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The Chief Controlling Revenue Authority, Board of Revenue, Madras Vs. R.K. Subramaniam and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtChennai High Court
Decided On
Case NumberR.C. No. 2 of 1972
Judge
Reported inAIR1977Mad44; (1977)1MLJ218
ActsIndian Stamp Act, 1899 - Sections 6 and 57 - Schedule - Articles 34 and 40; Indian Contract Act - Sections 2, 2(17) and 124
AppellantThe Chief Controlling Revenue Authority, Board of Revenue, Madras
RespondentR.K. Subramaniam and ors.
Excerpt:
.....or creates to, or in favour of another, a right over or in respect of specified property.;the document in question is, not one executed for the purpose of securing money advanced or to be advanced by way of loan, or an existing or future debt. the document merely substitutes another property for the property that was originally given as indemnity in the sale deed. the respondents have not engaged themselves earlier to the document to perform any particular act or service. both in the sale deed as well as in the document in question, the respondents have offered certain immovable property as indemnity towards any loss, damage or claim the vendee may suffer as a consequence of defect in title. offering certain properties as indemnity for loss or damage which the vendee may suffer as a..........various recitals in the document in support of the said submission. the operative portion of the deed of indemnity dated 20-4-1968, is as follows-'now this deed of indemnity witnesseth that in pursuance of the aforesaid agreement and in consideration of the party of the second part releasing her rights over the property set out in schedule a given as security in the sale deed dated 18-11-1967, by executing a deed of release, this day the parties of the first part do hereby create an indemnity over their house and ground bearing door no. 16 pilliar koil st, saidapet, madras, more fully described in the schedule b herein against any loss, damage or claim that may be put forward by any of the party of the second part or any loss or claim that may be incurred by the party of the second.....
Judgment:
1. This is a case referred by the Board of Revenue under Section 57 of the Indian Stamp Act, 1899. The respondents along with their father Kanthimathinatha Pillai had executed a sale deed dated 18-11-1967 in favour of one Thirumathi Nagammal in respect of the property bearing door No. 6 Munuswami Achari St, Siruvalloor, Madras. Under the said sale deed the house and ground bearing door No. 51 Seshachala Mudali St, Saidapet, Madras had been offered by the vendors and accepted by the vendees as indemnity against any loss, damage or claim in regard to the property conveyed. The vendors subsequently approached the vendee to release her right of indemnity over the said property bearing door No. 51 Seshachala Mudali St, Saidapet, madras and to accept instead another property bearing door No. 16 Pilliar Koil St, Saidapet, Madras as indemnity. The vendee agreed to the said proposal of the vendors and released her rights over the property given as indemnity under the sale deed, by means of a release deed. Thereupon, the vendors executed an instrument dated 20-4-1968 purporting to be an indemnity bond in favour of the vendee in respect of the substituted property bearing door No. 16 Pilliar Koil St, Saidapet, Madras as agreed. It is a recital in the said indemnity bond that since litigation had cropped up in respect of the property covered by the sale deed, the new property is made available against any loss that might be incurred by the vendee in the said litigation. The above document dated 20-4-1968 was written on a stamp paper of the value of Rs 22-50. When it was presented for registration, the Sub Registrar felt a doubt as to the quantum of duty payable on the document and referred the matter to the District Registrar, Madras, who held that the document was both a mortgage deed and an indemnity bond attracting levy of stamp duty under Articles 34 and 40(b) of Schedule J to the Indian Stamp Act, 1899, and chargeable under Section 6 of the Act with the higher of the duties.

2. An appeal was preferred to the Board of Revenue by the respondent against the order of the District Registrar. The Board dismissed the appeal, agreeing with the view expressed by the District Registrar. Subsequently the respondent obtained a direction on 27-2-1970 by way of mandamus from this court directing the Board of Revenue to refer the case to this court under Section 57 of the Indian Stamp Act. In pursuance of the said direction, the following question has been referred for our decision:

"Whether the document dated 20-4-1968, executed in respect of the property bearing door No. 16 Pilliar Koil St, Saidapet, Madras, by R. K. Subramaniam and others is liable to stamp duty both as an indemnity bond and a mortgage deed attracting levy of stamp duty under Articles 34 and 40(b) of Schedule I of the Indian Stamp Act 1899 and chargeable under Section 6 of the Act with the higher of the duties."

It is the contention of the learned counsel appearing for the Revenue that the document in question can clearly be treated both as a mortgage deed as well as an indemnity bond. There is no dispute before us that the document in question will fall under the document in question will fall under the definition of 'indemnity bond'. Therefore, the only question for consideration is whether the document falls within the definition of 'mortgage deed' in Section 2(17) of the Indian Stamp Act, so as to attract the higher of the duties.

3. 'Mortgage deed' as defined in Section 2(17) is as follows-

"Mortgage deed' includes very 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".

