1974 (10) TMI 109 - HC - Indian Laws

Summary

Issues:
1. Whether the document sought to be registered by a company is a mortgage deed subject to stamp duty under Article 40 (b) of the Indian Stamp Act.

Analysis:

1. Background of the Case:
The case involved a reference under Section 57 of the Indian Stamp Act to determine if a document styled as a trust deed securing bearer debentures was a mortgage deed subject to stamp duty. The company wanted an adjudication of the stamp duty payable on the document, which was considered chargeable under Article 40 (b) by the Collector. The company requested a reference under Section 56(2) of the Act.

2. Nature of the Document:
The document in question was a trust deed executed by the company in favor of a bank, following a Loan and Purchase Agreement. The trust deed created a floating charge over the company's assets and undertakings, to secure debentures. The terms of the trust deed specified events upon which the floating charge would crystallize, allowing for enforcement by a trustee or receiver for the benefit of debenture holders.

3. Interpretation of Mortgage Deed:
The court analyzed the definition of a mortgage deed under Section 2(17) of the Indian Stamp Act, which includes the transfer or creation of a right over specified property to secure money advanced. It was emphasized that a mortgage involves a transfer of interest or creation of a right in specified property, unlike a floating charge which crystallizes upon a specific event, creating a charge over the property at that point.

4. Comparison with Precedent:
The Advocate-General relied on a previous judgment involving a mortgage transaction but the court distinguished the cases. The previous case involved an enforceable charge without the need for a specific event, unlike the floating charge in the present case. The court highlighted the difference in the nature of the charges and concluded that the trust deed in question did not qualify as a mortgage deed under the Stamp Act.

5. Decision:
The court ruled against the Revenue, stating that the trust deed was not a mortgage deed subject to stamp duty under Article 40 (b) of the Indian Stamp Act. The Revenue's argument was dismissed, and costs were awarded to the respondent. Counsel's fee was also specified in the judgment.