P L D (PLP)

QADEERUDDIN AHMED, J.

‑This is a reference by the Chief Controlling Revenue Authority for Karachi under section 57 (1) of the Stamp Act, 1899. He has stated the case, given his own opinion on it, and then formulated three questions as follows "(i) Where a loan is advanced by the Bank against a promis sory note, is a mortgage deed, executed simultaneously or subsequently, to be regarded as the primary or as collateral security, within the meaning of the sub‑Article (c) of Article 40, Schedule I, Stamp Act, 1899 7 Whether the rulings relied upon by the National Bank of Pakistan would apply to the present case where the primary security is a promissory note, in face of ruling in A I R 1928 Lah. 370 wherein it has been held that Article 40 (c) applies where a document offering further security is executed subsequent to the original mort gage which has been reduced to writing ; (ii) Whether the applicant's contention that under the National Bank of Pakistan Ordinance, 1949, mortgage of immovable property can be accepted only as a collateral security and not as a primary security, is valid, and if so, whether it can overrule the provisions of the Stamp Act, 1899 ; (iii) Whether the mortgage deed in question is leviable with stamp duty under sub‑Article (c) or sub‑Article (b) of Article 40 of Schedule I, Stamp Act, 1899 ?"

2. Mr. Sayeed A. Sheikh appearing on behalf of the refer ring authority, withdrew the second question on the ground that the Revenue Authorities have no jurisdiction to decide as to what business can be carried on by the Bank under the National Bank of Pakistan Ordinance, 1949. That question had arisen incidentally before the Revenue Authorities owing to the argument that was advanced on behalf of the Bank, that the Bank could not accept immovable property as a primary secu rity; therefore, in law, the mortgage deed executed in favour of the Bank was necessarily a collateral security. We agree with counsel that this question could not be formulated in the refer ence for directly obtaining an answer to it, but we think that it arises indirectly, and can be considered by us incidentally if found necessary. We may further point out that the first question contains a subsidiary question with regard to the applicability of the decision in Tej Ram v. Maqbul Shah (A 11 R 1928 Lab. 370), irrespective of the decisions given in In re Gopaldas Versffmal (A I R 1928 Sind 90) and Imperial Bank v. Bengal National Bank (A I R 1930 Cal. 536). This subsidiary question as well as the three main questions are distinctly helpful to us in appreciating the rationale of the case, but we have to decide the case itself and not necessarily to answer the questions.

3. Section 57 of the Act requires that the Chief Controlling Revenue Authority may state any case referred to it under sub section (2) of section 56 of the Act or otherwise coming to its notice, and state such case, with its own opinion thereon for the decision of the High Court in the territorial jurisdiction of which it arises. When the case is so referred, it is to be decided by not less than three Judges of the High Court to which it is referred. We have, therefore, to examine the statement of the case contained in the reference and, if no further particulars are ordered by us to be furnished under section 58 of the Ac,, to decide the amount of the duty with which the document in question is legally chargeable, The sections are clear in this respect. They are as follows :‑ "57. (1) The Chief Controlling Revenue‑authority may state any case referred to it under section 56, subsection (2), or otherwise coming to its notice, and refer such case, with its own opinion thereon,‑ (a) if the case arises in East Bengal, to the High Court of East Bengal; (b) if the case arises in West Pakistan, to the High Court of West Pakistan. (2) Every such case shall be decided by not less than three Judges of the High Court to which it is referred, and in case of difference, the opinion of the majority shall prevail.

58. If the High Court is not satisfied that the statements contained in the case are sufficient to enable it to determine the questions raised thereby, the Court may refer the case back to the Revenue‑authority by which it was stated, to make such additions thereto or alterations therein as the Court may direct in that behalf."

4. The statement of the case shows that a mortgage deed was executed by two debtors of the Bank, to secure a loan of Rs. 6,000 on a stamp‑paper of the value of Rs. 12 only. It was impounded in 1959, by the Registrar of Documents and the Collector ordered the payment of Rs. 78 as additional duty on it as well as of Rs. 156 as penalty. He then referred the case under section 56 of the Act to the Chief Controlling Revenue Authority, Karachi. That Authority has referred it to this Court under section 57 of the Act.

