SARFAESI, Registration Law and Stamp Duty

Three documents keep recurring around SARFAESI: the memorandum recording a deposit of title deeds, the assignment of a loan to an ARC, and the sale certificate to an auction purchaser. Each raises a registration or stamp duty question, and each has a settled answer. This note sets out when an equitable mortgage document needs registration, the stamp duty relief for ARC assignments and its limits, and the position of the sale certificate.

1. The Equitable Mortgage

Figure 1: Deposit, memorandum, or instrument

• Created by the deposit. A mortgage by deposit of title deeds, s.58(f) TP Act, arises from the deposit itself with intent to create security, not from a written deed (Topic 77)
• Memorandum of a past deposit. In United Bank of India v Lekharam Sonaram (1965) the Court held that a memorandum merely recording a deposit already made needs no registration.
• Document that is the bargain. If the document itself contains the terms of the mortgage, it is the instrument of mortgage and must be registered under s.17 of the Registration Act.
• State variations. Some States require stamp duty on the memorandum or the filing of an intimation of the deposit, so the local law must be checked.

2. Stamp Duty on ARC Assignments and Sale Certificates

Figure 2: Relief, and its limits

• The exemption, s.8F. Documents by which a bank or financial institution assigns financial assets to an ARC for securitisation or reconstruction are exempt under s.8F of the Indian Stamp Act, read with s.5(1A) SARFAESI (Topic 17)
• Not for the ARC's own use. The relief applies only where the ARC acquires the asset for those purposes, not to hold it for its own use.
• No omnibus exemption. The Kerala High Court (2025) held the relief operates only under the Indian Stamp Act, not as a blanket exemption under other stamp enactments, and allowed registration at reduced State rates.
• Sale certificate. A sale certificate to an auction purchaser needs no compulsory registration, though stamp duty is payable and a copy is filed (Topic 61)

3. Frequently Asked Questions

Does a memorandum of deposit of title deeds need to be registered?

It depends on what the memorandum does. In United Bank of India v Lekharam Sonaram (1965), the Supreme Court held that where the memorandum merely records a deposit of title deeds that has already taken place, it is not the instrument of mortgage and needs no registration, because the mortgage arises from the deposit. If, however, the document itself constitutes the bargain and contains the terms of the mortgage, it is the instrument creating the mortgage and must be registered under Section 17 of the Registration Act. Some States separately require stamp duty or an intimation of the deposit.

Is the assignment of a loan to an ARC exempt from stamp duty?

Under Section 8F of the Indian Stamp Act, read with Section 5(1A) of SARFAESI, documents by which a bank or financial institution transfers financial assets to an asset reconstruction company for securitisation or asset reconstruction are exempt from stamp duty, provided the ARC is not acquiring the asset for its own use. In 2025 the Kerala High Court held that this is not an omnibus exemption from duty under every stamp enactment; it operates under the Indian Stamp Act, and the court directed registration at reduced rates fixed by the State.

4. Related Topics

• Topic 77: SARFAESI and the TP Act. The equitable mortgage as security interest.
• Topic 61: The Auction Purchaser and the Sale Certificate. Title without compulsory registration.