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Issues Involved:
1. Whether stamp duty is chargeable on the mere allotment of a convertible debenture without an instrument of debenture being issued. 2. Whether the State can demand stamp duty on a transaction not executed into an instrument. Detailed Analysis: Issue 1: Stamp Duty on Convertible Debentures Without Issuance of Instrument The primary legal question in both petitions is whether stamp duty is chargeable on the mere allotment of a convertible debenture when no debenture certificate has been issued, and the only instrument issued is a share certificate upon conversion of the debenture. In Writ Petition No. 1347 of 1992, the petitioner company offered 12.5% Secured Fully Convertible Debentures to its shareholders and employees. The debentures were to be automatically converted into equity shares after 12 months. The petitioner paid consolidated stamp duty on the equity shares to be issued upon conversion but did not issue any debenture certificates. The respondents demanded additional stamp duty on the fully convertible debentures, arguing that the petitioner was liable to pay stamp duty on the debentures as well. The petitioner's counsel argued that since no debenture certificates were issued, there was no "instrument" under the Bombay Stamp Act, 1958, that would attract stamp duty. The counsel cited the definition of "instrument" under Section 2(1) of the Act and argued that the law only mandates stamp duty on instruments, not transactions. The counsel also referred to the Supreme Court's decision in *Narendra Kumar Maheshwari v. Union of India* and SEBI Guidelines, which treat fully convertible debentures as quasi-equity, thus negating the need for separate debenture certificates. Issue 2: Stamp Duty on Transactions Not Executed into Instruments In Writ Petition No. 1674 of 1992, the petitioner company issued 14% Secured Partly Convertible Redeemable Debentures. Part of these debentures was automatically converted into equity shares. The petitioner paid stamp duty on the share certificates and the non-convertible part of the debentures but did not issue any debenture certificates for the convertible part. The respondents demanded additional stamp duty on the partly convertible debentures. The petitioner's counsel argued that stamp duty is only payable on instruments, not transactions, as per the Bombay Stamp Act, 1958. The counsel cited judgments from the Bombay High Court and the Andhra Pradesh High Court, which held that duty is levied on documents, not transactions. The counsel also referred to the Supreme Court's recent judgment in *Hindustan Lever v. State of Maharashtra*, which reiterated that stamp duty arises only from an instrument. Court's Conclusion: The court concluded that the State of Maharashtra is entitled to levy stamp duty only on instruments, not on transactions. The court found no law mandating the issuance of a debenture certificate before its conversion into an equity share. The court also noted that there was no instrument or document issued by the petitioners that could be construed as a debenture certificate. Therefore, the demands for additional stamp duty by the respondents were deemed unsustainable in law. The court quashed and set aside the demands for additional stamp duty in both petitions, making the rule absolute. The bonds executed by the petitioners were directed to be returned, and the operation of the judgment was stayed for eight weeks. Summary: The judgment clarified that under the Bombay Stamp Act, 1958, stamp duty is chargeable only on instruments, not on transactions. Since no debenture certificates were issued in both cases, the demands for additional stamp duty on fully and partly convertible debentures were quashed. The court emphasized that there is no legal requirement to issue debenture certificates before converting them into equity shares, thus supporting the petitioners' stance.
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