TaxTMI 
TaxTMI 
2009 (12) TMI 499
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....me statute ('the transferee-company/applicant'). These transferor-companies are stated to be hundred per cent subsidiaries of Delhi Towers Ltd., the transferee-company and transferor-companies were stated to be engaged in the same line of business. 2.2 In order to reap benefits from the integration of management activities; reduction of overall administrative costs; synergy of operations; improvement of business prospects and economies of scale with reduction of costs in the overall interest of business, these companies proposed a scheme of amalgamation whereby the undertakings of the transferor-companies, would with effect from the transfer date, be transferred to and vest in the transferee-company, pursuant to the provisions of section 394 of the Act. 2.3 The transferee-company and Suraj Construction & Estates (P.) Ltd. and one of the 15 transferor-companies, were registered at Delhi and having their registered offices at Delhi. Consequently, these sixteen companies had filed a Company Petition No. 50/2003 under sections 391 and 394 of the Act seeking approval of a proposed scheme of merger of the transferor-companies with the transferee-company. The proposed scheme of amal....
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....3. Contentions of the applicant 3.1 The primary contention of the applicant-transferee-company is that upon an order being passed by the company court approving the scheme of amalgamation/merger, the assets of the transferor-companies vested in the transferee-company by operation of law and that nothing further is required to be done. It has been urged at great length that a scheme which is sanctioned in exercise of power under sections 391 to 394 of the Act is not in the nature of an order accepting a compromise under order 23 of the Code of Civil Procedure, 1908 ('CPC') but having regard to the statutory scheme, is something beyond. In this behalf, reliance is placed on the provisions of section 394(4) of the Act. The submission is that such scheme of amalgamation is not covered under the definition of "conveyance" under sub-section (10) of section 2 of the Indian Stamp Act, 1899 and, therefore, is not exigible to stamp duty. In support of these submissions, Mr. P.V. Kapoor, learned senior counsel appearing for the applicant, has placed reliance on the pronouncement of the Apex Court at J.K. (Bom.) (P.) Ltd. v. New Kaiser-I-Hind Spg. & Wvg. Co. Ltd. AIR 1970 SC 1041 and the pr....
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....ed in the definition of "Conveyance" in the Indian Stamp Act (applicable to the State of Delhi), and, therefore, is not chargeable to stamp duty for this reason as well. 3.5 It is urged on behalf of the petitioner that the provisions of the Bombay Stamp Act have been amended to incorporate clause (iv) in its sub-section (g) of section 2 whereby an approved scheme of amalgamation have been covered under the definition of 'conveyance'. Consequently, the pronouncements relied upon by the respondents of the Supreme Court in Hindustan Lever's case (supra) and Ruby Sales & Services (P.) Ltd. v. State of Maharashtra [1994] 1 SCC 531 concerned with construing the provisions of the 'Bombay Act' cannot even guide, let alone bind, adjudication in the present case. 3.6 The petitioner also places reliance on two Notifications dated 16-1-1937 and 25-12-1937 to contend that an approved scheme of amalgamation would stand exempted from levy of stamp duty because of the remission granted by both these Notifications. 4. Respondent's contentions 4.1 It is contended that no amendment to the statutory provision is necessary and that the transfer of property upon approval of a scheme of amalg....
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....orce on 10-12-1985. 5.4 Inasmuch as the several judicial pronouncements relied upon by both parties are in context of the statutory position under the Bombay Stamp Act, the unamended definition of the expression 'conveyance' as against the amended definition thereunder deserves to be adverted to and reads as follows : Unamended provision Amended provision '2(g)"Conveyance" includes a conveyance on sale and every instrument by which property, whether movable or immovable, is transferred inter vivos and which is not otherwise specifically provided for by Schedule 1;' '(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 Act, in respect of amalgamation of companies ; by which property, whether movable or immovable, or any estate or interest in any property is transferred to, or vested in, any person, inter vivos, and which is not otherwise specifically provided for by Schedule I.' Section 2(g)( iv) of the Bombay Stamp Act, thus, specifically includes every order made under section 394 of the Act in the definition of ....
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.... any transferor-company; (ii )the allotment or appropriation by the transferee-company of any shares, debentures, policies, or other like interests in that company which, under the compromise or arrangement, are to be allotted or appropriated by that company to or for any person; (iii)the continuation by or against the transferee-company of any legal proceedings pending by or against any transferor-company; (iv)the dissolution, without winding up, of any transferor-company; (v )the provision to be made for any persons who, within such time and in such manner as the Court directs dissent from the compromise or arrangement; and (vi)such incidental, consequential and supplemental matters as are necessary to secure that the reconstruction or amalgamation shall be fully and effectively carried out. (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....
