Gujarat High Court
State Of Gujarat vs M/S Bio Deal Labouratories Pvt. Ltd on 22 December, 2021
Author: J. B. Pardiwala
Bench: J.B.Pardiwala
C/LPA/452/2017 JUDGMENT DATED: 22/12/2021
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/LETTERS PATENT APPEAL NO. 452 of 2017
In R/SPECIAL CIVIL APPLICATION NO. 345 of 2011
With
CIVIL APPLICATION (FOR STAY) NO. 1 of 2017
In R/LETTERS PATENT APPEAL NO. 452 of 2017
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE J.B.PARDIWALA Sd/-
and
HONOURABLE MR. JUSTICE NIRAL R. MEHTA Sd/-
==========================================================
1 Whether Reporters of Local Papers may be allowed Yes
to see the judgment ?
2 To be referred to the Reporter or not ? Yes
3 Whether their Lordships wish to see the fair copy No
of the judgment ?
4 Whether this case involves a substantial question No
of law as to the interpretation of the Constitution
of India or any order made thereunder ?
==========================================================
STATE OF GUJARAT
Versus
M/S BIO DEAL LABOURATORIES PVT. LTD.
==========================================================
Appearance:
MR. ISHAN JOSHI, LD. ASST. GOVERNMENT PLEADER(1) for the
Appellant(s) No. 1
UCHIT N SHETH(7336) for the Respondent(s) No. 1
==========================================================
CORAM:HONOURABLE MR. JUSTICE J.B.PARDIWALA
and
HONOURABLE MR. JUSTICE NIRAL R. MEHTA
Date : 22/12/2021
ORAL JUDGMENT
Page 1 of 16
Downloaded on : Wed Jan 12 13:39:27 IST 2022
C/LPA/452/2017 JUDGMENT DATED: 22/12/2021 (PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA)
1. This appeal under Clause 15 of the Letters Patent is at the instance of the State of Gujarat being an unsuccessful respondent of a writ application and is directed against the judgment and order passed by a learned Single Judge of this Court dated 04.02.2016 in the Special Civil Application No.345 of 2011 by which the learned Single Judge allowed the writ application filed by the respondent herein-original writ applicant.
2. The facts, giving rise to this appeal, may be summarized as under;
2.1 The writ applicant filed the Special Civil Application No.345 of 2011, seeking the following reliefs;
"(A) That this Hon'ble High Court may be pleased to issue the writ of Certiorari or any other appropriate writ, order or direction in the nature of Certiorari quashing and setting aside the order dated 16.06.2010 passed in Revision Application No.41 of 2008 by the Chief Controlling Revenue Authority, Gujarat State, Gandhinagar (Annexure-"I") together with the order dated 03.07.2008 issued by the Collector & Additional Superintendent of Stamps, Gujarat State, Gandhinagar (Annexure-"E") and thereby to allow this writ petition.
(B) That this Hon'ble High Court may be pleased to stay the operation, implementation and the execution of the order dated. 16.06.2010 passed in Revision Application No.41 of 2008 by the Chief Controlling Revenue Authority, Gujarat State, Gandhinagar (Annexure-"I"), till and pending the admission, hearing and the final disposal of this writ-Page 2 of 16 Downloaded on : Wed Jan 12 13:39:27 IST 2022
C/LPA/452/2017 JUDGMENT DATED: 22/12/2021 petition on merits by this Hon'ble High Court.
(C ) That this Hon'ble Court may be pleased to award the cost of this writ petition.
(D) That this Hon'ble High Court may be pleased to grant any other and further relief(s) which may deem to be just, fit and expedient in view of the equity, peculiar nature, facts and the circumstances of the case."
