India: Bombay High Court: No Set Off On Stamp Duty For Inter-State Amalgamations

  • A full judge bench of the Bombay High Court holds that a scheme settled by two companies is not a document chargeable to stamp duty. Rather, an order passed by the Court sanctioning such a scheme under Section 394 of the Companies Act, 1956 which effects such a transfer is a document chargeable to stamp duty.
  • If the registered offices of two companies are situated in two different states, then the order of the High Court which sanctions the scheme passed under Section 394 of the Companies Act, 1956 will be the instrument chargeable to stamp duty and a set off cannot be claimed against stamp duty paid pursuant to the order of the High Court in another state.
  • Orders of two different High Courts may be pertaining to same scheme but they are independently different instruments and cannot be said to be same document especially when the two orders of different High Courts are upon two different petitions by two different companies.


A full bench of the Bombay High Court in its recent decision in Chief Controlling Revenue Authority v. M/s Reliance Industries Limited1 has clarified the stamp duty applicable to inter-state amalgamations. The Court speaking through K.R Shriram J. has observed that a scheme settled by two companies is not a document chargeable to stamp duty. Rather, an order passed by the Court sanctioning a scheme of amalgamation under Section 394 of the Companies Act, 1956 which effects transfer is a document chargeable to stamp duty. Further, it has been held that in instances of the registered offices of the two Companies being in two different States, the order of the Court which sanctions the scheme to be passed under Section 394 of the Companies Act, 1956 will be the instrument chargeable to stamp duty.


Reliance Industries Ltd ('RIL') having its registered office in Mumbai and Reliance Petroleum Ltd ('RPL') having its registered office in Gujarat entered into a scheme of amalgamation under Sections 391 to 394 of the Companies Act, 1956 ('the Scheme'). Therefore, both filed a company petition before respective High Courts i.e. Bombay High Court and Gujarat High Court for getting the Scheme sanctioned. The Bombay High Court sanctioned the Scheme vide order dated June 7, 2002 whereas the Gujarat High Court did so vide order dated September 13, 2002. Pursuant to the orders passed by both the High Courts, RIL paid a stamp duty of INR 10 crores (Rupees Ten Crores) in Gujarat based on the order passed by the Gujarat High Court. Given that the stamp duty of a maximum of INR 25 crores (Rupees Twenty Five Crores) was payable in Maharashtra on the amalgamation, it was contended by RIL that it only needed to pay INR 15 crores (Rupees Fifteen Crores). The revenue authorities in Maharashtra refused to provide the set off sought by RIL. After series of appeals, the matter was referred by the revenue authorities in Maharashtra to the Bombay High Court to decide on the questions of law.


  1. Whether a scheme sanctioned between two companies under Section 391 and 394 of the Companies Act, 1956 is one and same document chargeable to stamp duty regardless of the fact that the order sanctioning the scheme may have been passed by two different High Courts by virtue of the fact that the registered offices of the two Companies are situated in two different states?
  2. Whether the instrument in respect of amalgamation or compromise or scheme between the two companies is such a scheme, compromise or arrangement and the orders sanctioning the same are incidental as the computation of stamp duty and valuation is solely based on the scheme and scheme alone?
  3. Whether in a scheme, compromise or arrangement sanctioned under Section 391 and 394 of the Companies Act, 1956 where registered office of the two companies are situated in two different states, the company in the state of Maharashtra is entitled for rebate under Section 19 in respect of the stamp duty paid on the said scheme in another state?
  4. Whether for the purpose of Section 19 of the Bombay Stamp Duty Act, 1958 ("the Act") the scheme/compromise/arrangement between the two Companies must be construed as document executed outside the state on which the stamp duty is legally levied, demanded and paid in another state?


