Today, Mr. Zahid Akhtar Zaman, Chief Secretary, Government of the Punjab has entered appearance alongwith Engr. Aamir Khattak, Commissioner, Rawalpindi to resolve the issue in this Intra Court Appeal regarding the disparity and discrimination in levying the stamp duty on mergers in the Province of Punjab, which is in clear-cut violation of Section 282(5) of the Companies Act, 2017 (the "Companies Act").
2. The issue involved in this intra court appeal relates to the levy of stamp fee on mergers of the Companies, which according to learned counsel for the Appellant, is against Section 282(5) of the Companies Act and its proviso, wherein the Islamabad Capital Territory has been exempted from collection of stamp duty. It has also been pointed out by Barrister Talha Ilyas Sheikh, Advocate that the Province of Sindh, which has largest commercial activities because majority of head offices of the companies are located within its territorial limits, is also not charging any stamp duty on mergers of the companies. In this regard, he has referred to the judgment passed by Sindh High Court at Karachi in the case of Total Parco Pakistan Ltd. and Total Oil Pakistan (Pvt.) Ltd. (2023 CLD 241) in which claim of the concerned authority regarding transfer fee from the merged entity in respect of a plot, has been declared unjustified and unlawful.
3. Pertinent to mention here that on similar proposition, the Single Bench of this Court is already hearing Writ Petition No.212 of 2025, which has been filed by Fauji Cement Company Limited (the "Fauji Cement") to declare the levy of such Stamp Duty, allied Taxes and Government Fee in case of merger approved under the Act, as illegal and without lawful authority. Earlier, the Single Bench allowed merger of the Fauji Cement under the Companies Act by settling certain law points in the case of Fauji Cement Company and another versus Securities and Exchange Commission of Pakistan and others (2022 CLD 604) and thereafter, when the FAUJI CEMENT wanted to transfer certain assets of Askari Cement Limited, which was merged into the Fauji Cement, the Respondents raised the demand of stamp duty under Section 27-A of the Stamp Act, 1899 (the "Stamp Act") in light of the law laid down by this Court in the matter of Fatima Sugar Mills Limited through Company Secretary and others (PLD 2015 Lahore 632) as well as the recent judgment passed in the case of Jadeed Feeds Industries (Pvt.) Limited versus Board of Revenue, Punjab through Chief Inspector of Stamps and others (2024 CLD 1570).
4. This Division Bench has to determine the questions whether stamp duty is only exempted within the Islamabad Capital Territory and whether the principles settled in the (aforesaid) judgments, which have been relied upon by the concerned authority for levy of stamp duty, are applicable in the matter. The stance taken by learned counsel for the Appellant is that the judgment rendered by this Court in Fatima Sugar Mills Case (supra) has been passed under provisions of previous company law, i.e. the Companies Ordinance, 1984 (the "Ordinance") whereas the new law, i.e. the Companies Act, has certain provisions regarding exemption of stamp duty. In this regard, reference has been made to proviso of Section 282(5) of the Companies Act, which provides a clear-cut exemption from levy of stamp duty. In the judgment passed by this Court on the point of amalgamation of companies in the case of Faqeer Muhammad versus Messrs Natover Lease and Refinance Ltd. through DMO, Peshawar and another (2024 PTD 758) the Scheme of Merger and the applicability of tax laws on merger has already been discussed in detail. Moreover, a number of mergers have been reported in the last six months since the enactment of the Companies Act with the new approach by developing certain law points and in this regard, reference can be made to the cases cited as Roomi Foods Pvt. Ltd. versus Joint Registrar of Companies (2020 CLD 900), Ms Fazal Cloth Mills Ltd versus Ms. Fazal Weaving Mills Ltd. (2021 CLD 182), Presson Descon International Pvt. Limited etc. versus Joint Registrar of Companies (2020 CLD 1128 = PLD 2020 Lahore 869), Dilsons (Private) Limited and others versus Security & Exchange Commission of Pakistan and another (2021 CLD 1317 Lahore), Nadeem Power Generation (Pvt.) Ltd. and another (2023 CLD 652) and Fauji Fertilizer Company Limited and Fauji Fertilizer Bin Qasim Limited versus Security and Exchange Commission of Pakistan and another (2024 LHC 5533) (LHC Citation).
