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CS Professional · Drafting, Pleadings and Appearances · Drafting of Agreements, Deeds and Documents

Arjun Ltd transfers shares to a lender by a duly stamped transfer intended as security. Later a separate instrument is executed making that transfer redeemable on repayment of the loan. This instrument is not a promissory note or bill of exchange. Under Section 23A of the Indian Stamp Act, 1899, how is the redeemability instrument charged?

It is chargeable as if it were an agreement under Article 5(c) of Schedule I. Section 23A(1)(b) applies to an instrument that makes redeemable a duly stamped security transfer, and earlier stamping of the transfer does not exempt it.

  1. AAs an agreement under Article 5(c) of Schedule I, because it makes redeemable a duly stamped security transferCorrect
  2. BAs a fresh conveyance, because shares are involved
  3. CIt is not chargeable because the transfer was already stamped
  4. DAs a bill of exchange, because it relates to a loan

Explanation

Section 23A(1)(b) covers an instrument that makes redeemable or qualifies a duly stamped transfer of a marketable security intended as security. Such an instrument is chargeable as an agreement under Article 5(c). The earlier stamping of the transfer does not exempt this separate instrument.

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