Neepa Real Estates Pvt. Ltd. v. State of Maharashtra and Ors.

12. Mr. Dani would submit that the distinguishing feature in the case of Coastal Gujarat Power Limited (supra) was that there were separate loan agreements executed with thirteen different lenders and in that context, the Hon’ble Apex Court considered the transactions to be distinct transactions. He submits that in present case as the mortgage deed which was executed between the same party was the ultimate step and constituted the ultimate transaction, the loan agreements even if separate, constituted several instruments 4 (2015) 10 Supreme Court Cases 700.

5 Writ Petition No. 8014 of 2019, decided on 11th September, 2019. sa_mandawgad 6 of 20 employed for completing the mortgage deed and therefore, Section 4 applies.

13. He submits that in so far as the decision in case of Navi Mumbai SEZ Pvt. Ltd. vs. The State of Maharashtra and Ors.[6] is concerned, the Hon’ble Division Bench of this Court had remanded the matter for fresh consideration as the deed of mortgage would require construction in accordance with the law laid down by the Hon’ble Apex Court in the case of Coastal Gujarat Power Limited and Ors. (supra), He submits that a similar course be adopted by this Court and matter be remanded.

14. Learned AGP would submit that remand is unnecessary by pointing out that the authority has construed the various clauses of loan documents and mortgage deed and has come to a definite finding of the mortgage instrument covering distinct transactions.

15. The undisputed facts are that the Petitioner had entered into four loan agreements with Indiabulls Housing Finance Limited on different dates i.e. 22nd December, 2017, 28th February, 2018, 26th June, 2018 and 12th September, 2018. To secure the repayment of the loans under the separate four loan agreements, the draft of single mortgage deed was lodged for adjudication in month of September, 2018 under Section 31 of the Stamp Act. The adjudicating authority

6 Writ Petition No.8014 of 2019 (Principal Seat). sa_mandawgad 7 of 20 adjudicated the stamp duty at Rs 10,01,100/ under Article 40(b) of Schedule I of the Stamp Act, to which audit objection was raised for deficit stamp duty.

16. The core issue which arises for determination is whether the mortgage deed constituted an instrument relating to several distinct matters/transactions or an instrument dealing with multiple documents used for one single transaction.

17. Dealing first with the submission of Mr. Dani that even if Section 5 of Stamp Act is applied, the aggregate amount of duty on Rs 625 crores is required to be charged, the said submission overlooks the latter part of Section 5 of the Stamp Act, which provides that the aggregate amount of duties means the duties with which separate instrument each would be chargeable under this Act. Therefore it is not the aggregate duty payable on Rs 625 crores but the duty payable on each instrument separately which will be assessed while applying Section 5 of the Stamp Act.

18. For the purpose of answering the issue of applicability of Section 4 or Section 5 of Stamp Act, it is necessary to examine the loan agreements and the mortgage deed.

19. The Petitioner has entered into four loan agreements with Indiabulls, whereby Indiabulls agreed to sanction four loans of diverse sa_mandawgad 8 of 20 amounts. For ease of reference and clarity, a concise table of the date of execution of loan agreements, the names of the borrowers and the loan amount is reproduced hereinbelow: Loan agreement(s ) Date Name of the Lender Name of the Borrower(s) Name of the Co- Borrower(s) Indiabulls Name: M/s Sheth Creators Private Limited Constitution: Company Registered Office Address: 12th Floor, Hallmaark Business Plaza, Sant Dyaneshwar -Marg, Near Gurunanak Hospital, Bandra - East Mumbai-400051 Corporate identity number: U7010MH2011PTC212674 Permanant Account number: AAPCS2976M Name: M/s. Neepa Real Estate Private Constitution:

