Anant Ramanath Hegde, J
1. Company Petitions No.229/2012 and 230/2012 were disposed of vide order dated 22nd February, 2013. These two petitions were filed under Sections 391-394 of the Companies Act, 1956 (hereinafter for short referred to as the "Act, 1956") seeking sanction to the Scheme of Arrangement of TTK Services Private Limited to TTK Property Services Private Limited. Company Petition No.229/2012 is by TTK Services Private Limited-the transferor Company and Company Petition No.230/2012 is by TTK Property Services Private Limited-the transferee Company.
2. This Court vide order dated 22.02.2013 allowed the petitions and the Scheme of Arrangement proposed by the transferor and transferee Companies is sanctioned by the Court.
3. The relevant portion of order dated 22.02.2013 reads as under:
“The entire assets and liabilities and rights of every description relating to Home Shikari Division of transferor Company would stand transferred to the transferee Company with effect from 01.04.2012”.
4. A direction is also issued to the Registry to draw the decree accordingly.
5. As there were two typographical errors while mentioning the dates of two events, two applications were filed in CA Nos.423/2013 and 424/2013 for correction and applications were also allowed on 06.09.2013. The date in paragraph No.3 at page No.6 is ordered to be corrected as 30.01.2013 instead of 21.01.2013, and in paragraph No.4 at page No.6, the date is ordered to be corrected as 22.02.2013 instead of 21.02.2013.
6. It is further relevant to note that despite a direction to intimate the Registrar of Companies about the order sanctioning the scheme, the petitioners did not intimate the Registrar of Companies. Hence, CA No.433/2014 in COP 229/2012 and CA No.434/2014 in COP No.230/2012 were filed with a prayer to direct the Registrar of Companies to accept the communication regarding order sanctioning the scheme.
7. As already noticed, the order in COP Nos.229/2012 and 230/2012 sanctioned the Scheme of Arrangement proposed by two Companies referred to above. The Scheme of Arrangement was to transfer the “Home Shikari Division" of transferor Company in favour of transferee Company. The consideration agreed is 31,00,000 equity shares, (each share having a face value of Rs.10/-) of transferee Company to be transferred to the transferor Company. In terms of the Court order, entire assets and liabilities of every description relating to "Home Shikari Division" of transferor Company stands transferred to the transferee Company with effect from 01.04.2012.
8. It is an admitted position that both Companies have taken the benefit of the order. The assets and liabilities of the transferor Company which were intended to be transferred as per the Scheme of Arrangement were transferred to the transferee Company and the agreed shares of the transferee Company have been transferred to the transferor Company.
9. Since there is a transfer of assets and liability, the transaction attracts the stamp duty under the Karnataka Stamp Act, 1957. (For short ‘Act of 1957’). Under the provisions of the Act of 1957, the stamp duty is to be paid when the transfer of assets takes place.
10. Though, the order sanctioning the scheme is passed in 22.02.2013, stamp duty is not paid till 2024. Before proceeding further, little background facts need to be stated.
11. The office note dated 05.05.2015, in the order sheet reveals that there was a direction to list the matter for orders as the petitioner had not filed the affidavit relating to the assets of the Company. On 01.04.2016, a week's time was granted to comply the office objections (to furnish the list of assets and liability) and there was a further direction to list the matter on 22.04.2016, if the order is not complied. On 22.4.2016, the matter was listed and two weeks' time was granted to file the affidavit.
12. On 27.4.2017, the learned counsel for the petitioner again sought two weeks time to file affidavit along with schedule of assets in Form No.42. And the matter was ordered to be listed immediately after vacation. Office note dated 29.01.2020 reveals that the Registry had put a note to list the matter for orders regarding non-filing of affidavit along with schedule of assets. However, the matter was listed on 19.04.2023. Even till then, there was no compliance by the petitioner. On that day the matter was ordered to listed after summer vacation, 2023. The case was listed on 24.11.2023.
On that day again a short accommodation was sought by the petitioner. On that day, the learned predecessor of this Court passed the following order:
"It is forthcoming that vide order dated 27.04.2017, this Court had granted time, despite which the affidavit has not been filed.
Hence, the matter is being adjourned putting the petitioner to notice that if the affidavit along with the Schedule of Assets in Form No.42 is not filed on or before the next date of hearing, the order dated 22.02.2013 approving the scheme of amalgamation would be liable to be recalled"
13. On 6.12.2023, again adjournment was sought to comply the order dated 24.11.2023. My learned predecessor made the following order:
"Reiterating the observations made in the Order dated 24.11.2023, as a final chance, call on 15.12.2023."
