1. Financing of infrastructure projects by means of syndicate loan arrangements is a common practice. Syndicate financing refers to a practice wherein a loan is sanctioned to a single borrower jointly by a group of lenders generally on the same terms. These lenders are usually banks, but they can also include other financial institutions. One amongst all these lenders is designated as the lead lender who provides probable participants with a memorandum including borrower specific information. The lead lender also acts as the security trustee on behalf of all other lenders, therefore, it holds the mortgaged property for and on behalf of all other lenders.
StampDuty is a type of government tax which is attracted on every instrument in form of a document by which any rights or liabilities are to be created, transferred, limited, extended, extinguished or recorded. A mortgage deed for the purpose of the Stamp Act is an instrument, hence, applicable, stamp duty is applicable. Therefore, in the syndicate loan financing model the single mortgage deed executed between the borrower and the security trustee (lead lender) would be constituted as an instrument, hence, amenable to stamp duty. Whether such instrument would constitute to encompass only one transaction or whether such instrument shall encompass to include multiple transactions with all other lender banks was the question raised before the Supreme Court.
Facts of the Case
2. In the present case of Chief Controlling Revenue Authority v. Coastal Gujarat Power Ltd.[C.A. No. 6054 of 2015, dated 11-8-2015] the respondent Coastal Gujarat Power Ltd. ("CGPL") needed financial assistance for setting-up an ultra-mega power project in the area of Kutch-Bhuj. For that purpose it secured assistance from a few lenders. The lenders, i.e., financial institutions, which were thirteen in number, formed a consortium as a trust and executed a security trustee agreement ("STA") inter se appointing one banker, viz,. the SBI as the security trustee.
CGPL had executed an 'Indenture of Mortgage for Delayed After Assets Deed' ("Mortgage Deed") with the SBI, mortgaging its assets as mentioned in the deed itself. The said document was presented for registration by paying stamp duty of Rs. 4,21,000/- and the deed was registered. However, according to the Stamp Authority, CGPL was liable to pay Rs. 54,62,000/- as stamp duty on the said deed and, hence, demanded the balance amount of Rs. 50,41,000/- from CGPL.
2.1 Applicable Law - For the purpose of this case the following provisions of the Stamp Act are relevant:
2.1-1 Section 2(1) - Defines "instrument" to include every document by which any right or liability is, or purports to be created, transferred, limited, extended, extinguished or recorded but does not include a bill of exchange, cheque, promissory note, bill of lading, letter of credit policy of insurance, transfer of share, debenture, proxy and receipt.
2.1-2 Section 5 deals with - Instrument relating to several distinct matters or distinct transactions: 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 be chargeable under this Act.
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