number: AAACN1884C Registered Office Address: 1201, 1203 and 1204, Hallmark Dyaneshwar -Marg, Opp Gurunanak Hospital, Kalanagar, Bandra (East), Mumbai-400 051 00/- (Rupees One Hundred Forty Five Crores only). Dece mber, 22, Name: M/s. Neepa Real Estate Private Limited Constitution: Private Limited Permanant Account number: 1201, 1203 and 1204, Hallmark Business Plaza, Sant Dyaneshwar -Marg, Opp Gurunanak Hospital, Kalanagar, Bandra (East), 00/- (Rupees Two Hundred Crores only). June 26, 2018 Indiabulls Name: M/s Sheth Creators Private Limited Constitution: Company 12th Floor, Hallmaark Dyaneshwar -Marg, Near Name: M/s. Neepa Real Estate Private Constitution:Compan y Registered Office Address: 1201, 1203 00/- Hundred Sixty Crores only). sa_mandawgad 9 of 20 Gurunanak Hospital, Bandra - East Mumbai-400051 U7010MH2011PTC212674 number: AAPCS2976M and 1204, Hallmark Dyaneshwar -Marg, Opp Gurunanak Hospital, Kalanagar, Bandra (East), U45200MH1992PTC0 number: 12th September, Name: M/s. Neepa Real Estate Private Limited Constitution: Private Limited Company 1201, 1203 and 1204, Hallmark Business Plaza, Sant Dyaneshwar -Marg, Opp Gurunanak Hospital, Kalanagar, Bandra (East), U45200MH1992PTC070103 number: AAACN1884C 00/- Hundred Twenty Crores only).

20. The subject mortgage deed has been executed by the Petitioner as sole mortgagor to secure the repayment of all four loans, out of which, in respect of two loan agreements, the Petitioner is the sole borrower and in other two loan agreements, Sheth Creators Pvt Ltd is the borrower and the Petitioner is co-borrower.

21. The loan agreements are standard loan agreements having identical recitals and covenants. Clause 1.1(xiv) of the loan agreement defines loan to mean the loan amount mentioned in Schedule I of the agreement which will be made available under the agreement. sa_mandawgad 10 of 20 Schedule I refers to the individual loan amount sanctioned under that individual loan agreement. Clauses 1.1(xxx) defines security documents to mean interalia the mortgage deed, other documents relating to mortgage in relation to security. Clauses 2.2. states that to secure the fulfillment of the obligations under the loan documents, there shall be created such security as mentioned in the loan documents. It provides that unless otherwise mentioned in the loan documents, the borrower undertakes to cause the execution of security document and creation of first ranking mortgage over the security in favour of Lender before or at the time of entering into the agreement and any failure/delay in execution of security documents and creation of security shall be an event of default under the loan documents.

22. The clauses of the loan agreement indicates that the contract between the parties was that for security of loan advanced under each of these individual loan agreements, the borrower was required to execute the security document creating mortgage in favour of the Lender before or at the time of entering into the agreement failing which it would constitute an event of default under the loan documents. The loan agreements makes no reference to the aggregate loans disbursed under the four loan agreements nor does it provide for creation of single mortgage deed to secure the the sa_mandawgad 11 of 20 amounts advanced under these four loan agreements. The creation of mortgage under the single mortgage deed was to secure the fulfillment of the obligations imposed by the individual loan agreements including the repayment of the loan amounts. The loan agreements provided for creation of mortgage before or at the time of entering into the loan agreement, which shows that individual loan agreement required individual creation of mortgage. It is not the case of single loan agreement sanctioning disbursement of the aggregate loan of Rs 625 crores and the release of the funds in tranches.

23. The Petitioner executed a single mortgage deed for securing the repayment of the loan advanced under the four loan agreements and lodged the same for adjudication. The adjudicating authority adjudicated the indenture under Article 40(b) of Schedule I of the Stamp Act noting that in pursuance to the loan granted, the borrower as security for repayment of the said debt amount is executing the deed of mortgage as security for repayment of the loan amount disbursed by the loan agreement. The adjudicating authority treated the mortgage deed as creation of security to secure single loan transaction and accordingly adjudicated the stamp duty without noticing that the mortgage deed embraced several loan transactions. It further took into consideration the indemnity bonds for the purpose of Section 6 of Stamp Act which was inapplicable as Section 6 deals sa_mandawgad 12 of 20 with a case of single transaction which might be viewed as falling under various categories. The adjudicating authority assessed the stamp duty @ 0.5% of the amount secured by the deed subject to the maximum cap of Rs 10,00,000/ and Rs 1100/ towards the indemnity bond etc.

