Indian Stamp Act, 1899 — Schedule 1-B, Articles 40 & 57 — Stamp duty — Security Bond cum Mortgage Deed — Nature and chargeability — Determination of applicable Article — Principles reiterated —
Where the instrument titled “Security Bond cum Mortgage Deed” executed by the appellant in favour of the Meerut Development Authority created a charge over specified immovable properties to secure performance of obligations in developing a colony and payment of external development charges — Held, the decisive factor is the substance of rights and obligations created, not the nomenclature of the document.
The instrument in question clearly transferred an interest in immovable property by way of security to secure performance of an engagement, satisfying the definition of “mortgage deed” under Section 2(17), Indian Stamp Act, 1899.
Since the deed was executed solely between the appellant-company and the Meerut Development Authority, and there was no third-party surety, it could not be treated as a “security bond” under Article 57 of Schedule 1-B, which applies only to instruments executed by a surety to secure performance of another’s obligations.
Accordingly, the instrument was held chargeable under Article 40 of Schedule 1-B as a mortgage deed, not under Article 57.
Contract Act, 1872 — Section 126 — Contract of guarantee — Surety, principal debtor and creditor — Tripartite nature —
Article 57 applies only when an instrument is executed by a “surety” distinct from the principal debtor — A contract of guarantee, by definition, requires three parties — In the present case, the company itself executed the deed through its director as principal debtor, not as a third-party surety — Hence, Article 57 not attracted.
Interpretation of instruments — Nomenclature vs. substance —
In matters of stamp duty, the nomenclature assigned to an instrument is not conclusive — The Court must ascertain the true legal character of the document from its operative clauses and substance — “Security Bond cum Mortgage Deed” was, in substance, a mortgage deed within the meaning of Section 2(17), Indian Stamp Act, 1899.
Held,
-
Instrument executed by principal debtor itself to secure performance of its own obligations does not fall under Article 57;
-
Article 57’s second limb (“executed by a surety to secure due performance of a contract”) is confined to cases involving a surety distinct from the principal debtor;
-
Mortgage executed by the principal debtor attracts Article 40 of Schedule 1-B;
-
High Court rightly upheld the levy of deficient stamp duty under Article 40;
-
No infirmity in the impugned orders.
Result: Appeals dismissed.
2025 INSC 1207
CA NO. 7661 OF 2014 ETC. Page 1 of 15
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.7661 OF 2014
M/S GODWIN
CONSTRUCTION PVT. LTD.
….APPELLANT(S)
VERSUS
COMMISSIONER, MEERUT
DIVISION & ANR.
…. RESPONDENT(S)
WITH
CIVIL APPEAL NO.12552 OF 2025
(ARISING OUT OF S.L.P. (CIVIL) NO.36434 OF 2014)
J U D G M E N T
PRASHANT KUMAR MISHRA, J.
1. Leave granted in SLP (Civil) No.36434 of 2014.
FACTUAL MATRIX IN CIVIL APPEAL NO. 7661 OF 2014
2. Civil Appeal No.7661 of 2014 calls in question the impugned
order dated 22.01.2013 passed by the High Court of Judicature at
Allahabad in Writ Petition No. 31966/2012, whereby the High Court
dismissed the writ petition filed by the appellant, affirming the order
dated 11.06.2012 passed by respondent No.1, which in turn affirmed
the order dated 15.09.2010 passed by respondent No.2, directing the
CA NO. 7661 OF 2014 ETC. Page 2 of 15
appellant to pay Rs.4,61,760/- (Rupees Four Lakh Sixty-one
Thousand Seven Hundred and Sixty) as deficient stamp duty under
Article 40(b) of Schedule 1-B of the Stamp Act, together with penalty of
Rs.100/- along with interest at the rate of 1.5% per month from the
date of execution of the instrument till recovery.
3. On 18.12.2006, the Meerut Development Authority allowed the
appellant to develop a colony known as “Global City, Abdullahpur,
Meerut”. On 19.12.2006, 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 Indian Stamp Act, 1899 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, totalling 2,934.45 square meters.
