9911796707
TMI Blog2012 (2) TMI 312X X X X Extracts X X X X X X X X Extracts X X X X ..... orm needs to be eschewed to pronounce, at the outset, that stamp duty would be payable on transfers effected pursuant to any scheme of amalgamation or demerger under the Companies Act since that is the law of the land as recognised by the Supreme Court in the year 2003. There is a history to the matter which requires narration. It was in 2002 that the company Judge of this court took a view that the transfer of property pursuant to any scheme of amalgamation or demerger would attract stamp duty as in any other ordinary case of transfer effected without the intervention of court. It was the court, and not the State, that took up the issue which culminated in the judgment reported at 114 Comp Cas 92 (In re: Gemini Silk Ltd) being rendered. The judgment held that an order sanctioning a scheme would amount to an instrument and conveyance that would be the subject to the charge under the Stamp Act as applicable in this State. That matter was heard upon notice to the State but the State's submission was recorded in two lines almost as a footnote to the judgment. The judgment reasoned that since an order of court or a decree could be regarded as an instrument within the meaning of that w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the relevant question arose in that matter and the Supreme Court held that even without the special provision in the applicable Stamp Act relating to stamp duty being payable on orders sanctioning schemes of amalgamation or demerger, such orders would, in any event, be instruments within the meaning of the Stamp Act that would attract stamp duty. The ratio decidendi in the Hindustan Lever judgment, which is what is binding on all courts in the country and is the law of the land under Article 141 of the Constitution of India, implied that even in the absence of any special provision requiring stamp duty to be paid on orders sanctioning schemes under the Companies Act, stamp duty would be payable thereon as in the case of any other comparable transfer. With the State being oblivious to such law as declared by the Supreme Court, it did not make any demand for payment of stamp duty on orders sanctioning schemes of amalgamation or demerger. And orders there have been aplenty since 2004 with several crores worth of revenue lost to the State. The State remained content with its seemingly proactive role in having a Bill introduced in the legislature and passed in the year 2010, aping ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at it was premature at the time of sanctioning a scheme of arrangement to hold as to whether the order would be exigible to stamp duty, but observed that nothing in the order should be construed as exempting the concerned company from the liability to pay stamp duty, if applicable. The petitioners canvass two principal points in support of their contention that an order sanctioning a scheme under the Companies Act would be exempted from stamp duty in this State. They contend that in view of the clear pronouncement of a Division Bench of this court in Madhu Intra, that stamp duty would not be payable on orders sanctioning schemes under the Companies Act, it is not open to the company Judge of this court to hold otherwise. They maintain that the Supreme Court judgment in Hindustan Lever should be read in the context of the issues that arose in that matter and against the backdrop of the added provisions of the Bombay Stamp Act that are absent in the Stamp Act applicable in this State. They suggest that in the appeal from Gemini Silk Ltd being allowed and the State accepting such position by not challenging it before the Supreme Court and the State subsequently passing a Bill to inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of such partition amongst the co-owners." Since Section 2(14) of the Stamp Act applicable in the State of Maharashtra is the same as the definition of an instrument as relevant under the applicable law in this State, it is next necessary to discover as to what is liable to be charged with stamp duty under the statute. Section 3 of the Stamp Act, as amended in various States, is the charging provision in the statute. The operative words in such provision are "the following instruments shall be chargeable with duty ..." The word "instrument" in the Stamp Act is the genus of which, inter alia, conveyance, lease, mortgage-deed and the like as defined in Section 2 of the Act are species. The charging section operates on the instrument and instruments, as defined in the Act, can be of various kinds by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or recorded. The moot question that arises is whether the transfer of any property upon the sanction of a scheme of amalgamation or demerger under the Companies Act is different from the transfer of a property by a company to any other party other than under such a scheme. In view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sales and Services (P) Ltd has been referred to in support of the conclusion that an order sanctioning a scheme "is based upon the compromise between two or more companies ... (and) is an instrument which transfers the properties ..." Nothing in the Stamp Act applicable in this State is at variance with the corresponding provisions of the Bombay Stamp Act for the principle as recognised in Hindustan Lever to not be applicable in this State. In Madhu Intra the primary question which fell for consideration is stated at paragraph 49 of the report: "In our view, the moot question which falls for consideration in these appeals, is not whether an order under section 394 is a "conveyance" or an "instrument", but as to whether in view of the provisions of sub-section (2) of section 394 an order under sub-section (1) sanctioning a scheme of amalgamation or arrangement is liable to be stamped under the Stamp Act." The answer to the question is provided at the end of paragraph 53 of the report which runs as follows: "... In our view, the transfer of assets and liabilities of the transferor company to the transferee company takes place on an order being made under sub-section (1) of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt since the orders of assessment were challenged before the Division Bench. It is true that when a bundle of properties passes from one company to another under an order sanctioning a scheme of amalgamation or demerger, the assets (or the positive value) pass along with certain liabilities (the negative value). But that is no different from, say, an immovable property being conveyed in favour of the vendee along with the liabilities (outstanding municipal rates and taxes, for example). By virtue of Article 31 of Schedule IA to the Stamp Act applicable in this State, the stamp duty on the exchange of property would be the same as a conveyance in Article 23 thereof and the quantum of stamp duty payable would be on the basis of the market value of the property of the greatest value. Again, in the context of the stage at which the matter is being considered, it is unnecessary to get into any protracted deliberation on the mode or manner of assessment of stamp duty as long as it is recognised that an order sanctioning a scheme of arrangement or demerger under Section 394 of the Companies Act would amount to both an instrument and a conveyance within the meaning of the Stamp Act applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extended the remission under the 1937 notification. The judgment in Delhi Towers Ltd is of no assistance to the petitioners in the present context. In fact, the judgment recognised that the Central Government, the successor-in-interest of the Governor General-in-Council, has the legislative competence to legislate on the issue of stamp duty and there is no legislation by the State Government in Delhi in respect of orders sanctioning schemes of merger or demerger, whether or not they involve principal and holding companies. An order sanctioning a scheme of amalgamation or demerger under Section 394 of the Companies Act, therefore, answers to the description of the words "instrument" and "conveyance" within the meaning of the Stamp Act applicable in this State and is, accordingly, exigible to stamp duty. As to the manner of assessment of the stamp duty and the mode of implementation of the obligation, nothing need be said at the present stage, save that no property transferred pursuant to any scheme of amalgamation of merger or demerger in this State would be effective unless appropriate stamp duty thereon has been paid. The notification dated January 16, 1937 providing for remiss ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
