did not require registration and non-registration did not bar the decree-holder from asking the Court to realise the decretal sum from the immovable property described in the bond. In this authority, the single Bench decision of the High Court of Lahore in Spinning and Weaving Mills v. Uttam Chand A.I.R. 1949 Lah 8 which had followed an earlier decision of the High Court of Madras in Nagarura Sambavva vs. Tangatur Subbayya I.L.R. 81 Mad 330, was expressly over ruled. During the course of arguments, it was frankly admitted by the counsel before the Full Bench that it was not execution of the bond which affected transfer of rights in the immovable property so as to make it available for the satisfaction of the decree which may be passed by the appellate Courts, it was the order of the Court accepting the bond which created those rights and even if the bond had been duly registered immediately after its execution, it would not become operative unless and until it was accepted by the Court. It was further observed by the Full Bench that if by reason of insufficiency of the security or on any other ground the Court chore not to accept the bond. it would remain a wholly ineffectual and inoperative document despite the fact that it contained all the terms of the transaction and had been duly executed and registered. The law thus laid dawn in the aforesaid authority has held the field in Punjab and Delhi ever since and there is no authority of this High Court to the contrary.

(9) The Full Bench decision of the Lahore High Court mentioned above with respect followed a Division B;nch decision of the High Court of Bombay in Javappa Lokapa Na ainganawar Vs Shivangouda Dvamangauda Patil A I.R. 1923 Bom 42, where Marten, C J. held that a security-bond being a part of Judicial proceedings and incorporated with it, was not by the provisions of Section 17 of the Registration Act and that a Security is given to the Court and not to named individual, still it could not be valid and could be enforced by the Court. The learned counsel for the parties appearing before me informed me that the said authority of the High Court of Bombay has since been followed in the State of Bombay and Maharastra and there is no decision of that Court taking a contrary view. Kasturi Lall's case (supral) has also been followed by the High Court of Nagpur in Dadoo Beluil Korku Vs . Konhatalal Dhanaram . The learned Judge after reciewing the various authorities bearing on the subject observed that the security bond hypothecating the immovable property of the surety for the performance of the decree did not require registration and that the giving of the seccurity bond was a stop in judicial proceedings before any stay order could be granted and execution of a bond did not effect transfer of rights in the immovable property so as to make it available for the satisfaction of the decree, but it was an order of the Court accepting the bond which created those rights and the bond did not become operative unless and until it is accepted by the Court. In this decision, his lordship further held that the security bond did not require a stamp duty under any article of the Stamp Act but it was liable to payment of Court fees under Article 6 of Schedule Ii of the Court Fees Act Kasturi Lal's case has also been followed by the High Court of Travancore and Cochin in Subramania Nadar Armughanperumal Nadar v. Esakkimndan Nadar Dwarapandia Nadar AIR 1953 Tra Coc 364. where the Division Bench held that the security-bond executed in favor of a Court and accepted by the Court and incorporated in the order accepting the same was exempt from registration

(10) [AFTER discussing the contrary view in A.S.P.S.S. Chettyar vs Lloyds Bank AIR 1935 Rang. 138; Gauri Shanker vs Baldev Sahujee AIR 1963 Pat. 210; Hrnter vs Emperor Mr. 1942 Oudh. 371 ; Rivers Steam Navigation Co. Ltd. vs Jalim Mulla & Aw AIR 1957 Ass. 157, R. M. Palot vs P. A. Nednngdi AIR 1988 Ker. 377; Bishanath Sahu Vs Prayag Din : AIR1958All820 , the judgment proceeds]

(11) After careful consideration of the provisions of law and the authorities of the various High Court, my conclusion is that the Court is not a juridical person and not a transferee or holder of the property and that the security bond furnished to it in pursuance of its order does not acquire validity or efficacy unless and until it is accepted by the Court and as such, the security bond forms part of the order of the Court and is step in judicial proceedings and, thereforee, it does not require registration under section 17 of the Registration Act. I also hold that the bond given in pursuance of the judicial order of the Court in statutory form, with necessaty variations and accepted by the Court, obliges the surety to his undertaking and the surety created a charge on the immovable property and places it at the disposal of the Court for its being dealt with under section 145 of the Code or other provisions of law and it is enforceable and not invalid for want of registration. The Full Bench authority of the High Court of Lahore AIR 1934 Lah 138 has consistently been followed in Delhi and I do not see any valid reason to differ from it and I find accordingly.

