Paragraph numbers below are the court’s original numbering, recovered from the source text.
19. It is contended on behalf of the appellant, that the deed falls within the ambit of Article 57 of Schedule 1-B of the Indian Stamp Act, 1899, on the footing that it partakes the character of a security bond. Hence, it is necessary to examine the scope and application of Article 57.
20. Article 57 of Schedule 1-B of the Indian Stamp Act operates in two distinct limbs. The first limb covers security bond or mortgage deed executed by way of security for the due execution of office, or to account for money or other properties received by virtue thereof.
21. The second limb, demarcated by the words “or executed by a surety to secure the due performance of a contract”, is restricted in its application to the execution of security bond or mortgage deed by a surety to secure the obligations of another, and does not extend to cases where the principal itself executes the deed to secure its own obligations.
22. The term “surety” must be strictly understood in accordance with Section 126 of the Indian Contract Act, 1872. Section 126 is reproduced below for reference: “126. “Contract of guarantee”, “surety”, “principal debtor” and “creditor”.—A “contract of guarantee” is a contract to perform the promise, or discharge the liability, of a third person in case of his default. The person who gives the guarantee is called the “surety”; the person in respect of whose default the guarantee is given is called the “principal debtor”, and the person to whom the guarantee is given is called the “creditor”. A guarantee may be either oral or written.”
23. It follows that a contract of guarantee is inherently tripartite, consisting of the surety, principal debtor, and a creditor. Consequently, the [2025] 10 S.C.R. M/s Godwin Construction Pvt. Ltd. v. Commissioner, Meerut Division & Anr. essential requirement for invoking Article 57 is the presence of a surety distinct from the principal debtor. Where the principal debtor itself executes a deed mortgaging its own property, Article 57 is inapplicable.
24. In the case at hand, it is apparent from the recitals of the instrument titled “Security Bond cum Mortgage Deed” executed by the appellant that only two parties are involved — the Meerut Development Authority and the appellant, M/s. Godwin Construction Pvt. Ltd.
25. It stands beyond doubt, that the deed was not executed by a surety but by the principal debtor/appellant, the company, through its director. It is evident that the company itself mortgaged the properties and not the director in his individual capacity. A company, though a juristic person, is not a sentient being, consequently, it must act through its directors. This firmly establishes that the properties were not mortgaged by a third party, but by the principal debtor itself, which, in our opinion, does not attract Article 57.
26. In the absence of any surety, to attract Article 57 of the Indian Stamp Act, the deed executed by the appellant cannot be termed as a security bond. It, however, fulfils all the requirements of a mortgage deed, falling under the ambit of Article 40 of Schedule 1-B of the Indian Stamp Act. CIVIL APPEAL ARISING OUT OF SLP (C) NO.36434/2014
27. In the Civil Appeal arising out S.L.P. (Civil) No. 36434/2014, as well, it is similarly observed that the instrument executed by the appellant in favour of the Allahabad Bank, carries the nomenclature “Security Bond or Mortgage Deed”. This instrument created a mortgage over certain immoveable property at Village Jugauli Tappa Sirsia, Pargana Vinayakpur, Tehsil Nautanwa, District Maharajganj to secure the loan repayment of the business loan. A careful perusal of the operative provisions of the instrument clearly indicates that it confers a right over specified property to secure repayment.
28. This Court finds that the instrument satisfies the essential characteristics of a mortgage deed as defined under Section 2(17) of the Indian Stamp Act, 1899. The nomenclature “Security Bond or Mortgage Deed” is not determinative; the substance of the instrument governs its character while assessing stamp duty. 380
29. As observed by us in the preceding paragraphs, the second limb of Article 57 of Schedule 1-B of the Indian Stamp Act, 1899, is confined to instruments executed by a surety to secure the obligations of another. In the present case, although clause III of the deed stipulates that the mortgagor shall be personally liable to repay the loan, a careful reading of the deed makes it manifestly clear that Shri Naveen Mittal executed the deed solely in his capacity as the director of the company M/s Ajay Forging Pvt. Ltd, acting on behalf of the company. No distinct surety exists apart from the principal debtor. Accordingly, reference to personal liability in the deed pertains to the director acting on behalf of the company and does not transform the instrument into a security bond under Article 57 of Schedule 1-B of the Indian Stamp Act, 1899. In substance and effect, the deed constitutes a mortgage executed by the principal debtor itself, thereby attracting the provisions of Article 40 of the Schedule 1-B of the Indian Stamp Act, 1899, for the purposes of stamp duty.
30. In our opinion, the impugned judgments passed by the High Court of Judicature at Allahabad do not suffer from any infirmity as to warrant interference by this Court. The Appeals are, accordingly, dismissed. Result of the case: Appeals dismissed. †Headnotes prepared by: Divya Pandey