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Umesh Kumar Gupta v. State Of U.P. And Others - WRIT - C No. 60449 of 2005 [2005] RD-AH 3335 (21 September 2005)


This is an UNCERTIFIED copy for information/reference. For authentic copy please refer to certified copy only. In case of any mistake, please bring it to the notice of Joint Registrar(Copying).


Court No. 5

Civil Misc. Writ Petition No. 60449 of 2005

Umesh Kumar Gupta ... ... ... ... . Petitioner


State of U.P. and others       ... ... Respondents


Hon'ble Janardan Sahai, J

The petitioner had taken a loan from the Punjab National Bank. The case of the petitioner is that the loan was secured by a mortgage by deposit of title deeds on 18.11.2004 and to evidence this transaction the petitioner executed a document titled as ''Memorandum of Mortgage by way of deposit of title deed' on 12.1.2005. The question in this case is whether this instrument dated 12.1.2005 is a mortgage deed covered under Article 40 (b) of Schedule I B of the Indian Stamp Act or is it an agreement relating to the deposit of title deeds covered under Article 6 of Schedule 1-B. The revenue authorities treating the instrument as a mortgage deed have found that there is a deficiency of Rs.4,90,000/- in stamp duty and have also imposed penalty of like amount and interest of Rs.14,700/- .

Section 2 (17) of the Indian Stamp Act defines a mortgage-deed. It is quoted hereunder:-

"2. Definitions. - In this Act, unless there is something repugnant in the subject or context  -

xxx xxx xxx xxx

(17) "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."

        Article 6 of Schedule I B is quoted hereunder.

"6. AGREEMENT RELATING TO DEPOSIT OF TITLE-DEEDS. PAWN OR PLEDGE, that is to say, any instrument evidencing an agreement relating to -

(1) the deposit of title deeds or instruments constituting or being evidence o the title to any property whatever (other than a marketable security): or

(2) the pawn or pledge of movable property, where such deposit, pawn or pledge has been made by way of security for the repayment of money advanced or to be advanced by way of loan or an existing or future debt -

(a) if such loan or debt is repayable on demand or more than three months from the date of the instrument evidencing the agreement;  and for every additional Rs.10,000 or part thereof in excess of Rs.30,000.

(b) if such loan or debt is repayable not more than three months from the date of such instrument.

Exemption. - Instrument of pawn or pledge of agricultural produce, if unattested"

Article 40 of Schedule I-B is extracted below

"6. MORTGAGE DEED, not being an agreement RELATING TO deposit to Title deeds Pawn or Pledge (No.6), Bottomry Bond  (No. 16), Mortgage of a Crop (No. 41), Respondentia Bond (No.56) or Security Bond (No. 57) -

(a) when possession of the property or any part of the property comprised in such deed is given by the mortgagor or agreed to be given;

(b) when possession is not given or agred to be given as aforesaid.


A mortgagor who gives to the mortgagee a power of attorney to collect rents or a lease of the property mortgaged or part thereof, is deemed to give possession within the meaning of this article.

(c) when a collateral or auxiliary or additional or substituted security or by way of further assurance from the abovementioned purpose where the principal or primary security is duly stamped for every sum secured not exceeding Rs.1,000, and for every Rs.1,000, or part thereof secured in excess of Rs.1,0000.


(1) Instruments executed by person taking advances under the land Improvement Loans Act, 1883, or the Agriculturists Loans Act, 1884 or by their sureties as security for the repayment of such advances.

(2) Letter of hypothecation accompanying a bill of exchange.

It is clear from the terms of Article 40 that an agreement relating to deposit of title deeds cannot be a mortgage deed. Before referring to the material terms of the instrument it is necessary to state the distinction between a mortgage by deposit of title deeds; an agreement relating to deposit of title deeds and a mortgage deed. A mortgage by deposit of title deeds envisaged in Section 58 (f) Transfer of Property Act is created when the debtor deposits with the creditor title deeds with intent to create a security thereon. No written instrument is envisaged. It is the act of deposit of the title deeds with the intention to create a security for the loan, which constitutes the mortgage. An agreement relating to deposit of title deeds is one by which no rights are created but the document is meant merely to be evidence of the transaction of the mortgage already created by deposit of title deeds. On the other hand if the instrument in question creates rights over specific property with intention of securing a loan the instrument will be a mortgage deed. The distinction has been considered in several authorities, which have been cited at the bar to which reference will be made in a later part of the judgment.