5. The main issue for decision before us is : whether the mortgage deed is chargeable with the lesser duty prescribed in clause (c) of Article 40 of the Stamp Act, 1899, or the higher duty prescribed in clauses (a) and (6) of that Article. This is to be determined, on the basis of the statement of the case, in terms of Article 40 (c) of the Act. The relevant parts of the Article are as follows: Description of Instrument

40. Mortgage deed not being an . Proper Stamp Duty (a) when possession of the property or any part of the property comprised in such deed is given by the mortgagor or agreed to be given ; The same duty as a Convey ance (No. 23) for a con sideration equal to the amount secured by such deed. (b) when possession is not given or agreed to be given aforesaid ; The same duty as a Bond (No. 15) for the amount secured by such deed. Explanation.‑A mortgagor who gives the mortgagee a power‑of‑attorney to col lect rents or a lease of the property mortgaged or part thereof, is deemed to give possession within the meaning of this Article. Two rupees. (c) when a collateral or auxi liary or additional or substituted security, or byway of further assur‑ ance for the above‑men‑ tioned purpose where the principal or primary security is duly stamped‑ for every sum secured not exceeding Rs. 1,000 ; and for every Rs. 1,000 or part thereof secured in excess of Rs. 1,

000. Two rupees.

6. The grounds on which the Chief Controlling Revenue Authority considers the mortgage deed to be chargeable with the higher duty are that‑ "The provisions of the section (c) shall not be attracted unless‑ (a) the document constituting the primary security is a mortgage deed, and (b) the proper stamp duty on such mortgage deed has been paid either under sub‑Article (a) or (b) of the Article 40." By "section (c)" and "Sub‑Article (a) or (b)" he means clauses (a), (b) and (c) of Article 40 of the Act. He has not explained the above grounds further. They are his conclusion as well as the reasons for it. The explanation of the conclusion itself, as provided by his counsel his address, is that though a promissory note can constitute; a primary security and though a mortgage deed can be a collateral security to any other primary security, yet unless such a primary security is a mort gage deed or at least a document which bears the proper stamp duty chargeable under clause (a) or clause (b) of the Article, such a collateral mortgage deed cannot properly bear the lesser duty that is prescribed in clause (c). This explanation makes it unnecessary for us to consider whether a promissory note can constitute a primary security or not. All that remains to be considered is whether a mortgage deed which purports to be a collateral security to a promissory note that is not stamped as a mortgage deed, can properly bear the lesser stamp duty or not. We may note here that neither the referring authority nor his counsel seems to attach any qualification to the collateral mortgage deed itself for considering it fit to attract the lesser duty, but attaches conditions to the primary security for that purpose.

7. In order to disprove the above view, two arguments were apparently advanced before the referring authority on behalf of the Bank. One of them was that the decisions given in Imperial Bank v. Bengal National Bank and In re Gopaldas Versimal, were judicial precedents, according to which a pro missory note could be a primary security, and the other argument was that the Bank was debarred by virtue of section 25(h) of the National Bank of Pakistan Ordinance, 1949 from advanc ing money against the primary security of immovable pro perty ; therefore, the mortgage deed in question which was executed in addition to a promissory note must be treated as a collateral security. The Authority has met these arguments, firstly, by relying on the view expressed in Tej Ram v. Maqbul Shah and the observation made in (1933) Madras Stamp Manual, page 121, which has been quoted by Chitaley and Rao at page 650 in their Commentary (2nd Edition) on the Stamp Act, 1899 ; and secondly, by interpreting section 25 (h) of National Bank of Pakistan Ordinance 1949, differently from the inter pretation placed on it by the Bank.

