(1) This is a reference by the Chief Controlling Revenue Authority, Madras, under S. 57 of the Indian Stamp Act, 1899, for our opinion whether the instrument in question is a mortgage with possession coming under Art. 40(a) of Schedule I of the Indian Stamp Act or an agreement.
(2) The instrument styled as an agreement, is the record of a transaction common in the film trade, whereby the film producer granting distribution rights in specified territories to the financier termed, the distributor. The instrument secures to the distributor the realisation of his advance by covenants giving him specified rights over the film. It generally specifies the title of the film and also names of prominent artistes, featuring or expected to feature in the film. The instrument in question under consideration has been entered into by Messrs. Sudarsanam Pictures, Film Producers, with Messrs. Gee Pictures (P.), Ltd., film distributors, in respect of a Tamil talkie entitled 'Aval Yar'. the document provides for the advance of a sum of Rs. 50,000, by the distributors to the producers, the amount to be paid in four instalments, the final instalment,, a sum of Rs. 20,000, being payable against delivery of the prints, that is, positive prints for exhibition. The producers grant to the distributors the exclusive rights of exhibition, distribution and exploitation of the picture in specified territories for a period of five years. Mutual covenants are found for the protection of the respective interests of the producer and the distributor. There is provision for the distributor having commission on the realisations from the exhibition of the film. The operative part of the instrument, material for our purpose, is found in the following clauses:--
'The producers hereby grant the distributors the exclusive rights of exhibition, distribution and exploitation of the said picture for the area referred to hereinabove for a period of five (5) years from the date of its first release in the said area. The producers shall deliver to the distributors three positive prints of the said picture for distribution, with three sets of photo cards, three sets of enlargements, three sets of slides and other lean publication. The producers shall, subject to availability of raw stock prepare and supply to the distributors as many extra prints as the distributors may require for which the distributors shall advance to the producers the necessary amounts towards the cost of the prints and debit the amount to the account of the producers................ The distributors shall have the first and paramount charge on the nett realisations. The distributors shall be entitled in the first instance to appropriate themselves the commission due to them from the realisations. The balance of the net realisations shall thereafter be appropriated towards the recovery of all advances made by the distributors. When all the advances and payments made by the distributors shall have been recovered as aforesaid, the distributors shall every month remit the net realisations less their commission on or before the 15th of the succeeding month. The distributors shall have the first charge over the distribution, exhibition and exploitation right of the said picture for the said distribution area, the realisations therefrom and of the copies of the picture supplied hereunder until the amount due to the distributors is fully discharged...... On the expiration of the period of distribution the distributors shall return to the producers all the prints of the said picture along with the lean publicities in the then existing conditions. If, within one year from the date of the first release of the said picture, the amounts advanced by the distributors are not fully collected, the producers shall be entitled to repay to the distributors the amounts standing to their credit.'
This document is signed by the producers and the distributors. It bears stamp as an agreement and is not attested.
(3) The learned Additional Government Pleader appearing for the Chief Controlling Revenue Authority, contends that the instrument is a mortgage, and a mortgage with possession in fact falling under Art. 40(a) of the Stamp Act. He stresses on to covenant in the Stamp Act. He stresses on the covenant in the instrument providing for delivery of positive prints of the picture to the distributors and the covenant that the distributors shall have the first charge over the prints and the distribution, exhibition and exploitation rights of the picture in the specified territory till the amount due to the distributors is fully discharged. Reliance is placed on the assurance in the instrument that the distributors shall have a first and paramount charge on the net realisations from the picture. Mr. R. Janardhana Rao, appearing amicus curiae for the respondent emphasises that at the time when the instrument was executed, the picture was still under production, the positive prints were yet to be taken after the completion of the picture and there was than no property in existence for any transfer to operate thereon. It is pointed out that before positive prints are got ready and given to the distributor for exhibition, several stages have to be passed through, the negatives have to be completed and the picture would have to pass through the Board of Censors. The picture may come through as proposed and planned or there may be variations. Till the picture is completed and ready for exhibition, the property over which mortgage rights could be claimed would be non-existent. It may be that the distributor could enforce the contract and secure the prints if they should come into existence, but that would not make the instrument at its execution a mortgage deed.
