RAJASTHAN HIGH COURT

                    National Bearing Company

                    Vs.

                    State, (Rajasthan)

                    C. W. P. No. 225 of 2000.
                     (Mohammad Rafiq, J.)

                    14.08.2007

                    ORDER

Mohammad Rafiq, J.

1. The petitioner which is a registered company under the Indian Companies Act,
1956 is challenging the order dated 27-7-1999 passed by the Additional Collector
(Stamps), Jaipur by which it was required to deposit stamp duty for registration of its
amended Memorandum of Association @ 0.5% ad valorem on the enhanced share
capital amount.

2. The petitioner-company was incorporated in the name and style of National Bearing
Company (Jaipur) Ltd. under the Jaipur Companies Act, 1942 at Jaipur on 13-1-1948
with its registered Office at Jaipur. Clause 5 of its Memorandum of Association prior
to the amendment dated 16-10-1998 contained thus:-

       "5. The capital of the Company is Rs. 5,75,00,000 (Rupees Five Crores Seventy
       five lacs) divided into 55,00,000 shares of Rs. 10 each and 25000 shares of Rs.
       100 each with power to sub-divide, consolidate and increase or decrease and
       with power from time to time to issue any share of the original capital or any
       new capital with the subject to any preferential, deferred, qualified or special
       rights, privileges or conditions as may be thought fit and upon the sub-division
       of a share to apportion the right to participate in profits in any manner as
       between the shares resulting from such sub-division."
3. Shareholders of the company in the annual general meeting held on 16-10- 1998
resolved to substitute aforesaid clause 5 by the following:-

"5. The Capital of the Company is Rs. 16,25,00,000 (Rupees Sixteen Crores
       Twenty-five Lacs) divided into 1,60,00,000 shares of Rs. 10 each and 25,000
       shares of Rs. 100 each with power to sub-divide, consolidate and increase or
       decrease and with power from time to time to issue any share of the original
       capital or any new capital with the subject to any preferential, deferred,
       qualified or special rights, privileges of conditions as may be thought fit and
       upon the sub-division of a share to apportion the right to participate in profits in
       any manner as between the shares resulting from such sub-division."
4. Articles of Association of the company in clause 3 thereof provides that the capital
of the company shall be such amount as may, from time to time, be authorized. It is
the common case between the parties that no amendment to Article 3 of the Articles of
Association was carried out by the company. Section 3 of the Rajasthan Stamp Law
(Adaptation) Act, 1952 (in short, "Act of 1952") provides that various instruments
shall be charged with duty of amounts indicated in the schedule. Schedule II to the Act
of 1952 describes various instruments excisable to stamp duty as per rates indicated
therein. Section 2(14) of the Act of 1952 defines an instrument to include every
document by which any right or liability is, or purports to be, created, transferred,
limited, extended, extinguished. Aforesaid Schedule II also includes Articles of
Association of a company at Serial No. 10 of Memorandum of Association at Serial
No. 39. The Companies Act, 1956 defines the Articles of Association under Section
2(2) whereas it defines the Memorandum of Association under Section 2(28).
Provisions of the Companies Act, 1956 that deal with the Memorandum of
Association are contained from Sections 12 to 19 whereas Section 26 refers to Articles
of Association to be signed by the subscribers of the Memorandum of Association of a
Company and Section 31 provides the manner of alteration of the Articles of
Association. Entry 10 of Schedule-II to the Act of 1952 provides that for increased
capital by a company stamp duty @ 0.5% to the extent of increase in the amount of
share capital by way of amendment in Articles of Association shall be payable. Article
10-A was inserted in Schedule-II of the Act of 1952 by Rajasthan Finance Act, 1997
w. e. f. 1st April 1997. The Additional Collector (Stamps) has passed the impugned
order dated 27-7-1999 under those provisions which is being impugned in the writ
proceedings by the petitioner-company.

5. I have heard Shri Alok Sharma, learned counsel for the petitioner and Shri S. N.
Gupta, learned Deputy Government Advocate for the State and perused the material
on record.