2.2 It appears from the materials on record that the original writ applicant is a Private Limited Company. The writ applicant was ordered to be directed by the authority concerned to pay the deficit stamp duty of Rs.5,89,340/- in accordance with Article 20(d) of the Schedule-I and also an amount of Rs.1,00,000/- towards the penalty in accordance with Section 39(1)(b) of the Bombay Stamps Act, 1958 (for short "the Act, 1958"). The order passed by the Collector & Addl. Superintendent of Stamps, State of Gujarat, Gandhinagar dated 03.07.2008 passed under Section 39(1)(b) of the Act, 1958 was challenged by the writ applicant by filing a revision application before the Chief Controlling Revenue Authority, Gujarat State, Gandhinagar under Section 53(2) of the Act. The revision application came to be rejected by the Chief Controlling Revenue Authority.
2.3 A Scheme of Amalgamation of one M/s.Usman Paper Mills with the writ applicant company was sanctioned under Sections 391 and 394 respectively of the Companies Act, 1956 by the Company Court vide a Page 3 of 16 Downloaded on : Wed Jan 12 13:39:27 IST 2022 C/LPA/452/2017 JUDGMENT DATED: 22/12/2021 common order dated 29th October, 2004 passed in the Company Petition No.04 of 2004 and Company Petition No.05 of 2004 respectively. In view of the definition of the term "conveyance" in Section 2(g)(iv) of the Bombay Stamp Act, 1958 (now the Gujarat Stamp Act, 1958), the order was liable to payment of stamp duty, in respect of the properties and assets of the transferor company conveyed to and in the name of the transferee company, as per Article 20(c) of the Schedule-I to the Act. The copy of order was presented before the stamp authority for payment of stamp duty. The stamp authorities took the view that the same was presented after a period of one year as contemplated under Section 40 of the Stamp Act.
2.4 The aforesaid order of amalgamation dated 29th October, 2004 in the Company Petitions was made subject to the requisite orders that may be passed by the Board of Industrial & Financial Reconstruction (BIFR). The certified copy was received on 11th January, 2005. The BIFR granted sanction on 07th June, 2005. The order was presented for stamp duty on 17/23rd February, 2006.
2.5 The relevant paras from the aforesaid order dated 29th October, 2004 sanctioning the Scheme of Arrangement in the nature of Amalgamation under Section 301 with Section 394 of the Companies Act are reproduced with relevance.
Page 4 of 16 Downloaded on : Wed Jan 12 13:39:27 IST 2022C/LPA/452/2017 JUDGMENT DATED: 22/12/2021 ".... learned Addl. Central Government Standing Counsel appearing on behalf of the Central Government and Mr. Pranav. G. Desai, learned Advocate appearing on behalf of Dena Bank. 3 Both the Transferor and the Transferee Companies belong to the same group of management. Both are Private Limited Companies. The meetings of the Shareholders of both the Companies and the Creditors of the Transferor Company were dispensed with in view of the consent letters obtained from the Shareholders and the Secured and Unsecured Creditors, approving the Scheme, having been placed on record vide order dated 26/12/2003 in Company Application Nos. 599 & 600 of 2003. 4 After the petitions were admitted the same were duly advertised in Newspapers "Indian Express" (English Daily)- Vadodara Edition and "Gujarat Mitra" (Gujarati Daily)-Surat Edition, on 24/03/2004. The publication in Government Gazette was dispensed with as directed in order dated 11/3/2004. No one has come forward with any objections to the petitions even after publication of the advertisement. 5 Notice of admission of petition of Transferor Company was served on Official Liquidator attached to the High Court of Gujarat. He has placed on record report dated 13/09/2004 along with report of Auditors appointed for the purpose of scrutiny and investigation. The report states that the affairs of the Transferor Company have not been conducted in any manner prejudicial to the interest of Members of the Company or the public interest. 6 Notice of admission of petition of the Transferee Company has also been served on the Central Government and Smt.P.J.Davawala, learned Addl. Central Government Standing Counsel appears for the Central Government. She has placed on record letter dated 20/09/2004 received from the Registrar of Companies, Gujarat along with communication dated 08/09/2004 from the Regional Director indicating that the Transferor Company is a sick Company, registered with Board For Industrial & Financial Reconstruction under Section 15(1) of the Sick Page 5 of 16 Downloaded on : Wed Jan 12 13:39:27 IST 2022 C/LPA/452/2017 JUDGMENT DATED: 22/12/2021 Industrial Companies (Special Provisions) Act,1985 on 12/06/2002 and hence, permission of BIFR may be necessary for proposing above amalgamation. It is further submitted that the Central Government has decided that after bringing the aforesaid fact to the notice of the Hon'ble High Court the matter may be left to the Hon'ble High Court to be decided on merits"
