CHIEF CONTROLLER, REVENUE AUTHORITY Vs. MADRAS FERTILIZERS LTD

JUDGEMENT

(1.) THIS is a reference under Section 57 of the Indian Stamp Act, the question being whether the document sought to be registered by the Madras Fertilizers Limited, styled as trust deed securing 5 = per cent bearer debentures 1973 and 5 = per cent, bearer debentures 1981, to be executed by the Madras Fertilizers Limited, in favour of the First National City Bank, is a martgage deed subject to levy of stamp duty under Article 40 (b) of the Indian Stamp Act, 1899. The respondent is a Company incorporated under tile Indian Companies Act having its head office at Madras. Through its Counsel, the Company wanted an adjudication of stamp duty payable on the document. The Collector was of opinion that the document was chargeable to duty under Article 40 (b) of Schedule I of the Act and asked the respondent to pay Rs. 38,98,499.90 and to get the document certified under Section 32 of the Act. In the circumstance, therefore, the respondent asked for a reference under Section 56 (2) of the Act.

(2.) THE document in question, which is styled as a trust deed, was preceded by an agreement called Loan and Purchase Agreement dated 19 -12 -1966, entered into between the respondent and the Chemical Bank, New York Trust Company, in the United States. This agreement contains terms for borrowing by the Respondent of a large sum of money in the form of U. S. Dollars secured by debentures to be issued. Section 6 (10) of this agreement stipulates that the party should take such action as may be necessary or appropriate to effect on the first closing date, and thereafter, to protect and keep in full force and effect, a legal and valid first floating charge (hereinafter called the floating charge) in favour of a trustee approved by the Bank for the benefit of the holders of the notes (debentures) on the entire assets and undertakings of the company, then owned or thereafter acquired, present or future, including its uncalled capital, such floating charge to be created by trust deed in such form as the Bank may reasonably request. It was pursuant to this stipulation in the agreement that the trust deed dated April 6, 1968, was executed as between the respondent and the First National City Bank. The recitals refer to the fact of the loan end purchase agreement just now mentioned and the terms under which the trust deed was being executed. The trust deed contains definition clauses, one of which defines "the mortgaged premises". The definition says that the expression means and includes all the undertaking, property and assets comprised in the floating charge created by clause 6 (a) thereof, including any property or asset hereafter charged in accordance with clause 9 (b) thereof. The charging clause is clause 6, Sub -clause (c) of Clause 6 says this:

(3.) SECTION 2 (17) of the Indian Stamp Act defines a mortgage deed. It is an inclusive definition. The expression, therefore, is not only to be understood in the sense of mortgage as defined by the Transfer of Property Act, but also as included, something more as mentioned in Section 2 (17) of the Stamp Act. A 'mortgage' under the Transfer of Property Act is the transference of an interect in the specified immovable property as security for re -payment of money borrowed. So also, a charge, though not involving a transfer of interest in any specified property, creates a right over or in respect of specified property. As defined in Section 2 (17), the inclusive part of it says: