- (1.) This appeal by special leave arises out of the decision of the Madras High Court dated 9-10-1974, on a reference by the Chief Controlling Revenue-authority under Section 57 of the Indian Stamp Act, 1899, hereinafter referred to as the Act. The Board of Revenue, Madras, which was the Chief Controlling Revenue-authority, initially stated the case raising the following questions for decision,- (a) Whether the decision of the Board of Revenue that the instrument relating to the Deed of Trust and Mortgage would attract the levy of a Stamp Duty as laid down in Article 40 (b) of Schedule I of the Indian Stamp Act and that the debentures would be exempted from the levy of stamp duty is correct or not; and (b) Whether the claim of the Respondent herein that the stamp duty is payable on the debenture under Article 27 (a) and on the Deed of Trust and Mortgage under Article 40 (c) is tenable or not The High Court directed the Board of Revenue to refer three additional questions, but ultimately took the view that the additional questions did not really arise in the case. It answered the first question in favour of the Revenue and the second question against the Madras Refineries Limited, hereinafter referred to as the Company. The Company feels aggrieved and has come up in appeal to this Court. It will be enough to state these facts which bear on the controversy before us.
(2.) The Company was incorporated under the Indian Companies Act, 1956, as a public limited company. An agreement known as the Loan and Note Purchase Agreement was executed between the Company and the First National City Bank and six others on December 20, 1966, by which the Company agreed to authorise the creation and issuance of $ 14,880,000 (U. S.) principal amount of its 5 1/2% secure notes Series 'A', and $ 7,440,300 (U. S.) principal amount of its 5 1/2% secured notes Series 'B', and the sale of, or the borrowing to be evidenced by such Notes in accordance with the terms and provisions of the agreement. 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. It was also agreed that the Notes shall be secured and shall have the other terms and provisions provided in the agreement and shall be guaranteed by the President of India pursuant to the terms of a "Guarantee Agreement", in the prescribed form. We shall have occasion to refer to the relevant clauses of the Loan and Note Purchase Agreement, the Deed of Trust and Mortgage and the Guarantee Agreement as and when necessary. The Deed of Trust and Mortgage and the Guarantee Agreement were executed between the President and the First National City Bank (as Trustee) on June 15, 1967. In the meantime the Company made an application to the Collector under Section 31 of the Act for opinion as to the stamp duty with which the Deed of Trust and Mortgage was chargeable, and the Collector referred the matter to the Board of Revenue. The Board decided on June 28, 1967 that the duty was chargeable on the Trust and Mortgage Deed under Article 40 (b) of Schedule I to the Act. The Company paid Rs. 37, 66,500/- as stamp duty under protest, stating that it would move the Board for a reference of the controversy to the High Court. The Trust and Mortgage Deed was registered on June 30, 1967, and the 'A' series debentures were issued the same day. The Company applied to the Board of Revenue to state the case to the High Court. 'B' series debentures were issued on June 28, 1968. The case was started on March 28, 1969 and was decided by the impugned decision of the High Court dated October 9, 1974.
(3.) It has been argued by Mr. Ram Reddy for the appellant Company that the Guarantee Agreement was the principal and primary security, and the Deed of Trust and Mortgage was a collateral or auxiliary security and that the stamp duty on the Deed of Trust and Mortgage was payable in accordance with Article 40 (c). It has been urged that the Guarantee Agreement was exempt from duty under Section 3 of the Stamp Act and the debentures were exempt under Article 27.;