5. Anyhow, here the proviso of Section 282(5) of the Companies Act is relevant, which is reproduced hereunder for ready reference: "282. Powers of Commission to facilitate reconstruction or amalgamation of companies.-(1)
Where an application is made to the Commission under section 279 to sanction a compromise or arrangement and it is shown that---- .......... ......... ..........
(5). Notwithstanding anything contained in the Stamp Act, 1899 (II of 1899) or any other law for the time being in force, no stamp duty shall be payable on transfer to the transferee company of the whole or any part of the undertaking and of the property of any transferor company as a result of sanctioning by the Commission, any compromise or arrangement under this Part: Provided that this sub-section (5) shall, in respect of the companies having registered office within the jurisdiction of--
(a) the Islamabad Capital Territory, be applicable at once; and the Provinces, be applicable upon notification or legislation by the respective Provincial Governments."
The above referred provision of law deals with the applicability of stamp duty in Islamabad Territory and the Provinces. Now, if a quick glance is taken on provisions of Section 4 of the Companies Act, it will elucidate that it gives the Companies Act an overriding effect over any other law, including the Stamp Act, and this principle has recently been strengthened by the Supreme Court of Pakistan in the case of Kausar Rana Resources (Private) Limited and others versus Qatar Lubricants Company W.L.L (QALCO) and others (2025 SCMR 517), relevant paragraph-11 of which is reproduced hereunder for ready reference: "11. The Court, i.e., a Company Bench of the High Court, established under Section 5 of the Companies Act, has been conferred specific jurisdiction to adjudicate disputes between individuals or entities concerning their civil rights and obligations relating to companies and matters connected therewith. Section 4 gives Companies Act an overriding effect over any other law. The jurisdiction conferred on the Court by the Companies Act is, therefore, civil in nature.
Consequently, the Court established under the Companies Act qualifies as a civil court of special jurisdiction and may appropriately be referred to as a special civil court."
The Companies Act was enacted on 30.05.2017 with the objective to protect the interests of shareholders, creditors, stakeholders and general public by inculcating the principles of good governance and safeguarding minority interests in corporate entities and providing an alternate mechanism for the expeditious resolution of corporate disputes as well as matters connected thereto, as is evident from its preamble, if read with the provisions of Sections 4 and 5 of the Companies Act, therefore, such kind of hinderance by way of imposing the stamp duty and other taxes will take away the companies law jurisdiction from this Court to other Provinces.
6. It is also to be noted that the provisions of Sections 4 and 282(5) of the Companies Act are to be read with Article 143 of the Constitution of Islamic Republic of Pakistan, 1973 (the "Constitution").
Sections 4 and 282(5) of the Companies Act, being part of the Federal Law, shall prevail over provision of the Provincial Law, i.e. Article 27A, Schedule I of the Stamp Act. To arrive at a conclusive decision in this appeal, a quick look may also be given to the Federal Legislative List (the "FLL") introduced under Article 70(4) of the Constitution and in this regard, relevant portions/clauses from Part I and Part II of the FLL are given below: "Part I of the FLL
31. Corporations, that is to say, the incorporation, regulation and winding-up of trading corporations, including banking, insurance and financial corporations, but not including corporations owned or controlled by a Province and carrying on business only within that Province, or cooperative societies, and of corporations, whether trading or not, with objects not confined to a Province, but not including universities.