Firstly, the Court relied on decision of the Supreme Court in Hindustan Lever v. State of Maharashtra2, wherein the Apex Court had observed that the order passed under Section 394 of the Companies Act, 1956 is passed on the basis of consent and is considered to be an instrument under Section 2 (1) of the Act.3 The rationale for this was that the order of the court is liable to stamp duty as it results in transferring the property and that the order of the court which results in transfer of the property would be an instrument as it includes every document.4 This is so as the scheme of amalgamation has no effect unless it is sanctioned by the court.

Secondly, the court opined that, "Although the two orders of two different high courts are pertaining to same scheme they are independently different instruments and cannot be said to be same document especially when the two orders of different high courts are upon two different petitions by two different companies. When the scheme of the said Act is based on chargeability on instrument and not on transactions, it is immaterial whether it is pertaining to one and the same transaction. The duty is attracted on the instrument and not on transaction."

Thirdly, it was held that Section 19 of the Act does not apply as the order is already in Mumbai and executed in Mumbai. As per Section 19 of the Act, where a document is executed outside a state and is subsequently brought into the state, stamp duty would have to be paid on that instrument after giving setting off duty that has already been paid in another state. Therefore, in this particular instance, the rebate cannot be claimed by RIL for having paid certain amount of stamp duty in the State of Gujarat.


A division bench of the Bombay High Court in Li Taka Pharmaceuticals Ltd. v. State of Maharashtra5 had held in the year 1997 that, a conveyance would include every instrument by which the property is transferred to or vested in another person inter vivos. Post that, by an amendment to the Act, Section 2(g) (iii) was introduced which made it clear that it is made clear that instrument would include a consent decree or final order of any civil court.

Similarly, a single judge of the Calcutta High Court in Gemini Silk Limited v. Gemini Overseas Limited6, was dealing with the issue of whether an order of Court sanctioning a scheme which effectuates the transfer a conveyance? The Court speaking through GC Gupta J similarly held that conveyance includes every instrument by which property whether moveable or immovable is transferred inter vivos since a company is a living person within the meaning of Section 5 of the Transfer of Property Act, 1988 and clearly a document creating or transferring a right is an instrument.

Thereafter, a Division Bench of the Calcutta High Court dissented from the view laid down by the single judge and adopted a different view in Madhu Intra Limited v. Registrar of Companies7 wherein it was held that the transfer of assets and liabilities from the transferor company to the transferee company takes place by virtue of subsection(2) of Section 394 of the Companies Act, 1956 without any further act or deed and hence the order of the court sanctioning the scheme would not qualify to be an instrument as the transfer is purely through operation of law.

The full bench decision of the Bombay High Court by clearly observing that the order passed under Section 394 of the Companies Act, 1956 is considered to be an instrument under Section 2 (1) of the Act has hopefully put to rest the issue regarding the chargeability of stamp duty of a scheme sanctioned by the Court. However, the same principle has been further extended in case of inter-state amalgamations, and it has been stated that each order of a court involved in a scheme of arrangement is chargeable to stamp duty. The Court has also expressly held that no deduction of stamp duty paid can be claimed for order passed by one High Court against stamp duty payable on another order passed by different High Court for the same scheme as both are two different instruments. This decision will have huge stamp duty cost implications in the case of amalgamations involving group companies as in a single amalgamation, the stamp duty payment may have to be done twice or thrice depending on where the group companies are located.


1.Civil Reference No. 1 of 2007 in Writ Petition No. 1293 of 2007 in Reference Application No. 8 of 2005.

2. (2004) 9 SCC 438

3.Section 2 (1) of the Bombay Stamp Act, 1968 defines instrument to include, "every document by which

any right or liability is, or purports to be created, transferred, limited, extended, extinguished or recorded, but does not include a bill of exchange, cheque, promissory note, bill of lading, letter of credit, policy of insurance, transfer of share, debenture proxy and receipt."

4.See Sun Alliance Insurance Ltd. vs. Inland Revenue Commissioners, (1971) 1 ALL ER 135

5.AIR 1997 Bom 7

6. (2003) 53 CLA 328

7. (2006) 130 Comp. Cas. 510

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.