Holding

The Court held that the Rs.65,00,000 contingent liability under the equitable mortgage is part of the consideration, making stamp duty payable on Rs.72,76,000, and that the two declaration deeds are supplementary deeds liable to Rs.4.50 each.

Summary

Godavari Sugar Mills sold land and buildings to Somaiya Organics for Rs.7,76,000, but the sale was subject to an equitable mortgage created in favour of Punjab National Bank for a contingent liability of Rs.65,00,000. The Sub‑Registrar and Collector treated the total consideration as Rs.1,92,76,000, leading to a dispute over stamp duty. The High Court held that the Rs.65,00,000 mortgage liability should be deemed part of the consideration under section 24 of the Indian Stamp Act, making the duty payable on Rs.72,76,000, and that the two declaration deeds were supplementary deeds liable to Rs.4.50 each. The Supreme Court affirmed this view, stating that a purchaser buying property subject to a debt, whether actual or contingent, must include that debt in the consideration for stamp duty purposes. Consequently, the appeals were dismissed with costs.

Issues considered

Whether the contingent liability of Rs.65,00,000 under the equitable mortgage forms part of the consideration for the sale deed under s.24 of the Indian Stamp Act.
Whether the loan amount of Rs.1,20,00,000 and the price of moveable machinery are to be included in the consideration for stamp duty.
Whether the two declaration deeds are supplementary deeds within the meaning of s.4 and liable to stamp duty of Rs.4.50 each.
What is the correct amount of stamp duty payable on the sale deed under Article 23 of Schedule 1‑B.

Legislation cited

Indian Stamp Act, 1899s. 24, s. 4

Subjects

stamp dutyIndian Stamp Actsection 24contingent liabilityequitable mortgageconsiderationsupplementary deedUttar Pradesh revenue law

Judgment

786

SCWIUA ORGANICS (INDIA) LTD. , ETC.
A v.
BOARD OF REV"...NUE, U.P., ETC.
MlVEMBER 29, 1985
[E.S. VENKATARAMIAH AliD R.B. MISRA, JJ.]
B
Indian Stamp Act, 1899 ss.4 and 24, Article 23, Schedule
I-B ~ Immoveable property - Property subject to equitable
mortgage - Sale of property - Consideration for sale - Computa-
tion of - For levy of stamp duty on sale deed - Debt, actual or
contingent - Whether to forn. part of consideration.
c Words & l'hrases: 'contingent liability' - Meaning of -
Indian Stamp .'ct, 1899 s.24.

Godavari Sugar Mills - appellant in Civil Appeal No. 989 of
1972 - was the owner of a distillery plant consisting of the
lands, buildings, machinery etc. It entered into a technical
collaboration Agre""1ent and obtained a deferred payment guarantee
D
up to the limit of Rs. 65,00,000 frOl!l the Punjab National Bank in
favour of M/s. Speichim, Paris under an equitable mortgage by
deposit of title deeds of its property including the aforesaid
lands and buildings. Godavari Sugar Mills resolved to sell the
lands, buildings and machinery to Somaiya Organics - appellant in
Civil Appeal No.988 of 1972 - for a consideration of Rs.36,64,678
E and a sale deed was executed on May 20, 1968. The sale deed
recited that out of Rs. 36,64,678 Rs· 28,88,678 represented the
price peyable for the machinery, vehicles, stores, finished goods
etc. being all moveable items, the sale and transfer of which bad
been completed by the parties to the document by manual delivery
and the balance of Rs. 7,76,000 represented the price payable in
F
respect of the lands and buildings as described in Schedule 'A'
attached to the said document and that the said document was
being executed for the purpose of conveying title in respect of
the lands and buildings free of all enn•brences. The document
further stated that in case the vendee was to pay any amount on
account of any charge or encUUlbrances created by the vendor on
G
the properties sold, the vendee would be entitled to get back the
entire sale consideration with interest from the vendor. On
October 28, 1968 a declaration was signed by each appellant to
the effect ·that the properties which were being transferred under
the document dated May 20, 1968 were being sold subject to the
equitable oortgage which had been created in favour of the Punjab
H
National Bank Ltd. in connection with the deferred payment
guarantee, after the Board of Directors of the two appellants had
S. ORGANICS v. BOARD OF REVf.1'UE, U.P. -787

passed resolutions to that effect. All· the three documents, A
namely, the sale deed dated May 20, 1968 and the two deecjs of
declarations executed by the appellants acknowledging that the
sale was subject to the equitable lllOrtgage were presented for
registration. The document dated May 20, 1968 bad been written on
a stamp paper of Rs. 35,000 treating that the consideration for
the sale deed was Rs. 7,76,000. B

The Sub-ilegistrar was of the view that the properties bad
been sold subject to two liabilities,· one for Rs.l,20,00,000 and
another for Rs. 65, 00, 000 and therefore, the total consideration
payable for sale was Rs. 1,92,76,000 that there was deficiency of
stamp duty of Rs. 8,32,420 and that each of the two supplementary c
deeds of declarations which bad been written on stamp papers of
Rs. 3.50 should have been written on stamp papers of Rs.4.50 and
one rupee was payable on each of them as deficient duty• The
Sub-ilegistrar accordingly impounded the sale deed and the deeds
of the declarations and forwarded them to the Collector for
necessary action. D

The Collector referred the matter to the Chief Controlling
Revenue Authority - Board of Revenue, under s.56 (2) of the
Indian Stamp Act 1899.

The Board of Revenue made a reference to the High Court E
under s. 57 of the Act for its opinion.