I shall now refer to the material terms of the deed for determining the real nature of the instrument.

Annexure-3 to the writ petition, is the copy of the disputed instrument. It is provided thereunder that the property secured by the mortgage would extend to the property described in Schedule B thereto together with all constructions erected or to be erected on the said property and other properties hereafter added by way of accretion to the mortgaged property, installed or affixed or brought upon or upon the said property for the purpose of its development/improvement or any other purposes allied or akin to the same along with all the rights title and interest claimed by the mortgagors against the mortgaged property.

Now it is well settled that a mortgage by deposit of title deeds in absence of any special terms of bargain extends to secure the property to which the title deeds relate. The portion of the instrument which has been quoted above, covers not only the existing property to which the title deeds relate namely those in  Schedule I-B but all constructions and additions to the property as may be made in future. Whether constructions to be made in future upon the land mortgaged have also been mortgaged is a matter to be decided on the intention of the parties. The instrument makes it explicit that future constructions have also been given in security. The act of deposit of title deeds and the instrument are therefore integral parts of the same transaction.

Paragraph II of the instrument recites  "the mortgagors hereby GRANTS AND TRANSFER un to the Bank by way of MORTGAGE BY WAY OF DEPOSIT OF TITLE DEED as security for the loans all his/her/their rights title and interest in the land together with all trees and other growths there on and buildings errections, structures, fixtures, fittings, equipments and machinery which now are or here after may at any time during the continuance of this security by erecting or standing  or attached to or affixed to the land or any part there of including all rights, liberties and easements in respect thereof AND all the estate, right, title, interest, claim and demand whatsoever of the borrowers/mortgagors into upon the land and the said premises (hereinafter referred to as the 'MORTGAGED PREMISES')".  The words "the mortgagors hereby grants and transfer" clearly effect a transfer by the deed itself and cannot be construed as a clause merely evidencing a transaction already completed. Paragraph III relates to the convenants which the mortgagors have made with the bank. Clauses (a) and (b) are as follows:-

"(a) the Bank shall not be required to make or continue any of the loans otherwise then at the Bank's discretion.

(b) The mortgagors shall at all times keep such items at mortgaged premises are of insurable nature, insured against loss or damaged by fire and other risks as may be required by the Bank and shall deliver to the Bank all such policies. It shall be lawful but not obligatory upon the Bank to insure and to keep insured by debit to the borrower's accounts the mortgaged premises as are of insurable nature. The proceeds of such insurance shall at the opinion of the bank either be applied toward replacement of the mortgaged premises or towards the satisfaction of the Bank's dues hereunder."

These conditions have been created by the mortgage deed. They do not flow out as the ordinary incidents of a mortgage by deposit of title deeds itself.  Paragraph IV contains conditions imposing personal liability upon the mortgagor to pay the loans and also provides the consequence of default in payment and a right to the bank to demand immediately the repayment of the amount owed if the bank is of the opinion that its interest is in jeopardy.

The provisions in the mortgage deed indicate that the terms of the transaction of mortgage have been reduced into writing in this document and the deed creates rights and operates as a transfer of interest. Its terms are elaborate and it contains all the conditions which one may find in a mortgage deed. It cannot be treated as a mere evidence of the mortgage by deposit of title deeds and cannot be described as an agreement relating to deposit of title deeds.  In Re The Indian Stamp Act, 1899 [AIR 1954 Bombay 462] Chagla C.J said:-

"What is intended by Art. 6 is a document which should merely contain the bargain between the parties with regard to the deposit of title deeds and, may be conditions subsidiary or ancillary to the deposit of title deeds. But if a document contains all the provisions which one would normally and in mortgage deed then, the mere fact that the document also contains the bargain with regard to the deposit of title deeds will not make it an agreement for the deposit of title deeds.

Where the deed contained many provisions which are never found in an agreement with regard to the deposit of title deeds such as a provision with regard to the acceleration of the due date for the payment of the mortgage debt."

