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TMI Blog2009 (12) TMI 499X X X X Extracts X X X X X X X X Extracts X X X X ..... t'). These transferor-companies are stated to be hundred per cent subsidiaries of Delhi Towers Ltd., the transferee-company and transferor-companies were stated to be engaged in the same line of business. 2.2 In order to reap benefits from the integration of management activities; reduction of overall administrative costs; synergy of operations; improvement of business prospects and economies of scale with reduction of costs in the overall interest of business, these companies proposed a scheme of amalgamation whereby the undertakings of the transferor-companies, would with effect from the transfer date, be transferred to and vest in the transferee-company, pursuant to the provisions of section 394 of the Act. 2.3 The transferee-company and Suraj Construction & Estates (P.) Ltd. and one of the 15 transferor-companies, were registered at Delhi and having their registered offices at Delhi. Consequently, these sixteen companies had filed a Company Petition No. 50/2003 under sections 391 and 394 of the Act seeking approval of a proposed scheme of merger of the transferor-companies with the transferee-company. The proposed scheme of amalgamation was approved by the Court by an order p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the applicant-transferee-company is that upon an order being passed by the company court approving the scheme of amalgamation/merger, the assets of the transferor-companies vested in the transferee-company by operation of law and that nothing further is required to be done. It has been urged at great length that a scheme which is sanctioned in exercise of power under sections 391 to 394 of the Act is not in the nature of an order accepting a compromise under order 23 of the Code of Civil Procedure, 1908 ('CPC') but having regard to the statutory scheme, is something beyond. In this behalf, reliance is placed on the provisions of section 394(4) of the Act. The submission is that such scheme of amalgamation is not covered under the definition of "conveyance" under sub-section (10) of section 2 of the Indian Stamp Act, 1899 and, therefore, is not exigible to stamp duty. In support of these submissions, Mr. P.V. Kapoor, learned senior counsel appearing for the applicant, has placed reliance on the pronouncement of the Apex Court at J.K. (Bom.) (P.) Ltd. v. New Kaiser-I-Hind Spg. & Wvg. Co. Ltd. AIR 1970 SC 1041 and the pronouncement of this Court at Telesound India Ltd., In re. [1983] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the State of Delhi), and, therefore, is not chargeable to stamp duty for this reason as well. 3.5 It is urged on behalf of the petitioner that the provisions of the Bombay Stamp Act have been amended to incorporate clause (iv) in its sub-section (g) of section 2 whereby an approved scheme of amalgamation have been covered under the definition of 'conveyance'. Consequently, the pronouncements relied upon by the respondents of the Supreme Court in Hindustan Lever's case (supra) and Ruby Sales & Services (P.) Ltd. v. State of Maharashtra [1994] 1 SCC 531 concerned with construing the provisions of the 'Bombay Act' cannot even guide, let alone bind, adjudication in the present case. 3.6 The petitioner also places reliance on two Notifications dated 16-1-1937 and 25-12-1937 to contend that an approved scheme of amalgamation would stand exempted from levy of stamp duty because of the remission granted by both these Notifications. 4. Respondent's contentions 4.1 It is contended that no amendment to the statutory provision is necessary and that the transfer of property upon approval of a scheme of amalgamation is covered under the existing definition of 'conveyance' under the India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are in context of the statutory position under the Bombay Stamp Act, the unamended definition of the expression 'conveyance' as against the amended definition thereunder deserves to be adverted to and reads as follows : Unamended provision Amended provision '2(g)"Conveyance" includes a conveyance on sale and every instrument by which property, whether movable or immovable, is transferred inter vivos and which is not otherwise specifically provided for by Schedule 1;' '(g) "conveyance" includes, - (i)a conveyance on sale, (ii)every instrument, (iii)every decree or final order of any civil court, (iv) every order made by the High Court under section 394 of the Act, in respect of amalgamation of companies ; by which property, whether movable or immovable, or any estate or interest in any property is transferred to, or vested in, any person, inter vivos, and which is not otherwise specifically provided for by Schedule I.' Section 2(g)( iv) of the Bombay Stamp Act, thus, specifically includes every order made under section 394 of the Act in the definition of 'conveyance' under section 2(g) which thereupon is chargeable to stamp duty. 6. Nature and impact of an order approving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e interests in that company which, under the compromise or arrangement, are to be allotted or appropriated by that company to or for any person; (iii)the continuation by or against the transferee-company of any legal proceedings pending by or against any transferor-company; (iv)the dissolution, without winding up, of any transferor-company; (v )the provision to be made for any persons who, within such time and in such manner as the Court directs dissent from the compromise or arrangement; and (vi)such incidental, consequential and supplemental matters as are necessary to secure that the reconstruction or amalgamation shall be fully and effectively carried out. (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. (3) Within thirty days after the making of an order under this section, every company in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection (4)(a) of that section, so as to include "rights and powers of every description" and "duties of every description" respectively. The expression "property" would, therefore, be wide enough to include rights under a contract, including a contract of tenancy. These are co-extensive with the property and right which the transferor-company has in relation to its assets, but could not be wider than what the transferor-company was entitled to enjoy. The rights, property, as indeed the liabilities of the transferor-company, become the rights, property and liabilities of the transferee-company by virtue of the order of vesting made by the Court consequent on amalgamation. It is neither an assignment of right or property, nor an assignment of property by the company. It is the transfer of rights, property and liabilities along with the company itself and it is only as a result of confusion of thought that it could be described as an assignment by the company to another person, which is independent and distinct from the company. Such a notion ignores the peculiar position of amalgamation in company law and its true legal incident. It is for historical reasons that the device of amalga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de for the narrow compass of this judgment. The analogy, therefore, between the death of a natural person and dissolution without winding up is inappropriate." 