The High Court held that the two deeds of declarations were
supplementary to the sale deed dated May 20, 1968 and all the
three should be read together to ascertain the terms of sale
settled between the parties, that the intention of the parties
was that the imnovable property was being transferred subject to F
the equitable mortgage created in favour of the Punjab National
Bank Ltd. for Rs. 65, -00,000, that under s.4 of the Act the duty
of Rs. 4.50 was payable as against Rs. 3.50 on the two declara-
tions, that the inclusion of Rs. 1,20,00,000 in the consideration
for the sale was incorrect because the property sold was not
subject to the payment of that loan; that was a loan facility G
given by the Punjab National Bani< to Somaiya Organics and the
property given as security therefor was the property of Somaiya
Organics and not the property which was being sold and the sale
was also not subject to that debt, that Rs. 28,88,678 which was
the price of the moveables 1.e. the n.achinery etc. was not part
of the consideration as they did not constitute the subject
matter of sale and they hsd already been sold by manual delivery, H
788 SUPREME COURT REPORTS [1985] SUPP. 3 s.c.R.

A that the sum of Rs. 65,00,000 for which the equitable ioortgage
had been created on the property transferred under the sale was
to be treated as part of the consideration for the conveyance in
question under s.24 of the Act, that the value on which stamp
duty was payable under the Act as per Article 23 in Schedule 1-B
thereto was Rs. 72,76,000 being the total of Rs. 7,76,000
B mentioned in the deed and Rs. 65,00,000 being the contingent
liability under the equitable mortgage and that appropriate stamp
duty should be collected on Rs. 72, 76,000 in the caae of the
document dated May 20, 1968 and Rs. 4.50 as against Rs.3.50 on
each of the two declarations.

Dismissing the Appeals to this Court,
c
HELD: 1. The High Court has rightly taken the view that the
amount of Rs.65,00,000 should also be deemed as part of the
consideration for the sale and that stamp duty was leviable on
Rs.72,76,000 under s.24 of the Indian Stamp Act, 1899. [804 D]

2, The object of s.24 of the Act is very clear. That
D section means that when a purchaser purchases a property for a
certain amount subject to the payment of another debt, actual or
contingent, he is virtually purchasing the property for the said
amount plus the amount of the debt and the aggregate of the two
amounts ought to be treated as the true amount for which the
property is being sold. Otherwise, there is bound to be a
E difference between the true consideration ar.d the consideratio11
which is made liable to stamp duty. [803 D-£]

3, A contingent liability to the payment of any debt means
such outstanding debt or possible adverse verdict which has to be
complied with but which is not ascertained on the relevant date.
F A security for any contingent future payments also falls within
the meaning of section 24 of the Act. [797 E-Fl

In the instant case, though in the first document dated May
20, 1968 it had been recited that the properties mentioned in
Schedule 'A' therein were being conveyed free from all
G encumbrances by the two deeds of declarations dated October 28,
1968 executed by and on behalf of Godavari Sugar Mills and
Somaiya Organics it was made very clear that the properties were
being conveyed subject to the equitable ioortgage upto the limit
of Rs, 05,00,000. It may be that on that date no liability as
such had actually arisen. But the terms of the mortgage were such
H that there was the contingency of the liability up to
Rs.65,00,000 materialising. Pursuant to the prior arrangements
s. ORGAJ-;lCS v. BuARL OF EEVl~U~. u.F. 789

A
entered into between Godavari Sugar Mills and Somaiya Organics a
letter was ·addressed to the Punjab National Bank on December 15,
1964 and on the basis of the letter the title deeds in respect of
the property now sold had been handed over to the bank creating
an equitable mortgage up to Rs. 65,00,000. But the bank had not
actually paid any amount under the Deferred Payment Guarantee to B
M/s Speichim even by April 29, 1969 as is evident from the letter
written by the bank to Godavari Sugar Mills. The mortgage which
had been created on December 14, 1964 was alive on the date of
the transaction and it was in force even on April 29, 1969
though the mortgagors had been substituted by the purchaser of
the property i.e. Somaiya Organics. The Deferred Payment c
Guarantee being in force even on April 29, 1969 the contingent
liability under the equitable mortgage was also very much in
existence on the date of sale i.e. May 20, 1968 even though no
payment had been made by the Bank to M/s Speichim, Faris. If on
any future date the Bank was compelled to pay any amount under
the guarantee &iven by it, such amount upto the limit of Rs. D
65,00,000 could be realised by the Bank by enforcing the mortgage
against the property in question. If that was not the position,
there would have been no necessity to execute the two deeds of
declaration stating that the properties were being sold subject
to the mortgage. Ead the document of May 20, 1968 been the only
document then questions would have arisen whether the recital E
therein that the consideration for the properties which were
considered sufficient by the bank to secure Rs. 65,00,000 could
truly be Rs. 7,76,000 and whether the said recital amounted to a
fraud on the stamp law or not. The duty to decide the said
questions does not arise in view of the deeds of declaration
which treated the sale as one subject to the mortgage the mavfnnw
liability under which at a future time could be Rs. 65,00,000. If F
the sale ' had been free from mortgage then any such contingent
future liability would •'have tahen on the vendor Godavari Sugar
Mills. But the parties to the sale took adequate precaution to
prevent any such liability being there by making it very clear
that the said liability to the Bank would be on the properties
sold in the hands of the purchaser, Somaiya Organics and by G
stating that under the tripartite agreement which was to be
executed, the Bank would treat Somaiya Organics as the company
responsible for that debt in the place of Godavari Sugar Mills.
The Bank had in fact written to the Godavari Sugar Mills on April
29, 1969 that on November 6, 1968 the name of Somsiya Organics
had been substituted for the name of the Godavari Sugar Mills in
the Deferred Payment Guarantee. [797 F-f!; 799 D-'E; 800 D-G; H
802 <HI; 803 A-C)
790 SUPREME COURT REPORTS (1985] SUPP. 3 s.c.R.

