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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 ..... rned authorities shall ensure that proceedings in the matter are concluded and an appropriate order passed within four weeks. This application is allowed to the above extent and terms. - CA NO. 466 OF 2008 IN CP NO. 50 OF 2003 - - - Dated:- 1-12-2009 - MS. GITA MITTAL, J. P.V. Kapur, Deepak Diwan, Sumit Garg and Ms. Chetna Gulati for the Petitioner. Rohit Madan and Aditya Madan for the Respondent. JUDGMENT 1. By this judgment, I propose to decide an application being CA No. 466/2008 filed by the Delhi Towers Ltd. The applicant is aggrieved by refusal of the authorities of the Government of NCT of Delhi to accept the scheme of amalgamation approved by this Court in exercise of jurisdiction under section 394 of the Companies Act, 1956 ( the Act ) without payment of stamp duty. 2. Factual narration 2.1 The essential facts, necessary for the adjudication are noticed here-after. Fifteen transferor-companies incorporated under the provisions of the Act, engaged in the business of real estate, proposed to merge with the "Delhi Towers Ltd.", also incorporated under the same statute ( the transferee-company/applicant ). These transferor-companies are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions, including charges, liens and mortgages of the transferor-companies as on the transfer date." 2.5 A prayer of the applicant for substituting a revised schedule relating to four of the transferor-companies was granted on 19-3-2008 whereby a correction of the order dated 26-3-2003 was allowed and the corrected revised schedules were taken on record. 2.6 The applicant contends that upon the scheme becoming effective, it made an application to the Tehsildar, Vasant Vihar, Kapashera, New Delhi having jurisdiction over the properties of company, on 19-5-2007 to effect mutation of the same in its records in favour of the transferee/applicant-company. Despite repeated requests, the Tehsildar of the Government of NCT of Delhi has not effected the mutation of the properties in favour of the transferee-company under the scheme of amalgamation. It is urged that the stamping authorities are not accepting the scheme of amalgamation without payment of stamp duty thereon. The present application has been filed at the instance of the Delhi Towers Ltd. the transferee-company for this reason. Rival contentions 3. Contentions of the applicant 3.1 The primary contention of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, Karnataka, Rajasthan, Chhattisgarh, Madhya Pradesh and Andhra Pradesh are the only seven States which have included the order approving a scheme of amalgamation passed under section 394 of the Act in the definition of conveyance . 3.3 It is pointed out that under sub-section (15) of section 2 of the Indian Stamp Act, the Legislature has specifically included a final order effecting a partition passed by the revenue authority or by the civil court and an award passed by the civil court directing partition under the definition of instrument of partition . However, there is no mention of transfer of rights under a scheme of amalgamation propounded and approved under the provisions of sections 391 to 394 of the Act. 3.4 The primary submission on behalf of the petitioner is that the legislation has not included a transfer by an approved scheme of amalgamation under sections 391-394 of the Act under the definition of either conveyance or instrument unlike the specific amendments including the same by some other States. The legislative intent, therefore, is to exclude them from the purview of stamping. The contention of the applicant is that such an order has not been inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate on the issue is taken. It is contended that in view of constitutional scheme of separation of powers, only the legislative assembly of Delhi is competent to legislate on the issue. For this reason the Notification of 1937 have no application. 5. Statutory provisions 5.1 So far as the legislation in Delhi is concerned, there is no special enactment relating to stamp duty. The Indian Stamp Act continues to hold the field. 5.2 Conveyance is statutorily defined under sub-section (10) of section 2 of the Indian Stamp Act as follows : (10) "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 I. The expression instrument is defined under sub-section (14) of section 2 of the Indian Stamp Act in the following manner : (14) "instrument" includes every document by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or recorded ; 5.3 It is noteworthy that the definition of conveyance under section 2( g ) of the Bombay Stamp Act came to be amended by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to stamp duty under the provisions of the Indian Stamp Act. It is, therefore, first necessary to examine the nature and impact of an order passed under section 394 of the Act. 6.3 Sanction of the scheme of amalgamation is effected under section 394 of the Act which provides as follows : 394. Provisions for facilitating reconstruction and amalgamation of companies. (1) Where an application is made to the Tribunal under section 391 for the sanctioning of a compromise or arrangement proposed between a company and any such persons as are mentioned in that section, and it is shown to the Tribunal ( a )that the compromise or arrangement has been proposed for the purposes of, or in connection with, a scheme for the reconstruction of any company or companies, or the amalgamation of any two or more companies ; and ( b )that under the scheme the whole or any part of the undertaking, property or liabilities of any company concerned in the scheme ("transferor-company") is to be transferred to another company ("the transferee-company"); the Tribunal may, either by the order sanctioning the compromise or arrangement or by a subsequent order, make provision for all or any of the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Amalgamation of a company with another or an amalgamation of two companies to form a third is brought about by two parallel schemes of arrangements entered into between one company and its members and the other company and its members and the two separate arrangements bind all the members of the companies and the companies when sanctioned by the court. 