K.P. Sethumadhavan vs P.K. Apputty

M.P. Menon, J.—The Plaintiff allowed his building to be occupied by the Defendant, as per written agreement dated 17th April 1979. The transaction was referred to in the agreement itself as ''usufructuary mortgage'', and the amount of Rs. 5,000 advanced to the Plaintiff was termed ''mortgage amount'' . The handing over of possession was stated to be as security for the said advance. The Defendant was to occupy the building for one year, with liability to pay to the Plaintiff, after adjustment of interest on the mortgage money, Rs. 200 every month as surplus profits . And if the Plaintiff committed default in the matter of repaying the mortgage money at the end of one year, the Defendant was entitled to recover the same (and all other dues) by bringing the building to sale, through Court. The other terms and details of the agreement are not relevant for the present; but it is necessary to notice that the document itself contained a recital that owing to certain "technical difficulties" in registering a mortgage deed, the parties were making an agreement only, which was to remain valid till a mortgage deed was duly registered.

In the year 1981 the Plaintiff instituted O.S. 354/81 for a decree "directing the Defendant to surrender the plaint schedule property to the Plaintiff with past and future mesne profits" etc. Evidently, the suit was one for recovery of the property on the strength of title. The agreement dated 17th April 1979 was referred to in the plaint, but was not included among the documents listed in it. It was however sought to be produced and marked in evidence when the Plaintiff was being examined, and the other side objected to the course, on the ground that the document was not properly stamped. By its order dated 22nd August 1983 the trial Court upheld the objection and directed payment of stamp duty and penalty on the footing that the agreement was a "mortgage deed" as defined in the Stamp Act; and the present revision by the Defendant is directed against the above order.

Counsel for the Petitioner-Defendant contends that the document in question is only a simple agreement involving no valid transfer of property by way of security so as to create a mortgage, that the parties have only agreed to create a mortgage and have not actually created one by executing a proper deed and getting it registered, and that apart from the clear intention of the parties in this regard as expressed in the document itself, the circumstance that it is signed by both the parties is also one militating against the conclusion reached by the Court below.

Section 2(n) of the Kerala Stamp Act, 1959 reads:

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;

For deciding whether the document in question is a "mortgage deed" and whether it is sufficiently stamped as required under the Act, ordinarily the definition clause as set out above alone can be looked into. Ignoring unnecessary details the requirements of Section 2(n) are:

(i) there should be an ''instrument'';

(ii) it should be one whereby one person transfers a right over or in respect of specified property;

and (iii) the transfer should be for the purpose of securing money advanced by way of loan.

''Instrument'' is defined in Section 2(j) as follows:

Instrument'' includes every document by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or recorded but does not include a bill of exchange, promissory note, bill of lading, letter of credit, policy of insurance, transfer of share, debenture, proxy and receipt;

Now, the first thing to be noted about the two clauses is that both are "inclusive definitions" suggesting thereby that the legislative intention has been to keep the concepts as wide as possible. The next is that they appear in an enactment imposing a duty; and therefore the legislative attempt must have been to rope in as many documents as possible, irrespective of other technicalities traceable to other enactments, in the interest of revenue. Now, an ''instrument'' includes not only every document by which rights or liabilities are actually created or transferred, but also one where they are purported to be created or transferred. Reading Sections 2(j) and 2(n) together, therefore, it is not difficult to conclude that in order to constitute a mortgage deed", there need not be an actual or valid transfer of rights, over or in respect of property a purported transfer of such rights is sufficient. It may be that a valid mortgage can be created, under Sections 58 and 59 of the Transfer of Property Act, only with a registered instrument; but for the coming into being of a "mortgage deed" as defined in Section 2(n) of the Stamp Act, registration is not necessary, because the definition does not make mention of any such requirement. The document, dated 17th April 1979 was evidently an ''instrument'' as defined in Section 2(j): it was one whereby the Plaintiff transferred or at least purported to transfer some right in favour of the Defendant. The right was in respect of specified property i.e. the building in question. And the transfer was for securing the amount of Rs. 5,000, given as advance or loan to the Plaintiff. Thus the three elements of Section 2(n) stood fully satisfied, and no other view could have been taken about the nature of the document, for the purpose of the Stamp Act, notwithstanding the understanding between the parties that registration was necessary for perfecting the arrangement as a mortgage under the T.P. Act.