A
Lord Canning v. Raper, 118 English Reports 400; Hortinore
v. Inland Revenue ec-1.ss:loners, (1864] 2 H & C 838; lndepeudent
Television Authority v. Inland Revenue Con< ssioners, [ 1960 l 2
All E.R. 481 and Coventry City Council v. Inland Revenue
Coomd.ssioners, (1978] 1 All E.R. 1107 relied on.
B
Sidhnatb Hebrotra v. Board of Revenue, A.l.R, 1959 All 655
and Board of Revenue, Uttar Pradesh v. Bai Sabeb Sidbnatb
Hebrotra, (1965] 2 S,C,R. 269 inapplicable.

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos, 988 and
989 of 1972.
c
From the Judgment and Order dated 23.12.1971 of the
Allahabad High Court in Misc. Stamp Act Reference No. 466 of
1969.

S.T. Desai, Mrs. A.K. Verma, Joel Peres and D.N. Mishra for
the Appellants,
D
Anil !Jeo Singh, Mrs. Sudhir Kulshreshta and Mrs. Shobha
Dixit for the Respondent.

The Judgment of the Court was delivered by

E VKllKATARAMIAli, J. The appellant in Civil Appeal No. 988 of
1972 is Somaiya Organics (India) Ltd. (hereinafter referred to as
'Somaiya Organics') and the appellant in Civil Appeal No, 989 of
1972 is Godavari Sugar Mills Ltd. (hereinafter referred to as the
'Godavari Sugar Mills'), These two appeals are filed under
Article 136 of the Constitution against the judgment of the High
F Court of Allahabad in Miscellaneous Reference No. 466 of 1969
which was a reference made by the Chief Controlling Revenue
Authority - Board of Revenue, Uttar Pradesh under section 57 of
the Indian Stamp Act, 1899 (hereinafter referred to as 'the Act')
.as in force in the State of Uttar Pradesh involving the question
relating to the proper stamp duty chargeable in respect of a
G transaction under which certain lands and buildings belonging to
Godavari Sugar Mills were sold in favour of Somaiya Organics. The
facts of the case are these.

Godavari Sugar Mills was the owner of a distillery plant
consisting of the lands 1 buildings, machinery etc. situated in
H the village called Basahia alias Captainganj in the district of
Deoria, State of Uttar Pradesh. It had entered into a technical
collaboration agreement with M/s. Mell,.e Bezons and in that
S. ORGANICS v. !>OARD GI REVfil.UE, U.F. [VENKATAR.i\SIAH, J] 791

connection pursuant to the resolution of its Board of Directors A
passed on October 23, 1964 it had obtained a deferred payment
guarantee upto the limit of Rs. 65 lakhs from the Punjab National
Bank Ltd. in favour of M./s Speichim, Paris under an equitable
mortgage by deposit of title deeds of its property including the
lands and buildings referred to above. 1hat on March 2, 1962
Godavari Sugar llills had resolved to sell the lljnds, buildings B
and machinery to Somaiya Organics for a consideration of Rs.
36,64,678 and pursuant to the said resolution a sale deed was
executed on May 20, 1968. The sale deed recited that out of Rs:
36,64,678, referred to above, Rs. 28,88,678 represented the price
payable for the machinery, vehicles 1 stores, finished goods etc.
being all moveable items, the sale and transfer of which had been C
completed by the parties to the document by manual delivery and
the balance of Rs. 7,76,000, represented the price payable in
respect of the lands and buildings of the sugar factory as
described in Schedule 'A' attached to the said docUIDent and that
the said docUIDent was being executed for the purpose of conveying
title in respect of the lands and buildings free of all :lncum- D
brllllCl?S. The above Rs. 7,76,000 was to be paid not in cash but in
the form of allotment of 7760 fully paid-up equity shares of the
face value of Rs. 100 each. The document further stated that in
case the vendee was to pay any amount on account of any charge or
incumbrances created by the vendor on the properties sold, the
vendee would be entitled to get back the entire sale considers- E
tion with interest at 1 per cent per month from the vendor. That
on October 28, 1968 a declaration was signed for and on behalf of
the Godavari Sugar llills by the two Directors of the Godavari
Sugar llills who had been authorised to do so which had the effect
of modifying or correcting certain error which had crept into the
document dated ~iay 20, 1968. It stated interalia :
F
"3. On the 15th day of December, 1964 the company /
deposited with the Punjab National Bank Ltd.
(hereinafter referred to as "the Bank") the title
deeds of the Company aforementioned immoveable
property with intent to create a security in favour
of the Bank by way of equitable mortgage. The creation G
of such security by way of equitable mortgage was
authorised by a resolution of the Board of Directors
of the Company passed on the 23rd day of October,
1964. A list of title deeds so deposited with the Bank
is set out in the Second Schedule hereto.

4. By a deed of Sale dated the 20th day of May, 1968 H
and made between the Company of the one .part and
Messrs. Somaiya Organics (India) Limited (hereinafter
792 SUPRE.ME COURT REPORTS [1985] SuPF. 3 s.c.R.

