2012 (4) TMI 256 - HC - Companies Law

Stamp Duty on scheme of Merger & Amalgamation - Continuing practice in this State for transfer of property pursuant to scheme of amalgamation or demerger without attracting stamp duty - The petitioners contented that an order sanctioning a scheme under the Companies Act would be exempted from stamp duty in this State - the other aspect of the matter relates to a notification of the year 1937 issued by the Governor General-in-Council providing, that stamp duty chargeable under Article 23 of Schedule I to the Indian Stamp Act, 1899 would stand remitted in the manner indicated in the notification Held that - Article 23 no longer forming a part of Schedule I to the Stamp Act as applicable in this State and being included in Schedule IA thereto, the benefit under the 1937 notification is no longer available as the State Legislature - An order sanctioning a scheme of amalgamation or demerger under Section 394 of the Companies Act, therefore, answers to the description of the words instrument and conveyance within the meaning of the Stamp Act applicable in this State and is, accordingly, exigible to stamp duty - no property transferred pursuant to any scheme of amalgamation of merger or demerger in this State would be effective unless appropriate stamp duty thereon has been paid.

Issues Involved:
1. Whether stamp duty is payable on transfers effected pursuant to any scheme of amalgamation or demerger under the Companies Act, 1956.
2. The applicability of the 1937 notification providing remission of stamp duty under Article 23 of Schedule I to the Indian Stamp Act, 1899.
3. The binding nature of the Supreme Court's pronouncement in Hindustan Lever v. State of Maharashtra on the issue of stamp duty on amalgamation or demerger schemes.

Issue-wise Detailed Analysis:

1. Stamp Duty on Transfers Pursuant to Amalgamation or Demerger Schemes:
The court addressed whether stamp duty is payable on the transfer of properties under schemes of amalgamation or demerger sanctioned by the Companies Act, 1956. The court noted that the issue is not res integra and referred to the Supreme Court's recognition in 2003 that stamp duty is payable on such transfers. The history of the matter was traced back to a 2002 judgment by the company Judge of this court in the case of Gemini Silk Ltd, which held that an order sanctioning a scheme amounts to an instrument and conveyance subject to stamp duty under the Stamp Act. This judgment was later set aside by the Division Bench in Madhu Intra Ltd v. Registrar of Companies. However, the Supreme Court in Hindustan Lever v. State of Maharashtra opined that the transfer of property upon the sanction of a scheme of amalgamation or demerger has all the trappings of a sale, making such orders instruments chargeable under the Stamp Act. The court concluded that stamp duty is payable on transfers effected pursuant to any scheme of amalgamation or demerger under the Companies Act, as it is the law of the land recognized by the Supreme Court.

2. Applicability of the 1937 Notification:
The petitioners argued that the 1937 notification issued by the Governor General-in-Council, which provided for remission of stamp duty under Article 23 of Schedule I to the Indian Stamp Act, 1899, continues to hold the field under Article 372 of the Constitution of India. However, the court observed that Article 23, relevant for conveyances, does not figure in Schedule I to the Stamp Act applicable in this State but falls under Schedule IA. The court concluded that the benefit under the 1937 notification is no longer available as the State Legislature has overtly taken it outside the purview of Schedule I without extending the remission under the 1937 notification.

3. Binding Nature of the Supreme Court's Pronouncement in Hindustan Lever:
The petitioners contended that the Supreme Court judgment in Hindustan Lever should be read in the context of the issues that arose in that matter and against the backdrop of the added provisions of the Bombay Stamp Act that are absent in the Stamp Act applicable in this State. The court noted that the Supreme Court's pronouncement in Hindustan Lever is binding and concluded that orders sanctioning schemes of amalgamation or demerger are instruments within the meaning of the Stamp Act and attract stamp duty. The court emphasized that the principle enunciated by the Supreme Court in Hindustan Lever applies equally to the statute relevant in this State.

Conclusion:
The court held that an order sanctioning a scheme of amalgamation or demerger under Section 394 of the Companies Act is an instrument and conveyance within the meaning of the Stamp Act applicable in this State and is exigible to stamp duty. The 1937 notification providing for remission of stamp duty is not applicable in this State. The appropriate authorities are tasked with working out the procedure consequent upon this judgment. The petitions CP No. 627 of 2011, CP No. 398 of 2011, and CP No. 474 of 2011 will appear as "Company Matters (New)" a fortnight hence. The petitioners' request for a stay of the operation of the order was declined.

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