1. This reference comes before us on a Rule Nisi issued by this court in the nature of a writ of Mandamus to the Chief Controlling Revenue Authority, Pondicherry, to make a reference under Art. 57 of the Indian Stamp Act, 1899, so as to assess the correct stamp duty payable on a document styled as an undertaking affidavit executed by one Thiru. Savariappan Remi in favour of the respondent.
2. The relevant facts leading to the reference, as stated in the statement of the case filed by the Chief Controlling Revenue Authority, Pondicherry, which are not disputed before us, are as follows: The respondent company is running a chit fund, having been licensed under the Tamil Nadu Chit Funds Act and its registered office is at Mayuram. One Thiru. Savriappan Remi became a successful bidder in a chit for Rupees 50,000, at the 18th draw held on 13-11-1975. The highest bidder was apparently a resident of Pondicherry State. The auction chit having been knocked down at the prize amount of Rs. 23,245, the respondent chit fund company took certain documents from Thiru. Savariappan Remi and inter alia he executed what is known as an "undertaking affidavit" which was one of the security documents. Under this undertaking affidavit, he offered as security a terraced and titled house situate at door No.11 Thulava Veerasami Naicker St. Muthialpet in Pondicherry. This undertaking affidavit has been fully set out therein. On receipt of the prize amount Thiru. Savariappan Remi executed a promissory note along with his wife and one Bagianathan for payment of the installments of the chit fund Company.
By way of further assurance for regular payment of future subscriptions of the chit and in addition to the security by way of a promissory note executed as above, Thiru Savariappan Remi agreed to and undertook to create a first charge over the property detailed in the schedule to the affidavit. The affidavit further provides that the Foreman of the chit fund company shall be entitled to collect the entire amount of future installments of the chit due from the date of default, with all charges and expenses incurred in connection therewith, having a first charge over the property mentioned in the schedule given in the affidavit. The affidavit also proclaims that over the property mentioned in the schedule to the affidavit, the Foreman shall have a first charge for the collection of the amount due to the chit fund company. Contemporaneously Thiru Savriappan Remi has agreed to deposit the title deeds of the said property. The undertaking affidavit was engrossed on stamp papers for the value of Rs. 22.50. When that documents was presented for registration to the Joint sub Registrar, Pondicherry on 20-11-1975, it was impounded by him under Section 33 of the Indian Stamp Act, and he submitted the same to the District Registrar for proper assessment of stamp duty. The District Registrar was of the view that the undertaking affidavit reflects a mortgage over immovable property and the intrinsic recitals in the affidavit make it chargeable for stamp duty under Article 40 of Schedule I of the Indian Stamp Act.
Thiru Savariappan Remi was called upon to pay the deficit duty of Rupees 506-25 as also a penalty of Rs. 5, which he paid under protest. Thereafter, he came to this court for a writ of Mandamus to direct the Chief Controlling Revenue Authority, Pondicherry, who is the petitioner in this reference to make a reference under Art. 57 of the Indian Stamp Act, 1899, as Thiru Savariappan Remi was the view of that the undertaking affidavit was properly stamped. The petitioner, after considering the recitals in the document, which have been succinctly referred to above, was of the view that the recitals therein were enough to treat the undertaking affidavit as creating a mortgage over immovable property within the meaning of Section 2(17) of the Indian Stamp Act. The alternative contention of Thiru Savariappan Remi that at best the undertaking affidavit would be chargeable as the security bond under Article 57(b) of Schedule I to the Stamp Act was negatived by the petitioner. Pursuant to the directions of this court, the petitioner referred the subject to us to decide the question as to whether the undertaking affidavit is chargeable under Article 40 or under Article 57(b) of Schedule I to the Stamp Act.
3. The contention of the learned counsel for the petitioner is that on a fair reading of he affidavit, it squarely satisfies the ingredients of the definition of a mortgage given under Sec. 2(17) of the Indian Stamp Act itself and as a charge has been created over the immovable property for the performance of an engagement undertaken by Thiru Savariappan Remi with the respondent company, it was chargeable as a mortgage deed.
4. Countering this contention, learned counsel for the respondent would say that the affidavit merely disclosed an undertaking and if at all it was chargeable it could be only under Art. 57(b) of Schedule I of the Indian Stamp Act.
5. We are unable to agree with the learned counsel for the respondent. In order to appreciate the rival contentions, it would be convenient to refer to the definition of 'mortgage' in Section 58 of the Transfer of Property Act - Section 58, as well as the definition of the 'mortgage deed' in the Indian Stamp Act, 1899. Section 58(a) of the Transfer of property Act reads--
"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, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability. The transfer is called a mortgagor, the transferee a mortgagee; the principal money and interest of which payment is secured for the time being are called the mortgage money and the instrument (if any) by which the transfer is effected is called a mortgage deed".
