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2012 (10) TMI 40 - HC - Companies LawScheme of amalgamation /arrangement sanctioned by the High Court - whether it would attract the mischief of Indian Stamp Act, 1899 in the State of West Bengal - Held that - Transfer of property being inter vivos . Section 5 of the Transfer of Property Act would squarely be applicable in a scheme of amalgamation or demerger. It was a transfer between two juristic persons . Hence, it was nothing but one of the methods of transfer in corporate field that would certainly be inter vivos. An inter vivos transfer would definitely attract Stamp Duty as per the said Act of 1899 and/or the State amendments applicable therefor. On the question of holding subsidiary corporate entities are having distinctive features. Shareholders do not own the corporate entity. Lifting of the corporate veil might suggest otherwise. In the eye of law, corporate entities are distinct. Hence, transfer from A to B would definitely a transfer to come within the scope of paragraph 45 of Hindusthan Lever (2003 (11) TMI 335 - SUPREME COURT OF INDIA), attracting appropriate duty - As per the proposed law scheme of amalgamation and/or arrangement would involve two per cent Stamp Duty whereas the conveyance as of date would require payment of duty at the rate of seven per cent. It is for the State to fix the rate. So long the new law does not come in force the existing law would prevail. The parties would have to adhere to the same.
Issues Involved
1. Competency of the Judge to impose Stamp Duty. 2. Whether the transfer of business, being a movable property, attracts Stamp Duty. 3. Applicability of the Hindusthan Lever judgment. 4. Relevance of the 1937 notification regarding Stamp Duty exemption. 5. Whether holding-subsidiary relationship exempts from Stamp Duty. Detailed Analysis Competency of the Judge to Impose Stamp Duty The appellants argued that the learned Judge was not competent to impose Stamp Duty on the sanction of the scheme of amalgamation or arrangement. The court, however, upheld the Judge's competency, referencing the scheme itself which provided for the exemption of Stamp Duty based on the notification. The court found no merit in the appellants' contention regarding the Judge's competency. Transfer of Business and Applicability of Stamp Duty The appellants contended that the transfer of business, being a movable property, should not attract Stamp Duty under the Indian Stamp Act, 1899. The court rejected this argument, stating that the transfer of property through a scheme of amalgamation or demerger has "all trappings of a sale," as per the Hindusthan Lever judgment. The court emphasized that such transfers are voluntary and, therefore, attract appropriate Stamp Duty. Applicability of Hindusthan Lever Judgment The appellants argued that the Hindusthan Lever judgment should not apply due to distinguishing features in their case. The court disagreed, stating that the Hindusthan Lever judgment, which held that a scheme of amalgamation is a transfer of property with all trappings of a sale, is binding under Article 141 of the Constitution of India. The court noted that the judgment considered similar provisions in other states and found that the lack of specific amendments in West Bengal does not exempt the transfer from Stamp Duty. Relevance of the 1937 Notification The appellants relied on the 1937 notification which they claimed exempted the transfer from Stamp Duty. The court found this notification inapplicable, noting that Article 23, which applies to conveyance, is not in Schedule 1 but in Schedule 1(A) in West Bengal. The court emphasized that the notification did not speak about Schedule 1(A) and thus could not be applied. Holding-Subsidiary Relationship and Stamp Duty The appellants argued that the holding-subsidiary relationship should exempt the transfer from Stamp Duty. The court rejected this, stating that corporate entities are distinct in the eyes of the law. The transfer from one corporate entity to another, even within a holding-subsidiary relationship, is considered a "transfer" and attracts Stamp Duty as per the Hindusthan Lever judgment. Conclusion The court dismissed the appeals, upholding the imposition of Stamp Duty on the sanctioned schemes of amalgamation. The court reiterated that the existing law requires payment of Stamp Duty on such transfers, and any changes to the law are the prerogative of the state. The court emphasized the binding nature of the Hindusthan Lever judgment and found no merit in the appellants' arguments regarding the 1937 notification and holding-subsidiary relationship. The appeals were dismissed with no order as to costs.
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