Atofina Catalyst India Ltd. (Now known as ARCIL Catalyst Pvt. Ltd.) v. The State of Madhya Pradesh & Ors.

of Stamps, Ujjain dated 6.5.2002 as affirmed by the order of the Board of Revenue dated 28.5.2010 holding that the order of the Bombay High Court in Company Petition No.500/1999 dated

17.7.1999 passed under Section 394 of the Companies Act is a conveyance and is chargeable to 6.5% stamp duty under Article 23 in view of Section 3bb read with Section 6A of the M.P. Stamp Act and directing the petitioner company under Section 40 of the Indian Stamp Act, 1899 (for short “the Act”) read with Section 29(C) to deposit Rs.1,30,17,000/- as deficit stamp duty and to pay penalty at the rate of 10% per year of deficit duty amounting to Rs.35,79,675/-. 5/ In brief, th petitioner's had filed an application before the Bombay High Court under Section 391 and 394 of the Companies Act for sanction of scheme of arrangement between 3 Aroni Chemical Industries Limited (transferror company) and Nagda Orgo-chem Private Limited (transferee company). By the order dated 17.7.1999 Bombay High Court had approved the scheme of arrangement between two companies with effect from 16.3.1999 and in terms of the said order the assets and all properties of Aroni Chemical Industries Limited mentioned in the scheme of arrangement were transferred to the Nagda Orgo-chem Private Ltd. The petitioner M/s Nagda Orgochem had paid stamp duty on the order of the Bombay High Court under Article 25(b) of the Bombay Stamp Act, 1958. The petitioner had also filed an application dated 20.7.1999 before the Sub-Registrar, Nagda (M.P.) enclosing the certified copy of the order of the Bombay High Court for record and registration. The said application was sent by the Sub-Registrar to the Collector of Stamps, Ujjain for necessary action and on that basis the case under Section 40 of the Act was registered against the petitioner. The petitioner thereafter approached the Collector of Stamps on 5.4.2000 for withdrawal of the said application but no order permitting withdrawal of the application was passed by the Collector and the Collector of Stamps had served the notice dated 5.12.2001 stating that the petitioner is liable to pay the stamp duty under Article 23 and requiring the petitioner to produce the original order as well as the other documents to show that the stamp duty was paid in terms of Article 23 read with Section 19A of the M.P. Stamp Act, failing which it was to be presumed that the petitioner had not paid any stamp duty and action under Section 48B/40 of the Act for deficit stamp duty and levy of penalty was to be taken. After 4 the petitioner had submitted the reply, it was served with the further notices dated 21.1.2002 and 4.2.2002 requiring to pay the deficit stamp duty after adjusting the stamp duty already paid under the Bombay Stamp Act. The petitioner had submitted the reply to these notices and also filed written submissions before the Collector. Thereafter the Collector stamps had passed the impugned order dated 6.5.2002 under Section 40 of the Act requiring the petitioner to deposit the deficit stamp duty and the penalty as stated above. The petitioner had preferred Revision under Section 56(4) of the Act, 1899 before the Board of Revenue. The Board of Revenue had made a reference to this Court under Section 57 of the Act, which was registered as MCC No.284/2004 and MCC No.285/2004. This court by order dated 17.10.2007 had sent the matter back to the Board of Revenue since the requirement of Section 57(1) of the Act were not complied with. The Board of Revenue thereafter by the impugned order dated 28.5.2010 has rejected the Revision preferred by the petitioner and upheld the order of the Collector (Stamps) dated 6.5.2002. 6/ Learned counsel for the petitioner has submitted that it was necessary for the Board to make a reference to the High Court and Board could not have passed the impugned order without making the reference under Section 57 of the Act. He has also submitted that petitioner had right to withdraw the application filed before the Sub Registrar, therefore, there is no basis to initiate the present proceedings. He further submitted that the order passed by the Bombay High Court under Section 394 of the Companies Act is not an instrument and it is not 5 covered withing the meaning of conveyance, therefore, no stamp duty is payable on it. He further submits that the State amendment in Article 23 has been made with effect from

