2026 (2) TMI 1112 - HC - Companies Law

Stamp duty on sanctioning orders must be levied on the sanctioning instrument, not by dissecting underlying transactions.

Section 5 of the Maharashtra Stamp Act does not apply to a lodged NCLT sanction order where the instrument for levy of duty is the sanctioning order ... Applicability of Section 5 of the Stamp Act, 1958 to the order of NCLT sanctioning the scheme of amalgamation under the statutory provisions of Section 230 to 232 of the Companies Act, 2013 - Instrument chargeable with duty - order of sanction as instrument - bringing an instrument executed outside the State - Section 19 rebate for instrument executed outside State - Article 25(da) cap on stamp duty for NCLT orders - HELD THAT:- The provisions of Section 5 of the Stamp Act, 1958 applies, where one instrument relates to several distinct matters of transactions which cannot be blended into one or cannot be conceived as merely parts of one aggregate. It applies where the instrument comprises of several distinct matters, though may be of same category and where Section 5 applies, each of the instruments dealing with each of the matter would be chargeable under the Stamp Act, 1958 by the aggregate amount of stamp duty in respect of all such instruments. The application of Section 5 requires going into the underlying transaction which cannot be done in respect of order of sanction of scheme. The composite scheme was considered by NCLT, Mumbai Bench for ascertaining whether the same was fair and reasonable. In that context, the consideration in respect of the share holders of the second transferrer company i.e LuK India was noted. A similar exercise was carried out by NCLT, Chennai which also noted the consideration of issuance of shares to share holders of LuK India by the Petitioner Company. The observations of NCLT, Mumbai as regards the consideration in respect of amalgamation of LuK India does not constitute a distinct transaction within the meaning of Section 5 of the Stamp Act, 1958 or amounts to bringing the order of NCLT, Chennai in this State. Even accepting that the order of sanction of scheme of NCLT Chennai bench has not been lodged for adjudication in Chennai and there is no payment of stamp duty, the stamp authorities in Mumbai would not have the jurisdiction to assess the stamp duty on the NCLT, Chennai order as it is not an order which is originating in Maharashtra. The provisions of Section 19 envisages an instrument executed outside State in respect of the property in the State and subsequently received in the State of Maharashtra. As the order of the NCLT, Chennai bench has not been received in Maharashtra, the mere reference to the same in the NCLT Mumbai order would not amount to that instrument of NCLT Chennai being brought in the State of Maharashtra. Whether the duty has been paid on the NCLT Chennai order is an issue to be considered by the concerned authorities in Chennai and the same is immaterial for the purpose of assessing the stamp duty on the order of NCLT, Mumbai bench. The impugned order assessing the stamp duty on the transactions of merger with INA Bearings and LuK India by considering the two transactions as separate and distinct transactions is clearly erroneous in view of the settled legal position. The impugned order seeks to levy the stamp duty on the transaction by segregating the transactions into two different transactions : one of amalgamation of INA Bearings with Petitioner and other of LuK India with the Petitioner. As held by the Hon’ble Gujarat High Court in Ambuja Cements Limited vs Chief Controlling Revenue Authority [2023 (2) TMI 1447 - GUJARAT HIGH COURT (LB)], such reconstruction cannot be inter se segregated. The writ petition is allowed: the orders of Respondent Nos.1 and 2 are quashed and set aside The Petition is allowed in the above terms. Issues: Whether Section 5 of the Maharashtra Stamp Act, 1958 applies to the NCLT sanction order of a composite scheme of amalgamation (i.e. whether stamp duty may be assessed on the underlying transactions as separate transactions rather than on the NCLT Mumbai sanction order as the instrument).Analysis: The Court examined the statutory scheme of the Maharashtra Stamp Act, 1958 including Section 2(g)(iv), Section 2(l), Section 3, Article 25(da) of Schedule I and Sections 5 and 19, together with the Companies Act, 2013 provisions (Sections 230-234 and 232) governing sanction of amalgamation. The Court relied on the principle that stamp duty under the Stamp Act is attracted on the instrument and not on the underlying transaction(s), and on precedents holding that an order sanctioning a scheme is the instrument chargeable with duty. The Court found that the NCLT, Mumbai order lodged for adjudication is the instrument for levy of duty and that applying Section 5 requires dissecting underlying transactions, which is impermissible when assessing duty on a sanctioning order. The Court also held that references in the Mumbai order to a Chennai sanction do not amount to the Chennai order being brought into Maharashtra for purposes of Section 19, and that jurisdiction to adjudicate duty on the Chennai order rests with authorities in Chennai.Conclusion: Section 5 of the Maharashtra Stamp Act, 1958 does not apply to the NCLT sanction order in this case; the stamp duty is chargeable on the NCLT, Mumbai sanction order as the instrument. The impugned orders dated 25 March 2019 and 12 September 2022 are quashed and set aside; the petitioner is entitled to refund of excess stamp duty paid and relief granted accordingly.