The Supreme Court has clarified that a security bond executed by a debtor itself isn’t considered a surety bond, implying the stamp duty payable would be as per mortgage provisions rather than those applicable to security bonds.
Key Aspects of the Ruling-
Security Bond vs. Surety Bond: A security bond by the debtor itself isn’t a surety bond; stamp duty aligns more with mortgage provisions.
Stamp Duty Implications: Duty depends on instrument classification; courts look at substance over form.
Indian Stamp Act, 1899: Governs stamp duty; states have amendments affecting rates.
Classification Matters: Determines applicable stamp duty; distinctions impact liability.
Implications-
Proper Classification: Crucial for determining stamp duty liability.
State Variations: Stamp duty rates differ across states.
Non-payment Consequences: Instruments may be impounded; admissibility as evidence impacted.
The Supreme Court has ruled that a security bond executed by a debtor itself isn’t a surety bond, meaning stamp duty is payable as per mortgage provisions (Article 40 of the Indian Stamp Act, 1899) rather than those for security bonds (Article 57). This decision emphasizes that the substance of the instrument, not its nomenclature, determines stamp duty liability. The court looks at whether the deed secures the principal debtor’s own obligations or involves a third-party surety; if it’s the former, it’s treated like a mortgage deed for stamp duty purposes. This ruling clarifies stamp duty applicability and underscores adherence to statutory mandates in property and contract law in India.