12.8.2002, which is after the order of the Bombay High Court, therefore, Article 23 of Schedule 1A of the Act is not attracted in the present case. He has also submitted that penalty has wrongly been levied in the matter without appreciating that there was no intention or mens-rea on the part of the petitioner to evade the duty. He has also submitted that certified copy of the order can not be impounded and stamp duty and penalty can not be levied unless the original document is produced and that Section 40 and 48B of the Act can not be invoked without invoking Section 33 of the Act and without impounding the document. 7/ Shri B.L. Pavecha, learned senior counsel and amicus curiae in this case, has submitted that Section 57 of the Act is discretionary and Board of Revenue was not bound to make a reference to the High Court. He further submitted that order of Bombay High Court passed under Section 394 of the Companies Act is an instrument and conveyance and that the duty is payable by the petitioner even under unamended Article 23 of Schedule I since by the State amendment only the rate of duty is reduced in such cases. He has submitted that a copy of the instrument can not be impounded. 8/ Learned counsel for the respondent/State has adopted the arguments advanced by the learned amicus curiae and has supported the impugned order. 9/ I have heard the learned counsel for the parties and perused the record. 6 10/ Counsel for the petitioner has raised a preliminary issue that instead of passing the impugned order dated

28.5.2010, it was mandatory for the Board to make a reference to the High Court under Section 57 of the Act. Initially the Board had made a reference to the High Court under Section 57 which was registered as MCC No.284/2004 and 285/2004 but while making the said reference the Board had not complied with the requirement of Section 57(1) of the Act inasmuch as the Board had not stated its own opinion on different questions referred to the High Court, therefore, the High Court instead of answering the questions had sent the matter back to the Board of Revenue. In the order of the High Court dated 17.10.2007 there was no direction to the Board to make a reference again. Under Section 57 of the Act, it is not mandatory to the Board to refer the question of law to the High Court but the said Section given discretionary power to the Board to make a reference to the High Court. Therefore, the impugned order of the Board can not be faulted on the ground that the Board itself has passed the impugned order without making a reference to the High Court. Thus I do not find any substance in the objection raised by the counsel for the petitioner in this regard. 11/ The petitioner had also raised a contention that the petitioner had right to withdraw the application dated 20.7.1999 along with which the certified copy of the order of the Bombay High Court was submitted before the Sub Registrar. Once the order of the Bombay High Court was submitted by the petitioner before the Sub Registrar for record and registration, it was open 7 to the Authorities under the Stamp Act to initiate action against the petitioner in terms of the provisions of the Act and subsequent prayer of the petitioner for withdrawal of the application will be of no consequence. 12/ So far as the merits of the controversy is concerned, on the basis of the arguments raised by counsel for the parties and from the record, it is found that the present matter involves two basic questions :-

