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Judgment
Anant S. Dave, J.—This petition under Article 226 and 227 of the Constitution of India is filed with following prayers:
7(A) Issue an appropriate writ, order or direction quashing and setting aside the impugned order dated 24.3.2006 (copy at Annexure A ) hereto_ passed by the respondent No. 1 herein seeking recovery of an amount of Rs. 10 crores from the petitioner allegedly being the amount of the stamp duty to be payable on the Scheme of Arrangement between the petitioner company and Reliance Communication Infrastructure Limited which has never come into effect and be further pleased to quash and set aside the order dated 15.6.2006 at Annexure C hereto issued by the respondent No. 2.
(B) During the hearing and final disposal of this petition, stay the implementation, operation and execution of the impugned order dated 24.3.2006 at Annexure A hereto passed by the respondent No. 1 and the order dated 15.6.2006 at Annexure C hereto issued by the respondent No. 2.
By the impugned order dated 24.3.2006 respondent No. 1 directed the petitioner to pay stamp duty to the tune of Rs. 10 crores on account of the de-merger between the petitioner-Company and Reliance Communication Infrastructure Limited in view of a scheme of arrangement between the transfer Company and transferee Company came to be sanctioned by the learned Company Judge on 22.9.2004 w.e.f. the appointed date i.e. 1.4.2004 in Company Petitions No. 162 and 163 of 2004.
2.1. According to the authority recovery of an amount of Rs. 10 crores is attracted by virtue of Article 20(d) of Schedule-I of the Bombay Stamp Act, 1958 read with Section 2(g)(iv), Section 2(l), 17 and 18 of the Act, 1958.
2.2. It is to be noted that the petitioner herein filed Misc. Civil Application Nos. 132 and 133 of 2005 in Company Petition No. 162 and 163 of 2004 respectively, with a prayer to recall the order dated 22.9.2004 sanctioning the scheme w.e.f. the appointed date i.e. 1.4.2004 and subsequently modified to 1.4.2005. Upon considering the rival submissions, on 23rd December, 2005 the Company Court passed an order to the effect that it is an admitted position that the order made by the Court u/s 391(2) under the Companies Act, 1956 was not filed with the Registrar of Companies as required by provisions and hence, under Sub-section (3) of Section 391 of the Companies Act, the order shall have no effect and, therefore, in the circumstances, there would be no occasion to recall the order.
2.3. However, notice to Central Government was issued and subsequently after hearing the learned Counsel appearing for the Central Government who has no objection for recalling the order, on 27.1.2006, the learned Company Judge refused to grant first part of the prayer namely recalling the order sanctioning the scheme in view of the fact that order had not become effective in terms of the provisions of Section 391(3) of the Companies Act, 1956 and so far as second part of the prayer namely permission to withdraw the petitions is concerned, the application was granted permission to withdraw the impugned petitions being Company Petitions No. 162 and 163 of 2004.
2.4. Thus, the above two orders passed by the learned Company Judge are the basis/genesis of this petition and it is contended that in view of common oral order dated 27.1.2006 passed by learned Company Judge in Misc. Applications permitting the petitioners to withdraw the petitions and by virtue of provisions of Section 391(3) of Companies Act, 1956 the order dated 22.9.2004 passed in Company Petitions had no effect, directions to recover stamp duty to the tune of Rs. 10 crores by the respondent under Article 20 (d) of Schedule-I of Bombay Stamp Act, 1958 is illegal, unjust, arbitrary and contrary to principles of natural justice and, therefore, it requires to be quashed and set aside.
Along with the above main contention MR. S.N. Soparkar, learned senior advocate appearing with Mr. Amar Bhatt, learned advocate for the petitioner contended that in view of emerging trends in Consolidation of Telecom Sector and changes in the Foreign Direct Investment Policy promulgated by the Government of India led the transfer Company to review the scheme of arrangement by way of demerger and, therefore, the Board of Directors of the petitioner and the transferee Company decided to withdraw the very scheme and, therefore, necessary application was preferred to the Company Court and orders were passed accordingly.
