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PETITIONER: SOMATYA ORGANICS (INDIA) LTD., ETC.

       Vs.

RESPONDENT: BOARD OF REVENUE, U.P., ETC.

DATE OF JUDGMENT29/11/1985

BENCH: VENKATARAMIAH, E.S. (J) BENCH: VENKATARAMIAH, E.S. (J) MISRA, R.B. (J)

CITATION:  1986 AIR  403            1985 SCR  Supl. (3) 786  1986 SCC  (1) 351        1985 SCALE  (2)1107

ACT:      Indian  Stamp  Act,  1899  ss.4  and  24,  Article  23, Schedule I-B  - Immovable  property -  property  subject  to equitable mortgage  - Sale  of property  - Consideration for sale -  Computation of - For levy of stamp duty on sale deed Debt, actual  or  contingent  -  Whether  to  form  part  of consideration.      Words &  Phrases: ’contingent  liability’ -  Meaning of Indian Stamp Act, 1899 s.24.

HEADNOTE:      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  Agreement and  obtained a  deferred payment guarantee  up to the limit of Rs. 65,00,000 from 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 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  payable  for  the  machinery,  vehicles,  stores, finished goods  etc. being  all moveable items, the sale and transfer of  which had  been 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 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  encumbrances. The  document  further stated that  in case  the vendee  was to  pay any  amount on account of  any charge or encumbrances created by the vendor on 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  mortgage  which  had  been created in  favour of  the  Punjab  National  Bank  Ltd.  in

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connection with  the deferred  payment guarantee,  after the Board of Directors of the two appellants had 787 passed resolutions  to that effect. All the three documents, namely, the  sale deed  dated May 20, 1968 and the two deeds of declarations  executed by  the  appellants  acknowledging that the  sale was  subject to  the equitable  mortgage were presented 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 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  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 the deeds of the  declarations and forwarded them to the Collector for necessary action.      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 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  immovable  property  was  being transferred subject  to 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  declarations,  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 given by the  Punjab National  Bank 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  i.e.  the machinery etc. was not part of the consideration as they did not constitute  the subject  matter of  sale  and  they  had already been sold by manual delivery, 788 that the  sum of  Rs.  65,00,000  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 s.24 of the Act, that the value on  which stamp  duty was payable under the Act as per Article 23  in Schedule  I-B thereto was Rs. 72,76,000 being the total  of Rs.  7,76,000 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 case 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, ^      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

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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 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  difference  between  the  true consideration and  the consideration which is made liable to stamp duty. [803 D-E]      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.  A security for any contingent future payments also  falls within the meaning of section 24 of the Act. [797 E-F]      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 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 mortgage upto  the limit of Rs. 65,00,000. It may be that on that date  no liability  as sch had actually arisen. But the terms  of   the  mortgage  were  such  that  there  was  the contingency   of    the   liability   up   to   Rs.65,00,000 materialising. Pursuant to the prior arrangements 789 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 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 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 N/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  necessity to  execute the  two deeds of declaration stating that  the properties  were being sold subject to the mortgage. 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 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 maximum liability under which at a future  time could  be Rs. 65,00,000. If the sale had been

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free from mortgage then any such contingent future liability would have  fallen 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 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  Somaiya Organics  had been substituted for the name of  the   Godavari  Sugar  Mills  in  the  Deferred  Payment Guarantee. [797 F-H; 799 D-E; 800 D-G; 802 G-H; 803 A-C] 790      Lord  Canning   v.  Raper,  118  English  Reports  400; Mortinore v.  Inland Revenue  Commissioners, [1864] 2 & 838; Independent   Television   Authority   v.   Inland   Revenue Commissioners, [1960]  2 All  E.R.  481  and  Coventry  City Council v.  Inland Revenue  Commissioners, [1978] 1 All E.R. 1107 relied on.      Sidhnath Mehrotra  v. Board of Revenue, A.I.R. 1959 All 655 and  Board  of  Revenue,  Uttar  Pradesh  v.  Rai  Saheb Sidhnath Mehrotra, [1965] 2 S.C.R. 269 inapplicable.

JUDGMENT:      CIVIL APPELLATE  JURISDICTION :  Civil Appeal  Nos. 988 and 989 of 1972.      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.      Anil Deo Singh, Mrs. Sudhir Kulshreshta and Mrs. Shobha Dixit for the Respondent.      The Judgment of the Court was delivered by      VENKATARAMIAH, 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  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 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, buildings,  machinery  etc. situated in  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. Melle Bezons and in that 791 connection pursuant  to  the  resolution  of  its  Board  of Directors passed  on October  23, 1964  it  had  obtained  a deferred payment  guarantee upto  the limit  of Rs. 65 lakhs

