1996 (2) TMI 369 - HC - Companies Law

Issues Involved:
1. Constitutionality of section 2(g)(iv) read with article 25 of Schedule I of the Bombay Stamp Act, 1958.
2. Competence of State Legislature to impose stamp duty on amalgamation orders.
3. Nature of stamp duty as a levy on documents versus transfer of property.
4. Repugnancy between the Bombay Stamp Act and the Companies Act.

Summary:

Issue 1: Constitutionality of section 2(g)(iv) read with article 25 of Schedule I of the Bombay Stamp Act, 1958
The petitioners challenged the constitutionality of section 2(g)(iv) read with article 25 of Schedule I of the Bombay Stamp Act, 1958, arguing it to be unconstitutional and ultra vires the Constitution of India. The Court held that the order passed by the Court under section 394 of the Companies Act is based upon a compromise between two or more companies and involves the transfer of assets and liabilities. The Court concluded that such an order is an "instrument" as defined u/s 2(l) of the Bombay Stamp Act and is subject to stamp duty.

Issue 2: Competence of State Legislature to impose stamp duty on amalgamation orders
The petitioners argued that a State Legislature cannot impose stamp duty on an order of amalgamation of companies u/s 394, as it is not merely an order approving an act of the parties. The Court rejected this contention, stating that the State Legislature has the jurisdiction to levy stamp duty under Entry 44, List III of the Seventh Schedule of the Constitution and prescribe rates of stamp duty under Entry 63, List II.

Issue 3: Nature of stamp duty as a levy on documents versus transfer of property
The petitioners contended that the impugned duty is not on a document or instrument but is effectively a duty on the transfer of property. The Court held that the stamp duty is levied on the instrument, and the measure of duty is based on the valuation of the property transferred. The Court clarified that the measure of tax does not alter the essential character of the levy, which remains a duty on the instrument.

Issue 4: Repugnancy between the Bombay Stamp Act and the Companies Act
The petitioners argued that the provisions of section 2(g)(iv) read with section 34 of the Bombay Stamp Act are repugnant to sections 391 and 394 of the Companies Act. The Court found no merit in this argument, stating that the Bombay Stamp Act does not invalidate the document if not duly stamped; it only provides that it would not be admissible in evidence if it is not properly stamped.

Conclusion:
The petitions challenging the constitutionality of section 2(g)(iv) read with article 25 of Schedule I of the Bombay Stamp Act, 1958, were dismissed. The Court ruled that the State Legislature is competent to levy stamp duty on amalgamation orders, and such orders are considered instruments subject to stamp duty. The interim reliefs granted were vacated but continued up to 20-4-1996 at the request of the petitioners.

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