2004 (1) TMI 434 - HC - Companies Law

Sanction of a Scheme of Amalgamation - condonation of the delay in filing appeal - conveyance and an instrument under the Indian Stamp Act - Whether in view of the provisions of sub-section (2) of section 394 an order under sub-section (1) sanctioning a Scheme of Amalgamation or Arrangement is liable to be stamped under the Indian Stamp Act - HELD THAT - While dealing with the submissions of the respective parties, it has to be kept in mind that the question as to whether an order under section 394 of the Companies Act, 1956, amounted to a conveyance and, therefore, liable to payment of stamp duty, arose in an application filed before the learned Company Judge for sanction of a Scheme of Amalgamation. As will appear from the trend of decisions cited by Mr. S.N. Mukherjee, the consistent view of this Court has been that the transfer of assets and liabilities of the transferor company to the transferee company was by operation of law in view of the provisions of sub-section (2) of section 394 of the aforesaid Act, and apart from complying with the provisions of sub-section (2) of section 394, nothing further was required to be done in order to complete the transfer of liabilities and assets from the transferor company to the transferee company. The entire exercise appears to have been influenced by the decision of the Supreme Court in the case of Ruby Sales Services Pvt. Ltd. 1993 (10) TMI 348 - SUPREME COURT and that of the Bombay High Court in the case of Li Taka Pharmaceutical Ltd. 1996 (2) TMI 369 - HIGH COURT OF BOMBAY referred to and relied upon by the learned Company Judge in answering the question referred to hereinabove. The entire fabric of the judgment of the learned Company Judge has been woven around the said two decisions and the concept of the order u/s 394 being a conveyance and an instrument was tailored to fit the said two decisions. In our view, the moot question which falls for consideration in these appeals is not whether an order u/s 394 is a conveyance or an instrument , but as to whether in view of the provisions of sub-section (2) of section 394 an order under sub-section (1) sanctioning a Scheme of Amalgamation or Arrangement is liable to be stamped under the Indian Stamp Act. The facts of both the two aforesaid cases are completely distinguishable from the facts of matters generally relating to orders u/s 394(1) of the Companies Act, 1956. Even if the order u/s 394(1) is to be taken to be a conveyance or an instrument the transfer of assets and liabilities effected thereby is purely by operation of law which on account of section 2( d ) of the Transfer of Property Act also excludes the operation of section 6( e ) thereto. Notwithstanding the definition of the expression instrument in section 2(14) of the Indian Stamp Act, the unamended provisions of the Indian Stamp Act in relation to such definition and the definition of conveyance and/or instrument does not apply to an order u/s 394(1) of the Companies Act for the purpose of stamp duty. We agree with the view expressed by the Division Bench of this Court in New Central Jute Mills Co. Ltd. 1959 (2) TMI 12 - HIGH COURT OF CALCUTTA that the transfer of assets and liabilities from the transferor company to the transferee company takes place by virtue of sub-section (2) of section 394 without any further act or deed. We are, therefore, inclined to agree with the submissions made on behalf of the appellants in these appeals that the learned Company Judge erred in importing the concept of transfer as explained in the case of Ruby Sales Service s (P) Ltd. ( supra ) and Li Taka Pharmaceutical Ltd. ( supra ) to the case of amalgamation and/or compromise governed simply by the provisions of sub-section (2) of section 394 of the Companies Act, 1956. In our view the transfer of assets and liabilities of the transferor company to the transferee company takes place on an order being made under sub-section (1) of section 394 by operation of sub-section (2) thereof. The judgment and order of the learned Company Judge in the case of Gemini Silk Limited v. Gemini Overseas Limited 2002 (8) TMI 772 - HIGH COURT OF CALCUTTA , and the directions contained therein are accordingly set aside and the department is directed to draw up and complete the orders passed u/s 394(1) of the Companies Act, 1956, as if the judgment of the learned Company Judge in Gemini Silk Limited v. Gemini Overseas Limited, had not intervened. In the event any orders u/s 394(1) have been stamped consequent upon the decision rendered in the case of Gemini Silk Limited v. Gemini Overseas Limited , the parties will be entitled to apply for and to obtain refund of such stamp duty in accordance with law. The appeals are accordingly allowed. There will, however, be no order as to costs.