1. Whether the petitioner is liable to pay deficit stamp duty on the order of the Bombay High Court dated 17.7.1999 and

2. Whether the Collector of Stamp has rightly treated the certified copy of the order of the Bombay High Court as impounded instrument and directed payment of deficit stamp duty and penalty under Section 40 read with Section 29C of the Act. 13/ In the present matter the different provisions of the Stamp Act are to be construed, therefore, before dealing with these provisions a look into the principles of interpretation of the taxing/stamp statute is necessary. It is the settled position in law that Stamp Act is a piece of fiscal legislation. There is no scope for equity or judiciousness if the letter of law is clear and unambiguous. The benefit of any ambiguity or conflict in different provisions of the statute shall go to the subject. 8 The power to impound a document and to recover duty with or without penalty thereon has to be construed strictly and exercise of such a power would be sustained only when falling within the four corners of letters of law. [2005(1) SCC 496 District Registrar and Collector, Hyderabad and Another Vs. Canara Bank and others]. Stamp Act being a true fiscal statute in nature, strict construction is required to be effected and no liberal interpretation is permissible. [2001(7) SCC 573 Hameed Joharan (Dead) and others Vs. Abdul Salam (dead) By Lrs. and others]. 14/ In respect of the question No.1 about the petitioner's liability to pay the deficit stamp duty on the order of the Bombay High Court in the State of M.P., the first contention of the counsel for the petitioner is that the order of the Bombay High Court sanctioning the scheme of arrangement under Section 394 of the Company Act is not an instrument or conveyance, therefore, no stamp duty is payable on the said order. 15/ Under Section 2(14) of the Act, every document by which right or liability is created, transferred, extinguished or recorded is an instrument. Section 2(14) reads as under :- “Instrument” includes every document by which any right or liability is, or purports to be, created, transferred, extinguished or limited, record.” extended, 16/ Conveyance is defined under Section 2(10). Every instrument by which property is transferred inter vivos is conveyance meaning thereby transfer of property between two 9 jurisdic persons other than succession or devise by an instrument is covered within the meaning of conveyance. Section 2(10) defines conveyance as under :- “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 I.” 17/ By the order of the Bombay High Court dated

17.7.1999, the scheme of arrangement has been sanctioned under Section 394 of the Companies Act and with effect from

16.3.1999 the assets and all properties of Aroni Chemical Industries Limited (transferror company) mentioned in the scheme of arrangement without any further Act or deed are transferred to and vested in the petitioner company as a going concern so as to become the properties of the petitioner's company. The Bombay High Court by the said order had directed that with effect from appointed date all debts, liability, dues and obligations of the Aroni Chemical Industries Ltd. (transferror company) described in scheme of arrangement without any further act or deed are transferred to the petitioner company so as to become the debts, liabilities, dues and obligations of the petitioner's company. 18/ Since by the order of the Bombay High Court passed under Section 394 of the Companies Act, all properties of the transferror company specified in the scheme of amalgamation have been transferred to the petitioner company, therefore, such an order by which rights and liabilities are 10 transferred is an instrument under Section 2(14) of the Act and since by such an instrument movable and immovable property are transferred inter vivos, therefore, it is a conveyance under Section 2(10). 19/ The aforesaid view taken by this Court is supported by the judgment of the Supreme Court in the matter of Hindustan Lever and another Vs. State of Maharashtra and another reported in 2004(9) SCC 438 where considering the definition of “instrument” as contained in Section 2(l) of the Bombay Stamp Act, 1958 the Supreme Court has held the order of the Companies Court passed under Section 394 of the Companies Act to be an instrument. The language of Section 2(l) of the Bombay Stamp Act, 1958 is para materia to the language of Section 2(14) of the Act except that under Section 2(l) bills of exchange, cheque, promissory note, bill of lading, letter of credit, policy of insurance, transfer of share, debenture, proxy and receipt have been excluded but since the present case does not relate to any of these excluded documents, therefore, the said judgment of the Supreme Court applies with full force in the present case. The Supreme Court in the matter of Hindustan Lever and another (supra) has held as under :- “15. This definition of instrument is not amended by Maharashtra Act 17 of 1993. The word “instrument” is defined to mean, every document by which any right or liability is, or purports to be created, transferred, limited, extended, extinguished or recorded, but does not include bill of exchange, cheque, promissory note, bill of lading, letter of credit, policy of insurance, transfer of shares, debenture proxy and receipt. 11 The recital the scheme of amalgamation as well as the order of the High Court under Section 394 of the Companies Act, declares, that, upon such order of the High Court the undertaking of the transferor company shall stand transferred to the transferee company with all its movable, immovable and tangible assets to the transferee company without any further act or deed. Sub-section (3) of Section 394 provides that the certified copy of the order of the court has to be presented before the Registrar of Companies within thirty days for registration. And in default any officer of the company, who is in default, becomes liable to be punished and fined, 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 coy of the order has been filed with the Registrar. On presentation of the certified copy of the order, the Registrar of the Company 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.

