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The Chief Controlling Revenue Authority Vs. Mayavaram Financial Corporation Limited Mayavaram, Represented by Its Managing Director - Court Judgment

LegalCrystal Citation
SubjectProperty;Civil
CourtChennai High Court
Decided On
Reported in(1979)2MLJ170
AppellantThe Chief Controlling Revenue Authority
RespondentMayavaram Financial Corporation Limited Mayavaram, Represented by Its Managing Director
Cases ReferredNatesa Aiyar v. Sahasranama Iyer
Excerpt:
- .....j., in natesa aiyar v. sahasranama iyer : air1927mad773 . that was a case where a bond or a kootchit deed was executed by a person similarly placed as thiru savariappam 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 kootchit amounted only to a charge and not to a mortgage. ramesam, j., expressed thus:it seems 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.....
Judgment:
ORDER

Ramaprasada Rao, CJ.

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 Section 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 Savariappam 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 Savariappam Remi became a successful bidder in a chit for Rs. 50,000 at the 18th drawing held on 13th November, 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 Savariappam Remi and inter alia he executed what is known as an 'under-taking affidavit' which was one of the security documents. Under this undertaking affidavit he offered as security a terraced and tiled house situate at door No. 11, Thulava Veerasami Naicker Street, Muthialpet in Pondicherry. This undertaking affidavit has been fully set out therein. On receipt of the prize amount Thiru Savariappam Remi executed a promissory note along with his wife and one Bagianathan for payment of the instalments 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 Savariappam Remi agreed 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 instalments 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 Savariappam 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 document was presented for registration to the Joint Sub-Registrar of Pondicherry on 20th November, 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 Savariappam Remi was called upon to pay the deficit duty of Rs. 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 Section 57 of the Indian Stamp Act, 1899 as Thiru Savariappam Remi was of the view 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 Savariappam 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 the affidavit, it squarely satisfies the ingredients of the definition of a mortgage given under Section 2(17) of the Indian Scamp Act itself and as a charge has been created over the immovable property for the preformance of an engagement undertaken by Thiru Savariappam Remi with the respondent company, itself was chargeable as a mortgage deed.

4. Countering this connection, learned Counsel for the respondent would say that the affidavit merely disclosed an undertaking and if at all it was chargeable it should be only under Article 57 (b) of Schedule I of the Indian Stamp Act.

5. We are unble 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, as well as the definition of the 'mortgage deed' in the Indian Stamp Act, 1899. Section 85 (a) of the Transfer of Property Act, reads:

A mortgage is the transfer of an interest in specific immoveable 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 transferor is called a mortgagor, the transferee a mortgagee; the principal money and interest on 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 gives a clue to interpret what a mortgage, amongst other 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 in such immovable property for the performance of an engagement which may give rise to a pecuniary liability, which involves a 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, which ought to be the basis to find out whether a given instrument is a mortgage or not, and the literal sense of the expression used does not generally serve as a 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 applies that term to the transfer of both 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 provision 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 Code of Civil Procedure, would attract stamp duty under Article 40, provided the security bond involves a mortgage over immovable property.

7. In Abubacker Labbai v. Chinnathambi Rowther : AIR1938Mad262 a Full Bench of our Court presided over by the then Chief Justice Leach, considered the character of a security bond executed by two sureties of an insolvent for his 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 Article 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 a 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 quientessence 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 as 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 Article 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 that fall under this Article. But it should satisfy the purposes 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 the due performance of a contract. We have already referred to a Full Bench decision of our Court in Abubacker Labbai v. Chinnathambi Rowther : AIR1938Mad262 . 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 Article 57 of Schedule I 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 Savariappam 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 deed 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 Savariappam 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 say 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 a promissory note he has given 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 Savariappam 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 of the Indian Stamp Act.

11. We may also refer in passing to certain observations of Ramesam, J., in Natesa Aiyar v. Sahasranama Iyer : AIR1927Mad773 . That was a case where a bond or a kootchit deed was executed by a person similarly placed as Thiru Savariappam 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 kootchit amounted only to a charge and not to a mortgage. Ramesam, J., expressed thus:

It seems 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 Article 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.


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