There have been a lot of mergers/amalgamations over the years where the transferor and transferee companies are registered in different states and have assets in different states. Any Amalgamation is carried out by drafting a scheme detailing the transfer of business in whole for consideration in equity or cash. Currently, the schemes are to be presented to the NCLT of each state where the transferor and transferee companies have its registered office. Respective NCLT passes the order sanctioning the scheme. The ORDER, thus passed, is liable to levying of stamp duty.
This is where the trouble is right now, payment of stamp duty is fine but the questions of which state should the stamp duty be paid, how much rebate can one get in case of paying stamp duty in both states, paying stamp duty in the respective state as per the value of assets which are transferred is to be considered or the worst to pay stamp duty in all the relevant states without rebate at full amount applicable. So, the question is the order of which NCLT is primary instrument by which assets and liabilities are transferred hence liable to full stamp duty
There are numerous cases in the past where the companies have gone to their state high courts seeking clarity on the same but there is a need for some clarity and guideline as to what is the best way to levy stamp duty and by whom in case of companies in different states.
In our previous article, we saw the following case, the lack of understanding of our judiciary to consider the increase in the transaction cost of amalgamation.
Amalgamation of Reliance Industries, Mumbai and Reliance Petroleum, Gujarat
In the matter of amalgamation, Bombay High Court held that
- Amalgamation scheme is not document chargeable to duty. Order passed by the Court sanctioning such a Scheme under Section 394 of the Companies Act,1956 which effects transfer is a document chargeable to Stamp Duty.
- The Amalgamation Order of High Court is the instrument. It is not incidental.
- Amalgamation Scheme is not a document chargeable to duty. Hence Section 19 of the Maharashtra Stamp Act is not applicable in the subject matter. Accordingly, no rebate will be granted to Transferee Company in payment of Stamp duty on its High Court order on account of stamp duty paid by the Transferor Company on the respective Order issued by the High Court within whose jurisdiction it falls.
Reasons quoted by Courts on payment of Stamp duty separately on each Order:
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