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

Meera Traders deposits share certificates (marketable securities) with Kaveri Finance as security for a loan of Rs 20 lakh and signs a letter recording the deposit. The letter is not a promissory note or bill of exchange. Under the Indian Stamp Act, 1899, how is this letter chargeable to stamp duty?

The letter is chargeable as if it were an agreement or memorandum of agreement under Article 5(c) of Schedule I, because Section 23A treats instruments given on deposit of marketable securities as security for a loan in that way, not as conveyances.

  1. AAs if it were an agreement or memorandum of an agreement under Article 5(c) of Schedule ICorrect
  2. BAs a conveyance on the full market value of the shares
  3. CIt is exempt because the securities are only deposited and not transferred
  4. DAs a promissory note on the loan amount

Explanation

Section 23A(1)(a) covers an instrument given on the occasion of deposit of a marketable security as security for money advanced. Such an instrument is chargeable as if it were an agreement under Article 5(c) of Schedule I. It is not treated as a conveyance, and the deposit does not make it exempt.

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