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TMI Blog2016 (4) TMI 482X X X X Extracts X X X X X X X X Extracts X X X X ..... be the instrument chargeable to stamp duty. Whether the instrument in respect of amalgamation or compromise or scheme between the two Companies is such a scheme, compromise or arrangement and the orders sanctioning the same are incidental as the computation of stamp duty and valuation is solely based on the scheme and scheme alone? - Held that:- The orders of the court, sanctioning a Scheme of amalgamation are not just incidental orders even in accordance with the Scheme of the Companies Act laid down by Section 391 r/w, Section 394. Only after the orders are passed by the Court, sanctioning the Scheme of Amalgamation, such a scheme becomes operational and effective. Computation of stamp duty and valuation does not make Scheme of Amalgamation alone chargeable to stamp duty. The order is the instrument. Whether in a scheme, compromise or arrangement sanctioned under Sections 391 and 394 of the Companies Act where Registered Offices of the two Companies are situated in two different States, the Company in State of Maharashtra is entitled for rebate under Section 19 in respect of the stamp duty paid on the said scheme in another State? - Held that:- The answer to this question w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gly, on 10th April 2002, the respondent no.1- transferee company filed a Company Petition No.391 of 2002 and Company Application No.133 of 2002 in this court for sanctioning the arrangement in the Scheme of Amalgamation. Similarly, respondent no.2, the transferor company on 16th April 2002, filed the Company Petition No.75 of 2002 and Company Application No.76 of 2002 in Gujarat High Court for sanctioning the arrangement in the Scheme of Amalgamation. This court passed an order under Section 394 of the Companies Act 1956 on 7.6.2002 sanctioning the scheme and the Gujarat High Court passed an order on 13.9.2002 sanctioning the scheme. 2 On 16.10.2002, Respondent no.1 submitted the order dated 7.6.2002 passed by this court along with the order dated 13.9.2002 passed by the Gujarat High Court for adjudication of stamp duty in the office of Superintendent of Stamp, Mumbai (the applicant no.2) now known as Superintendent of Stamp (Head quarters) Mumbai. Respondent no.1 requested the applicant no.2 to adjudicate the stamp duty, if any, payable on the order dated 7.6.2002 passed by the Bombay High Court. The respondent no.1 had paid stamp duty of ₹ 10 crores in the State of Gu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r a scheme sanctioned between the two companies under Section 391 and 394 of the Companies Act is one and same document chargeable to stamp duty regardless of the fact that order sanctioning the scheme may have been passed by two different High Courts by virtue of the fact that the Registered Offices of the two Companies are situated in two different states ? 2. Whether the instrument in respect of amalgamation or compromise or scheme between the two companies is such a scheme, compromise or arrangement and the orders sanctioning the same are incidental as the computation of stamp duty and valuation is solely based on the scheme and scheme alone ? 3. Whether in a scheme, compromise or arrangement sanctioned under Section 391 and 394 of the Companies Act where registered office of the two companies are situated in two different States, the Company in state of Maharashtra is entitled for rebate under Section 19 in respect of the stamp duty paid on the said scheme in another State ? 4. Whether for the purpose of Section 19 of the Act the scheme/compromise/arrangement between the two Companies must be construed as document executed outside the state on which the stamp duty is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than those specified in List I i.e. Entry 91. In the same List Entry 66 relates to fees in respect of any of he matters in that List but not including fee taken in any court. The following Entries in List III may be reproduced : 26. Legal, medical and other professions . 44. Stamp duties other than duties or fees collected by means of judicial stamp, but not including rates of stamp duty . There is no dispute that the Act was enacted under Entries 77 and 78 in List 1. It is equally clear that the words persons entitled to practice would include determining or prescribing the qualifications and conditions that a person should possess and satisfy before becoming entitled to practice as an advocate before, the Supreme Court or the High Courts. So far as persons entitled to practice before these courts are concerned the power to legislative regard to them is carved out from the general power relating to the provision in Entry 26 in List III and is made the exclusive field for Parliament . In other words the power to legislate in regard to persons entitled to practice before the Supreme Court and the High Courts is altogether excluded from Entry 26 in List II. (See 6. N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch has legislative power to impose stamp duty, as also, prescribe the rates of stamp duty inasmuch as the instrument that deals with `Amalgamation of Companies'. 