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Issues Involved:
1. Whether the instrument in question is a mortgage with possession under Article 40(a) of Schedule I of the Indian Stamp Act, 1899, or an agreement. Detailed Analysis: Issue 1: Nature of the Instrument - Mortgage with Possession or Agreement Instrument Details: The instrument under consideration is styled as an agreement and involves a transaction common in the film trade. The film producer grants distribution rights in specified territories to the financier (distributor) to secure the distributor's advance by covenants. The document provides for an advance of Rs. 50,000 by the distributor to the producer, with the final instalment of Rs. 20,000 payable against delivery of the film prints. The producers grant the distributor exclusive rights of exhibition, distribution, and exploitation of the film for five years. The instrument includes mutual covenants for the protection of respective interests and specifies the distributor's commission on realizations from the film's exhibition. Contentions: - Government Pleader: The instrument is a mortgage with possession under Article 40(a) of the Stamp Act. Emphasis is placed on the covenants providing for the delivery of film prints to the distributor and the first charge over the prints and distribution rights until the distributor's dues are fully discharged. - Amicus Curiae: At the time of execution, the film was still under production, and the positive prints were not yet in existence. Hence, there was no property in existence for any transfer to operate upon. Relevant Articles of the Stamp Act: - Article 5(c): Agreement or memorandum of agreement not otherwise provided for. - Article 6: Agreement relating to deposit of title deeds, pawn, or pledge (not applicable as the instrument is unattested). - Article 40: Mortgage deed, classified under two heads: - Article 40(a): Mortgage with possession. - Article 40(b): Mortgage without possession. Definition of Mortgage Deed under Section 2(17) of the Stamp Act: A mortgage deed includes every instrument whereby, for securing money advanced or to be advanced, or an existing or future debt, or the performance of an engagement, one person transfers or creates a right over or in respect of specified property. Legal Principles: - Transfer of Property Act, 1882: Defines transfer of property as an act by which a living person conveys property, in present or in future, to one or more other living persons. - Privy Council and Supreme Court Precedents: A transfer of property not in existence at the time of the contract can only operate as a contract to be performed in the future, enforceable by specific performance when the property comes into existence. Court's Analysis: - Existence of Property: The film was under production at the time of execution, and the positive prints were not yet created. Therefore, there was no existing property to transfer or create a right over. - Specified Property: For an instrument to be a mortgage deed, the property must be clearly defined and in existence at the time of execution. Anticipated realizations from the film's exhibition are not considered specified property. - Equitable Principles: Equity treats as done what ought to be done, but this does not alter the original instrument's character or make it a mortgage deed for fiscal purposes. Conclusion: The instrument in question does not qualify as a mortgage deed under Section 2(17) of the Stamp Act and is not chargeable under Article 40(a) or (b). It is merely an agreement. The court answered the reference accordingly and made no order as to costs, thanking the amicus curiae for his assistance.
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