3.1. Therefore, when the Company Petitions were permitted to be withdrawn and there was no effect to the order of Court dated 22.9.2004 by virtue of provisions of Sub-section (3) of Section 391 of Companies Act, 1956 the impugned action at Annexure A dated 24.3.2006 of respondent No. 1 is illegal, arbitrary and deserves to be quashed and set aside.
Learned senior advocate also refer to provisions of Section 31 of the Bombay Stamp Act which refer to adjudication as to proper stamp and also provisions of Section 32 and subsequently introduced Section 32(a) of the Bombay Stamp Act. In support of his arguments reliance is placed on the decision in the case of Government of Uttar Pradesh and Others Vs. Raja Mohammad Amir Ahmad Khan, and it was contended that once the application is withdrawn no adjudication could have taken place and there is no power to levy stamp duties and the order refer to in Section 2(g)(iv) defining conveyance do not refer to the order which had no effect u/s 391(3) of the Companies Act. Learned senior advocate further distinguished provisions of Section 391(3) and Section 394 of Companies Act and reiterated that the above provision is a complete Code within Company Act and when the order of the learned Judge dated 22.9.2004 passed in company Petitions had not become effective, since the order and scheme was not filed before the Registrar as required under Sub-section (3) of Section 391. The action of the impugned authority deserves to be quashed and set aside.
Ms. Sangeeta Vishen, learned AGP for respondent-State submitted that the learned Company Judge has not recalled the order by refusing to grant first part of prayer A of Misc. Application and it is clear if the order dated 27.1.2006 is perused. It is vehemently argued by learned AGP that by permitting withdrawal of petitions effective by order dated 22.9.2004 qua the provisions of Companies Act may not come into force but so far as Bombay Stamp Act, 1958 is concerned if the definition of Section 2(g)(iv) and Section 17 read with Schedule-I and meaning of conveyance clearly reveal that order passed by the Company Judge u/s 394 of the Companies Act, 1956 is covered under the definition of ''Conveyance''. According to learned AGP definition of Section 2(l) refer to ''instrument'' and it includes every document in which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or recorded and, therefore is provided u/s 17 and 18 of the Act of Instrument chargeable with duty and executed by any person in the State shall have to be imposed before or at the time of execution or immediately thereafter on the next working day following the day of execution and, therefore, when the order dated 22.9.2004 was passed by the learned Company Judge in Company Petitions within 24 hours it became an instrument chargeable for duties in the State of Gujarat and, therefore, order may not cannot be said to be illegal in any manner.
5.1. Learned AGP as also placed reliance on the affidavit-in-reply filed by the Superintendent of Stamp and submitted that when the case is referred to Chief Controlling Revenue Authority as per provisions of Section 53(2) and Section 53(3) of Bombay Stamp Act, 1958 decision rendered by the above authority after hearing the petitioner and thereafter if decision is taken by Superintendent of Stamp declaring that stamp duty is to be paid by the petitioner cannot be said to be violative of principle of audi alteram partem namely natural justice and, therefore, no violation of principles of natural justice is breached.
5.2. Thus, learned AGP on the strength of provisions of Section 2(g)(iv), 2(l) and Article 20(d) of Schedule-I of Bombay Stamp Act, 1958 submitted that order made by the High Court u/s 394 of Companies Act, 1956 is amenable to the powers of authority to levy stamp duty on such order.
That, relevant provisions applicable in the facts of the case of Bombay Stamp Act, 1958 and Companies Act, 1956 as relied on by learned advocate are as under:
Article 20(d) of Schedule I of Bombay Stamp Act, 1958 reads as under:
20(d) Conveyance, so far as it relates to reconstruction or amalgamation of companies by an order of the High Court u/s 394 of the Companies Act, 1956.
[Explanation1]
For the purpose of this Article, an agreement to sell an immovable property or an irrevocable power of attorney shall, in case of transfer of possession of such property before, at the time of, or after the execution of such agreement or power of attorney, be deemed to be a conveyance and the stamp duty thereon shall be chargeable accordingly:
Provided that the provisions of section 32-A shall apply mutatis mutandis to such agreement or power of attorney as are applicable to a conveyance:
Provided further that where subsequently a conveyance is executed in pursuance of such agreement of sale, or an irrevocable power of Attorney, the stamp duty, if any, already paid and recovered on the agreement of sale of an irrevocable power of attorney which is deemed to be a conveyance, shall be adjusted towards the total duty leviable on the conveyance.