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 - J.K. (Bombay) (P.) Ltd. v. New Kaiser-i-Hind Spg. Wvg. Co. Ltd. [1970] 40 Comp. Cas. 689 (SC). Once the Court sanctions the amalgamation, the amalgamation is made effective and binding by virtue of statutory power, inter alia, by the transferor to the transferee-company of the whole or any part of the undertaking, property rights and liabilities of the transferor-company by virtue of the provisions of sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to exist, but because for all practical purposes, it has merged into another forming part of one corporate shell. The dissolution is the death of its independent corporate shell, because a company cannot have two shells. It is, therefore, dissolved because the independent shell or corporate name is superfluous. The company in its essence means its members, who compose it, the assets, property and rights that it had, its liabilities, its undertaking, business or other activity. It is not synonymous with the shell or name. On amalgamation and consequential dissolution all these attributes continue to live as part of a larger entity. The only part that dies is the shell and the name. It is unlike the death of a natural person and yet in a larger and deeper sense the same. It is unlike it, because a natural person, as ordinarily understood, does not survive the death in any physical form. The transferor-company, however, does survive, in that there is a continuity even after dissolution of its members, its assets, undertaking, etc. The estate of a natural person continues in the hands of the successor for a limited period. In a larger and a deeper sense even a natural person survive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad held that : 51. In the case of Bombay, the law has been amended so as to include orders made under section 394 of the aforesaid Act within the definition of "conveyance" in the Bombay Stamp Act. The ratio of the decision in the Ruby Sales Services (P.) Ltd. ( supra ) case, cannot, also, in our view, be generally applied to all orders under section 394 of the Act, since the said decision was based on the consideration that the parties had themselves agreed on the basis of the consent decree that the order under section 394 was to operate as a "conveyance" for transfer of the assets and liabilities of the transferor-company to the transferee-company. It should not be lost sight of that in the case of Ruby Sales Services (P.) Ltd. ( supra ), the learned Single Judge of the Bombay High Court, following a Full Bench decision of the same Court had come to the conclusion that an order under section 394 was not liable to stamp duty. The Division Bench took a contrary view on account of the fact that in the consent decree itself it had been indicated that the same was to operate as a "conveyance". It is in the said special facts of the case that the decision in Ruby Sales S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Sadanand S. Varde s case ( supra ), a public interest litigation was filed by the petitioners who claimed to be deeply interested in environmental issues assailing construction and developmental activity being undertaken on the Bandra Land End on several issues. The petitioners assailed the amalgamation of the 6th and 9th respondents under sections 391 and 394 of the Act pursuant to the sanction of the scheme of amalgamation vide Company Petition Nos. 442/1992 and 443/1992 by an order made on 3-2-1993 by the learned Company Judge of the Bombay High Court. The petitioner also contested application of Chapter XX-C of the Income-tax Act to the amalgamation. Several earlier pronouncements including the decision of the Full Bench of the Madras High Court in Sahayanidhi (Virudhunagar) Ltd. v. A.R.S. Subrahmanya Nadar [1950] 20 Comp. Cas. 214 ; Telesound India Ltd. s case ( supra ), J.K. (Bom.) (P.) Ltd. s case ( supra ), inter alia, were relied upon by the Bench and it was finally held as follows : ". . . A scrutiny of the definitions of "apparent consideration" given in clause ( b ) and "transfer" given in clause ( f ) would unmistakably indicate that the transfers to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gets satisfied about the same. (6)That the proposed scheme of compromise and arrangement is not found to be violative of any provision of law and is not unconscionable, nor contrary to public policy. For ascertaining the real purpose underlying the scheme with a view to be satisfied on this aspect, the Court, if necessary, can pierce the veil of apparent corporate purpose underlying the scheme and can judiciously X-ray the same. (7)That the company court has also to satisfy itself that members or class of members or creditors or class of creditors, as the case may be, were acting bona fide and in good faith and were not coercing the minority in order to promote any interest adverse to that of the latter comprising the same class whom they purported to represent. (8)That the scheme as a whole is also found to be just, fair and reasonable from the point of view of prudent men of business taking a commercial decision beneficial to the class represented by them for whom the scheme is meant. (9)Once the aforesaid broad parameters about the requirements of a scheme for getting sanction of the Court are found to have been met the Court will have no further jurisdiction to sit i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the legislative competence of the State Legislature to impose stamp duty on the order of amalgamation approved under the Act. The Court considered the principles underlying approval of a scheme of amalgamation brought out in the earlier pronouncement in Miheer H. Mafatlal s case ( supra ) and summed up as follows : "12. Two broad principles underlying a scheme of amalgamation which have been brought out in this judgment are : (1)that the order passed by the Court amalgamating the company is based on a compromise or arrangement arrived at between the parties; and (2)that the jurisdiction of the company court while sanctioning the scheme is supervisory only, i.e., to observe that the procedure set out in the Act is met and complied with and that the proposed scheme of compromise or arrangement is not violative of any provision of law, unconscionable or contrary to public policy." 