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I take this opportunity to express my gratitude to all those who

encouraged and guided me in completing my present research work.
First and foremost, I would like to thank Dr. K.P.S. Mahalwar, Head and
Dean, Faculty of Law, M .D. University, Rohtak, who is my supervisor, for his
valuable guidance, constructive help and whole hearted support given to me
from time to time during my research work.
I am also thankful to all the faculty members, for their valuable advice
and support in completing my thesis.
I have no words to express my gratitude for the valuable guidance by
my father, Shri Satish Kumar and by my mother Smt. Kamlesh, who helped me
a lot in choosing subject to complete research work. When I decided to join the
research work, they encouraged me to join the research work from this
esteemed University.
Apart from the, above I would like to thank all my colleagues and
Library Staff of my University who have helped me a lot and cooperated me in
providing relevant books and material from time to time.
It would be unjust if I fail to express my gratefulness to my younger
brother Nishant and my husband Mr. Nitesh Sandhu and my son Gunaditya
who inspired me a lot and assisted me in writing this thesis without their
cooperation, it was not possible to complete this work.
Place : Rohtak (Komal)
Date :

Amalgamation is defined as a simple arrangement or reconstruction of business. It is a
process that involves combining of two or more companies as either absorption or as blend.
Two or more companies can either be absorbed by an entirely new firm or a subsidiary
powered by one of the basic firm. In such cases all the shareholders of the absorbed
company automatically become the shareholders of the ruling company as the amalgamating
company loses its existence. All the assets and liabilities are also transferred to the new

Amalgamation has given different forms to different actions in due course of the merger
taking place. It can either be classified in the nature of merger or in the nature of purchase. If
the process takes place in the nature of merger then the all assets, liabilities, and
shareholders holding not less than 90% of equity shares are automatically transferred to the
new company or the holding company by virtue of the amalgamation.

When amalgamation takes place in nature of purchase then the assets and liabilities of the
company are taken over by the ruling company. All the properties and characteristics of
amalgamating company should vest with the other company. Even the shareholders holding
shares not less than 75% should transfer their shares to the transferee company. In such a
case any company does not purchase the business resulting in a takeover, the transferor
company does not completely lose its existence.
Normally, there are two types of amalgamations. The first one is similar to a merger where all
the assets and liabilities and shareholders of the amalgamating companies are combined
together. The accounting treatment is done using the pooling of interests method. It involves
laying down a standard accounting policy for all the companies and then adding their relevant
accounting figures like capital reserve, machinery, etc. to arrive at revised figures.
The second type of amalgamation involves acquisition of one company by another company.
In this, the shareholders of the acquired company may not have the same equity rights as
earlier, or the business of the acquired company may be discontinued. This is like a purchase
of a business. The accounting treatment is done using a purchase method. It involves
recording assets and liabilities at their existing values or revaluating them on the basis of
their fair values at the time of amalgamation

The Amalgamations seed was sown in 1938 with one man's vision for a prosperous, industrialised India. Shri. S.
Anantharamakrishnan, or J as he was fondly known as, was a visionary who dared challenge the impediments
to India's Industrial future. He pioneered many ventures and spearheaded the quest for sourcing the finest
technologies in the world.

The Amalgamations saga was born when it took over the 100 year old Simpsons in 1941. Amalgamations soon
brought under its shade some of the oldest companies in Southern India like Higginbothams, Associated Printers,
Associated Publishers, Addison & Co., SRVS, George Oakes, T.Stanes, The United Nilgiri Tea Estates and
Stanes Amalgamated Estates.

From the mid 1950s, the auto component manufacturing companies of the Group have worked with practically
every major OEM in the country, to bolster their import substitution requirements. Strong collaborations with
international market leaders have influenced the technology advancements. These, combined with technological
innovations and strong initiatives on new product development, have contributed substantially to a strong equity
in the After-markets as well, ably supported by vibrant national distribution networks. The Group's overseas
presence and distribution have over time, moved from strength to strength.

The Group's R&D facilities have focused on proactive product development and have cemented a strong base in
the domestic and overseas markets. In fact, several of the Group Companies have obtained ISO, QS, TS and
other international certifications for quality and environmental management systems.

As a business philosophy, the Group companies maintain their leadership status by focusing on new generation
technologies. A carefully calibrated strategy of the product-market matrix has enabled sharp focus on the product
range, R&D capabilities and new technologies, besides sales and distribution. These initiatives have enabled the
Group to build a sound technology platform, with strong in-house capabilities.
Today, the Group is one of India's largest Light Engineering Conglomerates It has 47 companies and 50
manufacturing plants with presence in Manufacturing, Trading & Distribution, Plantations and Services.

