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Stamp duty to be paid on when borrowing from multiple banks

A two judge bench of the Supreme Court of India in Chief Controlling Revenue Authority v. Coastal Gujarat Power Ltd. (Civil Appeal No. 6054 of 2015 arising out of S.L.P. (C) No. 32319 of 2013) has set aside an order passed by the High Court of Gujarat on 3 December 2012 in Stamp Reference No. 1/2011, holding that a mortgage deed with security trustee to secure loans of multiple banks would be treated as distinct transactions and would be liable for stamp duty as if separate mortgage deeds were recorded for each bank

The High Court had observed that the stamp duty is payable on the instrument and not the transaction. As per the High Court the instrument was a mortgage deed between a borrower (mortgagor) and a security trustee (mortgagee). It was the security trustee alone who had the power to enforce the mortgage and not the banks. The High Court observed that Section 5 cannot be construed to empower the State to levy duty on the transaction as opposed to the instrument and since there is only one instrument creating mortgage in favour of the security trustee, the relationship between the thirteen lenders and the borrower was independent from that of the borrower and the security trustee.

This judgment is of course only valid for Gujarat which has a specific clause to deal with this situation under Gujarat Stamp Act.

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