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....(Cal.). The expression "property" and "liabilities", which can be transferred on amalgamation, under section 394(1) have been defined in very wide terms by sub-section (4)(a) of that section, so as to include "rights and powers of every description" and "duties of every description" respectively. The expression "property" would, therefore, be wide enough to include rights under a contract, including a contract of tenancy. These are co-extensive with the property and right which the transferor-company has in relation to its assets, but could not be wider than what the transferor-company was entitled to enjoy. The rights, property, as indeed the liabilities of the transferor-company, become the rights, property and liabilities of the transferee-company by virtue of the order of vesting made by the Court consequent on amalgamation. It is neither an assignment of right or property, nor an assignment of property by the company. It is the transfer of rights, property and liabilities along with the company itself and it is only as a result of confusion of thought that it could be described as an assignment by the company to another person, which is independent and distinct from the compan....
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....th, or what is sometimes described as life after life, where the process is of a different dimension and defies description and is, in any event, too deep and wide for the narrow compass of this judgment. The analogy, therefore, between the death of a natural person and dissolution without winding up is inappropriate." 6.5 These observations were relied on by this Court in a recent judgment at Hotline Hol Celdings (P.) Ltd.'s case (supra) wherein it was held as follows: "Amalgamation is, therefore, an absorption of one company into another or merger of both to form a third, which is not a mere act of the two companies or their members but is brought about by virtue of a statutory instrument and to that extent has statutory genesis and character, and to that extent it is distinguishable from a mere bilateral arrangement to merge or join in a common endeavour, an undertaking or enterprise." [pp. 212-13 of 65 CLA] 6.6 Placing reliance on these judicial pronouncements it is urged that the transfer of property is by operation of law and the respondents have no jurisdiction to claim stamp duty on such scheme of amalgamation approved by the company court. 6.7 It is urged that ....
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....ansfer of assets and liabilities effected thereby is purely by operation of law which on account of section 2(d) of the Transfer of Property Act also excludes the operation of section 6(e) thereto. Notwithstanding the definition of the expression "instrument" in section 2(14) of the Indian Stamp Act, the unamended provisions of the Indian Stamp Act in relation to such definition and the definition of "conveyance" and/or "instrument" does not apply to an order under section 394 of the Act for the purpose of stamp-duty. We agree with the view expressed by the Division Bench of this Court in New Central Jute Mills Co. Ltd. (supra), that the transfer of assets and liabilities from the transferor-company to the transferee-company takes place by virtue of sub-section (2) of section 394, without any further act or deed. 53. We are, therefore, inclined to agree with the submissions made on behalf of the appellants in these appeals that the learned Company Judge erred in importing the concept of transfer as explained in the case of Ruby Sales & Services (P.) Ltd. (supra) and Li Taka Pharmaceutical Ltd. (supra) to the case of amalgamation and/or compromise governed simply by the provision....
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....ituation of amalgamation, the transfer is not by way of sale, exchange, lease or rent so as to fall within section 269UA. Further, the process by which the land in question stood vested in the transferee-company by virtue of the amalgamation order, would not answer the description of "immovable property" within the meaning of clause (d)( ii), nor does it answer the description of "transfer" as defined in clause (f)( ii) of section 269UA of the Income-tax Act." 6.10 In view of the argument that approval of the scheme amounts to transfer by operation of law, it is also essential to understand the scope of enquiry and jurisdiction of the company court. In this regard, my attention has been drawn to the pronouncement of the Apex Court in Miheer H. Mafatlal v. Mafatlal Industries Ltd. [1996] 10 SCL 70 wherein the Court had laid down the broad contours of the jurisdiction of the company court and the permissible nature and extent of its enquiry before granting sanction to the scheme under section 391 of the Act as follows : "(1)The sanctioning Court has to see to it that all the requisite statutory procedure for supporting such a scheme has been complied with and that the requisite....
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....s or creditors for whom the scheme is framed. The Court cannot refuse to sanction such a scheme on that ground as it would otherwise amount to the Court exercising appellate jurisdiction over the scheme rather than its supervisory jurisdiction. It is the commercial wisdom of the parties to the scheme who have taken an informed decision about the usefulness and propriety of the scheme by supporting it by the requisite majority vote that has to be kept in view by the Court. The Court has neither the expertise nor the jurisdiction to delve deep into the commercial wisdom exercised by the creditors and members of the company who have ratified the scheme by the requisite majority. Consequently the company court's jurisdiction to that extent is peripheral and supervisory and not appellate. The Court acts like an umpire in a game of cricket who has to see that both the teams play their game according to the rules and do not overstep the limits. But subject to that how best the game is to be played is left to the players and not to the umpire. The supervisory jurisdiction of the company court can also be culled out from the provisions of section 392. Of course, this section deals with post....
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....reholders/creditors. Even in the absence of individual agreement by all the shareholders and creditors the decision of the majority prescribed in section 391(2) binds all the creditors and the shareholders. The scheme after being sanctioned by the Court binds all its creditors, members and shareholders including even those who were opposed to the scheme being sanctioned. It binds the company as well. While exercising its power in sanctioning the scheme of amalgamation, the Court is to satisfy itself that the provisions of statute have been complied with. That the class was fairly represented by those who attended the meeting and that the statutory majority was acting bona fide and not in an oppressive manner. That the arrangement is such as which a prudent, intelligent or honest man or a member of class concerned and acting in respect of the interest might reasonably would take. While examining as to whether the majority was acting bona fide the Court would satisfy itself to the effect that the affairs of the company were not being conducted in the manner prejudicial to the interest of its members or to public interest. The basic principle underlying such a situation is none other ....
