2002 (8) TMI 772 - HC - Companies Law

Summary

Issues Involved:
1. Whether an order sanctioning a scheme of reconstruction or amalgamation under section 394 read with section 391 of the Companies Act, 1956, is liable to be stamped in accordance with the provisions of the Indian Stamp Act in its application to the State of West Bengal.

Detailed Analysis:

Issue 1: Whether an order sanctioning a scheme of reconstruction or amalgamation under section 394 read with section 391 of the Companies Act, 1956, is liable to be stamped in accordance with the provisions of the Indian Stamp Act in its application to the State of West Bengal.
The primary issue debated was whether an order sanctioning a scheme of reconstruction or amalgamation under section 394 read with section 391 of the Companies Act, 1956, is liable to be stamped as per the Indian Stamp Act in West Bengal. The determination hinged on whether such an order qualifies as a "conveyance" under the Stamp Act.

Definition and Interpretation of "Conveyance" and "Instrument":
- Conveyance: Defined under section 2(10) of the Indian Stamp Act as "every instrument by which property, whether movable or immovable, is transferred inter vivos and which is not otherwise specifically provided for by Schedule I; or by Schedule IA."
- Instrument: Defined under section 2(14) of the Indian Stamp Act as "every document by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or recorded."

Effect of Court Order under Sections 391 and 394:
- Section 391(2): Provides that a compromise or arrangement, if sanctioned by the court, is binding on all creditors and members.
- Section 394(2): States that properties and liabilities of the transferor company are transferred to the transferee company by virtue of the court's order.

Court's Analysis:
- The transfer of assets and liabilities is effectuated by an order of the court, and the consideration for the transfer is the issuance of shares to the shareholders of the transferor company.
- The court referenced the Supreme Court's decision in General Radio and Appliances Co. Ltd. v. M.A. Khader, which held that such transfers are not involuntary and have all the trappings of a sale.
- The court also noted that the transaction involves the transfer of property and liabilities, which is akin to a sale, and thus, the order sanctioning the scheme has all the attributes of a conveyance.

Relevant Case Law:
- General Radio and Appliances Co. Ltd. v. M.A. Khder: Affirmed that the transfer of assets and properties by virtue of a court order under section 394 is not involuntary.
- Ruby Sales and Services (P.) Ltd. v. State of Maharashtra: Held that a consent decree was an instrument as it conveyed title in the property, establishing that court orders effectuating transfers are instruments.
- Li Taka Pharmaceuticals Ltd. v. State of Maharashtra: Distinguished as the State of Maharashtra had amended the Stamp Act to specifically include orders under section 394 within the definition of conveyance.

Conclusion:
- The court concluded that an order sanctioning a scheme of reconstruction or amalgamation under section 394 read with section 391 of the Companies Act, 1956, is indeed an instrument and qualifies as a conveyance under the Indian Stamp Act.
- The Registrar of Companies is directed not to take on record an order sanctioning a scheme until it is duly stamped. The department of the court is directed to engross the final order on appropriate stamp paper before it is signed.
- However, remission of stamp duty is available under the notification dated January 16, 1937, for transfers between companies with at least 90% beneficial ownership.

This judgment underscores the necessity of stamping court orders sanctioning schemes of amalgamation or reconstruction to ensure compliance with the Indian Stamp Act.