A question recently arose for consideration before the Division Bench of the Himachal Pradesh High Court comprising of the Chief Justice L. Narayana Swamy and Dharam Chand Chaudhary J. in the case of Reckitt Benckiser (India) Private Limited vs. State of H.P. & Ors. [CWP No. 1293 of 2019, decision dated February 29, 2020], that whether on a mere change of the name of a company upon conversion of a company from public to private, and without any sale and transfer of its immovable property, any stamp duty is chargeable when the name of the company is sought to be recorded in the revenue record?
Facts of the Case:
The petitioner company was initially incorporated as a public limited company under the name and style of Reckitt & Colman of India on July 5, 1951, which was subsequently changed to Rackitt Benckiser (India). Thereafter, again on May 13, 2015, with the approval of the Registrar of Companies, the name of the petitioner company was changed to Reckitt Benckiser (India) Private Limited upon its conversion from a public limited company to a private limited company.
Consequent upon such name change, the petitioner company had made an application for making necessary changes in the revenue records in relation to the immovable properties held by it, such application was allowed subject to payment of stamp duty and registration fee on the value of land and assets on account of addition of the word 'private' in its name.
Arguments:
It was argued on behalf of the petitioner company that merely on the change of its name, neither stamp duty nor registration fee on the value of the land and assets is required to be paid for the reason that there is no transfer and/or conveyance of land and other assets and rather the same is with the petitioner company throughout and have never been transferred nor conveyed consequent upon addition of word 'private' to its name. Further, according to the petitioner company, registration fee is required to be paid on an instrument compulsorily registerable under Section 17 of the Registration Act and since, in the instant case, there is no transfer of immovable property, no instrument is required to be compulsorily registered under the Registration Act and consequently, no registration fee is required to be paid.
The petitioner company also argued that the change in the name of the company was undertaken with the approval of the Registrar of the Companies even though such approval was not required to be obtained since as per the proviso to Section 13(2) of the Companies Act, 2013. The only change in the name of the company is either deletion therefrom or addition thereto of the word 'private', consequent upon conversion of any one class of Companies to another Class in accordance with the provisions contained under the Companies Act, 2013. Therefore, as per the petitioner company, no new company was ever created as a result of the change of its name and it is the case of mere addition of the word 'private' to its name.
In the course of the arguments, the petitioner company also made a reference to a circular dated February 16, 2012 issued to all the Deputy Commissioners in the State of Himachal Pradesh. The said circular enumerated that when it is merely the name of the company which has been changed with the approval of the Registrar of the Companies in terms of Sections 21 and 23 of the Companies Act, 1956 (Section 13 of the Companies Act, 2013) and no transaction/sale of property has taken place and only, the change in the name of the company is sought to be recorded in the revenue record, no stamp duty is chargeable. The said circular also stated that stamp duty is chargeable only when along-with change of the name of the Company, its assets are also proposed to be transferred to the Company incorporated with such a changed name.
Per contra, the respondents while referring to a letter dated December 28, 2016, argued that stamp duty and registration fee is required to be charged from the petitioner company on the value of the assets to be transferred from one company to another.
Decision by the Court:
The Court while referring to the said circular, stated that the instant case is not such where the petitioner while making addition of the word 'private' in its name, also proposed to transfer its assets and that the change is rather only limited to the extent from "public limited Company" to “private limited Company”.
The Court further held that:
“The proviso to Section 13(2) of the Act reveals that even in a case of such change approval of Registrar of Companies is also not required. Anyhow, in this case the approval of the Registrar of Companies has been obtained. The petitioner as such is absolutely justified in claiming that neither stamp duty nor registration fee is chargeable and its name should be entered in the revenue record being owner in possession of the land in question and also the building standing thereon.” (emphasis supplied)
Further, while countering the argument of the respondents that stamp duty is chargeable under Section 3 of the Indian Stamp Act, 1899 as the instant case is a case of conversion of a public limited company to a private limited company, the Court held that:-
“Section 3 of the Stamp Act speaks about the instruments, which are chargeable with duties, subject to the exemptions contained in Schedule-I. The instrument referred to herein and also Schedule-I, nowhere show that on mere addition of word 'private' in the name of a company without transfer of its assets and liability, is an instrument, which is chargeable thereunder. So far as the Registration Act is concerned, only that instrument is chargeable, which needs registration.” (emphasis supplied)
The Court also observed that in the instant case, there is no question of existence of an instrument of transfer of its assets and property and compulsory registration thereof since, the land and building remained with the petitioner company, even after addition of the word ‘private’ to its name.
The Court thus, held that:
“In the case in hand since no transfer of assets occurred on account of change of the name of the petitioner Company, hence neither stamp duty nor registration charges is payable on such change of name of the petitioner and its name is required to be entered in the revenue record pertaining to the land and building in question. The respondents, therefore, are under an obligation to update the entries in the revenue record pertaining to the land with the new name of the petitioner Company by addition of word 'private' without payment of any stamp duty and registration charges.” (emphasis supplied)
This update has been contributed by Arka Majumdar (Partner) and Kunal Dey (Associate).
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