Prem Agnani And Another, v. The Head Quarters Sub-Registrar, Gandhinagar, Bangalore, .

K. Jagannatha Shetty, J.:— Under the orders of this Court in Writ Petition No. 2460 of 1972 the Chief Controlling Revenue Authority submitted a statement of the case under Section 54(1) of the Karnataka Stamp Act, 1957 (Act No. 34 of 1957). The question in this Reference relates to the proper duty chargeable on the mortgage deed executed on 6-12-1971 by Hotel Swiss Cottage (referred to as the ‘Mortgagor’) in favour of the Mysore State Financial Corporation (referred to as the ‘Corporation’) under the provisions of the Karnataka Stamp Act, 1957.

2. The Mortgagor borrowed a sum of Rs. 1,40,000/- from the Corporation and executed a mortgage deed on 6-12-1971 in respect of the immoveables (leasehold rights of the Mortgagor's premises) for Rs. 2,000/- and an unattested hypothecation deed for Rs. 1,38,000/- against moveables in favour of the Corporation. The deed has been drawn on a stamp paper of the value of Rs. 85/- on the basis that the sum secured thereunder was rupees two thousand only. The deed was presented for registration before the Sub-Registrar, Gandhinagar, Bangalore-9, on 7-12-1971. The Sub-Registrar was of the opinion that the sum secured under the mortgage deed was Rs. 1,40,000/- advanced to the Mortgagor and he accordingly assessed the deficit stamp duty of Rs. 5,865/- under Section 35(d) of the Karnataka Stamp Act, 1957, with a penalty equal to five times the amount of deficit stamp duty. He has however referred the question under Section 53(2) of the said Act, for the decision of the Chief Controlling Revenue Authority. On receipt of the reference, the Chief Controlling Revenue Authority heard the representatives of the mortgagor and the Corporation. He also held that the deed in question is a simple mortgage for sanctioned loan amount of Rupees 1,40,000/- and not for Rs. 2,000/. He was of the opinion that the deed is deceptive and so worded as to evade the stamp duty otherwise chargeable under the Act. He has, however, reduced the penalty from five times the amount of deficit stamp duty to one time of the same. Before us, counsel for the Mortgagor and the Corporation took a common stand that the principal sum secured under the mortgage deed is only Rs. 2,000/- and the Corporation has no right to recover its entire loan of Rs. 1,40,000/- under the said deed. The correctness of this contention has been seriously challenged by counsel for the State.

3. It is a cardinal rule of construction that the instrument has to be considered as a whole and the intention of the parties has to be ascertained by the terms thereof and not by extraneous circumstances or evidence. It is therefore necessary to set out the relevant clauses of the deed for the determination of the question. The preamble provides:

“WHEREAS

(1) The Mortgagor(s) propose(s) to carry on or is/are carrying on business under the name and style of Hotel Swiss Cottage.

(2) The Mortgagor(s) is/are seized of or otherwise well and sufficiently entitled to the piece or parcel of land, hereditaments and premises situate at 33, Race Course Road, Bangalore and particularly and fully described in the schedule hereto free from encumbrances.

(3) By an Indenture of lease (hereinafter called “the said Lease”) bearing date the First day of February 1971 and expressed to be made between (1) Raja Shankar Royal (2) Raja Krishnadeva Royal and (3) Raja Surendra Deva Royal (owner) of the one part and Sri Prem Agnani (mortgagor) of the other part (and registered in the office of the Sub-Registrar at Bangalore as Sl. No. 4481/70-71 of Book No. 1, Volume No. 2284 page 158 on the Eighth day of February 1971) the land, hereditaments and premises situate at No. 33, Race Course Road, Bangalore-1 and particularly therein described and also particularly described in the Schedule hereto were demised by the former to the latter for the term of Ten years commencing from the 1-5-1971 (and renewable as therein provided) at the rent reserved by and subject to the covenants and conditions in the said Lease contained.

(5) The Mortgagor(s) has/have installed in and erected on the said land, hereditaments and premises, fixed machinery and plant and other fixtures required to carry on his/their business.

(7) The Mortgagor(s) and the Guarantor(s) have requested the Corporation to lend to the mortgagors a sum of Rupees 2,00,000/- for establishment/expansion of a Hotel and the Corporation has sanctioned a loan of Rs. 1,40,000/-. (Rupees One lakh & forty thousand only) out of which the Corporation have agreed to advance a sum of Rs. 2,000/- (Rupees Two thousand only) on having the repayment thereof with interest secured in the manner expressed in the Hypothecation deed executed separately along with these Presents”.

