IMPORTANT POINT
Order of amalgamation of two companies is an instrument which transfers the properties and would fall within the definition of Section 2(1) of the Bombay Stamp Act, therefore, the State Legislature would have the jurisdiction to levy stamp duty on the order.

Headnote:Companies Act, 1956-Section 394-Bombay Stamp Act, 1958-Section 2(g)(iv)-Levy of stamp duty on order of amalgamation of companies-Validity of-Writ petition challenging constitutional validity of provisions of Section 2(g)(iv) of the Stamp Act-Scheme of amalgamation of Tata Oil Mills Co. Ltd. (Transferor Company) with Hindustan Lever Ltd. (Transferee Company)-Order of amalgamation approved by the High Court-Whether State Legislature had legislative competence to impose stamp duty on order of amalgamation passed by a court-(Yes)-Whether an order sanctioning a scheme of amalgamation u/s 394 rw/s 391 Companies Act, is liable to be stamped-(Yes).
       Held : The order passed by the Court under Section 394 of the Companies 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 instrument which transfers the properties and would fall within the definition of Section 2(1) of the Bombay Stamp Act which includes every document by which any right or liability is transferred. The State Legislature would have the jurisdiction to levy stamp duty under Entry 44, List III of the seventh Schedule of the Constitution of India and prescribe rates of stamp duty under Entry 63, List II. (Para 32)
       As discussed above, the order passed under Section 394 is founded on consent and this order is an instrument as defined under Section 2 (1) of the Bombay Stamp Act. The State Legislature would have the jurisdiction to levy stamp duty under Entry 44 List III of the Seventh Schedule of the Constitution and prescribes rate of stamp duty under Entry 63 List II. It does not in any way impinge upon any entry in 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. Along with this, 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 provisions of List I, that is to say, rates of stamp duty in respect of Bill of Exchange, cheques, promissory notes, Bill of landing, letter of credit, policies of insurance, transfer of shares, debentures, proxies and receipts. By sanctioning of amalgamation scheme, the property including the liabilities are transferred as provided in Section 394 of the Companies Act and on that transfer instrument, stamp duty is levied. It, therefore, cannot be said that the State Legislature has no jurisdiction to levy such duty. (Para 38)
       Stamp duty is levied on the instrument and the measure is the valuation of the property transferred. There is no question of encroachment on the field of Parliament under Entry 43, List I of the Constitution which empowers the Union to make laws re: incorporation, regulation winding up of trading corporation including banks insurances and finance corporations but not including corporative societies. The follow up legislation under Entry 43 List I is totally different from the levy of stamp duty and of prescribing rate of stamp duty on such documents. The Bombay Stamp Act does not provide for any Legislation with regard to incorporation, regulation and winding up of corporations. It only levies the stamp duty and prescribes the rate of stamp duty in respect of documents by compromise or arrangement. Section 2(g)(iv) of the Act does not in any way describe any alternate procedure as compared to the one appearing in Section 394 of the Companies Act, 1956. The question of repugnancy of Section 2(g)(iv) of the Act vis-a-vis Section 394 of the Companies Act, 1956 is therefore irrelevant. Section 2(g)(iv) does not impinge or negate the judicial power because it merely defines the word "conveyance" in regard to the order passed by the High Court under Section 394 of the Companies Act, the basis of which is consent and voluntary act which ultimately result in transfer of property for consideration. (Paras 42 and 43)

JUDGMENT

Bhan, J.-Civil Appeal Nos. 8232 of 1996, 8231 of 1996, 9237 and 10208 of 1996 arising from a common judgment of the High Court involving the same question of law are taken up for disposal together. Illustrative facts are taken from Civil Appeal No. 8232 of 1996.

2. Tata Oil Mills Co. Ltd. (Transferor Company) was incorporated on 10.12.1917 under the Companies Act, 1913. Hindustan Lever Ltd. (Transferee Company) was incorporated under the same Act on 17.10.1933. The scheme of amalgamation of transferor company with the transferee company was formulated and approved by the Board of Directors of respective companies on 19.3.1993. On 3.3.1994 the scheme of amalgamation of the transferor company with the transferee company was sanctioned with certain modifications by a Single Judge of the High Court. Appeal filed against the judgment and order of the Single Judge was rejected by the Division Bench on 18.5.1994. Special leave petition against the above judgment of the Division Bench was dismissed by this Court on 24.10.1994. This judgment is reported in Hindustan Lever Employees Union Vs. Hindustan Lever Ltd. & Ors. 1995 Suppl. (1) SCC 499.

3. The drawn up order of amalgamation of transferor company with transferee company was approved by the High Court on 24.11.1994. On presentation of the certified copy of the Court s order the Registrar of Companies, Maharashtra issued a certificate amalgamating the two companies.

4. In view of the stamp duty sought to be levied on the order of amalgamation passed under Section 394 of the Companies Act, 1956 (hereinafter referred to as "the Act") the appellant filed writ petition in the Bombay High Court challenging the constitutional validity of the provisions of Section 2(g)(iv) of the Bombay Stamp Act, 1958 (hereinafter referred to as "the Stamp Act"). By the impugned order the Division Bench of the High Court has dismissed the writ petition. The validity of Section 2(g)(iv) of the Stamp Act has been upheld. Section 2(g) of the Stamp Act which defines "Conveyance" reads:

"2. In this Act, unless there is anything repugnant in the subject or context.-

xxx xxx

(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 under Section 44A of the Banking Regulation Act, 1949 in respect of amalgamation or reconstruction of Banking companies

by which property, whether movable or immovable, or any estate or interest in any property is transferred to, or vested in, any other person, inter vivos, and which is not otherwise specifically provided for by Schedule I;

Explanation.-An instrument whereby a co-owner of any property transfers his interest to another co-owner of the property and which is not an instrument of partition, shall, for the purposes of this clause, be deemed to be an instrument by which property is transferred inter vivos;"

5. It would be seen that conveyance includes a conveyance on sale as well as every instrument. Clause (g)(iii) was added by the Maharashtra Act No. 27 of 1985 which came into operation w.e.f. 10.12.1985. It provides that conveyance includes every decree or final order of any civil court. Clause (g) (iv) was added by the Maharashtra Act No. 17 of 1993 which came into operation w.e.f 1.4.1993.

6. Section 2(g)(iii) came up for interpretation before this Court in the case of Ruby Sales and Services (P) Ltd. & Anr. Vs. State of Maharashtra & Ors., 1994 (1) SCC 531. It was held that the definition of "conveyance" and "instrument" starts with the expression "includes" which shows that the definition is very wide which would include a consent decree as well. That the sub-clause (iii) of Section 2(g) was introduced out of abundant cau

Click Here to Read the rest of this document

2003 Supreme(SC) 1162

IMPORTANT POINTOrder of amalgamation of two companies is an instrument which transfers the properties and would fall within the definition of Section 2(1) of the Bombay Stamp Act, therefore, the State Legislature would have the jurisdiction to levy stamp duty on the order.

Cases Referred (11)

IMPORTANT POINT
Order of amalgamation of two companies is an instrument which transfers the properties and would fall within the definition of Section 2(1) of the Bombay Stamp Act, therefore, the State Legislature would have the jurisdiction to levy stamp duty on the order.