Article 57 Of Schedule 1-B Of Indian Stamp Act Inapplicable Where Principal Debtor Itself Executes Deed Mortgaging Its Own Property: Supreme Court
The Supreme Court said that the term ‘surety’ must be strictly understood in accordance with Section 126 of the Indian Contract Act, 1872 (ICA).
Justice Ahsanuddin Amanullah and Justice Prashant Kumar Mishra, Supreme Court
The Supreme Court held that Article 57 of Schedule 1-B of the Indian Stamp Act, 1899 (ISA) is inapplicable where Principal Debtor itself executes a Deed mortgaging its own property.
The Court held thus in a Civil Appeal filed against the Judgment of the Allahabad High Court, which dismissed a Writ Petition and affirmed the Order of the Commissioner, Meerut Division.
The two-Judge Bench of Justice Ahsanuddin Amanullah and Justice Prashant Kumar Mishra observed, “… a contract of guarantee is inherently tripartite, consisting of the surety, principal debtor, and a creditor. Consequently, the essential requirement for invoking Article 57 is the presence of a surety distinct from the principal debtor. Where the principal debtor itself executes a deed mortgaging its own property, Article 57 is inapplicable.”
The Bench said that the term ‘surety’ must be strictly understood in accordance with Section 126 of the Indian Contract Act, 1872 (ICA).
Senior Advocate Kavita Jha represented the Appellant while AOR Shaurya Sahay represented the Respondents.
Factual Background
In 2006, the Meerut Development Authority allowed the Appellant-M/s Godwin Construction Pvt. Ltd. to develop a colony known as “Global City, Abdullahpur, Meerut”. The Appellant executed a “Security Bond cum Mortgage Deed” in favour of the Meerut Development Authority under Article 57 of Schedule 1-B of the ISA to secure performance of all obligations relating to the development of the colony, including payment of external development charges and provision of requisite amenities. The Appellant mortgaged specified plots of land under the deed and transferred interest in the properties specified in the deed to the authority, intending that they shall remain mortgaged.
A stamp duty of ₹100/- was paid, in accordance with Article 57. In 2008, the Deputy Commissioner (Stamps), Meerut Circle, issued a notice to the Appellant stating that the stamp duty was payable under Article 40 and initiated recovery proceedings under Section 33(4) for remaining deficit stamp duty of ₹4,61,660/- In 2010, the Appellant filed objections and by order, the Deputy Commissioner held that the instrument described as “Security Bond cum Mortgage Deed” was chargeable under Article 40 and not under Article 57. The Respondent-Commissioner affirmed the said order and this was challenged before the High Court, which also confirmed the same. Hence, the case was before the Apex Court.
Reasoning
The Supreme Court in the above context of the case, noted, “In the case at hand, it is apparent from the recitals of the instrument titled “Security Bond cum Mortgage Deed” executed by the appellant that only two parties are involved — the Meerut Development Authority and the appellant, M/s. Godwin Construction Pvt. Ltd.”
The Court added that the deed was not executed by a surety but by the principal debtor/Appellant, the company, through its director and it is evident that the company itself mortgaged the properties and not the director in his individual capacity.
“A company, though a juristic person, is not a sentient being, consequently, it must act through its directors. This firmly establishes that the properties were not mortgaged by a third party, but by the principal debtor itself, which, in our opinion, does not attract Article 57”, it enunciated.
The Court was of the view that in the absence of any surety, to attract Article 57 of the Indian Stamp Act, the deed executed by the Appellant cannot be termed as a security bond and it, however, fulfils all the requirements of a mortgage deed, falling under the ambit of Article 40.
“As observed by us in the preceding paragraphs, the second limb of Article 57 of Schedule 1-B of the Indian Stamp Act, 1899, is confined to instruments executed by a surety to secure the obligations of another”, it further observed.
The Court, therefore, concluded that the deed constitutes a mortgage executed by the principal debtor itself, thereby attracting the provisions of Article 40, for the purposes of stamp duty.
Accordingly, the Apex Court dismissed the Appeals and upheld the impugned Judgment.
Cause Title- M/s Godwin Construction Pvt. Ltd. v. Commissioner, Meerut Division & Anr. (Neutral Citation: 2025 INSC 1207)
Appearance:
Appellant: Senior Advocate Kavita Jha, AORs Pahlad Singh Sharma, Aniket Deepak Agrawal, Advocates Vaibhav Kulkarni, and Akash Shukla.
Respondents: AORs Shaurya Sahay and Bhakti Vardhan Singh.
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