D.Dis.No.9266/P1/2021, Mortgage Deed Classification Review
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 presented at the Sub Registrar Office, Sulur. It classified the deed as a mortgage without initial delivery of possession under Article 40(b) of the Indian Stamp Act, 1899, 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, issued D.Dis.No.9266/P1/2021 dated 20 April 2021 after reviewing pending document No.100/2020 at the Sub Registrar Office, Sulur. The authority decided that the mortgage deed falls under Article 40(b) of the Indian Stamp Act, 1899, rather than Article 40(a), because possession remained with the mortgagor unless a future default occurred.
The revision petition was allowed, and the District Registrar, Coimbatore order dated 4 February 2021 was set aside.
Document and dispute
The reviewed instrument had the following details:
- It was a deed of mortgage executed on 6 June 2020.
- Marudhamalai Industrial and Logistics Parks LLP was the executant.
- IDBI Trusteeship Services Limited was the claimant.
- The amount secured was Rs.250,00,00,000.
- The deed bore stamp duty of Rs.40,100.
- The District Registrar had treated it as a mortgage with possession and determined deficit stamp duty and penalty of Rs.9,99,59,900.
The Sub Registrar and District Registrar relied on provisions authorising the lender or security trustee to act for the mortgagor, and on a separate power of attorney permitting possession to be taken following default.
Reasons for the decision
The Chief Controlling Revenue Authority and Inspector General of Registration found that:
- Clauses in the mortgage deed indicated that the mortgagor retained possession until default.
- Permission to inspect the property did not amount to delivery of possession.
- A right to take possession or sell the property after default did not mean that possession was handed over when the mortgage was created.
- Earlier registration proceedings and guidance distinguished immediate delivery of possession from possession that may be taken only after breach of a mortgage covenant.
- The security trustee's power to sell was exercisable only following default and did not make the instrument a power for consideration.
Who may be affected
D.Dis.No.9266/P1/2021 is relevant to mortgagors, lenders, security trustees and registration professionals dealing with mortgage documents containing enforcement rights after default. Its reasoning supports classification under Article 40(b) where the mortgagor keeps possession initially, even if the mortgagee or trustee may take possession or sell the property following default.
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 right to take possession after loan default make a mortgage one with possession?
Not in the circumstances reviewed. The authority found that possession retained by the mortgagor until default supported classification under Article 40(b), rather than as a mortgage with possession under Article 40(a).
Was the deficit stamp duty and penalty demand upheld?
No. The revision petition was allowed, and the District Registrar, Coimbatore order determining Rs.9,99,59,900 as deficit stamp duty and penalty was set aside.
Does allowing a mortgagee to inspect the property transfer possession?
The proceedings found that permission to inspect the mortgaged property did not amount to delivery of possession. The relevant clauses indicated that the mortgagor continued in possession until default.
Can a separate power of attorney be used to classify the mortgage as one with possession?
The authority did not accept that result in this case. It treated powers connected with enforcing security after default as different from handing over possession when the mortgage was created.