4. Clause II provides:

“II. For the consideration aforesaid:—

(a) The Mortgagor(s) doth/do hereby bind himself/themselves personally for the repayment of the principal sum with interest and other moneys due to the Corporation under these presents:

(b) The Mortgagor(s) doth/do further, hereby grant, convey and assure unto the Corporation by way of security for the said principal and interest and other moneys that become due to the Corporation under these presents, all that piece or parcel of land or ground together with buildings (messuages), tenements of dwelling houses now standing or hereafter to be erected thereon or any part thereof situate at Bangalore and more particularly described in the Schedule hereunder written (hereinafter called “the land and building”) And all the estate, right, title, interest, claim and demand of the Mortgagor(s) into or upon all the land and buildings or any part thereof TO HOLD the same unto the CORPORATION forever but as to all the said premises subject to the proviso for redemption hereinafter contained.

Provided that if the Mortgagor(s) shall duly pay to the Corporation all the said principal sum and interest hereby secured in the manner herein “provided and all other moneys if any, by these presents or by law payable by fie Mortgagor(s) to the Corporation, then and in such case the Corporation shall at any time thereafter upon the request in writing and at the cost of the Mortgagor(s) reconvey the land and buildings hereinbefore expressed to be hereby conveyed (hereinafter collectively called “the mortgaged premises”) unto the Mortgagor(s) or as he/they shall direct.”

5. Clause IV (10) provides:

“Any default in payment of interest or instalment as provided in the Hypothecation Deed of even date shall be deemed to be a default under these presents”.

6. The Schedule reads:

“Schedule

(Details of Land and Buildings)

(a) Existing:

Leasehold rights on the land and buildings situate in No. 33, Race Course Road, Bangalore-1 measuring about 1859 square yards and bounded as follows:

East by — Race course road;

West by —Government road,

North by — The House of Prince Basalat Jha

South by — House of Sadanand D. Udhayakayar.”

7. The instrument is admittedly a mortgage deed. ‘Mortgage deed’ is defined for the purpose of the Stamp Act in Section 2(1)(n) of the said Act. It 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 a specified property. Entry 34 of the Schedule to the Stamp Act provides for payment of duty in respect of a mortgage deed. Clause (b) of the said entry states that when possession is not given or agreed to be given the duty payable on the deed would be the same as a Bottomry Bond (No. 13) for the amount secured by such deed.

8. By the terms of the mortgage deed, we have got to consider what exactly is the amount secured thereunder, or to what extent the mortgagor has bound himself under the instrument, or what exactly is his liability thereunder. Is it the entire loan of Rs. 1,40,000/- or only a sum of Rs. 2,000/-. We should not forget that the total advance to the Mortgagor was split up into two parts, one secured by the mortgage deed in question and the other by a hypothecation deed. Both are payable by instalments. Throughout the mortgage deed, it is recited that the principal sum is Rs. 2,000/- which is repayable in ten half-yearly equal instalments of Rs. 200/- together with interest at 10% per annum. The mortgaged premises are also specified thereunder; i.e the leasehold rights of the mortgagor in respect of his business premises. There is, therefore no doubt that the sum secured under the mortgage deed is only Rs. 2,000/-. Counsel for the State, however, referred to us the default clause provided under Cl. IV(10) and other clauses in the deed where there is a reference to “other moneys due to the Corporation” and argued that the principal sum secured under the mortgage deed in substance is Rs. 1,40,000/- and not merely Rs. 2,000/-. On an examination of these clauses, we find no support for the contention. It is true that the default in payment of instalments under the hypothecation deed would automatically be construed as a default in payment under the mortgage deed, but that by no means can indicate that the security under the mortgage deed is a security for the entire loan. The said default clause provides for a cause of action for the Corporation to recover the sum secured under the mortgage deed and no more. The “other moneys due to the Corporation” found in several clauses of the deed, has reference, in the context, only to the sum payable under the deed and not covered by the hypothecation deed. It includes the interest and the incidental charges on the sum secured under the mortgage deed. By reading the entire instrument, we find that it admits of only one construction, that is, the sum secured is only Rs. 2,000/, and therefore the stamp duty paid by the mortgagor was correct. We hold that the mortgage deed in question is a deed under which only a sum of Rs. 2,000/- is secured and it is correctly stamped under the provisions of the Karnataka Stamp Act, 1957. We answer the reference accordingly.

9. No order as to costs.

10. Order accordingly.