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....n connection therewith, shall not be sanctioned unless the Court has received a report from the Company Law Board or the Registrar that the affairs of the company have not been conducted in a manner prejudicial to the interest of its members or to public interest; and secondly that the order of resolution of transfer of company shall not be made unless Official Liquidator on scrutiny of the books and papers of the company makes a report to the Court that the affairs of the company had not been conducted in a manner prejudicial to the interest of its members or to public interest." 6.15 My attention is also drawn by learned senior counsel for the petitioner to the provisions of section 18(6A) of the Sick Industrial Company (Special Provision) Act, 1985 ('SICA') which is in pari materia with the provisions of section 391 of the Act. Section 18(6A) is to the following effect: "18.(6A) Where a sanctioned scheme provides for the transfer of any property or liability of the sick industrial company in favour of any other company or person or where such scheme provides for the transfer of any property or liability of any other company or person in favour of the sick industrial compan....
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.... of the Calcatta High Court in Madhu Intra Ltd.'s case (supra), has held that any transfer of assets and liabilities of the transferor-company to the transferee-company made under section 394(1) and (2) of the Act, by means of an amalgamation is not chargeable with any stamp duty as the said transaction does not fall within the ambit of section 2(14) of the Indian Stamp Act. . . . (20)Both in the case of amalgamation under the Act, as well as in the case of any scheme under the BIFR, the transfer is not effected on the act of parties, but it is by operation of law. It is an involuntary transfer which takes place as soon as the statutory authority, namely, the BIFR passes the order." 6.17 As noted by the Madras High Court, on this aspect the Bombay High Court had taken a different view. The scheme of the Act also shows transfer of assets and liabilities on effectuation of a scheme of amalgamation consequent upon its approval has no element of compulsion. The scheme is proposed voluntarily. It is based on the consent and wishes of the majority of the members and creditors. The objection and intendment of the provisions of the SICA has no parity with purpose of sections 392-394 ....
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....as also observed that the scheme could not be altered except with the sanction of the Court even if the shareholders and creditors acquiesce in such alteration. It was for this limited reason that the Court observed that the scheme would be said to have statutory operation. 6.21 Placing reliance on the principles laid down in the above case on the scope of the proceedings under section 391 of the Act, in para 32 of the pronouncement at Garware Polyster Ltd.'s case (supra), the Supreme Court held that the Court would not grant sanction to a proposed scheme only because the same reflects the will of the majority of the creditors or a class of them but it must consider all aspects of the matter so as to arrive at a finding that the scheme is fair, just and reasonable and does not contravene public policy or any statutory provision. The Supreme Court held that such care and caution is required to be exercised by all Courts including the civil courts in terms of rule 1 of the Order XXIII, of the CPC. This pronouncement also does not state that there is any adjudication by the Court on the merits or demerits of the proposed scheme and only emphasises the limited scope of the enquiry b....
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....a scheme of amalgamation under section 394 is not an order simplicitor of transfer of property by an act of parties but is an order after judicial scrutiny and that it bears the imprimatur of the Court; the moot question is whether such approved scheme stands on a special footing, is exempted from the legal consequences of transfer of property and that it cannot be subjected to stamp duty. The applicants' submission is that an order of a Court cannot be subjected to scrutiny or interference by the revenue authorities. 7.2 In General Radio & Appliances Co. Ltd. v. M.A. Khader [1986] 2 SCC 656, the Court was concerned with a petition by a landlord seeking eviction of a tenant company on the ground of subletting. The question raised was as to whether the amalgamation amounted to a transfer of the tenant company's rights under the lease by way of subletting. The Court came to a conclusion that the order of amalgamation had been made on the basis of a petition filed by the transferor-company and, therefore, was not involuntary. It was held to be a voluntary act by agreement between the parties. The Apex Court, therefore, held that it had to be concluded that there was a transfer of t....
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....the rights in property have been subjected to levy of stamp duty in several situations. It is therefrom the date of the inception of the Indian Stamp Act, 1899. Section 2(15) of the Indian Stamp Act defines "instrument of partition" to mean any instrument whereby co-owners of any property divide or agree to divide such property in severalty, and includes also a final order for effecting a partition passed by any revenue authority or any civil court and an award by an arbitrator directing a partition. This provision specifically provides that any final order effecting partition by any Court, revenue authority or award made by the arbitrator directing partition would be an instrument of partition. . . . 27. Section 394(2) of the Act provides that the properties and liabilities of the transferor-company stand transferred to the transferee-company by virtue of an order of Court. . . . 30. A document creating or transferring a right is an instrument. Can it be said that an order effectuating the transfer is a document? The answer has been given in the affirmative by this Court in Haji Sk. Subhan v. Madhorao AIR 1962 SC 1230, wherein it was held that the question is whether the wor....
