Circular No.49282/P1/2018, Transfer of Property Taking Place under Companies Act
The Office of the Inspector General of Registration, Chennai, issued Circular No.49282/P1/2018 dated 20 November 2018, with copies to the Commercial Taxes and Registration Department, to clarify stamp duty on property transferred through company merger, amalgamation or reconstruction schemes. It directs registering officers to classify schemes sanctioned by a High Court or registered by competent authorities that evidence a property transfer as conveyances under Article 23 of the Indian Stamp Act, 1899, and not register them unless the original instrument is shown to be duly stamped.
What it governs
Circular No.49282/P1/2018 dated 20 November 2018 addresses schemes for merger, amalgamation or reconstruction of companies that transfer property from one company to another. Such schemes were previously sanctioned by a High Court under the Companies Act, 1956. Under the Companies Act, 2013, schemes are filed with the competent authorities empowered by that Act.
The Office of the Inspector General of Registration, Chennai, issued the clarification because registering officers had doubts about whether these schemes attract stamp duty when presented for registration.
Who is affected
Circular No.49282/P1/2018 directly instructs all registering officers, Deputy Inspectors General of Registration and District Registrars responsible for administration. It also affects companies presenting merger, amalgamation or reconstruction schemes for registration when those schemes transfer property.
A property buyer or professional may need to consider the circular where the property's ownership history includes a transfer made through a company scheme. The relevant scheme or court order must meet the stamping requirement before registration.
Key provisions
The Office of the Inspector General of Registration sets out the following conclusions:
- A company arrangement sanctioned by a High Court or registered by a competent authority is an instrument when it evidences a transfer of property.
- Such an instrument is classified as a conveyance under Article 23 of the Indian Stamp Act, 1899.
- A court decree or order may be an instrument because it transfers title, whether or not it is based on the parties' consent.
- A transfer between companies can be a transfer between living persons because a company, association or body of individuals is included within that concept.
- An instrument, or a copy presented for registration, must not be registered unless it is unequivocally evident that the original instrument has been duly stamped.
If adequate stamping is not shown
Circular No.49282/P1/2018 requires the registering officer to return an instrument that is not shown to be duly stamped. The officer must issue a check slip explaining the legal position and require the person presenting the document to produce evidence that the original instrument was duly stamped.
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Common questions
Does a company merger scheme transferring property attract stamp duty?
Yes. A scheme sanctioned by a High Court or registered by a competent authority that evidences a property transfer is classified as a conveyance under Article 23 of the Indian Stamp Act, 1899.
Can the Sub Registrar register a copy of the scheme if stamping of the original is unclear?
No. Registration must not proceed unless it is unequivocally evident that the original instrument has been duly stamped.
What happens if the company scheme is not duly stamped?
The registering officer must return the instrument with a check slip explaining the legal position and ask for evidence that the original instrument was duly stamped.
Does the rule apply only to consensual court orders?
No. The circular explains that a decree or court order becomes an instrument when it transfers title, whether or not it is based on consent.
