Intricacies Surrounding Timing Of Stamping Of Order Sanctioning Scheme Of Restructuring
Whilst the issue of stampability of Scheme Orders is fairly settled, there could be multiple issues which may arise on account of such stamping, such as treatment of value of property situated outside the State for the purpose of determination of stamp duty or the time of payment of such stamp duty
Introduction
Stamp duty payable on an order sanctioning a scheme of restructuring (“Scheme Order”) has been subject matter of debate for a number of years. Whilst the uncertainty regarding the status of such a Scheme Order has prompted certain States (such as Maharashtra, Karnataka, Gujarat, West Bengal) to specifically clarify the treatment of such orders as instrument for the purpose of stamp duty, certain States (such as Odisha, Jharkhand) and Union Territories (Delhi) have not adapted to introduce specific articles/ provisions dealing with such orders. Non introduction of specific provisions has, however, not deterred the revenue department of such States from levying stamp duty on the Scheme Orders. Further, the recent line of jurisprudence seems to have fairly settled the debate about stampability of Scheme Orders, whether or not enabling provision exists under the applicable stamp legislation.
Whilst the issue of stampability of such Scheme Orders is fairly settled, there could be multiple issues which may arise on account of such stamping, such as treatment of value of property situated outside the State for the purpose of determination of stamp duty or the time of payment of such stamp duty.
In this paper, we intend to focus on the intricacies surrounding the timing of payment of stamp duty on the order sanctioning scheme.
Time of stamping of instruments
Section 17 of the Indian Stamp Act, 1899 (“ISA”) requires all instruments chargeable with duty and executed by any person in India to be stamped before or at the time of execution. to the expression at the time of execution has been subject of some debate, prompting the Law Commission, in its 67th Report (“LCR”), to recommend replacing such expression by “at the time of execution or immediately thereafter”. Whilst the said suggestion was adopted by certain States such as Maharashtra and Gujarat, majority of the States have not adopted the same.
Time of stamping of court order
In the context of stamping of a Scheme Order, the provision contained in Section 17 poses a peculiar problem. Even if it is assumed that the date of signing of the decree by the Court/ tribunal amounts to execution for the purpose of such order, in no way could such an order be stamped before or at the time of execution.
If we compare the position of the Scheme Order with other decrees/ awards requiring stamping, we note that liability to pay stamp duty on the arbitral award arises only when the same is sought to be enforced1. On the other hand, a partition decree is required to be engrossed on a stamp paper for it to be effective. However, payment of stamp duty is not a condition precedent for the scheme to be effective.
Amongst the stamp duty legislations applicable to the States reviewed, it appears that only the State of Gujarat had amended the legislation to provide clarity on the time period within which Scheme Order would have to be stamped. For instance, second proviso to Section 17 of the
Gujarat Stamp Act specifies that an order of NCLT in respect of a scheme of amalgamation would need to be stamped within thirty days from the date of such order. In relation to the other states, it probably would be governed by timelines, if any, allowed under the order itself. For instance, our review of the orders passed by Mumbai bench of NCLT indicates that, it typically allows a period of sixty days to make the payment of stamp duty.
Duly Stamped
Assuming that the stamp duty would have to be paid within the period specified under the legislation, could such payment be delayed pending adjudication of proper stamp duty?
In a recent decision by Full Bench of Gujarat High Court2, it was observed by the Court that the word used in Section 17 is ‘stamped’ and not ‘duly stamped’ (which term means a stamp affixed being not less than the proper amount in accordance with law) and pendency of adjudication of stamp duty was not held to be a valid excuse for not meeting the obligation of paying stamp duty within the specific period. Such a view, however, seems to be at variance with the LCR, which had noted that expression “shall be stamped” under Section 17 means that the instrument should be duly stamped.
Consequence of delay in payment of stamp duty
In two recent orders3, Karnataka High Court had passed orders directing payment of 8% interest on the outstanding stamp duty payable on Scheme Orders from the date of passing of the order. Notably, such levy of interest was on the basis of Section 46 of Karnataka Stamp Act, 1957, which specifically allowed levy of interest on the outstanding stamp amount and is a provision unique to the State of Karnataka. In absence of such an enabling provision, it would be interesting to analyse how the Courts may address the issue of delay in payment of stamp duty on Scheme Orders.
Conclusion
The purpose of the paper was to highlight the various intricacies surrounding the payment of stamp duty on an order sanctioning a scheme of restructuring. As one may note from the discussion, the issues are myriad and may require legislative intervention to address the ambiguities. Until then, one may not have much of an alternative, apart from relying on Courts to seek guidance on perplexing issues.
Disclaimer – The views expressed in this article are the personal views of the author and are purely informative in nature.
1. M. Anasuya Devi v. M. Manik Reddy [Appeal (Civil) 7940-7942 of 2001, decided on October 16, 2003 (Supreme Court)].
2. Vodafone Idea Telecom Infrastructure Limited v. CCRA [Stamp Reference No. 1 of 2023, decision dated December 20, 2023 (Gujarat)].
3. TTK Property Services Private Limited In Re [Company Petition No. 230 of 2012, order dated March 14, 2024 (Karnataka)]; TE Connectivity Global Shared Services Private Limited In Re [Company Petition No. 230 of 2012, order dated March 14, 2024 (Karnataka)].