(4) The Articles of the Stamp Act, 1899, under which the instrument can possibly fall are: Article 5(c) of Schedule I--agreement or memorandum of agreement not otherwise provided for; Art. 6--agreement relating to deposit of title deeds; pawn, or pledge; and Art. 40--mortgage deed. Article 6 may be left out, as the instrument in question is unattested, and unattested instruments relating to pawn or pledge are exempted under Art. 6. The State does not rely on that Article. Article 40, which provides for a mortgage deed excludes agreements relating to deposit of title deeds, pawn or pledge, bottomry bond, mortgage of a crop, respondentia bond or security bond. A mortgage deed under Art. 40 is classified under two heads: Art. 40(a) is for cases when possession of the property or any of the property comprised in such deed is given by the mortgagor or agreed to be given; the duty here is the same as for a conveyance; Clause (b) covers cases when possession is not given or agreed to be given under the mortgage deed. The clause relied upon here in Clause (a). Section 2(17) of the Act defines a mortgage deed thus:
' '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 definition of a mortgage deed under the Stamp Act is wide and extensive and is not limited to immovable property and the definition is special and introduced for the purpose of the Act: the mortgage can be even for the performance of an engagement and includes a charge and the definition is of the instrument and not of the transaction. The essential elements are required for an instrument to be a mortgage deed under the Act. There must be a transfer or a creation of a right over, or in respect of a property by the instrument and (2) it must be a right over or in respect of 'specified' property. The expression 'specified property' has not been defined under the Act nor the expression 'transfer'. The expression 'property' has, therefore, to be taken in its widest amplitude, comprehending in its scope every possible interest which a party can have, capable of transfer or being subjected to rights. The expression 'transfer of property', whether moveable or immoveable, is defined in the Transfer of Property Act 1882, by Sec. 5 thus:
'In the following sections' transfer of property' means an act by which a living person conveys property, in present or in future, to one or more other living persons, or to himself and one or more other living persons; and 'to transfer property' is to perform such act.'
(5) The word 'conveyance' is used in this definition in a wide sense so as to include sale, mortgage, charge, lease, etc. As will be seen presently, it is settled law that while a transfer of property may take place not only in the present, but also in the future, the property must be in existence at the time of the transfer, for an instrument to be a deed of transfer. The words 'in present or in future' in the definition, it is manifest, qualify the word 'conveys' immediately preceding 'property' and not the word 'property'. The conveyance may be in present or in future, but the conveyance should be of property in existence. A purported transfer of property, not in existence at the time of the contract, can only operate as a contract to be performed in future. Reference in this connection may be made to the decision of the Privy Council in Ranee Bhobosoondree Dassee v. issur Chunder Dutt, (1872) 18 SWR 140. There, a person who had not the means to institute a suit for the recovery of the property he was entitled to, agreed to sell and sold a moiety of the property to another in consideration of a sum of money, which the other person was to pay for the purpose of carrying on the suit, both of them to figure as plaintiffs. Shortly after the conveyance, the owner compromised with the opposite party, who was in possession of the property. Affirming the dismissal of the suit in ejectment filed by the person who had advanced the money as on a sale against the owner and the opposite party, their Lordships observed that the transaction of sale did not operate as a present transfer of the property, but only as an agreement to transfer so much of it as might be recovered in a suit to be instituted. They referred to earlier observations of the Privy Council in Rajah Sahib Perhlad Sein v. Y. Baboo Budhee Singh, (1867) 12 Moo Ind App 275, where it is stated:
'To support it, the execution of the bill of sale must be treated as a constructive transfer of possession. But how can there be any such transfer, actual or constructive, upon a contract under which the vendor sells that of which he has no possession and to which he may never establish a title. The bill of sale in such a case can only be evidence of a contract to be performed in future and upon the happening of a contingency of which the purchaser may claim a specific performance, if he comes into Court showing that he has himself done all that he was bound to do.'
In Jugalkishore Saraf v. Raw Cotton Co., Ltd. AIR 1955 SC 376, the Supreme Court points out that 'under the Transfer of Property Act, there can be no transfer of property which is not in existence at the date of the transfer.' If there can be no transfer in praesenti of property not in existence, it stands to reason and follows that there can be no creation of a right over, or in respect of such property. In our view, the principles that govern the construction of the word 'transfer' in relation to property under the Transfer of Property Act, would equally apply to the transfer or creation of right provided under the definition 'mortgage deed' in Sec. 2(17) of the Stamp Act. The Lahore High Court in Miran Baksh v. Emperor, AIR 1945 Lah 69 on a Stamp Reference observed:
'A transfer is property that is not in existence operates as a contract to be performed in future which may be specifically enforced as soon as the property comes into existence, but it does not operate as a transfer. I am of opinion that the same principles must govern the construction of the words 'transfer' and 'property' used in Section 2(17) of the Stamp Act, and in order that a document by which property is transferred may come within the purview of a mortgage deed for the purposes of the Act, the property to which it relates must be in existence.'