14. On 15.12.2023, the case was listed. The submission is made stating that the affidavit containing schedule of assets is filed on 12.12.2023. Then two weeks time was granted to the State to file its valuation report. On 19.01.2024, the Government again sought short accommodation to file valuation report and matter was ordered to be listed on 02.02.2024. On that day, the case was adjourned to 09.02.2024. Government had accepted the valuation submitted by the petitioner. Rs.3,10,000/- is the stamp duty paid on the value of assets of the Company as it stood in 2013.
15. Since the transfer of assets has taken place with effect from 01.04.2012, vide order dated 22.04.2013, which attracted stamp duty under the Act of 1957 whether the stamp duty paid in 2024 can be accepted without accounting for the delay and should the petitioner be asked to compensate the loss occurred to the exchequer.
16. Learned counsel appearing for the petitioner would urge that the liability to pay the stamp duty will arise only from the date of issuance of order in Form No.42 and same is not issued, by the Registry as such, there is no delay in paying the stamp duty and there cannot be any liability to pay interest. It is also urged that the Act of 1957 does not provide for payment of interest in the event of delay in paying the stamp duty. It is his further submission that the provisions of the Act of 1956 and Rules, 1959 made there under do not impose any liability to pay interest on the stamp duty on an instrument which is drawn pursuant to the orders passed by the Company Court under the Act of 1956.
17. Learned counsel for the petitioners in support of his contention has placed reliance on the following three judgments:
1. Shankar Balwant Lokhande (dead) by LRs vs. Chandrakant Shankar Lokhande and Anr. reported in (1995) 3 SCC 413.
2. Dr.Chiranjilal (d) by LRs vs. Hari Das (D) by LRs reported in (2005) 10 SCC 746.
3. Hindustan Lever and another vs. State of Maharashtra and another reported in (2004) 9 SCC 438.
18. The learned Government Advocate urged that there is unjustifiable inordinate delay in furnishing the affidavit containing the list of assets of the Company as such there is inordinate delay in paying the requisite stamp duty which was required to be paid immediately after the order sanctioning the Scheme of Arrangement. It is urged that on account of default on the part of the Company, the stamp duty which was required to be paid in 2013, is paid in the year 2024, and the Company be directed to pay 18% interest per annum on the said amount. It is urged that the transaction being a commercial transaction, there is justification to charge 18% interest per annum on the stamp duty payable.
19. This Court has considered the contentions raised at the bar.
20. Admittedly, the order sanctioning the scheme is passed under Section 394 of Act, 1956. Sub-section 2 of Section 394 reads as under:
394. PROVISIONS FOR FACILITATING RECONSTRUCTION AND AMALGAMATION OF COMPANIES –
(1) xxxx
(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 and 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 virtue of the compromise or arrangement, to cease to have effect.
(Emphasis supplied)
21. On a reading of the aforementioned provision, it is apparent that the transfer of assets and liabilities in terms of Scheme of Arrangement takes place in terms of the Court order. In other words, the order of the Court under section 394 of the Act of 1956 itself would be an instrument of transfer. The Apex Court in HINDUSTAN LEVER & ANR. Vs STATE OF MAHARASHTRA & ANR. supra has held that order under Section 394 of the Act of 1956 is an instrument of transfer.
22. It is also relevant to refer to Rules 81 and 84 of The Companies (Court) Rules, 1959 (‘Rules’ 1959 for short). The said Rules read as under:
81. Order on petition- Where the Court sanctions the compromise or arrangement, the order shall include such directions in regard to any matter and such modifications in the compromise or arrangement as the Judge may think fit to make for the proper working of the compromise or arrangement. The order shall direct that a certified copy of the same shall be filed with the Registrar of Companies within 14 days from the date of the order, or such other time as may be fixed by the Court. The order shall be in Form No.41, with such variations as may be necessary.
84. Order under section 394- An order made under section 394 shall be in Form No.42 with such variation as the circumstances may require.
23. In terms of Rule 81, of Rules 1959, there has to be a direction to the Company to send the certified copy of the order to the Registrar of Companies. As per Rule 84 of Rules, 1959, the order under Section 394 of the Act of 1956 shall be in Form No.42 with such variations. The expression “with such variation as the circumstances may require” in Rule 84 referred to above, also indicates that the format prescribed in Form No. 42 is illustrative.
24. The stamp duty payable by the Company pursuant to Order under Section 394 of the Act of 1956 is dependent on the value of the assets of the Company ordered to be transferred as per the Scheme of Arrangement. The assets get transferred once the Scheme of Arrangement is accepted by the Court. The liability to pay the stamp duty arises from the date of the order and not from the date of issuance of Form No.42.
