The principal instrument for the purposes of stamp duty is the document that creates the security for the loan, even if other documents, such as debentures or guarantees, are also involved in the transaction.

VEERASWAMI, C.J. :- This is a reference under Section 57 of the Indian Stamp Act, 1899. The Board has proposed to this court the following questions-

"(1) Whether the decision of the Beard of Revenue that the instrument relating in the deed of Trust and mortgage would attract the levy of 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 (2) Whether the claim of the respondent herein that the stamp duty is payable on the debentures under Article 27 (a) and on the deed of Trust and mortgage, under Article 40 (c) is tenable or not?"

This reference was heard before by the then Chief Justice along with two other learned Judges, who expressed no final opinion, but in exercise of the powers under Section 58 of the Stamp Act, called for a further reference propounding the following additional questions:

"1. Whether the President's guarantee in this case is a document liable to stamp duty under the Indian Stamp Act ?

2. If it is liable to stamp duty, whether it is entitled to the exemption contained in any of the provisions of the Indian Stamp Act; and

3. If it is found that it is not entitled to the exemption but is liable to stamp duty whether such stamp duty has been levied and paid in any proceedings which the law permits the concerned Revenue Authority to initiate for the purpose?"

The answer to these questions by the Board is that the President's guarantee having been executed by him in that

capacity is not liable for stamp duty under Section 3, Proviso (1) of the Stamp Act. It is also stated that under

Section 29 of the Indian Stamp Act, in the case of a bond as defined under Section 2 clause (5) of the Act, the Stamp Duty is payable by the person executing the instrument and that if, in the normal; course, therefore, there is any stamp duty payable on this Instrument, it is to be borne by the President. Under Proviso (1) to Section 3 of the Indian Stamp Act, in respect of any instrument executed by or on behalf of the Government, where but for this exemption the Government will be liable to pay the duty, no duty shall be chargeable. We may at once say

that the additional questions propounded by this court in respect of which the Board has made a report, do not, on the view we take, arise in the case and in any case, we agree with the Board that the document executed by the President by way of guarantee does not attract stamp duty for file reasons stated by the Board.

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