Stamp Duty For Alteration In Share Capital Of A Company

Owais Khan, Government Law College, Mumbai

Rishabh Rai, SVKM NMIMS Law College, Mumbai

An Article of Association (AoA) constitutes a very imperative document in relation to a Company, incorporated under the Companies Act. The former as well the present Companies Act, expressly authorize alteration in the Articles of Association. Section 14 of the Companies Act 2013 allows alteration in the AoA by a Special Resolution. The AoA, inter alia, also specifies the power of the company to alter its share capital. Thus, at any point, a Company intends to increase its share capital, the first step is to amend the AoA if it does not permit any increase in the Share Capital.

As per the provisions of Section 61 of Companies Act, 2013, a company can alter its Memorandum of Association (MoA) only if authorized by its AoA. Every alteration in the AoA for authorizing the increase in Share capital or the Increase in the Share Capital by altering the MoA, needs to be notified to the Registrar of Companies (RoC). As per Rule 15 of Companies (Share Capital & Debentures) Rules, 2014 If a company alters its share capital or increases the share capital by conversion of debentures the notice of such alteration, increase or redemption shall be filed by the company with the Registrar in Form No. SH-7 along with the fee. Thus, a question arises that whether Form SH-7 is an instrument under the Stamp Act.

Recently, the Hon’ble Supreme Court in State of Maharashtra vs. National Organic Chemical Industries Ltd (2024) held that a Form submitted to the RoC does not satisfy the requisites of an Instrument and thus, outside the purview of payment of Stamp duty. Any Stamp Duty, if at all, is payable only on the AoA, which are within the Ambit of Instrument and explicitly stated in the Schedule. In the above case, the court held that any stamp duty to be levied on the increase in share Capital shall depend upon the Wordings concomitant with the AoA in the Schedule. If the Schedule in the Stamp Act provides any of the three grounds - the Company has no share capital or nominal share capital or increased share capital in relation to AoA, then the increase in Share Capital shall be subject to Stamp duty. (The above case was based on Bombay Stamp Act, 1958)