1. Execution of instruments titled as security bonds cum mortgage deeds to secure obligations and loans — Dispute over stamp duty chargeability under Articles 40 and 57, Indian Stamp Act. (Para 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10 )
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2025 Supreme(SC) 1791
SUPREME COURT OF INDIA
AHSANUDDIN AMANULLAH, PRASHANT KUMAR MISHRA, JJ.
M/s Godwin Construction Pvt. Ltd. – Appellant
VERSUS
Commissioner, Meerut Division & Anr. – Respondents
Civil Appeal No. 7661 of 2014 With Civil Appeal No. 12552 of 2025 (Arising out of S.L.P. (Civil) No. 36434 of 2014)
Decided On : 08-10-2025
Important Points
IMPORTANT POINT
Determination of stamp duty – In matters of stamp duty, decisive factor is not nomenclature assigned to instrument, but substance of rights and obligations it embodies – Court is duty-bound to ascertain true legal character of instrument.
Determination of stamp duty – In matters of stamp duty, decisive factor is not nomenclature assigned to instrument, but substance of rights and obligations it embodies – Court is duty-bound to ascertain true legal character of instrument.
Subject
Taxation - Stamp Duty
Act Referred
Headnote
Civil Appeal No.7661 of 2014
(A) Indian Stamp Act, 1899 – Section 7 – Determination of stamp duty – In matters of stamp duty, decisive factor is not nomenclature assigned to instrument, but substance of rights and obligations it embodies – Court is duty-bound to ascertain true legal character of instrument – Unless nature and effect of such instrument are conclusively identified, application of any provision for determination of stamp duty on instruments under Stamp Act, 1899, cannot be undertaken. (Para 15)
(B) Indian Stamp Act, 1899 – Article 57 of Schedule 1-B read with Section 2(17) – Indian Contract Act, 1872 – Section 12 – Security Bond cum Mortgage Deed – Direction to pay deficient stamp duty together with penalty and interest – Appellant has executed “Security Bond cum Mortgage Deed” in favour of Meerut Development Authority – Transfer was made with intent that same shall remain charged by way of mortgage to secure due performance of obligations in developing colony and payment of external development charges – Instrument stipulates that in the event of default, Meerut Development Authority shall be entitled to sell mortgaged properties to realize the amount – Instrument executed by appellant fulfils essential characteristics of a mortgage deed – In substance and effect, deed confers right over specified properties in favour of Meerut Development Authority to secure performance of an obligation, while preserving appellant’s interest until full discharge of obligation – Nomenclature “Security Bond cum Mortgage Deed” is inconsequential, as it is substance and operative provisions of instrument which govern its character for the purposes of stamp duty – Deed was not executed by a surety but by principal debtor/appellant, company, through its Director – In absence of any surety, to attract Article 57 of Stamp Act, deed executed by appellant cannot be termed as a security bond – It, however, fulfils all requirements of a mortgage deed, falling under ambit of Article 40 of Schedule 1-B of Stamp Act. (Paras 16, 17, 25 and 26)
Civil Appeal arising out S.L.P. (Civil) No. 36434/2014
(C) Indian Stamp Act, 1899 – Section 2(17) and Article 40 of Schedule 1-B – Security Bond or Mortgage Deed – Determination of stamp duty – Instrument confers right over specified property to secure repayment – Instrument satisfies essential characteristics of a mortgage deed as defined under Section 2(17) of Stamp Act, 1899 – Nomenclature “Security Bond or Mortgage Deed” is not determinative; substance of instrument governs its character while assessing stamp duty – No distinct surety exists apart from principal debtor – Reference to personal liability in deed pertains to Director acting on behalf of company and does not transform the instrument into a security bond under Article 57 of Schedule 1-B of Stamp Act, 1899 – In substance and effect, deed constitutes mortgage executed by principal debtor itself, thereby attracting provisions of Article 40 of Schedule 1-B of Stamp Act, 1899, for the purposes of stamp duty – Impugned Judgments passed by High Court upheld. (Paras 27, 28, 29 and 30)
Facts of the case:
Civil Appeal No.7661 of 2014 calls in question impugned order dated 22.01.2013 passed by High Court of Judicature at Allahabad in Writ Petition No. 31966/2012, whereby High Court dismissed writ petition filed by appellant, affirming order dated 11.06.2012 passed by respondent No.1, which in turn affirmed order dated 15.09.2010 passed by respondent No.2, directing appellant to pay deficient stamp duty under Article 40(b) of Schedule 1-B of Stamp Act, together with penalty along with interest at the rate of 1.5% per month from the date of execution of the instrument till recovery.