4. The appellant transferred all their interest in the properties
specified in the deed to the Meerut Development Authority, intending
that they shall remain mortgaged. In case of default of liability, the
Meerut Development Authority shall be entitled to sell the mortgaged
properties to realize an amount of ₹1,00,44,000/- (Rupees One Crore
and Forty-four Thousand). The appellant had also deposited an
advance deposit of ₹15,00,000/- (Rupees Fifteen Lakh) and upon the
full discharge of all obligations, the surety under the bond and
CA NO. 7661 OF 2014 ETC. Page 3 of 15
obligation will be void. A stamp duty of ₹100/- was paid, in
accordance with Article 57 of Schedule 1-B of the Indian Stamp Act.
5. On 16.02.2008, the Deputy Commissioner (Stamps), Meerut
Circle, Meerut, issued a notice to the appellant stating that the stamp
duty was payable under Article 40 of Schedule 1-B of the Indian
Stamp Act, and initiated recovery proceedings under Section 33(4) for
remaining deficit stamp duty of ₹4,61,660/- (Rupees Four Lakh Sixtyone Thousand Six Hundred and Sixty).
6. On 07.07.2010, the appellant filed objections to the notice dated
01.05.2008 before respondent No.2. By order dated 15.09.2010,
respondent No.2 held that the instrument described as “Security Bond
cum Mortgage Deed” was chargeable under Article 40 of Schedule 1-B
of the Indian Stamp Act and not under Article 57 as claimed by the
appellant. Accordingly, he confirmed the demand for deficit stamp
duty of ₹4,61,660/- together with a penalty of ₹100/- totalling
₹4,61,760/- and interest at the rate of 1.5% per month with effect
from the date of execution of the said instrument till the date of
recovery.
7. Aggrieved by the order dated 15.09.2010 passed by respondent
No.2, the appellant filed Stamp Appeal No.8/2010 under Section
56(1)(b) of the Indian Stamp Act before the respondent No.1.
CA NO. 7661 OF 2014 ETC. Page 4 of 15
However, the said appeal was dismissed by respondent No.1 vide order
dated 11.06.2012.
8. Aggrieved, the appellant preferred Writ Petition No.31966/2012
before the Hon’ble High Court. Vide judgment dated 22.01.2013, the
High Court dismissed the writ petition, holding that the Security Bond
cum Mortgage Deed dated 19.12.2006 was executed solely between
the appellant and the Meerut Development Authority as a mortgage
deed. In the absence of any surety or third party, it was chargeable
under Article 40 of Schedule 1-B of the Indian Stamp Act, 1899.
Pursuant to the above dismissal, the present Civil Appeal has been
filed.
FACTUAL MATRIX IN CIVIL APPEAL ARISING OUT OF SLP (C)
NO.36434/2014
9. The appellant applied for a business loan of Rs.1,66,00,000/-
(Rupees One Crore and Sixty-six Lakh) from the Allahabad Bank. To
ensure re-payment of loan, he executed a “Security Bond or Mortgage
Deed” placing immoveable property being plot No.122-M measuring
0.202 hectares, situated in Village Jugauli Tappa Sirsia, Pargana
Vinayakpur, Tehsil Nautanwa, District Maharajganj as security with
the bank. The deed was executed on a stamp paper of ₹.100/- in
compliance with Article 57 of Schedule 1-B of the Indian Stamp Act,
1899.
CA NO. 7661 OF 2014 ETC. Page 5 of 15
10. The deed was presented before Sub-Registrar for registration on
04.12.1995 which was forwarded to the Deputy Collector (Stamp),
with his report dated 06.01.1996, observing that the document was a
mortgage deed, and chargeable under Article 40, Schedule 1-B of the
Indian Stamp Act, thus, indicated a stamp deficit of Rs.1,37,500/-
(Rupees One Lakh Thirty-seven Thousand and Five Hundred). The
Deputy Collector (Stamp) vide order dated 10.04.1997, concurred
with the Sub-Registrar’s report and held that the deed in question was
a simple mortgage deed chargeable with stamp duty at the rate of
Rs.62.50 per thousand. Aggrieved thereto, appellant preferred Stamp
Revision No.59/1997-98 but the same was dismissed. Assailing the
orders dated 10.04.1997 and 10.08.2001; the appellant filed Writ
Petition No.33415/2001 before the High Court. The High Court after
dealing with the issue on merits, dismissed the writ petition, finding
no perversity in the impugned orders.