Part II of the FLL
6. All regulatory authorities established under a Federal law."
Now, Article 143 of the Constitution, which is also relevant, is reproduced hereunder: "If any provision of an Act of a Provincial Assembly is repugnant to any provision of an Act of Majlis-e-Shoora (Parliament) which Majlis-eShoora (Parliament) is competent to enact, then the Act of Majlis-e-Shoora (Parliament), whether passed before or after the Act of the Provincial Assembly, shall prevail and the Act of the Provincial Assembly shall, to the extent of the repugnancy, be void.]"
This Bench will examine that in case of inconsistency or conflict of the Federal and the Provincial Law, the Federal Law would prevail when Federation has the legislative competence. Because the conflict of law is created only when the two, i.e. the Federation and the Province, simultaneously have the authority and in such circumstances, the Federal Law would prevail. Therefore, Section 4 and Section 282(5) of the Companies Act, being part of the Federal Law, shall prevail over provision of the Provincial Law, i.e. Section 27A of the Stamp Act. Under Articles 148 and 149 of the Constitution, this Bench may pass direction to issue notification to the proviso of Section 282(5) in light of the law laid down in the cases of Benazir Bhutto versus President of Pakistan (PLD 1998 SC 388), Mian Muhammad Asif versus Superintendent of Police (PLD 2020 Lahore 137), Sharaf Faridi versus The Federation of Islamic Republic of Pakistan through Prime Minister of Pakistan (PLD 1989 Karachi 404), Al-Jehad Trust versus Federation of Pakistan & other (1990 SCMR 1379), Province of Sindh & others versus M.Q.M. through Deputy Convener & others (PLD 2014 SC 531) and Walid Iqbal versus Federation of Pakistan & others (PLD 2018 Lahore 1). Proviso (b) is a constitutional grace shown by the Federation and issuance of the requisite notification is a constitutional and legal duty of the Province. It is also noted that the law has changed by the afflux of time and the judgment passed by this Court in Fatima Sugar Mills Case (supra) under the law prevailing at that time, i.e. the Ordinance, which do not explain any mechanism regarding exemption of stamp duty as is given in proviso of Section 282(5) of the (newly enacted) Companies Act and the judgment recently passed by this Court in Jadeed Feeds Industries Case (supra) has also not discussed the same. In both these judgments, the Security & Exchange Commission of Pakistan (the "SECP"), which is Regulator of the company matters and established under Section 3 of the Security and Exchange Commission of Pakistan Act, 1997 (the "SECP Act"), has neither been made party to the proceedings nor given a chance to present its stance on the point involved. Further the theoretical conceptual framework and other aspects like the basis of merger and the scheme of arrangement with the applicability of stamp duty, if any, will be seen by this Court in the instant appeal. This Court, while hearing arguments in Fauji Cement's case, is also examining legal anthology of the Stamp Act with its applicability on merger which is defined under the SECP Act for which guidelines have been issued under Section 5(10) of this Act. This Court will also consider the basic definition of merger, which means that two entities become one, and as such there is no exchange of any instrument attracting provisions of the Stamp Act for imposing the stamp duty. The point that if any judgment of the Company Judge on merger develops the law points and decides a question of law, it will have binding effects on all authorities/forums and Courts below under Article 201 of the Constitution, which important aspect has also not been discussed in the said judgments. In fact, it is duty of the revenue authorities to implement the law points earlier developed by this Court on different occasions in various merger cases, instead of creating hurdles to take away the business from Punjab on such discrimination, which is not seen in other Provinces.
