2023 (12) TMI 1374 - HC - Companies Law

Impounding of the NCLT order under Section 33 of the Gujarat Stamp Act - 30-day stamping requirement to instruments presented under Section 31 - Interpretation of Section 32(3) regarding the Collector's authority to impound. Whether the subject instrument being the order of the NCLT Ahmedabad could have been impounded under Section 33 of the Gujarat Stamp Act, 1958 and consequently subjected to duty and penalty under Section 39 thereof, particularly when the said instrument was presented under Section 31 of the Stamp Act for the purpose of the opinion of the Collector, who would have no jurisdiction to impound the same as held by the Hon ble Supreme Court of India in Government of Uttar Pradesh others v/s Raja Mohammed Amir Ahmad Khan? - HELD THAT - Even the State has conceded to the fact that powers under Section 31 of the Act are confined to the administrative exercise of granting an opinion, when after the Collector would become functus officio, there can be no simultaneous invocation of the process provided for under Section 33 of the Act. Consequentially when we read Section 39 of the Stamp Act, which deals with the Collector s power to stamp instruments impounded and impose penalty, for the reasons of holding that the instrument presented for opinion cannot be impounded would also lead us to hold that no penalty under Section 39 thereof can be imposed. The question is therefore answered in the negative. Whether the provisions of Section 17 of the Stamp Act requiring an order of the National Company Law Tribunal to be stamped within 30 days from the date of such order could at all be made applicable in respect of an instrument presented to the Collector under Section 31 of the Stamp Act and whether any proceedings could have been initiated for a purported breach thereof? - HELD THAT - Section 31 of the Stamp Act deals with Chapter III Adjudication as to Stamps . Under this Section, though for the purpose of seeking an opinion, the limitation of 30 days will not be applicable as the process thereunder is that of giving an opinion or adjudicating on the stamp duty chargeable, however, the provisions of Section 17 of the Stamp Act mandate stamping of instruments within 30 days as in the case of the Tribunal s order. What is to be noted as the word used in Section 17 is stamped and not duly stamped which term means a stamp affixed being not less than the proper amount in accordance with law. In other words, irrespective of an adjudication or an opinion, an instrument has to be stamped either fully or as perceived by the holder within 30 days in case of an order of the Tribunal and therefore the provisions of Section 17 of the Stamp Act requiring an order to be stamped within 30 days would be applicable to an instrument presented to the Collector under Section 31 of the Act. The scheme of adjudication is a separate mechanism prescribed under Section 31 and consequences thereof under Sections 32 and 33 of the Stamp Act. For failure to adhere to the timeline no proceedings for breach as impounding can be exercised. The question therefore is answered accordingly i.e. so far as the applicability of provision of Section 17 requiring an order of the Tribunal to be stamped within 30 days is answered in the affirmative and so far as whether any proceedings could have been initiated for a purported breach thereof the answer is in the negative. Whether Section 32(3) of the Stamp Act disabling the Collector from endorsing any instrument brought to him after the expiration of one month from the date of its execution can be construed as an enabling provision authorizing the Collector to impound the instrument under Section 33 of the Stamp Act? - HELD THAT - Section 32(3) of the Stamp Act disables the Collector from endorsing any instrument brought to him after the expiration of one month from the date of its execution. A document presented under Section 31 for the opinion of the Collector cannot be impounded under Section 33 of the Stamp Act and having opined that the only fall out for having failed to stamp the instrument within 30 days would be that the Collector will be disabled from endorsing any instrument. The question is answered in the negative inasmuch as there will be no authorization in the Collector in impounding such an instrument under Section 33 of the Stamp Act. Whether the general time limit prescribed under Section 17 of the Stamp Act providing for stamping of the order of the National Company Law Tribunal within 30 days from the date of such order can be applied when such order/instrument itself permits the applicant to present the order before the Collector within 60 days from the date of the receipt of the order? - HELD THAT - Since the provisions of Section 17 have been discussed while answering Question B above, what is evident is that the order of the Tribunal as per the provisions of Section 17 has to be stamped within 30 days from the date of the order. It is the contention of the company that as per the relevant clauses of the scheme, which defined the terms appointed date and effective date , it was open for the companies to file the instrument before the stamp