BackgroundSyndicated loans are quite common in lending transactions. In large loans, a single bank may not be in a position to provide the loan by itself. Hence, the loan is syndicated such that “two or more banks agree to make loans to a borrower on common terms governed by a single agreement between all parties.” Similarly, a common security trustee is appointed to receive and hold the security provided by the borrower, which is held for the benefit of the common lenders.The issue of stamp duty on the mortgage provided by a borrower to a security trustee for the benefit of syndicated lenders came up before the Supreme Court in Chief Controlling Revenue Authority v. Coastal Gujarat Power Ltd. Specifically, the question was whether a single mortgage executed in favour of the security trustee for the benefit of several syndicated lenders would be treated as a single document or as multiple documents (equivalent to the number of syndicated lenders). The Supreme Court concluded that the agreement ought to be construed separately for each syndicated lender and stamped as such (i.e. multiple documents).Facts and DecisionThe borrower, Coastal Gujarat Power Limited, required finance to set up a power project. Thirteen lenders, who were banks and financial institutions, formed a consortium to undertake the lending. They executed a security trustee agreement appointing State Bank of India as the security trustee. The borrower executed an “Indenture of Mortgage for Delayed After Assets Deed” with the security trustee, and paid stamp duty of Rs. 4,21,000 on the document. This was disputed by the revenue authorities who demanded a total sum of Rs. 54,62,000 on the document. The dispute landed before a Full Bench of the Gujarat High Court, which opined that the State of Gujarat is not entitled to recover any additional stamp duty, and that “stamp duty is payable on instruments and not on transactions”. The High Court found that there was only one instrument creating the mortgage and that the relationship between the borrower and security trustee is independent of the relationship between the borrower and the lending banks. It was also categorical that the single mortgage deed cannot be treated as a combination of thirteen lenders.The Gujarat revenue authorities appealed against this decision to the Supreme Court, which analysed the documentation structure and found (at para. 28) that “it is manifest that the instrument of mortgage came into existence only after separate loan agreements were executed by the borrower with the lenders with regard to separate loan advanced by those lenders to the respondent borrowers”. The principal question therefore relates to the stamp duty payable where several matters (or transactions) are contained in a single instrument. This was tested against the provisions of section 5 of the Gujarat Stamp Act (the “Act”), which is extracted below:Section 5 – Instrument relating to several distinct matters or distinct transactions. Any instrument comprising or relating to several distinct matters 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.Based on a reading of this and related provisions (sections 4 and 6 of the Act), the Supreme Court held:31. From bare reading of these provisions, it is clear that … Section 5 deals only with the instrument which comprises more than one transaction and it is immaterial for the purpose whether those transactions are of the same category or of different categories. 32. It appears from the trustee document that altogether 13 banks lent money to the mortgagor, details of which have been described in the schedule and for the repayment of money, the borrower entered into separate loan agreements with 13 financial institutions. Had this borrower entered into a separate mortgage deed with these financial institutions in order to secure the loan there would have been a separate document for distinct transactions. On proper construction of this indenture of mortgage it can safely be regarded as 13 distinct transactions which falls under Section 5 of the Act.The Supreme Court also relied upon The Member, Board of Revenue v. Arthur Paul Benthall, 1955 SCR 84 in arriving at its conclusion.ImplicationsThis decision is likely to have widespread impact not just in syndicated loan transactions, but also in other types of transactions that involve common documentation. For example, if there is a sale and purchase of assets (say shares of a company) between one or more sellers in favour of a single buyer under a common sale and purchase agreement, the document may be treated differently for each of the separate sellers in respect of the specific assets they are selling. This may not matter much while computing stamp duty on an ad valorem basis, but it becomes determinative when stamp duty is based on either a fixed amount on the document or an ad valorem amount with a cap.The other implication is the extent to which the court has considered surrounding circumstances and not merely the document in question. For example, the syndicated lending arrangement was considered as a whole in interpreting the scope of the mortgage. This expands the considerations that may arise while computing stamp duty, and the ability of the courts to look beyond the text of the document and into surrounding circumstances will give rise to a great amount of uncertainty. Computation of stamp duty (particularly on complex transactions) has never been straightforward, and the approach followed in the present judgment may compound matters further.Although the court did take into account the surrounding circumstances, adequate consideration does not appear to be given the nature of a trustee. It is the case that the trustee has legal title or interest in the mortgaged property (given this involved an English mortgage). The relationship between the trustee and the lenders is secondary in that the trustee must hold the property and act for the benefit of the lenders. The Supreme Court paid scant regard to the specific capacity in which the trustee holds the mortgage and treated it simply as a pass-through, implying that it is acting as an agent of the lenders.Finally, the decision erodes the distinction between a “document” and a “transaction”. While stamp duty can be levied only on the document, the ability of the courts to cut through the documentation structure and explore surrounding circumstances through an expansive interpretation of section 5 of the Gujarat Stamp Act (or similar provisions) will likely turn the basic principles of the law of stamp duty on their head.  Philip Wood, Law and Practice of International Finance, University Edition (London, Sweet & Maxwell, 2008).