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TMI Blog2004 (1) TMI 434X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 under section 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. The learned Company Judge directed that the Registrar of Companies shall not take on record an order sanctioning a scheme until the same was duly stamped. The concerned department of this Court was directed to engross the final order sanctioning a scheme under section 394 of the aforesaid Act on appropriate stamp paper, before placing the same for final signature. 3. The appellants in these three appeals were not parties to C.P. No. 74 of 2002, or to the said order dated 8-8-2002, but in the aforesaid facts and circumstances their rights have been affected by the said order which has compelled them to file the three appeals, along with connected applications for leave to appeal after condonation of the delay in filing the same. 4. The said applications having been allowed, the appeals were directed to be heard to resolve the question referred to her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of convey- ance. Mr. Mitra submitted that unlike other orders and decrees of Court providing for transfer of property, for example, by way of decree for specific performance of an agreement for sale of immovable property, no conveyance or instrument is required to be executed, in respect of an order under section 394(1) of the Act. 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. In this regard Mr. Mitra firstly referred to and relied on the Full Bench decision of the Madras High Court in the case of Sahayanidhi Virindhunagar Ltd. v. A.S.R. Subrahmanya Nadar AIR 1951 Mad. 209, wherein while considering the scope of section 153A of the Companies Act, 1913, which is similar to the provisions of section 394 of the Companies Act, 1956, the Court observed that the same had been enacted to facilitate arrangements and compromises between a company and its creditors or shareholders which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no reason to assume that section 394 of the Companies Act was intended to override the provisions of the Transfer of Property Act. In fact, a scheme sanctioned under section 394(1) of the Companies Act, 1956 effects a transfer by operation of law and the definition of 'conveyance' contained in section 2(10) of the Indian Stamp Act would not apply to transfers by operation of law. Mr. Mitra submitted that 'conveyance' as defined under section 2(10) of the above Act was confined to transfer inter vivos by voluntary execution of the document of transfer. Mr. Mitra submitted that in order to give a harmonious construction to the provisions of section 2(10) of the Indian Stamp Act and the provisions of the Transfer of Property Act, the scope of section 2(10) of the former Act should be interpreted to mean transfer of property by act of parties to which the Transfer of Property Act applies, having particular regard to the definition of 'transfer' in section 5 of the Transfer of Property Act. 17. By way of an alternative argument Mr. Mitra submitted that section 2(10) of the Indian Stamp Act does not mention an order of Court. On the contrary it defines conveyance on sale and every ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory Form No. 42 referred to in Rule 84 of the Companies (Court) Rules, 1959, requiring an order under section 394 of the Companies Act to be in such form and renders it impossible to give effect to the provisions both of sub-section (2) and sub-section (3) of section 394 of the above Act. 22. Mr. S.N. Mukherjee who appeared for the appellant in A.P.O. No. 76 of 2003, while adopting Mr. Mitra's submissions, sought to elaborate on the issue as to whether an order of Court could be brought within the definition of 'conveyance' in sub-section (10) of section 2 of the Indian Stamp Act or the Explanation included by the West Bengal Amendment including the expression 'instrument' by way of and Explanation to the definition of 'conveyance', or for that matter within the scope of sub-section (14) of section 2 of the Indian Stamp Act which describes an instrument to include every document by which any right or liability is or purports to be created, transferred, limited, extended, extinguished or recorded. 23. Mr. Mukherjee urged that as would be supported by authority an order of Court sanctioning a scheme of reconstruction or amalgamation under section 394 read with section 391 of the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bombay Stamp Act, 1958, where under the expression 'conveyance' had been amended on 10-12-1984, to include every decree or final order of any Civil Court. Furthermore, by a subsequent amendment dated 1-4-1993, every order made by the High Court under section 394 of the Companies Act, 1956, in respect of amalgamation of companies was also included within the meaning of the expression 'conveyance'. It was pointed out that the matter had gone up to the Supreme Court against the decision of the Division Bench of the Bombay High Court which had disagreed with the finding of the learned Single Judge, that the consent decree was neither 'conveyance' under section 2(g) nor 'instrument' under section 2(1) of the Bombay Stamp Act so as to make it liable for payment of stamp-duty. Mr. Mukherjee submitted that as will be evident from the judgment of the Hon'ble Supreme Court the learned Single Judge, while taking a view which was opposite to the view of the Division Bench, had relied on a Full Bench decision of the Bombay High Court in the case of Sharan Basappa Tippanna Indi v. Sangan Basappa Sridramappa Sahapur, considering a reference under section 16 of the Indian Stamp Act on the questio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uled by the Division Bench in New Central Jute Mills v. Rivers Steam Navigation Co. Ltd. AIR 1959 Cal. 352, in which the provisions of section 153A of the Indian Companies Act, 1913, which are similar to those in section 394 of the Companies Act, 1956, fell for consideration and it was held that the argument that the transfer infringes