Nowhere in the Companies Act is the term amalgamation defined. It is said to be a
term of art without any clear or precise legal meaning. However Halsbury has
attempted a definition which reads, Amalgamation is the blending of two or more
existing undertaking into one undertaking with the shareholder of each blending
company becoming substantially the shareholders in the company which is to carry
on the blended undertakings14
Weinberg defines Amalgamation in his book on the Takeovers and
Amalgamations 2nd edition as, arrangement whereby the assets of two
companies become vested in or under the control of one company (which may or
may not be one of the original companies) which has its two shareholders all or
substantially all the shareholders of the two companies. In essence under a merger
two or more companies are merged either de-jure by consolidation of their
undertakings or de-facto by the acquisition of a controlling interest in the share
capital of one by the other or of the capital of both by a new company. This is the
view of Gower.
According to Mitras Legal and Commercial Dictionary the term amalgamation

means merger16

14 Halsbury Laws, Third Edition, Vol. 6, Pg.764
15 Gower, Principles of Modern Company Law, Third edition, Pg. 61
16 Mitras Legal and Commercial Dictionary as quoted.6
According to Websters Dictionary amalgamation means to compound, consolidate
or combine the interest of firms.
Oxford Economic Papers defines amalgamation as uniting of two companies, the
shareholders in each unit emerging as shareholders in the resultant organization. The
companies are often of similar size. Thus, the success of the consumer co-operative
movement depends upon the extent to which the smaller units are amalgamated with
similar neighbouring primary consumers stores to secure the benefits of economics
of scale and provide diversified services to cater to the tastes and needs of
According to the Concise Law Dictionary it means merging of two or more business
concerns into one.
The English Oxford Dictionary defines amalgamation as combining to form a new
corporate or structure.
There may be amalgamations either by the transfer of two or more undertakings to
a new company or by the transfer of two or more undertakings to an existing
The meaning of the term given in Section 2 (1B) of Income Tax Act, 1961 which
has peculiar characteristics to be found in a transaction to be covered under the
definition due to a) vesting of all properties of amalgamating company in the
amalgamated company, b) vesting of all liabilities of amalgamating company in the
amalgamated company and c) the shareholder of the amalgamating company
holding not less that 90% of the shares should become shareholders of the
amalgamated company19

In Heavy Head and co-Vs. Roprer Holdings Ltd., it is stated that, The effect of an
arrangement would be one of the companies involved to absorb the business and all

17 Acquisition Objectives and Policies, Oxford Economic Papers, Vol.49, No.3, July 1997.
18 Magnus & Estrin, Companies Law and Practice, Fourteenth Edition, Pg. 216
19 Section 2(1B) Income Tax Act, 1961, 7
assets and liabilities of the other, the latter being then dissolved, or alternatively,
both companies might be absorbed into a new company formed for that purpose.20
Not only this the Andhra Pradesh High Court held in S.S. Somajulu vs. Hope
Pradhomme and Co,21 that the word amalgamation has no definite legal meaning. It
contemplates a state of things under which tow companies are so joined as to form a
third entity or one company is absorbed or blended with another company.
Amalgamation doesnt involve a formation of new company to carry on the business
of old company.
According to S.C. Sen the term amalgamation which is used in relation to companies
has no technical meaning and thus falls on one or other of the following heads (a)
Transfer of undertaking of an existing company to another existing company, of
which all the members of the transferring company become members, and the
subsequent dissolution of the transferring company. (b) The transfer of undertaking
of two or more existing companies to a new company formed to takeover the same,
of which all the members of the transferring company become or have the right to
become members, and the subsequent dissolution of transferring company. (c) the
acquisition by one company of the whole of or a controlling interest in the shares of
another company. S.Shiva Ramu has given similar definition for the
merger/amalgamation. He defines in amalgamation a new corporation is created by
uniting companies voluntarily.
According to Brookfields Lawyers Commercial Tax an amalgamation involves the
blending of business of one company with the business of one or more companies to
form an amalgamated company. Shareholders of each blending company become the
shareholders in the amalgamated company. The result of amalgamation is that each
of the amalgamated company ceases to exist. If company A amalgamates with
company B and Company A is the amalgamated company, company A survives

and company B doesnt. Alternatively, it might be desirable to establish a new
company. Company C, to be the amalgamated (surviving) company to which the

