ROLE OF CENTRAL GOVERNMENT

IN SANCTIONING/MODIFYING
SCHEMES RELATED TO MERGER
AND AMALGAMATION
Submitted By : LEKHA AJGALLEY

Section C (Sociology Majors)

Roll No. 63
Semester VI
B.A., LL.B. (HONS.)
Project Submitted to : MR SHYAMTANU PAL

HIDAYATULLAH NATIONAL LAW UNIVERSITY

RAIPUR, CHHATTISGARH

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ACKNOWLEDGEMENTS
I am deeply indebted to:

God for always being with me and for motivating me in each and every path of my life and for

His eternal support and love.

My corporate law teacher Mr. Shyamtanu Pal for his invaluable guidance that he rendered in
making

of

my

project

report

SANCTIONING/MODIFYING

on

ROLE

SCHEMES

OF

CENTRAL

RELATED

TO

GOVERNMENT
MERGER

IN

AND

AMALGAMATION . The books he told to refer have been of immense help in execution of the

project.
My family and friends for their initial and continuous encouragement in the pursuit of research

of related topic.
I would like to thank the University, Vice Chancellor for providing the books in the library and

internet connection. I would also like to thank library staff for helping me find relevant books.
Suggestion and comments for improving this project report will be gratefully acknowledged.

-Lekha Ajgalley
Sem-VI
Roll No. - 63 ( C )

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TABLE OF CONTENTS
I.

INTRODUCTION4

II.

ROLE OF CENTRAL GOVERNMENT IN MERGER AND AMALGAMATION..6

III.
IV.
V.
VI.
VII.

SCOPE AND OBJECTIVE..7

HYPOTHESIS....8
RESEARCH QUESTION.9
REVIEW OF LITERATURE....10
RESEARCH METHODOLOGY11

VIII.

CHAPTER 1- AMALGAMATION..13
a) AMALGAMATIONS AND MERGERS UNDER COMPANIES ACT 1956
b) AMALGAMATION UNDER INCOME TAX ACT, 1961

IX.

CHAPER-2 MERGER REGIME UNDER THE COMPANIES ACT, 2013.15

a) INTRODUCTION
b) THE FRAMEWORK

X.

CHAPTER-3 INTRODUCTION TO LEGAL PROCEDURES FOR MERGER AND

AMALGAMATIONS .17
a) SECTION 394A: NOTICE TO BE GIVEN TO CENTRAL GOVERNMENT FOR
APPLICATION UNDER SECTION 391 AND 394.
b) SECTION 396: POWERS OF CENTRAL GOVERNMENT TO PROVIDE FOR
AMALGAMATION OF COMPANIES IN NATIONAL INTEREST.

XI.
a)
b)
c)
d)
XII.

CHAPTER-4 AMALGAMATION AND MERGER UNDER COMPANIES ACT

1956.19
COMPANIES ACT , 1956
COMPANIES (AMENDMENT) ACT ,1960
COMPANIES (AMENDMENT) ACT ,1985
COMPANIES (SECOND AMENDMENT) ACT ,2002
CHAPTER-5 REQUIREMENT AND PROCEDURE OF AMALGAMATION IN
PUBLIC INTEREST.22

a) SECTION 396A: PRESERVATION OF BOOKS AND PAPERS OF AMALGAMATED

COMPANY
XIII.
XIV.