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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. That on March 2, 1962 Godavari Sugar Mills  had resolved  to sell  the lands, buildings 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 stores, finished  goods etc.  being all  moveable items, the sale and transfer of which had been 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 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 incumbrances. 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  consideration  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  Mills by  the two  Directors of  the Godavari Sugar  Mills who had been authorised to do so which had the  effect of  modifying or  correcting  certain  error which had  crept into  the document  dated May  20, 1968. It stated inter alia :           "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  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 and  made between the Company of the one part           and  Messrs.   Somaiya  Organics  (India)  Limited           (hereinafter 792           for the  sake of brevity 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 immoveable property described           in  the  First  Schedule  hereto  along  with  the           Buildings  standing   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 May 1968.           5. Through  inadvertance and oversight it has been           stated in  the said  Deed of Sale that the Company           had convenated  that the  entire property sold was           "free  from  all  sorts  of  transfer  charges  or           encumbrance created by the Vendor (the company) in           favour of  any one.  "In the  said Deed of Sale it           was also  further stated  that in  case of  vendee

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         (i.e. the  S.O.I.L.) might  have to pay any amount           by way  of charge  transfer or encumbrance created           by the  vendor (i.e.,  the company)  on  the  said           property the  vendee (i.e.,  the  SOLL)  shall  be           entitled to get back the entire sale consideration           with interest  at 1  % per  month  from  the  said           vendor (i.e.  the Company)  we say that it was not           the intention  either of  the company  or  of  the           S.O.I.L. to  transfer the said immoveable property           described in  the First  Schedule hereto free from           the charge created by the Company 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 of Sale that the property           was free  from any  encumbrance or charge, or that           in the  event of  the S.O.I.L.  having to  pay any           amount by  way of  charge transfer  or encumbrance           the S.O.I.L.  should be  entitled to  get back the           entire sale consideration as stated aforesaid.           6. We  solemnly and sincerely declare and say that           the intention  of the company as also the S.O.I.L.           was that  the said  immovable property  should  be           transferred  subject  to  the  charge  created  in           favour of  the Bank  by the  Company by deposit of           title deeds  on the  15th day of December, 1964 as           stated in paragraph 3 above." (underlining by us)      As can  be seen  from the  extract of  the  declaration given above that the properties which were being transferred under the  document dated  May 20,  1968.  were  being  sold subject to the 793 equitable mortgage  which had  been created in favour of the Punjab 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 equitable mortgage in favour of the 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 Gadavari Sugar Mills,  somaiya Organics  and the Punjab National Bank Ltd. treating  the  deferred  payment  guarantee  issued  in favour of  M/s Speichim,  Paris as  having been given at the instance and  on behalf  of Somaiya Organics, confirming the equitable   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  properties sold  under the document dated May 20, 1968  subject to  the  equitable  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 respectively acknowledging that  the sale  was subject  to the  equitable mortgage were  presented before  the Sub-Registrar, Hata 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

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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 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  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 questions for the opinion of the High Court. 794      The reference  was first  heard by  the High  Court  in March, 1970. By its order dated March 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  that order  along with  certain other documents.  Accordingly a  fresh statement of the case was submitted  to the  High  Court.  In  the  reference  the following six  questions were referred to the High Court for its opinion           1. Whether  in view  of the  above opinion  of the           Board, the  principal sale deed dated 20.5.1968 is           a conveyance  not only  of the lands and buildings           but also  the machineries  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.9,97,425 under Article 23 Schedule I-           B of  the U.P.  Stamp (Amendment)  Act,  1962,  as           against Rs. 35,000 paid?                              or           2. Whether the sale deed aforesaid is a conveyance           only of  lands and  buildings in  consideration of           Rs.7,76,000     plus      Rs.1,85,00,000     total           Rs.1,92,76,000 in  the light  of section 24 of the           Stamp Act  and is  chargeable with  a duty  of Rs.           8,67,420 under  Article 23  aforesaid  as  against           Rs.35,000 paid?                              or           3. Whether  the sale-deed  aforesaid does not fall           within the  ambit of  section 24  of the Stamp Act           and is conveyance of the lands and buildings along           with   machineries   fixed   in   the   earth   in           consideration of  Rs. 36,64,678  and is chargeable           with a duty of Rs. 1,74,925 under Art.23 aforesaid           as against Rs.35,000 paid?                              or           4. Whether  the sale-deed  aforesaid does not fall           within the  ambit of  section 24  of the Stamp Act           and is  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? 795                              or           5. If  the sale-deed aforesaid does not fall under           any  of  the  alternatives  mentioned  above  what

