2009 (12) TMI 499 - HC - Companies Law

Amalgamation - refusal of the authorities of the Government of NCT of Delhi to accept the scheme of amalgamation - changeability to stamp duty - Held that - The scheme of amalgamation stands accepted by the Court. I find that even the order dated 19-3-2008 also records that the transferor-companies were hundred per cent subsidiaries of the transferee-company. In view of the requirement of item 55 of the Notification dated 25-12-1937 requires a certificate to be produced by the parties to the instrument that the conditions prescribed in the instant case are fulfilled. In the given facts, the same would appear to be a technicality and there should be no difficulty in obtaining such certificate. Compliance with the requirement of the Notification cannot be waived. As a result, subject to the petitioner satisfying the above condition described in item 55 of the Notification dated 25-12-1937 the stamp duty chargeable on the approved scheme of amalgamation would stand remitted in terms thereof. The concerned authorities shall ensure that proceedings in the matter are concluded and an appropriate order passed within four weeks. This application is allowed to the above extent and terms.

Issues Involved:
1. Refusal to accept the scheme of amalgamation without payment of stamp duty.
2. Nature and impact of an order approving a proposed scheme of amalgamation under section 394 of the Companies Act, 1956.
3. Whether transfer of property by an order of the Court or by operation of law is exigible to stamp duty.
4. Whether transfer of property under an approved scheme of amalgamation is an inter vivos transfer.
5. Basis for valuation of property transferred under the scheme of amalgamation.
6. Applicability of pre-Constitution notifications on stamp duty to the scheme of amalgamation.

Detailed Analysis:

1. Refusal to accept the scheme of amalgamation without payment of stamp duty:
The applicant, Delhi Towers Ltd., was aggrieved by the refusal of the Government of NCT of Delhi to accept the scheme of amalgamation approved by the Court without payment of stamp duty. The transferee-company argued that upon the Court's approval, the assets of the transferor-companies vested in the transferee-company by operation of law, and no further action was required. The applicant contended that the scheme of amalgamation is not a "conveyance" under the Indian Stamp Act, 1899, and thus, not liable for stamp duty.

2. Nature and impact of an order approving a proposed scheme of amalgamation under section 394 of the Companies Act, 1956:
The Court examined whether an order approving a scheme of amalgamation under section 394 is covered under the definition of "conveyance" under section 2(10) of the Indian Stamp Act, 1899. It was determined that the scheme of amalgamation results in the transfer of property by operation of law and is not merely a bilateral arrangement. The Court's role is supervisory, ensuring compliance with statutory procedures and that the scheme is not violative of law, unconscionable, or against public policy.

3. Whether transfer of property by an order of the Court or by operation of law is exigible to stamp duty:
The Court held that orders resulting in the transfer of property are subject to stamp duty. The Supreme Court in Hindustan Lever's case clarified that an order under section 394 of the Companies Act is based on a compromise between companies and is an instrument transferring properties, thus falling within the definition of "conveyance" and liable to stamp duty.

4. Whether transfer of property under an approved scheme of amalgamation is an inter vivos transfer:
The Court concluded that an approved scheme of amalgamation amounts to a transfer inter vivos between two companies, which are juristic persons in existence at the time of the order. This transfer is covered under the definition of "conveyance" under section 2(10) of the Indian Stamp Act, 1899.

5. Basis for valuation of property transferred under the scheme of amalgamation:
The valuation of the scheme of amalgamation should be based on the price of the shares allotted by the transferee-company to the transferor-company or other consideration paid. The Court rejected the argument that the conveyance of property under a scheme of amalgamation is not capable of valuation.

6. Applicability of pre-Constitution notifications on stamp duty to the scheme of amalgamation:
The Court examined the applicability of two pre-Constitution notifications (dated 16-1-1937 and 25-12-1937) which provided remission of stamp duty on transfers of property between companies. It was held that these notifications continue to be in force under article 372 of the Constitution, as they have not been repealed or amended by a competent authority. The Court found that the notifications are applicable to the scheme of amalgamation in question, subject to the fulfillment of specified conditions.

Conclusion:
The objections raised by the respondent were found to be legally untenable. The Court held that the scheme of amalgamation approved under section 394 of the Companies Act, 1956, is exigible to stamp duty. However, subject to the petitioner obtaining the necessary certificate as prescribed in the notification dated 25-12-1937, the stamp duty chargeable on the approved scheme of amalgamation would stand remitted. The authorities were directed to conclude proceedings and pass an appropriate order within four weeks.

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