2024 (11) TMI 299 - HC - Companies Law

Doctrine of Merger - Jurisdiction of the respondent to adjudicate stamp duty under sections 31 and 33 of the Indian Stamp Act, 1899 - challenge to impugned order on the grounds that the respondent misinterpreted and misapplied Delhi Towers Ltd. while passing the impugned order - HELD THAT - The meaningful reading of section 47A reflects that it pertains to instruments which can be registered under the Registration Act, 1908. Section 47A (3) confers suo-motu power on the respondent to call for and examine any instrument to satisfy himself as to the correctness of its value or consideration and the duty payable thereon. However, such suo-motu power can only be exercised within two years from the date of registration of the instrument. In the present case, the petitioner filed Form 21 with the Registrar of Companies for registration of the merger order on 07.12.2011 and the respondent issued the show-cause notice on 20.03.2014 which is beyond the period of limitation of two years as provided under section 47A (3). There is legal force in the argument advanced by the learned Senior Counsel for the petitioner that the exercise of power conferred upon the respondent by section 47A (3) is appearing to be barred by limitation. A Coordinate Bench of this Court in Delhi Towers Ltd. observed that the Supreme Court in HINDUSTAN LEVER VERSUS STATE OF MAHARASHTRA 2003 (11) TMI 335 - SUPREME COURT held that orders passed by courts have been subjected to levy of stamp duty in several situations. It was also observed that the thing which is liable to stamp duty is the instrument and it is not a transaction of purchase and sale which is struck at. The Court also observed that merely because the legislature has not amended the existing statutory provision as applicable to Delhi to specifically include transfer of property under an order approving a scheme of amalgamation in the definition of conveyance, it is of no consequence at all. The same does not amount to exclusion from applicability of the Indian Stamp Act and chargeability to stamp duty thereon. It was also observed that the statutory definition of conveyance under section 2 (10) of the Act is an inclusive definition of wide import which cannot be confined to specific instruments mentioned in the statute. The argument advanced by the Standing Counsel for the respondent that the Notification no. 13 dated 25.12.1937 has been repealed and is not applicable, does not have any legal force and is accordingly rejected. The petitioner and ACIPL were wholly owned subsidiaries of a common parent company Holderind and therefore, the scheme of amalgamation and the merger order are squarely covered under the Notification no. 13 dated 25.12.1937 which exempts the said instruments from payment of stamp duty. The show-cause notice dated 20.03.2014 and the impugned order dated 07.08.2014 issued by the respondent are quashed and set aside along with all consequential proceedings - Petition allowed.

Summary

Issues Involved:
1. Jurisdiction of the respondent to adjudicate stamp duty under sections 31 and 33 of the Indian Stamp Act, 1899.
2. Applicability of section 47A (3) and section 73 of the Act for determining stamp duty.
3. Chargeability of stamp duty on the merger order under Article 23 of Schedule IA of the Act.
4. Applicability of the 1937 Notification exempting certain transactions from stamp duty.
5. Maintainability of the writ petition despite the availability of alternative remedies under sections 56 or 47A (4) of the Act.

Issue-wise Analysis:

1. Jurisdiction of the Respondent:
The petitioner argued that the respondent exceeded its jurisdiction by adjudicating stamp duty beyond the powers conferred under sections 31 and 33 of the Act, which involve voluntary submission of documents for adjudication. The court agreed, noting that the respondent admitted the impugned order was not passed under these sections but under section 48, which only empowers recovery of duties under Chapter IV, not applicable here. The court referenced the Supreme Court's decision in District Registrar and Collector V Canara Bank, which emphasized the voluntary nature of section 31 and the limitations of section 33.

2. Applicability of Section 47A (3) and Section 73:
The respondent relied on section 47A (3) to justify its actions, which allows the Collector to determine duty within two years of registration. However, the court found this inapplicable as the show-cause notice was issued beyond the two-year limitation period from the date of registration. Section 73, allowing inspection of public documents, was deemed irrelevant as it was raised as an afterthought and did not pertain to the petition's issues.

3. Chargeability of Stamp Duty on Merger Order:
The respondent argued that the merger order constituted a 'conveyance' under section 2 (10) of the Act and was chargeable under Article 23 of Schedule IA. The court examined Delhi Towers Ltd., which held that an approved scheme of amalgamation involving transfer of property is a conveyance. However, the court noted that the present case involved only the transfer of shares, not immovable property, and thus did not fit the same criteria.

4. Applicability of the 1937 Notification:
The petitioner contended that the merger was exempt from stamp duty under the 1937 Notification, as both companies were wholly owned subsidiaries of a common parent company. The court upheld this argument, rejecting the respondent's claim that the notification was repealed. The court cited Delhi Towers Ltd., affirming the notification's applicability and binding nature, thus exempting the merger from stamp duty.

5. Maintainability of the Writ Petition:
The respondent challenged the petition's maintainability due to alternative remedies under sections 56 or 47A (4). The court, referencing Whirlpool Corporation V Registrar of Trade Marks, clarified that the availability of alternative remedies does not bar the High Court's jurisdiction under Article 226, especially where jurisdictional issues are involved. The court found that the respondent acted beyond its jurisdiction, justifying the writ petition.

Conclusion:
The court allowed the petition, quashing the show-cause notice and the impugned order, along with all consequential proceedings, based on the jurisdictional overreach by the respondent and the applicability of the 1937 Notification exempting the merger from stamp duty.