authority within 60 days is contrary to the mandate of Section 17 of the Act. Well settled it is that taxing statutes are required to be strictly interpreted especially when the language used by the legislature is plain and unambiguous. In this context, it is well settled that a limitation period provided under a statute cannot be altered and amended or extended. The procedure must be adhered to in the manner prescribed. The term in section 17 is very clear that the Tribunal s order has to be stamped within 30 days from the date of the order. The Full Bench of the Bombay High Court in the case of Reliance Industries 2016 (4) TMI 482 - BOMBAY HIGH COURT has unequivocally held that the scheme of arrangement or amalgamation and the order sanctioning the scheme would be an instrument under section 2(l) of the Stamp Act. What is chargeable to duty is the instrument and not the transaction - The answer therefore is that the general time limit prescribed under Section 17 of the Stamp Act would apply to an order of the Tribunal. The question is accordingly answered in the affirmative. Whether the action of impounding the said instrument and subjecting it to imposition of penalty is not contrary to the scheme and provisions of the Stamp Act and more particularly Section 40 thereof, which vests a discretion with the Collector of not impounding such instrument even if presented beyond the period of 30 days but before the period of 1 year from the date of such instrument? - HELD THAT - Reading Section 40 of the Act which has also been reproduced in the course of written submissions by the State Government indicates that from the title itself it is applicable to instruments which are unstamped by accident. The circumstances to invoke Section 40 of the Act and get the benefit of the extended period of a year is only available when the omission to duly stamp such instrument has been occasioned by accident, mistake or urgent necessity. Reading the section would indicate that as per the scheme in order to undertake the benefit thereof the instrument not duly stamped must be within one year from the date of its execution and such presentation and omission to pay the duty must be owing to the three circumstances narrated hereinabove. In the facts of the present case, there are no eventualities or circumstances to suggest any of the three ingredients for invoking Section 40. The question therefore is answered in the negative. Whether the CCRA has erred in rejecting the Applicant s submission that there was no delay in filing of application under Section 31 of the Stamp Act, the same having been filed within 30 days of the Effective Date under the Scheme, especially when the consideration amount payable under the Scheme could not have been computed unless the Scheme was made effective? - HELD THAT - There was no question of interpreting the provision otherwise as suggested by the company by relying on the relevant clauses of the scheme to seek an extended period of limitation. The instrument i.e. the Tribunal s order was signed on 18.09.2019 and was presented before the Collector on 13.11.2019 approximately after two months from the date of its execution. Even the certified copy of the order was received on 30.09.2019. This was therefore also not within the time limit of 30 days as per the mandate. The CCRA therefore has not erred in holding that the instruments presented were beyond a period of limitation. The answer to the question is therefore No. Whether the imposition of penalty is not disproportionate, excessive, unreasonable, illegal, and unjust, in the absence of any mens rea on the part of the Applicant which had itself presented the said instrument for seeking opinion of the Collector under Section 31 of the Act and which was within the time stipulated in the order of NCLT Ahmedabad itself? - Whether the CCRA ought not to have set aside the order of the Collector imposing penalty, particularly since the Collector has failed to assign any reasons whatsoever for imposition of the said penalty, and in absence of assignment of reasons by the Collector, whether the CCRA has not erred in supplanting its own reason to justify the imposition of penalty? - HELD THAT - Once having presented the document for opinion/adjudication, albeit in this case, beyond a period of 30 days, it is a clear case of a perception of the company as well as the authority and therefore it cannot be inferred that there was an intention to evade payment of stamp duty. Section 39 indicates that it deals with the power of the Collector to stamp instruments impounded. The instruments presented under Section 31 cannot be impounded, Section 39 cannot also be invoked. The bonafides of the companies was apparent when on the order passed by the Collector it willingly deposited an amount of Rs. 25 crores worked out on a consideration of Rs. 4639 crores. There was no intention to avoid/evade payment. Once having held thus, the penalty clause of Section 39 could not be invoked. The imposition of penalty is disproportionate, excessive, unreasonable , illegal, and unjust, in the absence of any mens rea on the part of the applicant - Stamp Reference is accordingly disposed of.