6. Shri Alok Sharma, learned counsel for the petitioner argued that while the
Rajasthan Finance Act, 1997 has affected amendment in Article 10 of Schedule- II
relating to Articles of Association of the Act of 1952 by separately inserting Article
10A but no corresponding amendment has been made in Article 39 which pertains to
Memorandum of Association of a Company. No stamp duty therefore can be levied
and demanded in respect of enhancement of the authorized share capital of the
company by way of amendment of the Memorandum of Association. The Company
has merely sought an amendment of clause 5 and in its Memorandum of Association
no consequential amendment has thus been made in the Articles of Association. This
still remains as it was. Shri Alok Sharma argued that for determination the stamp duty
on amendment of Memorandum of Association, reference ought to be made only to
Article 39 of Schedule-II of the Act of 1952 and no other entry. When Memorandum
of Association has been specifically and separately indicated in the Schedule-II supra
as an independent entry, no entry other than that can be pressed into service for
charging the stamp duty. In fact, petitioner-company pursuant to the amendment in
clause 5 of its Memorandum of Association on 16-10-1998 sought to file the said
amendment in Form No. 5 under the Companies (Court) Rules as required by the
Companies Act, 1956 before the Registrar of Companies, Jaipur vide their letter dated
28-10-1998. Registrar, however, refused to accept Form No.5, arbitrarily and illegally
requiring the petitioner to first pay the stamp duty. The petitioner-company was
constrained to furnish amendment of its Memorandum of Association for Form No. 5
to the Registrar of Companies vide registered letter dated 28-10-1998 and when it did
not receive any communication from the Registrar of Companies thereabout, it had to
serve a notice on him through its counsel on 17-11-1998 raising all those grounds
which are being agitated in this petition and that the Articles of Association of a
Company could not be confused with Memorandum of Association which were two
distinct and separate instruments required to be stamped with reference to separate
entries in the Second Schedule of the Act of 1952 and that the Memorandum of
Association of the Company having already been registered, there was no requirement
under the Act of 1952 for paying stamp duty with regard to any amendment brought
about therein. The Additional Collector (Stamps) by his order dated 27-7-1999 relying
on the purported legal advise of the Deputy Legal Remembrancer, Ajmer by his letter
dated 2-7-1999 required the petitioner to deposit the stamp duty for registration of
Form No.5 under the Companies Act, 1956 in respect to the amendment of the
Memorandum of Association @ 0.5% ad valorem on the amount of Rs. 10,50,00,000/-
being the difference between pre-amendment and post- amendment share capital of
the petitioner- company consequent upon the change in clause 5 of the Memorandum
of Association vide resolution dated 16-10-1998. It was argued that the notice dated
17-11-1998 addressed by the petitioner-company to the Registrar of Companies has
completely been overlooked inasmuch as, the Additional Collector (Stamps) has not
applied his mind to those questions. No opportunity of hearing was provided to the
petitioner prior to passing of the impugned order. It was incumbent upon the
Additional Collector (Stamps) to resort to the provisions of Section 47-C of the Act of
1952 before making a formal demand of payment of stamp duty. He has, however, in
passing the impugned order has acted ultra vires of the provisions of the Act of 1952
and also acted contrary to the procedure contained in the said Act.

7. Shri Alok Sharma relied on the judgment of the Supreme Court in M/s. Baidyanath
Ayurved Bhawan (Pvt.) Ltd., Jhansi v. The Excise Commissioner, U. P. and others, 1
and Income Tax Officer, Tuticorin v. T.S. Devinatha Nadar etc. 2

8. On the other hand, Shri S. N. Gupta learned Deputy Government Advocate
appearing for the State of Rajasthan while opposing the writ petition argued that the
impugned order could not be straightway challenged before this Court in extraordinary
remedy of writ jurisdiction in the face of alternate remedy of revision available to the
petitioner under Section 65 of the Stamp Act before the Chief Controlling Revenue
Authority. On merits, he argued that although Article 10 of Schedule-II of the Act of
1952 deals with Articles of Association and article 39 deals with the Memorandum of
Association of the Company, however, Article 39 itself provides that amount of stamp
duty livable on Memorandum of Association shall be same as may be stamp duty on
Articles of Association (No. 10) pertaining to the share capital of the company or
rupees five hundred, whichever is higher. Therefore, even if no amendment was made
in Article 39 of the Schedule II itself, by virtue of amendment in Article 10 of the said
Schedule, Memorandum of Association when amended is liable to attract to the levy
of stamp duty at the same rate at which stamp duty was levied on amendment in the
Articles of Association. According to Article 10A of Schedule-II, Articles of
Association of a company, if amended, stamp duty @ 0.5% ad valorem to the extent of
increase in the amount or authorized share capital is required to be paid. There was,
therefore, no illegality in passing the impugned order because Article 39 by itself
incorporated Article 10 of Schedule-II of the Act of 1952. It was, therefore, prayed
that the writ petition be dismissed.

