Instrument of trust in debenture security documentation chargeable under the Karnataka Stamp Act, not a mortgage or bond.

An instrument executed by a bank as debenture-trustee was held not to be a deed of mortgage because it was not executed by the property owner and did not itself create a mortgage or transfer any interest in the underlying properties. It was also not a bond, as the trustee did not undertake to pay from its own funds but only to apply monies realised on enforcement of the securities. Read as a whole, the document created a trust over the securities for the benefit of debenture-holders, with the bank holding the securities and enforcement proceeds on trust subject to the stated priorities. The remuneration and reimbursement clauses did not change its essential character. It was therefore chargeable as an instrument of trust under Article 54A of the Karnataka Stamp Act, 1957.

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Issues: Whether the instrument executed by the debenture-trustee was a deed of mortgage, a bond, or an instrument of trust, and consequently under which entry in the Schedule to the Karnataka Stamp Act, 1957 it was chargeable.

Analysis: The instrument was not a deed of mortgage because it was executed by the bank as debenture-trustee and not by the owner of the properties, and it did not itself create a mortgage by deposit of title deeds or transfer an interest in the immovable or movable properties. It was also not a bond, since the bank undertook only to apply monies realised from the securities upon enforcement and did not obligate itself to pay out of its own funds. Reading the document as a whole, the declaration created a trust in respect of the securities held for the benefit of the debenture-holder, with the bank holding the securities and the proceeds of enforcement upon trust and subject to the declared priorities and obligations. The trustee's remuneration and reimbursement clauses did not alter the essential character of the document as a trust deed.

Conclusion: The instrument is an instrument of trust and is chargeable to stamp duty under Article 54A of the Schedule to the Karnataka Stamp Act, 1957.

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