7. Most important to note here is that the judgment passed in Fatima Sugar Mills Case (supra) is based upon consent of the shareholders of the companies, which consent is a voluntary act of the shareholders of the companies without any compulsion from the Court. The Court in sanctioning the scheme merely exercise a supervisory jurisdiction and in doing so, its role is to simply superimpose its order on the agreement between the parties; and provides for the transfer of assets from one company to another on the consent of their shareholders. Further, the case law relied upon by this Court in the judgment passed in Jadeed Feeds Industries Case (supra), is also based on entirely different circumstances and pertains to a transfer fee on the transfer of an immovable property rather than the stamp duty. The bone of contentions made by learned counsel for the Appellant is that a court-sanctioned merger order does not constitute a "conveyance" or an "instrument" under the Stamp Act because the transfer of assets occurs by operation of law, not by an executed document between parties. Even if, for the sake of argument, is considered as an "instrument", it is not "chargeable" under the Stamp Act as it is not "executed"
(signed) by the parties. His other submissions (i) that a merger is an absorption of one entity into another by law, not a voluntary transfer; (ii) that no change in beneficial ownership in family- owned companies, assets remain within the same ownership structure; (iii) that the principles laid down in Fatima Sugar Mills Case, mentioned above, were misapplied, as it was decided under the pre-legal regime when no federal exemption existed; (iv) that the proviso requiring a provincial notification does not empower Provinces to impose stamp duty as it only regulates the procedural implementation of the exemption; (v) that the Doctrine of Harmonious Construction, which requires the proviso to be read as complementing, was not applied and (vi) that the Companies Act is a federal law regulating corporate restructuring, therefore, stamp duty cannot be imposed in contradiction to Section 282(5) of the Companies Act, have also some legal force.
8. Here, it would also be advantageous to mention that during the course of hearing in Fauji Cement's case, Mr. Muzaffar Ahmed Mirza, Chief Prosecutor, SECP appeared and also conceded the fact that Sub-Section (5) was added under Section 282 of the Companies Act pertaining to exemption from stamp duty, which was not earlier part of Section 287 of the Ordinance. He also pointed out that this provision contains non-obstante clause and overrides all other laws, including the Stamp Act. He explained that although this newly added provision for the exemption applies immediately in the Islamabad Capital Territory but its application in the Provinces is contingent upon notification or legislation by respective provincial governments, particularly in relation to provincial jurisdiction, so as to eliminate any confusion about imposition of stamp duty and to facilitate the implementation of schemes of arrangement under the Companies Act. He further urged that the SECP established a separate Mergers & Restructuring Department in March, 2024 for handling the schemes of arrangements and primary authority to sanction such schemes is vested with the Commission under the Companies Act, while previously certain powers were vested with the Court (of law) as a temporary arrangement in terms of Section 285(2) of the Companies Act. In the said case, M/s Jahanzeb Awan, Haidermota & Co. and Mikael Rahim, Partner, Mohsin Tayebaly & Co., who are expert in dealing with the merger issues/matters have also rendered assistance and once the said writ petition fixed and heard alongwith this Intra Court Appeal, their submissions will also be made part of the proceedings.
9. Today, while hearing of this appeal, the Chief Secretary, Government of the Punjab (Mr. Zahid Akhtar Zaman) has appeared and sought some time to look into the matter. This Court has already strengthened the role of Secretary in the cases of PIA Officers Cooperative Housing Society Ltd. through President versus Province of Punjab through Secretary to the Government of Punjab, Cooperatives Department, Lahore and 4 others (2024 CLC 947) and Muhammad Banaras versus Government of the Punjab etc. (PLJ 2024 Lahore 242). Thereafter, in the case of Adnan Arif versus Province of Punjab and others (2025 CLC 550) this Court has further elaborated the scope of powers of the Secretary by observing that he/she has constitutional powers. In the said case, this Court has placed reliance on the judgment passed by the Supreme Court of Pakistan reported as Messrs Mustafa Impex, Karachi and others versus The Government of Pakistan through Secretary Finance, Islamabad and others (PLD 2016 SC 808) and held that: "....that the Rules of Business cannot be understated within a constitutional framework and all rules are binding for, and in relation to, the powers thereby conferred on the Executive, this is especially so in the case of the Rules of Business. In the said case, the Supreme Court of Pakistan has further observed that the Rules of Business are closely intertwined with the concept of good governance for and in the public interest and allowing a departure therefrom would be detrimental to open and transparent forms of government, therefore, it can be safely stated that the Rules have the constitutional command because the same have been made under Article 139 of the Constitution...."