[Explanation-II]
For the purpose of this Article, the expression premises means any land or building or part of a building including any flat, apartment, tenement, shop or warehouse therein and includes:-
i. gardens, grounds and out houses, if any, pertaining to such building or part of a building, and
ii. any fittings affixed to such building or part of a building for the more beneficial enjoyment thereof.
[Explanation-III]
For the purpose of clause (d) the market value of share-
(a) in relation to the transferee company, whose shares are listed and quoted for trading on a Stock Exchange, means the market value of share as on the appointed date mentioned in the scheme of amalgamation, or when the appointed date is not so fixed the date of order of the High Court,
(b) in relation to the transferee company, whose share are not listed or listed but not quoted for trading on a Stock Exchange means the market value of the share issue or allotted with reference to the market value of share of the transferor company,
(c) where the transferee company and the transferor company, whose share are not listed or listed but not quoted for trading on a Stock Exchange means the face value of the share issued or allotted with reference to the face value of the share of the transferee company.
Subject to maximum ten crores rupees-
(i) an amount equal to [1 per cent] of the aggregate amount comprising of the market value of share issued or allotted in exchange of or otherwise, or the face value of such shares, whichever is higher and the amount of consideration, if any, paid for such amalgamation, or
(ii) an amount equal to [1 per cent] of the true market value of the immovable property situated in the State of Gujarat of the transferor company.
Whichever is higher.
Section 2(g)(iv) and 2(l) of the Act, 1958 reads as under:
2.(g) Conveyance includes,
I. xxx,
II. xxxx
III. xxxx
IV. every order made by the High Court u/s 394 of the Companies Act, 1956 in respect of [reconstruction or amalgamation of companies, or]
L) instrument includes every document by which any right or liability 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 share, debentrue, proxy and receipt.
[Explanation.- The term document also includes any electronic record as defined in Clause (t) of Sub-section (1) of Section 2 of the Information Technology Act, 2000.]
Sections 17 and 18 of the Act reads as under:
Instruments executed in State:
All instruments chargeable with duty and executed by any person in this State shall be stamped before or [at the time of execution or immediately thereafter on the next working day following the day of execution]:
Provided that the clearance list described in Articles 18A, 18B, 18C, 18D or 18E of Schedule I may be stamped by an officer authorised by the State Government by rules made under this Act, if such clearance list is submitted for stamping by the clearing house of an Association in accordance with its rules and bye-laws with the requisite amount of stamp duty, within two months from the date of its execution.
Instruments executed out of State:
Every instrument chargeable with duty executed only out of this State may be stamped within three months after it has been first received into his State.
Where any such instrument cannot, with reference to the description of stamp prescribed therefore, be duly stamped by a private person, it may be taken within the said period of three moths to be Collector, who shall stamp the same, in such manner as the State Government may by rule prescribe, with a stamp of such value as the person so taking such instrument may require and pay for.
Section 391(2) and (3) of the Companies Act, 1956 reads as under:
Power to compromise or make arrangements with creditors and members
(1) xxxxx
(2) If a majority in number representing three-fourths in value of the creditors, or class of creditors, or members, or class of members as the case may be, present and voting either in person or, where proxies are allowed 2[under the rules made u/s 643], by proxy, at the meeting, agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the 1[Tribunal], be binding on all the creditors, all the creditors of the class, all the members, or all the members of the class, as the case may be, and also on the company, or, in the case of a company which is being wound up, on the liquidator and contributories of the company:
3 [Provided that no order sanctioning any compromise or arrangement shall be made by the 1[Tribunal] unless the 1[Tribunal] is satisfied that the company or any other person by whom an application has been made under Sub-section (1) has disclosed to the 1[Tribunal], by affidavit or otherwise, all material facts relating to the company, such as the latest financial position of the company, the latest auditor''s report on the accounts of the company, the pendency of any investigation proceedings in relation to the company under Sections 235 to 351, and the like.]