(12) This takes me to the question of levy of stamp duty. Section 2(17) of the Stamp Act defines a mortgage deed as inclusive of 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 agree one person transfers or creates, to, or in favor of another, a right over or in respect of specified property. In my opinion, the security-bond in Form 2 or 3 of Appendix 'G' of the Code does not satisfy the conditions of a mortgage deed as denned in clause 17 above. It is rot an instrument for the purpose of securing the money advanced or to be advanced by way of loan, nor an existing or future debt nor is it a transfer of a right in immovable property, nor it is in favor of any other person. The Court is neither a person nor a transferee. The security-bond does not transfer a right in property. But it creates a charge over the property and places the property at the disposal of the Court for being proceeded against according to law. It is similar to the seizure and proceeds against the property of the judgment-debtor by the Court by the force of law to realise the decretal amount. Since no judgment has been pronounced against the surety, it will need his initial consent to undertake the obligation and to place his property at the disposal of the Court, but having done so, it is in law subject to the same incidents of exercise of power by the Court as the property of the judgment-debtor in execution of a decree. It is, thereforee, not a mortgage. Consequently, Article 40 of the Stamp Act will not apply to it. As mentioned above, the Full Bench of the Chief Court of Oudh held in that Article 57 did not apply to security-bond because its execution did not constitute a contract. If this argument valid in respect of Article 57, it would have strouger force against attraction of Article 40. So in any view of the matter Article 40 cannot apply.

(13) An article which could easily be attracted is 15 relating to a bond, clauses (a) and (b) of which define it as an obligation for the performance of certain conditions or for payment of money to somebody. But this Article itself specifies that the stamp duty under this Article would not be livable if it is provided for by the Court Fees Act 1870. This would lend support to the view that the provisions of the Stamp Act are ordinarily not intended to apply to judicial proceedings. Article 6 of Schedule Ii of the Court fees Act provides a duty to be levied on bail bonds or other instruments of obligation given on bail bonds or other instruments of obligation given in pursuance of an order made by a Court of magistrate under any section of the Code or otherwise provided for by the Court Fees Act. The security-bond in the present case is certainly an instrument of obligation given in pursuance of an order of the Court. In my opinion the security bond given under Order 41 Rules 5 or 6 of the Code requires duty to be paid by way of Court fees under Article 6 of Schedule Ii which, for the present moment, is 65 Paise. In giving this answer to the question, raised, I am supported by an authority of the High Court of Lahore reported as Ghulam Muhammad vs. The Crown A.I.R. 1933 Lah 89 as well as in the reference by the District Registrar Dadu A.I.R. 1936 Sind 41 and the case in Dadoo Balai Korku's As far as I remember, this was the old prevailing practice to pay Court-fees under Sbeduled Ii, Article 6 of the Couit Fees Act as well as stamp duty ' under Article 57 of the Stamp Act on such security-bonds. For some time past, the affixation of court-fee has fallen out of use, I hold that in the view I have taken that the security-bond is a part of Judicial proceedings, it is imperative that court-fees under the aforesaid Article must be paid on all such bonds.

(14) The question remaining to be decided is whether in addition to court-fees, stamp duty under Article 57 of the Stamp Act must be paid on the bond. In this connection, I am, as at present advised, not inclined to disturb the uniform practice followed in Delhi for paying stamp duty under Article 57 of the Stamp Act without hearing the Chief Revenue Controlling Authority to whom notice of this proceeding has not been issued.

(15) As a result, my answer to the question is that the security-bond in question must bear the court-fee stamp under Article 6, Schedule 2 of the Court Fees as well as stamp duty under Article 57 of the Stamp Act, but it does not require any stamp duty under Article 40.