CONCLUSION 25
BIBLIOGRAPHY 26

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INTRODUCTION
Mergers, acquisitions and takeovers have been a part of the business world for centuries. In
today's dynamic economic environment, companies are often faced with decisions concerning
these actions - after all, the job of management is to maximize shareholder value. Through
mergers and acquisitions, a company can (at least in theory) develop a competitive advantage
and ultimately increase shareholder value. The said terms to a layman may seem alike but in
legal/ corporate terminology, they can be distinguished from each other:
A business may grow over time as the utility of its products and services is recognized. It may
also grow through an inorganic process, symbolized by an instantaneous expansion in work
force, customers, infrastructure resources and thereby an overall increase in the revenues and
profits of the entity. Mergers and acquisitions are manifestations of an inorganic growth process.
While mergers can be defined to mean unification of two players into a single entity, acquisitions
are situations where one player buys out the other to combine the bought entity with itself. It may
be in form of a purchase, where one business buys another or a management buy out, where the
management buys the business from its owners. Further, de-mergers, i.e., division of a single
entity into two or more entities also require being recognized and treated on par with mergers
and acquisitions regime as recommended below, and accordingly references below to mergers
and acquisitions also is intended to cover de-mergers (with the law & Rules as framed duly
catering to the same).
Mergers and acquisitions are used as instruments of momentous growth and are increasingly
getting accepted by Indian businesses as critical tool of business strategy. They are widely used
in a wide array of fields such as information technology, telecommunications, and business
process outsourcing as well as in traditional business to gain strength, expand the customer base,
cut competition or enter into a new market or product segment. Mergers and acquisitions may be
undertaken to access the market through an established brand, to get a market share, to eliminate
competition, to reduce tax liabilities or to acquire competence or to set off accumulated losses of
one entity against the profits of other entity.

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A full joining together of two previously separate corporations. A true merger in the legal sense
occurs when both businesses dissolve and fold their assets and liabilities into a newly created
third entity. This entails the creation of a new corporation.
Taking possession of another business. Also called a takeover or buyout. It may be share
purchase (the buyer buys the shares of the target company from the shareholders of the target
company. The buyer will take on the company with all its assets and liabilities. ) or asset
purchase (buyer buys the assets of the target company from the target company)
In simple terms, A merger involves the mutual decision of two companies to combine and
become one entity; it can be seen as a decision made by two "equals", whereas an acquisition or
takeover on the other hand, is characterized the purchase of a smaller company by a much larger
one. This combination of "unequals" can produce the same benefits as a merger, but it does not
necessarily have to be a mutual decision. A typical merger, in other words, involves two
relatively equal companies, which combine to become one legal entity with the goal of
producing a company that is worth more than the sum of its parts. In a merger of two
corporations, the shareholders usually have their shares in the old company exchanged for an
equal number of shares in the merged entity. In an acquisition, the acquiring firm usually offers a
cash price per share to the target firms shareholders or the acquiring firm's share's to the
shareholders of the target firm according to a specified conversion ratio. Either way, the
purchasing company essentially finances the purchase of the target company, buying it outright
for its shareholders

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ROLE OF CENTRAL GOVERNMENT

IN MERGER AND AMALGAMATION
The process of mergers and acquisitions in India is court driven, long drawn and hence
problematic. The process may be initiated through common agreements between the two parties,
but that is not sufficient to provide a legal cover to it. The sanction of the High Court is required
for bringing it into effect. The Companies Act, 1956 consolidates provisions relating to mergers
and acquisitions and other related issues of compromises, arrangements and reconstructions,
however other provisions of the Companies Act get attracted at different times and in each case
of merger and acquisition and the procedure remains far from simple. The Central Government
has a role to play in this process and it acts through an Official Liquidator (OL) or the Regional
Director of the Ministry of Company Affairs. The entire process has to be to the satisfaction of
the Court. This sometimes results in delays.
Needless to say, in the context of increasing competitiveness in the market, speed is of the
essence, especially in an expanding and vibrant economy like ours. A sign of corporate readiness,
skill and stratagem is the ability to do such mergers and acquisitions with digital speed. Egovernance could provide a helpful tool in achieving the objective of speed with provisions for
online registration, approvals etc.
The Committee was of the view that contractual mergers may be given statutory recognition in
the Company Law in India as is the practice in many other countries. Such mergers and
acquisitions through contract form (i.e. without court intervention), could be made subject to
subsequent approval of shareholders by ordinary majority. This would eliminate obstructions to
mergers and acquisitions, ex-post facto protection and ability to rectify would be available.
There has been a steady increase in cross-border mergers with the increase in global trade. Such
mergers and acquisitions can bring long-term benefits when they are accompanied by policies to
facilitate competition and improved corporate governance.
The Committee went into several aspects of the provisions in the existing law constituting a
separate code in themselves and regulating a very important aspect of restructuring and
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consolidation of business in response to the economic environment. An effort was made to