Findings of Court:
Second limb of Article 57 of Schedule 1-B of Indian Stamp Act, 1899, is confined to instruments executed by a surety to secure obligations of another. In present case, although clause III of deed stipulates that mortgagor shall be personally liable to repay loan, Shri Naveen Mittal executed the deed solely in his capacity as Director of company acting on behalf of company.
Result : Appeals dismissed.
Legal Category Hierarchy
Advocates appeared:
For the Appellant(s) : Mr. Pahlad Singh Sharma, AOR Ms. Kavita Jha, Sr. Adv. Mr. Vaibhav Kulkarni, Adv. Mr. Aniket Deepak Agrawal, AOR Mr. Akash Shukla, Adv.
For the Respondent(s): Mr. Shaurya Sahay , AOR Mr. Bhakti Vardhan Singh, AOR
For the Appellant(s) : Mr. Pahlad Singh Sharma, AOR Ms. Kavita Jha, Sr. Adv. Mr. Vaibhav Kulkarni, Adv. Mr. Aniket Deepak Agrawal, AOR Mr. Akash Shukla, Adv.
For the Respondent(s): Mr. Shaurya Sahay , AOR Mr. Bhakti Vardhan Singh, AOR
Table of Contents
2. Appellants contend instruments are security bonds under Article 57; Respondents argue they are mortgage deeds chargeable under Article 40 of the Indian Stamp Act. (Para 11 , 12 )
3. Substance of the instrument prevails over nomenclature; Article 57 requires a distinct surety to secure another's obligation, whereas these deeds were executed by the principal debtors. (Para 14 , 15 , 17 , 18 , 19 , 20 , 21 , 24 , 25 , 26 , 27 , 28 , 29 )
4. An instrument executed by a principal debtor to secure its own obligation is a mortgage deed under Article 40, not a security bond under Article 57. (Para 22 , 23 , 25 , 26 , 29 )
5. Appeals dismissed; High Court orders affirming chargeability under Article 40 of the Indian Stamp Act upheld. (Para 30 )
6. Does the title of an instrument determine the stamp duty chargeable under the Indian Stamp Act?
No, the decisive factor is the substance of rights and obligations embodied in the instrument, not the nomenclature assigned to it. The court must ascertain the true legal character of the instrument based on its operative recitals and clauses. (Para 14 , 17 , 28 )
7. When is an instrument chargeable as a security bond under Article 57 instead of a mortgage deed under Article 40?
Article 57 applies when a security bond or mortgage deed is executed by a surety to secure the due performance of a contract for another person, rather than the principal debtor securing their own obligation. (Para 21 , 23 )
8. What constitutes a surety for the purpose of applying Article 57 of the Indian Stamp Act?
A surety is a person who enters into a tripartite contract of guarantee to perform the promise or discharge the liability of a third person (the principal debtor) in case of their default. (Para 22 , 23 )
9. Is a deed executed by a principal debtor to secure its own obligations chargeable under Article 57?
No, where the principal debtor itself executes a deed mortgaging its own property to secure its own obligations, Article 57 is inapplicable, and the instrument is chargeable as a mortgage deed under Article 40. (Para 23 , 25 , 26 , 29 )
JUDGMENT
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 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 Rs.1,00,44,000/- (Rupees One Crore and Forty-four Thousand). The appellant had also deposited an advance deposit of Rs.15,00,000/- (Rupees Fifteen Lakh) and upon the full discharge of all obligations, the surety under the bond and obligation will be void. A stamp duty of Rs.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 Rs.4,61,660/- (Rupees Four Lakh Sixty- one 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 Rs.4,61,660/- together with a penalty of Rs.100/- totalling Rs.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. 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