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         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?                              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 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 chargeable under  the Stamp  Act in respect of the sale deed dated May  20, 1968, and (2) whether the other two documents were supplementary  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 appeal found that the  two deeds of declaration 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. It  held that the intention of the parties was that the immoveable property was being transferred subject to the equitable mortgage  created in favour of the Punjab National Bank Ltd. for Rs. 65,00,000. 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 held  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 given by the Punjab National Bank to Somaiya  Organics and  the  property  given  as  security therefore was  the property  of Somiya  Organics and not the property which was being sold. The sale was also not subject to that  debt. This  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 machinery 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 796 is not  in question before us. The High Court, however, held that the  sum of  Rs.  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 accordingly held  that the  value on  which stamp  duty  was payable under  the Act  as per  Article 23  in Schedule  I-B thereto was  Rs. 72,76,000  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.72,76,000 in the  case of  the document dated May 20, 1968 and Rs.4.50 as against  Rs.  3.50  on  each  of  the  two  declarations. Aggrieved by  the inclusion of Rs. 65 lakhs in the value for purposes of  levying duty  Godavari Sugar  Mills 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 :           "24. Where  any property  is  transferred  to  any           person in consideration, wholly or in part, of any           debt due  to him,  or subject  either certainly or           contingently to  the payment  or transfer  of  any

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         money or  stock, whether  being or  constituting a           charge or  incumbrance upon  the property  or not,           such debt,  money or  stock is  to be  deemed  the           whole  or  part,  as  the  case  may  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           Article No. 18 of Schedule I.           Explanation.- In  the case  of a  sale of property           subject to  a mortgage  or other  incumbrance, any           unpaid mortgage  money or  money charged, together           with the  interest (if any) due on the same, shall           be deemed  to 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 mortgage. 797                        Illustrations           1. A  owes Rs.1,000.  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.1,500.           2. A  sells a  property to  B for  Rs.500 which is           subject to  a mortgage  to C  for  Rs.  1,000  and           unpaid interest  Rs.200. Stamp-duty  is payable on           Rs.1,700.           3. A  mortgages a  house of the value of Rs.10,000           to B  for Rs.5,000.  B afterwards  buys the  house           from A.  Stamp-duty is  payable on  Rs.10,000 less           the amount  of stamp-duty  already  paid  for  the           mortgage."      The meaning  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 him, subject either certainly or contingently  to the  payment or transfer of any money or stock whether or not charged 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 charged  with ad  valorem stamp  duty. The Explanation to section 24 of the Act provides that in the case of a sale of property subject  to a  mortgage or  other  incumbrance  any unpaid mortgage  money or  money charged  together with  the interest (if any) due on the same shall be deemed to be part of the consideration for the sale. 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. A security for any  contingent future  payments also  falls within  the meaning of section 24 of the Act.      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 incumbrances 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 said properties were being conveyed subject to the equitable mortgage upto  the limit of Rs. 65,00,000. 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.   65,00,000 materialising. Pursuant to the prior arrangement

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798 entered  into  between  Godavari  Sugar  Mills  and  Somaiya Organics, a letter was addressed to the Punjab National Bank on December 15,1964 which read as follows :                "THE GODAVARI SUGAR MILLS LTD.           E334-45/                         December 15, 1964           The Punjab National Bank Ltd.           Karimjee House Branch,           Sir P.M.Road, Bombay - 1.           Dear Sirs           RE : DEFERRED PAYMENT GUARANTEE FOR RS.65 LAKHS IN           FAVOUR OF M/S SPEICHIM OF PARIS           With reference  to the  above facility  which your           bank has  agreed to give to our Company, we beg to           record  that  at  the  meeting  of  the  Board  of           Directors held  on Friday  the 23rd October, 1964,           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           terms and  conditions set  out in the letter dated           16th October,  1974 bearing  ref. No.  Loans/24241           addressed by the Banks Head Office to the Manager,           B.O. Karimjee  house, Bombay  and a  copy of which           is, hereto attached for case of reference.           We  hereby   confirm  that  our  Company  and  our           Director  will  do  all  act  matters  and  things           necessary to carry out and implement the terms and           conditions  to   be  observed   and  performed  as           envisaged  in  the  said  letter  dated  the  16th           October, 1964.           As desired  by you  we have  passed the  necessary           resolutions  at   the  meeting  of  our  Board  of           Directors held  on the  23rd October, 1964. A true           and complete  copy of  the relevant portion of the           minutes of  the said meeting is annexed as Ex.A to           the Joint Declaration of (i) K.J. Somaiya and (ii)           Sri S.K.  Somaiya which  is sent herewith. We also           record that pursuant to the authority given to our           Director Shri 799           K.J. Somaiya  in that behalf, we have through Shri           K.J. Somaiya  deposited with  you  all  the  title           deeds if  our immoveable properties at Captainganj           with intent  to create  security thereon by way of           equitable mortgage,  the intention  of the parties           being that your Bank may look to the said security           and thereout  reimburse realise  and  recover  all           monies that  the Bank  may have to pay or disburse           by reason  or as a result of or in connection 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 client costs.)           We also  send herewith  the Counter indemnity duly           executed by  us and  our two  Directors Shri  K.J.           Somaiya and Shri S.K. Somaiya.                                        Yours faithfully,                          FOR THE GODAVARI SUGAR MILLS LTD.                         For K.J. SOMAIYA & SONS PRIVATE LTD.                                       Sd/-                                Director, Managing Agents."                                  (under lining by us)