25. Admittedly, after the order sanctioning the Scheme of Arrangement, the petitioners have not furnished the list of assets and liabilities of the Companies which are parties to the Scheme of Arrangement. Hence, there was no order in the format prescribed in Form No.42. Nevertheless, there is an order approving the Scheme of Arrangement which effectively transferred the assets of the transferor-Company in favour of transferee-Company. And admittedly, the benefit of the order is availed by the petitioner.
26. The legal consequence of the order passed under Section 394 of the Act of 1956 is that the entire assets and liabilities of the transferor-Company relating to "Home Shikari Division" of transferor Company stood transferred in favour of transferee-Company. In other words, the order of the Court itself is an instrument of transfer. Thus, the order sanctioning Scheme of Arrangement will attract stamp duty as the Scheme of Arrangement is the scheme for transferring entire assets and liabilities of the transferor-Company.
27. The stamp duty payable depends on the value of the assets and liabilities transferred. This being the position, the obligation is on the part of the petitioners to disclose the value of assets and liabilities and to pay the requisite stamp duty pursuant to the order sanctioning the Scheme of Arrangement. The petitioners need not wait for one more order to be issued in Form No.42 disclosing the list of assets in the schedule once the order is passed under Section 394 of the Act of 1956. Assuming that one more order in Form No.42 is required (akin to a decree in a civil suit after the judgment) then also the obligation is on the petitioners to furnish the list of assets and liabilities to enable the Registry to issue such an order.
28. In any case, this Court is of the view that the liability to pay the stamp duty arose on 22.02.2013 when the order was passed. Both petitioners have taken the benefit of the orders sanctioning the scheme. It is true that the provisions of the Act, 1956 or the Rules, 1959 do not specifically put any time frame to furnish the details of assets and liabilities of the Company to enable a formal order in Form No.42. Nevertheless the order of the Court sanctioning the Scheme of Arrangement for transfer of assets, in effect is the instrument of transfer and it attracts the stamp duty under Article 20 of the Act of 1957. Thus, as soon as the order is passed, the transfer of assets and liability takes place by operation of Section 394(2) of Act of 1956, and there is an immediate obligation on the petitioner to submit the list of assets and liabilities and to pay the requisite stamp duty.
29. The claim of the petitioner-Company that it was waiting for one more order in Form No.42 and unless, such an order is passed there is no liability to pay the stamp duty, does not stand to the reason given the fact that the particulars to be filled in Form No.42 are to be furnished by the petitioner-Company which is the beneficiary of the order approving the Scheme of Arrangement. No fault can be attributed to the Registry of the Court or the Government as the further action pursuant to the order sanctioning the Scheme was entirely dependent on the petitioner-Company furnishing the list of assets and liabilities. The Registry of the High Court is not expected to chase the petitioner-Company to furnish the assets of the Company. On the other hand, it is the responsibility of the petitioner Company to furnish the list of assets to the Registry so as to enable the Registry to issue one more order in Form No. 42. This part of the obligation is not carried out by the petitioner. Despite the Registry listing the matter for not furnishing the list of assets and liabilities, the petitioner-Company took adjournments to furnish the details. It is only in December 2023 after the order passed by this Court indicating the recall of the order sanctioning the Scheme, the petitioner-Company has come out with list of assets and liabilities. Thus, it is a clear case of wilful default on the part of the petitioner-Company which has resulted in delayed payment of stamp duty which in fact has resulted in revenue loss to the State.
30. Merely because the Court order did not prescribe any time limit or merely because there is no provision in the Act of 1956 which stipulates the period for filing the list of assets, it does not mean that the beneficiary of the order can afford to submit the list of assets as and when he pleases. What is required to be noticed is the benefit of the order approving the Scheme is enjoyed by the transferee-Company without obtaining an order in Form No.42 on payment of stamp duty. In other words, the transferee-Company has kept the money payable on stamp duty with itself and has derived benefit from it. And the exchequer is deprived of the stamp duty from 2013 till 2023.
31. Though, this Court has granted adjournments to comply the office objections relating to non-furnishing of affidavit containing the assets, such indulgence by the Court cannot be construed as an extension of time to furnish the affidavit containing list of assets. It is required to be noticed that after the disposal of the petition, only thing that is required to be done by the Registry is to issue a formal order in Form No.42 and for this purpose, the list of assets of the Company is required to be furnished by the petitioner. This having not been done resulted in undue and unjustified delay in paying the stamp duty. The petitioner has come forward to furnish the list of assets only after this Court issued an order indicating that why the order sanctioning the scheme should not be recalled.