9. In the facts of the case, however, when the writ petition has remained pending
before this Court for last over seven years, I have purposely not dealt with the
argument of alternative remedy because that would have necessitated the remand and
further delay in final decision of the matter, therefore, I have proceeded to consider the
matter on merit.

10. In order to appreciate and decide the controversy involved in the present writ
petition, it would be appropriate to reproduce Article 10, Article 10-A and Article 39
of the Second Schedule of the Act of 1952 which are as under :-

Description of Instrument                                 Proper Stamp duty

[10. Articles of Association of a Company-]               Half (0.5) per cent of the
                                                          authorized share capital

Exemption :

Articles of any Association not formed for profit and
registered under section 26 of the Companies Act,
1956

                                                                Half (0.5) per cent of the
[10-A. Amendment in Articles of Association of a

                                                                increase in authorized share
Company.-]

                                                                capital

(i) If relating to increase in authorized share capital;

(ii) in any other case.

Exemption :                                               One hundred rupees

Articles of any Association not formed for profit and
registered under section 26 of the Companies Act,
1956.

[39. Memorandum of Association of a Company:] Five hundred rupees

(a) if accompanied by Articles of Association under
section 26 of the Companies Act, 1956.

(b) if not accompanied.

                                                          The same duty as on Articles of
                                                          <BR
                                                          capital of the company or rupees
                                                          five hundred, whichever is

                                                          higher.

Exemptions :