32. In view of the aforesaid discussion, we hold that the order passed by the Court under Section 394 of the Companies Act is based upon the compromise between two or more companies. Function of the court while sanctioning the compromise or arrangement is limited to oversee that the company were not conducted in a 12 manner prejudicial to the interest of its members or to public interest, that is to say, it should not be unfair or contrary to public policy or unconscionable. Once these things are satisfied the scheme has to be sanctioned as per the compromise arrived at between the parties. It 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. The State Legislature would have the jurisdiction to levy stamp duty under Entry 44 List III of the Seventh Schedule of the Constitution of India and prescribe rates of stamp duty under Entry 63 List II.” 20/ Thus it is held that the order of the Bombay High Court dated 17.7.2009 passed under Section 394 of the Companies Act is an instrument and is a conveyance within the meaning of Section 2(14) and S.2(10) of the Act. 21/ The second connected issue under question No.1 is if after payment of stamp duty under Bombay Stamp Act, 1958 the petitioner is still liable to pay deficit stamp duty under M.P. Stamp Act. 22/ Section 3 of the Act deals with instrument chargeable with duty. Clause bb of first proviso to Section 3 of the M.P. Stamp Act makes an instrument chargeable with duty under Schedule 1A, which is executed out of M.P., relating to any property or to any matter of thing done or to be done in the M.P. and is received in M.P. The relevant extract of the first proviso to Section 3 and clause bb is as under :- “Provided that, except as 13 otherwise expressly provided in this Act, and notwithstanding anything contained in clause (a), clause (b) or clause (c) of this section or in Schedule I, the amount indicated in Schedule I-A to this Act shall, subject to the exemptions contained in that schedule be the duty chargeable on the instrument mentioned in clauses (aa) and (bb) of this proviso, as the proper duty thereof, respectively :- (aa) ***************************************** (bb) “Every instrument mentioned in Schedule 1-A as chargeable with duty under that schedule, which not having been previously executed by any person, is executed, out of Madhya Pradesh on or after the commencement of the Central Provinces and Berar Indian Stamp (Amendment) Act, 1939, and relates to any property situated, or to any matter or thing done or to be done, in Madhya Pradesh and is received in Madhya Pradesh.” 23/ In the present case, the order of the Collector (Stamps) reflects that both Aroni Chemical Industries Limited and Nagda Orgo-chem Industries Pvt. Ltd. are situated in Nagda district, Ujjain (M.P.) and the properties are situated in M.P. They have their registered office in Mumbai, therefore, they had submitted scheme of arrangement before the Mumbai High Court. The said instrument when received in M.P. becomes chargeable to duty in terms of the Clause bb of Proviso to Section 3. Section 19A of the M.P. Stamp Act provides for payment of duty on certain instrument liable to increased duty in M.P. under Clause bb of Section 3 and reads as under :- “19-A.Payment of duty on certain 14 instruments liable to increased duty in Madhya Pradesh under clause (bb) of section 3 -- Where any instrument has become chargeable in any part of India other than Madhya Pradesh with duty under this Act or under any other enactment for the time being in force in any part of India and thereafter becomes chargeable with a higher rate of duty in Madhya Pradesh under clause (bb) of the first proviso to section 3-- i. instrument the amount of the duty chargeable shall, on such notwithstanding anything contained in the first proviso to the amount section 3, chargeable on it under Schedule 1- A, less the amount of duty, if any, already paid on it in India; ii. such instrument shall, in addition to the stamps, if any, already affixed thereto, be stamped with the stamps necessary for the payment of the amount of duty chargeable on it under clause (I) in the same manner and at the same time and by the same person as though such instrument were an instrument received in India for the first time at the time when it becomes chargeable with the higher duty.” 24/ Since Clause bb of Section 3 is attracted in the present matter, therefore, the petitioner in view of the aforesaid provision contained in Section 19A, is liable to pay differential amount of stamp duty on the order of the Bombay High Court, which is already held to be an instrument. 25/ The petitioner has paid stamp duty under Section 25A of Schedule 1 of the Bombay Stamp Act at the rate of 3%. 15 Article 23 of Schedule 1A of the Act as amended by the State amendment of State of M.P. dated 12.8.2002 expressly provides for levy of stamp duty at the rate of 7% in case of immovable property and shares when an instrument relates to amalgamation or reconstruction of companies under the orders of the High Court under Section 394 of the Companies Act. Article 23 as amended by the State amendment reads as under :-

