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Issues: (i) Whether a demerger falls within the expression "reconstruction" under Article 20(d) of Schedule-I of the Gujarat Stamp Act, 1958, so as to attract stamp duty on a conveyance under an order made under Section 394 of the Companies Act, 1956; (ii) whether the applicant was liable to pay stamp duty under Section 2(g) and Article 20(d) of the Gujarat Stamp Act, 1958 on the change of ownership pursuant to the scheme; (iii) whether, for valuation under Explanation III to Article 20(d), the shares had to be valued at their market value of Rs. 50.05 per share or at their face value of Rs. 2 per share.
Issue (i): Whether a demerger falls within the expression "reconstruction" under Article 20(d) of Schedule-I of the Gujarat Stamp Act, 1958, so as to attract stamp duty on a conveyance under an order made under Section 394 of the Companies Act, 1956.
Analysis: Article 20(d) was construed as covering conveyances arising from orders under Section 394 of the Companies Act, 1956 in cases of both amalgamation and reconstruction. The statutory amendment inserting "reconstruction" before "amalgamation" showed a legislative intent to include demerger-type schemes within the charging provision. A narrow reading excluding reconstruction would make the amended words ineffective and defeat the purpose of the provision.
Conclusion: A demerger amounts to reconstruction for the purposes of Article 20(d) and is chargeable to stamp duty.
Issue (ii): Whether the applicant was liable to pay stamp duty under Section 2(g) and Article 20(d) of the Gujarat Stamp Act, 1958 on the change of ownership pursuant to the scheme.
Analysis: The definition of conveyance in Section 2(g) expressly includes an order of the High Court under Section 394 of the Companies Act, 1956 in respect of reconstruction or amalgamation. Since the scheme was sanctioned as a restructuring arrangement under Sections 391 to 394 of the Companies Act, 1956, the transaction fell within the statutory ambit attracting duty under Article 20(d).
Conclusion: The applicant was liable to pay stamp duty on the change of ownership under Section 2(g) read with Article 20(d).
Issue (iii): Whether, for valuation under Explanation III to Article 20(d), the shares had to be valued at their market value of Rs. 50.05 per share or at their face value of Rs. 2 per share.
Analysis: Explanation III governed the method of valuation for shares issued or allotted under the scheme. The transferee company's listed shares were required to be valued with reference to the market value as on the appointed date, and the authorities correctly applied the SEBI-reported market value. The contention that face value alone should govern was rejected as inconsistent with the express valuation mechanism in the Article.
Conclusion: The correct valuation was Rs. 50.05 per share, not Rs. 2 per share.
Final Conclusion: The reference was answered against the applicant and the impugned stamp duty determination was upheld on the basis that the scheme amounted to reconstruction and the higher market value method of valuation applied.
Ratio Decidendi: Where a stamp statute expressly brings reconstruction within the charging provision and prescribes a valuation mechanism for shares under the scheme, the court must give effect to the plain language of the amendment and apply the statutory market-value method rather than restricting the provision to amalgamation alone.
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