D.Dis.No. 8526/P1/2023, Revision Petition on Mortgage Without Possession

What the proceeding decides

D.Dis.No. 8526/P1/2023 of the Chief Controlling Revenue Authority and Inspector General of Registration, Chennai, concerns Document No. P.18/2023 pending before the Sub Registrar Office, Joint II Chennai Central. The document was an indenture of mortgage without possession executed by Mr. Dodla Subbha Reddy in favour of ICICI Bank Limited for a loan amount of Rs.15,00,00,000.

The proceeding allows the revision petition and classifies the mortgage under Article 40(b) of the Indian Stamp Act, 1899. It sets aside the Sub Registrar's decision that the instrument had the dual nature of a mortgage with possession and a power of attorney to sell immovable property granted for consideration.

Background to the dispute

The mortgage deed was executed on 1 February 2023 and bore stamp duty of Rs.40,000. The registering officer relied on several clauses to determine that it was chargeable under Article 40(a) and Article 48(e).

The Sub Registrar, in the cadre of District Registrar, consequently ordered payment of:

• Deficit stamp duty of Rs.1,19,60,000.
• Penalty of Rs.5,000.

Mr. Dodla Subba Reddy filed a revision petition under section 56(1) of the Indian Stamp Act, 1899. He argued that possession had not been handed over, and that the mortgagee could take possession or exercise the power of sale only following default.

Reasons for the final classification

The Chief Controlling Revenue Authority and Inspector General of Registration found that:

• The deed permitted the mortgagee to take possession only if a default occurred.
• The power to sell was not absolute or unconditional, but was a remedy available upon default.
• The interest created over the property was intended to secure the mortgage money.
• Clause 4 concerned a possible sale by the mortgagor with the mortgagee's cooperation, with the sale proceeds charged in favour of the mortgagee.
• The possible sale under clause 4 was contingent and might never occur.

The proceeding also referred to an Inspector General of Registration circular and earlier Chief Controlling Revenue Authority proceedings in which default based possession or sale clauses did not change the instrument into a power for consideration.

Who may find it relevant

D.Dis.No. 8526/P1/2023 directly affects the executant, ICICI Bank Limited and the Joint II Sub Registrar, Chennai Central. Its reasoning is also relevant when examining a mortgage deed that allows possession or sale only after default, rather than transferring possession or granting an unconditional power of sale at execution.