TMI Blog2024 (4) TMI 308X X X X Extracts X X X X X X X X Extracts X X X X ..... general law must give way to the special law. A conjoined reading of the Stamp Act and the Companies Act would show that while the former governs the payment of stamp duty for all manner of instruments, the latter deals with all aspects relating to companies and other similar associations - In the case at hand, we are concerned with an instrument which is chargeable to Stamp Duty and finds its origin in the Companies Act. The various provisions of the Companies Act provide the purpose and scope of the instrument. Thus, it has to be said that the Companies Act is the special law and the Stamp Act is the general law with regards to Articles of Association, and the special will override the general. Whether the maximum cap on stamp duty is applicable every time there is an increase in the share capital or it is a one-time measure? - HELD THAT:- It is an admitted fact that when the respondent increased its share capital from Rs. 36 crores to Rs. 600 crores it paid a stamp duty of Rs. 1,12,80,000/- and at that time there was no provision for a maximum cap or upper ceiling on the amount payable - The fact that the maximum cap of Rs. 25 lakhs would be applicable as a one-time measure and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) on 02.08.1994 amended Article 10 and introduced a maximum cap of Rs. 25 lakhs on stamp duty which would be payable by a company. The amending notification is reproduced below in part: In exercise of the powers conferred by clause (a) of Section 9 of the Bombay Stamp Act, 1958 (Born. LX of 1958), the Government of Maharashtra, having satisfied that it is necessary to do so in the public interest, hereby reduces, with effect from the 1st August, 1994, the maximum duty chargeable on Article of Association of a Company under Article 10 of Schedule-I to the said Act, to Rs. Twenty Five Lakhs. Subsequently, the respondent passed a resolution for a further increase in its share capital to Rs. 1,200 crores and paid Rs. 25 lakhs as stamp duty when it filed its Notice in Form No. 5, 1 pursuant to Section 97 of the Companies Act, 1956 (hereinafter Companies Act ). However, according to the respondent this was done inadvertently as it was soon realised that stamp duty was not liable to be paid by them since the maximum stamp duty which was of Rs. 25 lakhs payable on Articles of Association as per the provisions of the Stamp Act, had already been paid by them in 1992. Consequently, the resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e share capital of a company does not materially or substantially alter the character of the Articles of Association so as to fall within Section 14A of the Stamp Act. She refers to Section 31 of the Companies Act to submit that any alterations made to the Articles of Association are valid and are to be taken as if originally contained therein. Finally, she relies on a catena of judgements to contend that fiscal statutes have to be construed strictly and in case of any ambiguity in the charging provision, the same has to be resolved against the Department. 5. Let us now examine the relevant provisions of the Stamp Act. Section 3 of the Stamp Act provides that inter alia stamp duty is payable on instruments which are executed in the State of Maharashtra and the duty payable is the amount indicated in Schedule-I of the Stamp Act. The definition of instrument is provided under Section 2(l) of the Stamp Act, which is reproduced below: (l) instrument includes every document by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or recorded, but does not include a bill of exchange, cheque, promissory note, bill of lading, letter of cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may, if so authorised by its articles, alter the conditions of its memorandum as follows, that is to say, it may (a) increase its share capital by such amount as it thinks expedient by issuing new shares; (b) (c) (d) (e) (2) The powers conferred by this section shall be exercised by the company in general meeting and shall not require to be confirmed by the Court. (3) (emphasis supplied) A perusal of Section 94 of the Companies Act shows that a company is empowered to increase its share capital, by such amount as it thinks expedient, by passing a resolution in a general meeting. It is pertinent to note that no approval or confirmation by the Court is required to exercise this power. Once a resolution for authorising increase in share capital has been passed in terms of Section 94 of the Companies Act, a notice is required to be sent by the company in Form No. 5 to the Registrar, pursuant to Section 97 of the Companies Act. The provision is reproduced below: 97. Notice of increase of share capital or of members. (1) Where a company having a share capital, whether its shares have or have not been converted into stock, has increased its share capital beyond the authorised capital, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be sanctioned