24. The appellate authority applied the provisions of Section 5 of Stamp Act whereas according to Mr. Dani, the provisions of Section 4 are applicable. Section 4 and Section 5 of the Stamp Act reads as under:

sa_mandawgad 13 of 20

25. Section 4 of the Stamp Act deals with a single transaction completed in several instruments, whereas Section 5 applies where the instrument comprises more than more transaction and it is settled that is immaterial whether those transactions are of the same category or of different categories. The conditions which are necessary for application of Section 4 are; (a) there is more than one instrument employed for completing the transaction, and, (b) the multiple instruments are employed to complete the same transaction, and

(c) the transaction is of sale, mortgage or settlement.

26. Analysing the aforesaid provisions, in my opinion, for applicability of Section 4, there should be commonality of transaction. Section 5 is the converse of Section 4 and deals with cases where several distinct matters or transactions are embodied in a single instrument. Where Section 5 applies, each of the instruments dealing with each of the matter would be chargeable under the Stamp Act by the aggregate amount of stamp duty in respect of all such instruments.

27. At this juncture, it would be apposite to refer to the decision of Hon’ble Apex Court in the case of Coastal Gujarat Power Limited and Ors. (supra). In that case, the respondent-company has secured sa_mandawgad 14 of 20 assistance from thirteen different lenders to form the consortium as a trust and executed a security trustee agreement inter se appointing one banker as the lead trustee for the security trustee. The Respondent executed an indenture of mortgage with the security trustee mortgaging its assets as mentioned in the deed itself which was presented for registration. The High Court held that there being only one instrument creating a mortgage in favour of security trustee, such relation is independent of the relationship between the borrower and the lending banks. The Hon’ble Apex Court noted that the borrower had requested thirteen lenders to make available the loan to the borrower and pursuant to the loan agreement entered into between the borrower and the senior lenders, each of the senior lenders inter alia agreed to provide the borrower credit and loan facilities to finance part of the credit, cost of the project more specifically set out in the Schedule therein. The Hon’ble Apex Court considered the relevant clauses of the mortgage deed to observe that the instrument or mortgage came into existence only after separate loan agreements were executed by the borrower with the lenders with regard to the separate loans advanced by those lenders to the respondent-borrower.The observation of the Hon’ble Apex Court in paragraph 31 assumes significance which reads as under: “31. It appears from the trustee document that altogether 13 sa_mandawgad 15 of 20 banks lent money to the mortgagor, details of which have been described in the Schedule and for the repayment of money, the borrower entered into separate loan agreements with 13 financial institutions. Had this borrower entered into a separate mortgage deed with these financial institutions in order to secure the loan there would have been a separate document for distinct transactions. On proper construction of this indenture of mortgage it can safely be regarded as 13 distinct transactions which falls under Section 5 of the Act.”

28. Mr. Dani would seek to distinguish the decision on the ground that in that case there were thirteen different separate lenders and therefore those were considered as thirteen distinct transactions. I am unable to subscribe to the reading of the decision as done by Mr. Dani. The considerations which weighed with the Hon’ble Apex Court for applying Section 5 of Stamp Act was not the existence of thirteen different lenders but that the instrument of mortgage had the underlying thirteen loan transactions which required thirteen mortgage deeds. By considering the said fact position, the Hon’ble Apex Court construed such mortgage securing several loan agreements as comprising of several distinct matters/transactions.

29. Digressing a bit, prior to the decision of the Hon’ble Apex Court, Section 5 of the Stamp Act used the expression “distinct matters”. In view of the decision of Hon’ble Apex Court, the Government of Maharashtra amended the provisions of Section 5 of the Stamp Act, to specifically include the expression “distinct transaction” in Section 5 sa_mandawgad 16 of 20 to align the same in accordance with the judgment of the Hon’ble Apex Court in the case of Coastal Gujarat Power Limited and Ors (supra). The Constitution Bench of the Hon’ble Apex Court in the case of Coastal Gujarat Power Limited and Ors. (supra) has held that the expression “distinct matters” is different from the expression “different categories” and even if two transactions are of the same description, the two transactions can be construed as “distinct matters”. The amendment gave a legislative effect to the decision of the Apex Court in the case of Coastal Gujarat Power Limited and Ors. (supra).