9 The questions referred to this court as mentioned above are required to be adjudicated in the context of the provisions of the Bombay Stamp Act 1958. The provisions of Bombay Stamp Act, 1958 which we need to consider for the purpose of adjudication of this matter are reproduced below :- Section 2(d) : Chargeable means, as applied to an instrument, executed or first executed after the commencement of this Act, chargeable under this Act, and as applied to any other instruments, chargeable under the law in force in the State when such instrument was executed or, where several persons executed the instrument at different times, first executed. Section 2(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 Companies Act, 1956 (in respect of amalgamation or reconstruction of companies, and every order made by the Reserve Bank of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property situate, or to any matter or thing done or to be done in this State and is received in this State : [Provided that a copy or extract, whether certified to be a true copy or not and whether a facsimile image or otherwise of the original instrument on which stamp duty is chargeable under the provisions of this section, shall be chargeable with full stamp duty indicated in the Schedule I if the proper duty payable on such original instrument is not paid ] [Provided further that] no duty shall be chargeable in respect of (1) any instrument executed by or on behalf of, or in favour of, the Government in cases, where, but for this exemption, the Government would be liable to pay the duty chargeable in respect of such instrument [or where the Government has undertaken to bear the expenses towards the payment of the duty ]; (2) any instrument for the sale, transfer or other disposition, either absolutely or by way of mortgage or otherwise, of any ship or vessel, or any part, interest, share or property of or in any ship or vessel registered under the Bombay Coasting Vessels Act, 1838, or [Merchant Shipping Act, 1958]. Section 4 : Several Instru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the like description executed in this State less the amount of duty, if any, already paid under any law in force in India excluding the State of Jammu and Kashmir on such instrument when it was executed ; (b) and in addition to the stamps, if any, already affixed thereto such instrument [or a copy of the instrument] shall be stamped with the stamps necessary for the payment of the duty chargeable on it under clause (a) of this section, in the same manner and at the same time and by the same persons as though such instrument [or a copy of the instrument] were an instrument received in this State for the first time at the time when it became chargeable with the higher duty ; and (c) the provisions contained in clause (b) of the proviso to subsection (3) of section 32 shall apply to such instrument [or a copy of such instrument] as if such were an instrument executed or first executed out of this State and first received in this State when it became chargeable to the higher duty aforesaid, but the provisions contained in clause (a) of the said proviso shall not apply thereto. Article 25 : CONVEYANCE (not being a transfer charged or exempted under Article 59) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erson by whom an application has been made under sub-section (1) has disclosed to the court, by affidavit or otherwise, all material facts relating to the company such as the latest financial position of the company, the latest auditor's report on the accounts of the company, the pendency of any investigation proceedings in relation to the company under sections 235 to 251, and the like] (3) An order made by the court under sub-section (2) shall have no effect until a certified copy of the order has been filed with the Registrar. (4) A copy of every such order shall be annexed to every copy of the memorandum of the company issued after the certified copy of the order has been filed as aforesaid, or in the case of a company not having a memorandum, to every copy so issued of the instrument constituting or defining the constitution of the company. If default is made in complying with sub-section (4), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to [one hundred] rupees for each copy in respect of which default is made. The court may, at any time after an application has been made to it under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not been conducted in a manner prejudicial to the interests of its members or to public interest. Provided further that no order for dissolution of any transferor company under clause (iv) shall be made by the court unless the Official Liquidator has, on scrutiny of the books and papers of the company, made a report to the court that the affairs of the company have not been conducted in a manner prejudicial to the interests of its members or to public interest.] (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 relation to which the order is made shall cause a certified copy thereof to be filed with the Registrar for registration. If default is made in complying with this sub-section, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... secure sanction separately, as also the provision of the Scheme itself, the Scheme as also the first order of this Hon'ble Court sanctioning the Scheme on the Transferee Company's Application, would not constitute an instrument or a conveyance, unless and until the Gujarat High Court had sanctioned the Scheme on