(Para 6) "As can be seen from the Minutes of The Joint Meeting the Transferor Company submitted Draft Rehabilitation Scheme in terms of the orders passed by the Bench of BIFR on 16/09/2003 and at the meeting the Secured Creditors viz. Dena Bank, Regional Office, Surat, GSFC, Gandhinagar and GIIC, Surat were represented. As recorded in the Minutes the Transferor Company has entered into one time settlement with all the three Secured Creditors for the amounts mentioned in the Minutes. Furthermore, in the same Minutes it is recorded that the revised DRS, whereunder the Transferor Company is to amalgamate with Transferee Company, has been consented to by the Secured Creditors. It is further recorded in the Minutes that the advantages that would flow on the Scheme of Amalgamation being sanctioned are:
"(a) Once the amalgamation takes place, the applicant unit will become part of the Bio-deal Laboratories Pvt.Ltd. which is growing and profitable company. Thus, the applicant company will have immense benefits and can go for future up-gradation and expansion. This will result in to increase in production which will expedite the turnaround of the company make the unit viable at much early stage than envisaged in the scheme.
(b) Bio-deal Laboratories Pvt.Ltd., consumes large quantity of corrugated boxes, which amounts to forward integration for USMPL and thus, has a strong synergy for both the companies.Page 6 of 16 Downloaded on : Wed Jan 12 13:39:27 IST 2022
C/LPA/452/2017 JUDGMENT DATED: 22/12/2021
(c) Bio-deal Laboratories Pvt.Ltd. will be able to get the benefits of carry forward loss of the applicant company and thus it will be able to save sizeable amount by way of tax which will in turn further help in revival of the applicant unit.
(d) Once Usman Paper Mills Pvt.Ltd. is taken over as going concern by way of amalgamation, the paper mill will be operated for three shifts which will also assure additional turnover and it will also contribute by way of higher excise duties and sales-tax to the ex-chequer of the Govt.of India/Gujarat". The minutes further record that "it was decided to submit the minutes of the meeting to BIFR with due recommendation for acceptance of DRS as submitted by the Company"."
(Para 8) (emphasis for the present case) "No other objections are raised by anybody. In view of the aforesaid fact situation it is apparent that the amalgamation would be in the interest of the Companies, their Members and their Creditors. There is no reason to withhold sanction to the Scheme of Amalgamation. Prayers in terms of paragraph No.15.
(a) of Company Petition No.5 of 2004 and Company Petition No.4 of 2004 are hereby granted to the effect that arrangement embodied in the Scheme (Annexure-C) is hereby sanctioned so as to be binding on all Members, Shareholders and other persons concerned under the Scheme of Compromise with effect from the appointed date." (Para 9) "As already recorded in the Minutes of the Meeting held on 10/09/2004, the petitioner Company shall submit the Minutes of the said Meeting through the lead institution and this order shall be subject to the requisite orders of sanction by BIFR.
(Para 10) (emphasis for the present case)"
Page 7 of 16 Downloaded on : Wed Jan 12 13:39:27 IST 2022C/LPA/452/2017 JUDGMENT DATED: 22/12/2021 Few relevant statutory provisions:-
2.6 Section 2(g)(iv) of the Act is as under;
"2. Definitions
(g) "Conveyance" includes.-
(iv) every order made by the High Court under Section 394 of the Companies Act, 1956 in respect of reconstruction or amalgamation of companies, or by which property, whether movable or immovable, or any estate or interest in any property is transferred to, or vested in, any other person, inter vivos, and which is not otherwise specifically provided for by Schedule I;
Explanation:- For the purposes of this clause, an instrument whereby a co-owner of any property transfers his interest to another co-owner of the property and which is not an instrument of partition, shall be deemed to be an instrument by which the property is transferred inter vivos."