(3) An order made by the 1[Tribunal] under Sub-section (2) shall have no effect until a certified copy of the order has been filed with the Registrar.
(4) xxx
(5) xxx
(6) xxxx
Section 394 of the Companies Act, 1956 reads as under:
Provisions for facilitating reconstruction and amalgamation of companies
(1) Where an application is made to the 1[Tribunal] u/s 391 for the sanctioning of a compromise or arrangement proposed between a company and any such persons as are mentioned in that section, and it is shown to the 1[Tribunal]-
(a) that the compromise or arrangement has been proposed for the purposes of, or in connection with, a scheme for the reconstruction of any company or companies, or the amalgamation of any two or more companies; and
(b) that under the scheme the whole or any part of the undertaking, property or liabilities of any company concerned in the scheme (in this section referred to as a "transferor company") is to be transferred to another company (in this section referred to as "the transferee company");
the 1[Tribunal] may, either by the order sanctioning the compromise or arrangement or by a subsequent order, make provision for all or any of the following matters:
(i) the transfer to the transferee company of the whole or any part of the undertaking, property or liabilities of 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[Provided that no compromise or arrangement proposed for the purposes of, or in connection with, a scheme for the amalgamation of a company, which is being wound up, with any other company or companies; shall be sanctioned by the 1[Tribunal] unless the Court has received a report from 3[***] the Registrar that the affairs of the company have not been conducted in a manner prejudicial to the interests of its members or to public interest:
Provided further that no order for the dissolution of any transferor company under Clause (iv) shall be made by the 1[Tribunal] unless the Official Liquidator has, on scrutiny of the books and papers of the company, made a report to the 1[Tribunal] that the affairs of the company have not been conducted in a manner prejudicial to the interests of its members or to public interest.]
(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 the compromise or arrangement, to cease to have effect.
(3) Within 4[thirty] days after the making of an order under this section, every company in relation to which the order is made shall cause a certified copy thereof to be filed with the Registrar for registration.
If default is made in complying with this Sub-section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to 5[five hundred rupees].
(4) In this section-
(a) "property" includes property rights and powers of every description; and "liabilities" includes duties of every description; and
(b) "Transferee company" does not include any company other than a company within the meaning of this Act; but "transferor company" includes any body corporate, whether a company within the meaning of this Act or not.
5.3. In support of her submissions, learned AGP has placed heavy reliance on decision in the case of Sun Alliance Insurance Ltd. v. Inland Revenue Commissioners 1972 (1) Ch.133 and submitted that the order of the Court is a written document and, therefore, an instrument and subject to levy of stamp duties.
In a rejoinder Mr. Soparkar, learned senior advocate for the petitioner relied on order dated 13.3.2006 passed by Chief Controlling Revenue Authority, Gujarat State, in exercise of powers u/s 53(2) of the Act, it is submitted that if the above order is perused it is not correct that the petitioner was given a fair opportunity of hearing and on the contrary the above authority has observed that representation made by the petitioner with regard to permission granted by the learned Company Judge for withdrawal of Company Petitions by an order dated 27.1.2006 it is to be submitted before the Collector and Superintendent of Stamp but ultimately order is passed without hearing the petitioner. According to learned senior advocate for the petitioner if the application submitted by the petitioner dated 4.5.2006 is perused it is requested that the adjudication has been made on a non-existent order/document and, therefore, it has no effect and there being no conveyance and no executed document, there is no liability to pay stamp duty and, therefore, authority was to refrain from taking any action for recovery of the ineffectively adjudicated duty of Rs. 10 crores as there is no liability whatsoever under the Stamp Act.
6.1. In spite of the above request, the petitioner is repeatedly reminded to pay the stamp duty pursuant to order dated 24.3.2006 passed by Superintendent of Stamps, Gandhinagar and, therefore, it is prayed before this Court that orders impugned deserves to be quashed and set aside.
