Amalgamation — Conveyance — Order of Company Court approving scheme of amalgamation resulting in transfer of property to transferee company is a conveyance — Indian Stamp Act 1899, S. 2(10), (14).

[Delhi Towers Ltd. v. G.N.C.T. of Delhi, (2010) 159
Comp. Cas 129 (Del.)]

The applicant was aggrieved by refusal of the authorities of
the Government of NCT of Delhi to accept the scheme of amalgamation approved by
the Court in exercise of jurisdiction u/s.394 of the Companies Act, 1956 without
the payment of a stamp duty.

It was urged that the stamping authorities are not accepting
the scheme of amalgamation without payment of stamp duty thereon.

The Delhi High Court held that a proposed scheme of
amalgamation of companies is a voluntary act of the parties (companies) without
any compulsion, statutory or otherwise at all. The scheme when approved by the
majority of members and creditors, binds the minority dissenters as well. The
Court exercises only a supervisory jurisdiction while examining it. No element
of adjudication is involved in the order of approval. The Court is not empowered
to consider the merits of the terms on which the scheme for amalgamation has
been proposed by the consenting parties. The role of the Court is confined to
considering whether the scheme was not violative of the principles of law,
public policy, and was not opposed to public interest. The order of approval of
the scheme results in amalgamation and absorption of the assets and assets and
liabilities of the transferor company with those of the transferee company which
includes immovable property.

It is the “instrument whereby property is legally and
equitably transferred” which is made liable for payment of stamp duty. Section
349(2) of the Companies Act, 1956 provides that the properties and liabilities
of the transferor company stand transferred to the transferee company by virtue
of the order of the Court. The statute does not provide any exception to the
definition of ‘instrument’ or ‘conveyance’. Transfer of property on effectuation
of a scheme of amalgamation after its acceptance by the approval of the Court is
not a transfer by any statutory prescription. 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.
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. Thus, for the purposes of imposition of stamp duty, it
would be immaterial 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.

Section 2(10) of the Indian Stamp Act, 1899 contains an
inclusive definition of ‘conveyance’. The definition of ‘conveyance’ in the
Bombay Stamp Act, 1958 was an inclusive definition. The amendment to that Act by
the Maharashtra Act No. 27 of 1985 was only with a view to setting at rest any
doubts and to clarify and explicitly state what was already included in the
unamended definition of conveyance. A scheme of amalgamation approved by a Court
in exercise of jurisdiction under the Companies Act, 1956 and given effect
thereafter, where under property is conveyed from one company to another, was
covered within the unamended definition of the term ‘conveyance’ in the Bombay
Stamp Act as well. 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 does not amount to exclusion from applicability of the Indian
Stamp Act and chargeability to stamp duty thereon. The statutory definition of
‘conveyance’ u/s.2(10) of the 1899 Act is an inclusive definition of wide import
which cannot be confined to specific instruments mentioned in the statute. An
order passed by the Company Court in exercise of jurisdiction u/s.394 of the
Companies Act, 1956 approving a scheme of amalgamation proposed by the parties,
is covered under the definition of ‘conveyance’ u/s.2(10) of the Indian Stamp
Act, 1899.

A scheme of amalgamation which was placed before the Court
and stands approved u/s.391 to 394 of the Companies Act, 1956 would be covered
under the definition of ‘instrument’ as contained in Section 2(14) and would be
chargeable to stamp duty.

Accordingly, 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 sanctioning of the scheme
whereby right, title and interest in the immovable property of the transferor
company are transferred to the transferee company. The transfer takes place in
the present and is not postponed to any later date and is covered under the
definition of conveyance u/s.2(10) of the Stamp Act.