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....and prescribe rates of stamp duty under Entry 63, List II." 7.6 Mr. P.V. Kapur, learned counsel for the petitioner, has sought to draw a distinction before this Court that the judgment in Hindustan Lever's case (supra) was rendered in its peculiar facts and legal situation having regard to the applicable statute in Maharashtra or other States and cannot govern adjudication in the instant case. It is contended that there are no statutory provisions in the Indian Stamp Act, 1899 applicable to Delhi which are in pari materia to section 2(g)(iv ) of the Bombay Stamp Act. It is also emphasised that the Bombay Stamp Act, 1985 is not in pari materia and, therefore, the judgments which decide issues relating to this enactment would have no application to the instant case. 7.7 There can be no dispute with the well-settled principle that a judicial precedent requires to be considered in the light of the issues which were before the Court passing the judgment. It also needs no elaboration that statutes which are not in pari materia cannot be compared. 8. Inclusive definition clauses - Interpretation 8.1 In view of the distinction being drawn on behalf of the petitioners, it become....
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....rd 'include' is used to amplify the meaning while removing a possible doubt. 8.7 In the decision of the Supreme Court entitled Thirumanickam & Co. v. State of Tamil Nadu MANU/SC/0427/1996, it was held that an amendment which is by way of a clarification of an earlier ambiguous provision, can be a useful aid in construing the earlier provision, even though such an amendment is not given a retrospective effect. 8.8 The legal position was summarised by the Supreme Court in Karnataka Power Transmission Corpn. Ltd. v. Ashok Iron Works (P.) Ltd. AIR 2009 SC 1905 (para 13) and it was stated that the inclusive definition by the legislation is used for the following purposes : ". . . (one) to enlarge the meaning of words or phrases so as to take in the ordinary popular and natural sense of the words and also the sense which the statute wishes to attribute to it; (two) to include meaning about which there might be some dispute; (three) to bring under one nomenclature all transactions possessing certain similar features but going under different names." 8.9 From the above, it is evident that a legislative omission to mention a subject or item in an inclusive definition does not ta....
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....fore, was by way of clarification of an ambiguous provision. 8.14 There is yet another aspect of this matter. Section 2(g) of the Bombay Stamp Act defines the expression "conveyance" as including an instrument by which there is transfer of right, title and interest in immovable property. 'Instrument' stands defined under section 2(l ) of the Act which is another inclusive definition and opens with the words that "instrument includes every document." 8.15 In M. S. Builders (P.) Ltd.'s case (supra), an argument was laid before the Court by the respondents that the decree put a seal of the Court on the position existing in law as to the legal status of the respondents; that it formally expresses such rights; that wherever the Legislature intended to include a final order of the civil court to be covered under the provisions of the Act, it had specifically provided so. In this behalf, it was argued that 'instrument of partition' in section 2(m) of the Bombay Stamp Act was specifically included by the Legislature; and that there was no statutory provision including a consent decree within the scope of 'conveyance' as defined under section 2(g) of the Act or by the definition of th....
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....endment the consent decree was not included in the definitions of "conveyance" and "instrument". The High Court proceeded on the footing that the 1985 Amendment was clarificatory and declaratory. 15. As we have noticed earlier the definitions of "conveyance" and "instrument" start with the expression "includes" which shows that the definitions are very wide. It appears to us that the amendment was made out of abundant caution and it does not mean that the consent decree was not otherwise covered by the definitions given in section 2(g) or 2(l) of the Act. As stated earlier it depends on the terms thereof. Merely because an agreement is put in the shape of a consent decree it does not change the contents of the document. It remains an agreement and it is subject to all rights and liabilities which any agreement may suffer. Having a stamp of Court affixed will not change the nature of the document. A compromise decree does not stand on a higher footing than the agreement which preceded it. A consent decree is a mere creature of the agreement on which it is founded and is liable to be set aside on any of the grounds which will invalidate the agreement.' 8.18 In Li Taka Pharmaceu....
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....irtue of the Maharashtra Act No. 27/1985 (Amendment), made no impact to the substantive provisions and was really in the nature of a clarification to the existing provisions. This being the legal position, it certainly cannot be contended that merely because some of the judicial precedents cited before this Court arise out of the Bombay Stamp Act, 1985, the clear legal principles laid in such pronouncements would have no application to the instant case. 8.21 The very reasoning noticed hereinabove applies to the present consideration. Merely because the Legislature has not amended the existing statutory provision as applicable to Delhi to specifically include transfer of property under an order approving a scheme of amalgamation in the definition of 'conveyance', it is of no consequence at all. The same does not amount to exclusion from applicability of the Indian Stamp Act and chargeability to stamp duty thereon. The statutory definition of "conveyance" under sub-section (10) of section 2 is an inclusive definition of wide import which cannot be confined to specific instruments mentioned in the statute. 8.22 The contention on behalf of the petitioner that the failure of the L....
