IMPORTANT POINT
Stamp duty under the Indian Stamp Act applies only to written instruments evidencing agreements; oral agreements do not create a taxable event.

JUDGMENT :

Saumitra Dayal Singh, J.

1. Present reference (to a full bench) has arisen on a doubt expressed by a learned single judge, to the correctness of the ratio contained in a division bench decision of the Court in HDFC Ltd. v. Assistant Commissioner Stamps, Ghaziabad, 2015 (9) ADJ 331 (DB). In that, the division bench reasoned as below:

“In the case in hand also, the instrument, namely, agreement executed between the petitioner and its borrowers does not, in itself, evidences or contain terms regarding the deposit of title deed. The loan agreement only provides for a future eventuality requiring the giving of security, which necessarily would not fall within the ambit of Article 6 of Schedule 1-B of the Act. The Stamp Act is a fiscal statute and its provisions are to be strictly construed. No stamp duty is liable to be charged on assumptions and conjectures or surmises. The stamp duty is to be paid on the tenor of instrument and not at any future possibility. The Article meant in the agreement for security does not spell out even the nature of the security that may be required to be furnished sometimes in future. Stamp duty also cannot be charged on an assumptions that at any future time, the security by creation of equitable mortgage by deposit of title deeds would be executed. An equitable mortgage created by simply depositing the title deed without there being any instrument, letter, note, memorandum or writing evidencing such an agreement relating to deposit of title deeds, is also not subject to payment of stamp duty.

In view of the aforesaid settled legal positing, petitioner cannot be forced to mention in the loan agreement the fact that title document has been deposited with the Bank as it is open in between the Bank and the borrower to either create an oral equitable mortgage by deposit of title deed as provided under Section 58 (F) of the Transfer of Property Act or execute a document in that regard by way of an instrument, letter, note and only in the eventuality of execution of an instrument, memorandum, undertaking, letter, the same would be chargeable with duty under Article 6 of Schedule 1-B. In case, the loan agreement executed between the parties, does not contain stipulation in writing about creation of a mortgage by the deposit of title deed, the stamp duty would not be chargeable under Article 5 of Schedule 1-B of the Act.”

2. The reference was made at the admission stage of the writ petition. At that stage, the State had not filed its Counter-affidavit. It had opposed the writ petition on the strength of instructions. Even those are not on record. In such circumstances, relying on the document that may have been produced by the State (at that stage) and referring to Clauses 10.5(f), and 10.5(h) read with Clause 13(d) of the Loan Agreement, the learned single judge observed as below, in the order dated 19.12.2019:

“9. Learned Standing Counsel, who was earlier given time by this Court to seek instructions, on the basis of instructions, has informed this Court that in the loan agreement signed between the bank and the loanee, there is a Clause 10.5(f) and 10.5(h), which was not pointed out at the time of decision of the Court rendered on 31.8.2015. The emphasis is on these two clauses and therefore, they are being quoted herein-below:

“10.5(f). The Borrower alone shall be responsible to bear and pay the Stamp Duty, all charges levied by the Central Registry of Securitization Asset Reconstruction and Security Interest of India, as well as all other statutory/regulatory charges/levies/taxes as may be applicable to the Loan, the Security, this Agreement as well as on all other instruments in relation to the Loan/Security (to the extent as may be applicable during the pendency of the Loan).

10.5(h) The Borrower further agrees that the terms and conditions of the Offer Letter, the loan application and the relat