Karnataka High Court Remands Quikr's ₹1.77 Crore Stamp Duty Dispute Over NCLT-Approved Amalgamation

The Karnataka High Court has set aside an order directing Quikr India Private Limited, which operates the online classifieds platform Quikr, to pay an additional ₹1.77 crore as stamp duty on a National Company Law Tribunal (NCLT)-approved scheme of amalgamation. The matter has been remitted to the District Registrar for fresh consideration.

Justice M.G.S. Kamal observed that, for the purpose of levying stamp duty under the Karnataka Stamp Act, 1957, the NCLT's order approving the amalgamation is the relevant "instrument."

“Comprehensive readings of the aforesaid provisions indicate that the term ''instrument'' for the purpose of imposition of stamp duty in the instant case is the order of NCLT.”, it ruled,

The tribunal approved Quikr's scheme of amalgamation involving five companies on May 6, 2019. Following the approval, the company sought adjudication of the stamp duty payable on the amalgamation order.

Quikr was directed to obtain a valuation of the movables from the Technical Consultancy Services Organisation of Karnataka (TECSOK). Based on that report, the District Registrar determined the stamp duty at ₹1,07,800. Quikr paid the amount and the amalgamation order was stamped.

In April 2021, the District Registrar issued a notice stating that there had been an error in the earlier computation of stamp duty. By an order dated September 17, 2021, the authority demanded an additional ₹1.77 crore after relying on a valuation report dated February 23, 2018.

Quikr challenged the demand before the High Court. It argued that the authorities could not determine stamp duty on the basis of a valuation report that pre-dated the tribunal's order approving the amalgamation. The company also contended that the actual deficit in stamp duty was ₹6,86,347.

After examining the Karnataka Stamp Act, the court observed that there was "considerable force" in Quikr's contention because the valuation relied upon by the authorities had been prepared before the NCLT approved the amalgamation scheme on May 6, 2019.

The court, however, also noted that Quikr had not furnished the valuation report prepared during the amalgamation process or at the time the tribunal approved the scheme before the respondent-authority.

"It is submitted that, fiscal law has to be construed strictly as it involves public money. Therefore, the respondent-authorities cannot be found fault with for reopening the case and relying upon the valuation of 23.02.2018.”, the tribunal noted.

The court observed that there were shortcomings on both sides in arriving at the correct valuation of the shares covered by the amalgamation scheme.

While Quikr had produced an affidavit and a chartered accountant's report, it had not furnished the valuation, if any, prepared when the scheme was submitted to the tribunal or when the tribunal passed its order.

Recording Quikr's undertaking to produce that valuation report, the court set aside the September 17, 2021 order and remitted the matter to the district registrar for fresh consideration.

It directed the authority to consider the additional material furnished by Quikr, grant the company a personal hearing and pass a fresh order in accordance with law within three months.

For Petitioner: Advocates Niyathi M and Uday Sankar R

For Respondents: Advocate Mahantesh Shettar, A.G.A