20 Hooper vs. Western Countries and South Western Telephone Co., 41 WR 84 (PC).
21 (1963) 2 Comp. LJ 61(AP) 8
business of company A and company B are to be transferred. In that case both
companies A and B would strike off and ceases to exist.22 Their business would
continue to operate through company C.
After all these definitions a new question arises. Are amalgamations and mergers
Very often, the two expressions Merger and amalgamation are taken as
synonymous but in fact, a difference, merger is a restricted to a case where the assets
and liabilities of the companies get vested in another company, the company which
is merged losing its identity and its shareholders becoming shareholders of other
company. On the other hand, amalgamation is an arrangement, whereby the assets
and liabilities of two or more companies become vested in another company (Which
may or may not be one of the original companies) and which would have as its
shareholders substantially, all the shareholder of the amalgamating companies.
It is submitted that they are not. Merger is the whole of which amalgamations is a
part. When companies coalesce or firms unite in some form the result is variously
described as an absorption, amalgamation, fusion, merger, or takeover.
Although the word amalgamation is commonly used by businessmen, of recent, the
word merger has been preferred because it covers a wide range of ways and means
by which the union is achieved23
To Weston24 merger covers acquisitions, absorptions, amalgamations and
combinations. There for the reader is advised that the term merger used in this and
subsequent chapters includes amalgamations in absence of specific reference of the
term amalgamation.
Mergers or amalgamations result in the combination of two or more companies into
one, wherein the merging entities lose their identities. No fresh investment is made
through this process. However an exchange of shares takes place between the

22 Brookfields Lawyers, Tax Issues Merger and Acquisition, Brookfields Lawyers-Commercial/Tax,
2002, Pg.57.
23 Ronald W Moon, Business Mergers and Takeovers,
24 JF Weston, Role of Mergers in Growth of Large Firms, , Pg.59
entities involved in such a process. Generally, the company that survives is the buyer
which retains its identity and the seller company is extinguished.
A merger can also be defined as an amalgamation if all assets and liabilities of one
company are transferred to the transferee company in consideration of payment in
the form of equity shares of the transferee company or debentures or cash or a mix
of above modes of payment
Reasons and motivations for merger and acquisitions:
Companies undertake merger and acquisition to achieve certain strategic and
financial objectives. In modern finance the shareholder wealth maximisation theory
and managerial utility theory is being considered as a rational criterion as to what
fundamentally derives acquisitions and mergers.
Merger and acquisitions are caused with the support of shareholders, managers and
promoters of combining companies. The factors which motivate shareholders,
managers and promoters to lend support to these combinations can be summarised
as follows:

cost per unit is decreased through increased production.

company will be absorbing the major competitor and thus increase its to set
a stock broker can sign up the
bank customers for brokerage account.

form of revenue enhancement and cost savings.
s tax right off i.e.
wherein a sick company is bought by giants.

results of a company, which over the long term smoothens the stock price of
the company giving conservative investors more confidence in investing in
the company. However, this does not always deliver value to shareholders..
From the viewpoint of the shareholders
It is based on the shareholders wealth maximisation theory that means a firms
decision or merger of acquisition should be based on the objective of maximising the
wealth of shareholders of the firm. This approach hypotheses that managers try to
pursue those mergers and acquisition activities which offer positive net present
value. The basic pattern of merger and acquisition activities is that the divesting
company moves from a diversifying strategy to concentrate on core activities in
order to increase competitiveness. Both patterns are based on an attempt to create
value for the shareholders.
Management buyouts help to restructure the firms, resulting in a realignment of the
interests of the shareholders and managers. Managements buyouts provide incentive
to managers (who are shareholders themselves) to maximised shareholding. The
shareholder wealth maximised criterion is satisfied when the added value created by
acquisition exceeds the cost of acquisition.
Added value from acquisition = value of acquirer and acquired after acquisition
their aggregate value before
Increase in acquirer share value = added value cost of acquisition
Cost of acquisition = acquisition transaction cast acquisition premium
Acquisition transaction cost is incurred when an acquisition is made, in the form of
various advisers fees like the stock exchange fees, cost of underwriting, regulators
fees. The acquisition premium is the excess of offer price paid to the target over the
target pre-bid-price and is also known as the control premium. Then investment
made by the shareholders in the companies subject to merger should enhance in
value. Shareholders may gain from mergers in different ways viz. from the gains and
achievements of the company through:

Diversification of product line

stment opportunities in combination

Title of the Thesis: A Study of Amalgamation of
Companies in India
Even though mergers and acquisitions (M & A) have been an important
element of corporate sector all over the world from several decades,
research on mergers and acquisitions has not been able to provide the
complete knowledge about legal framework of Amalgamation. There is
no conclusive evidence on whether they enhance efficiency or destroy
wealth. There is thus an ongoing global debate on the effects of mergers
and acquisitions on industries.