8. The relevant portion of Tej Ram v. Maqbul Shah is as follows :‑ "Article 40 (c) deals with a case in which a separate instru ment offering additional or substituted security is executed subsequent to the original mortgage transaction, which had been reduced to writing in previously completed instrument. This is admittedly not the case here, as the stipulation as to the original mortgage and the collateral security were made simultaneously and were both embodied in one and the same deed." In the above case the mortgage deed contained a stipulation that in the event of the house and the vacant site, which were mortgaged, being found to be insufficient to pay off the dues, the mortgagee could recover the balance from certain shop. The point for decision was as to whether Article 40 (c) was attracted when the two securities were created simultaneously. The quotation, therefore, is not helpful in the present case. The observation quoted by Chitaley and Rao from the Madras Stamp Manual is as follows :‑ "A document, whereby the executant mortgaged certain lands to secure the payment of a certain sum due to the mortgagee under a promissory note previously executed, is not a colla teral security falling under this clause. It is a primary mortgage and the duty is leviable under clause (b)." Neither the facts of that case, nor the reasons for the view are known; therefore, we cannot safely accept the view as a general proposition of law.

9. The relevant provision of the National Bank of Pakistan Ordinance, 1949, at the time of the execution of the mortgage deed which is now in question, was as follows S.

25. The Bank is authorised to carry on and transact the several kinds of business hereinafter specified, namely * * * * * (h) immovable property or documents of title relating thereto as collateral security is one of those specified in sub‑clauses (a) to (J) and, subject to such directions as may be issued by the Central Board, where the original security is of the kind specified in sub‑clause (g)"." Clause (a) relates to certain stocks, funds and securities, clauses (b) and (d) to certain debentures, clauses (e) and (j) to certain goods and documents of title thereto, clause (e) to certain shares of companies and clause (g) to certain bills of exchange and promissory notes. The referring Authority has interpreted clause (h) as follows :‑ "The use of the word `or' between `immovable property' and `document of title' relating thereto, in my opinion implies that according to the provisions of sub‑clause (h) the Bank is competent to lend money either (a) on the security of immovable property, i.e., by mortgage thereof (in which case sub‑Article (b) of Article 40, Schedule I of the Stamp Act will apply, as in the case under refer ence); or (b) on the security of title deeds. The condition regarding acceptance `as collateral security only' appears, to be attached only to documents of title‑deeds relating to `immovable property' It is unnecessary to discuss the above argument because the con clusion, which is set out in the last sentence, is unreasonable. A According to it, the Bank cannot lend money on the security of documents of title to immovable property but can do so on the security of immovable property itself. In our opinion, the word `or' in clause (h) is conjunctive and not disjunctive,

10. As pointed out above, in paragraph 5, this case must be decided on the basis of clause (c) of Article 40 of the Stamp Act; 1899. Mr. Sheikh has argued, firstly, that the words‑ "for the above‑mentioned purpose", which occur in the clause, refer to the mortgages executed as the primary security under clauses (a) and (b) of the Article; therefore, the primary security of a collateral mortgage deed must be a mortgage. Moreover, as the words‑ "where the principal or primary security is duly stamped" follow the words "for the above‑mentioned purpose", the pri mary security must be duly stamped as a mortgage deed if the collateral mortgage is to attract the lighter duty. Counsel's second argument was that if the primary security had not been intended to be a mortgage deed only, then clause (c) which relates to secondary mortgage deeds would not have been given a place in Article 40 which relates to mortgage deeds and to no other securities.