To the same effect is the view taken by a Full Bench of the Madras High Court in Chief Controlling Revenue Authority, Board of Revenue, Madras Vs. Jawahar Mills Ltd., Salem [AIR 1967 Madras 1]

It is well settled that a mere description of a document, as an agreement to deposit of title deeds would not mean that the document is really of that character.  The intention of the parties has to be culled out from the document and that would determine its true character. Shri Anil Kumar Mehrotra, learned standing counsel has relied upon United Bank of India Ltd Vs. Messrs Lekharam Sonaram and Co. and others [AIR 1965 SC 1591].  The Apex Court in para 7 held that:

" (7) A mortgage by deposit of title deeds is in a form of mortgage recognized by s. 58 (f) of the Transfer of Property Act which provides that it may be effected in certain towns (including Calcutta) where a person "delivers to a creditor or his agent document of title to immovable property with intent to create a security thereon". In other words, when the debtor deposits with the creditor title deeds of his property with an intent to create a security the law implies a contract between the parties to create a mortgage and no registered instrument is required under S. 59 as in other classes of mortgage. It is essential to bear in mind that the essence of a mortgage by deposit of title deeds is the actual handing over by a borrower to the lender of documents of title to immovable property with the intention that those documents shall constitute a security which will enable the creditor ultimately to recover the money, which he has lent. But if the parties choose to reduce the contract to writing, this implication of law is excluded by their express bargain, and the document will be the sole evidence of its terms. In such a case the deposit and the document both from integral parts of the transaction and are essential ingredients in the creation the mortgage. ........."

It has therefore to be seen whether the act of deposit of title deeds and the instrument can be regarded as one transaction. From the terms of the instrument it is clear that it does not merely refer to the transaction of deposit of title deeds but contains elaborate conditions of the mortgage reduced into writing by the parties. Some of these conditions are not mere incidents of a mortgage by deposit of title deeds.  Applying the test it is clear that the deposits and the instrument both form integral parts of the same transaction. The document in question thus is a mortgage deed and is covered under Article 40 (b) of Schedule I-B of the Indian Stamp Act.

Shri Shashi Nandan counsel for the petitioner relied upon the decision of a Special Bench of this court in Padam Chand Jain Vs. The Chief Controlling Revenue Authority [AIR 1970 Alld 644]. In that case it was held that the deed in question evidenced an agreement pledging goods and also an agreement purporting to create a first mortgage by deposit of title deeds and was not chargeable under Article 40 but chargeable under Article 6 of the Act. The case is clearly distinguishable as it was found by the bench that the instrument did not create any charge upon the property to secure the debt. The other decision cited by him is that of Deb Dutt Seal Vs. Raman Lal Phumra and others [AIR 1970 SC 659] in which the Apex Court in para 7 laid down that:-  

"7. The only question is whether the parties intended to create a charge by the execution of Ex.2 or was it merely a record of the transaction which had already been concluded and under which rights and liabilities had already been created. It seems to us that the document did not intent to create a charge by its execution."

The terms of the instrument in the present petition have been set out above. It creates an interest in the property for securing the loan. Applying the test laid down by the apex court the instrument is a mortgage deed.

Shri Sashi Nandan then placed reliance upon a Government Notification dated 3.7.2004 in which certain concessions in stamp duty have been granted to new industries. It appears that this notification was not filed by the petitioner before the authorities below. The applicability of this notification would have a bearing upon the quantum of stamp duty payable as well as upon the imposition of penalty. In the interest of justice the applicability of this notification is required to be considered. The authorities below shall now consider the question of applicability of the notification dated 3.7.2004 to the petitioner's case. Counsel for the petitioner stated that the petitioner will file a certified copy of the judgement before the Assistant Commissioner (Stamp), Bulandshahar along with an application annexing there to copy of notification dated 3.7.2004 within a period of two months from today. In case the petitioner files such an application, the Assistant Commissioner (Stamp), Bulandshahar shall try to dispose of the same expeditiously.  The order imposing the deficiency of stamp duty and penalty and interest is therefore set aside at this stage to enable the Assistant Commissioner to consider whether the notification is applicable to the case.

In case no application is filed by the petitioner within one month from today, the writ petition shall be deemed to have been dismissed and it would not be required of the Assistant Commissioner to consider the applicability of the notification dated 3.7.2004

With these directions the writ petition is disposed of.

Dt. 21.9.2005



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