A
for the sake of bravity called "the s.o.I.L. ") of the
other part, the Company transferred with effect from
1st June, 1967 all its right title and interest in the
said imnoveable property described in the First
Schedule hereto along with the Buildings standing
B thereon in favour of the S.O.I.L. for the
consideration and on the terms and conditions set out
in the said deed of the Sale dated 20th ~lay, 1968.

5. lbrougb ioadvertance and oversight it has been
stated in the said Deed of Sal.e that the Ccmpany bad
conveoated that the entire property sold was "free
c from ell sorts of trSDSfer charges or incdllbrance
created by the Vendor (the COIOp8lly) in favour of any
ooe. "In the said Deed of Sale it was also further
stated that in case of vendee (i.e. the s.o.I.L.)
mif,ht have to pay any amount by way of charge transfer
or incumbrance crested by the vendor (i.e., the
company) on the said property the vendee (i.e., the
D SOIL) shall be entitled to get back the entire sale
consideration with interest at l % per month from the
said vendor (i.e. the Company) We say that it was not
the intention either of the cmpany or of the s.o.r.L.
to transfer the said :lmnoveable property deacrihed in
the First Scbedi•l e hereto free fran the charge created
E by the Ccmpany in favour of the Bank by way of
Equitable Mortgage by deposit of title deeds as
aforesaid and it was only through oversight and
inadvertence that it was erroneously stated in the
said Deed cf Sale that the property was free from any
incumbrance or charge, or that in the event of the
F s.o.I.L. having to pay any amount by way of charge
transfer or incumbrance the S.G.I.L. should be
entltled to get back the entire sale consideration as
stated aforesaid.

6. we solemnly and siDcerely declare and say that the
G intention of the cmpany as also the s.0.1.L. was that
the said :lmllOveable property should be transferred
subject to the charge created in favour of the llanlt by
the Cooipaoy by deposit of title deeds on the 15th day
of &eceruber, 1964 as stated in paragraph 3 above."
(underlinitlf. l-y us)
H
As can be Sten from the extract of the declaration given
abo\Te that the properties which 1or.·ere beir4', transferre.d under the
document dated ~.a;, 20, l96a •·ere being sold subject to the
S. ORGANICS v. BOARD OF REVENUE, U.P. [VENKATARAMIAH, JJ 793

eqilitable mortgage which had been created in favour of the Punjab A
National Bank Ltd. in connection with the deferred payment
guarantee. Before the above declaration was signed resolutions
were passed by the Board of Directors of Godavari Sugar Mills and
the Board of Directors of Somaiya Organics on 17th September,
1968 affirming transfer of property under the document dated May
20, 1968 subject to the eqilitable mortgage in favour of the B
Punjab National Bank Ltd. upto the limit of Rs.65 lakhs. The
resolution passed by the Board of Directors of Somaiya Organics
on the 17th September, 1968, referred to above, contemplated the
execution of a tripartite agreement by and amongst Godavari Sugar
Mills, Somaiya Organics and the Punjab National Bank Ltd.
treating the deferred payment guarantee issued in favour of M/s C
Speichim, Paris as having been given at the instance and on
behalf of Somaiya Organics, confirming the eqilitable mortgage,
and transferring the liability thereunder as mentioned in the
draft tripartite agreement which had been placed before the Board
for its consideration. Somaiya Organics also executed a deed of
declaration on October 28, 1968 stating that it had purchased the D
properties sold under the document dated May 20, 1968 subject to
the eqilitable mortgage executed by Godavari Sugar Mills in favour
of the Punjab National Bank Ltd. All the three documents, namely,
the sale deed dated May 20, 1968 and the two deeds of declaration
executed by Godavari Sugar Mills and by Somaiya Organics respect-
ively acknowledging that the sale was subject to the eqilitable E
mortgage were presented before the Sub-Registrar, llata for
registration. The document dated May 20, 1968 had been written on
a stamp paper of Rs. 35,000 treating that the consideration for
the sale deed was Rs. 7,76,000. The Sub-Registrar was of the view
that the properties had been sold subject to two liabilities, one
for Rs. 1,20,00,000 and another for Rs. 65,00,000. According to
him the total consideration payable for the sale was in the order F
of Rs. 1, 92, 76,000 and there was deficiency of stamp duty of
Rs. 8,32,420, He was also of the view that each of the two
supplementary deeds of declarations which had been written on
stamp papers of Rs.3.50 should have been written on stamp papers
of Rs.4.50 and one rupee was payable on each of them as deficient
duty. The Sub-Registrar accordingly impounded the sale deed and G
the deeds of declarations and forwarded them to the Collector for
necessary action. The Collector in his turn under section 56(2)
of the Act referred the matter to the Chief Controlling Revenue
Authority, i.e., Board of Revenue, Uttar Pradesh. The Chief
Controlling Revenue Authority, i.e., Board of Revenue thereafter
referred the case to the High Court of Allahabad under section 57
of the Act. In its reference the Board of Revenue referred six H
questions for the opinion of the High Court.
794 SUPREl1E COURT REPORTS [1985] SUPP. 3 s.c.R.