as per the compromise arrived at between the parties. It is an instrument which transfers the properties and would fall within the definition of Section 2(1) of the Bombay Stamp Act which includes every document by which any right or liability is transferred The above judgment nowhere states that Form No. 5 is an instrument. The reliance of the appellant here, on the above judgment, seems to be misconceived. An order of the Court sanctioning a scheme of amalgamation cannot be equated to Form No. 5. Any increase in the share capital by a company is neither required to be confirmed by the Court in view of Section 94(2), nor does the Registrar exercise any discretion, provided Form No. 5 is duly filled. On the other hand, learned senior counsel for the respondent has relied on New Egerton Woollen Mills, In re, 1899 SCC OnLine All 22, where the Allahabad High Court was faced with a similar question; as to whether stamp duty is payable on the document whereby alterations were made to Articles of Association. A Full Bench of the High Court (in the context of the Indian Companies Act, 1882) answered in the negative with the following reasoning: ... we are satisfied that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te instrument. On the other hand, learned senior counsel for the respondent refers to Section 31(2) of the Companies Act, which provides that any alteration of the articles shall, subject to the provisions of this Act, be valid as if it were originally in the articles. She further submits that whether an instrument has been materially altered or not is a question of fact and the appellants have neither taken this plea while rejecting the request for the refund, nor before the High Court. 11. It is a settled position of law that in case of conflict between two laws, the general law must give way to the special law. A conjoined reading of the Stamp Act and the Companies Act would show that while the former governs the payment of stamp duty for all manner of instruments, the latter deals with all aspects relating to companies and other similar associations. In the case at hand, we are concerned with an instrument which is chargeable to Stamp Duty and finds its origin in the Companies Act. The various provisions of the Companies Act provide the purpose and scope of the instrument. Thus, it has to be said that the Companies Act is the special law and the Stamp Act is the general law wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 which was under consideration of the High Court was as follows: 10 ARTICLES OF ASSOCIATION OF A COMPANY:- (a) When the authorized capital of the company does not exceed one lac 0.15% of the Authorized share capital with a monetary ceiling of Rs. 25 Lakhs. (b) In other cases 0.15% of the Authorized share capital with a monetary ceiling of Rs. 25 Lakhs. The Single Judge of the High Court 3 observed that other State Legislatures have included a specific provision for levy of stamp duty on increase in authorised share capital and held as follows: 13. In the absence of a specific provision that permits the levy of stamp duty on the increase in authorized share capital, it would not be open to the Respondents to insist upon the Petitioner having to pay stamp duty for the increased authorized share capital. The fact that the Petitioner earlier paid stamp duty when the authorized share capital was increased to Rs. 8.5 crores cannot act as an estoppel against the Petitioner. 14. The second question is whether the maximum cap on stamp duty is applicable every time there is an increase in the share capital or it is a one-time measure. It is an admitted fact that when the respondent increase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time, stamp duty would be calculated as per the nominal share capital. The effect of adding increased share capital is that stamp duty will be charged on subsequent increases in the authorised share capital, subject to the maximum cap. In other words, the ceiling of Rs. 25 lakhs in Column 2 is applicable on Articles of Association and the increased share capital therein, not on every increase individually. In case stamp duty equivalent to or more than the cap has already been paid, no further stamp duty can be levied. For a better understanding, let us consider a hypothetical example: SHARE CAPITAL OF A COMPANY STAMP DUTY PAYABLE STAMP DUTY TO BE ACTUALLY PAID DUE TO CAP TOTAL STAMP DUTY 50 crores 10 lakhs 10 lakhs 10 lakhs 100 crores 10 lakhs 10 lakhs 20 lakhs 150 crores 10 lakhs 5 lakhs 25 lakhs 200 crores 10 lakhs Nil 25 lakhs 16. The fact that the maximum cap of Rs. 25 lakhs would be applicable as a one-time measure and not on each subsequent increase in the share capital of a company is fortified directly by the Maharashtra Stamp (Amendment) Act, 2015 which amended the charging section for Articles of Association i.e., Article 10 of the Stamp Act. The Section as it stands now ..... X X X X Extracts X X X X X X X X Extracts X X X X
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