It is clear that the document in question is not one executed for the purpose of securing money advanced or to be advanced by way of loan, or an existing or future debt. The learned Government Pleader submits that the document is one executed for the purpose of securing due performance of an agreement. He refers to the various recitals in the document in support of the said submission. The operative portion of the deed of indemnity dated 20-4-1968, is as follows-

'Now this deed of indemnity witnesseth that in pursuance of the aforesaid agreement and in consideration of the party of the second part releasing her rights over the property set out in schedule A given as security in the sale deed dated 18-11-1967, by executing a deed of release, this day the parties of the first part do hereby create an indemnity over their house and ground bearing door No. 16 Pilliar Koil St, Saidapet, Madras, more fully described in the schedule B herein against any loss, damage or claim that may be put forward by any of the party of the second Part or any loss or claim that may be incurred by the party of the second part in respect of the aforesaid suit O. S. No. 5234 of 1967 and any appeals therefrom.

The above operative clause in the document shows that the respondents have created an indemnity over door No. 16 Pilliar Koil St; Saidapet, madras, against any loss, damage or claim that may be put forward by any of them against the vendee or any loss or claim that may be incurred by her in respect of suit O. S. No. 5234 of 1967 and any appeal therefrom.

4. Under the sale deed the respondents have given their property No. 51 Seshachala Mudali St, Saidapet as indemnity for any loss or damage that may be incurred by the vendee due to any defect in their title to the property sold. But instead of that property another property bearing door No. 16 Pilliar Koil St, Saidapet, Madras has been substituted by the document in question. The document merely substitutes another property for the property that was originally given as indemnity in the sale deed. The respondents have not engaged themselves earlier to the document to perform any particular act or service. Neither under the sale deed nor in the document in question the vendors have agreed themselves to perform any positive act or service the due performance of which had to be secured by an indemnity. Both in the sale deed as well as in the document in question the respondents have offered certain immoveable property as indemnity towards any loss, damage or claim the vendee may suffer as a consequence of defect in title. Offering certain properties as indemnity for loss or damage which the vendee may suffer as a result of defect in title cannot be equated to an engagement under which the vendors have undertaken to perform any positive act, the due performance of which had to be secured by a deed. It is true, wherever one person creates a right in favour of another under an instrument in respect of a specified property to secure the performance of an engagement then it will partake the nature of mortgage deed. It cannot be disputed that under the document in question the vendors have offered their property as indemnity to the vendee on against any possible loss, damage or claim and not for securing the performance of nay engagement.

5. The Revenue says that the document has been executed in furtherance of a prior and specific assurance given by the vendors to the vendee to substitute another property as indemnity against any loss or damage and that makes the document a mortgage. It is true that the vendee has earlier released her right of indemnity in respect of some other property on the assurance given by the vendors to give another property as indemnity and that the document in question came to be executed in pursuance of such an assurance. However, such an assurance to substitute another property as indemnity cannot be treated as an "engagement" entered into between the vendor and the vendee. The word 'engagement' is not defined in the Stamp Act or in the Contract Act, but it must mean 'a contract' as not defined in the Stamp Act or in the Contract Act, but it must mean 'a contract' as defined in Section 2 of the Contract Act. The word 'engagement' occurring in Section 2(17) cannot, therefore, be equated to a mere assurance or undertaking. In the context, it has to be taken to mean a binding and enforceable contract. Here, apart from the contract of sale, there is no other contract to secure the performance of which the document had been executed. Though the property given as indemnity in the document in question is of a specified property, and the vendors have transferred or created a right in favour of the vendee over such specified property, still so long as it is not possible to hold that the creation of interest was for the purpose of securing the performance of an engagement, it cannot be treated as coming under the definition of 'mortgage'.

6. The document in question, as already stated, does not secure the performance of any engagement but it is merely a contract by which the vendors promise to save the vendee from any loss or damage that may be caused to her by the conduct of the vendors themselves or by the conduct of any other person. This is clearly a contract of indemnity falling under Section 124 of the Indian Contract Act. A contract of indemnity contained in an instrument which is implied by law or is ancillary to the main purpose is not separately chargeable with duty as an indemnity bond. It is for this reason a convenient relating to a warranty of title included in a conveyance is not chargeable separately as an indemnity bond. Therefore, in this case where the vendors have not engaged themselves to perform any positive act or services to the vendee, the rights created under the instrument by way of indemnity for any loss or damage which the vendee may suffer cannot be said to come under the definition of 'mortgage'.

7. The decision in In the matter of Gajraj Singh (1887) ILR 9 All 585 referred to by the learned Government Pleader is not of any assistance. In that case a grower of sugarcane executed a deed whereby he borrowed a certain sum of money and covenanted to deliver to the lender on a certain date certain quantity of sugar and as a collateral security he hypothecated the produce of a field of sugarcane. The said deed was held to be a mortgage by a Full Bench of the Allahabad High Court. The reasons for holding the deed to be a mortgage are these: firstly there was a contract to deliver certain quantity of sugar with a provision for damages in case of breach of contract to deliver. Secondly it is a hypothecation bond of certain moveable property given as security for the payment of any damages that may become recoverable by way of compensation for non-delivery. On the facts of this case, no contract to perform any positive act can be inferred, the performance of which had to be secured by creating a right in the immoveable properties. The said decision therefore has no application to the facts of this case. In our view, therefore, the document in question will not fall under the definition of 'mortgage deed'. The reference is answered accordingly. There will be no order as to costs.

8. Reference answered accordingly.


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