MATHARU STEELS PVT LIMITED Vs. STATE OF PUNJAB

JUDGEMENT

(1.) The order impugned is a direction by the Deputy Commissioner, Sangrur, calling upon the Director of the petitionerCompany to pay Rs. 1,36,000/- as alleged stamp duty payable. This was in the context of an objection taken from the Auditor General, Punjab, that a power of attorney executed by the petitioner constituted PSIDC with the power to act on its behalf to secure a 'legal English mortgage' and it was to be treated as a mortgage document and hence, stamp duty and registration charges were to be collected.

(2.) I have gone through the recitals of the power of attorney. The first portion of the document contains the usual clauses of the petitioner as having created a mortgage in favour of PSIDC by deposit of title deeds with the letter of undertaking to execute and register a mortgage in the form of an English mortgage. This portion must therefore be taken as a mere record of fact that the petitioner undertook to execute and register an English mortgage. Elsewhere under clause (i), the authority granted under the power is to constitute PSIDC as a lawful power of attorney to do several acts, which includes the act of the registering a mortgage for the loan agreement and delivering up the documents. I find the clause to be rather strange, for, the petitioner, who has availed of a loan from the PSIDC and who has delivered up the title deeds, ought to be taken as having constituted PSIDC as a mortgagee. If the PSIDC has, therefore, security over the property covered through the title deeds, there is nothing left for a mortgagee to have the power to register the mortgage to itself. A mortgagor does not normally constitute a mortgagee as his power of attorney to register the document in its own favour. The power of attorney makes a meaningless document of constituting the mortgagee as itself as an attorney to create a mortgage and register the same in favour of itself. For whatever purpose such a document was made, it will be wrong to infer that the power of attorney creates a mortgage. The power of attorney only empowers the mortgagee to secure to itself a registered document of English mortgage. There is no scope for treating it as a mortgage and collecting stamp duty on the same. The letter requiring the petitioner to pay Rs. 1,36,000/- is wholly incompetent on the part of Deputy Commissioner to issue.

(3.) If the document is required to be stamped as a mortgage, the law contemplates a different procedure under the Stamp Act. A document, which is insufficiently stamped, is required to be impounded for stamp duty and transmitted to the Collector for adjudication regarding the proper stamp duty payable. If we must understand that the impugned letter which is a letter by the Deputy Commissioner, is an order passed in the capacity as a Collector, then he is bound to act in the manner under Section 40 of the Stamp Act. There is no reference to any legal provision under which the Deputy Commissioner was acting. Even apart from the defect in procedure, I would find the document as a matter of content does not create a mortgage, but only allows the PSIDC an irrevocable power to create to itself a document of mortgage. If an equitable mortgage has been created already by deposit of title deeds, it is ununderstandable as to how the parties were contemplating for creating of an English mortgage. The English mortgage creates a particular legal incidence contemplated under Section 58(e) of the Transfer of Property Act that transfers the mortgage property absolutely to the mortgagee but subject to the proviso that he will re-transfer it to the mortgagor upon payment of the mortgage money as agreed. It would have been open for PSIDC to convert the equitable mortgage, if it so chose and had the document registered and collected the stamp duty and registration charges from the mortgagor. It could have been only through an independent transaction and the liability would also arise only in a situation where the mortgagee had chosen to effect such conversion. There is no scope for a Deputy Commissioner to treat the power of attorney as a mortgage document, for, the document itself did not create any mortgage. It could only be taken at best to be the evidence of two transactions: One, deposit of title deeds for securing a loan from PSIDC which was in the nature of equitable mortgage. This transaction does not require registration. Two, the document empowered the mortgagee under the equitable mortgage to obtain as an agent to the mortgagor himself to create an English mortgage. It must be merely taken as an undertaking to do a particular act in future and could not be construed as creation of the English mortgage itself.