SECRETARY TO THE COMMISSIONER OF SALT, ABKARI AND SEPARATE REVENUE, REVENUE BOARD Vs. MRSEWORR AND THE BANK OF MADRAS

JUDGEMENT

(1.) The question we have to consider is whether the instrument which has been submitted to us is a mortgage deed within the meaning of Section 2(17) of the Indian Stamp Act (II of 1899). If so it is chargeable with stamp duty as such under Article 40 of the 1st Schedule to the Act. Mr. Barton has argued that the instrument in question is a declaration of trust and that it is chargeable as such under Article 64. At the conclusion of his argument he suggested that the instrument might be construed as a letter of hypothecation accompanying a bill of exchange, and therefore fell under the 2nd exemption to Article 40.

(2.) A mortgage deed is defined for the purposes of the Stamp Act, and for the purposes of that Act only, as including " 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 favor of another, a right over or in respect of specified property." The definition is almost as wide as the definition of a bill of sale in the English Bills of Sale Acts.

(3.) What are the material provisions of this deed ? It is an instrument to which the parties are one Mrs. Orr and the Bank of Madras. It recites that probate of the will of the late Mr. E. W. Orr was granted to Mrs. Orr as sole executrix thereof, that the late Mr. Orr was the sole proprietor of a certain Gold and Silver smiths business, that Mrs. Orr, in order that certain creditors of the firm may be repaid their loans and with a view to certain other matters, has entered into an agreement with the Bank of Madras by which the Bank has agreed to advance to Mrs. Orr a certain amount on a proroissory note to be executed by one Thomas William Barton in favour of the firm (Messrs. P. Orr and Sons) and endorsed by them to the Bank of Madras upon the said Mrs. Orr executing a declaration of trust of the machinery, plant, stock in trade, goods, chattels and effects in connection with the business more particularly described in the Schedule to the instrument. In consideration of advances to be made by the Bank Mrs. Orr declares that she holds the said machinery, plant, stock-in-trade and etc., on trust for and on behalf of the Bank. There is a provision as regards interest. There is then a provision that the trustee shall have full power to use and employ the trust property in certain ways and to replace and make good such portions of the trust property as may be sold or otherwise dealt with and that the substituted goods shall be included in the security; there is a provision for insurance. Then there is a declaration that the trustee stands possessed of the net profits, realized after payment of all expenses including the retention by the trustee of a sum not exceeding Rs. 20,000 annually, in trust to pay and apply the same in payment of sums advanced by the Bank. (The reference in the letter of the Board of Revenue to this part of the instrument is not quite accurate).