6.5 These observations were relied on by this Court in a recent judgment at Hotline Hol Celdings (P.) Ltd.'s case (supra) wherein it was held as follows: "Amalgamation is, therefore, an absorption of one company into another or merger of both to form a third, which is not a mere act of the two companies or their members but is brought about by virtue of a statutory instrument and to that extent has statutory genesis and character, and to that extent it is distinguishable from a mere bilateral arrangement to merge or join in a common endeavour, an undertaking or enterprise." [pp. 212-13 of 65 CLA] 6.6 Placing reliance on these judicial pronouncements it is urged that the transfer of property is by operation of law and the respondents have no jurisdiction to claim stamp duty on such scheme of amalgamation approved by the company court. 6.7 It is urged that by virtue of the order sanctioning the scheme for amalgamation, nothing further is required to be done for the property to stand transferred to and vested in the transfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 under section 394 of the 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 & Services (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 Act. In our view, the transfer of assets and liabilities of the transferor-company to the transferee-company takes place on an order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sted in the transferee-company by virtue of the amalgamation order, would not answer the description of "immovable property" within the meaning of clause (d)( ii), nor does it answer the description of "transfer" as defined in clause (f)( ii) of section 269UA of the Income-tax Act." 6.10 In view of the argument that approval of the scheme amounts to transfer by operation of law, it is also essential to understand the scope of enquiry and jurisdiction of the company court. In this regard, my attention has been drawn to the pronouncement of the Apex Court in Miheer H. Mafatlal v. Mafatlal Industries Ltd. [1996] 10 SCL 70 wherein the Court had laid down the broad contours of the jurisdiction of the company court and the permissible nature and extent of its enquiry before granting sanction to the scheme under section 391 of the Act as follows : "(1)The sanctioning Court has to see to it that all the requisite statutory procedure for supporting such a scheme has been complied with and that the requisite meetings as contemplated by section 391(1)( a) have been held. (2)That the scheme put up for sanction of the Court is backed up by the requisite majority vote as required by section 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rather than its supervisory jurisdiction. It is the commercial wisdom of the parties to the scheme who have taken an informed decision about the usefulness and propriety of the scheme by supporting it by the requisite majority vote that has to be kept in view by the Court. The Court has neither the expertise nor the jurisdiction to delve deep into the commercial wisdom exercised by the creditors and members of the company who have ratified the scheme by the requisite majority. Consequently the company court's jurisdiction to that extent is peripheral and supervisory and not appellate. The Court acts like an umpire in a game of cricket who has to see that both the teams play their game according to the rules and do not overstep the limits. But subject to that how best the game is to be played is left to the players and not to the umpire. The supervisory jurisdiction of the company court can also be culled out from the provisions of section 392. Of course, this section deals with post-sanction supervision. But the said provision itself clearly earmarks the field in which the sanction of the Court operates. The supervisor cannot ever be treated as the author or a policy-maker. Conse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heme after being sanctioned by the Court binds all its creditors, members and shareholders including even those who were opposed to the scheme being sanctioned. It binds the company as well. While exercising its power in sanctioning the scheme of amalgamation, the Court is to satisfy itself that the provisions of statute have been complied with. That the class was fairly represented by those who attended the meeting and that the statutory majority was acting bona fide and not in an oppressive manner. That the arrangement is such as which a prudent, intelligent or honest man or a member of class concerned and acting in respect of the interest might reasonably would take. While examining as to whether the majority was acting bona fide the Court would satisfy itself to the effect that the affairs of the company were not being conducted in the manner prejudicial to the interest of its members or to public interest. The basic principle underlying such a situation is none other than the broad and general principle inherent in any compromise or settlement entered into between the parties the same being that it should not be unfair, contrary to public policy and unconscionable or against t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest of its members or to public interest; and secondly that the order of resolution of transfer of company shall not be made unless Official Liquidator on scrutiny of the books and papers of the company makes a report to the Court that the affairs of the company had not been conducted in a manner prejudicial to the interest of its members or to public interest." 