CHIEF CONTROLLING REVENUE AUTHORITY Vs. MADRAS REFINERIES LTD

JUDGEMENT

(1.) THIS is a reference under Section 57 of the Indian Stamp Act, 1899. The Board has proposed to this court the following questions -

(2.) TO appreciate the questions which had been originally referred by the Board of Revenue to this court, it is necessary to notice the essential facts. The respondent, the Madras Refineries Ltd., is a Government public limited company incorporated under the Indian Companies Act, 1956. By a document described as a loan and note purchase agreement dated 20 -12 -1966, which it entered into with the First National City Bank as trustee for various Pension trusts and six others, it was agreed that the company would authorise the creation and issuance of secured notes for 14,886,000 U. S. Dollars at certain rates of interest called series A and another set of secured notes for 7,440,000 U. S. Dollars at the same interest, as series B. The notes were to be issued under and secured by a deed of trust and mortgage between the company and the First National City Bank, trustee. The notes shall be dated, shall mature, shall bear, interest, shall be payable, shall be secured and shall have such other terms and provisions as provided in the mortgage and shall be guaranteed by the President of India pursuant to the terms of a guarantee agreement in the form attached to the agreement. Then followed various covenants in the agreement which it is not necessary for us to notice, except that most of the terms in this agreement refer to those in the mortgage -cum -trust deed. For instance, one of the clauses in the covenants is that in order to obtain the necessary funds for the construction of the Refinery and for working capital the company proposes to issue and sell equity shares of its capital stock for a cash consideration, aggregating the rupee equivalent of $ 18,000,000, computed, at the time of payment, at the exchange rate specified in Section 14,06 of the mortgage. Again, we find it stated that the borrowing to be evidenced by, and the sale of, the notes pursuant to the agreement and the execution and delivery of the agreement, the mortgage and the notes have been duly authorised by all necessary corporate action on the part of the company. There is a further stipulation in the agreement that the President of India and the trustee shall enter into a guarantee agreement which shall be in full force and effect. In short, a perusal of this agreement shows that the notes of both the series, which in legal parlance are debentures, were to be issued under and secured by a deed of trust and mortgage and that the First National City Bank was to be the trustee and that the essential terms on which the debentures would be issued would be those mentioned in the mortgage cum trust deed. Pursuant to this agreement was executed on 29 -6 -1967, a deed of trust and mortgage. This document was executed as between the Madras Refineries Ltd., and the First National City Bank, which is a national banking association incorporated and existing under the law of the United States of America having its corporate trust office in New York. The very first recital in this document is -

(3.) DURING the hearing of the reference on the earlier occasion, apparently, this court thought that the nature of the Presidential guarantee for purposes of the Stamp Act should also have to be determined and it was on that view, as we mentioned earlier, a further reference was called for on the additional questions above referred to.