2.7 Section 39(1)(b) is extracted hereinbelow;
"39. Collector's power to stamp instruments impounded (1) ... ... ...
(b) if he is of opinion that such instrument is chargeable with duty and is not duly stamped he shall require the payment of the proper duty or the amount required to make up the same, together with a penalty of five rupees; or, if he thinks fit, an amount not exceeding ten times the amount of the proper duty or of the deficient portion therefore, whether such amount exceeds or falls short of five Page 8 of 16 Downloaded on : Wed Jan 12 13:39:27 IST 2022 C/LPA/452/2017 JUDGMENT DATED: 22/12/2021 rupees :
Provided that, when such instrument has been impounded only because it has been written in contravention of section 13 or section 14, the Collector may, if he thinks fit, remit the whole penalty prescribed by this section."
2.8 Section 40 relied on by the stamp authorities for contending as regards the period of one year reads as under;
"40. Instruments unduly stamped by accident If any instrument chargeable with duty and not duly stamped, not being an instrument chargeable with a duty of twenty naye paise or less is produced by any person of his own motion before the Collector within one year from the date of its execution or first execution, and such person brings to the notice of the Collector the fact that such instrument is not duly stamped and offers to pay to the Collector the amount of the proper duty, or the amount required to make up the same, and the Collector is satisfied that the omission to duly stamp such instrument has been occasioned by accident, mistake or urgent necessity he may instead of proceeding under section 33 and 39, receive such amount and proceed as next hereinafter prescribed."
2.9 The learned Single Judge held as under;
"6. Recapitulating the facts and the dates, the order of amalgamation by the Company Court came to be passed on 29th October, 2004. The same was, as noted above, subject to the requisite orders of sanction to be passed by the BIFR. Certified copy became available to the petitioner on 11th January, 2005, however since the implementation of the order was conditional on the approval of BIFR, the same was presented before the said authority. BIFR Page 9 of 16 Downloaded on : Wed Jan 12 13:39:27 IST 2022 C/LPA/452/2017 JUDGMENT DATED: 22/12/2021 accorded sanction to the Scheme of Amalgamation in BIFR Case No.264 of 2002 on 07 th June, 2005. The petitioner submitted the order of this Court along with copy of the Scheme of Amalgamation and other requisite documents before the Superintendent of Stamps for the purpose of payment of stamp duty on 17/23rd February, 2006. The said presentation was within one year from the date of order of BIFR. The stamp authorities took a stand that one year was to be counted from the date of Company Court's order, and proceeded to pass the impugned orders.
6.1 It was impermissible for the stamp authorities to issue notice under Section 39(1)(b) of the Act and ultimately passing order directing the petitioner to make payment of deficit stamp duty and penalty on the ground that the aforesaid order dated 29th October, 2004 in Company Petition No.04 of 2004 and Company Petition No.05 of 2004 was not presented for the purpose of stamp duty within one year therefrom. The period of one year for the purpose of applying the said time limit under Section 40 was counted erroneously, especially when the order of sanctioning the Scheme of Amalgamation was subject to the approval to be granted by the BIFR. The order and the Scheme sanctioned thereunder was to come into force at a later date only upon sanction being accorded by the BIFR which was accorded on 07th June, 2005. Period of one year shall have to be reckoned from the said date of sanction by BIFR.