Though mergers and acquisitions have become common in India today
but, very little appears to be known about their procedure and the legal
angle in takeovers. Our study attempts to fill this gap in knowledge about
mergers and acquisitions in India. In my first chapter there is a detail
description about meaning and definition of amalgamation, merger,
acquisition as well as takeover, I have quoted different definition, given
by major legal dictionaries and definition given by philosopher and
writer. From the perception of business organizations, there is a whole
host of different mergers. However, from an economist point of view i.e.
based on the relationship between the two merging companies, mergers
are classified into following:
1. Horizontal merger.
2. Vertical merger.3. Circular merger
4. Conglomerate merger
5. Within stream merger
6. Diagonal
On the other hand acquisition will be classified as negotiated and
friendly, open market or hostile takeover and Bailout takeover.
In our Third Chapter legal provisions related to takeover and merger from
different Acts of India are discussed. Such as the procedure
amalgamations are given in section 390 to 395 of companies Act, 1956
which deals with arrangement, amalgamation and merger. Section 5 and 6
of Competition Act, 2002 deal with combinations which defines
combination by reference to assets and turnover exclusively in India and
outside India also. The Foreign Exchange Management Act, prescribes to
foreign entities. The Foreign Exchange Management (Transfer or issue of
security by a person residing out of India) Regulation, 2000 issued by
RBI vide GSR No. 406 (e) dated 3rd may, 2000. RBI also issued detailed
guidelines on foreign investment in India vide foreign direct investment
schemes contained in schedule I of said regulation. Major question arose
after Vodafone case in last year about income tax provisions related to
cross border mergers in industry. Section 2(1B) relating to Income Tax

Act provide condition to be followed in merger process for tax liabilities
on both companies. Stamp Act provision varies from state to state in
nowadays intellectual property related provisions also taken into
consideration at the time of amalgamation of companies.Fourth chapter brings out the comparative study
between USA, UK and
Indian legal provisions. In Fifth chapter emerging trends of mergers in the
new economic scenario have been discussed.
Indian Industry saw a spurt in outbound Merger and Acquisition in 2010
driving home the point that Indian companies are keen to make up for lost
time. The biggest transaction was Airtels $ 10.7 billion acquisition of
Zain Africa to explore new markets. The total Merger and Acquisition in
year 2010 was close to $ 50 billion mark across 623 transactions inching
towards the bench mark year of 2007.
Since liberalization, India has experienced a number of Hostile takeover
attempts. Hostile takeover of companies is a well known phenomenon in
corporate sphere. Since liberalization corporate takeover take two
forms friendly and hostile, takeover. In a friendly takeover, the
controlling group sells its controlling shares to another group of its own
accord. In a hostile takeover, an outside group launches a hostile attack to
take over the control of the company without the con-currence of existing
controlling group. This is normally done by means of an open offer for
purchase of equity shares from the shareholder of the target company.
Seventh chapter deals with various judgments related to different field of
mergers with a view to study the changing aspect in field of merger
activity. Now what kind of legal regime is suitable for India? Already
there are suitable FDI limits in various sectors. This implies the need to
look at the existing laws within the country. There are already certain
laws governing domestic mergers and there are certain tax benefits in
cases of mergers which are of a domestic nature. Suggestions related to betterment of working of mergers are
given in the concluding last
After Foreign Direct Investment policies becoming more liberalized
Mergers, Acquisitions and alliance talks are growing and are growing

with an ever increasing cadence. They are no more limited to one
particular type of business. The list of past and anticipated mergers covers
every size and variety of business mergers are on the increase over the
whole marketplace, providing platforms for the small companies being
acquired by bigger ones. The basic reason behind mergers and
acquisitions is that organizations merge and form a single entity to
achieve economies of scale, widen their reach, acquire strategic skills,
and gain competitive advantage. In simple terminology, mergers are
considered as an important tool by companies for purpose of expanding
their operation and increasing their profits, which is faade depends on
the kind of companies being merged. Indian markets have witnessed
burgeoning trend in mergers which may be due to business consolidation
by large industrial houses, consolidation of business by multinationals
operating in India, increasing competition against imports and acquisition
activities. Therefore, it is ripe time for business houses and corporate to
watch the Indian market, and grab the opportunity