6.12 On the question being considered, the Court held as follows : "18. It is difficult to subscribe the view propounded by the learned counsels for the appellants. As stated earlier, the order of amalgamation is based on a compromise or an arrangement arrived at between the two companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lows : "9. Section 394 provides that application and order of amalgamation under section 394 is based on compromise or arrangement which has been proposed for the purpose of amalgamation of two or more companies. The amalgamation scheme, which is an agreement between the companies is presented before the Court and the Court passes an appropriate order sanctioning the compromise or arrangement. The foundation or the basis for passing an order of amalgamation is agreement between two or more companies. Under the scheme of amalgamation, the whole or any part of the undertaking, properties or liability of any company concerned in the scheme is to be transferred to the other company. The company whose property is transferred would be the transferor-company and the company to whom property is transferred would be considered as the transferee-company. The scheme of amalgamation has its genesis in an agreement between the prescribed majority of shareholders and creditors of the transferor-company with the prescribed majority of shareholders and creditors of the transferee-company. The intended transfer is a voluntary act of the contracting parties. The transfer has all the trappings of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Madras in the pronouncement at T.T. Krishnamachari Co. v. Joint Sub-Registrar-I [2008] 144 Comp. Cas. 708. It was held by the Court that there is automatic transfer and vestiture of title in favour of the said company and so no more document or deed is required to be executed. The Court also observed that the SICA does not provide for execution of any such deed, chargeable with stamp duty. Placing reliance on the pronouncement of the Division Bench of the Calcutta High Court at Madhu Intra Ltd. s case ( supra ), the Madras High Court held as follows : "(14)Section 18(6A) of the Sick Industrial Companies (Special Provisions) Act, 1985 reads as follows : . . . (15)A close reading of the above provision would go to indicate that the BIFR has got such power to pass an order approving the scheme and as soon as such an order is passed by the BIFR, the property shall stand transferred and vested in the company in whose favour the scheme provides for such transfer. Thus, transfer of title in favour of TTK Prestige Ltd., has been effected, by operation of law as per section 18(6A) of the SICA. There is automatic transfer and vestiture of title in favour of the said company and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etween the parties ; it becomes binding on the company, the creditors and the shareholders and has statutory force, and, therefore, the joint-debtor could not invoke the principle of accord and satisfaction. By virtue of the provisions of section 391 of the Act, a scheme is statutorily binding even on creditors and shareholders who dissented from or are opposed to its being sanctioned. It has statutory force in that sense and, therefore, cannot be altered except with the sanction of the Court even if the shareholders and the creditors acquiesce in such alteration ( cf. Premila Devi v. Peoples Bank ). The effect of the scheme is "to supply by recourse to the procedure thereby prescribed the absence of that individual agreement by every member of the class to be bound by the scheme which would otherwise be necessary to give it validity" ( Palmer s Company Law, 20th edn., p. 664). Sub-section (2) of section 391 of the Act allows the decision of the majority prescribed therein to bind the minority of creditors and shareholders and it is for that reason that a scheme is said to have statutory operation and cannot be varied by the shareholders or the creditors unless such variation is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... precedents that have held that the Court is empowered to consider the merits of the terms on which the scheme for amalgamation has been proposed by the consenting parties. On the contrary statutory provisions mandate and judicial precedents have held that even a modification suggested by the court is required to have the approval of the shareholders and the creditors before it can be incorporated in the scheme. No adjudication is involved. The role of the Court is merely supervisory within the contours of the broad parameters noticed here-inabove without ruling on the merits of the schemes placed before the Court and its consideration is confined to the issue that the scheme was not violative of the principles of law, public policy and, was not opposed to public interest. There is nothing to denigrate from the basic and primary fact that the order of the Court is based on the consent of the parties. The most relevant factor is the undisputable reality that the transfer of property is not an involuntary act of the parties, i.e., the companies involved. The order of approval of the scheme results in amalgamation and absorption of the assets and liabilities of the transferor-compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also stands squarely answered. It is noteworthy, that in its discussion in the Hindustan Lever s case ( supra ), the Apex Court observed in para 19 that orders passed by Courts have been subjected to levy of stamp duty in several situations. The Court considered its earlier pronouncement in Purshottam H. Jadye v. V.B. Potdar AIR 1966 SC 856 wherein it was held that the expression instrument would include an award made by the Industrial Tribunal. Reliance was also placed on Commissioner of Inland Revenue v. G. Angus Co. [1891] XXIII QBD 579 wherein it was held that the term conveyance on sale includes every instrument and every decree or order of any Court or of any Commissioners, whereby any property upon the sale thereof is legally or equitably transferred to or vested in the purchaser or any other person on his behalf or on his directions. It was further held herein 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. 