A
The reference was firs~ heard by the High Court in March,
1970. By ~ts order dated "'*rch 2, 1970 the High Court referred
the case back to the Chief Controlling Revenue Authority, Uttar
Pradesh directing it to submit a fresh statement of the case
incorporating certain additions and alterations referred to in
B that order along with certain other documents. Accordingly a
fresh statement of the case was submitted to the fdgh Court. In
the reference the follOloling six questions were referred to the
High Court for its opinion :

l, Whether in vi~ of the above opinion of the Board,
the principal sale deed dated 20.5.1968 is a
c conveyance not only of the lands and buildings but
also the machinaries fixed in the earth in
consideration or Rs.36,64,678 in the light of section
24 of the Stamp Act and is chargeable with a duty of
Rs.9,97 0425 under Article 23 Schedule 1-B of the U.P.
Stamp (Amendment) Act, 1962, as against Rs. 35,000
paid?
D
or

2. Whether the sale deed aforesaid is a conveyance
only of larids and buildings in consideration of
Rs.7,76,000 plus Rs.l,85,00,000 total Rs.l,92,76,000
E in the light of tsection 24 of the Stamp Act and is
chargeable with duty of Rs. 8,67 ,420 under Article
23 aforesaid as a ainst Rs.35,000 paid?

or

F 3. Whether the sale-deed aforesaid does not fall
lolithin the ambit of section 24 of the Stamp Act and is
conveyance of t\le lands and buildings along "1th
machineries fixe4 in the earth in consideration of.
Rs. 36,64,678 aPd is chargeable with a duty of
Rs. 1,74,925 under Art.23 aforesaid as against
G Rs. 35,000 paid?

.or

4. Whether the sale-deed aforesaid does not fall
within the ambit ff secticn 24 of the Stamp Act and is
H conveyance of ' lands and buildings only in
consideration of Rs.7,76,000 only and is sufficiently
stamped with a duty of Rs.35,000 under Article 23
aforesaid?
S. ORGAl\ICS v. BOARD OF REVENUE, U.P. [VE.M<ATARAhL\ll, J] 795

or A

5. If the sale-deed aforesaid does not fall under any
of the alternatives mentioned above what should be
deemed to be its consideration for payment of stamp
duty under Article 23 aforesaid read with section 4
and section 24 of the Stamp Act? B

or

6. Whether the other two documents are supplementary
deeds within meaning of section 4 of the Stamp Act and
were liable as such to a duty of Rs.4.50 as against C
Rs.3.50 paid in each case?

On the basis of the above six questions the High Court
formulated two questions for its consideration by reframing the
questions referred to it: (1) what was the correct duty charge-
able under the Stamp Act in respect of the sale deed dated May D
20, 1968, and (2) whether the other two documents were supple-
mentary deeds within the meaning of section 4 of the Stamp Act
and were liable as such to duty of Rs. 4.50 as against Rs.3.50
paid in each case? The High Court by its judgment dated December
23, 1971 which is under appe_al found that the two deeds of
declaration were supplementary to the sale deed dated May 20,1968 E
and all the three should be read together to ascertain the terms
of sale settled between the parties. It held that the intention
of the parties was that the inanoveable property was being trans-
ferred subject to the equitable mortgage created in favour of the
Punjab National Bank Ltd. for Rs. 65,0G.,OOO. Accordingly, it held
that under section 4 of the Act the duty of Rs. 4.50 was payable
as against Rs. 3.50 on the two declarations. The high Court also F
held that the_ inclusion of Rs. l,20,00,000 in the consideration
for the sale was incorrect because the property sold was not
subject to the payment of that loan. That was a loan facility
given by the Punjab National Bank to Somaiya Organics and the
property given as security therefore was ~he property of Somiya
Organics and not the property which was being sold. The sale was G
also not subject to that debt. 'Ihis need not detain us any longer
since the correctness of this part of the order is not questioned
by any party before us. Similarly the inclusion of Rs. 28,88,678
which was the price of the moveables i.e. the mechinery etc. was
also held by the High Court to·be not part of the consideration
as they did not constitute the subject matter of sale. They had
already been sold by manual delivery. This part of the case also H
796 &LFREJ.£ COURT RE.PORTS [1985] SUPP. 3 s.c.R.

A
is not in question before us. The High Court, however, held that
the sum of !<s. 65 lakhs for which the equitable mortgage had been
created on the property transferred under the sale was to be
treated as part of the consideration for the conveyance in
question under section 24 of the Act. It accordin5ly held that
H the value on which stamp duty was payable under the Act as per
Article 23 in Schedule 1-B thereto was Rs. 72,76,00G being the
total of Rs. 7,76,000 mentioned in the deed and Rs. 65 lakhs
being the contingent · liability under the equitable mortgage and
directed that appropriate stamp duty should be collected on
Rs.72,76,0GO in the case of the document dated ~lay 20, 1968 and
Rs.4.50 as against Rs. 3.50 on each of the two declarations.
c ABgrieved by the inclusion of Rs. 65 lakhs in the value for
purposes of levying duty Godavari Sugar hills and Somaiya
Organics have filed these two appeals.

The provision of law which arises for consideration in this
case is section 24 of the Act. It reads thus :

D "24. where any property is transferred to any person
in. consideration, wholly or in part, of any debt due
to hilli, or subject either certainly or contingently to
the payment or transfer of any money or stock, whether
bei"b or constituting a charge or incumbrance upon the
property or not, such debt, money or stock is to be
E deemed the whole or part, as the case n:.ay be, of the
consideration in respect whereof the transfer is
chargeable with ad valorem duty:

Provided that nothing in this section shall apply to
any such certificate of sale as is mentioned in
F Article ~o. 18 of Schedule I.