32. The contention that the Company need not pay the stamp duty unless order in Form No.42 is issued can be accepted only if the Company had complied all the requirements to enable the Registry to issue order in Form No.42. Admittedly, the Company did not comply the requirement. Hence, the contention that there is delay in issuing Form No.42 does not come to the aid of the petitioner as the delay is attributable to the petitioner alone.
33. Though, it is urged that there is no provision under the Act of 1956 and the Act of 1957 to charge interest, the said contention overlooks Section 46 of the Act of 1957. Even otherwise, the Court can certainly take notice of the fact that the money to be spent on stamp duty was retained by the petitioner-Company and the State was deprived of the said amount from 2013 to 2023. The petitioner-Company has used the said money which otherwise belonged to the State and the State is deprived of the said money for ten years. If the interest is not levied on the premise that the law does not provide for said payment of interest then, it amounts to rewarding the petitioner-Company which violated the provisions of the Act of 1957 which mandated payment of stamp duty on an instrument of transfer which came into existence in 2013 in view of mandate of Section 394(2) of Act of 1956. Not levying the interest on the delayed payment of stamp duty in a matter of this nature where the non-payment is apparently wilful certainly sends a wrong signal.
34. Though, the learned counsel for the petitioner relied upon the judgments in the case of Shankar Lokhande, Chiranjilal, and Hindustan Lever supra, it is to be noticed that in the cases of Shankar Lokhande and Chiranjilal, the Court was dealing with the question relating to the stamp duty payable on a final decree pursuant to the preliminary decree in a partition suit. In this case, the Court is not concerned with the stamp duty pursuant to a preliminary decree in a partition suit. Moreover, in partition suits, the schedule of the properties is available in the plaint as well as in the preliminary decree. Once the draft final decree is published except paying the stamp duty nothing else is required to be done by the decree holder. However, in the petition seeking sanction for Scheme of Arrangement, once the order is passed approving the scheme, the obligation lies on the petitioner Company to furnish the list of assets and to pay the requisite stamp duty. Hence, the aforementioned judgments do not come to the aid of the petitioner.
35. In Hindustan Lever supra, the Court has held that the order under Section 394 of the Act of 1956 is an instrument and the said instrument is chargeable with stamp duty. This being the position, the liability to pay the stamp duty arises the moment the scheme is sanctioned. Hence, the aforementioned judgment also does not come to the aid of the petitioner.
36. Now the Court has to decide on the rate of interest payable by the petitioner-Company. Though, the learned Government Advocate would contend that the transaction being commercial transaction, the Company should be ordered to pay interest @ 18% per annum, this Court does not find any justification to impose interest @ 18% per annum. Section 46 of the Act of 1957 provides for payment of interest in respect of certain orders passed under the Chapter IV of the Act of 1957. The said provision provides for notification by the Government relating to the interest to be levied. However, no such notification is produced before the Court. This Court is of the view that the petitioner-Company has to pay interest at the rate specified in the notification, if any published under Section 46 of the Act of 1957. In the absence of any such notification, this Court is of the view that interest of justice would be met if the petitioner-Company is directed to pay interest at the rate of 8% per annum.
37. As already noticed this is a case of wilful default in paying the stamp duty on time. It is also relevant to note that the petitioner-Company has acknowledged its liability to pay the stamp duty throughout whenever the case was listed. In addition, the payment is also made in the year 2023. Thus, the question of limitation if any, does not apply. Under these circumstances, this Court is of the view that petitioner-Company is liable to pay interest as specified in the notification if any, under Section 46 of the Act of 1957 on Rs.3,10,000/-with effect from 22.02.2013 till 12.12.2023. In the absence of any such notification, the petitioner-Company shall pay interest @ 8% per annum on Rs.3,10,000/- with effect from 22.02.2013 till 12.12.2023.
38. Hence, the following:
ORDER
(i) The petitioner-Company is liable to pay interest as specified in the notification if any, under Section 46 of the Act of 1957 on Rs.3,10,000/- with effect from 22.02.2013 till 12.12.2023.
(ii) The State Government shall communicate to the petitioner- Company, the notification if any issued under Section 46 of the Karnataka Stamp Act, 1957, specifying rate of interest, within one month from today. In such an event, the petitioner-Company shall pay interest at the rate specified in the notification.
(iii) In the absence of any such notification under Section 46 of the Act of 1957, the petitioner-Company in COP No.230/2013 shall pay interest @ 8% per annum on Rs.3,10,000/- with effect from 22.02.2013 till 12.12.2023 within 30 days from today.
(iv) If the amount so ordered is not paid within 30 days from today, the State is entitled to recover the same from the petitioner-Company as arrears of land revenue.