6.15 My attention is also drawn by learned senior counsel for the petitioner to the provisions of section 18(6A) of the Sick Industrial Company (Special Provision) Act, 1985 ('SICA') which is in pari materia with the provisions of section 391 of the Act. Section 18(6A) is to the following effect: "18.(6A) Where a sanctioned scheme provides for the transfer of any property or liability of the sick industrial company in favour of any other company or person or where such scheme provides for the transfer of any property or liability of any other company or person in favour of the sick industrial company, then, by virtue of, and to the extent provided in, the scheme, on and from the date of coming into operation of the sanctioned scheme or any provision thereof, the property shall be transferred to, and vest in, and the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lgamation is not chargeable with any stamp duty as the said transaction does not fall within the ambit of section 2(14) of the Indian Stamp Act. . . . (20)Both in the case of amalgamation under the Act, as well as in the case of any scheme under the BIFR, the transfer is not effected on the act of parties, but it is by operation of law. It is an involuntary transfer which takes place as soon as the statutory authority, namely, the BIFR passes the order." 6.17 As noted by the Madras High Court, on this aspect the Bombay High Court had taken a different view. The scheme of the Act also shows transfer of assets and liabilities on effectuation of a scheme of amalgamation consequent upon its approval has no element of compulsion. The scheme is proposed voluntarily. It is based on the consent and wishes of the majority of the members and creditors. The objection and intendment of the provisions of the SICA has no parity with purpose of sections 392-394 the Act. As noticed above, the Supreme Court has in clear terms held that the scheme for amalgamation involves no adjudication and is based on consent without any nuance or element of compulsion. The principles laid down by the Apex Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to have statutory operation. 6.21 Placing reliance on the principles laid down in the above case on the scope of the proceedings under section 391 of the Act, in para 32 of the pronouncement at Garware Polyster Ltd.'s case (supra), the Supreme Court held that the Court would not grant sanction to a proposed scheme only because the same reflects the will of the majority of the creditors or a class of them but it must consider all aspects of the matter so as to arrive at a finding that the scheme is fair, just and reasonable and does not contravene public policy or any statutory provision. The Supreme Court held that such care and caution is required to be exercised by all Courts including the civil courts in terms of rule 1 of the Order XXIII, of the CPC. This pronouncement also does not state that there is any adjudication by the Court on the merits or demerits of the proposed scheme and only emphasises the limited scope of the enquiry by the Court. 6.22 I am unable to find any conflict between the consideration by the Apex Court in the Hindustan Lever's case (supra) and the prior judgments so far as the scope and ambit of the consideration by a Court of a scheme for amalgamatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ands on a special footing, is exempted from the legal consequences of transfer of property and that it cannot be subjected to stamp duty. The applicants' submission is that an order of a Court cannot be subjected to scrutiny or interference by the revenue authorities. 7.2 In General Radio & Appliances Co. Ltd. v. M.A. Khader [1986] 2 SCC 656, the Court was concerned with a petition by a landlord seeking eviction of a tenant company on the ground of subletting. The question raised was as to whether the amalgamation amounted to a transfer of the tenant company's rights under the lease by way of subletting. The Court came to a conclusion that the order of amalgamation had been made on the basis of a petition filed by the transferor-company and, therefore, was not involuntary. It was held to be a voluntary act by agreement between the parties. The Apex Court, therefore, held that it had to be concluded that there was a transfer of tenancy interest on account of the scheme of amalgamation in utter contravention of the provisions of the Rent Act and the terms and conditions of the rent agreement between the landlord and the General Radio & Appliances Co. Ltd.'s case (supra ). 7.3 Mr. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o-owners of any property divide or agree to divide such property in severalty, and includes also a final order for effecting a partition passed by any revenue authority or any civil court and an award by an arbitrator directing a partition. This provision specifically provides that any final order effecting partition by any Court, revenue authority or award made by the arbitrator directing partition would be an instrument of partition. . . . 27. Section 394(2) of the Act provides that the properties and liabilities of the transferor-company stand transferred to the transferee-company by virtue of an order of Court. . . . 30. A document creating or transferring a right is an instrument. Can it be said that an order effectuating the transfer is a document? The answer has been given in the affirmative by this Court in Haji Sk. Subhan v. Madhorao AIR 1962 SC 1230, wherein it was held that the question is whether the word "document" includes a decree of the Court. It was held that there was no good reason why a decree of the Court when it affects the proprietary rights and is in relation to them should not be included in this expression. This question more pointedly arose before this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having regard to the applicable statute in Maharashtra or other States and cannot govern adjudication in the instant case. It is contended that there are no statutory provisions in the Indian Stamp Act, 1899 applicable to Delhi which are in pari materia to section 2(g)(iv ) of the Bombay Stamp Act. It is also emphasised that the Bombay Stamp Act, 1985 is not in pari materia and, therefore, the judgments which decide issues relating to this enactment would have no application to the instant case. 7.7 There can be no dispute with the well-settled principle that a judicial precedent requires to be considered in the light of the issues which were before the Court passing the judgment. It also needs no elaboration that statutes which are not in pari materia cannot be compared. 