Explanation.- In the case of a sale of property
subject to a mortgage or other incum.brance, any unpaid
mortgage 1"0ney or money charged, to5ether with the
interest (if any) due on the same, shall be deemed to
G be part of the consideration for the sale:

Provided that, where property subject to a mortgage is
transferred to the mortgagee, he shall be entitled to
deduct from the duty payable on the transfer the
amount of any duty already paid in respect of the
H mortgage.
S. ORGMICS v. BGAKL GF REV!iliLE, U.P. [Vl~KATARANIAH, J] 797

Illustrations
A
1. A owes B Rs.l,OGO. A sells a property to B, the
consideration being Rs.500 and the release of the
previous debt of Rs.1,000. Stamp duty is payable on
Rs.l,500.

2. A sells a property to B for Rs.500 "'hich is subject B
to a mortf,ai;.e to C for Rs. l,GOC and unpaid interest
Rs.ZOO. Stamp-duty is payable on Rs.1,700.

3. A mortgages a house of the value of Rs.10,000 to B
for Rs.5,GGO. B afterwards buys th~ house from A.
Stamp-duty is payable on Rs.10,GOC le~s th.e amount of c
stamp-duty already paid for the mortgage."

The meanint of section 24 in short is that where property is
conveyed to a person for consideration, wholly or in part, of any
debt due to bin., subject either certainly or contingently to the
paYffient or transfer of any money or stock whether or not charged D
on the property then debt money or stock is to be deemed the
whole or part as the case may be of the consideration in respect
of which ·the conveyance is chaq;ed with ad valoreffi stamp duty.
The Explanation to section 24 of the Act"Provides that in the
case of a sale of property subject to a n.ortgage or other
E
incumbrance any unpaid mortgage money or money charged together
with the interest (if any) due on the san.e shall be deemed to be
part of the consideration for the sale. A contingent liability
to the payn.ent of an; debt n.eans such outstanding debt or
possible adverse verdict which has to be complied with but which
is not ascertained on the relevant date. A security for any
contingent future payments also falls within the meaning of
F
section 24 of the Act·

In the instant case, though in the first document dated Nay
20, 1968 it had been recited that the properties mentioned in
Schedule 'A' therein were being conveyed free from all incumbran-
ces by the two deeds of declarations dated October 28, 1968
G
executed by and on behalf of Godavari Sugar Mills and Somaiya
Organics it was made very clear that the said properties were
being conveyed subject to the equitable mortgage upto the limit
of Rs. 65,CiC,OOO. It may be that on that date no liability as
such had actually arisen. But the terms of the mortgage were such
that there was the contingency of the liability up to
Rs. 65,00,CiOO materialising. Fursuant to the prior arrangement
ll
790 SUF1'El'ili COLRT RE.PORTS [1985] SUFF. 3 s.c.R.

A
entered into bet•een Godavari Sugar ~iills and Somaiya Organics, a
letter was addressed to the Funjab t.ational tank on December
15, 1964 which read as follows :

"lHE. GOLAVARl SUGAR MlLLS LlL.
B E 334-45/ Lecembez 15, 1964
lhe Punjab ~ational Bank Ltd.
Karimjee Rouse branch,
Sir P .~,. !<oad,
1ombay - 1.

Lear Sirs
c
ll : DEFERBED PAYMENI GUAIW1IEF. FOR liS.65 IAXllS IN
FAVOUR OF WS SFEIClilll OF FARIS

\,ith reference to the above facility which your bank
r.as agreed to give to our C01llpany, we beg to record
that at the meeting of the Leard of Lirectors held on
lJ J<'riday the 23rd October, 1%4, our Board has approved
of and agreed to the terms and conditions on which the
captioned Guarantee is to be issued by your Bank to
the Company and for the sake of good order we beg to
hereby record that your Bank at our request has agreed
to initially issue the said guarantee to us on the
E terms and conditions set out in the letter dated 16th
October, 1974 bearing ref. 1'o. Loans/24241 addressed
by the Banks head Office to the ~.anager, B.O. Karimjee
house, bonibay and a copy of which is, hereto attached
for case of reference.

F We hereby confinn that our Compan)' and our Directot
will do all act matters and things necessary to carrl'
out and implen.ent the terms anci conditions to be
observed anci performed as envisaged in the said lette:~
dated the 16th October, 1964.

G As desired by you we have passed the necessary
resolutions at the meeting of our Eoard of Directo1·s
held on the :i.3rd October, 1%4. A true and complete
copy of the relevant portion of the minutes of the
said meetint; is annexed as l:.x.A to the Joint
Leclaration of (i) K.J. Son.aiya and (ii) Sri S.'.<.
H Somaiya which is sent herewith. l>e also record that
pursuant to the authority given to our Lirector Shri
S. ORGANICS v. BOARD OF REVENUE, U.P. [VENKATARAMIAH, J] 799

A
K,J, Somaiya in that behalf, we have through Sbri K.J.
Sooiaiya deposited with you all the title deeds i f our
imooveable properties at Captainganj with intent to
create, security thereon by way of equitable 111rtgage,
the .intentiou of the parties being thst your Bank may
look to the eaid security and tbereout reimburse B
realise and recover all monies that the llank may have
to pay or disburse by reason or as a cesult of or in
COllllection with the issue of the above captioned
guarantee, and also all costs, charges and expenses
which the Bank may incur (and in case of legal costs
the attorney and clien~ costs.) c
We also send herewith the Counter indemnity duly
executed by us and our two Directors Shri K,J, Somaiya
and Shri o.K. Somaiya.