SUBMISSIONS
11. Learned counsel for the appellants in both the Appeals submit
that the instrument executed by the appellants should be charged for
stamp duty as per Article 57 of Schedule 1-B of the Indian Stamp Act.
Learned counsel further asserted that the subject deeds are not
simplicitor mortgage deeds as defined under Section 2(17) of the Indian
CA NO. 7661 OF 2014 ETC. Page 6 of 15
Stamp Act, 1899. Hence, the stamp duty cannot be levied under
Article 40 of the Indian Stamp Act, 1899.
12. Per contra, the learned counsel for the respondents contended
that the impugned orders have rightly held that the deeds executed by
the appellants in favour of the Meerut Development Authority and the
Allahabad Bank respectively are chargeable under Article 40 of
Schedule 1-B of the Indian Stamp Act, 1899. Learned counsel assert
that the orders of the High Court do not require any interference.
13. The question which falls for our consideration in both the
Appeals is whether the stamp duty on the instrument “Security Bond
cum Mortgage Deed”, is chargeable under Article 40 or Article 57 of
Schedule 1-B of the Indian Stamp Act 1899.
ANALYSIS
CIVIL APPEAL NO.7661 OF 2014
14. It is trite that, in matters of stamp duty, the decisive factor is not
the nomenclature assigned to the instrument, but the substance of
rights and obligations it embodies. The Court is duty-bound to
ascertain the true legal character of the instrument. In the instant
case, the appellant has executed a “Security Bond cum Mortgage
Deed” in favour of the Meerut Development Authority. Unless the
nature and effect of such an instrument are conclusively identified,
CA NO. 7661 OF 2014 ETC. Page 7 of 15
the application of any provision for the determination of stamp duty
on instruments under the Indian Stamp Act, 1899, cannot be
undertaken. It is necessary to have regard to the operative recitals
and clauses of the deed executed by the appellant. For this purpose,
the relevant portions of the “Security Bond cum Mortgage Deed dated
19.12.2006 are extracted below:
“STAMP DUTY RS 100/- IMPROVEMENT TRUST DUTY NILL
TOTAL RS 100/- THIS SECURITY Bond CUM MORTGAGE
DEED is being executed by surety to secure due performance
of contract and for due discharge of liability. The stamp duty is
being paid under Article 57 of the schedule I-B of the Indian
Stamp Act, 1989, as amended in its application of Uttar
Pradesh.
THIS INDENTURE IS MADE at Meerut on the 19th day
December 2006.
BETWEEN
Godwin Construction Pvt. Ltd. through Director Shri Jitender
Bajwa R/o A-151, Defence Colony, Meerut hereinafter called
SURETIES of the one part which expression shall, unless
repugnant to the context or in consistent with the subject,
include their heirs, executors and administrators etc.
AND
MEERUT DEVELOPMENT AUTHORITY, Vikas Bhawan, Meerut
hereinafter called MDA of the other part, which expression,
unless repugnant to the context or inconsistent with the
subject shall include its interest assigns, transferees in
interest etc.
WHEREAS M/S Godwin Construction Pvt. Ltd., A-151,
Defence Colony, Meerut hereinafter referred to as the
COLONIZER is developing a colony, under the name and style
of Global City, Abdullapur Meerut hereinafter referred to as
colony and,
WHEREAS MDA has agreed to approve the lay out plan of the
colony and colony itself provided to Colonizer discharges all
the liability to develop and colony together with all required
amenities and for due discharge of the liabilities of the
Colonizers the MDA has asked to furnish security of Rs.
1,15,44,000/- for external development charge which will be
CA NO. 7661 OF 2014 ETC. Page 8 of 15
released after the payment of external development charge of
the colony as per terms and conditions and bye laws (sic) of
the MDA And.
WHEREAS the sureties or the Guarantors have in
consideration of approving the lay out of colony by the MDA
has agreed to give security of 1,00,44,000/- in the manner
hereinafter mentioned & have deposited Rs. 15,00,000/- as
advance in the shape of Demand Draft.
NOW THIS DEED WITNESSES :-
1. THAT the sureties to secure the due performance the
contract and for due discharge of the liability to pay of external
development charge of the colony Global City, Abdullapur,
Meerut and all amenities, work of the Colony, the surety
hereby transfer to MDA all their interests in the property
detailed in the schedule here to with intent that the same shall
remain and be charged by way of mortgage.