8. Inclusive definition clauses - Interpretation 8.1 In view of the distinction being drawn on behalf of the petitioners, it become essential to consider the statutory definitions before proceeding further. 8.2 Section 2(10) of the Indian Stamp Act, 1899 contains an inclusive definition of 'conveyance'. Interpretation of an inclusive definition clause in statutes has fallen for consideration in several cases b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e a useful aid in construing the earlier provision, even though such an amendment is not given a retrospective effect. 8.8 The legal position was summarised by the Supreme Court in Karnataka Power Transmission Corpn. Ltd. v. Ashok Iron Works (P.) Ltd. AIR 2009 SC 1905 (para 13) and it was stated that the inclusive definition by the legislation is used for the following purposes : ". . . (one) to enlarge the meaning of words or phrases so as to take in the ordinary popular and natural sense of the words and also the sense which the statute wishes to attribute to it; (two) to include meaning about which there might be some dispute; (three) to bring under one nomenclature all transactions possessing certain similar features but going under different names." 8.9 From the above, it is evident that a legislative omission to mention a subject or item in an inclusive definition does not tantamount to legislative exclusion or exemption from applicability of the statutory provisions. 8.10 So far as the amendment and inclusion of sub-clause (iv) in section 2(g) of the Bombay Stamp Act is concerned, the impact of the specific inclusion of the scheme of amalgamation in the Act has been cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efined under section 2(l ) of the Act which is another inclusive definition and opens with the words that "instrument includes every document." 8.15 In M. S. Builders (P.) Ltd.'s case (supra), an argument was laid before the Court by the respondents that the decree put a seal of the Court on the position existing in law as to the legal status of the respondents; that it formally expresses such rights; that wherever the Legislature intended to include a final order of the civil court to be covered under the provisions of the Act, it had specifically provided so. In this behalf, it was argued that 'instrument of partition' in section 2(m) of the Bombay Stamp Act was specifically included by the Legislature; and that there was no statutory provision including a consent decree within the scope of 'conveyance' as defined under section 2(g) of the Act or by the definition of the word 'instrument'. It is noteworthy that the Division Bench rejected all these contentions after a detailed consideration. 8.16 In the judgment reported at entitled Ruby Sales & Services (P.) Ltd.'s case (supra), the Supreme Court was considering the inclusion of a consent decree within the definition of the 'c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws that the definitions are very wide. It appears to us that the amendment was made out of abundant caution and it does not mean that the consent decree was not otherwise covered by the definitions given in section 2(g) or 2(l) of the Act. As stated earlier it depends on the terms thereof. Merely because an agreement is put in the shape of a consent decree it does not change the contents of the document. It remains an agreement and it is subject to all rights and liabilities which any agreement may suffer. Having a stamp of Court affixed will not change the nature of the document. A compromise decree does not stand on a higher footing than the agreement which preceded it. A consent decree is a mere creature of the agreement on which it is founded and is liable to be set aside on any of the grounds which will invalidate the agreement.' 8.18 In Li Taka Pharmaceuticals Ltd.'s case (supra ) on this very aspect the Bombay High Court had ruled as follows : '4. Clause (g)( iii), which is added by the Maharashtra Act No. 27 of 1985 which has come into operation from 10th December, 1985, provides that conveyance includes every decree or final order of any civil court. Clause (g)( iv) is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ombay Stamp Act, 1985, the clear legal principles laid in such pronouncements would have no application to the instant case. 8.21 The very reasoning noticed hereinabove applies to the present consideration. 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. The statutory definition of "conveyance" under sub-section (10) of section 2 is an inclusive definition of wide import which cannot be confined to specific instruments mentioned in the statute. 8.22 The contention on behalf of the petitioner that the failure of the Legislature to specifically include the order sanctioning a scheme of amalgamation in the definition of "instrument" or "conveyance" in the Indian Stamp Act manifests an intent to exclude it from applicability of the statutory provisions is, therefore, devoid of legal merit and has to be rejected. 8.23 The salutary principle pressed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt within the meaning of section 2(l ). The said instrument is on the basis of agreement or arrangement between two or more companies. By the said instrument, properties are transferred. . . . 10. Re : Contention (a ) : Mr. Andhyarujina vehemently submitted that if Court decrees and instruments are included and considered as conveyances, then, the result would be a startling one and that every order passed by this Court or the Supreme Court or the civil court would be subject to interference by the revenue authorities and would not be admissible under section 34 of the Bombay Stamps Act unless it is duly stamped. The consequence would be that there will be inroads in judicial orders passed by the Courts. He contended that once the Court passes an order or a decree, it is required to be implemented or executed and its execution or implementation cannot be subjected to payment of duty. He further pointed out that this would be in direct violation of article 142 of the Constitution which provides that every decree or order passed by the Supreme Court shall be enforceable throughout the territory of India in such manner as may be prescribed by or under any law made by Parliament. 