Yours faithfully, D
FOR THE GODAVARI SUGAR MILLS LTD.
For K.J. SOMAIYA & SONS PRIVATE LTD.
Sd/-
Director, Managing Agents."
(under lining by us)
E
On the basis of the above letter the title deeds in respect
of the property now sold had been handed over to the Bank
creating an equitable mortgage up to Rs.65,00,000. It is true
that the Bank had not actually paid any amount under the Def erred
Payment Guarantee to M/s Speichim even by April 29, 1969 as can
be seen by the letter of that date written by the Bank which read
thus : F

"THE PUNJAB NATIONAL BANK LTD.
PNB HOUSE
SIR P.M. ROAD
BOMBAY
REF: LA/B/3404/69 29.4.1969 G
M/s The Godavari Sugar Mills Ltd.
Fazalbhoy Building,
Mahatma Gandhi Road,
BOMBAY - 1.

Dear Sir,
H
REF: EQUITABLE MORTGAGE FOR CAPTAINGANJ DISTILLERY

We thank you for your letter No. E 334/45/2754 dt.
800 SUPREME COURT REPORTS (1985) SUPP. 3 s.c.R.
A
26.4.1969 and have to inform you that you had created
equitable mortgage in favour of the Bank on 14.12.1964
in respect of your iumoveable property known as
"Captainganj Distillery" as security for Deferred
Payment Guarantee issued by us on 15.12.1964 on your
B behalf in favour of M/ s Speichim Paris. Subsequently
on 6.11.1968 the name of M/s Somaiya Organics (India)
Ltd., was substituted for the name of your company in
the said Def erred Payment Guarantee to the intent that
the said guarantee be treated as having been issued by
us for and on behalf of the said M/ s Somaiya Organics
(India) Ltd.
c
We hereby confirm that we have not so far made any
payment whatsoever either on behalf of your company or
on behalf of M/s Somaiya Organics (India) Ltd. in
respect of the above guarantee either to M/s Speichim
Paris or to any other party.
D Thanking you,
Yours faithfully,
Sd/-
Manager"

But it is however clear that the mortgage which had been
E created on December 14, 1964 was alive on the date of the
transaction and it was in force even on April 29, 1969 though the
mortgagors had been substituted by the purchaser of the property
i.e. Somaiya Organics. The Deferred Payment Guarantee being in
force even on April 29, 1969 the contingent liability under the
equitable mortgage was also very much in existence on the date of
F sale i.e. May 20, 1968 even though no payment had been made by
the Bank to M/s Speichim, Paris. If on any future date the Bank
was compelled to pay any amount under the guarantee given by it,
such amount upto the limit of Rs.65,00,000 could be realised by
the Bank by enforcing the mortgage against the property in
question. If that was not the position, there would have been no
G necessity to execute the two deeds of declaration stating that
the propertl , >re being sold subject to the mortgage.

Loni Canning v. Raper 118 English Reports 400; is a case in
poir' . That case concerned the stamp duty payable on an
a.ssignment by a debtor bj way of mortgage in favour of one who
H had stood surety for the debtor. The question was whether tlw
assignment was a security for the payment of money to be'
.thereafter lent, advanced or paid within the meaning of Part I o:'
S. ORGMICS v. BOARD OF REVENUE, U.P. [VENKATARAMIAH, J] 801

the Schedule to the Stamp Act, 1815 which was in force· in A
England. It was held that a security for contingent future
payment was as much within the words and meaning of the statute
as a security for certain future payments. In Mortinore v. Inland
Revenue Commissioners (1864) 2 R &C 838, which was decided about
12 years later the vendor had sold a property subject to a
100rtgage debt which was expressed to become payable if but only B
.!!_, the vendor's predecessor died without male issue. The point
was whether the said contingent debt had to be taken into account
under the wording of section 10 of the English Stamp Act, 1853,
the relevant part of which read thus:

"Where any Lands or other Property shall be sold and C
conveyed subject to any Mortgage •••. or other Debt, or
to any gross or' entire Sum of Money or Debt shall be
deemed the Purchase or Consideration Money, or Part of
the Purchase 01 Consideration Money ••••••• "

~iartin B, delivering the judgment of the court, said : D
11
••• • we think that the words of' the enactm~nt any
mortgage or other debt, include contingent debts as
well as absolute one.s ••••••••••.•. .•••••••••••• "

In the case before us we need not read 'contingent debts' E
into the statutory provision in section 24 of the Act because it
expressly refers to any debt which may become contingently
payable which should be deemed to be part of the consideration.

In Independent Television Authority v. Inland Revenue
Comnissiooers (1960) 2 All E.R. 481, the appellant who was liable
to pay stamp duty objected that the total stamp duty payable F
could not be determined at the date when the document was·
tendered for stamping owing to the clause for increase or
decrease qualifying a liability contracted earlier. This
argument was rejected on the broad principle that such words as
'money payable' when used in the English Stamp Act, 1891 intended
money payable either on a contingency or as a certainty. Lord G
Radcliffe, with whom.Lord Tucker and Lord ~!Orris agreed observed
thus :

"I take it, therefore, to be a well-settled principle
that the money payable is ascertained for the purposes
of charge without regard to the fact that the
agreement in question may itself contain provisions H
802 SUPREME COURT REPORTS [1985] SUPP. 3 s.c.R.