30. Applying the law laid down by the Hon’ble Apex Court to the facts in hand, each of the loan instrument required execution of mortgage deed at or before the execution of the loan agreement and constituted a default in case of failure. The clear arrangement was therefore of execution of mortgage deed in respect of each individual loan instrument. If the condition would have been complied with, the Petitioner would have executed four separate mortgage deeds to secure the financial assistance availed under the four loan instruments. Despite the existence of such specific condition, the Petitioner has executed a single mortgage deed in September, 2018 which secured even the repayment of loan availed under a loan instrument executed in December, 2017. The multiple loan sa_mandawgad 17 of 20 transactions at differing period of time for different loan amounts executed either singly with the Petitioner as the borrower or with the Petitioner as co-borrower alongwith another entity i.e. Sheth Creators Private Limited, in my view, constitutes distinct transactions and the single mortgage deed embraces four distinct transactions.

31. In such case, Section 5 of the Stamp Act would be applicable and the instrument of mortgage would be chargeable with the duty with which each separate instrument of mortgage would have been charged. I am unable to accept that the loan agreements are ancillary documents employed in creation of mortgage deed in view of the specific requirement of creation of mortgage imposed in the individual loan agreements. It is pertinent to note that as per Section 28 of the Stamp Act, the Petitioner is obliged to set out the facts and circumstances affecting the chargeability of the instrument with duty. The mortgage deed merely aggregates the loan amounts and executes a single mortgage deed without setting out the basis for non execution of separate mortgage deeds as specified in the loan instrument.

32. Mr. Dani would seek remand of the matter for fresh consideration in line with the course adopted by the Hon’ble Division Bench in Navi Mumbai SEZ Pvt Ltd (supra). In that case the Hon’ble sa_mandawgad 18 of 20 Division Bench noted that the deed of mortgage presented for registration therein would require a construction in accordance with the law declared by the Hon’ble Apex Court in Coastal Gujarat Power Limited and Ors (supra). From perusal of the impugned order, I find that the Appellate Authority has given due consideration to the clauses of the mortgage deed and remaind is unnecesary.

33. Perusal of the impugned order would indicate that the revisional authority has formulated the correct proposition for consideration as regards the applicability of Section 4 or Section 5 of the Stamp Act. The revisional authority has considered the terms and conditions of the loan instruments which imposed obligation on the financial institution to disburse the loan amount within period of one month and execution of mortgage deed by the borrower. The authority noted that instead of executing separate mortgage deeds, the borrower has aggregated the loan amount and executed single mortgage deed which is contrary to the conditions of loan instrument and statutory provisions. The authority held that the loan instruments constituted separate and distinct transactions and assessed the stamp duty leviable on each transaction separately.The authority has assessed the stamp duty and imposed penalty by treating all four loan agreements as separate and distinct agreements by rightly construing the mortgage deed and the underlying loan transactions in sa_mandawgad 19 of 20 accordance with the law laid down by the Hon’ble Apex Court in Coastal Gujarat Power Limited and Ors(supra).

34. `In so far as the decisions cited by Mr. Dani are concerned, there is no quarrel with the proposition of law laid down in the said decisions. The decision which governs the present case is Coastal Gujarat Power Limited and Ors(supra) and upon applying the law laid down by the Hon’ble Apex Court, I do not find any infirmity in the impugned order dated 22nd December, 2021 passed by the revisional authority to warrant interference under Article 227 of Constitution of India.

35. Resultantly, the Petition stands dismissed. Rule is discharged. Civil/Interim Applications, if any, do not survive for consideration and stands disposed of. [Sharmila U. Deshmukh, J.]

36. At this stage, request is made for extension of interim relief. The interim relief is extended for a period of eight weeks from today. [Sharmila U. Deshmukh, J.] sa_mandawgad 20 of 20