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t cannot be termed an instrument or a document unless it ratifies the act of the parties. As discussed above, the foundation of an order under section 394 of the Act is a compromise or arrangement between two or more companies and it involves transfer of assets and liabilities of one company to the other company. The proviso to sub-section (1) of section 394 provides that the Court can sanction the scheme if the affairs of the company have not been conducted in a manner prejudicial to the interests of its members or to public interest. The transfer of the assets of a transferor-company is based upon the compromise and while sanctioning the scheme the Court is not substituting or changing the compromise or arrangement. It only verifies whether it is a lawful act and is in accordance with the prescribed procedure. . . . 20. . . . The Legislature is not making any direct or indirect inroads into the judicial powers. It has only provided that if an instrument including an order passed by the Court transfers movable or immovable property, then on the same instrument, stamp duty as provided under the Act is required to be paid. This cannot be stated to be in any manner making direct inr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransferee-company along with all its assets and liabilities. Thus, the amalgamation scheme sanctioned by the Court would be an "instrument" within the meaning of section 2(l). By the said "instrument" the properties are transferred from the transferor-company to the transferee-company, the basis of which is the compromise or arrangement arrived at between the two companies.' 8.28 It is well-settled, that a document creating or transferring a right in immovable property is an 'instrument'. Before this Court, it was stated by Mr. P.V. Kapoor, learned senior counsel for the petitioner, that he does not dispute that a scheme of amalgamation which was placed before the Court and stands approved under sections 391 to 394 of the Act would be covered under the definition of 'instrument' as contained in sub-section (14) of section 2. For this reason as well it would be chargeable to stamp duty. 8.29 In Hindustan Lever's case (supra), the Apex Court observed that in Ruby Sales & Services (P.) Ltd.'s case (supra), the Court was of the opinion that the consent decree which purports to convey the title in the property was an instrument liable for stamp duty at all times and it was only by way ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act is based upon a compromise between two or more companies. The scheme has to be sanctioned by the Court as per the compromise arrived at between the parties if the same is lawful and the company court is satisfied that the affairs of the company were not conducted in a manner prejudicial to the interests of its members or to public interest, that is to say, it should not be unfair or contrary to public policy or unconscionable. It has been unequi-vocally held that the same is an instrument which transfers the properties. 9. To conclude 9.1 The pronouncement of the Apex Court in Hindustan Lever's case (supra) was not placed before the Calcutta High Court which considered Madhu Intra Ltd.'s case (supra). In addition thereto, the discussion of the impact of the amendment to the definition of the term 'conveyance' in the Bombay Stamp Act in Hindustan Lever's case (supra); Li Taka Pharmaceutical Ltd.'s case (supra ) and Ruby Sales & Services (P.) Ltd.'s case (supra ) was also not brought to the notice of the Court. The Apex Court has held that amendment to the Bombay Stamp Act was merely on account of abundant caution. 9.2 The consistent view of the Supreme Court is that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t important principle which emerges is that it would be immaterial for chargeability to stamp duty that approval and effectuation of the scheme or arrangement required Court intervention by way of the necessary approval. 9.6 Thus, for the purposes of imposition of stamp duty, it would be immaterial as to whether the conveyance was by operation of law, statutory operation, or by virtue of a private contract between parties. Exemption has to be by specific statutory provision. 9.7 The order approving the scheme for amalgamation passed by the company court in exercise of jurisdiction under sub-section (2) of section 394 which have the impact of transferring of all assets and liabilities including the property of the transferor-company to the transferee company would be, therefore, exigible to stamp duty under the Indian Stamp Duty Act. 10. Is transfer of property under an approved scheme of amalgamation not an inter vivos transfer of interest under section 5 of the Transfer of Property Act, 1882 and, therefore, not covered under the sub-section (10) of section 2 of the Stamp Duty Act defining conveyance? 10.1 Mr. P.V. Kapoor, learned senior counsel for the petitioner, has laid gre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is noteworthy, that the expression 'inter vivos' is not statutorily defined in the Indian Stamp Act or in any other statutory provision. This expression would, therefore, derive its meaning from the meaning given to it in common parlance which is to be found in several dictionaries. 10.6 Learned senior counsel for the applicant has pointed out in the judgment at T.K. Lathika's case (supra). In para 16, the Supreme Court has placed reliance on the definition of the expression "inter vivos" given in the Black's Law Dictionary while deciding on the question as to whether a moratorium of one year on filing of an eviction petition by a transferee-landlord would apply to a tenanted premises which were gifted by the original landlord to his daughter who was thereby a transferee-landlord. It was held that :- '16. Assuming that Ext. A.1 has created a new lease after terminating the erstwhile lease, the difficulty is that the grip of the ban contained in the third proviso would still continue to foreclose the landlord from filing the petition for a period of one year from the new lease deed. This is because "the landlord's right to recover possession" would then arise under that instrumen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility is purported to be created and transferred in praesenti. It takes effect instantaneously and its operation is not postponed to a later point in time and has been held to be covered under the definition of 'instrument' under section 2(l) of the Bombay Stamp Act. So far as the persons between whom it takes effect is concerned, in para 14 of the judgment, it was held that it is a live document and taking effect between persons who may be natural or artificial, who are alive at the relevant time, which would make the transaction or transfer 'inter vivos'. It was held that this would be well within the inclusive part of the definition of 'conveyance' and 'instrument' as they existed prior to 1985 and are sufficient and substantial enough, to take in its form and forceful grip the 'consent decree', albeit brought about by a use, or even abuse of the process of law. 10.9 In para 45 of the pronouncement in Hindustan Lever's case (supra), on this issue the Court clearly observed as follows :- '45. It was contended that since the transaction was not between the "living beings", the same was not "inter vivos" as the transfer of property had not taken place between the living beings. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e restricted to only a natural person and would not include a juristic entity or an artificial person. 10.12 It, therefore, has to be held that a transfer inter vivos would include a transfer in praesenti between persons who are in existence at the time of the transfer. Such person would take into its ambit not only natural persons but artificial persons including juristic persons. A company incorporated under the provisions of the Act is a juristic person created artificially in the eyes of law which admittedly is owning and transferring the property. 10.13 Accordingly, it is held that an approved scheme of amalgamation amounts to a transfer inter vivos between two companies who were juristic persons in existence at the time of passing of the order and sanctioning of the scheme whereby right, title and interest in the immovable property of the transferor-company are transferred to the transferee-company. The transfer takes place in the present and is not postponed to any later date and is covered under the definition of 'conveyance' under sub-section (10) of section 2 of the Stamp Act. 11. No valuation of property transferred and basis for assessment 11.1 Learned senior counse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d which is valued at a particular amount and that valuation would be on the basis of share exchange ratio. . . . 33. . . . In this view of the matter, we hold that normally in a case of amalgamation of a scheme sanctioned by the High Court, its consideration under article 25(1) of Schedule I to the Stamp Act should be based on its valuation arrived at on the basis of shares allotted by the transferee-company to the transferor- company. In the case of Hindustan Lever Employee's Union v. Hindustan Lever Ltd. [1995] 83 Comp. Cas. 30 (SC) at the time of making valuation of the share exchange ratio, the Court itself took into consideration the valuation report based on three well-known methods, viz., (i) the net worth method, (ii) the market value method, and (iii) the earning method. It is also established that the quotation of shares in the share market provides a larger reliable index of the assets of the company. 34. Hence, we accept the contention of learned counsel for the petitioners that valuation under article 25(1) of Schedule I on the instrument of the amalgamation scheme sanctioned by the Court, after due verification, is to be determined by the stamp authority only on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter the transfer of property. 12.3 The first Notification placed before this Court reads as follows :- "Notification No. 1, dated the 16th January, 1937.-In exercise of the powers conferred by clause (a) of section 9 of the Indian Stamp Act, 1899 (II of 1899), the Governor General in Council is pleased to remit the stamp duty chargeable under articles 23 and 62 of Schedule I to the said Act on instruments evidencing transfer of property between companies limited by shares as defined in the Indian Companies Act, 1913, in cases- (i )where at least 90 per cent of the issued share capital of the transferee-company is in the beneficial ownership of the transferor-company, or (ii )where the transfer takes place between a parent company and a subsidiary company one of which is the beneficial owner of not less than 90 per cent of the issued share capital of the other, or (iii)where the transfer takes place between two subsidiary companies of each of which not less than 90 per cent of the share capital is in the beneficial ownership of a common parent company : Provided that in each case a certificate is obtained by the parties from the officer appointed in this behalf by the local Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tue of the amendment of 1991, article 239AA was incorporated to make special provisions with regard to Delhi which was renamed as the National Capital Territory as a result thereof. 12.6 By virtue of the Constitution (Sixty-ninth Amendment) Act, 1991 (with effect from 1-2-1992) a special provision by way of article 239AA was incorporated in Part VIII of the Constitution whereby, special provisions with respect to Delhi were made. Delhi was renamed as the National Capital Territory as a result thereof. The relevant portion thereof reads as follows :- "239AA. Special provisions with respect to Delhi.-(1) As from the date of commencement of the Constitution (Sixty-ninth Amendment) Act, 1991 the Union Territory of Delhi shall be called the National Capital Territory and the administrator thereof appointed under article 239 shall be designated as the Lieutenant Governor. (2)(a) There shall be a Legislative Assembly for the National Capital Territory of Delhi and the seats in such Assembly shall be filled by members chosen by direct election from territorial constituencies in the National Capital Territory.... (3)(a) Subject to the provisions of the Constitution, the Legislative Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n List I in the Seventh Schedule (in this Constitution referred to as the Union List). (2) Notwithstanding anything in clause (3), Parliament, and, subject to clause (1), the Legislature of any State also, have power to make laws with respect to any of the matters enumerated in List III in the Seventh Schedule (in this Constitution referred to as the Concurrent List). . . . (4) Parliament has power to make laws with respect to any matter for any part of the territory of India not included (in a State) notwithstanding that such matter is a matter enumerated in the State List." Clause (4) of article 246 of the Constitution of India, therefore, empowers the Parliament to make laws with respect to any matter for any part of the territory of India not included in a State, notwithstanding that such matter is enumerated in the State List. Legislation in respect of the Union Territory would be such matter. These constitutional provisions, thus, set out in clear terms the legislative competence of the Parliament to legislate with respect to Delhi. 