7.5 The Apex Court also referred to Sun Alliance Insurance Ltd. v. Inland Revenue Commissioners [1971] 1 All ER 135 wherein it was held that an order of the Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but which is decisive is by the terms of the document. It is clear from the terms of the consent decree that it is also an "instrument" under which title has been passed over to the appellant/plaintiffs. It is a live document transferring the property in dispute from the defendants to the plaintiffs . The aforesaid decree was based on an agreement between the parties. So is the case with an order under section 394 of the Act which is also based on an agreement between the transferor-company and the transferee-company. . .. 32. In view of the aforesaid discussion, we hold that the order passed by the Court under section 394 of the Act is based upon the compromise between two or more companies. Function of the Court while sanctioning the compromise or arrangement is limited to oversee that the compromise or arrangement arrived at is lawful and that the affairs of the company were not conducted in a manner prejudicial to the interest of its members or to public interest that is to say it should not be unfair or contrary to public policy or unconscionable. Once these things are satisfied the scheme has to be sanctioned as per the compromise arrived at between the parties. It is an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the things that are declared in the interpretation clause to be included - Ref. : Dilworth v. Commission of Stamps 1899 AC 99, 105. 8.4 In Amin Shaiff v. Emperor AIR 1934 Cal. 580, it was stated that the grammatical and ordinary sense of the words is to be adhered to, unless that would lead to some absurdity, or repugnance or inconsistency with the rest of the statute, in which case, the grammatical and ordinary sense of the words may be modified, so as to avoid that absurdity, repugnance and inconsistency, but no further ( Beal s Cardinal Rules of Legal Interpretation, 3rd edn., p. 343, et. Seq.). 8.5 The decision of the Supreme Court in Taj Mahal Hotel s case ( supra ) rendered in the context of sub-sections ( 2 ) and ( 5 ) of section 10 of the Income-tax Act provides another instance of an inclusive definition of the word plant . On this provision, in para 6 of the judgment, the Supreme Court observed the impact of the use of the expression "includes" in a definition clause by the Legislature as follows : The word "includes" is often used in interpretation clauses in order to enlarge the meaning of the words or phrases must be construed as comprehending ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conveyance under section 2( g ) of the Bombay Stamp Act, 1958 or such consent decree falls outside the ambit and scope of the definition of "conveyance under the Act. The argument on behalf of the writ petitioner was that the amendment had introduced new provisions by substitution. 8.12 In para 15 of its pronouncement, the Division Bench of the Bombay High Court has clearly held that the amendment introduced to section 2( g ) of the Bombay Stamp Act was merely declaratory and not a remedial one. It was also held that the consent decree which fulfils all requisites of transferring right, title and interest under it in favour of the respondents, is an instrument under section 2( g ) of the Bombay Stamp Act which would be chargeable to stamp duty under entry 25 of Schedule 1 of the Act. On such interpretation of the amendment, it was held that consent decrees which had been passed prior to coming into force of the amendment, were covered under the unamended section 2( g ) and were chargeable to stamp duty. 8.13 The Division Bench of the Bombay High Court placed reliance on two pronouncements of the Supreme Court at Taj Mahal Hotel s case ( supra ) and State of Tamil N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 2( g ) or section 2( l ) of the Stamp Act. It was held by the Supreme Court that it was clear from the consent decree that it also falls within the definition of instrument under which title has passed over to the appellants/plaintiffs. It is a live document transferring the property in dispute from the defendants to the plaintiffs. It was observed by the Apex Court that the position became clear that the consent decree falls under the definition of both "conveyance" and "instrument". Such position was held to exist even prior to the statutory amendment to the Bombay Stamp Act. 8.17 It was observed by the Apex Court that the statutory amendment was made out of abundant caution and it did not mean that a consent decree was not otherwise covered. In paras 11,14 and 15 of the judgment, the Court noticed the submission on behalf of the appellant and observed thereon as follows : 11. There is no particular pleasure in merely going by the label but what is decisive is by the terms of the document. It is clear from the terms of the consent decree that it is also an "instrument" under which title has been passed over to the appellants/plaintiffs. It is a live document transferr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich whether movable or immovable property or asset or interest in any property is transferred to or vested in any other person, inter vivos, and which is not otherwise specifically provided. By adding section 2( g )( iii ), it is made clear that "every instrument" would include a consent decree or final order of any civil court. 8.19 The Supreme Court and High Court of Bombay have held that the amendment to the Bombay Stamp Act by the Maharashtra Act No. 27/1985 was only with a view to set at rest any doubts and to clarify and explicitly state what was already included in the unamended definition of conveyance . The definition of conveyance in the Act was an inclusive definition. The amendments were held to be merely declaratory and by way of a clarification and that the same were not any new statutory provision. There can, therefore, be no manner of doubt, that even if the Legislature had not effected the amendment and included the clause in clause (g) of section 2 of the Bombay Stamp Act, it made no difference to the legal issue at all. A scheme of amalgamation approved by a Court in exercise of jurisdiction under the Act and given effect to thereafter, whereunder prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is no room for any intendment and regard must be had to the clear meaning of the words. Where the meaning of the statute is in doubt, it must be construed in favour of the subject, however, much within the spirit of the law, the case might otherwise appear to be; but a fair and reasonable construction must be given to the language used without leaning to one side or the other. If the interpretation of a fiscal enactment is in doubt, the subject cannot be taxed unless he comes within the letter of the law and the argument that he falls within the spirit of the law cannot avail the department. 