23. Conveyance, not transfer being a charged or exempted under No.56 Eight percent of the market value of the property which is the subject matter of conveyance. Provided that- (a) Where an instrument relates amalgamation reconstruction companies under orders of High Court under section 394 of Companies Act, 1956 (1 of 1956), or under the order of the Reserve Bank of India under Section 44 A of the Banking Regulation Act, 1949 (10 of 1949) the duty chargeable shall not exceed an amount equal to 7% of the market value of the immovable property transferred which located within the State of Madhya Pradesh; or an amount equal to 0.7% of the aggregate of the market value of the shares issued or allotted in exchange or otherwise the amount consideration paid such transfer, whichever is 16 higher. 26/ Counsel for the petitioner has raised an argument that the Proviso by way of amendment in the Article 23 has been incorporated with effect from 12.8.2002 whereas the order of the Mumbai High Court is dated 17.7.1999, therefore, the amended Article will not apply. Such an argument does not help the petitioner as the petitioner was liable to pay the stamp duty on the order of the Bombay High Court which is covered even under unamended Article 23 being a conveyance. The effect of the amendment is that the rate of duty in case of an instrument relating to amalgamation or reconstruction of companies under the orders of the High Court under Section 394 has been reduced from 8% to 7%. Thus the Collector of stamps has not committed any error in holding that the petitioner is liable to pay the deficit stamp duty under Section 3bb read with Section 19A in terms of Article 23 of the M.P. Stamp Act. 27/ The question No.2 which arises for consideration of this Court is in respect of treating the certified copy of the order of the Bombay High Court as an impounded instrument and invoking Section 40 of the Stamp Act. 28/ Learned counsel for the petitioner has raised an argument that in terms of scheme of Indian Stamp Act, a copy of the instrument can not be impounded and that section 40 of the Act can not be attracted unless the original document itself is produced. 29/ In the present matter, the petitioner had submitted 17 certified copy of the order of the Bombay High Court before the Sub Registrar who had sent the said copy to the Collector of Stamps and District Registrar Ujjain, on that basis the Collector stamps had registered the case under Section 40 of the Stamp Act. Section 40 can be invoked when the Collector impounds an instrument under Section 33 or receives an instrument sent to him under Section 38 Sub-section 2 of the Act. Section 33 deals with examination and impounding of instrument and Section 38(2) provides for sending the impounded instrument in original to the Collector. In the present case neither under Section 33 the instrument has been impounded nor under Section 38(2) the instrument in original was sent to the Collector of Stamps. The entire proceedings have been initiated on the basis of the certified copy of the order of the Bombay High Court. So far as Section 48B of the Act is concerned, it provides that where the deficiency of stamp duty is noticed from a copy of an instrument, the Collector may by order require the production of the original instrument and if the original instrument is not produced within the time specified by him, it is presumed that the original document is not duly stamped and the Collector has an option to proceed in the manner provided in Chapter 4 of the Act. 30/ The Supreme Court in the matter of Hariom Agrawal Vs. Prakash Chand Malviya reported in 2007(8) SCC 514 has held that Section 48(B) of the Stamp Act does not authorize the Collector to impound the copy of the instrument and that expression “instrument” occurring in Section 2(14) of the Act refers to original document. 18 31/ In the matter of Hariom Agrawal (supra) It has been held that :- “8. The instrument as per definition under Section 2(14) has a reference to the original instrument. ........................

