Kripal Singh v. State Of U.P Opp. Party.

A.U Khan, M.:— The facts are: On 23.9.1988 Kripal Singh executes a security bond in favour of Allahabad Bank. The deed is written at the instance of mortgager and on M/s. Curio Containers to obtain a credit facility to the extent at Rs. 4,80,000.00 to aid in farming. The deed has been executed on a stamp paper of Rs. 60.00

2. On 23.9.1988 Sub-Registering Officer Secunderabad, Bulandshahar submits a reference under Sec. 38(2) Stamp Act to Collector for realisation of deficient stamp duty. A show cause notice is issued.

3. On 27.2.1989 an objection in opposition is filed by Kripal Singh. The case set forth is that he has submitted the security bond only as a guarantor. The case falls under Art. 57 and Stamp duty payable thereon is at Rs. 55.00 It is urged that facts do not constitute a case under Art. 40(b) of Schedule 1-B of Stamp Act. Parties are given chance to lead their evidence. On 29.3.1990 Addl. Collector determines that facts in the document make out a case under Art. 40(b) of Schedule 1-B of Stamp Act. He directs furthermore to pay Rs. 26,340.00 as stamp duty and a sum in the like amount as penalty. Aggrieved by this order, the revision has been filed.

4. Heard the counsel for the parties and perused the record.

5. What is the nature of the document executed by Kripal Singh on September, 23, 1988 in favour of Allahabad Bank? A perusal of the document shows that it has been executed by mortgagor Kripal Singh. Possession of the land has not been given or agreed to be given. He has not signed as a surety to secure the due discharge of a liability or performance of a contract. The senior counsel submits that case, is one of deposit of title deeds and is chargeable under Art. 6. He calls to attention 1970 AWR 496 H.C In this case the deed was evidencing an agreement pledging goods and also an agreement purporting to create a first mortgage by deposit of title deeds. In this setting, it was held that document is not dutiable under Art. 40 but falls under Art. 6 of the Stamp Act. This case is not in point. Kripal Singh has himself covenanted to avail credit facilities to the tune of Rs. 4,80,000.00 and has himself executed a mortgage bond as a security. There is no question of deposit of title deeds.

6. The crucial difference between a mortgage created by deposit of title deeds covered by Art. 6 and those falling under Art. 40(b) has been brought out by Sri G.N Bhandari in his commentary on Stamp Act 1899 af page 75. It reads:

“Section 58(f) of Transfer of Property Act lays down that mortgage by deposit of title deeds may be created by the mere act of deposit of title deed and may be affected without a written or registered instrument. But it is not unusual to render the transaction to writing. The writing may take the form of memorandum, merely recording the fact of deposit or may include the terms and conditions of the transaction or the bargain when it becomes chargeable either under Art. 40 or Art. 6. The following example will make the distinction clear.

(1) In this case a loan of Rs. 70,000/- was advanced and was secured by deposit of title deeds. The document prepared in this connection, contained the additional covenants such as payment of interest, payment of costs and charges etc. incurred by the lender and the executant also undertook to execute a legal mortgage, whenever required by the lender. The court observed….” “Stamp Act make no distinction between a legal and equitable mortgage but provides that although a document may be mortgage deed if it falls under Art. 6, it will be looked upon as an agreement relating to deposit of title deeds. It was further observed: What was intended by Art. 6 was a document which would merely contain the bargain between the parties, with regard to the deposit of title deeds, and may be, conditions subsidiary or ancilliary to it. But if we have a document, which contains all the provisions normally found in a mortgage deed, then the mere fact that the document also contains a bargain with regard to deposit of title deeds, will not make it an agreement relating to deposit of title deeds. It was held that the document was chargeable under Art. 40 and not under Art. 6.”

7. On a consideration of arguments and material I am of certain opinion that deed executed by Kripal Singh falls under Art. 40(b) of Schedule 1-B of Stamp Act. The deficient stamp duty comes to at Rs. 26,340.00. The amount of penalty is supportable under this provision.

8. Revision is partly dismissed. The order of court below as respects deficient stamp duty is proper. Revision is partly allowed. The amount of penalty at Rs. 26,340.00 is reduced to Rs. 5,000.00.