Stamp Duty_ ascertainment of Mortgage and performance guarantee/ security deed

There is no term namely “performance guarantee” in the stamp act. The term “security bond / mortgage deed” has been used in the stamp act to secure the due performance of a contract i.e. performance guarantee. Proper Stamp Duty payable upon mortgage deed is same duty as a Conveyance [No. 23 clause (a)] or a Bond (No. 15) for the amount secured or One hundred rupees as the case may be depending upon the nature of the mortgage deed as stipulated in the UP Stamp Act.

Below is a bird eye view on the relevant statutory provisions with regard to mortgage and stamp duty applicable to it. 

The term "mortgage", "mortgagor", "mortgagee", "mortgage-money" and "mortgage-deed" have been defined under Section 58(a) of Transfer of Property Act, 1882 read as under: 

"58. "Mortgage", "mortgagor", "mortgagee", "mortgage-money" and "mortgage-deed" defined.—

(a) A mortgage is the transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability. 

The transferor is called a mortgagor, the transferee s mortgagee; the principal money and interest of which payment is secured for the time being are called the mortgage-money and the instrument (if any) by which the transfer is effected is called a mortgage-deed." 

My Submission:

Transfer of an Interest:

1 1. It means the transfer of some right belonging to the mortgagor in respect of the property.

2 2. Ownership consists of a bundle of rights, such as, right to possess, right to enjoy, sell, etc.

3 3. It is enough if one of these rights is transferred. The right transferred may vary

(i)    It may be the right to sell or

(ii)  It may be the right to enjoy or 

(iii) It may be the right to own etc

4 4. The nature of the right transferred is matter of no consequence so long as some right is transferred.

The term "mortgage deed" has been defined under UP stamp Act vide Section 2(17) reads as under: 

"2.(17) 'mortgage deed'.--Mortgage deed includes 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 favour of another, a right over, or in respect of specified property."

My Submission:

Immovable property can be mortgaged either for the purpose of securing

a a) money or

b b)  the performance of an engagement

Different stamp duty under different article number have been stipulated by legislature in stamp act upon aforesaid mortgage.

Article 40 is applicable only to those mortgage deeds through money has been secured. This can be ascertain from the fact that proper stamp duty under article 40  upon mortgage is either

    a) or a consideration equal to the amount secured or

    b) for the amount secured

depending upon status of possession of the mortgaged immovable property.

Article 40 is applicable only to those mortgage deeds which has been executed to secure

   a)  the due performance of a contract or

   b)  the due discharge of a liability

This can be ascertained from the description of the instrument and proper stamp duty given schedule 1-B of the stamp act.

In the light of aforesaid if mortgage has been for securing money, stamp duty would be payable under article 40 and if mortgage has been for securing the performance of an engagement, stamp duty would be payable under article 57.

SCHEDULE I-B

[See section 3]

STAMP-DUTY ON INSTRUMENTS UNDER THE INDIAN STAMP ACT, 1899 AS

AMENDED UPTO DATE IN ITS APPLICATIOIN TO UTTAR PRADESH.

NOTE- The Articles in Schedule I-B are numbered so as to correspond with similar Articles in Schedule I of Act no.2 of 1899.

Article No.	Description of instrument	Proper stamp duty
40.	MORTGAGE-DEED, not being AN AGREEMENT RELATING TO DEPOSIT OF TITLEDEEDS, PAWN OR PLEDGE (NO. 6), BOTTOMRY BOND (NO. 16), MORTGAGE OF A CROP (NO. 41), RESPONDENTIA BOND (NO. 56), OR SECURITY BOND (NO. 57) -
	(a) when possession of the property or any part of the property comprised in such deed is given by the mortgagor or agreed to be given;	The same duty as a Conveyance [No. 23 clause (a)] for a consideration equal to the amount secured by such deed.
	(b) when possession is not given or agreed to be given as aforesaid;	The same duty as a Bond (No. 15) for the amount secured by such deed.
	Explanation: A mortgagor who gives to the mortgagee a power-of- attorney to collect rents or a lease of the property mortgaged or part thereof, is deemed to give possession within the meaning of this Article.
	(c) When a collateral or auxiliary or additional or substituted security, or by way of further assurance for the above-mentioned purpose where the principal or primary security is duly stamped – for every sum secured not exceeding Rs.1,000;	Ten rupees
	and for every Rs.1,000 or part thereof secured in excess of Rs.1,000.	Ten rupees
	Exemptions  1)    Instruments, executed by persons taking advances under the Land Improvement Loans Act, 1883 (19 of 1883), or the Agriculturists' Loans Act, 1884 (12 of 1884), or by their sureties as security for the repayment of such advances.  2)    Letter of hypothecation accompanying a bill of exchange.
57.	SECURITY BOND OR MORTGAGE DEED, executed by way of security for the due execution of an office, or to account for money or other property received by virtue thereof or executed by a surety to secure the due performance of a contract or the due discharge of a liability- (a) when the amount secured does not exceed Rs.1,00	Ten rupees
	b) in any other case	One hundred rupees.
	Exemptions  Bond or other instrument, when executed- a)    by headmen nominated under rules framed in accordance with the Bengal Irrigation Act, 1876 (Bengal Act 3 of 1876), section 99, for the due performance of their duties under that Act; b)    by any person for the purpose of  guaranteeing that the local income derived from private subscriptions to a charitable dispensary or hospital or any other object of public utility shall not be less than a specified sum per mensem; c)    under No. 3A of the rules made by the State Government under section 70 of the Bombay Irrigation Act, 1879 (Bombay Act 5 of 1879); d)    executed by persons taking advances under the Land Improvement Loans Act, 1883 (19 of 1883), or the Agriculturists Loans 'Act, 1884 (12 of 1884),or by their sureties, as security for the repayment of such advances; e)    executed by officers of the Government or their sureties to secure the due execution of an office or the due accounting for money or other property received by virtue thereof.