PinakiChandra Ghose, ACJ.

This appeal is directed against an order dated 28th July, 2011 passed by the Hon’ble Single Judge in WVMP.No.2196 of 2011 in WPMP.No.16436 of 2011 in Writ Petition No.13562 of 2011.

2) The case of the petitioner is that it has entered into a loan transaction with one M/s. ABC Engineering Works on 16th October, 2008. The financial arrangement between the petitioner and M/s. ABC Engineering Works was secured by hypothecation of the machinery. The loan transaction was of Rs.58.63 Crores and additional security was created on behalf of the borrower by way of mortgaging certain immovable properties. A memorandum of deposit of title deeds was also executed to confirm the creation of equitable mortgage. The third party mortgagors have also agreed to sell their respective immovable properties in favour of the petitioner treating the basic market value of the property in question as consideration. Several sale deeds were executed. Those sale deeds were presented for registration.

3) It is the case of the writ petitioner that the Sub-Registrar declined to release the sale deeds presented before him for registration since they have suffered stamp duty only to the extent of market value of the respective properties conveyed by the conveyance deeds concerned, but not on Rs.58.63 Crores. It is the case of the writ petitioner that loan transaction between the petitioner and the said ABC Engineering Works is an independent transaction. The additional security offered by the third parties was ultimately converted into transaction of sale by those third parties in favour of the petitioner company and the conveyance deeds have specifically mentioned the consideration for the said sale transaction which is confined to the market value of the property sought to be conveyed. The case of the writ petitioner is that the stamp duty has been paid on the basis of the market value treating the same as consideration and it is contended that the entire loan transaction cannot be taken or treated as consideration for these sale deeds.

4) The contention of the State is that in terms of Section 24 of the Indian Stamp Act, 1899 (for short, ‘the Act’), if any property is transferred to any person in consideration, wholly or in part, of any debt due to him, such debt is deemed to be consideration and the transferee is chargeable with ad valorem duty in respect of the said consideration or the market value of the property transferred whichever is higher. Accordingly, it was submitted that since the total loan amount comes to Rs.58.63 Crores, the said amount has to be taken as consideration.

5) The Hon’ble Single Judge held that if the entire loan transaction is to be treated as consideration for each of the sale deeds which have been executed by third parties in favour of the petitioner, the said consideration amount of Rs.58.63 Crores would be multiplied by 26 times since there are 26 sale deeds. The Court held that the intention of the legislature cannot be as sought to be contended on behalf of the State. The consideration of a property is always confined to the market value. Therefore, the loan amount only to that extent will be discharged. Hence, the Court found that there is no reason to pass any order in favour of the State. It further appears that the petitioner was asked to deposit a sum of Rs.5 lakhs with the Sub-Registrar. The Court further opined that if the writ petitioner fails in the writ petition, then the authority has a right to recover the deficit stamp duty. In these circumstances, the Court dismissed WVMP.No.2196 of 2011 filed by the State authorities for vacating the interim order passed on 13.6.2011.

6) It is submitted by the learned Government Pleader appearing for the State authorities that in the writ petition, the petitioner has not questioned the order passed by the Registrar, the third appellant herein, under Section 24 of the Act. Therefore, the Court was wrong in holding that the provisions of Section 24 of the Act are not applicable to the facts of the case since the writ petitioner did not challenge this. He further submitted that the main ingredient of Section 24 of the Act constitutes transfer in consideration of the debt which has to be reckoned for calculating the stamp duty and this escaped from the mind of the Hon’ble Court. It is further pointed out that the direction of deposit of Rs.5 lakhs was inadequate compared to the deficit stamp duty of Rs.14.66 Crores. It is further contended that until and unless the order passed by the third appellant under Section 24 of the Act is set aside, no relief could have been granted in the said miscellaneous petition by the Hon’ble Single Judge. In these circumstances, he submitted that the interim order should be vacated by this Court and the appeal should be allowed.

7) To appreciate the issue, it is necessary to refer to Section 24 of the Act, which reads:

'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 money or stock, whether being or constituting a charge or encumbrance 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 1.

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.'

It appears to us prima facie the meaning of Section 24 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 the 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.

8) In the instant case, on account of the loan transaction which the writ petitioner entered into with ABC Engineering Works, a security was created on behalf of the borrower by way of mortgaging certain immovable properties. A memorandum of title deeds was also executed to confirm the creation of equitable mortgage. Subsequently, the third party mortgagors agreed to sell their respective immovable properties in favour of the writ petitioner treating the basic market value of the properties in question as consideration and accordingly 26 sale deeds were executed. When these sale deeds were presented for registration, the Sub-Registrar, Jadcherla – appellant No.4 herein – declined to release the same on the ground that they have suffered stamp duty only to the extent of the market value of the respective properties and the entire loan amount of Rs.58.63 Crores has to be taken as sale consideration.

9) 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.

10) A reading of Section 24 of the Act and the object of that provision makes it clear that for the purpose of stamp duty, the amount of the debt and the value of the property purchased have to be taken into account. If that be so, the writ petitioner is required to pay stamp duty on Rs.58,63,71,255/- plus the value of the property conveyed through sale deeds i.e. Rs.4,75,75,250/-. However, the writ petitioner states that the entire loan amount was secured mainly by the primary security of the hypothecated equipment and partially by the mortgage of immovable property though the entire loan amount is shown in the memorandum of deposit of sale deeds. If the sale consideration is shown as Rs.58.63 Crores, the entire loan receivables stand liquidated causing irreparable loss to the writ petitioner. But this cannot be a ground for us to take a different view than what is understood from the language of Section 24 of the Act

. 11) In this connection, a reference may be made to the judgment of the Supreme Court in SomaiyaOrganics (India) Ltd. v. Board of Revenue (1986) 1 SCC 351). In the said judgment, the Supreme Court considered the object of Section 24 of the Act and held that stamp duty would be payable on the sum total of amount of consideration for sale of lands and buildings plus the amount for which the equitable mortgage had been created. In our view, the principle laid down therein squarely applies prima facie to the facts of the case. 12) We are, therefore, of the view that the impugned order passed by the Hon’ble Single Judge is liable to be set aside and the writ appeal has to be allowed. 13) All the questions to be decided by the Writ Court finally. 14) The writ appeal is accordingly allowed. No costs. 15) The Writ Petition may be placed before the Hon’ble Single Judge for final hearing after four weeks from date. Liberty is given to the parties to mention before the Hon’ble Single Judge.