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....bility is, or purports to be, created, transferred, limited, extended, extinguished or recorded, but does not include a bill of exchange, cheque, promissory note, bill of lading, letter of credit, policy of insurance, transfer of shares, debenture, proxy and receipt. Therefore, the amalgamation scheme sanctioned by the Court would be an instrument within the meaning of section 2(l ). The said instrument is on the basis of agreement or arrangement between two or more companies. By the said instrument, properties are transferred. . . . 10. Re : Contention (a ) : Mr. Andhyarujina vehemently submitted that if Court decrees and instruments are included and considered as conveyances, then, the result would be a startling one and that every order passed by this Court or the Supreme Court or the civil court would be subject to interference by the revenue authorities and would not be admissible under section 34 of the Bombay Stamps Act unless it is duly stamped. The consequence would be that there will be inroads in judicial orders passed by the Courts. He contended that once the Court passes an order or a decree, it is required to be implemented or executed and its execution or imple....
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.... is the instrument whereby any property upon the sale thereof is legally or equitably transferred and the taxation is confined to the instrument whereby the property is transferred. ... 15. Learned counsel further contended that the jurisdiction of levy stamp duty is in respect of a document or an instrument and, therefore, an order or decree of the Court cannot be termed an instrument or a document unless it ratifies the act of the parties. As discussed above, the foundation of an order under section 394 of the Act is a compromise or arrangement between two or more companies and it involves transfer of assets and liabilities of one company to the other company. The proviso to sub-section (1) of section 394 provides that the Court can sanction the scheme if the affairs of the company have not been conducted in a manner prejudicial to the interests of its members or to public interest. The transfer of the assets of a transferor-company is based upon the compromise and while sanctioning the scheme the Court is not substituting or changing the compromise or arrangement. It only verifies whether it is a lawful act and is in accordance with the prescribed procedure. . . . 20. . . ....
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....ined, which may extend up to Rs. 500. Section 391(3) provides that an order made by the Court under sub-section (2) of section 391 shall not have effect till a certified copy of the order has been filed with the Registrar. On presentation of the certified copy of order, the Registrar of Companies certifies that the transferor-company stands amalgamated with the transferee-company along with all its assets and liabilities. Thus, the amalgamation scheme sanctioned by the Court would be an "instrument" within the meaning of section 2(l). By the said "instrument" the properties are transferred from the transferor-company to the transferee-company, the basis of which is the compromise or arrangement arrived at between the two companies.' 8.28 It is well-settled, that a document creating or transferring a right in immovable property is an 'instrument'. Before this Court, it was stated by Mr. P.V. Kapoor, learned senior counsel for the petitioner, that he does not dispute that a scheme of amalgamation which was placed before the Court and stands approved under sections 391 to 394 of the Act would be covered under the definition of 'instrument' as contained in sub-section (14) of sectio....
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.... the defendants to the plaintiffs". The aforesaid decree was based on an agreement between the parties. So is the case with an order under section 394 of the Act which is also based on an agreement between the transferor-company and the transferee-company.' 8.31 In Hindustan Lever's case (supra), it was further held that an order passed by the Court under section 394 of the Act is based upon a compromise between two or more companies. The scheme has to be sanctioned by the Court as per the compromise arrived at between the parties if the same is lawful and the company court is satisfied that the affairs of the company were not conducted in a manner prejudicial to the interests of its members or to public interest, that is to say, it should not be unfair or contrary to public policy or unconscionable. It has been unequi-vocally held that the same is an instrument which transfers the properties. 9. To conclude 9.1 The pronouncement of the Apex Court in Hindustan Lever's case (supra) was not placed before the Calcutta High Court which considered Madhu Intra Ltd.'s case (supra). In addition thereto, the discussion of the impact of the amendment to the definition of the term 'c....
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....plicants herein was similar in terms of the contentions raised before the Apex Court in Hindustan Lever's case (supra) is rejected. The Apex Court has pointed out that merely because a scheme for amalgamation requires approval by Court, it makes no difference at all to its real nature. It is nothing better than and remains a compromise or settlement. From the above discussion, the most important principle which emerges is that it would be immaterial for chargeability to stamp duty that approval and effectuation of the scheme or arrangement required Court intervention by way of the necessary approval. 9.6 Thus, for the purposes of imposition of stamp duty, it would be immaterial as to whether the conveyance was by operation of law, statutory operation, or by virtue of a private contract between parties. Exemption has to be by specific statutory provision. 9.7 The order approving the scheme for amalgamation passed by the company court in exercise of jurisdiction under sub-section (2) of section 394 which have the impact of transferring of all assets and liabilities including the property of the transferor-company to the transferee company would be, therefore, exigible to stamp ....
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....egislative prescription, the special law in force relating to transfer of property by companies under the Act is not impacted by the provisions of the general law in Transfer of Property Act and a transfer of assets and liabilities, by virtue of the sanction of a scheme under section 394 of the Act would, therefore, not attract the applicability of the provisions of Transfer of Property Act. 10.5 It is noteworthy, that the expression 'inter vivos' is not statutorily defined in the Indian Stamp Act or in any other statutory provision. This expression would, therefore, derive its meaning from the meaning given to it in common parlance which is to be found in several dictionaries. 10.6 Learned senior counsel for the applicant has pointed out in the judgment at T.K. Lathika's case (supra). In para 16, the Supreme Court has placed reliance on the definition of the expression "inter vivos" given in the Black's Law Dictionary while deciding on the question as to whether a moratorium of one year on filing of an eviction petition by a transferee-landlord would apply to a tenanted premises which were gifted by the original landlord to his daughter who was thereby a transferee-landlord.....
