2016 (4) TMI 482 - HC - Companies Law

Stamp Duty on Company Schemes Decided by Court

The court held that the order sanctioning a scheme between two companies under Sections 391 and 394 of the Companies Act is the document chargeable to ... Amalgamation Scheme - Whether a scheme sanctioned between the two companies under Section 391 and 394 of the Companies Act is one and the 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 Office of the two companies are situated in different States? - Held that:- A scheme settled by two companies is not a document chargeable to stamp duty. An order passed by the Court sanctioning such a Scheme under Section 394 of the said Act, which effects transfer is a document chargeable to stamp duty. In case if the Registered Offices of the two Companies are situated in two different States, requiring such Orders, sanctioning 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. 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 will be in the negative for the reasons set out in detail herein above. Whether for the purposes 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 legally levied, demanded and paid in another State? - Held that:- Basically, a scheme/compromise/arrangement between the two companies is never a document chargeable to stamp duty, whether such a document is executed in the State or outside the State of Maharashtra. Moreover, in view of our conclusions above, Section 19 of the Act in any event, has no application whatsoever. Issues Involved:1. Whether a scheme sanctioned between two companies under Sections 391 and 394 of the Companies Act is one and the same document chargeable to stamp duty regardless of the fact that orders 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 Sections 391 and 394 of the Companies Act where registered offices of the two companies are situated in two different States, the company in the State of Maharashtra is entitled to a 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 a document executed outside the state on which the stamp duty is legally levied, demanded, and paid in another State.Detailed Analysis:Issue 1:The court determined that a scheme sanctioned between two companies under Sections 391 and 394 of the Companies Act is not a document chargeable to stamp duty. Instead, the order passed by the court sanctioning such a scheme under Section 394, which effects the transfer, is the document chargeable to stamp duty. If the registered offices of the two companies are situated in different states, requiring orders from two different High Courts, the order of the High Court that sanctions the scheme under Section 394 of the Companies Act will be the instrument chargeable to stamp duty.Issue 2:The court clarified that the orders of the court sanctioning a scheme of amalgamation are not merely incidental orders. According to the scheme of the Companies Act laid down by Sections 391 and 394, only after the orders are passed by the court sanctioning the scheme does the scheme become operational and effective. The computation of stamp duty and valuation does not make the scheme of amalgamation alone chargeable to stamp duty; the order is the instrument.Issue 3:The court concluded that the company in the State of Maharashtra is not entitled to a rebate under Section 19 in respect of the stamp duty paid on the said scheme in another State. Section 19 applies only when an instrument chargeable under stamp duty in Schedule I and relating to any property situate or to any 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. Since the order dated 7.6.2002 was executed in Maharashtra, Section 19 does not apply.Issue 4:The court held that a scheme/compromise/arrangement between two companies is never a document chargeable to stamp duty, whether executed in the State or outside the State of Maharashtra. Moreover, Section 19 of the Act has no application in this context. The instrument in question is the order dated 7.6.2002 executed by the High Court of Bombay, which was executed in Mumbai and not outside Maharashtra. Therefore, the ingredients of Section 19 are not met.Conclusion:The court concluded that the order of the High Court sanctioning the scheme under Section 394 of the Companies Act is the instrument chargeable to stamp duty. The company in Maharashtra is not entitled to a rebate under Section 19 for stamp duty paid in another state, and Section 19 does not apply to the scheme/compromise/arrangement between the two companies. The civil reference was disposed of accordingly, with no order as to costs.