(16) Question No. 3 The next question for consideration is the deposit of title deeds. The High Court of Delhi was establised with effect from October, 1966 and it was given original jurisniction to try suits of a certain valuation. Under Section 7 of the High Court Act, the High Court framed rules. Chapter 20 of which deals with the procedure for furnishing security and rule 2 thereof prescribes that every person offering himself as surety shall produce before the Court officer concerned, his title-deeds and vouchers and may be examined by him on oath or solemn affirmation, touching the value of his property, and the debts and liabilities to which it is subject: after being examined and allowed, he shall sign the requisite bond and shall deposit his title-deeds and vouchers.

(17) Provided that in cases where the amount of the bond does not exceed Rs. 5,0001 the officer concerned, and in other cases, the Court may, on good cause shown, dispense with the deposit of title-deeds and vouchers. Rule 6 prescribes that papers and records relating to the taking of security, including securities and security bonds, shall be kept by the Registrar in safe custody in safe in the strong room after mailing an appropriate entry in a register to be maintained by him for the purpose. The provision, thereforee, requires the deposit of title deeds in respect of bonds for more than Rs. 5,030.00.

(18) This practice has informally been adopted on the original side and has been working satisfactorily. The rules of the Court on the appellate side do not contain any such requirement for deposit of title-deeds. Nor do I find in them any prohibition in this behalf. I am of the view that it is very salutary to obtain deposit of title-deeds from the sureties. It avoids the danger of fraud alluded to in the case of Chittvar Firm's A.I.R. 1935 Rang 168. Under section 58 and 59 of the Transfer of Property Act, a mortgage by deposit of title-deeds can be effected orally by delivery of documents of title. So a subsequent transferee of interest in the property for value would, not finding the title-deeds with his transferor, be put on enquiry and notice of the charge created by deposit of title-deeds under the security-bond even in the absence of registration. This fortifies the legal results flowing from the furnishing of the security to the Court and minimises fraud. I, thereforee, hold that on the appellate side also the principle behind the original side rule mentioned above should be followed and in respect of security-bonds of the value of Rs. 5,000.00 or more, the title-deed relating to the charged property must be deposited with the Registrar of the Court.

(19) Arguments addressed at the bar invited my attention to one or two difficulties in the matter, for example if a party was unable to deposit the title-deed on account of security being a second charge (if it was already subject to a mortgage) or a title-deed consisting of a renewal of an expired lease had not been obtained or the suerty being entitled to only a share in undivided property, were bona fide not in a position to deposit the original title-deeds. In my opinion, ordinarily the Registrar would insist upon furnish ing of clear security where documents of title could bo deposited. If for any reason, this cannot be done, I bold that the party may apply to the Court for such directions as it may deem fit to give and or such motion, the Court may order the surety to execute a regular mortgage-deed on proper stamp duty under article 40 of the Stamp Act in favor of the Registrar or other officer of the Court, or it may, if so consented to by the surety, order the attachment of the property of the surety in question in accordance with the provisions of Order 38, Rules 5 & 6 read with section 145 of the Code, in order to bring about the result mentioned in Section 64 of Code. Lastly, the Court may pass such other or further orders according to law as it may deem fit.

(20) To summarise, my conclusions are as follows :- (1) The security-bond executed (with necessary variations) in form 2 and 3 of Appendix G' of the Civil Procedure Code in pursuance of orders passed under Order 41, Rule 5 ft 6 of the Code does not require registration under section 17 of the Registration Act (1) The requisite stamp on such security- bond is the fee payable under Article 6 of Schedule Ii of the Court. Fees Act in addition to the duty under Article 57 of the Stamp Act. (2) If the security-bond involves an obligation to pay more than Rs. 5,000.00, the documents of the title of the charged property must be deposited along with security-bond in accordance with the principle contained in Chapter Xx of the Delhi High Court (Original Side) Rules, 1967.

(21) If for any good reason, the title deed cannot be deposited. Court may give directions as it may deem fit to give in the circumstances of the case. In appropriate cases, the Court may order the surety to execute and registrar a regular mortgage-deed in favor of the Registrar or other officer of the Court or it may, if so consented to by the surety, or the Court may pass other or further orders according to law as it may deem fit.

(22) Before I part with the case, I must record appreciation of the assistance render- ed to (he Court by the counsel. I desire to thank to Mr. Sardari Lal Bhatia, Seni Advocate, President of the Delhi High Court Bar Association.


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