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....ere held to constitute a transfer and a conveyance within the meaning of sub-section (10) of section 2 and, hence, chargeable to stamp duty under Entry 23 of Schedule 1 of the Indian Stamp Act. 10.8 A similar submission arose for consideration before the Bombay High Court in M.S. Builders (P.) Ltd.'s case (supra). In this pronouncement, it was observed that a consent decree is a document by which right or liability is purported to be created and transferred in praesenti. It takes effect instantaneously and its operation is not postponed to a later point in time and has been held to be covered under the definition of 'instrument' under section 2(l) of the Bombay Stamp Act. So far as the persons between whom it takes effect is concerned, in para 14 of the judgment, it was held that it is a live document and taking effect between persons who may be natural or artificial, who are alive at the relevant time, which would make the transaction or transfer 'inter vivos'. It was held that this would be well within the inclusive part of the definition of 'conveyance' and 'instrument' as they existed prior to 1985 and are sufficient and substantial enough, to take in its form and forceful g....
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....e between two juristic persons or a transfer to which 'the juristic person is one of the parties'. 10.11 I find that so far as the expression inter vivos and the interpretation of the definition of 'conveyance' in sub-section (10) of section 2 is concerned, the reference is to a 'living person'. There is nothing in any dictionary or in any judicial pronouncement or legal literature whereby such living person has to be restricted to only a natural person and would not include a juristic entity or an artificial person. 10.12 It, therefore, has to be held that a transfer inter vivos would include a transfer in praesenti between persons who are in existence at the time of the transfer. Such person would take into its ambit not only natural persons but artificial persons including juristic persons. A company incorporated under the provisions of the Act is a juristic person created artificially in the eyes of law which admittedly is owning and transferring the property. 10.13 Accordingly, it is held that an approved scheme of amalgamation amounts to a transfer inter vivos between two companies who were juristic persons in existence at the time of passing of the order and sanctio....
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.... amalgamation scheme, virtually a transferee-company in effect purchases the transferor-company for a specified sum which is paid in terms of the shares of the transferee- company to the shareholders of the transferor-company. For this purpose, what is to be kept in mind is that by sanctioning the amalgamation scheme, the Court is sanctioning not a transfer of the assets or liabilities separately but the going concern is transferred which is valued at a particular amount and that valuation would be on the basis of share exchange ratio. . . . 33. . . . In this view of the matter, we hold that normally in a case of amalgamation of a scheme sanctioned by the High Court, its consideration under article 25(1) of Schedule I to the Stamp Act should be based on its valuation arrived at on the basis of shares allotted by the transferee-company to the transferor- company. In the case of Hindustan Lever Employee's Union v. Hindustan Lever Ltd. [1995] 83 Comp. Cas. 30 (SC) at the time of making valuation of the share exchange ratio, the Court itself took into consideration the valuation report based on three well-known methods, viz., (i) the net worth method, (ii) the market value method, a....
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....tion. 12.2 On the other hand, Mr. Aditya Madan, learned counsel representing the Government of NCT of Delhi, has submitted that the two Notifications not having been accepted by the legislative assembly of the Government of National Capital Territory of Delhi would stand repealed. It is further contended that the Notifications do not apply to an amalgamation effected under section 394 of the Act whereby the transferor-company ceases to exist after the transfer of property. 12.3 The first Notification placed before this Court reads as follows :- "Notification No. 1, dated the 16th January, 1937.-In exercise of the powers conferred by clause (a) of section 9 of the Indian Stamp Act, 1899 (II of 1899), the Governor General in Council is pleased to remit the stamp duty chargeable under articles 23 and 62 of Schedule I to the said Act on instruments evidencing transfer of property between companies limited by shares as defined in the Indian Companies Act, 1913, in cases- (i )where at least 90 per cent of the issued share capital of the transferee-company is in the beneficial ownership of the transferor-company, or (ii )where the transfer takes place between a parent compa....
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....lf by the Chief Commissioner of Delhi that the conditions above prescribed are fulfilled." It is noteworthy that this Notification relates specifically to the then province of Delhi. 12.5 Delhi occupies a unique position and was one among the union territories listed in the Constitution. Part VIII of the Constitution is concerned with the provisions regarding union territories. Special provisions for some of the union territories have been made in article 239. By virtue of the amendment of 1991, article 239AA was incorporated to make special provisions with regard to Delhi which was renamed as the National Capital Territory as a result thereof. 12.6 By virtue of the Constitution (Sixty-ninth Amendment) Act, 1991 (with effect from 1-2-1992) a special provision by way of article 239AA was incorporated in Part VIII of the Constitution whereby, special provisions with respect to Delhi were made. Delhi was renamed as the National Capital Territory as a result thereof. The relevant portion thereof reads as follows :- "239AA. Special provisions with respect to Delhi.-(1) As from the date of commencement of the Constitution (Sixty-ninth Amendment) Act, 1991 the Union Territory ....
