The main legal point established in the judgment is that the letter in question does not qualify as a mortgage deed or a bond under the relevant provisions of the Kerala Stamp Act.

1. This is a reference made by the Board of Revenue under S.55(1) of the Kerala Stamp Act, 1959.

2. The Lord Krishna Bank Ltd. was the foreman of a kuri and M/s. Sellwell Tea Agencies, a subscriber. The ticket was prized at the 25th instalment. Under S.27(1) of the Kerala Chitties Act, 1975 the foreman was bound to take reasonable security for the due payment of future subscriptions before allowing the subscriber to draw the prize amount. The security taken by the Bank from the Agencies was in the form of the following letter:

"Dear Sirs,

In consideration of the sum of Rs. 25,000/- paid by you to me (receipt whereof has been acknowledged in a separate receipt dated 18-2-1980 executed by me to you) towards the prize amount due to me in respect of ticket No. 27/27 subscribed to by me in the Chitty No. 1/78 conducted by you, in accordance with the terms and conditions of the variola, I do hereby, as beneficial owner, transfer to you all my rights in the debt due and owing by you on the fixed deposit receipt No. 8/80 dated 18-2-1980 for Rs. 17500/- issued by you to me on today and all interest due and/or to become due in respect of the said fixed deposit receipt and/or renewal of the said deposit and all thereof to hold the same as security for the due and regular payment of the future subscription payable by me to you in respect of the said ticket from 26th instalment of the chitty till its termination in accordance with the terms and conditions of the said variola.

You may realise all or any amounts payable by me arising from my default in the due and regular payment of the subscriptions in accordance with the terms and conditions of the aforesaid variola in respect of the said chitty as a first charge on the amounts that may be due to me in respect of the said fixed deposit receipt and/or any renewal thereof. I do not hereby hand over to you the said Fixed deposit receipt in taken of the transfer.

Yours faithfully, (Sd)

For Sellwell Tea

The Sub-Registrar thought that the letter was a "bond" within the meaning of S.2 (a) of the Stamp Act, chargeable with duty under Art.13 of the Schedule to the Act The District Registrar caused enquiries to be made and found that the future instalments payable amounted to Rs. 8,750/- In his opinion, the transaction was "a mortgage of moveables" for the said sum, and stamp duty was accordingly payable under Art.37. The Board of Revenue concurred with the above opinion, but wanted a decision from this Court as to whether the document could be construed as a mortgage deed for the purposes of Art.37 or Art.50, or as a bond for the purposes of Art.13.

3. The first question to be considered, therefore, is whether the letter could be treated as a "mortgage deed" under S.2(n). The said sub-section reads:

"(n) "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;"

A mortgage deed is thus an instrument whereby a right over or in respect of specified property is transferred or created; and such transfer or creation must be for one or other of the following purposes:

(i) for securing money advanced or to be advanced by way of loan; (ii) for securing an existing or future debt; and (iii) for securing the performance of an engagement.

The letter in question, as already seen, was given for the purpose of securing "due payment of future subscriptions", as required by S.27(1) of the Chitties Act. In view of the decision of a bench of five judges of this Court in Janardhana Mallan v. Gangadharan (1983 KLT.197) it must now be taken as settled law that a promise to pay future subscriptions by a prized subscriber of a chitty does not amount to a promise to repay a loan or a debt, because the transaction does not involve payment of a loan by the foreman or the in