HC issues notice in a petition challenging Circular imposing Stamp Duty on Mergers & Amalgamations

January 31, 2019:

On Wednesday, the Madurai Bench of the Madras High Court has issued notice in a petition challenging a circular to impose stamp duty on mergers and amalgamations in the state.

The circular was issued last year by the Inspector General of Registration, Tamil Nadu.

Justice V Bhavani Subbaroyan issued notice in the petition filed by alloy company, Harihar Alloys Private Limited (petitioner), through Advocates Naveen Kumar Murthi and S Varsha, challenging the 2018 circular as unlawful, arbitrary and unconstitutional.

The petitioner-company had sought to merge two of its sister concerns, Harihar Dwellings Private Limited and Wellshine Investments and Financial Services Limited to streamline its business.

It had also sought the sanction of the National Company Law Tribunal (NCLT) in 2018.

While this representation seeking approval for amalgamation was pending before the NCLT, Chennai, the Inspector General of Registration in Tamil Nadu issued a circular in Nov 2018, stating that a scheme for mergers & amalgamations b/w companies falls under the definition of “conveyance” under the Stamp Act.

The circular therefore informed that mergers & amalgamations would thus be subject to stamp duty.

However, the petitioner company points out that neither the Stamp Act, 1899, nor any State amendment applicable in Tamil Nadu provides for including the transfer of properties of Companies under a scheme of amalgamation under the definition of the term “conveyance”.