the Transferor Company's Application. This is because the Scheme would become effective operative and the property would stand transferred and vested from the transferor to the transferee, only on the Gujarat High Court making the second order sanctioning the Scheme. In fact if the second High Court had not sanctioned the Scheme, the same would not have become operative and there would be no transfer or vesting of property in the transferee company. Accordingly on such sanction being granted by the Gujarat High Court, the parties were liable to pay stamp duty on the sanctioned scheme (read with the two orders) in Gujarat and then to pay stamp duty in Maharashtra subject to a rebate under sec.19 for duty already paid in Gujarat. Therefore, it is the scheme that is the instrument and not the orders. (vi) Alternatively if pursuant to sanction by the Gujarat H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to a rebate on the stamp duty paid in Gujarat as mentioned in section 19, it is the case of the applicants that section 19 applies only when an instrument chargeable under stamp duty in schedule-I and relating to any property situate or to any in matter or thing done or to be done in this State is executed out of the State and subsequently such instrument or a copy of the instrument is received in this State. As the instrument submitted for adjudication in this State is the order dated 7.6.2002 and which has been executed in the State prior to payment of stamp duty of ₹ 10 crores in Gujarat, the question of taking benefit of section 19 does not arise. It was also submitted that section 19 provides for contingency in which instrument is executed outside the State and then brought into the State. In this case as the instrument is the order dated 7.6.2002 passed by this court within the State of Maharashtra, the question of being brought into the State did not arise. Hence, section 19 is not applicable at all. 13 The issue in short is whether the scheme of arrangement between the parties which has been sanctioned by the court is the instrument or the order of the court sanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that the order of the court which results in transfer of the property would be an instrument as it includes every document. Paragraphs-23, 24 25 of the Hindustan Lever (supra) reads as under :- 23. Point as to whether the stamp duty was leviable on the Court order sanctioning the scheme of amalgamation was considered at length in Sun Alliance Insurance Ltd. Vs. Inland Revenue Commissioners 1971 (1) All England Law Reports 135. The point which arose for determination as to whether the stamp duty was payable on the order of the Judge sanctioning the scheme of arrangement under Section 206 of the Companies Act, it was held:- It follows that it is the court order that effects the transfer; and this is nonetheless so because the scheme is not operative until an office copy has been delivered to the Registrar of Companies for registration, for the court order itself ordered that to be done and the Act so provides; nor because London has still to cause the name of Sun Alliance to be entered on to the register as the holder of the shares. The registration of the transferee occurs in every case where a transfer is executed, and merely perfects the title of the transferee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and execution means signed and signature. In this context the Order of the Hon'ble High Court, Bombay was executed on 07/06/2002. As per section 2(d) an instrument becomes chargeable on execution or first execution after the commencement of the Bombay Stamp Act, 1958. Section 17 of the Bombay Stamp Act, 1958 provides for stamping of the instruments executed in the State. This section makes it clear that any instrument chargeable with duty executed in the State is required to be stamped before or at the time of execution or immediately thereafter or on the next working day following the day of execution. Considering all the provisions above, the transferee- respondent no.1 in any event was bound to pay the necessary duty as it stood on the date of execution, i.e., 07/06/2002, the date of passing of Order by this Court. Here it is pertinent to note that the words executed and execution represent signed and signature under the stamp Law. These words, however, do not represent completion of an act, task, things or compliance of any nature, to be done as per contents of the document. Therefore it was obligatory on the part of the Respondent no.1-transferee to approach stamp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ders of different high courts are upon two different petitions by two different companies. When the scheme of the said Act is based on chargeability on instrument and not on transactions, it is immaterial whether it is pertaining to one and the same transaction. The duty is attracted on the instrument and not on transaction. 