1996 (2) TMI 600 - HC - Companies Law

Summary

Issues Involved:
1. Constitutionality of Section 2(g)(iv) of the Bombay Stamp Act, 1958.
2. Competence of the State Legislature to levy stamp duty on amalgamation orders.
3. Whether the impugned duty is a tax on the transfer of property.
4. Repugnancy between the Bombay Stamp Act and the Companies Act, 1956.

Detailed Analysis:

Issue 1: Constitutionality of Section 2(g)(iv) of the Bombay Stamp Act, 1958
The petitioners argued that Section 2(g)(iv) of the Bombay Stamp Act, which includes every order made by the High Court under Section 394 of the Companies Act in respect of amalgamation of companies, is unconstitutional. They contended that an order of the court approving a scheme of amalgamation is not merely an act of the parties but involves judicial investigation, and hence, cannot be subjected to stamp duty.

The court held that the inclusion of court orders, compromise decrees, or amalgamation schemes for stamp duty does not lead to startling results. The court referred to the Indian Stamp Act, 1899, which already subjects certain court orders to stamp duty. The court also cited various precedents, including Ruby Sales and Services (P.) Ltd. v. State of Maharashtra (1994)1SCC531, which held that a consent decree transferring property is an instrument subject to stamp duty.

Issue 2: Competence of the State Legislature to Levy Stamp Duty on Amalgamation Orders
The petitioners contended that the State Legislature cannot impose stamp duty on an order of amalgamation as it is not a document or instrument but a judicial order. They argued that such a levy is beyond the scope of the State Legislature's powers.

The court rejected this argument, stating that the State Legislature has the competence to levy stamp duty on instruments, including court orders that transfer property. The court referred to Purshottam H. Jadye v. V. B. Potdar (1966)ILLJ412SC and Mohan Chowdhury v. Chief Commissioner, 1964CriLJ132, which interpreted "instrument" to include formal legal writings like court orders.

Issue 3: Whether the Impugned Duty is a Tax on the Transfer of Property
The petitioners argued that the impugned duty is essentially a tax on the transfer of property, which the State Legislature is not competent to impose. They contended that the duty on amalgamation orders is, in reality, a tax on the amalgamation of companies.

The court held that the stamp duty is levied on the instrument (the amalgamation order) and not on the transfer of property per se. The measure of the duty is based on the valuation of the property transferred, which is a valid basis for determining stamp duty. The court cited Himalaya House Co. Ltd. v. Chief Controlling Revenue Authority [1972]3SCR332 and Goodricke Group Ltd. v. State of West Bengal [1995] 1 Supp. SCC 707, which upheld the validity of using property valuation as a measure for stamp duty.

Issue 4: Repugnancy between the Bombay Stamp Act and the Companies Act, 1956
The petitioners argued that the provisions of Section 2(g)(iv) of the Bombay Stamp Act are repugnant to Sections 391 and 394 of the Companies Act, and hence, the State legislation cannot prevail.

The court found no repugnancy between the two statutes. It held that the Bombay Stamp Act does not invalidate the transfer of property under an amalgamation scheme; it merely requires the instrument to be duly stamped. The court referred to Navjivan Mills Co. Ltd., In re [1972] 42 Comp Cas 265 and Hindustan Lever Employees' Union v. Hindustan Lever Ltd. [1995] 83 Comp Cas 30 (SC) to support the view that the court's role in sanctioning an amalgamation scheme is limited and does not substitute the compromise or arrangement between the companies.

Conclusion:
The court dismissed the petitions, holding that Section 2(g)(iv) read with Article 25 of Schedule I to the Bombay Stamp Act is constitutional and within the competence of the State Legislature. The court also clarified that the stamp duty is levied on the instrument of amalgamation and not on the transfer of property itself. The petitions were dismissed with no order as to costs, and interim reliefs were vacated but continued up to April 20, 1996, at the request of the petitioners' counsel.