8.24 Placing reliance on the principles in Smt. P. Laxmi Devi s case ( supra ) (para 19 at p. 735) has been urged that there can be no dispute that the stamp duty is a tax and that hardship is not relevant in construing taxing statutes which are to be considered strictly. As often said, there is no equity in a tax. There can be no dispute with these propositions. However, no issue of hardship arises in the present case. 8.25 So far as the definition clauses are concerned, there is another reason why an approved scheme of amalgamation would be exigible to stamp duty. It is notewort ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the date of the inception of the Indian Stamp Act, 1899. Section 2( m ) defines "instrument of partition" to mean any instrument whereby co-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 partition. This section specifically provides that any final order effecting partition passed by the civil court, revenue authority and an award passed by the arbitrator directing a partition would be an instrument of partition. Further, similar contentions were considered by the Queen s Bench Division in the case of IRC v. G. Angus Co. [1889] 23 QBD 579, 582 with regard to section 70 of the Stamp Act, 1870, which gives the interpretation to be placed upon the expression "conveyance on sale", in the following language : "The term "conveyance on sale" includes every instrument and every decree or order of any Court or of any Commissioners, whereby any property upon the sale thereof is legally or equitably transferred to or vested in the purchaser or any other person on his behalf or by his direction." 12. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is violated. This article itself provides that it could be executed anywhere within the territory according to law and law includes law which prescribes payment of stamp duty on such instrument if it transfers or conveys movable or immovable property. 8.27 The issue of chargeability of the approved scheme of amalgamation to stamp duty in the light of the statutory scheme, provisions and amendments and the definition of the expression instrument under section 2( l ) of the Bombay Stamp Act was also considered in Hindustan Lever s case ( supra ). The principles laid down by the Apex Court in this regard read as follows : 15. This definition of "instrument" is not amended by the Maharashtra Act of 17 of 1993, The word "instrument" is defined to mean, every document by which any right or liability is or purports to be created transferred, limited, extended, extinguished or recorded, but does not include bill of exchange, cheque, promissory note, bill of lading, letter of credit, policy of insurance, transfer of shares, debenture proxy and receipt. The recital in the scheme of amalgamation as well as the order of the High Court under section 394 of the Companies Act, decla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consent decree where the terms of settlement stated that the same would be treated as the conveyance. This aspect also stands considered in Hindustan Lever s case ( supra ). Placing reliance on its earlier pronouncements on this very issue in the context of consent decrees, the Apex Court answered the question as follows : 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 Court in Ruby Sales Services (P.) Ltd. ( supra ). In that case in a suit for specific performance the property was conveyed to the vendee by a consent decree. The question arose whether the consent decree is an instrument and liable to be stamped. The consent decree contained a recital to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he findings of the counts on the same also not placed before the Bench in Madhu Intra Ltd. s case ( supra ). The pronouncements of the Apex Court on these aspects bind this Court and would guide the adjudication in the present case. 9.3 From a bare reading of the statutory provisions and the judicial pronouncements noticed above, it is apparent that it is the "instrument whereby property is legally and equitably transferred" which is made liable for payment of stamp duty. 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 the order of the Court. The statute does not provide any exception to the definition of "instrument" or "conveyance". Orders passed by the Court resulting in transferring the right of the property have been subjected to levy of stamp duty in several situations noted hereinabove. 9.4 It is noteworthy that there would be several instances of transfer of interest in immovable property by operation of law. Grants and transfer of land or of any interest therein are effected under the Government Grants Act, 1895 on behalf of the Government. There is allotment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has been extensively urged that inter vivos is restricted to only living persons . Learned senior counsel for the petitioner submits that so far as the transaction involving transfer of assets from one company to another on an amalgamation of the assets and liabilities of one company with another under section 394 of the Act is concerned, the same is not a transfer between living persons and, therefore, is not a transfer "inter vivos". 10.2 In order to buttress the abovenoted submissions, Mr. Kapur, learned senior counsel has also placed reliance on the amendment effected to section 5 of the Transfer of Property Act which was amended by section 6 of Act 20 of 1929. 