Cinemax India approves amalgamation of company with PVR Cinemax
India has informed BSE that the Board of Directors of the Company at its meeting held on June 15, 2013,
approved the amalgamation of Cinemax India Limited with PVR Limited. 1 0 0Google +0 0 Cinemax India Ltd
has informed BSE that the Board of Directors of the Company at its meeting held on June 15, 2013, approved the
amalgamation of Cinemax India Limited with PVR Limited.The Board of Directors of the Company, based on the
Joint valuers report received from Independent Valuers, M/s. Hari Bhakti & Co. and M/s. S.S.P.A. & Co. -
Chartered Accountants and further based on Fairness Opinion Report received from AXIS Capital, Category-I
Merchant Banker and as per the report received from the Audit Committee recommending the draft scheme
taking in to consideration inter-alia the aforesaid Valuation Reports, approved the Swap ratio i.e. for every 7
Equity Shares of face value of Rs. 5/- each of Cinemax India Limited, issue of 4 Equity Shares of face value of
Rs. 10/- each of PVR Limited. The Board of Directors also approved the Scheme of Amalgamation for the merger
of Cinemax India Limited with PVR Limited.Source : BSE

Vodafone Indias proposed amalgamation hits a roadblock

New Delhi: Vodafone India Ltds proposed amalgamation of its operating subsidiaries has hit a roadblock with
the department of telecommunications (DoT) ruling that the merged entity would have to sign an undertaking to
migrate to the new unified licence notified by the government last week. Analysts say this will be
disadvantageous to Vodafone as under the new norms it would have to pay for the spectrum it already owns,
weakening the case it is fighting against the Indian government. The DoT has termed Vodafones proposed
amalgamation a merger and acquisition (M&A) activity. Vodafone Mobile Service Ltd shall give an undertaking to
the effect that the merged entity shall migrate to UL (Unified Licence) regime and all licencees involved in the
merger and acquisition activity will migrate to UL regime, the DoT said in a 27 August letter to Vodafone in
response to its proposal for the amalgamation. Mint has reviewed the letter. A telecom operator has to migrate to
the new unified licence if it wants to offer a new service or its existing licence is expiring, or if it is a new entity
formed as a result of a merger or acquisition. Vodafone India operates through a number of subsidiary
companies including Vodafone East Ltd, Vodafone South Ltd, Vodafone Cellular Ltd, Vodafone Digilink Ltd,
Vodafone West Ltd and Vodafone Spacetel Ltd. The telco has proposed to merge the first four entities with
Vodafone Mobile Services and the last two with Vodafone Services Ltd. DoTs reply was in reference to letters by
Vodafone dated 12 and 18 July. Vodafone first proposed the amalgamation last year in connection with an initial
public offering (IPO) of its shares. It has since dropped the plan, citing weak market conditions, regulatory
uncertainty and the ongoing Rs.20,000 crore tax issue (including penalties and interest) being fought between its
parent company and the Indian government. Analysts said Vodafone will be against migrating to the new unified
licence at this time for a number of reasons. The biggest impact will be to the licence extension case that they
are fighting in the courts. Migrating to the unified licence would mean they would have to pay for the spectrum
they have. Their main argument in court is that the spectrum they have is already liberalized and, therefore, they
do not need to pay the market price for liberalizing it again, a Mumbai-based analyst with a multinational
brokerage said, requesting anonymity. The UL essentially delinks the licence from the spectrum and to migrate
they would have to pay for the spectrum and the licences separately, while the current UASL (unified access
services licences) were allotted to them with spectrum bundled, he added. The amalgamation is also necessary
for Vodafone Group Plc, the UK-based parent, to be able to increase its holding in its Indian units to 100%, but
this can be worked around, the analyst said. Also, crossholding restrictions in the new licence norms will require
Vodafone to sell its 9.9% stake in Bharti Airtel Ltd, Indias largest telecom services provider. DoT has also asked
the telco for a break-up of its foreign equity holdings for all the companies involved in the proposed
amalgamation. A Vodafone spokesperson declined to comment for this story. People familiar with the matter said
Vodafone had adopted a wait-and-watch stance given that the Telecom Regulatory Authority of India is working

on recommendations for M&As, spectrum trading and valuation, which will have an impact on the companys
plans for an IPO later and increasing investment by its parent. Last month, the government increased the foreign
direct investment (FDI) limit in telecom to 100%, from 74% earlier. Vodafone Group owns 74% in Vodafone India
and the remaining stake is held by the Piramal family (11%) and other Indian investors. Late last year,
Vodafones attempts for an amalgamation were hindered by the tax dispute with the Indian government.