Summary

Issues Involved:

1. Impounding of the NCLT order under Section 33 of the Gujarat Stamp Act.
2. Applicability of Section 17's 30-day stamping requirement to instruments presented under Section 31.
3. Interpretation of Section 32(3) regarding the Collector's authority to impound.
4. Conflict between Section 17's 30-day rule and a 60-day allowance in the NCLT order.
5. Penalty imposition under Section 39 in light of Section 40's discretion.
6. Delay in filing under Section 31 relative to the Scheme's Effective Date.
7. Proportionality and justification of penalty imposition.
8. CCRA's role in upholding penalty without Collector's reasoning.

Detailed Analysis:

A. Impounding of the NCLT Order:

The court examined whether the NCLT order, presented for opinion under Section 31, could be impounded under Section 33. It was determined that the Collector's role under Section 31 is limited to providing an opinion on stamp duty, and once this is done, the Collector becomes functus officio, meaning they cannot impound the document. This interpretation aligns with the Supreme Court's ruling in the case of Raja Mohammed Amir Ahmad Khan, which clarified that instruments presented merely for opinion cannot be impounded.

B. Applicability of Section 17's 30-Day Rule:

The court considered whether the 30-day stamping requirement under Section 17 applies to instruments presented under Section 31. It was concluded that while Section 31 allows for the seeking of an opinion without a strict time limit, Section 17 mandates that instruments like the NCLT order must be stamped within 30 days. However, the failure to adhere to this timeline does not automatically lead to proceedings for breach, as the primary consequence is the inability to certify the instrument.

C. Interpretation of Section 32(3):

The court addressed whether Section 32(3), which prevents the Collector from endorsing instruments brought after one month, authorizes impounding under Section 33. It was clarified that Section 32(3) merely limits the Collector's ability to certify late instruments and does not grant authority to impound them under Section 33.

D. Conflict Between 30-Day Rule and 60-Day Allowance:

The court examined the discrepancy between the statutory 30-day stamping requirement and the 60-day period allowed by the NCLT order for presenting the instrument. It was emphasized that statutory provisions must be strictly followed, and the 30-day rule under Section 17 cannot be overridden by the NCLT's allowance, as statutory timelines are binding and cannot be altered by court orders.

E. Penalty Imposition and Section 40's Discretion:

The court considered whether imposing a penalty was contrary to the Stamp Act's scheme, particularly Section 40, which allows discretion for unstamped instruments presented within a year due to accident, mistake, or urgent necessity. It was found that the circumstances did not justify invoking Section 40, as there was no evidence of such conditions. Therefore, the penalty imposition was deemed not contrary to the Act.

F. Delay in Filing Under Section 31:

The court evaluated whether the CCRA erred in rejecting the applicant's claim of timely filing under Section 31, considering the Scheme's Effective Date. It was determined that the statutory requirement of presenting the instrument within 30 days from execution was not met, and the CCRA correctly held the application as delayed.

G. Proportionality and Justification of Penalty:

The court assessed the proportionality of the penalty, considering the absence of mens rea (intent to evade duty) and the applicant's voluntary presentation of the instrument. It was concluded that the penalty was disproportionate and excessive, as there was no deliberate intention to defy the law, and the applicant had already shown willingness to pay the stamp duty.

H. CCRA's Role in Upholding Penalty:

The court examined whether the CCRA erred in upholding the penalty without the Collector providing reasons. It was found that the CCRA should not have justified the penalty in the absence of explicit reasoning from the Collector. Given the court's finding on the disproportionate nature of the penalty, the CCRA's decision to uphold it was incorrect.

Conclusion:

The court answered the questions raised in the reference, emphasizing the need for strict adherence to statutory provisions and the importance of proportionality in penalty imposition. The reference was disposed of with specific answers to each question, clarifying the legal position on the issues involved.