10.3 By virtue of section 6 of the Amending Act 20 of 1929, the description of a "living person" in section 5 was specifically amended to include a company and the Legislature also clearly stipulated that the provisions of section 5 as amended should not effect any law for the time being in force relating to transfer of property to or by companies, associations or body of individuals. Upon amendment the provision reads, thus : 5. Transfer of property defined in the following sections "transfer of prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing : "Between the living; from one living person to another. Where property passes by conveyance, the transaction is said to be inter vivos, to distinguish it from a case of succession or devise". 10.7 My attention has been drawn to the pronouncement of a Full Bench of the Madras High Court reported as the Chief Controlling Revenue Authority, Board of Revenue s case ( supra ) in support of the contention that the expression conveyance under sub-section (10) of section 2 of the Indian Stamp Act 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 in Schedule 1. It was held that though the definition is an inclusive one, it was clear that the essence of conveyance is transfer of property or an interest therein, whether movable or immovable, and the transfer should be inter vivos . It is not necessary that a document should always use the word transfer or assign in order to constitute such a transaction. Whether there is a transfer will depend upon the words of a disposition. If a person says in a document that he had delivered possession o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... living person conveys property, in present or in future to one more other living persons. Company or association or body of individual, whether incorporated or not, have been included amongst the "living person" in this section. It clearly brings out that a company can effect transfer of property. The word " inter vivos " in the context of section 394 of the Act would include within its meaning also a transfer between two "juristic persons" or a transfer to which a "juristic person" is one of the parties. The transaction between a minor or a person of unsound mind with the other person would not be recognised in law, though the same is between two living beings, as they are not juristic persons in the eyes of law who can by mutual consent enter in a contract or transfer the property. The company would be juristic person created artificially in the eyes of law capable of owning and transferring the property. Method of transfer is provided in law. One of the methods prescribed is dissolution of the transferor-company by merger in the transferee-company along with all its assets and liabilities. Where any property passes by conveyance, the transaction would be said to be inter vivos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of right, title and interest in immovable property, there is no basis for arriving at a valuation of the same for the purposes of assessment of the amount of stamp duty payable. 11.2 So far as the valuation of the scheme of amalgamation is concerned, this issue has also been considered and stands authoritatively decided. In Li Taka Pharmaceuticals Ltd. s case ( supra ) reliance was placed on a pronouncement of the Bombay High Court at Hanuman Vitamin Foods (P.) Ltd. v. State of Maharashtra [1989] 2 CLA 221 wherein a Division Bench of the Court considered an instrument under which there was a transfer of 5 shares of a co-operative society by which one of the incidents of membership of the said society was to occupy a specific office premises in the same building. The Court had held that this document of transfer of shares was a conveyance of property chargeable with stamp duty under article 25( b )( i ) of the Bombay Stamp Act as amended in 1985 on the basis of the market value of the said property. The Court observed that in effect, along with the transfer of shares, the document incorporated a conveyance of property. On the aspect of what stamp duty would be payable on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y or other consideration, if paid, but not by 64 separately valuing the assets and the liabilities." 11.3 On the aspect of valuation, in Hindustan Lever s case ( supra ), the Apex Court held, thus : "28. The transfer of assets and liabilities takes effect by an order of the Court. The order also provides for passing of consideration from the transferee-company to the shareholders of the transferor-company. The consideration for sale in a transaction like this is the shares. The share exchange ratio is decided on the basis of number of factors including the value of net assets of the transferor and transferee-company. To arrive at this figure of net assets the liabilities have to be set off against the gross value of the assets. The share value is fixed. The properties belong to the company and the company belongs to the shareholders. Once the shareholders of the transferee-company receive the consideration it would be deemed as if the owner has received the consideration." In view of the above discussion, the submission that conveyance of property under a scheme of amalgamation is not capable of valuation is unacceptable. 12. Notification No. 1, dated 16-1-1937 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions above prescribed are fulfilled." 12.4 This Notification is stated to have been superseded by a subsequent Notification bearing No. 13 which is dated 25-12-1937. The copy of the Notification placed before the Court reads as follows : " No. 13, dated the 25th of December, 1937. In exercise of the powers conferred by clause ( a ) of section 9 of the Indian Stamp Act, 1899 (II of 1899), and in supersession of all previous notifications issued from time-to-time under the said clause of the said section insofar as they relate to the Province of Delhi ("the said Province") except the Notification of the Government of India in the Finance Department (Central Revenue) No. 6 Stamps, dated the 14th August, 1937, the Central Government is pleased to reduce, to the extent set forth in each case, the duties chargeable in the said Province under the said Act in respect of the instruments hereinafter described under Nos. 4, 15, 30, 39, 40, 43, 49, 56 and 57 and to remit the duties so chargeable in respect of instruments of the other classes hereinafter described : . . . . K. Other documents.... 