2. THAT the Sureties declare that:-
a. THAT Sureties are the absolute owners of the property and
free from encumbrances of any kind.
b. THE SURETIES are entitled to sell, transfer or alienate the
said property.
c. THAT SURETIES have not deposited delivered that the title
deed/s of the property with any one else and have not created
any charge by way of mortgage or any other encumbrance on
the property.
3. THAT SURETIES undertake not be create charge or
mortgage or transfer or part with possession of the said
property without the consent of the MDA in writing.
4. THAT SURETIES hereby authorise and appoint the
Colonizer as agent to acknowledge on behalf of the Sureties
the liability and security hereby created.
SURETIES covenant in case of non-discharge of the
liability by the Colonizer within the stipulated period, the MDA
shall be within its rights so cause the property mortgaged to be
sold for the realization of the amount to the extent of Rs.
1,00,44,000/-.
NOW THIS CONDITIONS of the written bond are such
that if the colonizer performs and fulfills the obligations and
discharge all the liability regarding Completion of the said
company, the said surety under the above said written bond
and obligation shall be void and of no effect otherwise the
same shall be and remain in full force.
CA NO. 7661 OF 2014 ETC. Page 9 of 15
SCHEDULE REFERRED TO ABOVE
All the land Global City, Abdullapur Meerut
LIST FOR MORTGAGE PLOTS
Plot No. Area (in sq. mts)
01 to 03 486.00
13 to 16 648.00
69 to 71 336.00
73 to 82 1464.45
__________
Total 2934.45
IN WITNESS WHEREOF the above written surety Bond has
signed these present at Meerut 19th day of December year
2006.”
15. Having set out the operative clauses of the instrument executed
by the appellant, it is evident that the instrument records that the
appellant transferred all their interest in the properties detailed in the
schedule to the Meerut Development Authority. The transfer was
made with the intent that the same shall remain charged by way of
mortgage to secure due performance of obligations in developing the
colony and payment of external development charges.
16. The instrument further stipulates that, in the event of default,
the Meerut Development Authority shall be entitled to sell the
mortgaged properties to realize the amount. Having thus analysed the
operative clauses and substance of the instrument, it is apposite to
refer to the definition of “Mortgage Deed” under Section 2(17) of the
Indian Stamp Act ,1899 which reads as follows:
“2. Definitions. — In this Act, unless there is
something repugnant in the subject or context,—
….
CA NO. 7661 OF 2014 ETC. Page 10 of 15
“(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:”
17. When juxtaposed with Section 2(17) of the Indian Stamp Act, it
is evident that the instrument executed by the appellant fulfils the
essential characteristics of a mortgage deed. In substance and effect,
the deed confers a right over specified properties in favour of the
Meerut Development Authority to secure performance of an obligation,
while preserving the appellant’s interest until full discharge of
obligation. The nomenclature “Security Bond cum Mortgage Deed” is,
therefore, inconsequential, as it is the substance and operative
provisions of the instrument which govern its character for the
purposes of stamp duty.
18. With the nature and substance of the deed thus established, we
now turn to the pivotal question of chargeability of the instrument
under the Indian Stamp Act, 1899. In light of its nomenclature as a
“Security Bond cum Mortgage Deed”, the relevant provisions for
determining the stamp duty are confined to Articles 40 and 57 of
Schedule 1-B of the Indian Stamp Act, 1899. The relevant provisions
are reproduced below for ready reference:
“40. MORTGAGE-DEED, not being an AGREEMENT
RELATING-TO DEPOSIT OF TITLE-DEEDS, PAWN OR
PLEDGE (NO. 6), BOTTOMRY BOND (NO. 16), MORTGAGE
CA NO. 7661 OF 2014 ETC. Page 11 of 15
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 agreed to be given as
aforesaid;
Explanation.—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 for 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.
1,000.
Exemptions
(1) Instruments, executed by person taking advances
under the Land Improvement Loans Act, 1883 (XIX of
1883), or the Agriculturists' Loan Act, 1884 (XII of 1884),
or by their sureties as security for the repayment of such
advances.
(2) Letter of hypothecation accompanying a bill of
exchange.
