India – Litigation Snapshots.

3 August, 2016

 

Orders of Two Different High Courts on Stamp Duty Payable on a Scheme of Amalgamation 

 

A bench of three judges of the Mumbai HC in the case of Chief Controlling Revenue Authority, Maharashtra State, Pune and Superintendent of Stamp (Headquarters), Mumbai v. Reliance Industries Limited, Mumbai and Reliance Petroleum Limited, Gujarat4 has consid- ered whether stamp duty would be payable on orders of two different HCs in case of a scheme of arrangement under Sections 391 to 394 of the CA 1956 involving two States.

 

In 2002, Mumbai HC and the Gujarat High Court sanctioned a scheme of amalgamation between Reliance Industries Limited (‘RIL’) having its registered office in Maharashtra and Re- liance Petroleum Limited (‘RPL’), having its registered office in Gujarat (‘Scheme’). While RPL paid stamp duty in Gujarat on the order passed by the Gujarat High Court, RIL contended be- fore the Superintendent of Stamps, Mumbai that the stamp duty paid in Gujarat by RPL should be set off against the stamp duty payable on the Mumbai HC order under the Maharashtra Stamp Act, 1958.

 

Based on an application made by RIL, Mumbai HC held that: (i) stamp duty is charged on an ‘instrument’, and not on the ‘transaction’ effected by the ‘instrument’; and (ii) orders passed by two different HCs, albeit pertaining to the same scheme of amalgamation, are separate instruments, and therefore, full stamp duty is payable in all States where such a scheme of amalgamation is sanctioned. 

 

Reference to BIFR under the Sick Industrial Companies (Special Provisions) Act, 1985 

 

SC, in the case of Madras Petrochem Limited v. Board for Industrial and Financial Re- construction and Ors.5, dealt with the interaction between SARFAESI and the Sick Industrial Companies (Special Provisions) Act, 1985 (‘SICA’) and held that SARFAESI prevails over SICA to the extent that the latter is inconsistent with the former.

 

The main issue before SC was with regard to Section 22 of SICA which provides that if a company is registered as a sick industrial company with the BIFR, all other legal proceedings against the company will be suspended and cannot be resumed without the BIFR’s permission. Further, Proviso 3 to Section 15(1) of SICA provides that a reference pending before the BIFR will abate if secured creditors representing 75% or more of the borrower’s total debts initiate action under SARFAESI to recover their debts. In considering the above, SC held as under:

 

i. Where a single secured creditor in whose favour an exclusive charge has been cre- ated seeks to recover its debt under SARFAESI, such secured creditor may realise such secured debt notwithstanding provisions of SICA; 

 

ii Where there are more than one secured creditors of a sick industrial company, and at least 60% of such secured creditors in value of the amount outstanding as on a record date decide to proceed against the security charged in their favour, the provisions of SICA will not be applicable; and

 

iii Where secured creditors representing not less than 75% in value of the amount outstanding against financial assistance decide to enforce their security under SARFAESI, any reference pending under SICA cannot be proceeded with and the proceedings under SICA will abate. Hence, if such SICA proceedings abate, any par- ty can proceed to recover its dues and all pending proceedings against the indus- trial undertaking will stand revived. 

 

4  Chief Controlling Revenue Authority, Maharashtra State, Pune and Superintendent of Stamp (Headquarters), Mumbai v. Reliance Industries Limited, Mumbai and Reliance Petroleum Limited, Gujarat, AIR 2016 Bom 108

5  Madras Petrochem Limited v. Board for Industrial and Financial Reconstruction and Ors., (2016) 4 SCC 1