In a recent case in the Supreme Court the issue of stamp duty payment and its applicability to certain forms filed with the Registrar of Companies has been clarified, shedding light on the intricacies of stamp duty laws under the Bombay Stamp Act, 1958. The case in question involved National Organic Chemical Industries Ltd. and the State of Maharashtra, highlighting the nuances of stamp duty obligations in corporate transactions.

The central question before the Court revolved around whether a notice submitted in Form No. 5 to the Registrar constitutes an "instrument" as defined under Section 2(l) of the Bombay Stamp Act, 1958. This distinction is crucial as it determines the levy of stamp duty on such documents. 

The State of Maharashtra contended that stamp duty was payable each time a company increased its share capital and filed Form No. 5, while the respondent company argued that stamp duty was not applicable in this scenario.

The two-Judge Bench comprising Justice Sudhanshu Dhulia and Justice Prasanna B. Varale delved into the legislative intent behind the Stamp Act and the nature of documents subject to stamp duty. They emphasized that Form No. 5 serves as a method of notifying the Registrar about changes in share capital or membership, facilitating necessary alterations in the company's articles. However, the Court clarified that the articles themselves constitute an "instrument" attracting stamp duty, not the filing form.

The respondent company had initially paid stamp duty in accordance with Article 10 of Schedule-I of the Bombay Stamp Act, 1958, upon increasing its share capital to Rs. 600 crores. Subsequently, amendments introduced a maximum cap on stamp duty payable by companies. When the respondent further increased its share capital to Rs. 1,200 crores, it paid stamp duty based on the amended provisions, albeit inadvertently, as it had already paid the maximum stamp duty in 1992.

The Court's analysis focused on the language of the Act, noting that stamp duty obligations are linked to the Articles of Association (AOA) and the amendments therein. It rejected the contention that stamp duty must be paid afresh upon each increase in share capital, emphasizing that the stamp duty cap applies as a one-time measure per instrument. This interpretation was bolstered by amendments to the Stamp Act, specifically referencing increased share capital and prescribing duty accordingly.

Moreover, the Court's decision underscored the continuity of the underlying instrument (AOA) despite amendments, warranting consideration of previously paid stamp duty when calculating obligations for subsequent changes. While amendments do not have retrospective effect, the essence of the instrument remains unchanged, leading to a pragmatic approach in determining stamp duty liabilities.

Advocate Aniruddha Joshi represented the appellants (State of Maharashtra), while Senior Advocate Madhavi Divan appeared for the respondent (National Organic Chemical Industries Ltd.).

The Court's ruling upheld the High Court's decision, directing the appellants to refund the stamp duty erroneously paid by the respondent, amounting to Rs. 25 lakhs.

Case: State of Maharashtra & Anr. v. National Organic Chemical Industries Ltd,

CIVIL APPEAL NO.8821 OF 2011.

Click to read/download judgment.