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....uding a law adding to, amending, varying or repealing the law so made by the Legislative Assembly. 12.9 It is also necessary to examine article 246 of the Constitution so far as the legislative competence of the Parliament is concerned which reads as follows :- "246. Subject matter of laws made by Parliament and by the Legislatures of States.-(1) Notwithstanding anything in clauses (2) and (3), Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule (in this Constitution referred to as the Union List). (2) Notwithstanding anything in clause (3), Parliament, and, subject to clause (1), the Legislature of any State also, have power to make laws with respect to any of the matters enumerated in List III in the Seventh Schedule (in this Constitution referred to as the Concurrent List). . . . (4) Parliament has power to make laws with respect to any matter for any part of the territory of India not included (in a State) notwithstanding that such matter is a matter enumerated in the State List." Clause (4) of article 246 of the Constitution of India, therefore, empowers the Parliament to make laws with resp....
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....tutional provisions fell for consideration before the Constitution Bench of nine Judges of the Supreme Court. In its judgment in New Delhi Municipal Council v. State of Punjab [1997] 7 SCC 339, the Court held that the Parliament would be in a position of superiority in hierarchy qua the Delhi Legislative Assembly. In this regard, in para 10 of its judgment, the Constitution Bench had construed the implication of provisions of section 239AA vis-a-vis the Government of National Capital Territory of Delhi Act in some detail and held as follows :- '10. By the Constitution (Sixty-ninth Amendment) Act, 1991, article 239AA was introduced in Part VIII of the Constitution. This article renamed the Union Territory of Delhi as the "National Capital Territory of Delhi" and provided that there shall be a Legislative Assembly for such National Capital Territory. The Legislative Assembly so created was empowered by clause (3) of the said article "to make laws for the whole or any part of the National Capital Territory with respect to any of the matters enumerated in the State List or in the Concurrent List insofar as any such matter is applicable to Union Territories except matters with respec....
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....the Punjab Courts Act, 1918 was extended to the National Capital Territory of Delhi. It was held that in the absence of any provisions in the Government of National Capital Territory of Delhi Act or in the absence of any other notification, order or legislation, the Punjab Courts Act, 1918 had continuous application to Delhi along with the laws made by the Delhi Legislative Assembly. Placing reliance on the principles laid down in Mithan Lal v. State of Delhi AIR 1958 SC 682, it was held that though the Punjab Courts Act was only extended to Delhi, it has the status of a central legislation specifically enacted for Delhi. The Apex Court held that on extension of the applicability of the Act of 1918 to the Union Territory of Delhi, it becomes a Central enactment or an Act of the Parliament as it is made in exercise of powers of the Parliament to legislate for the Union Territory of Delhi by virtue of clause (4) of article 246 of the Constitution. Therefore, this Act of 1918 assumes the position of a central legislation enacted specifically for Delhi and is the law operative in the National Capital Territory ('NCT' of Delhi). The Apex Court further held that any legislation passed by....
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....the Government of NCT of Delhi that the notification not having been adapted by the appropriate Government does not have any legal force or binding. Mr. Madan, learned counsel for the respondent, has placed strong reliance on the Adaptation of Laws Order 1950, the relevant portion provides as follows : "Adaptation of existing Central Laws.-(3) As from the appointed day, the existing Central laws mentioned in the Schedule to this order shall, until repealed or amended by a competent Legislature or other competent authority, have effect subject to the adaptation and modifications directed by those Schedules on if it is so directed shall stand repealed. . . ." 12.17 It is further contended that after the coming into force of the Constitution of India, amendments have been effected to section 9(1) of the Indian Stamp Act, 1899 (vide AO 1950) which reads as follows : "9. Power to reduce, remit or compound duties.-(1) The Government may, by rule, or order published in the Official Gazette,- (a )reduce or remit, whether prospectively or retrospectively, in the whole or any part of the territories under its administration, the duties with which any instruments or any particular....
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....ourt is not covered under clause (a) of sub-section (2) of section 9. As such, the jurisdiction to reduce or remit stamp duties in respect of such an instrument and document is specifically vested in the State Government under sub-clause (b) of sub-section (2) of section 9. 12.19 It would be useful also to consider the three entries referred to during the course of arguments. Learned counsel for the respondents has relied on Entry 91 of List I and Entry 63 of List II, while learned senior counsel for the petitioner has placed reliance on Entry 44 of List III. These entries read as follows : "Entry 91 of List I.-Rates of stamp duty in respect of bills of exchange, cheques, promissory notes, bills of lading, letters of credit, policies of insurance, transfer of shares, debentures, proxies and receipts. Entry 63 of List II.-Rates of stamp duty in respect of documents other than those specified in the provisions of List I with regard to rates of stamp duty. Entry 44 of List III.-Stamp duties other than duties or fees collected by means of judicial stamps, but not including rates of stamp duty." 12.20 The power to prescribe the rate of stamp duty is, thus, divided between....