A
which will, in certain circumstances, prevent it being
payable at all. If that is so, there is at least no
better reason for adopting a different principle when
there are found clauses which merely vary the amount
to be paid according to specified contingencies. Nor
B does it matter for this purpose whether the effect of
such clause is to make it possible for the sum to be
increased or to be diminished. In County of Durhan.
Electrical Power Distribution Co. v. Inland RevenUE
comrs. (1909) 2 KB 604 any variation would have beeri
downwards; in the Underground Electric Rys. Co. cas<:
(1906) AC 21 (that is, the first case) the variation
c might have been upwards or downwards. What ill
necessary is that it should be possible to ascertaia
from the agreement that there is some specified sun
agreed on •• rhe subject of payment which may perhsps
fairly be called the prima facie or basic payment.
Even that minimum condition may hsve to be restated in
relation to certain kinds of securities, such for
D example "s guarantees, in which the ad valorem chsrg.e
is calculated according to the maximum stm
contingently payable, or, to put it in another way,
the amount of the guarantee; see Underground Electrtc
Rys. Co. of London, Ltd. & Glyn. Mills, Currie & Co.
v. Inland Revenue Comrs. [1916] 1 KB 306)"
E
In Coventry City Council v. Inland Revenue ComniBSiooen,
[1978] 1 All E.R. 1107, the Chsncery Division hss followed ne
above principle after reviewing all the cases referred to
therein.

F It was, however, argued by the learned counsel for the
appellants that the liability of the document for the stamp d".ty
was dependent upon what was written in it and the Court shotld
not look at anything else to decide the reference made uniier
section 57 of the Act. It is not necessary to consider the
correctness of this proposition in this case, since it is the
G case of the appellants themselves that what was a sale free fi~om
all incumbrances originalJy was treated as a sale subject to ·~he
equitable mortgage from the very beginning when the deeds of ·
declaration were written. had the document of May 20, 1968 been
the only document then questions would have arisen whether the
recital therein that the consideration for the properties which
H were considered sufficient by the Bank to secure Rs. 65,00,000
could truly be Rs. 7,76,000 and whether the said recital amour.ted
S. ORGANICS v. BOARD OF REVENUE, U.P. [VENKATARAMIAH, J] 803
A
to a fraud on the stamp law or not. We are relieved of the duty
to decide the said questions in view of the deeds of declaration
which treated the sale as one subject to the mortgage the maximum
liability under which at a future time could be Rs. 65,00,000, If
the sale had been free from mortgage then any such contingent
B
future liability would have fallen on the vender Godavari Sugar
Mills. But the parties to the sale took adequate precaution to
prevent any such liability being there against the Godavari Sguar
Mills by making it very clear that the said liability to the Bank
would be on the _properties sold in the hands of the purchaser,
Somaiya Organics and by stating that under the tripartite agree-
ment which was to be executed, the Bank would treat Somaiya
c
Organics as the company responsible for that debt in the place of
Godavari Sugar Mills • The Bank had in fact writ ten to the
Godavari Sugar Mills on April 29, 1969 that on November 6, 1968
the name of Somaiya Organics had been substituted for the name of
the Godavari Sugar Mills in the Deferred Payament Guarantee 'to
D
the intent that the said guarantee be treated as having been
issued by us for and on belialf of the said M/ s. Somaiya Organics
(India) Ltd.'.

The object of section 24 of the Act· is very clear. That
section means that when a purchaser purchases a property for a
E
certain amount subject to the payment of another debt, actual or
contingent, he is virtually purchasing the property for the said
amount plus the amount of the debt and the aggregate of the two
amounts ought to be treated as the true amount for which the
property is being sold. Otherwise there is bound to be a
difference between the true consideration and the consideration
which is made liable to stamp duty. To illustrate, take the
F
present case itself. The properties which had been treated as
sufficient security by the Bank for the liability of Rs.65,00,000
must be ordinarily much more valuable than Rs.65,00,000 but on
the date of conveyance stamp duty would have become payable only
on Rs.7,76,000 but for the above rule in section 24 of the Act.
In this case the amount of Rs. 7, 76,000 must have been fixed by
G
the parties taking into consideration the liability to the Bank
under the mortgage which might arise in future. The two decisions
on which reliance was placed by the appellants are of no
assistance to them. The first one was Sidhnath Mehrotra v. Boanl
of Revenue, A.I.R. 1959 All 655. In that case the High Court of
Allahabad held that where an immoveable property which was
encumbered by a charge or mortgage was sold but not subject to
H
the incumbrance, then the amount of money constituting the charge
or mortgage need not be added to the con~ideration mentioned in
the conveyance as the value of the property sold. The next
804 SUPREME COURT REPORTS [1985] SUPP. 3 s.c.R.

A decision is the decision of this Court which was rendered on
appeal against the above decision of the Allahabad High Court,
The said decision is Board of Revenue, llt:tar Pradesh v. 'Rai Saheb
Sidhnath !!ehrotra, [1965] 2 s.c.R, 269. This Court affirmed the
decision of the Allahabad High Court and dismissed the appeal of
the Revenue. In the transaction involved in these two decisions
B the sale was free from all incumbrances or any mortgage, In such
case even if there was some mortgage money which had remained
unpaid the Explanation to section 24 of the Act could not be
relied on by the Revenue to insist upon payment of stamp duty on
such unpaid mortgage money. But the facts of the case before us
C are different. Here the sale was in fact ~ubject to the equitable
mortgage in favour of the Bank. Renee these decisions are of no
avail to the appellants.

We are of the view that the High Court in its well-consi-
D dered judgment has rightly taken the view that the amount of
Rs.65,00,000 should also be deemec!.as part of the consideration
for the sale and that stamp duty was leviable on Rs. 72,76,000
under section 24 of the Act.

E The afpeals, therefore, fail and they are dismissed with
costs.

A.P .J. Appeals dismissed.