Section 17 of the Stamp Act provides that "all instruments chargeable with duty and executed by any person in the State of Kerala shall be stamped before or at the time of execution". In other words, the intention of the legislature is that the State should be able to collect the stamp duty either before or at the time of execution of the instrument, even assuming that registration is necessary and that has to be effected later. Section 18 is the only provision of the Act which contemplates stamping of an instrument after its execution i.e. instruments executed out of India. "Executed" and "execution", used with reference to instruments, mean ''signed'' or ''signature'', as is made clear by Section 2(f) and this is Anr. indication that so far as stamp duty is concerned, it is to be paid, u/s 17, before or at the time of signing the instrument, irrespective of the circumstance that in order to create a valid transaction under another enactment, it has to be registered also.

Section 33, proviso (b) to Section 34 and Section 37 of the Stamp Act, show, when read together, that a Sub-Registrar before whom an instrument is presented for registration is empowered to insist on payment of deficit stamp duty, before registration. That is, even in the case of documents which require registration under other enactments, payment of proper stamp duty is to be made before registration. Sufficiency of Stamp duty is thus not dependent on actual registration; the question can arise, and does arise, under the Stamp Act, before registration.

In Hazrami Gangaram Vs. Kamlabai and Another, a bench of five Judges had adverted to some of the provisions of the Stamp Act, as also the trend of judicial decisions, before observing:

The definitions and the terms of every section of the Stamp Act indicate clearly that an instrument need not be valid in law or meet the requirements of law as a valid document before it is chargeable to stamp duty under the Act. It is chargeable to stamp duty before or at the time of its being signed or executed. It is not necessary that it must be attested, or registered when such registration is an essential requirement for validity of the document. In our opinion, there is not the slightest indication in any of the provisions of the Stamp Act to lend support to the contention that a document must be validly executed either under the provisions of the Transfer of Property Act or under the Registration Act or, for that matter, tinder any other provision of law, before it is chargeable to stamp duty.

In Kochunarayanan v. Aravindakshan 1974 KLT 301 it was contended before this Court that as the instrument in question, a rent deed was executed only by one of the parties to the transaction and not by both, as required by the provisions of the T.P. Act, it could not be considered as a "lease" for the purposes of the Stamp Act; and Namboodiripad, J. firmly rejected the contention, in the following words:

When once the transaction is defined in the Act itself it is not permissible to go outside the provisions of the Act and search for a definition of the very same term in some other statute. In as much as the expression ''lease'' has been defined in the Act the Court below was right in holding that the definition of ''lease'' in the Transfer of Property Act or for that matter in any other statute cannot be of any assistance. Being a taxing statute if a particular transaction is hit by the provisions of the statute the person concerned cannot escape liability by pressing into service provisions of other statutes. In as much as the disputed instrument squarely falls within the definition of lease as contained in Section 2(1)(ii) of the Act the instrument has to be taxed under item 33(a)(viii) of the Schedule.

I think what has been said above should answer all the contentions raised on behalf of the Petitioner. That the parties had chosen to call the instrument a "mere agreement" and had even agreed to register a mortgage later as required by the T.P. Act was not conclusive of the question whether the document, dated 17th April 1979 was an ''instrument'' as defined in Section 2(n) of the Stamp Act. The circumstance that it was signed by both the parties was also not material, in the light of Section 2(n) or the other relevant provisions of the said enactment. In AIR 1930 76 (Privy Council) the question was whether an agreement between two persons that the first would give a regular mortgage of immovable property to the second would amount to a mortgage or charge, within the meaning of Sections 58 or 100 of the T.P. Act. All that was said in Ma Mo E v. Ma Kun Haling AIR 1941 Rang 234 was that where a mortgage was unregistered, the mortgagor could sue for possession on title, though he could not seek redemption. In J.K. (Bombay) P. Ltd. Vs. New Kaiser-I-Hind Spg. and Wvg. Co. Ltd. and Others, also, the question, as in AIR 1930 76 (Privy Council) , was whether an agreement to execute a mortgage could create rights under Sections 58 or 100 of the T.P. Act. The above and other decisions relied on by Sri Dandapani were not decisions arising under the Stamp Act and relating to the question of admissibility of documents alleged to be improperly stamped.

There are therefore no grounds for interfering with the view taken by the trial Court. The plaint in O.S. 354/81 contains an averment that "the Defendant is not a lessee under the provisions of the Kerala Buildings (Lease and Rent Control) Act"; and that perhaps is capable of suggesting that the parties were anxious to side-step not only the provisions of the Stamp Act, but also of the Rent Control Act. In any event, actual execution of "mortgage deed" as defined in the Stamp Act, coupled with a recital therein that the parties would register another instrument as a "pucca mortgage" (for the purposes of the T.P. Act) would not alter the character of the instrument so far as levy of proper stamp duty is concerned.

Revision dismissed. No costs.