12.10 In exercise of powers under article 239AA of the Constitution, the Parliament passed the Government of National Capital Territory of De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act in some detail and held as follows :- '10. By the Constitution (Sixty-ninth Amendment) Act, 1991, article 239AA was introduced in Part VIII of the Constitution. This article renamed the Union Territory of Delhi as the "National Capital Territory of Delhi" and provided that there shall be a Legislative Assembly for such National Capital Territory. The Legislative Assembly so created was empowered by clause (3) of the said article "to make laws for the whole or any part of the National Capital Territory with respect to any of the matters enumerated in the State List or in the Concurrent List insofar as any such matter is applicable to Union Territories except matters with respect to Entries 1, 2 and 18 of the State List and Entries 64, 65 and 66 of that List insofar as they relate to the said Entries 1, 2 and 18". Clause (3) further provided that the power conferred upon the Legislative Assembly of Delhi by the said article shall not derogate from the powers of Parliament "to make laws with respect to any matter for a Union Territory or any part thereof". It further provided that in the case of repugnancy, the law made by Parliament shall prevail, whether the parliamentary law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ab Courts Act was only extended to Delhi, it has the status of a central legislation specifically enacted for Delhi. The Apex Court held that on extension of the applicability of the Act of 1918 to the Union Territory of Delhi, it becomes a Central enactment or an Act of the Parliament as it is made in exercise of powers of the Parliament to legislate for the Union Territory of Delhi by virtue of clause (4) of article 246 of the Constitution. Therefore, this Act of 1918 assumes the position of a central legislation enacted specifically for Delhi and is the law operative in the National Capital Territory ('NCT' of Delhi). The Apex Court further held that any legislation passed by the State Legislative Assembly is always subordinate to the laws of the Parliament, whether passed prior to or after the enactment of the Central legislation and that article 239AA(3)(b) and (c) limited the power of the State Legislature. In this regard, it was held as follows :- "52. The power to legislate to the Legislative Assembly of Delhi shall not supersede the powers of Parliament to make laws with respect to any matter for Union Territory or any part thereof. If any provision made by the Legislativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority, have effect subject to the adaptation and modifications directed by those Schedules on if it is so directed shall stand repealed. . . ." 12.17 It is further contended that after the coming into force of the Constitution of India, amendments have been effected to section 9(1) of the Indian Stamp Act, 1899 (vide AO 1950) which reads as follows : "9. Power to reduce, remit or compound duties.-(1) The Government may, by rule, or order published in the Official Gazette,- (a )reduce or remit, whether prospectively or retrospectively, in the whole or any part of the territories under its administration, the duties with which any instruments or any particular class of instruments, or any of the instruments belonging to such class, or any instruments when executed by or in favour of any particular class of persons, by or in favour of any members of such class, are chargeable, and (b )provide for the composition or consolidation of duties of policies of insurance and in the case of issues by any incorporated company or other body corporate or of transfers (where there is a single transferee, whether incorporated or not) of debentures, bonds or other marketable securities. (2) I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce on Entry 44 of List III. These entries read as follows : "Entry 91 of List I.-Rates of stamp duty in respect of bills of exchange, cheques, promissory notes, bills of lading, letters of credit, policies of insurance, transfer of shares, debentures, proxies and receipts. Entry 63 of List II.-Rates of stamp duty in respect of documents other than those specified in the provisions of List I with regard to rates of stamp duty. Entry 44 of List III.-Stamp duties other than duties or fees collected by means of judicial stamps, but not including rates of stamp duty." 12.20 The power to prescribe the rate of stamp duty is, thus, divided between the exclusive jurisdiction of the Union, as specified in Entry 91 of List I and the State Government stands empowered to legislate with regard to other instruments under Entry 63 of List II. Entry 91 of List I confines the power of the Centre to legislate rates of stamp duty in respect of bills of exchange, promissory notes, cheques, etc.-Ref. : Hindustan Lever's case (supra) (para 38 at p. 459). Entry 63 of List II empowers the State Legislature to prescribe rates of stamp duty in respect of documents other than those specified in the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Legislative Assembly of the State of Maharashtra vis-a-vis the position of the Delhi Legislative Assembly. It also fails to consider the constitutional conferment of a special status upon the National Capital Region of Delhi and the supremacy of the Parliament under article 239AA(3)(b) and article 246(4) to legislate on all matters concerning Delhi. These two factors render the observations of the Apex Court in Hindustan Lever's case (supra) on the issue of the legislative competency of the State Government with regard to the subject-matter inapplicable to the issue under examination in the present case. 12.23 Section 3(60)(c ) of the General Clauses Act, 1897 also lays down, that so far as Union territories are concerned, the expression 'State Government' means the 'Central Government'. The expression so occurring in section 9 of the Stamp Act, in the context of Union Territories including Delhi, has also to be so construed and would mean the Central Government. 