Case: Hindustan Lever  Vs. State Of Maharashtra

2. Tata Oil Mills Co. Ltd. (Transferor Company) was incorporated on 10.12.1917 under the Companies Act, 1913. Hindustan Lever Ltd. (Transferee Company) was incorporated under the same Act on 17.10.1933. The scheme of amalgamation of transferor company with the transferee company was formulated and approved by the Board of Directors of respective companies on 19.3.1993. On 3.3.1994 the scheme of amalgamation of the transferor company with the transferee company was sanctioned with certain modifications by a Single Judge of the High Court. Appeal filed against the judgment and order of the Single Judge was rejected by the Division Bench on 18.5.1994. Special leave petition against the above judgment of the Division Bench was dismissed by this Court on 24.10.1994. This judgment is reported in Hindustan Lever Employees Union vs. Hindustan Lever Ltd. & others (1995 Supp. (1) SCC 499.)3. The drawn up order of amalgamation of transferor company with transferee company was approved by the High Court on 24.11.1994. On presentation of the certified copy of the Courts order the Registrar of Companies, Maharashtra issued a certificate amalgamation the two companies.4. In view of the stamp duty sought to be levied on the order of amalgamation passed under Section 394 of the Companies Act, 1956 (hereinafter referred to as the Act) the appellant filed writ petition in the Bombay High Court challenging the constitutional validity of the provisions of Section 2(g)(iv) of the Bombay Stamp Act, 1958 (hereinafter referred to as the Stamp Act"). By the impugned order the Division Bench of the High Court has dismissed the writ petition. The validity of Section 2(g)(iv) of the Stamp Act has been upheld. Section 2(g) of the Stamp Act which defines ConveyanceIn this Act, unless there is anything repugnant in the subject or context -xx xx xx(g) Conveyance includes -(i) a conveyance on sale,(ii) every instrument,(iii) every decree or final order of any Civil Court,(iv) every order made by the High Court under Section 394 of the Companies Act, 1956 in respect of amalgamation or reconstruction of companies; and every order made by the Reserve Bank of India under Section 44A of the Banking Regulation Act, 1949 in respect of amalgamation or reconstruction of Banking companies.by which property, whether movable or immovable, or any estate or interest in any property is transferred to, or vested in, any other person, inter vivos, and which is not otherwise specifically provided for by Schedule:Explanation: An instrument whereby a co-owner of any property transfers his interest to another co-owner of the property and which is not an instrument of partition, shall, for the purposes of this clause, be deemed to be an instrument by which property is transferred interIt would be seen that conveyance includes a conveyance on sale as well as every instrument. Clause (g)(iii) was added by the Maharashtra Act No. 27 of 1985 which came into operation w.e.f. 10.12.1985. It provides that conveyance includes every decree or final order of any civil court. Clause (g) (iv) was added by the Maharashtra Act No. 17 of 1993 which came into operation w.e.f. 1.4.1993.6. Section 2(g)(iii) came up for interpretation before this Court in the case of Ruby Sales and Services (P) Ltd. and Anr. vs. State of Maharashtra & others, 1994 (1) SCC 531. It was held that the definition of conveyance and instrument starts with the expression includes which shows that the definition is very wide which would include a consent decree as well. That the sub-clause (iii) of Section 2(g) was introduced out of abundant caution and it does not mean that the consent decree was not otherwise covered by the definition in Section 2(g) or 2(1) of the Stamp Act. That there was no particular pleasure in merely going by the label but what is decisive is the terms of the document. It was clear from the terms of the consent decree that it is also an instrument under which the property has been transferred by one persons to another. It wasis no particular pleasure in merely going by the label but what is decisive is by the terms of the document. It is clear from the terms of the consent decree that it is also an instrument under which title has been passed over to the appellants/plaints. It is a live document transferring the property in dispute from the defendants to the plaintiffs.Thus the position becomes clear that the consent decree falls under the definitions of conveyance as well as instrument..By Act No. 17 of 1993, the Legislature has added Section 2(g)(iv) to include every order passed by the High Court under Section 394 of the Companies Act in respect of amalgamation of the companies. Section 394 of the Companies Act reads.Provisions for facilitating reconstruction and amalgamation of companies - (1) Where an application is made to the Court under section 391 for the sanctioning of a compromise or arrangement proposed between a company and any such persons are are mentioned in that section, and it is shown to the Court -(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 court 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 appropriate 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 windingup of any transferor company(v) the provision to be made by any persons, who within such time and in such manner as the Courts 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:(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 woundup, with any other company or companies, shall be sanctioned by the Court unless the Court has received a report form the Company Law Board or 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 Court unless the Official Liquidator has, on scrutiny of the books and papers of the company, made a report to the Court 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 an 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 the virtue of the compromise or arrangement, to cease to have effect.(3) within (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 (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 with the meaning of this Act or not." (Emphasis

Court's reasoning:
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 observe that the compromise or arrangement arrived at is lawful and that the affairs of the company were not conducted in a 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(1) 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."Transfer of Property" has been defined in Section 5 of the Transfer of Property Act, 1882 to mean an act by which a living person conveys property, in present or in future to one more other living persons. Company or association or body of individual, whether incorporated or not, have been included amongst the "living person" in this Section. It clearly brings out that a company can effect transfer of property. The word "inter vivos" in the context of Section 394 of the Companies Act would include within its meaning also a transfer between two "juristic persons" or a transfer to which a juristic person is one of the parties. The transaction between a minor or a person of unsound mind with the other person would not be recognised in law, though the same is between two living beings, as they are not juristic persons in the eyes of law who can by mutual consent enter in a contract or transfer the property. The company would be juristic person created artificially in the eyes of law capable of owning and transferring the property. Method of transfer is provided in law. One of the methods prescribed in dissolution of the transferor company by merger in the transferee company along with all its assets and liabilit8es. Where any property passes by conveyance, the transaction would be said to be inter vivos as distinguished from a case of succession orduty is levied on the instrument and the measure is the valuation of the property transferred. There is no question of encroachment on the field of Parliament under Entry 43, List I of the Constitution which empowers the Union to make laws re: incorporation, regulation winding up of trading corporation including banks insurances and finance corporations but not including corporative societies. The follow up legislation under Entry 43 List is totally different from the levy of stamp duty and of prescribing rate of stamp duty on such documents. The Bombay Stamp Act does not provide for any Legislation with regard to incorporation, regulation and winding up of corporations. It only levies the stamp duty and prescribes the rate of stamp duty in respect of documents by compromise or