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....s. 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." 12.22 The submissions made by learned counsel for the respondent fail to consider the material distinction between the legislative competence of the Legislative Assembly of the State of Maharashtra vis-a-vis the position of the Delhi Legislative Assembly. It also fails to consider the constitutional conferment of a special status upon the National Capital Region of Delhi and the supremacy of the Parliament under article 239AA(3)(b) and article 246(4) to legislate on all matters concerning Delhi. These two factors render the observations of the Apex Court in Hindustan Lever's case (supra) on the issue of the legislative competency of the State Government with regard to the subject-matter inapplicable to the issue under examination in the present case. 12.23 Section 3(60)(c ....
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....ations of the Apex Court in John Vallamattom v. Union of India AIR 2003 SC 2902 can usefully be adverted to and reproduced as follows : "18. It is neither in doubt nor in dispute that clause (1 ) of article 13 of the Constitution of India in no uncertain terms states that all laws in force in the territory of India immediately before the commencement of the Constitution, insofar as they are inconsistent with the provisions of Part III there, shall, to the extent of such inconsistency, be void. Keeping in view the fact that the Act is a pre-Constitution enactment, the question as regards its constitutionality will, therefore, have to be judged as being law in force at the commencement of the Constitution of India - see Keshavan Madhava Menon v. The State of Bombay MANU/SC/0020/1951/[1951] Crl. LJ 680. By reason of clause (1) of article 13 of the Constitution of India, in the event, it be held that the provision is unconstitutional the same having regard to the prospective nature would be void only with effect from the commencement of the Constitution. Article 372 of the Constitution of India per force does not make a pre-constitution statutory provision to be constitutional. It m....
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....e, and any such adaptation or modification shall not be questioned in any Court of law.' Thus, clause (1) of the article provides for continuance, in force, of the existing laws notwithstanding the repeal by the Constitution of the enactments mentioned in article 395 and clause (2 ) provides for their adaptation with a view to bring them into accord with the provisions of the Constitution. The Government of India Act, 1935, undoubtedly stands repealed by article 395 of the Constitution, but laws made thereunder which were in existence immediately before the commencement of the Constitution would continue under article 372(1) and could be adapted under the second clause of that article. Mr. Chatterjee argues that article 372 has no application to the present case inasmuch as the order made by the Central Government under section 94(3) of the Government of India Act could not be regarded as "a law in force" within the meaning of article 372. A distinction is sought to be made by the learned counsel between an "existing law" as defined in article 366(10) and a "law in force" and it is argued that though an "order" can come within the definition of "existing law", it cannot be inclu....
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....der clause (2) of article 372 and this is precisely what has been done by the Adaptation of Laws Order, 1950. Paragraph 26 of the Order runs as follows : '26. Where any rule, order or other instrument was in force under any provision of the Government of India Act, 1935, or under any Act amending or supplementing that Act, immediately before the appointed day, and such provisions is re-enacted with or without modifications in the Constitution, the said rule, order or instrument shall, so far as applicable, remain in force with the necessary modifications as from the appointed day as if it were a rule, order or instrument of the appropriate kind duly made by the appropriate authority under the said provision of the Constitution, and may be varied or revoked accordingly'." 13.7 A similar contention on behalf of the petitioner was rejected by the Apex Court in the pronouncement of the Apex Court as M.G. Desai's case (supra) holding that : "15. There is no substance in the contention that in the absence of adaptations which the President of India is competent to make under clause (2) of article 372, the Bhor State Ordinance lapsed. By clause (2) of article 372, the President i....
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.... in force' shall include a law passed or made by a Legislature or 'other competent authority' in the territory of India before the commencement of the Constitution and not previously repealed, notwithstanding that it or parts of it may not be then in operation either at all or in particular areas. It is clearly evident therefrom that so far as a pre-Constitution law is concerned, the legislative competence of the law making authority is not required to be tested on the touchstone of the constitutional provisions or the assignment or delegation or the separation of powers provided thereunder. An objection to the legislative competence of the law-making authority has to be examined on the legislative competence and assignment of authority and power at the time the Law/notification was made. Before me, it is not the submission of learned counsel for the respondent that the Notifications of 1937 are bad for legislative incompetence. 13.11 So far as the Government of NCT of Delhi is concerned, it has been held hereinabove that the Central Government has the legislative competence to legislate on the issue of stamp duty. No legislation by the State Government with regard to the rate o....
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....o winding up of the transferor-company. On the contrary, the effect is of absorption of one company into another or merger into a larger third. It has been compared to shelling of a corporate shell by the transferor-company which merges into the transferee-company. For all practical purposes, the transferor-company remains alive and thrive as part of the larger whole. 15.3 Mr. P.V. Kapur, learned senior counsel for the petitioner, has drawn my attention to para 1(1.1) and para 2 of the scheme of amalgamation which points out that as per the approved scheme, the effective date for the scheme is the date when the order approving the scheme is filed with the RoC. The scheme has notified the appointed date as 15-11-2002. Para 2.11 of the scheme states that the transferor-company stands dissolved on the effective date. The transfer of assets is to be effected on the appointed date when the companies are in existence and effective. 15.4 Learned senior counsel for the petitioner has drawn my attention to a pronouncement of this Court reported at Sandy Estates Ltd. v. Landbase India Ltd. [1997] VI AD (Delhi) 981 wherein the question as to whether stamp duty is leviable on a transfer ....