Stamp Duty Shocker For Consortium Lending / Financing

On August 11, 2015, the Hon’ble Supreme Court has given a Verdict in case of Coastal Gujarat Power is an SPV set up by Tata Power for the Mundra Ultra Mega Power Project that can potentially have major cost implications in terms of Stamp Duty for Consortium Lending / Financing Arrangement.It said that in such deals stamp duty is applicable on individual transactions even if backed by a Single Instrument and the case shall be governed by Section 5 of Gujarat Stamp Act, 1954

It is noteworthy that the SC has reversed the High Court’s Order wherein which the High Court held in the favour of Coastal Power that the duty is to be paid on the fact there was only 1 (one) single instrument for mortgage. Supreme Court while quashing the High Court’s order has held that as per Section 5 of Act, where different transactions are comprised in a single instrument then duty 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.

Apex Court Held that

36. We have also gone through; the  provisions contained  in Sections 33,  39,  Article 6 and 6(b)  of   the Act as also Bombay Stamp   (Gujarat   Second   Amendment)   Rules,   2007   and   the Circular dated 2.4.2007.

After giving out anxious consideration to those provisions and also in the light of the ratio decided by the  Constitution Bench  of   this  Court   in  The  Benthall   case (supra), we are of the definite opinion that the High Court has committed serious error of law in interpreting the provisions of Sections 5 and 6 of the Act.  Consequently, the answer given by the High Court on the Reference cannot be sustained in Law.

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