Recently on 28.02.2025, in Writ Petition No.1596 of 2024 titled "Abdul Latif Chaudhary versus Province of Punjab etc.", this Court, while appreciating the serious and sincere efforts made by the Chief Secretary for resolving a dispute about allotment of plots to the journalists as per their legal entitlement in accordance with law, has strengthened his role by observing that he, being the head of Secretariat and being Secretary of Cabinet under Rule 9 of the Punjab Government Rules of Business, 2011 (the "Rules") has acted upon his role to conclude the matter. In the said case, it has also been observed that as per Rule 9(c) of the Rules, the Chief Secretary is responsible for all matters affecting public tranquility while under Rule 9(d) of the Rules, he can coordinate and supervise the activities of all the departments. The Chief Secretary, being higher authority and head of the Department, can also play pivotal role in resolving the issue in hand by exercising his supervisory powers and realizing his administrative responsibilities, under the Rules.
10. In view of the above, the Chief Secretary, Government of the Punjab will convene a meeting, on priority basis, with the Secretaries and other relevant authorities of the concerned Departments to discuss all the aforesaid legal points raised by learned counsel for the Appellant as well as the submissions made by Mr. Muzaffar Ahmed Mirza, Chief Prosecutor while appearing in Fauji Cement, as noted above, besides considering the following points:
(a) whether the Province of Punjab can levy the stamp duty on the mergers through the (Provincial) Stamp Act, which is against the basic spirit of the (Federal) Company Act;
(b) whether the Government of Punjab assisted the Courts in Fatima Sugar Mills Case and Jadeed Feeds Industries Case with the real picture of the relevant provisions of law when the express Federal Law, i.e. the Companies Act, bars the stamp duty on mergers through the (newly added) Section 282(5) and how the Province of Punjab can impose stamp duty through an earlier Provincial Law, i.e. the Stamp Act;
(c) whether the effect on the change of business address outside Punjab by various companies due to this approach, has been taken into account at the time of arguing the matter in Jadeed Feeds Industries Case by the Government of the Punjab;
(d) whether the aspect of transfer inter vivos, which means that sanction order is not a 'conveyance' in terms of Section 2(10) of the Stamp Act and the fact that if the sanction order is an 'instrument' for the purposes of the Stamp Act, it is not a chargeable instrument under Section 3 of the Stamp Act inasmuch as, it is not executed (i.e. signed) by the parties, has been considered;
(e) whether a court-sanctioned merger order is an Instrument Chargeable with stamp duty in terms of Section 27-A of the Stamp Act; and
(f) whether a scheme of arrangement inter vivos, i.e. but for the action of the Court, would the transaction have been completed?
The Chief Secretary will also keep in mind the very aspect that if he does not decide this issue carefully, it will be a huge loss of business in the Province of Punjab because the majority of companies are running business in its main cities like Lahore, Faisalabad, Multan, Sialkot and Gujaranwala and if the stamp duty is charged on merger it will also have a bad impact on business community. Mr. Muzaffar Ahmed Mirza, Chief Prosecutor, SECP will also attend the aforesaid meeting. The Chief Secretary will file a detailed report on or before the next date, explaining the progress made in the said meeting. It is to be noted that if the matter is not resolved despite efforts of the Chief Secretary then the Court will decide the same on its own merits, after discussing legal anthropology of relevant provisions of the law, i.e. the Companies Act and the Stamp Act.
11. Relist for 15.04.2025. In the meanwhile, since vires of the judgment passed in Jadeed Feeds Industries Case (supra) is under challenge in this appeal and balance of convenience for grant of interim relief also tilts in favour of the Appellant, therefore, it is directed that if said judgment has not been implemented so far, the same will not be acted upon, till the next date of hearing.
Needless to add that this is (tentative) opinion, subject to the final determination by this Bench and is the only guideline(s) incorporating certain important points mentioned in Para-10 from (a) to (f), for the Chief Secretary, Punjab, to convene meeting, in order to resolve the issue.