6.2 When the order under Section 394 of the Companies Act sanctioning the Scheme of Amalgamation is made chargeable to duty, levy of duty is not on the order as such, but it is on the effect of the order, that is transfer of properties and assets of the transferor company to the transferee company envisaged under the Scheme. The said transfer took effect only upon sanction granted by the BIFR which was a condition mentioned in the order of the Company Court. In other words, the Page 10 of 16 Downloaded on : Wed Jan 12 13:39:27 IST 2022 C/LPA/452/2017 JUDGMENT DATED: 22/12/2021 properties/assets can be said to have been "transferred" or "conveyed" when BIFR granted sanction. The "conveyance" within the meaning of Section 2(g)(iv) can be said to have been created at such point of time when the BIFR granted sanction. Therefore it is the said date and not the date of the order of the Company Court. In the facts and circumstances of the case, would bring the subject matter within the ambit of Section 2(g)(iv) to become the conveyance. Such "conveyance" was presented within one year as above for the purpose of stamp duty, the same was therefore regularly presented.
7. The impugned orders taking view that stamp duty and penalty was payable as presentation was not within one year from the date of the order of the Company Court are not liable to be sustained. They are therefore hereby quashed and set aside.
8. It appears from order dated 28th January, 2011 in the petition that petitioner had paid 25% of the total amount at the time of preferring Appeal before the Chief Controlling Revenue Authority and had also paid remaining 75% subsequently under protest. As the impugned orders are set aside, consequences including refund of the said amount to the petitioner, shall follow."
2.10 The State, being dissatisfied with the aforesaid impugned judgment and order passed by the learned Single Judge is here before this Court with the present appeal.
3. We have heard Mr. Ishan Joshi, the learned AGP appearing for the State and Mr. Uchit Sheth, the learned counsel appearing for the respondent (original successful writ applicant).
Page 11 of 16 Downloaded on : Wed Jan 12 13:39:27 IST 2022C/LPA/452/2017 JUDGMENT DATED: 22/12/2021
4. The short question that fell for the consideration of the learned Single Judge was whether the scheme of arrangement or amalgamation would have any effect or force when the same is being sanctioned by the Court?. Is it the order sanctioning the scheme that would be an instrument under Section 2(l) of the Act, 1958?. To put it in other words, whether the scheme of arrangement between the parties which has been sanctioned by the Court is the instrument or the order of the Court sanctioning the scheme is the instrument?.
5. We are in complete agreement with the view taken by the learned Single Judge that it is the order of the Court sanctioning the scheme which could be termed as the instrument.
6. The Supreme Court, in Hindustan Lever Vs. State of Maharashtra, (2004) 9 SCC 438 in the context of Section 2(g)(iv) has held that the transfer is effected by an order of the Court and the order of the Court sanctioning the scheme of amalgamation is an instrument which transfers the properties and would fall within the definition of Section 2(l) of the Bombay Stamp Act, which includes every document by which any right or liability is transferred. By the said instrument the properties are transferred from the transferor to the transferee company. Paragraph 38 of the Judgment reads as under :-
Page 12 of 16 Downloaded on : Wed Jan 12 13:39:27 IST 2022C/LPA/452/2017 JUDGMENT DATED: 22/12/2021 "As discussed above, the order passed under Section 394is founded on consent and this order is an instrument as defined under Section 2 (1) of the Bombay Stamp Act. The State Legislature would have the jurisdiction to levy stamp duty under Entry 44 List III of the Seventh Schedule of the Constitution and prescribes rate of stamp duty under Entry 63 List II. It does not in any way impinge upon any entry in List I. Entry 44 of List III empowers the State Legislature to provide for stamp duties other than duties or fees collected by means of judicial stamps. Along with this, Entry 63 of List II empowers the State Legislature to prescribe rates of stamp duty in respect of documents other than those specified in the provisions of List I, that is to say, rates of stamp duty in respect of Bill of Exchange, cheques, promissory notes, Bill of landing, letter of credit, policies of insurance, transfer of shares, debentures, proxies and receipts. By sanctioning of amalgamation scheme, the property including the liabilities are transferred as provided in Section 394 of the Companies Act and on that transfer instrument, stamp duty is levied. It, therefore, cannot be said that the State Legislature has no jurisdiction to levy such duty". (emphasis supplied)
