Stamp Duty Amendments On Amalgamation Cannot Apply Retrospectively: Kerala High Court

The Kerala High Court on 3 July held that amendments to the Kerala Stamp Act, 1959, introducing stamp duty on amalgamations and reconstructions, cannot be applied retrospectively to transactions completed before the amendments came into force.

Justice Harisankar V Menon allowed a petition filed by Zuri Hotels and Resorts Private Limited and quashed the stamp duty demand of Rs. 2.01 crore raised by the registration authorities along with the consequential revenue recovery proceedings. He held:

“…even the amendment pursuant to Section 2(d) pointed out by the learned Government Pleader has come into operation only with effect from 13.11.2016. Admittedly, there is no retrospective operation given to either the amendments of the year 2016 or to the amendment of the year 2020.”

Laguna Kumarakam Resorts Private Limited was amalgamated with Zuri Hospitality Private Limited under a scheme sanctioned by the Bombay High Court (Goa Bench) in 2010. Subsequently, in 2012, the Bombay High Court approved a demerger transferring the Kerala business of Zuri Hospitality to Zuri Hotels and Resorts.

When the petitioner sought mutation of the properties, the revenue authorities initially insisted that the Bombay High Court orders required registration. In earlier proceedings, the Kerala High Court held that registration was not required, subject to compliance with Section 89(5) of the Registration Act (which requires certain orders to be sent to registration authorities).

Following directions issued by the Bombay High Court, copies of the merger and demerger orders were forwarded to the Kerala registration authorities. Thereafter, the Sub-Registrar demanded stamp duty of Rs. 2.01 crore under the Kerala Stamp Act on the amalgamation and demerger and initiated revenue recovery proceedings.

Before the High Court, Zuri Hotels and Resorts argued that stamp duty on amalgamations and reconstructions was introduced through amendments to Section 2(d) of the Kerala Stamp Act only with effect from 1 April 2020 and could not be imposed on transactions completed in 2009 and 2012. The State contended that the amended definition of “conveyance” under Section 2(d) covered deeds of amalgamation and therefore attracted stamp duty.

Rejecting the State's contention, the Court held that the amendments made to Section 2(d) in 2016 and 2020 were prospective and could not be applied to earlier transactions. It noted that the amalgamation and demerger had taken place before the amendments came into force and that the authorities had not raised any stamp duty demand at the relevant time since such transactions were not covered under the Act.

The Bench observed that the demand was raised only after copies of the Bombay High Court orders were forwarded to the Kerala registration authorities following the amendments. It noted:

“Straight away it is to be noticed that the orders of the High Court cannot be made the basis for demand of stamp duty, since the statute cannot and does not visualise the orders of the Court as attracting stamp duty.”

Further, it relied on the Supreme Court's decision in Vijay v. Union of India, and reiterated that stamp duty liability has to be determined with reference to the date of execution of the instrument.

Accordingly, the High Court held that the registration authorities had wrongly applied prospective amendments to past transactions and quashed the stamp duty demand notice and the consequential revenue recovery proceedings.

For Petitioner: Senior Advocate S Sreekumar, Advocates Basil Mathew, Jemimah George Mathew, Anu Stephen, Sanjana Sara Varghese Annie and Ninan John

For Respondents: Advocate Balaprasannan, GP