11. Taking up the first argument, we may explain that if the words "for the above‑mentioned purpose", which occur in clause (c) are taken to refer to the contents of clauses (a) and (b) of Article 40 of the Act, then they convey no meaning. This will become clear if the relevant parts of Article 4 (reproduced above) are compared with the relevant parts of the English section from which clause (c) of our Article has been taken. Clause !c) is almost a verbatim copy of clause (2) of the section of the English Stamp Act 1891, which deals with‑ "Mortgage, Bond, Debenture, Covenant, . . . . . and War rant of Attorney ." A glance at the above heading of the English section will show that it is not restricted, like our Article, to mortgage deeds only. We reproduce below clauses (1) and (2) of the English section in order to indicate how inartistically clause (2) has been copied in our Article. The English clauses follow immedia tely after the above heading, as under :‑‑ "(1) Being the only or principal or primary security (other than an equitable mortgage) for the payment or repayment of money‑ * * * * * * (2) Being a collateral, or auxiliary, or additional, or substi tuted security (other than an equitable mortgage), or by way of further assurance for the above‑mentioned purpose where the principal or primary security is duly stamped * * * * * * (The italics are ours). Clause (2) has been inserted in our Stamp Act as clause (c) with two changes only. They are that the words which appear within brackets in it have been omitted in our clause (c), and the first word, i.e., "Being", has been replaced by the word "when". The result of the second change is that our clause suffers from a grammatical defect. It stands without a predicate. The reset of the retention in our clause (c) of the words "for the above‑mentioned purpose" is that they refer to no above‑named purpose at all in Article 40 of our Act, because the words "for the payment or re‑payment of money", which occur in clause (1) of the English section do not find a place in clauses (a) and (b) of our Article. These defects have been noted by Sanjiwa Rao and by Walter Russell Donogh in their commentaries on our Stamp Act. Mulla has observed in his commentary that The above‑mentioned purpose, must be the purpose stated in the definition (of a mortgage deed)", section 2(17) of our Act. There are 39 Articles and 79 sections above Article 40 of our Act, but the learned commentator has been able to find a suitable subject of reference in the definition that is contained in section 2(17) for the words "the above‑mentioned purpose" which occur in Article 40(c). That definition is as follows :‑ " `mortgage deed' includes every instrument whereby, for the purpose of securing money advanced, or to be advanced, by way of loan, or an existing or future debt, or the performance of an engagement, one person transfers, or creates, to, or in favour of, another, a right over or in respect of specified property." (The italics are ours). The purpose as stated in the above definition is merely "securing" money or debt or the performance of an engagement. The inclusion of this purpose in the definition of a mortgage deed does not make that particular kind of security an integral part of the purpose. This is borne out by the words "the above mentioned purpose" Their effect is not that the secondary mortgage deeds named in clause (c) must have been executed in relation to the principal mortgages mentioned in clauses (a) and (b) of Article 40 of the Act. This conclusion is further sup ported by the words "principal or primary security" used in clause (c). If the object was otherwise, then the words would have been "principal or primary mortgage".

12. We have relied on the language of clause (c) with some diffidence because it has been inserted in Article 40 with such lack of care for precision that using them in support of our view creates a self‑distrust, but the clause is the law of the land and our attempt is to give full effect to it.

13. Turning now to the second argument of Mr. Sayeed A. Sheikh, we find that there is a good reason why clause (c) should find a place with clauses (a) and (b), in Article 40 of the Act. That reason is that all of them deal with mortgage deeds. Clauses (a) and (b) deal with those mortgage deeds which con stitute the principal or primary securities, and clause (c) deals with those of them which are executed as collateral, auxiliary, additional, substituted or further assuring securities. As the Article deals wilt mortgage deeds of all types, clause (c) is rightly given a place in it. We may remind outset here that the Article merely prescribes the proper duty for various types of mortgage deeds without defining as to what is a mortgage, what is a principal or primary security and what is a collateral auxiliary, additional, substituted or further assuring security. It is unnecessary for the present discussion to draw the distinctions that exist between (i) a collateral, (ii) an auxiliary, (iii) an addi tional, (iv) a substituted and (v) a further assuring security. They are so fine that very often these classes appear to overlap, but the real value of using all the five expressions is to make clause (c) a comprehensive provision. They serve the purpose more of being inclusive than exclusive. The Article deals with all mortgage deeds but not with all securities; therefore, in spite of this Article there may be other kinds of secondary securities to primary mortgage deeds and other kinds of primary securities to secondary mortgage deeds. The contention that clause (c) would not have been included in Article 40 if a mortgage deed could be a collateral security to a promissory note seems to us to be patently wrong.

14. Our conclusion, therefore, is that the mortgage deed in question is chargeable with the lighter duty prescribed in clause (c) of Article 40 of the Stamp Act, 1899. As the stamp duty paid on it under this clause has not been questioned before us, we decide that it bears the correct stamp duty, and add, by way of caution, that no additional stamp duty or penalty is payable with respect to it.

15. The reference is answered accordingly. K. B. A. Reference answered accordingly.