Memorandum of any Association not
formed for profit and registered under section 26 of
the Companies Act, 1956
11. While Article 10 refers to Articles of Association of a Company, Article 10-A
covers an amendment in Articles of Association of a Company relating to increase in
the authorized share capital. It should be clear from the aforesaid two entries that
while Article 10 seeks to cover only such Articles of Association of a company which
are originally framed whereas Article 10-A covers the amendment in the Articles of
Association of a company. While in Article 10, the earlier formula of the levy of
stamp duty has been amended to provide levy of ad valorem stamp duty at the rate of
0.5% on the authorized share capital, the same rate has also been provided in relation
to increase in the authorized share capital by way of amendment in the Articles of
Association of a Company. What, therefore, has to be decided is as to whether
amendment in the Memorandum of Association of a Company which has the effect of
enhancing the share capital of a company, can attract levy of the same duty even
though there was no corresponding amendment in the Articles of Association. Article
39 of Schedule-II, clause (b) provides that if Memorandum of Association of a
Company is not accompanied by Articles of Association, it shall be liable to levy of
the same duty as on an Articles of Association pertaining to the share capital of the
company or Rs. 500/-, whichever is higher. It is significant to note that Article 39 was
simultaneously amended by the same Rajasthan Finance Act, 1997 (Act No. 9 of
1997) w. e. f. 1-4-1997 by which itself by which Article 10-A was inserted in the Act
of 1952. When Articles of Association is straightway amended so as to increase the
share capital of a company without making any corresponding amendment in its
Memorandum of Association, this would mean; issuance of share capital upon
Memorandum of Association of a Company. In such case Article 39 of Schedule-II
cannot be invoked for levy of stamp duty but Article 10-A would be attracted. When,
however, Memorandum of Association of a Company is sought to be registered,
Article 39 would be attracted but Article 39 has also been purposely divided in two
categories viz. clause (a) and clause (b). While clause (a) provide that if Memorandum
of Association of a Company is accompanied by Articles of Association under Section
26 of the Companies Act, 1956 then, only a fixed stamp duty of Rs. 500/- shall be
payable. This stamp duty has been limited to only Rs. 500/- at the fixed rate because
separate entry in Article 10 already covers the Articles of Association where under, ad
valorem rate of 0.5% on the authorized share capital has been provided. And this has
been purposely done to ensure that there should be no double taxation insofar as the
amount of authorized share capital is concerned. Similarly, once Articles of
Association has been registered but in the course of time if it is sought to be amended
so as to affect increase in the authorized share capital, it will attract levy of stamp duty
at the rate of 0.5% to the extent of difference of the share capital pre-amendment and
post-amendment. Clause (b) of Article 39, however, provides that if Memorandum of
Association of a Company is not accompanied by Articles of Association under
Section 26 of the Companies Act, 1956, it would attract the same duty as on Articles
of Association (No. 10) pertaining to the share capital of a company or Rs. 500/-,
whichever is higher. In the present case, therefore, the argument of the petitioner does
not stand scrutiny. While the petitioner has brought about amendment in the
Memorandum of Association of the company by substantially increasing its authorized
share capital, it has, however, not affected any corresponding amendment in the
Articles of Association. But, this would not make a difference because it has
nevertheless presented the amendments in the Memorandum of Association on Form
No.5 under the Companies (Court) Rules for registration before the Registrar of
Companies. Such a case, therefore, would fall within clause (b) of entry of Article 39
being a Memorandum of Association not accompanied by Articles of Association
being straightway presented for registration and, therefore, would attract the same
duty as applicable on Articles of Association pertaining to the share capital of the
company or Rs. 500/-, whichever is higher. Even though, Article 39 has not
specifically provided for a provision similar to the one contained in Article 10-A
relating to increase in the authorized share capital by way of amendment in the
Articles of Association, nevertheless, when Article 39 refers to the chargeability of
stamp duty even on registration of Memorandum of Association of a Company with
reference to Articles of Association pertaining to share capital of the company at the
same rate as indicated in Article 10, there can be no escape for the petitioner-
company but to pay demanded stamp duty because such an incident would fall in
clause (b) of Article 39 of Schedule-II of the Act of 1952 which provides for
registration of the Memorandum of Articles of Association not accompanied by
Articles of Association. The intention of the legislature to levy stamp duty on
registration of Memorandum of Association of a Company is clearly manifest in the
simultaneous amendment made in Articles 10 and 39 and insertion of Article 10-A in
the Schedule-II of the Act of 1952. A conjoint reading of Articles 10, 10-A and 39
clearly shows that petitioner-company if what the petitioner is contending is accepted,
this would mean that while stamp duty in the case of originally presented
Memorandum of Association not accompanied by Articles of Association would be
payable at the same rate as on Articles of Association pertaining to the share capital of
the company as provided in Article 10, no such stamp duty would be payable in the
case of increase in the authorized share capital of the company in Memorandum of
Association just because no corresponding amendment has been affected in its
Articles of Association. This would give rise to incongruous results inasmuch as,
while Memorandum of Association not accompanied by Articles of Association would
be excisable to stamp duty, an amended in Memorandum of Association would escape
the levy of stamp duty even if it seeks to effect increase in the share capital of the
company.

12. The interpretation of the subject entry even though to make strictly but has to
make keeping in view the scheme of the Act read with its Schedule-II. In interpreting
a taxing statute, the Court has to look at what has been clearly said. There is neither
any presumption of the tax nor can there be equity in such matter as held by their
lordships of the Hon'ble Supreme Court in M/s. Baidyanath Ayurved Bhawan (Pvt. )
Ltd. ( AIR 1971 Supreme Court 378) supra. And I have taken this interpretation on
collective and cumulative reading of Articles 10, 10-A and 39 of Schedule-II of the
Act of 1952, nothing being added or subtracted or supplemented thereto.

13. Having examined the matter as aforesaid, I do not find that the order passed by the
learned Additional Collector (Stamps) Jaipur suffers from any such illegality or
infirmity as may warrant interference by this Court in exercise of its powers of judicial
review under Article 226 of the Constitution of India.

The writ petition is accordingly dismissed though without any order as to costs.

Petition dismissed.

Cases Referred.

1. AIR 1971 SC 378