10. It is clear from the decisions of this Court and a plain reading of Sections 33, 35 and 2(14) of the Act that an instrument which is not duly stamped can be impounded and when the required fee and penalty has been paid for such instrument it can be taken in evidence under Section 35 of the Stamp Act. Sections 33 or 35 are not concerned with any copy of the instrument and party can only be allowed to rely on the document which is an instrument within the meaning of Section 2(14). There is no scope for the inclusion of the copy of the document for the purposes of the Stamp Act. Law is now no doubt well settled that copy of the instrument cannot be validated by impounding and this can not be admitted as secondary evidence under the Stamp Act, 1899.” 32/ The Supreme Court in the matter of State of Bihar Vs. M/s Karam Chand Thapar & Brothers Ltd. reported in AIR 1962 SC 110 has also held that a copy of the instrument can not be validated and the provisions of the Act can not be interpreted so as to allow secondary evidence of an instrument. Same view has been reiterated in the matter of Jupudi Kesava Rao Vs. Pulavarthi Venkata Subbarao reported in 1971(1) SCC 545 and in the matter of Hariom Agrawal Vs. Prakash Chand Malviya reported in 2007 (8) SCC 514. 33/ In the present matter a certified copy of the order of the High Court which was produced by the petitioner along with his application dated 20.7.1999, has been impounded. Though 19 the certified copy of an order of the High Court stands on a higher footing than a photocopy or other copy of an instrument, but the Constitution Bench of the Supreme Court in the matter of State of Bihar Vs. M/s. Karam Chand Thapar & Brothers Ltd. reported in AIR 1962 SC 110 has treated the certified copy of an Award different from the original. 34/ High Court is a court of record and no provision of law or the procedure has been pointed out by the counsel for the parties permitting the Collector (Stamps) to summon the original record containing the original order from the Bombay High Court, which is an instrument in terms of Section 2(14) of the Act, in the absence of which neither a certified copy can be impounded nor the stamp duty and penalty can be recovered inspite of the fact that the petitioner is liable to pay the duty under the Act. Since the Stamp Act is a Taxing Statute which is required to be construed strictly, therefore, in absence of any expressed provision permitting the impounding of the certified copy of an order of the High Court and in view of the judgment of Supreme Court in Hariom Agrawal (supra) it is held that the certified copy of the order of the High Court passed under Section 391 read with Section 394 of the Companies Act can not be impounded. 35/ Since this Court has held that the petitioner is liable to pay the deficit stamp duty but the impugned orders have been faulted on the ground of taking action on certified copy of the instrument, therefore though the certified copy of the order of the Bombay High Court can not be impounded but the petitioner has an option to pay the stamp duty on the certified 20 copy of the order under Section 6A of the M.P. Stamp Act and unless the deficit stamp duty on the instrument in question is paid by the petitioner, it is precluded from using it or a copy of it as an evidence of transfer of assets and liabilities in the State of M.P. 36/ Since the Collector stamps has treated certified copy of the order of the Bombay High Court as impounded instrument and has levied duty and penalty under Section 40 of the Act which can be attracted only when the original instrument is produced, therefore, the impugned order of the Collector of Stamps dated 6.5.2002 as affirmed by the order of the Board of Revenue dated 28.5.2010 can not be sustained and is hereby set aside. This Court has not examined the correctness of levy of penalty since the order of the Collector itself has been set aside for the aforesaid reason. 37/ The writ petitions filed by the petitioner are allowed to the extent indicated above. 38/ Before parting I express my gratitude to learned amicus curiae for his valuable assistance. 39/ Signed order be kept in the file of W.P. No.13204/2010 and a copy whereof be kept in the file of W.P. No.13026/2010. J u d g e (PRAKASH SHRIVASTAVA) Trilok.