55. Instrument evidencing transfer of property between companies limited by s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ative Assembly shall have power 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 44, 65 and 66 of that List insofar as they relate to the said Entries 1, 2 and 18. ( b ) Nothing in sub-clause ( a ) shall derogate from the powers of Parliament under this Constitution to make laws with respect to any matter for a Union Territory or any part thereof." 12.7 Article 239AA specifically states that it is subject to other constitutional provisions. So far as the conferment of legislative power is concerned, the same is to be found in article 239AA(3). While sub-clause ( a ) of clause (3) is concerned with the conferment of power on the Legislative Assembly, sub-clause ( b ) specifically states that the powers of the legislative assembly shall not derogate from the powers of the Parliament to make laws with respect to any matter for a Union Territory or part thereof. 12.8 The constitutionally recognised superiority of the legisl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of National Capital Territory of Delhi Act, 1991 which also took effect from 1-2-1992. This by itself would show that the Delhi Legislature is subordinate to the Parliament. 12.11 The Government of National Capital Territory of Delhi Act, 1991 was enacted to supplement the provisions of the Constitution relating to the Legislative Assembly and Council of Ministers for the National Capital Territory of Delhi and for matters connected therewith or incidental thereto. The Statement of Objects and Reasons for the Bill which was proposed makes a reference to the then proposed article 239AA and stated that under the new article 239AA proposed to be inserted by the Constitution (Seventy-fourth Amendment) Bill, 1991, a Legislative Assembly and Council of Ministers will be established for the National Territory. Clause (7)( a ) of the said article provides that the Parliament may by law make provisions for giving effect to, or supplementing the provisions contained in that article, and for all matters incidental or consequential thereto. In pursuance of the said clause, this Bill sought to make necessary provisions in respect of the Legislative Assembly and its functioning on the li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Parliament shall prevail, whether the parliamentary law is earlier or later to the law made by the Delhi Legislative Assembly. Parliament is also empowered to amend, vary or repeal any law made by the Legislative Assembly. Article 239AA came into force with effect from 1-2-1992. Pursuant to the article, Parliament enacted the Government of National Capital Territory of Delhi Act, 1991. It is not only provided for constitution of a Legislative Assembly but also its powers as contemplated by article 239AA. This Act too came into force on 1-2-1992. The subordinate status of the Delhi Legislature is too obvious to merit any emphasis. 12.13 A question with regard to the competence of the Lieutenant Governor to issue a notification in exercise of powers conferred under sub-section (1) of section 19 of the Punjab Courts Act, 1918 as extended to the National Capital Territory of Delhi relating to division of the national capital territory into different civil districts without such notification being deliberated upon by the Legislative Assembly of Delhi was raised before the Apex Court. By a judgment at Delhi Bar Association v. Union of India AIR 2009 SC 693, the Apex Court was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Territory or any part thereof. If any provision made by the Legislative Assembly with respect to any matter is repugnant to any provision of a law made by Parliament with respect to that matter, whether passed before or after the law made by the Legislative Assembly, or of an earlier law, other than a law made by the Legislative Assembly, then, in either case the law made by Parliament or such earlier law shall prevail and the law made by the Legislative Assembly shall, to the extent of repugnancy, be void. The Punjab Courts Act, 1918, being the central legislation, will have the primacy over any legislation made by the Delhi Legislative Assembly on the subject and even if the Delhi Legislative Assembly has a power to make law on the subject which is covered under the impugned notification, section 19 of the Punjab Courts Act, 1918 shall prevail on the subject and a notification issued thereunder shall not be invalidated merely because the subject-matter also falls within the Concurrent List." 12.14 From the above, it is apparent that the power of the Parliament to legislate under article 245 of the Constitution in respect of Union Territories is not denuded or derogated by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transferee, whether incorporated or not) of debentures, bonds or other marketable securities. (2) In this section, the expression "the Government" means, ( a )in relation to 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, and in relation to any other stamp-duty chargeable under this Act and falling within entry 96 of List I in the Seventh Schedule to the Constitution, the Central Government; ( b )save as aforesaid, the State Government." 12.18 The argument is that in view of section 9 of the Indian Stamp Act as amended after the Adaptation of Laws Order of 1950, the Central Govern-ment has the authority to reduce or remit stamp duty only in respect of the documents mentioned in clause ( a ) of sub-section (2) of section 9 and that a scheme of amalgamation sanctioned by the Court does not fall within its purview. Reliance is placed on the observations of the Supreme Court in Hindustan Lever s case ( supra ) and it is urged by the respondents that only the State Legislature would have the power to reduce or remit the stamp duty. The f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 63 of List II empowers the State Legislature to prescribe rates of stamp duty in respect of documents other than those specified in the provisions of List I. Entry 44 of List III empowers the State Legislature to provide for stamp duties other than duties or fees collected by means of judicial stamps. Stamp duty under Entry 44 of List III is levied on the instruments and the measure is the valuation of the property transferred. 