Stamp duty on “Security Bond-cum-Mortgage” falls under Article 40, not Article 57; SC dismisses builders’ appeals
Case name: M/s Godwin Construction Pvt. Ltd. v. Commissioner, Meerut Division & Anr. (with connected Civil Appeal arising out of SLP (C) No. 36434 of 2014)
Date of Order: 08 October 2025
Citation: 2025 INSC 1207; Civil Appeal No. 7661 of 2014 & Civil Appeal No. 12552 of 2025
Bench: Ahsanuddin Amanullah, J.; Prashant Kumar Mishra, J. (author)
Held: An instrument titled “Security Bond-cum-Mortgage Deed” executed by the principal debtor to secure its own obligations is not a “security bond” within Article 57 of Schedule 1-B of the Indian Stamp Act, 1899. Article 57’s second limb applies only where a distinct surety executes the instrument “to secure the due performance of a contract” by another (as per Section 126, Contract Act). Where the instrument, in substance, creates a right over specified property to secure performance/repayment, it is a mortgage deed within Section 2(17) of the Stamp Act and chargeable under Article 40. Consequently, stamp duty assessed under Article 40 (with incidental penalty/interest) was valid.
Summary: Godwin Construction obtained approval from the Meerut Development Authority (MDA) to develop “Global City” and, on 19.12.2006, executed a document styled “Security Bond-cum-Mortgage Deed,” expressly transferring its interests in identified plots (2,934.45 sq m) to remain charged by way of mortgage to secure external development charges and other obligations; on default, MDA could sell the mortgaged plots up to a quantified amount. The company paid ₹100 stamp duty invoking Article 57. The stamp authorities reclassified the instrument under Article 40 and demanded deficit duty (~₹4.61 lakh) plus nominal penalty and interest; appeals and a writ petition failed. In the connected matter, a borrower executed a similarly styled instrument in favour of Allahabad Bank to secure a business loan; stamp authorities again treated it as a mortgage deed under Article 40, and the High Court upheld the classification. Affirming those decisions, the Supreme Court emphasized that nomenclature does not control; courts must look to the operative recitals and the legal effect. Article 57 covers (i) security for due execution of an office/accounting for property received by virtue thereof, or (ii) instruments executed by a surety to secure another’s obligations. Both appeals lacked the tripartite guarantee structure (surety–principal debtor–creditor) required for Article 57. In each case, the principal debtor itself executed the instrument and created a mortgage over property to secure its own obligations—squarely attracting Article 40. References to “security bond” in the title or recitals could not displace the deed’s true character as a mortgage-deed, given the transfer of an enforceable interest in specified immovable property and the right of sale on default.
Decision: Appeals dismissed. Classification under Article 40 (Mortgage-Deed) is upheld; demands for deficit stamp duty (with statutory penalty/interest) stand confirmed.