The Chief Controlling Revenue Authority (Stamp Act) and Director General of Registration Madras vs Coimbatore Alcohol and Chemicals (P) Ltd. and Another

Nainar Sundaram, J.—This is a reference u/s 57 of the Indian Stamp Act, 2 of 1989, hereinafter, referred to as the Act. The question

referred to for our consideration and answer runs as follows:

Whether the document No. P. 531 of 1977 of Registrar Office South Madras is mortgage deed or a trust deed?"" The document, as per the copy

disclosed in the typed set, is separately annexed to this order as Annexure-A, As we could see from the contents of the document, the executants

are stated to be Murugesan and Coimbatore Alcohol and Chemicals (P) Ltd. The document is in favour of Ramalinga Gounder. It refers to an

agreement dated 25.10.1977 amongst Muthukumaraswami, Lakshmanasami, Rathanasami, Coimbatore Alcohol and Chemicals (P) Ltd, and

others. There is-a reference to the properties, set-out in the third Schedule to the said agreement, and it is further said that until the debts of Rs.

5,28,000 referred to in paragraph 5 of the said agreement are discharged by the sale properties shall be in the possession of Ramalinga Gounder,

and at the time of the discharge of the said debts, possession shall be handed over by Ramalinga Gounder to the purchasers, and he shall not hand

over possession to any one without the discharge of the said debts. The revenue wanted to maintain that this document will fall within the definition

of a mortgage deed u/s 2(17) of the Act attracting Article 40 of the Act. The respondents, on the other hand, presented the document without

tendering any stamp duty, and on objections being raised that the document has got to be stamped as a mortgage deed, the respondents would say

that it may, if at all to be stamped, have the character of a declaration of trust and certainly not that of a mortgage deed as defined u/s 2(17) of the

Act.

Section 2(17) of the Act defines mortgage deed in the following terms:

Mortgage deed: ''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.

As we could see from the above definition, it is an inclusive one. Mortgage, as such, stands defined u/s 58(a) of the Transfer of Property Act, as

follows:

58(a) A mortgage is the transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced or to be

advanced by way of loan, an existing or future debt or the performance of an engagement which may give rise to a pecuniary liability.

The transferor is called a mortgagor, the transferee a mortgagee; the principal money and interest of which payment is secured for the time being

are called the mortgage money and the instrument (if any) by which the transfer is effected is called a mortgage deed.

Looking into the language of Section 58(a) of the Transfer of Property Act, we find that there has got to be transfer of an interest in specific

immovable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, or an existing future debt, or

the performance of an engagement which may give rise to a pecuniary liability. The definition of mortgage deed u/s 29(17) of the Act includes

every instrument whereby, for the purpose of securing money, advanced or to be advanced, by way of loan, or an existing or a future debt, or the

performance of an engagement, there is a transfer or creation by one person to and in favour of another a right over or in respect of specified

property. Section 58(a) of the Transfer of Property Act, refers to mortgages as relating to immovable property only, while the inclusive definition in

Section 2(17) of the Act applies it to transfers both of movable and immovable property. With this salient exceptions, the definitions in both the

statutes are practically identical.

The document as such, by its terms, does not say that there is money advanced or to be advanced by way of loan by Ramalinga Gounder either

to the executants or any other person. Equally so, it does not speak about an existing or a future debt by the executants or any other person to

Ramalinga Gounder. Hence, the question of securing such a loan or debt to Ramalinga Gounder would not arise. This is because, there is no role

of a creditor apparently given to Ramalinga Gounder as per the terms of the document. So also there is no securing of the performance of an

engagement, either giving rise to pecuniary liability or otherwise, to and in favour of Ramalinga Gounder. Assuming all the above aspects in favour

of the Revenue, the further question that arises for consideration is as to whether there is a transfer of an interest in or transfer or creation of a right

over or in respect of the specified immovable properties with which alone we are now concerned to and in favour of Ramalinga Gounder by the

executants. We find from the terms of the document that apart from bare custody of possession given to Ramalinga Gounder subject to certain

specified conditions, there has been no transfer of an interest in or transfer or creation of a right over or in respect of the specified immovable

properties to and in favour of Ramalinga Gounder. A mere handing over of possession of the specified immovable properties with nothing more or

with no intention to transfer an interest in or transfer or creation of a right over or in respect of the same will not bring the transaction within the

ambit of a mortgage. Hence, the other crucial element of transfer of an interest in or transfer or creation of a right over or in respect of the specified

immovable properties is lacking in the instant case. Apart from a bare possession subject to certain specified conditions, Ramalinga Gounder

acquired no interest or right in the specified immovable properties so as to attract the concept of a mortgage within the meaning of both the

statutes. For the above reasons, we are not persuaded to hold that the document will fall within the definition of a mortgage deed u/s 2(7) of the

Act so as to attract Article 47 of the Act.

Then the question is whether the document would fall within the ambit of a declaration of a trust under Article 64 of the Act. We must straight

away point out that it is an essential condition of the creation of a trust that the property must vest in the trustee. In the instant case, the role of a.

trustee is sought to be given to Ramalinga Gounder. But, there is no vesting of property at all in him with any obligations annexed to such vesting.

He has been given the bare possession of the properties as already noted and he has to be in possession of the properties subject to certain

specified conditions, set in the document. He shall not hand over the properties until the debts referred to are discharged. He shall hand over the

properties to the purchasers at the time of the discharge of the debts. It is not possible to say that there is any vesting of a property in Ramalinga

Gounder as such. It is only a case of a personal relationship and personal obligations and nothing more. Hence, we could not characterise the

document as a declaration of trust.

If this is the position on facts and in law, then we have to hold that the document is one not falling within the ambit of any of the specified Articles

under the Act, and it has to be treated as a document not requiring any stamp duty as originally contended by the respondents. We answer this

reference as above. We make no order as to costs. We fix the fees for the Government Pleader at Rs. 500.