Case Law Details
Order of the Court approving amalgamation is a “conveyance” and an “instrument” on which stamp duty is payable
The Delhi High Court has inter alia held in the case of Delhi Towers Ltd. Vs. G.N.C.T. of Delhi [2010] 159 Comp Cas 129 (Del) that an order passed by the Court in terms of the provisions of Section 391 read with Section 394 of the Companies Act 1956 approving a scheme of amalgamation of companies is “conveyance” under Section 2(10) of Indian Stamp Act 1899 [ISA]. The High Court further held that such approved scheme of amalgamation would be an “instrument” under Section 2(14) of the ISA chargeable to stamp duty.
In this case Fifteen companies engaged in the business of real estate, proposed to merge with the Delhi Towers Ltd. which was also engaged in the same business. The transferor companies were 100 % Subsidiaries of Delhi Towers Ltd.
Whereby the undertakings of the transferor companies, would, with effect from the transfer date, be transferred to and vest in the t ransferee company, pursuant to the provisions of section 394 of the Companies Act, 1956. The proposed scheme of amalgamation was approved by the Company Court by its order.
The scheme of amalgamation would become effective on filing of the certified copy of the order with the Registrar of Companies, NCT of Delhi and Haryana.
The transferee company moved an application before the Tehsildar, which had jurisdiction over the properties of Company to effect mutation of the same in its records in favour of the transferee company. The Tehsildar had not effected the mutation of the properties in favour of the transferee company. The stamping authorities were not accepting the scheme of amalgamation without payment of stamp duty tereon. Being aggrieved, the transferee company moved application before the High Court.
The High Court held that the clear principle which emerged from the judicial decisions is that the proposed scheme is a voluntary act of the parties without any compulsion, statutory or otherwise at all. The Court exercises only a supervisiory jurisdiction is involved in the order of approval.
The High Court also held that there was nothing to denigrate from the basic and primary fact that the order of the Court was based on the consent of the parties. The most relevant factor was the undisputable reality that the transfer of property was not an involuntary act of the parties. The order of approval of the scheme resulted in amalgamation and absorption of the assets and liabilities of the transferor company with those of the transferee company which included immovable property.
The High Court held that 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 privaet vonctact between parties, exemption has to be by specific statutory provision.
Therefore, the High Court conclouded that on approved scheme of amalgamation is liable to stamp duty under the Indian Stamp Duty Act.
Hover, where transferor companies were 100% Subsidiary of transferee company, on satisfaction of conditions described in item of Notification no. 13, dated 25-12-1937 issued by the Central Government, that is , on production of certificates by parties to the effect that all conditions prescribed for amalgamation were fulfilled, stamp duty would stand remitted.
