In the matter of Chief Controlling Revenue Authority v. Coastal Gujarat Power Ltd., the Supreme Court decided upon the question of whether a single mortgage executed in favour of the security trustee for the benefit of several syndicated lenders would be treated as a single document or as multiple documents. The apex court held that a security trustee agreement ought to be construed separately for each syndicated lender and stamped as multiple documents.
The borrower, Coastal Gujarat Power Limited, required finance to set up a power project. Thirteen banks and financial institutions formed a consortium and executed a security trustee agreement appointing State Bank of India as the security trustee. The borrower executed a mortgage deed with the security trustee, and paid stamp duty of ` 421,000 on the document. The revenue authorities held that 5,462,000 ought to have been paid as stamp duty and, hence, demanded the balance amount of 5,041,000/- from the company.
Under Section 5 of the Gujarat Stamp Act, 1958 (the ‘Act’) any instrument comprising or relating to several distinct matters shall be chargeable with the aggregate amount of the duties with which separate instrument, each comprising or relating to one of such matters or distinct transactions, would have been chargeable under the Act.
The Gujarat High Court noted that stamp duty is payable on instruments and not on transactions. Therefore, merely because one single document was executed as against different sets of documents, such fact would not enable the State authorities to bring the transaction under the ambit of Section 5 of the Act.
The apex court however held that, by reading the trustee document, altogether 13 banks lent money to the mortgagor, 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, the apex court regarded this as 13 distinct transactions which fall under Section 5 of the Act.
This decision will have a major impact on all transactions where a single document is executed for multiple transactions to save on stamp duty. This judgment is a departure from the established position that only the form of the instrument would be looked at for determination of stamp duty and not the nature of the transaction. This decision will lead the authorities to scrutinize the documentation structure thoroughly so as to ensure that proper stamp duty is paid on distinct transactions.