12.21 In Hindustan Lever s case ( supra ), a question was raised with regard to the legislative competence of the Maharashtra Legislature to effect the amendment to the Bombay Stamp Act and considered by the Apex Court. The observations of the Apex Court while rejecting the challenge to the legislative competence of the Maharashtra Legislature to amend the definition of conveyance and include sub-clause ( iv ) to clause ( g ) of section 2 are also important and deserve to be considered in extenso and reads as follows : "43. It was next contended that provisions of section 2( g )( iv ), read with section 34, of the Bombay Stamp Act which provides that the instrument not duly stamped would be inadmissible in evidence are repugnant to section 394 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -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 anything done before the commencement of the Constitution, to mean the Governor General or the Governor General in Council. The Notification dated 16-1-1937 would, thus, be covered by this definition and is to be treated as a Notification issued by the Central Government. 12.25 This Notification stands superseded by the Notification No. 13, dated the 25-12-1937 which has been issued by the Central Government. 13. Pre-Constitution notification whether still applicable and binding 13.1 The issue which now remains to be considered, is whether this Notification of 1937 being a pre-Constitution notification is applicable and binding. 13.2 Article 372 of the Constitution of India is concerned with continuance in force of existing laws and their adaptation as on the date of the coming into force of the Constitution. Clause ( 1 ) of article 372 provides that notwithstanding the repeal by the Constitution of the enactments referred to in article 395, but subject to the other provisions of the Constit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 counsel for the Government of NCT of Delhi has not pointed out any amendment to the provisions of the Stamp Act which would have the impact of amending/revoking or repealing the Notification of 1937. 13.6 The question, thus, which is required to be considered is as to whether the Notification dated 25-12-1937 would lapse on the coming into force of the constitutional provisions unless specific legislation was enacted adopting or adapting the same. This issue is not res integra and stands authoritatively answered by the Apex Court in several judicial pronouncements. In the judgment reported at Edward Mills Co. Ltd. s case ( supra ), the Apex Court has occasion to consider a similar contention and on the effect of article 372, had held, thus : "13. The contention does not appear to us to be sound. A complete reply to this argument is furnished, in our opinion, by the provisions of clauses ( 1 ) and ( 2 ) of article 372 of the Constitution. Article 372 runs as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 article 366(10) of the Constitution, the expression "Indian law" has itself been defined in section 3(29) of the General Clauses Act as meaning any Act, ordinance, regulation, rule, order, or bye-law which before the commencement of the Constitution had the force of law in any province of India or part thereof. In our opinion, the words "law in force" as used in article 372 are wide enough to include not merely a legislative enactment but also any regulation or order which has the force of law. We agree with Mr. Chatterjee that an order must be a legislative and not an executive order before it can come within the definition of law. We do not agree with him, however, that the order made by the Governor-General in the present case under section 94(3) of the Government of India Act is a mere executive order. Part IV of the Government of India Act, 1935, which begins with section 94, deals with Chief Commissioners provinces and sub-section (3) lays ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 by article 395 of the Constitution and, therefore, an order issued under section 94(3), Government of India Act would not possibly be operative after the inauguration of the Constitution nor could it be regarded as an order made under article 239 of the Constitution. After negativing the contention that the order issued under that Act was not a "law in force" within the meaning of article 372, Their Lordships observed at p. 31 that an order made under section 94(3), Government of India Act conferring certain powers on the Chief Commissioner was really in the nature of a legislative provision, which defines his powers in respect of the province and, therefore, being a "law in force" immediately before the commencement of the Constitution would continue to be in force under clause ( 1 ) of the article. 11. This decision, therefore, is clear authority for the position that, even though the Government of India Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 referring to any former enactment relating to companies shall be construed as referring to the corresponding enactment in this Act." So far as the references to Companies Act, 1913 in the Notification in question, therefore, would not be of any consequence, so far as applicabi-lity of the notification to the scheme of amalgamation in question is concerned. 14.3 The Notification No. 13, dated 25-12-1937 has been made by the Central Government and supersedes the Notification No. 1, dated 16-1-1937. It is existing prior to the Constitution and in view of the provisions of article 372 of the Constitution would continue in force. 15. Objection that upon amalgamation, the transferor-company ceases to exist 15.1 Another argument was laid before this Court by the respondent that the exemption granted under the Notification dated 25-12-1937 would not apply to a scheme of amalga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 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 including 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. In view of the contents of the aforesaid notification, even if it is assumed that the provisions of article 23 or 62 of Schedule I of the said Act are attracted to the facts of the present cases, yet in view of remission granted to a case where 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, no stamp duty would b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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