12.24 The Notification dated 16-1-1937 was enacted by the Governor General in Council. Sub-section (8) of section 3 of the General Clauses Act, 1897 defines the expression 'Central Government' in relation to anyt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the question as regards its constitutionality will, therefore, have to be judged as being law in force at the commencement of the Constitution of India - see Keshavan Madhava Menon v. The State of Bombay MANU/SC/0020/1951/[1951] Crl. LJ 680. By reason of clause (1) of article 13 of the Constitution of India, in the event, it be held that the provision is unconstitutional the same having regard to the prospective nature would be void only with effect from the commencement of the Constitution. Article 372 of the Constitution of India per force does not make a pre-constitution statutory provision to be constitutional. It merely makes a provision for the applicability and enforceability of pre-Constitution laws subject of course to the provisions of the Constitution and until they are altered, repealed or amended by a competent Legislature or other competent authorities." 13.4 In view of the provisions of article 372, this Notification of 1937 would be a law in force as on the date of the Constitution coming into force. 13.5 It is an admitted position that the Notification of 1937 has not been superseded by any law made either by the Parliament or by the State Government. Learned c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Constitution would continue under article 372(1) and could be adapted under the second clause of that article. Mr. Chatterjee argues that article 372 has no application to the present case inasmuch as the order made by the Central Government under section 94(3) of the Government of India Act could not be regarded as "a law in force" within the meaning of article 372. A distinction is sought to be made by the learned counsel between an "existing law" as defined in article 366(10) and a "law in force" and it is argued that though an "order" can come within the definition of "existing law", it cannot be included within the expression "law in force" as used in article 372. It is argued next that even if the word "law" is wide enough to include an order, that order must be a legislative and not a mere executive order promulgated by an administrative authority, and in support of this contention, the learned counsel has relied on a number of cases decided by the Privy Council and the different High Courts in India. 14. The first point does not impress us much and we do not think that there is any material difference between "an existing law" and "a law in force". Quite apart from artic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as if it were a rule, order or instrument of the appropriate kind duly made by the appropriate authority under the said provision of the Constitution, and may be varied or revoked accordingly'." 13.7 A similar contention on behalf of the petitioner was rejected by the Apex Court in the pronouncement of the Apex Court as M.G. Desai's case (supra) holding that : "15. There is no substance in the contention that in the absence of adaptations which the President of India is competent to make under clause (2) of article 372, the Bhor State Ordinance lapsed. By clause (2) of article 372, the President is authorised to adapt existing laws but the application of the existing laws is not conditioned by the making of adaptations or modifications in that law by the President." 13.8 A pronouncement of the High Court of Andhra Pradesh which throws valuable light on this issue is reported as Putta Ranganayakullu's case (supra) wherein the Full Bench of the Andhra Pradesh High Court held, thus : '10. The Supreme Court in Edward Mills Co. v. State of Ajmer [1955] SC 25 (S)/AIR V 42(A) considered the scope of Explanation I. There, it was argued that the Government of India Act stood repealed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bjection to the legislative competence of the law-making authority has to be examined on the legislative competence and assignment of authority and power at the time the Law/notification was made. Before me, it is not the submission of learned counsel for the respondent that the Notifications of 1937 are bad for legislative incompetence. 13.11 So far as the Government of NCT of Delhi is concerned, it has been held hereinabove that the Central Government has the legislative competence to legislate on the issue of stamp duty. No legislation by the State Government with regard to the rate of stamp duty on the instrument in question has been pointed out. 14. Notifications of 1937 do not apply to an order of approval made under Act 14.1 It was lastly submitted that the Notifications dated 16-1-1937 and 25-12-1937 refers to the Indian Companies Act of 1913 and would not apply to a scheme of amalgamation which has been approved by this Court in exercise of jurisdiction under the Act. 14.2 This submission fails to take into consideration the provisions of section 649 of the Act which provided that : "649. Construction of references to former enactments in documents.-Any document refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er approving the scheme is filed with the RoC. The scheme has notified the appointed date as 15-11-2002. Para 2.11 of the scheme states that the transferor-company stands dissolved on the effective date. The transfer of assets is to be effected on the appointed date when the companies are in existence and effective. 15.4 Learned senior counsel for the petitioner has drawn my attention to a pronouncement of this Court reported at Sandy Estates Ltd. v. Landbase India Ltd. [1997] VI AD (Delhi) 981 wherein the question as to whether stamp duty is leviable on a transfer of assets by a scheme of amalgamation proposed between a hundred per cent owned subsidiary company with its parent company. The applicant before this Court had placed reliance on the notification dated 16-1-1937. The Court held as follows : "18. My attention has also been drawn by the counsel appearing for the petitioners to the contents of a Notification on 16th January, 1937 and published in the Gazette of India 1937 as Part I, p. 78. Under the said notification, it was notified that in exercise of the powers conferred by clause (A ) of section 9 of the Indian Stamp Act, the Governor General in Council was pleased to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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