Read Full Judgment: State of Maharashtra v. National Organic Chemical Industries Ltd.
The case of State of Maharashtra & Anr. vs. National Organic Chemical Industries Ltd. revolves around a dispute regarding stamp duty payment on an increase in share capital by the respondent company, National Organic Chemical Industries Ltd. (NOCIL). Initially, NOCIL paid stamp duty of Rs. 1,12,80,000 in 1992 when it increased its share capital to Rs. 600 crores. Subsequently, when it further increased its share capital to Rs. 1,200 crores, it paid an additional stamp duty of Rs. 25 lakhs in 1994. NOCIL later sought a refund of the Rs. 25 lakhs, contending that it was paid inadvertently as the maximum stamp duty payable under the amended provision was already paid in 1992.
The dispute centers on whether the notice sent to the Registrar in Form No.5, informing about the increase in share capital, qualifies as an “instrument” under the Stamp Act. The appellants argue that Form No.5 constitutes an instrument as it records the extension of a company’s right to increase its share capital, thereby falling under the definition of an “instrument.” Conversely, the respondent contends that Form No.5 serves a limited purpose of notifying the Registrar and does not materially alter the Articles of Association, which are the actual instruments chargeable to stamp duty.
The court examines various provisions of the Companies Act and the Stamp Act to determine the nature of Form No.5 and its relation to stamp duty payment. It concludes that Form No.5 is not an instrument within the meaning of the Stamp Act but is merely a method prescribed for giving notice to the Registrar about the increase in share capital. Stamp duty is affixed on Form No.5 for practical convenience, but the actual instrument chargeable to stamp duty is the Articles of Association.
The court also addresses the applicability of the maximum cap on stamp duty payable on Articles of Association. It clarifies that the maximum cap applies as a one-time measure and not to each subsequent increase in share capital. Therefore, the stamp duty already paid on the Articles of Association when the initial increase occurred should be considered, and no further stamp duty can be levied beyond the cap.
Ultimately, the court dismisses the appeal and upholds the Bombay High Court’s order directing the appellants to refund the stamp duty of Rs. 25 lakhs to the respondent along with interest. The court emphasizes that the Articles of Association remain the same instrument, and the increase in share capital merely constitutes a chargeable event within the existing instrument.