the provisions of section 6(e) of the Transfer of Property Act overlooks the plain language of section 153A and that the transfer takes place by virtue of a vesting order without any further act or deed. The Division Bench went on to observe that it is not necessary to obtain a formal conveyance from the transferor company and that the transfer being by an order of Court of competent jurisdiction, section 6(e) of the Transfer of Property Act has no application having regard to section 2(d) of the Transfer of Property Act which deals with transfer by operation of law. 30. Mr. Mukherjee submitted that the learned Company Judge had on an erroneous appreciation of the matter and on being influenced by the form of Form No. 42 indicated that it was well-settled law that the properties of a company belong to the company and the company belongs to the share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale - but for shares in the purchasing company." 34. Mr. Mukherjee submitted that in this connection the learned Company Judge also took into account the provisions of section 494 of the Companies Act which deals with the power of the Liquidator to accept shares etc. as consideration for sale of properties of the company in liquidation and in this regard the concept of sale as defined under the Sale of Goods Act as also Transfer of Property Act, was sought to be examined. 35. Mr. Mukherjee also pointed out that the learned Company Judge while considering the aforesaid proposition and finally come to the conclusion that a transaction such as one under section 394 of the Companies Act has all the trappings of a sale. In the said background, the learned Company Judge also posed a question as to whether an order of Court under section 394, sanctioning a scheme, which effectuates sale or transfer, is a 'conveyance' or not. In this regard the learned Company Judge took note of the definition of 'conveyance' under the Indian Stamp Act that includes every instrument by which property, whether movable or immovable, is transferred inter vivos and also posed another question as to whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the irresistible conclusion that the order which is an 'instrument' is a 'conveyance' which is required to be stamped under the provisions of the Indian Stamp Act. 39. Mr. Mukherjee submitted that the aforesaid conclusion arrived at by the learned Company Judge was contrary to the Bench decision of this Court in the case of Sailendra Kumar Ray v. Bank of Calcutta Ltd. [1948] 18 Comp. Cas. 1. In the said decision while considering an order sanctioning a Scheme of Amalgamation under section 153A of the Indian Companies Act, 1913, in relation to the provisions of Order 21 Rule 16 of the Civil Procedure Code, the Division Bench was of the view that such an order was not a transfer within the meaning of Order 21 Rule 16 of the Code and the order of the High Court sanctioning the scheme could not be regarded as an 'instrument' of transfer. 40. Mr. Mukherjee also contended that no reliance should have been placed on the decision of the Supreme Court in the case of Ruby Sales & Services Pvt. Ltd. (supra) where the parties to the transaction and the suit had agreed that the consent decree passed in the suit would itself operate as 'conveyance' from the defendants in favour of the plai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned Company Judge was not sustainable in law and was liable to be set aside. 44. As will appear from the opening paragraphs of the judgment of the learned Company Judge on the application for confirmation of a scheme of Amalgamation between Gemini Silk Ltd. v. Gemini Overseas Ltd. notice was issued to the learned Advocate General when the question arose as to whether stamp-duty is payable in respect of an order under section 394(1) of the Companies Act, 1956. Thereafter, the State of West Bengal was added as a party to the said application and several other similar applications were tagged with the main application for settlement of the issue which had cropped up. In such circumstances, the State of West Bengal, represented by the learned Advocate General, was also called upon to make submissions with regard to the question as to whether an order of the Company Judge sanctioning a Scheme of Amalgamation under section 394(1) of the Companies Act, 1956 was required to be stamped for the purposes of the Indian Stamp Act. 45. The learned Advocate General submitted that the transfer of assets from the transferor company to the transferee company does not take place under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Judge has been woven around the said two decisions and the concept of the order under section 394 being a 'conveyance' and an 'instrument' was tailored to fit the said two decisions. 49. In our view, the moot question which falls for consideration in these appeals is not whether an order under section 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. 50. Sub-section (2) of section 394 of the Companies Act, 1956, reads as follows: "(2) Where an order under this section provides for the transfer of any property or liabilities, then, by virtue of the order, that property shall be transferred to and vest in, and those liabilities shall be transferred to and become the liabilities of, the transferee company; and in the case of any property, if the order so directs, freed from any charge which is, by virtue of the compromise or arrangement, to cease to have effect." 51. In the case of Bombay, the law has been amended so as to include orders made under section 394(1) of the aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 'conveyance' and/or 'instrument' does not apply to an order under section 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. ( supra) 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. 53. 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. 54. The judgment and order of the learned Company Judge in the case of Gemini Silk Limited v. Gemini Oversea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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