6. The last portion of the definition clue to interpret what a mortgage, amongst others things, could be. Undoubtedly if there is a 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, it would be a mortgage. Equally so, if there is a transfer of an interest is such immovable property for the performance of an engagement which may give rise to a pecuniary liability, which involves legal obligation, even then it would be mortgage within the meaning of Section 58(a) of the Transfer of Property Act. As no form is required to operate as a mortgage, the intention of the parties has to be gathered from a fair and reasonable reading of the entire instrument is a mortgage or not, and the literal sense of the expression used does not generally serve as guide for the interpretation of deeds; but it is the real meaning of the transaction which has to be gathered as a whole. That is the proper test to find out the character of the document. The definition of a mortgage deed under the Indian Stamp Act reads 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 only essential difference between the two acts appears to be that whilst under the Transfer of Property Act, mortgages relate to immovable property alone, the Stamp Act applied that term to the transfer of both of movable and immovable properties. We should also bear in mind that under Section 100 of the Transfer of Property Act, a charge created over immovable property, notwithstanding the fact that the transaction does not amount to a mortgage, the Act makes all the provisions which apply to a simple mortgage as being applicable to such created charges.
The primordial ingredient which would make an instrument as a mortgage deed under the Stamp Act is that there should be a transfer of a right over specified property, not only for the purpose of securing money advanced or to be advanced by way of a loan, but also when the transfer is effected for the performance of an engagement. When once the property is described distinctly and a charge is created over such defined property not only for payment of a debt, which is admittedly due by the transferor, but also for the performance of an engagement as undertaken by him under the instrument, it would be undoubtedly a mortgage deed. If the given instrument is a mortgage deed then stamp duty as contemplated in Article 40 of the Schedule I of the Indian Stamp Act would be attracted. Under Article 40 it appears to us that even a security bond hypothecating a property executed in favour of the court under Order 41, rules 5 and 6 of the Civil Procedure Code, would attract the stamp duty under Article 40, provided the security bond involves a mortgage over immovable property.
7. In Abubacker Labbi v. Chinnathambi Rowther, (1938) 1 Mad LJ 159, a Full Bench of our court presided over by the then Chief Justice Leach, considered the character of a security bond executed by two securities of an insolvent for this due appearance in the insolvency proceedings, contemporaneously hypothecating immovable property under the bond. The question arose whether such an instrument was to be stamped under Art. 57 of Schedule I to the Stamp Act or under Article 40 therein. The Court was of the view that the bond must be stamped under Article 40 of the Indian Stamp Act, as it was not bond for the due performance of a contract by the insolvent, but to carry out the insolvent's duty to be in court when required. The quintessence of the subject seems to be that once the intention of the executant of a deed is clear that he was mortgaging immovable property or offering it is security or as a charge for the due performance of an engagement undertaken by him under it then it would undoubtedly be a mortgage deed, which has to be stamped under Art. 40 of the Indian Stamp Act.
8. Though Article 57 deals with security bond or mortgage deed, yet it is not all bonds that are commonly called security bonds hat fall under this article. But it should satisfy the purpose enumerated in Article
57. It should be by way of security for the due execution of an office, or to account for money or other property received by virtue thereof, or executed by a surety to secure that the performance of a contract. We have already referred to a Full Bench decision of our court in Abubacker Labbi v. Chinnathampi Rowther (1938) 1 Mad LJ 159, which considered the scope of a bond executed by a surety. Therefore a strict interpretation is necessary to find out whether an instrument would come under Art. 57 of Sch. 1 to the Indian Stamp Act.
9. In so far as the undertaking affidavit is concerned, it would not come under the various heads specifically enumerated in Article 57 for Thiru Savariappan Remi was not executing the bond for due execution of an office or to account for money or for other property received by virtue thereof. But, on the other hand, he executed the dead for purpose of securing the repayment of the prized chit amount received by him, for which purpose he has created an express charge over the property described in the schedule to the undertaking affidavit. In more than one place, Thiru Savariappan Remi would say that he is undertaking to repay the debt payable by him to the chit fund company, after creating a first charge over his property, in fact, at one place he would stay that the schedule property shall be subject to a first charge for collection of the amount due to the chit fund company. He would also say that in addition to the securities given by way of promissory note he was giving a charge over the property. This undoubtedly creates a transfer of an interest in an immovable property. Even otherwise, it would, as the petitioner says, satisfy the definition of a mortgage deed as defined in Section 2(17) of the Indian Stamp Act. Wherein Thiru Savariappan Remi has transferred his right over a specified immovable property for the performance of an engagement undertaken by him under the instrument.
10. The totality of the impression gained by us on a reading of the instrument and after ascertaining the intention of the parties, makes it clear that the undertaking affidavit has to be charged as a mortgage deed, which has to suffer stamp duty as prescribed under Article 40 of schedule I to the Indian Stamp Act.
11. We may also refer in passing to certain observations of Ramesam J. in Natesa Aiyar v. Sahasranama Iyer, AIR 1927 Mad 773. That was a case where a bond or a koorchit deed was executed by a person similarly placed as Thiru Savariappan Remi in favour of a chit fund company mortgaging two items of his properties for the due performance of his obligations in connection with the chit transactions. The contention before the learned Judges was that the koorchit amounted only to a charge and not to a mortgage, Ramesam J. expressed thus:--
"It sees to me to fall within the definition of Section 58 of the Transfer of Property Act, because it effects security of the property for the due performance of an engagement which may result in a pecuniary liability like simple mortgage bonds, which are usually executed in this presidency.
We respectfully adopt this view.
12. Having examined the document in full and for the reasons indicated above, we are of opinion that Art. 40 and not Article 57 of Schedule I to the Stamp Act is the appropriate Article applicable to the instant case, we answer the reference accordingly.
13. Answered accordingly.