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    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 Deferred 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 :                     "THE PUNJAB NATIONAL BANK LTD.                                                PNB HOUSE                                                SIR P.M.ROAD                                                BOMBAY                                                29.4.1969           REF: LA/B/3404/69           M/s The Godavari Sugar Mills Ltd.           Fazalbhoy Building,           Mahatma Gandhi Road,           BOMBAY - 1.           Dear Sir,           REF: EQUITABLE MORTGAGE FOR CAPTAINGANJ DISTILLERY           We thank you for your letter No. E 334/45/2754 dt. 800           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  immoveable           property  known  as  "Captainganj  Distillery"  as           security for  Deferred Payment Guarantee issued by           us on  15.12.1964 on  your 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 Deferred 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.           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.                Thanking you,                                           Yours faithfully,                                                   Sd/-                                                Manager"      But it  is however  clear that  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 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,  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  necessity to  execute the  two deeds of declaration stating that  the properties  are being  sold subject to the mortgage.      Lord Canning  v. Raper  118 English  Reports 400,  is a case in point. That case concerned the stamp duty payable on an assignment  by a  debtor by  way of mortgage in favour of one who  had stood  surety for  the debtor. The question was

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whether the  assignment was  a security  for the  payment of money to  be thereafter  lent, advanced  or paid  within the meaning of Part I of 801 the Schedule  to the  Stamp Act,  1815 which was in force in 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 H  & C 838, which  was decided  about 12 years later the vendor had sold a  property  subject  to  a  mortgage  debt  which  was expressed to  become payable  if but  only if,  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 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  or Consideration           Money......."           Martin B,  delivering the  judgment of  the court,           said :           "....we think  that the words of the enactment any           mortgage or  other debt,  include contingent debts           as well as absolute ones....................."      In the  case before  us we  need not  read  ’contingent debts’ 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 Commissioners (1960)  2 All  E.R. 481, the appellant who was liable to  pay stamp duty objected that the total stamp duty payable 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  Radcliffe, with  whom Lord Tucker and Lord Morris 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 802           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 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 Country of Durham Electrical           Power Distribution  Co. v.  Inland Revenue  comrs.           (1909) 2  KB 604  any variation  would  have  been           downwards; in  the Underground  Electric Rys.  Co.           case (1906)  AC 21  (that is,  the first case) the           variation might  have been  upwards or  downwards.           What is necessary is that it should be possible to           ascertain from  the agreement  that there  is some

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         specified sum  agreed on as the subject of payment           which may perhaps fairly be called the prima facie           or basic  payment. Even that minimum condition may           have to  be restated  in relation to certain kinds           of securities,  such for example as guarantees, in           which  the   ad  valorem   charge  is   calculated           according to the maximum sum contingently payable,           or, to  put it  in another  way, the amount of the           guarantee; see  Underground Electric  Rys. Co.  of           London, Ltd. & Glyn. Mills, Currie & Co. v. Inland           Revenue Comrs. [1916] 1 KB 306)"      In   Coventry    City   Council   v.   Inland   Revenue Commissioners, [1978] 1 All E.R. 1107, the Chancery Division has followed  the above  principle after  reviewing all  the cases referred to therein.      It was,  however, argued by the learned counsel for the appellants that  the liability of the document for the stamp duty was dependent upon what was written in it and the Court should not  look at  anything else  to decide  the reference made under  section 57  of the  Act. It  is not necessary to consider the  correctness  of this proposition in this case, since it  is the case of the appellants themselves that what was a sale free from all incumbrances originally was treated as a  sale subject  to the  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 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 803 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 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 Sugar 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 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 Somaiya Organics had been  substituted for  the name  of the  Godavari  Sugar Mills in  the Deferred 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.’.      The object of section 24 of the Act is very clear. That 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  difference  between  the  true consideration and  the consideration which is made liable to stamp duty. To illustrate, take the 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

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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 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. Board 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 the incumbrance, then the amount of money constituting the charge or mortgage need not  be   added  to   the  consideration  mentioned  in  the conveyance as the value of the property sold. The next 804 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, Uttar Pradesh v. Raj  Sabah Sidhnath  Mehrotra, [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 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 are different.  Here the  sale was  in fact  subject to  the equitable mortgage  in  favour  of  the  Bank.  Hence  these decisions are of no avail to the appellants.      We are  of the  view that  the High  Court in its well- considered judgment  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 section 24 of the Act.      The appeals,  therefore, fail  and they  are  dismissed with costs. A.P.J.                                    Appeals dismissed. 805