The learned Government Pleader drew our attention to In re Bajraj Singh, ILR (1887) All 585, also a reference under the Stamp Act, as authority for the proposition that future property could be subject of mortgage. Having perused the judgment carefully, we find no warrant for such an inference. What was hypothecated there was produce of a field with sugarcane, then existing property, and there was no discussion in the case whether property not in existence could be the subject of mortgage; nor does the decision in Secretary to the Commr. of Salt, Abkari and Separate Revenue, Madras v. Mrs. Orr, ILR (1917) Mad 646 = AIR 1917 Mad 374, cited for the State advance the contention. The question there was, whether the instrument was a mortgage within the meaning of Sec. 2(17) of the Stamp Act and was chargeable with stamp duty under Art. 40 or was a declaration of trust chargeable under Art. 64. The instrument was between the proprietors of a business and the Bank of Madras, who had agreed to advance moneys. The deed covered besides machinery, plant, etc., stock-in-trade, goods, chattels and effects of the business in Madras and Rangoon, described in the schedule to the instrument. The net profits realised after payment of expenses under the instrument in question were also to be retained by the trustee under the instrument in trust to pay and apply the same in payment of sums advanced by the bank. The Special Bench held that so fare as stock-in-trade etc., described in the deed as trust properties were concerned, the properties were specified and that the instrument was a mortgage deed. But as to net profits, which had also to be applied in payment of the sums advanced by the bank, it was observed, at p. 649: 'It may be that the net profits here are not 'specified property' within the meaning of the definition'. Crompton Engineering Co., Madras, Ltd. v. Chief Controlling Revenue Authority, Madras : AIR1953Mad764 (FB) again as only an authority for the position that stock-in-trade is 'specified property' within the meaning of Section 2(17). In that case it was held that the document was not a mortgage deed, as there was no transfer of rights in accordance with the requirements of Sec. 59 of the Transfer of Property Act. Apart from the stock-in-trade, there were other items of properties and immoveable property comprised in the transaction, all one and indivisible, and the instrument was unattested. While holding, in the circumstances, that there was no mortgage, their Lordships pointed out hat to make a document liable to stamp duty as a mortgage deed it was not enough if the document purported to effect a transfer, but that it must transfer. Authority for the view that stock-in-trade is 'specified property' under Sec. 2(17) is not authority for the position that future property could be the subject of immediate transfer. Stock-in-trade is not future property. If stock-in-trade is mortgaged, there is existing property for the transfer to act upon, the security takes in all the effects then available as stock-in-trade. No doubt substituted property may be effectually included in the security by apt words, which can be found and are usually found in mortgages of stock, machinery, plant and the like where the subject-matter may change from day to day. It is a matter of construction of the deed whether effects subsequently brought in on the promises for the purposes of replacing those disposed of or consumed in the course of the business are covered by the mortgage. They are future property, but when the instrument is executed, there is existing property. No formalities are required for the creation of a mortgage of moveable property. A parole mortgage of goods is perfectly valid though a transfer on an actionable claim will have to comply with the requirement of Section 130 of the Transfer of Property Act. For the purpose of the Stamp Act, the effect of the instrument has to be examined at the time of the execution; whether in fact there is an operative transfer or mortgage on the execution of the instrument and by virtue of the instrument. In this connection we may refer to the observations of the Supreme Court in AIR 1955 SC 376 already cited, where it is observed as follows:
'Where there is a contract for the transfer of property which is not in existence at the date of the contract, the intending transferee may, when the property comes into existence, enforce the contract by specific performance, provided the contract is of the kind which is specifically enforceable in equity. It is only when the transferor voluntarily executes a deed of transfer a sin all conscience he should do or is compelled to do so by a decree for specific performance that the legal title of the transferor in that property passes from him to the transferee. This transfer of title is brought about not by the prior agreement for transfer but by subsequent deed of transfer. This process obviously involves delay, trouble and expense. To obviate these difficulties, equity steps in again to short circuit the process.'
