The Chief Controlling Revenue Authority, Board of Revenue, Madras vs Rani Pictures

Natesan, J.—This is a reference u/s 57 of the Indian Stamp Act, and, the question referred to us is whether the instrument under

consideration amounts to a mortgage falling under Article 40 of Schedule I of the Stamp Act, as well as a bond falling under Article 15 and a

pledge falling under Article 6.

It is seen, on a perusal of the instrument, that with reference to an anterior contract, under which the second party to the instrument had

advanced a sum of Rs. 40,000, for the production and completion of talkie picture ""Kannadi Maligai,"" on the contract failing, the instrument in

question styled deed of agreement came into existence. As per this document the first party agreed to repay to the second party the said sum of

Rupees 40,000 with interest, under the terms and conditions set out in the document. The material parts of the document, with which we are now

concerned, are found in Clause 4 and Clause 7. Clause 4 provides for the payment of Rs. 10,000, on the date of signing of the agreement and the

issue of two post-dated cheques, each for Rs. 5000. The balance of Rs. 20,000 it is provided, will be a second charge on the distribution rights of

the film under production. It is unnecessary to set out the areas in which the second mortgage over distribution rights is given. Clause 7, the next

important one, provides that a certain camera, which had been pledged earlier on 27-11-1961, shall continue as security until the entire amount

due under the instrument to the second party is dis-charged. The value of the camera is also specified as Rs. 25,000. Clause 8 of the instrument

provides for the entire balance due under the agreement to be paid within a period of six months from the date of the agreement.

We may immediately answer the claim of the Chief Controlling Revenue Authority that the instrument is a mortgage. In this case, the security, if

at all, is created over a picture to be produced and completed, and we have in Chief Controlling Revenue Authority, Madras Vs. Sudarsanam

Picture, Madras, held that a similar agreement advancing money over a film under production, does not create a mortgage. The essential ingredient

for an instrument to be a mortgage, as defined u/s 2(17) of the Stamp Act, is that the property should be ''specified property.'' A film under

production is manifestly not specified property, it Is not property in existence. But, we have no doubt that the instrument in question is a bond.

Section 2(5) defines ""bond"" as including any instrument whereby a person obliges himself to pay money to another, attested by a witness, end not

payable to order or bearer. In the instant case, we have a document whereby the first party obliges himself to pay a certain sum of money to the

second party. The instrument is admittedly attested. The obligation to pay the money is clear, it is in acknowledgment of a liability. This is not a

case of a mere promise to pay money. The essential requisites for an instrument to be a bond are:

there must be an obligation to pay money,

the money must not be payable to order or bearer, and

the instrument must be attested by a witness. All the essential requisites for a bond are found in this case, and we are of the view that this

instrument falls under Article 15 of Schedule I of the Stamp Act.

On the question whether this instrument is also a pledge; Clause 7 of the instrument, in clear words, pledges a camera for the moneys due and

undertaken to be paid under the instrument. The instrument clearly says that the camera shall continue as security until the entire amount due is

discharged. Article 6 (2) relating to stamp duty payable, on a pledge runs:

Article 6. Agreement relating to deposit of title deeds, pawn or pledge, that is to say, any instrument evidencing an agreement relating to .....

(2) the pawn or pledge of moveable 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.

The very Article gives an Indication of what is meant by pawn or pledge of moveable property. The moveable property must have been given

by way of security for the repayment of money advanced or to be advanced by way of loan or an existing or future debt. In this case, moveable

property has been pledged for an existing debt. Section 172 of the Indian Contract Act defines ""pawn"" or ""pledge"" as bailment of goods as

security for payment of a debt or performance of a promise. Clearly, the instrument also satisfies the requirement of Article 6. As the instrument is

attested, it does not fall under the exemption to Article 6.

The next question for consideration is whether the instrument falls u/s 5 or Section 6 of the Stamp Act. The learned Additional Government

Pleader would contend that Section 5 applies to this case. Section 5 deals with instruments containing distinct matters. Under that section, any

instrument comprising or relating to several distinct matters, shall be chargeable with the aggregate amount of the duties with which separate

instruments, each comprising or relating to one of such matters, would be chargeable under this Act. We are unable to see how this instrument can

fall u/s 5. As pointed already, it is an attested instrument evidencing a pledge by way of security for money due. A bond also is an instrument

whereby a person obliges himself to pay money to another, and the instrument is attested. The only condition with reference to a pledge is that

moveable property is given as security. The obligation to pay money in this case is one and indivisible. As additional security moveable property is

given as pledge. It is difficult to say that the instrument consists of distinct matters.

Reference was made by learned counsel to the decision of the Supreme Court in The Member, Board of Revenue Vs. Arthur Paul Benthall, .

But that was a case where a person possessed rights, both in his personal capacity and in a representative capacity as trustee. The stamp duty

payable on the power of attorney there in question came up for consideration, and the Supreme Court held that there was a delegation of power

by the executant in both his capacities and the position in law was exactly the same as different persons jointly executing a power in respect of

matters which were unrelated. Such is not the case here. In our view. Section 6 of the Stamp Act is alone applicable to the case. The instrument in

question falls both under Article 15 and Article 6 and, in such a case, u/s 6, it shall be chargeable only with the highest of the duties payable. The

Revenue cannot charge the instrument for the stamp duty payable under both the heads.

Reference was made by learned counsel for the respondent to the decision in Radha Swami Sat Sang Sabha Vs. Raj Narain, , for the

contention that the instrument in question cannot be considered to be a bond. But that was a case where, with reference to a promissory note, a

document was subsequently executed which provided the method of payment and reduction of interest, under certain contingencies. In that case

the obligation under the promissory note did not merge in the subsequent document concerned. Here that is not the case. Here earlier, there was a

contract advancing moneys for the production of a film. The contract fell through before it was completed, and, for the advances taken, the first

party obliged himself by the instrument under consideration, to pay the amounts advanced under the contract. The mutual obligations between the

parties were put an end to, and the first party agreed that their relationship was thereafter that of a debtor and creditor. He obliged himself by the

instrument to pay Rs. 40,000, then due, in a particular manner, and, in addition gave a camera as security.

In the circumstances, we answer the reference in the following manner. The instrument is not a mortgage falling under Article 40 of Schedule I,

but, it is a bond falling under Article 15 and also a pledge falling under Article 6. Section 5 of the Stamp Act. does not apply to the matter, The

instrument would fall u/s 6 of the Act, and the highest of the stamp duties payable thereunder is leviable. No order as to costs.