7. In Hindustan Lever (supra) the apex court also referred to the English Court Judgment in Sun Alliance Insurance Ltd. Vs. Inland Revenue Commissioners, (1971) 1 ALLER 135 and observed " It was further held that the order of the court was liable to stamp duty as it resulted in transferring the property and that the order of the court which results in transfer of the property would be an instrument as it includes every document. Paragraphs- 23, 24 & 25 of the Hindustan Lever (supra) reads as Page 13 of 16 Downloaded on : Wed Jan 12 13:39:27 IST 2022 C/LPA/452/2017 JUDGMENT DATED: 22/12/2021 under :-
"23. Point as to whether the stamp duty was leviable on the Court order sanctioning the scheme of amalgamation was considered at length in Sun Alliance Insurance Ltd. Vs. Inland Revenue Commissioners 1971 (1) All England Law Reports
135. The point which arose for determination as to whether the stamp duty was payable on the order of the Judge sanctioning the scheme of arrangement under Section 206 of the Companies Act, it was held:-
" It follows that it is the court order that effects the transfer; and this is nonetheless so because the scheme is not operative until an office copy has been delivered to the Registrar of Companies for registration, for the court order itself ordered that to be done and the Act so provides; nor because London has still to cause the name of Sun Alliance to be entered on to the register as the holder of the shares. The registration of the transferee occurs in every case where a transfer is executed, and merely perfects the title of the transferee. The same thing occurs in the case of registered land, where one finds a transfer and subsequent registration. I have therefore come to the conclusion that by the court order the shares were transferred to Sun Alliance, or, to use the words of s. 54, by that order property was transferred to a purchaser."
24. Expression "conveyance on sale" as provided in Section 54 of the Stamp Act, 1891 is similar to Section 2 (g) of the Bombay Stamp Act. The expression "conveyance on sale" as defined in the said Section includes every instrument, and every decree or order of any Court or any Commissioner, Page 14 of 16 Downloaded on : Wed Jan 12 13:39:27 IST 2022 C/LPA/452/2017 JUDGMENT DATED: 22/12/2021 whereby any property, or a estate or interest in any property, upon the sale thereof was transferred or vested in the purchaser, or any other persons on his behalf and on his direction.
25. The Court further considered as to whether the order of the judge is an instrument executed in any part of the United Kingdom for the purposes of Section 14(4) of the Stamp Act, 1891; it was held that it was an instrument executed in the United Kingdom within the meaning of Section 14(4) of the Stamp Act 1891. It was further held that order of the Court was liable to stamp duty as it resulted in transferring the property and that the order passed by any Court which results in transfer of property would be an instrument as it includes every document."
8. In Li Taka Pharmaceuticals Ltd. & Anr. Vs. State of Maharashtra, 1996 (2) Mah. L.J. 156 a division bench of the Bombay High Court had held that an order under Section 394 is found or based upon compromise or arrangement between the two companies of transferring assets and liabilities of one company to another company. The order is an "instrument" as defined under Section 2(l) of the Bombay Stamp Act which includes every document by which any right or liability is transferred.
9. Therefore, as the scheme of arrangement or amalgamation has no effect or force unless or until it was sanctioned by the court, it is the order sanctioning the scheme that would be an instrument under Section 2(l) .
10. In view of the aforesaid, we find no good reason to Page 15 of 16 Downloaded on : Wed Jan 12 13:39:27 IST 2022 C/LPA/452/2017 JUDGMENT DATED: 22/12/2021 disturb a well-reasoned order passed by the learned Single Judge impugned in the present appeal.
11. In the result, this appeal fails and is hereby dismissed. The interim relief, earlier granted, stands vacated forthwith.
(J. B. PARDIWALA, J) (NIRAL R. MEHTA,J) Vahid Page 16 of 16 Downloaded on : Wed Jan 12 13:39:27 IST 2022