Their Lordships easier refer to the equitable principles enunciated by Lord Westbury in Holroyd v. Marshall (1862) 10 HLC 19, in the following words:--
'It is quite true that the deed which professes to convey property which is not in existence at the time is as a conveyance void at law, simply because there is nothing to convey. So in equity a contract which engages to transfer property, which is not in existence, cannot operate as an immediate alienation merely because there is nothing to transfer. But if a vendor or mortgagor agrees to sell or mortgage property, real or personal, of which he is not possessed at the time and he receives the consideration for the contract, and afterwards becomes possessed of property answering the description in the contract, there is no doubt that a Court of Equity would compel him to perform the contract, and that the contract would, in equity, transfer the beneficial interest to the mortgagee or purchaser immediately on the property being acquired.'
The equitable principle flowing from the above that equity treats as done what ought to be done does not make out any new contract between the parties or alter the true character of the original instrument.
(6) The decision in Performing Right Society, Ltd., v. London Theaters of Varieties, Ltd., 1924 AC 1, referred to with approval by the Supreme Court in Jugalkishore Saraf v. Raw Cotton Co., Ltd., : 1SCR1369 , may be usefully referred to here. There, a firm of music publishers being members of the plaintiff society assigned by the deed to the society the performing right of every song the right of performance of which they then possessed or should thereafter acquire, to be held by the society for the period of the assignor's membership. Subsequent to the said assignment, an author wrote a song and assigned the copyright in it, together with the right of performance to the firm of publishers. The firm did not make any fresh assignment in respect of this song to the society, as required under the English Copy-right Act, 1911. In an action by the society against the defendants for infringement of their performing rights in the song under the original assignment, rejecting the claim of the plaintiffs as assignees of the copyright, under the Copyright Act, Viscount Cave, L.C., said (at p. 13):
'No doubt when a person executes a document purporting to assign property to be afterwards acquired by him, that property on its acquisition passes in equity to the assignee: (1862) 10 HLC 191; Tailby v. Official Receiver, (1888) 13 AC 523, but how such a subsequent acquisition can be held to relate back, so as to cause an instrument which on its date was not an assignment under the Act to become such an assignment, I am unable to understand.'
(7) If we examine the instrument under consideration here, in the light of the above principles, it is manifest that it is not a mortgage deed as defined under Sec. 2(17) to be charged under Art. 40 of Schedule I as there could have been no transfer of or creation of right in or over property at the time of the execution of the instrument. When the instrument was executed, the film was under production. There was merely a covenant on completion of the picture to deliver certain positive prints of the picture to the distributor. Certain rights were assured over property to come into existence.
(8) The second ingredient for an instrument to be a mortgage deed under Sec. 2(17) is that the property should be 'specified property'. The dictionary meaning of the word 'specify' is: 'to mention, describe, or define in detail'. Property may be considered to be 'specified' if it is clearly defined so that there may be no difficulty in its identification. Non-existent property cannot be considered to be clearly defined and capable of identification at the time when the instrument is executed. May be sufficient description is found in the instrument to enable identification in future; but what the definition requires is transfer or creation of rights over or in respect of specified property, that is, at the time the instrument is executed. A property cannot be regarded as certain and defined in praesenti when all that is found is, hope and expectation and sustained effort to produce property as specified, and the thing is in the course of production in accordance with specifications. There can be no question that anticipated realisations on exhibition are not specified properties. In the decision in ILR (1916) Mad 646 = AIR 1916 Mad 374, cited already, it is remarked that anticipated net profits over which a charge is provided may not be specified property. The several rights which are to be security for the advances made by the distributor have yet to come into existence. In the circumstances, even assuming that there was every possibility, and even probability bordering on certainty of the producer completing the picture as planned, and that in fact the distributor later secured his prints, the subsequent acquisition of the security cannot relate back so as to make the instrument for fiscal purposes, at the time of its execution. There is no need here to consider any other Article. For a pawn pretty either actual or constructive; a mere agreement to give possession cannot operate as a pledge and for the instrument to be a conveyance there must be transfer and here, there can be no transfer or delivery of possession.
(9) We, therefore, hold that the instrument in question is not a mortgage deed as defined in S. 2(17) chargeable under Art. 40(a) or (b) of Schedule I of the Indian Stamp Act. It is only an agreement. The question is answered accordingly. No order as to costs. We thank Mr. R. Janardhana Rao, counsel appearing amicus curiae for his assistance.