Indian Stamp Act 1899 – Article 40 or Article 57 of Schedule 1-B – Stamp duty on the instrument “Security Bond cum Mortgage Deed”, if chargeable u/Article 40 or Article 57 of Schedule 1-B:
Held: In matters of stamp duty, the decisive factor is not the nomenclature assigned to the instrument, but the substance of rights and obligations it embodies – Court is duty-bound to ascertain the true legal character of the instrument – In the instant case, the appellant executed a “Security Bond cum Mortgage Deed” in favour of the Meerut Development Authority – The instrument executed by the appellant fulfils the essential characteristics of a mortgage deed – In substance and effect, the deed confers a right over specified properties in favour of the Meerut Development Authority to secure performance of an obligation, while preserving the appellant’s interest until full discharge of obligation – The nomenclature “Security Bond cum Mortgage Deed” is, therefore, inconsequential, as it is the substance and operative provisions of the instrument which govern its character for the purposes of stamp duty – Further, it is apparent from the recitals of the instrument titled “Security Bond cum Mortgage Deed” executed by the appellant that only two parties are involved viz. the Meerut Development Authority and the appellant – The deed was not executed by a surety but by the principal debtor/appellant, the company, through its director – The company itself mortgaged the properties and not the director in his individual capacity – A company, though a juristic person, is not a sentient being, consequently, it must act through its directors – Thus, the properties were not mortgaged by a third party, but by the principal debtor itself, which does not attract Article 57 – In the absence of any surety, to attract Article
57 of the Indian Stamp Act, the deed executed by the appellant cannot be termed as a security bond – It, however, fulfils all the requirements of a mortgage deed, falling under the ambit of Article
40 of Schedule 1-B of the Indian Stamp Act – Impugned judgments not interfered with. [Paras 14, 17, 24-26]
Indian Stamp Act 1899 – Article 57 of Schedule 1-B – Operation of, explained – Contract Act, 1872 – s.126 – “Contract of guarantee”, “surety”, “principal debtor” and “creditor”. [Paras 20-23]
As published in the Supreme Court Reports, Supreme Court of India. Headnotes prepared by: Divya Pandey. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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