***
57. SECURITY-BOND OR MORTGAGE-DEED, executed
by way of security for the due execution of an office, or to
account for money or other property received by virtue
thereof or executed by a surety to secure the due
performance of a contract,—
(a) when the amount secured does not exceed Rs. 1,000;
(b) in any other case......”
19. It is contended on behalf of the appellant, that the deed falls
within the ambit of Article 57 of Schedule 1-B of the Indian Stamp Act,
1899, on the footing that it partakes the character of a security bond.
Hence, it is necessary to examine the scope and application of Article
57.
CA NO. 7661 OF 2014 ETC. Page 12 of 15
20. Article 57 of Schedule 1-B of the Indian Stamp Act operates in
two distinct limbs. The first limb covers security bond or mortgage
deed executed by way of security for the due execution of office, or to
account for money or other properties received by virtue thereof.
21. The second limb, demarcated by the words “or executed by a
surety to secure the due performance of a contract”, is restricted in its
application to the execution of security bond or mortgage deed by a
surety to secure the obligations of another, and does not extend to
cases where the principal itself executes the deed to secure its own
obligations.
22. The term “surety” must be strictly understood in accordance
with Section 126 of the Indian Contract Act, 1872. Section 126 is
reproduced below for reference:
“126. “Contract of guarantee”, “surety”,
“principal debtor” and “creditor”.—A “contract of
guarantee” is a contract to perform the promise, or
discharge the liability, of a third person in case of
his default. The person who gives the guarantee is
called the “surety”; the person in respect of whose
default the guarantee is given is called the “principal
debtor”, and the person to whom the guarantee is
given is called the “creditor”. A guarantee may be
either oral or written.”
23. It follows that 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
CA NO. 7661 OF 2014 ETC. Page 13 of 15
principal debtor itself executes a deed mortgaging its own property,
Article 57 is inapplicable.
24. 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.
25. It stands beyond doubt, that the deed was not executed by a
surety but by the principal debtor/appellant, the company, through
its director. 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.
26. 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. It, however, fulfils all the requirements of a mortgage
deed, falling under the ambit of Article 40 of Schedule 1-B of the
Indian Stamp Act.
CA NO. 7661 OF 2014 ETC. Page 14 of 15
CIVIL APPEAL ARISING OUT OF SLP (C) NO.36434/2014
27. In the Civil Appeal arising out S.L.P. (Civil) No. 36434/2014, as
well, it is similarly observed that the instrument executed by the
appellant in favour of the Allahabad Bank, carries the nomenclature
“Security Bond or Mortgage Deed”. This instrument created a
mortgage over certain immoveable property at Village Jugauli Tappa
Sirsia, Pargana Vinayakpur, Tehsil Nautanwa, District Maharajganj to
secure the loan repayment of the business loan. A careful perusal of
the operative provisions of the instrument clearly indicates that it
confers a right over specified property to secure repayment.
28. This Court finds that the instrument satisfies the essential
characteristics of a mortgage deed as defined under Section 2(17) of
the Indian Stamp Act, 1899. The nomenclature “Security Bond or
Mortgage Deed” is not determinative; the substance of the instrument
governs its character while assessing stamp duty.
29. 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. In the present case, although clause III of the deed
stipulates that the mortgagor shall be personally liable to repay the
loan, a careful reading of the deed makes it manifestly clear that Shri
Naveen Mittal executed the deed solely in his capacity as the director
CA NO. 7661 OF 2014 ETC. Page 15 of 15
of the company M/s Ajay Forging Pvt. Ltd, acting on behalf of the
company. No distinct surety exists apart from the principal debtor.
Accordingly, reference to personal liability in the deed pertains to the
director acting on behalf of the company and does not transform the
instrument into a security bond under Article 57 of Schedule 1-B of
the Indian Stamp Act, 1899. In substance and effect, the deed
constitutes a mortgage executed by the principal debtor itself, thereby
attracting the provisions of Article 40 of the Schedule 1-B of the Indian
Stamp Act, 1899, for the purposes of stamp duty.
30. In our opinion, the impugned judgments passed by the High
Court of Judicature at Allahabad do not suffer from any infirmity as
to warrant interference by this Court. The Appeals are, accordingly,
dismissed.
…………………..........................J.
(AHSANUDDIN AMANULLAH)
.………………............................J.
(PRASHANT KUMAR MISHRA)
NEW DELHI;
OCTOBER 08, 2025.