D.Dis.No.9266/P1/2021, Mortgage Without Possession
The Chief Controlling Revenue Authority and Inspector General of Registration, Chennai, issued D.Dis.No.9266/P1/2021 dated 20 April 2021, allowing a revision petition concerning a mortgage deed registered at the Sub Registrar Office, Sulur. The authority classified the deed under Article 40(b) of the Indian Stamp Act, 1899, rather than as a mortgage with possession under Article 40(a), and set aside the District Registrar, Coimbatore order demanding deficit stamp duty and penalty of Rs.9,99,59,900.
What the proceedings decide
The Chief Controlling Revenue Authority and Inspector General of Registration, Chennai, examined pending document No.100/2020 from the Sub Registrar Office, Sulur. Marudhamalai Industrial & Logistics Parks LLP had executed the deed of mortgage on 6 June 2020 in favour of IDBI Trusteeship Services Limited to secure Rs.250,00,00,000.
The deed had borne stamp duty of Rs.40,100. The District Registrar, Coimbatore classified it as a mortgage with possession under Article 40(a) of the Indian Stamp Act, 1899, and determined deficit stamp duty and penalty of Rs.9,99,59,900.
D.Dis.No.9266/P1/2021 dated 20 April 2021 allows the revision petition, classifies the deed under Article 40(b), and sets aside the District Registrar's decision.
Why the classification was changed
The Chief Controlling Revenue Authority and Inspector General of Registration found that the mortgage terms showed continued possession by the mortgagor until a default occurred. The decision records these points:
- Clauses 5.6, 6.1.17, 6.1.21 and 7.1 indicated that the mortgagor retained possession.
- Permission for the mortgagee to inspect the property did not amount to delivery of possession.
- The security trustee could take enforcement action, including sale of the property, only after an event of default.
- A separate power of attorney authorised enforcement of the security interest, but did not establish that possession was delivered when the mortgage was created.
- Earlier registration proceedings and a circular had treated possession following breach of a mortgage covenant differently from possession handed over at the outset.
The authority therefore concluded that a right to take possession after a future default did not make the deed a mortgage with possession at the time of execution.
Who may be affected
D.Dis.No.9266/P1/2021 is directly concerned with document No.100/2020 and the parties to that mortgage. Its reasoning is also relevant to mortgagors, lenders, security trustees and registration professionals dealing with a mortgage where:
- the mortgagor remains in possession initially,
- the mortgagee has inspection rights, or
- possession or sale rights arise only after default.
The wording and effect of the mortgage deed remain important because the classification in these proceedings depended on its particular clauses.
This summary is generated from the source document to help you find what is relevant. The PDF above is authoritative. For advice on your own property, use LandLens One or speak to a qualified professional.
Common questions
Does a lender's right to take possession after default make the mortgage one with possession?
Not in the circumstances examined here. The authority found that possession retained by the mortgagor until default supported classification under Article 40(b), rather than Article 40(a).
Did the authority uphold the Rs.9,99,59,900 demand?
No. D.Dis.No.9266/P1/2021 dated 20 April 2021 allowed the revision petition and set aside the District Registrar, Coimbatore order.
Does allowing the mortgagee to inspect the property amount to giving possession?
The proceedings treated the inspection permission in clause 5.6 as consistent with the mortgagor continuing to possess the property.
Does a separate power of attorney automatically turn the deed into a mortgage with possession?
The authority did not treat the separate power of attorney in this case as delivery of possession. It was described as authorising enforcement of the security interest.
