Summary
| Category | Data |
|---|---|
| Court | Supreme Court of India |
| Case Number | C.A. No.-007661-007661 – 2014 |
| Diary Number | 14864/2013 |
| Judge Name | HON’BLE MR. JUSTICE SANJAY KAROL |
| Bench |
HON’BLE MR. JUSTICE SANJAY KAROL HON’BLE MR. JUSTICE PRASHANT KUMAR MISHRA |
| Precedent Value | Binding authority |
| Overrules / Affirms | Affirms existing law |
| Type of Law | Stamp-duty / fiscal law |
| Questions of Law | Whether instruments titled “Security Bond cum Mortgage Deed” executed by a principal debtor without an independent surety are chargeable under Article 57 or Article 40 of Schedule 1-B of the Indian Stamp Act, 1899 |
| Ratio Decidendi |
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| Logic / Jurisprudence / Authorities Relied Upon by the Court |
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| Facts as Summarised by the Court |
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Practical Impact
| Category | Impact |
|---|---|
| Binding On | All courts in India |
What’s New / What Lawyers Should Note
- Confirms that Article 57’s second limb applies only where a distinct surety guarantees another’s obligation; a principal debtor cannot invoke Article 57 for its own mortgage.
- Reinforces the principle that the substance and operative provisions of an instrument, not its title, determine stamp-duty classification.
- Validates routine application of Article 40 for deeds executed by principal debtors, even if styled as “Security Bond cum Mortgage Deed.”
Summary of Legal Reasoning
- Emphasised substance over form: nomenclature is not decisive for stamp duty (para 14).
- Extracted and examined operative clauses of the deed to ascertain true character (paras 14–16).
- Applied Section 2(17) definition: deed confers a right over specified property to secure an obligation, fulfilling mortgage-deed criteria (paras 16–17).
- Analysed Articles 40 & 57 of Schedule 1-B: Article 57’s second limb restricted to a surety distinct from the principal debtor (paras 20–23).
- Noted absence of a tripartite relationship (principal debtor, surety, creditor) in both instruments; concluded both deeds are mortgages chargeable under Article 40 (paras 25–29).
- Dismissed appeals for lack of infirmity in High Court’s affirmation of Article 40 chargeability (para 30).
Arguments by the Parties
Petitioner (Appellant)
- The “Security Bond cum Mortgage Deed” is not a simplicitor mortgage but a security bond, hence stampable under Article 57.
- No independent mortgage deed; the duty rate under Article 57 applies.
Respondent (Stamp Authorities / Revenue)
- Substance of the instrument is that of a mortgage deed; no third-party surety exists.
- Article 40 correctly applies; High Court orders dismissing appeals were valid.
Factual Background
In the first appeal, the appellant obtained layout approval from the development authority and executed a “Security Bond cum Mortgage Deed” on 19 December 2006, mortgaging multiple plots (totaling 2,934.45 sqm) to secure development obligations. Although ₹100 stamp duty was paid under Article 57, the stamps department raised a demand of ₹4,61,660 under Article 40; all administrative and writ appeals were dismissed.
In the second appeal, a similar deed was executed for a bank loan on one plot; a ₹100 stamp was affixed under Article 57, but a deficit under Article 40 (₹1,37,500) was demanded and upheld.
Statutory Analysis
- Section 2(17), Indian Stamp Act, 1899: Defines “mortgage–deed” by substance (transfer/creation of right over property to secure a debt or obligation).
- Section 126, Indian Contract Act, 1872: Defines “surety” within a tripartite contract of guarantee.
- Article 40, Schedule 1-B (Items for Mortgage-deeds): Applies to deeds where principal debtors themselves mortgage property or give possession.
- Article 57, Schedule 1-B: Two limbs—(i) security bond/mortgage deed for due execution of office; (ii) deeds executed by a surety for another’s liability. Second limb not attracted when debtor mortgages its own property.
Alert Indicators
- ✔ Precedent Followed