Case: Joint District Registrar (Class-I) and Collector of Stamps, Nagpur and Another Vs. M/S Jaika Automobiles Private Limited, Nagpur

interpretation of Section 4. The Appellants contended that all three documents i.e. the two hypothecation agreements and the Security-cum-Mortgage deed were executed on the same date i.e. 23.08.2002 and therefore, the presence of the word collateral in Article 40(c) ought to have been understood in the context of any document presupposing prior existence of a principal or main document. The thrust of submissions on the part of the Appellants before us was that the two instruments of hypothecation would hardly be called as adequate security for sanctioning a loan of Rs. 7 crores and thus, in that background the document of Security-cum-Mortgage deed had to be construed as the principal Instrument on which stamp- duty was leviable/payable by the Respondent. 7. We have heard Ms.N.P. Mehta, leraned Additional Government Pleader for Appellants and Mr.S.V. Manohar, learned Senior Counsel for the Respondent-Company and carefully considered the submissions and gone through the pleadings before us. At the outset, the relevant provisions of Section 4 of the Stamp Act and Article 40(c) of the Stamp Act which are applicable in the present case are required to be considered and they read thus: 4. Several Instruments used in single transaction of [development agreement] sale, [lease], mortgage or settlement (1) several instruments are employed for completing the transaction, the principal instrument only shall be chargeable with the duty prescribed in Schedule-I for the coneyance [development agreement] [lease] mortgage or settlement, and each of the other instruments shall be chargeable with a duty of [one hundred rupees] instead of the duty (if any) prescribed for it in that Schedule. 2) The parties may determine for themselves which of the instruments so employed shall, for the purpose of subSection (1), be deemed to be the principal instrument. (3) If the parties fail to determine the principal instrument between themselves, then the officer before whom the instrument is produced may, for the purposes of this section, determine the principal instrument. Provided that the duty chargeable on the instrument so determined shall be the highest duty which would be chargeable in respect of any of the said instrument employed. Provided that the duty chargeable on the instrument so determined shall be the highest duty which would be chargeable in respect of any of the said instrument employed. table 8. From a reading of the above provisions, it is evident that the provisions of Section 4 clearly enumerate that when the same transaction is completed by more than one instrument, it is for the parties to determine for themselves which of the said instrument so employed shall for the purposes of Section 4 (1) be deemed to be the principal Instrument. Sub-Section (3) further contemplates and lays down that if the parties fail to determine the principal instrument between themselves, then the Officer before whom the instrument is produced may for the purposes of this Section, determine the principal instrument. The Proviso further states that the duty chargeable on the instrument so determined shall be the highest duty which would be chargeable in respect of any of the said instruments employed. Thus, in the present case, it is required to be seen as to whether the Respondent Company had determined for themselves i.e. between the Respondent and United Commercial Bank as to which document/instrument was deemed to be the principal instrument. Mr. Manohar drew our attention to the clauses of the Securitycum-Mortgage deed dated 23.08.2002 and more specifically to Clause 21 therein which reads thus : 21. …........Cash credit limit of Rs. 7,00,00,000/- (Rs. 7 crores) has been sanction in the name of M/s. Jaika Motors Limited, on the condition that the borrower company shall furnish the principal and primary security by executing the hypothecation agreement/deed, giving the exclusive first charge of the entire stock, plant and machineries and book debts of the borrower company present and future. The Borrower Company shall furnish the Collateral security (in addition to the Hypothecation deed) of the sureties/guarantors who shall execute mortgage in favour of the Mortgage Bank in respect of their properties at Nagpur, Amravati and Chandrapur 9. From the above Clause appearing in the Security-cumMortgage deed between the Respondent-Company and United Commercial Bank it is clear that the Respondent -Company had specifically deemed that the two hypothecation agreements would be the principal instruments in consonance with the provisions of Section 4 (2) of the Stamp Act, thereby negating the employment of Section 4 (3) to the facts of the Respondents case. The parties had specifically elected the Hypothecation agreements as the principal Instruments as required by the provisions of Section 4(2). 10. Our attention was also drawn to the sanction letter dated 27.07.2002 issued by United Commercial Bank to the Respondent-Company in respect of sanction of the credit proposal for Rs.7 crores. In the said letter, apart from the cash credit limit of Rs.7 crores the value of the primary security, viz. hypothecation of plant and machineries, Telco vehicles, stores and spares lying at Nagpur, Chandrapur, Amravati, Raipur, Jagadalpur or elsewhere in the Companys go-downs, book debts and all current assets of the company were taken at the invoice Price or Market Price. Further, the immovable properties of the Respondent-Company situated at Amravati, Chandrapur and Nagpur was itself valued at Rs.720.18 lakhs. Apart from this, the Respondent was required to produce the personal guarantees of its five Directors and Corporate guarantees of six associate companies as mentioned therein. 11. Therefore, we are in agreement with the submissions made on behalf of the Respondent that the Security-cum-Mortgage Instrument which was entered into by the Respondent with United Commercial Bank was not the principal instrument and it will have to be construed as a collateral document in view of the provisions of Section 4(2) of the Stamp Act in the facts of the present case. 12. In view of the above, we find no merits in the submissions advanced on behalf of the Appellants and do not find it necessary to interfere with the order and judgment passed by the learned Single Judge.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]9. From the above Clause appearing in the Security-cumMortgage deed between the Respondent-Company and United Commercial Bank it is clear that the Respondent -Company had specifically deemed that the two hypothecation agreements would be the principal instruments in consonance with the provisions of Section 4 (2) of the Stamp Act, thereby negating the employment of Section 4 (3) to the facts of the Respondents case. The parties had specifically elected the Hypothecation agreements as the principal Instruments as required by the provisions of Section 4(2)In the said letter, apart from the cash credit limit of Rs.7 crores the value of the primary security, viz. hypothecation of plant and machineries, Telco vehicles, stores and spares lying at Nagpur, Chandrapur, Amravati, Raipur, Jagadalpur or elsewhere in the Companys go-downs, book debts and all current assets of the company were taken at the invoice Price or Market Price. Further, the immovable properties of the Respondent-Company situated at Amravati, Chandrapur and Nagpur was itself valued at Rs.720.18 lakhs. Apart from this, the Respondent was required to produce the personal guarantees of its five Directors and Corporate guarantees of six associate companies as mentioned therein11. Therefore, we are in agreement with the submissions made on behalf of the Respondent that the Security-cum-Mortgage Instrument which was entered into by the Respondent with United Commercial Bank was not the principal instrument and it will have to be construed as a collateral document in view of the provisions of Section 4(2) of the Stamp Act in the facts of the present case12. In view of the above, we find no merits in the submissions advanced on behalf of the Appellants and do not find it necessary to interfere with the order and judgment passed by the learned Single Judge.