Hindustan Lever & another Vs. State of Maharashtra & another
Tata Oil Mills Co. Ltd amalgamated with Hindustan Lever Ltd [HLL] under a scheme of amalgamation, which was sanctioned by the Court. On presentation of the certified copy of the Court's order the Registrar of Companies, Maharashtra issued a certificate of amalgamating of the two companies. The authorities under the Bombay Stamp Act, 1958 demanded stamp duty on the transfer of assets and properties affected under the sanctioning order passed by the High Court, from HLL. In view of this HLL filed a writ petition in the Bombay High Court challenging the constitutional validity of the provisions of the Stamp Act. By the impugned order the Division Bench of the High Court dismissed the writ petition. HLL then appealed to the Supreme Court.Issues:
The issues presented before the Supreme Court are as follows:
- Whether the State Legislature has the legislative competence to impose stamp duty on the order of amalgamation passed by a court; and
- Whether an order sanctioning a scheme of amalgamation under Section 394 read with Section 391 of the Companies Act, 1956 is liable to be stamped in accordance with the provisions of the Bombay Stamp Act in its application in the State of Maharashtra.
HLL appealed to the Supreme Court mainly on the following grounds: (I). Amalgamation being an act by operation of law, transfer of immovable properties effected under the court order sanctioning the scheme of amalgamation is an “involuntary transfer” in nature, and therefore, not liable to stamp duty as only “voluntary transfer” under the head “conveyance” is subject to stamp duty. (II). Court order is not an instrument subject to stamp duty.
The court held that the conveyance to the transferee company would be regarded as an instrument, which is subject to payment of stamp duty and also an additional stamp duty on the scheme of amalgamation/ merger, which is to be calculated on the basis of shares exchange ratio between the transferor company and the transferee company and not solely on the basis of the assets and liabilities to be transferred under such scheme.Conclusion:
The judgment of this case has clarified on the payment of stamp duty by the transferee company in the process of amalgamation which has been in question for so many years.