Summary

Issues Involved:
1. Whether an order passed by the Company Court u/s 394(1) of the Companies Act, 1956, is a 'conveyance' and an 'instrument' under the Indian Stamp Act, and therefore, liable to stamp-duty.

Summary:

Issue 1: Whether an order passed by the Company Court u/s 394(1) of the Companies Act, 1956, is a 'conveyance' and an 'instrument' under the Indian Stamp Act, and therefore, liable to stamp-duty.

Altamas Kabir, J. - These three appeals have been taken up together for hearing and disposal as they involve a common question as to whether an order passed by the Company Court u/s 394(1) of the Companies Act, 1956, is a 'conveyance' and an 'instrument' under the Indian Stamp Act, and therefore, liable to stamp-duty.

2. An application was filed by Gemini Silk Limited & Anr. before the learned Company Judge, being company petition No. 74 of 2002, praying for sanction of a Scheme of Re-construction and/or Amalgamation pursuant to sections 391, 392, 393 and 394 of the Companies Act, 1956. By his order dated 8-8-2002, the learned Judge, inter alia, held that an order sanctioning such a scheme u/s 394 of the said Act is covered by the definition of the expressions 'conveyance' and 'instrument' under the Indian Stamp Act and was, therefore, liable to payment of stamp-duty.

6. Mr. Anindya Mitra submitted that the Company Court's jurisdiction to sanction a scheme and to provide for transfer of property in accordance with the scheme is derived from sub-section (1) of section 394 of the Companies Act, 1956.

7. Mr. Mitra urged that an order passed by the Court u/s 394 is sufficient to vest properties and liabilities in the transferee company without execution of any further document, having regard to the scheme embodied in sub-section (2) of section 394 of the said Act. Mr. Mitra submitted that it is by operation of law, as provided under sub-section (2) of section 394, that the assets and liabilities of the transferor company get transferred to and vests in the transferee company without the need for execution of any further document.

10. Mr. Mitra then urged that the provisions of the Transfer of Property Act, 1882, would not apply to a transfer by operation of law as indicated in section 2(d) of the said Act, which is the reason as to why there is no conflict between the provisions of section 5 of the Transfer of Property Act and section 394(2) of the Companies Act, 1956.

11. Mr. Mitra referred to the Full Bench decision of the Madras High Court in Sahayanidhi Virindhunagar Ltd. v. A.S.R. Subrahmanya Nadar AIR 1951 Mad. 209, wherein it was observed that where an order of Court made under the section provides for the transfer of the assets and liabilities of a company in liquidation to another company, the assets by virtue of that order, without anything more stand transferred to and vested in the transferee company.

12. Mr. Mitra also referred to the decision of the Hon'ble Supreme Court in General Radio and Appliances Co. Ltd. v. M.A. Khader AIR 1986 SC 1218, wherein it was observed that by an order sanctioning amalgamation, the rights, interest and liabilities of the transferor company are transferred to and vest in the transferee company.

13. Mr. Mitra referred to a Bench decision of this Court in L. Mullick & Co. v. Binani Properties (P.) Ltd. [1983] 53 Comp. Cas. 693 (Cal.), wherein it was held that an order u/s 394(2) of the Companies Act will include all the properties of the transferor company.

22. Mr. S.N. Mukherjee, adopting Mr. Mitra's submissions, elaborated that an order of Court sanctioning a scheme of reconstruction or amalgamation u/s 394 read with section 391 of the Companies Act, 1956, is neither a 'conveyance' nor an 'instrument' so as to make it liable to be stamped in accordance with the provisions of the Indian Stamp Act in its application to the State of West Bengal.

25. Mr. Mukherjee pointed out that in the case of Gemini Silk Limited v. Gemini Overseas