22 As regards the amalgamation of Companies is concerned, section 391 r/w. Section 394 of The Companies Act, 1956, contemplates following steps :- (i) Formation of a Scheme mutually agreed by the Transferor and the Transferee company ; (ii) Holding of meeting for approval of the Scheme ; (iii) The Order of the Court sanctioning the Scheme ; (iv) Filing of a Certified copy of the Order sanctioning the Scheme with the Registrar of Companies for registration ; The transfer of any property or any interest in any property on account of such amalgamation, takes place pursuant to the Order passed by the Court sanctioning the Scheme of amalgamation. This aspect is clear in view of sub-section 2 of section 394 of the Companies Act, which specifically states that, by virtue of an Order issued under Section 394(1), the property of the Transferor Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1956 so as to become the properties and assets of the petitioner company. (emphasis supplied) Therefore, the order of this court sanctioning the Scheme was not a conditional order, which was to operate after the scheme was also sanctioned by the Hon'ble Gujarat High Court. By this Order dated 7.6.2002 of this Court itself, it could be considered that the transfer was effected and therefore the said Order of this Court is the 'order made by the High Court under Section 394 of the Companies Act 1956.............. as contemplated by Section 2(g) (iv) of the said Act. For the same reason the order dated 7.6.2002 of this Court is the 'instrument', as contemplated by the provisions of the said Act. However, it may also be mentioned that this court in its order dated 7th June, 2002 has further ordered as under :- AND THIS COURT DOTH FURTHER ORDER that the petitioner company do within 30 days of the sealing of this order, cause a certified copy of this order to be delivered to the Registrar of Companies, Maharashtra, Mumbai for registration And upon such certified copy of order being so delivered to the Registrar of Companies, Maharashtra, Mumbai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stamp duty of ₹ 10 crores. Admittedly, the respondents have not paid any stamp duty on the order of this Hon'ble court, which is the subject matter of this reference. The order of this court dated 7th June, 2002 was presented for payment of stamp duty for the first time only on 16th October, 2002 by the respondent no.1 Transferee Company along with application produced at Exhibit '6' to the affidavit filed on behalf of the Transferee-1st respondent and not by the 2nd respondent-Transferor company. 27 The respondent no.2 Transferor Company has not paid any stamp duty on the order passed by this court either in the State of Gujarat or in the State of Maharashtra at the time when the aforesaid application dated 16th October, 2002 was submitted with the Superintendent of Stamps, Mumbai. Therefore, the respondent no.1 Transferee Company was liable to pay full stamp duty on the order dated 7th June, 2002 passed by this Court in the State of Maharashtra inasmuch as on this order, no stamp duty was ever paid by anybody either in the State of Gujarat or in the State of Maharashtra. 28 The contention of the respondents that the provisions of Section 4 of the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... instrument executed out side State; (ii) of property in the State or thing done or to be done in State; and (iii) subsequently received in the State of Maharashtra. The instrument in question is the order dated 7.6.2002 executed by High Court of Bombay. The order is already in Mumbai and executed in Mumbai. It is not executed out side Maharashtra. The order dated 7.6.2002 is not received in Maharashtra since it originated in Maharashtra. Therefore, the ingredients of Section 19 are not complied. Respondent no.2-transferee while paying duty on the order dated 7.6.2002 of the Bombay High Court can not claim rebate for duty paid on order dated 13.9.2002 in State of Gujarat by invoking Section 19 of the Act. 33 The provisions of Section 17 of the said Act also need to be considered in its proper perspective. This Section specifically contemplates that all instruments chargeable with duty, are required to be stamped either before or at the time of execution or atleast immediately thereafter on the next working day following the day of execution. In the present case, this Court passed the order, which is the instrument in issue on 7th June, 2002. The respondents were re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nctioning the Scheme to be passed under Section 394 of the Companies Act by two different High Courts, then in that event, the order of this High Court which sanctions the Scheme passed under Section 394 of the Companies Act will be the instrument chargeable to stamp duty. (ii) Whether the instrument in respect of amalgamation or compromise or scheme between the two Companies is such a scheme, compromise or arrangement and the orders sanctioning the same are incidental as the computation of stamp duty and valuation is solely based on the scheme and scheme alone? Ans. The orders of the court, sanctioning a Scheme of amalgamation are not just incidental orders even in accordance with the Scheme of the Companies Act laid down by Section 391 r/w, Section 394. Only after the orders are passed by the Court, sanctioning the Scheme of Amalgamation, such a scheme becomes operational and effective. Computation of stamp duty and valuation does not make Scheme of Amalgamation alone chargeable to stamp duty. The order is the instrument. (iii) Whether in a scheme, compromise or arrangement sanctioned under Sections 391 and 394 of the Companies Act where Registered Offices of the two Com ..... X X X X Extracts X X X X X X X X Extracts X X X X
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