Having heard learned advocates appearing for the parties and considering record of the case and also order dated 22.9.2004 passed by learned Company Judge in Company Petitions No. 162 and 163 of 2004 which later on came to be partially modified by an order dated 15.3.2005, by which, an appointed date of the scheme was permitted to be changed from 1.4.2004 to 1.4.2005 and finally a common oral order dated 27.1.2006 passed in Misc. Civil Application No. 132 and 133 of 2005 in Company Petitions No. 162 and 163 of 2004, I am of the opinion that this petition deserves to be allowed on the ground that both the authorities namely respondent No. 1 as well as respondent No. 2 have not followed a fiar and reasonable procedure while determining the issues involved in the application preferred by the petitioner and so referred by the Collector and Additional Superintendent of Stamps on 13.12.2004 to Chief Controlling Revenue Authority, State of Gujarat.
The petitioner-company specifically raised contentions before the Chief Controlling Revenue Authority about the order dated 27.1.2006 passed by the Company Judge in Misc. Civil Applications , by which Company Petitions Nos. 162 and 163 of 2004 were permitted to be withdrawn and first prayer made in above Misc. Applications of recalling of the order dated 22.9.2004 was not granted in view of provisions of Section 391(3) of the Companies Act, 1956 since the above order was not filed before the Registrar and, therefore, it had not become effective. Thus, the authority exercising powers u/s 53(2) of the Bombay Stamp Act held that the above issued can be raised by the petitioner before the Collector and the Additional Superintendent of Stamps but at the same time proceeded to determine levying of stamp duty in view of the provisions of Article 20(d) of Schedule-I of the Bombay Stamp Act, 1958.
8.1. On the basis of above order on 13.3.2006 of Chief Controlling Revenue Authority the respondent No. 1 by order dated 24.3.2006 determined the stamp duty and accordingly opinion was given but in a note below the above order of the Collector and Additional Stamp Duties, Gujarat State, Gandhinagar the petitioner herein was directed to pay stamp duty to the tune of Rs. 10 crores within specific time limited and failing to which, appropriate action will be taken under law is contrary to principles of natural justice and no hearing is given to the petitioner by the above authority also.
8.2. Thus, both the impugned orders therefore are devoid of fair procedure and reasonable approach on the part of the authorities exercising powers u/s 53(2) of the Act and Section 33 and 31 of the Act and deserve to be quashed and set aside.
So far as various contentions raised before this Court on the functions to be discharged and powers to be exercised by the authority u/s 31 and 53(2) of the Act can be raised before the authority and after issuing notices in this regard whether the petitioner is liable to be levied stamp duty in view of orders dated 22.9.2004 of permitting sanction of the scheme and subsequent order dated 27.1.2006 passed by the learned Company Judge permitting withdrawal of the impugned Company Petitions being Company Petitions No. 162 and 163 of 2004 and effect of the order passed by the learned Company Judge on 22.9.2004 which was ultimately not filed before the Registrar and, therefore, it had become in effective in terms of provisions of Section 391(3) of the Companies Act, 1956 are permitted to be raised before the competent authorities and in such an event the authorities concerned shall consider the above aspect and thereafter decide applicability if any of Section 2(g)(iv), 2(l), 17, 18 and Article 20(d) of Schedule-I of the Bombay Stamp Act, 1958.
9.1. The above decision is to be taken by the authority concerned within eight weeks from the receipt of the writ of this Court after hearing the petitioner and considering relevant record and material that may be available before such authority and to pass reasoned order in accordance with law and keeping in mind provisions of Section 31 of the Bombay Stamp Act, 1958 and Section 391(3) and 394 of Companies Act, 1956 and orders passed by the learned Company Judge on 27.1.2006 in Misc. Civil Application Nos. 132 and 133 of 2005.
With the aforesaid directions and on the ground that the petitioner was not given fair opportunity of hearing and to represent his case on various issues and relevant material was not considered by the authorities though available, I am of the opinion that impugned orders deserve to be quashed and set aside quashed and set aside accordingly and matter is remanded to the authorities for taking decision afresh in accordance with law within eight weeks from the date of receipt of writ of this Court. Accordingly this petition is allowed. Rule is made absolute to the above extent only.