identify the areas of concern under the present law and to recommend means of addressing them.
At present, in case of a proposed scheme for amalgamation of company which is being dissolved
without winding up, the law requires a report from the Official Liquidator (OL) or Registrar of
Companies (ROC) that the affairs of company have not been conducted in a manner prejudicial
to the interest of its members or to public interest. The Act also requires that no order for
dissolution of any transferor company shall be made by the Court unless the OL makes a report
to the Court that the affairs of the company have not been conducted in a manner prejudicial to
the interest of its members or to public interest. The Committee felt that the above two
requirements under the present law can be covered by issuing notices to ROC and OL
respectively; who may file before the Court, information that may have a bearing on the
proposed merger. There is no requirement of a separate information in response to the notice to
be filed for the purpose. Filing of such report may be time-bound, beyond which it may be
presumed that ROC/OL concerned have no comments to offer.

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SCOPE AND OBJECTIVES

The scope of this project is to give detailed account of Governments role in Amalgamation and
merger in India. To study about the meaning, nature, scope of the two terms, their respective
provisions and conditions for the same.

To give detailed account of Amalgamation and merger in India.

To study about the meaning, nature, scope of the two terms, their respective provisions

and conditions for the same.

To do the relative study between the Amalgamation and merger in 2013 and 1956 Act.

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HYPOTHESIS
The meaning of term Amalgamation in laymans language is the action, process, or result of
combining or uniting where as merger means a combination of two things, especially companies,
into one. In general, amalgamation is the process of combining or uniting multiple entities into
one form Both of them, more or less appears to be same but there is a great line of difference
between the two terms. The combining of two or more companies, generally by offering the
stockholders of one company securities in the acquiring company in exchange for the surrender
of their stock. Basically, when two companies become one. This decision is usually mutual
between both firms.

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RESEARCH QUESTIONS
(a)
(b)
(c)
(d)

What is the meaning of term Amalgamation and merger?

what are the provisions under company act 2013 as well as 1956 related to M & A?
What is the role of central government regarding Amalgamation and merger?
What is the role played by Government in Amalgamation and merger regarding
Public Interest?

REVIEW OF LITERATURE
Here is the list of all the documents that has been referred in this project. Company Law And
Practice by A.K Majumdar and Dr. S.K Kapoor, Taxmann Publications Pvt Ltd. 2013,18th edition
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has been referred for the meaning of amalgamation and merger and role of government under
Company (Amendment)Act 2000 and Company Act 2013.
Next, Companies Act 2013 by T.P.Ghosh, Taxmann Publications Pvt. Ltd. 2013,1st edition which
provided an insight into the Central Governments role in merger and amalgamation. Ramaiyya,
Guide to Companies Act, 1956 and Avtar Singh, Company Law,2013 have also been of immense
help regarding this topic. Taxmans Master Guide to Companies Act 2013 provided with the
relevant section and provisions. However, not much detail has been given in these books and
hence, help from the electronic methods have been taken.
Datas are taken from websites such as

www.mca.in
www.moneylife.in
www.slideshare.net
topics.wisegeek.com

Statutes i.e. Companies Act 2013 and Companies Act, 1956 have also been referred

RESEARCH METHODOLOGY

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My research is secondary and electronic type. It is based on many books related to this topic. It is
descriptive and analytical in nature. Many web pages and books have been of great importance in
carrying out this project report.
Footnotes and endnotes have been given where required.

CHAPTER 1- AMALGAMATION

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AMALGAMATIONS AND MERGERS UNDER COMPANIES ACT 1956

The term amalgamation has not been defined in the Companies Act, 1956.
In general, amalgamation is the process of combining or uniting multiple entities into one form.
Whereas Merger means the combining of two or more entities into one, through a purchase
acquisition or a pooling of interests. Differs from a consolidation in that no new entity is created
from a merger
The terms merger and amalgamation have not been defined in the Companies Act, 1956
(hereinafter referred to as the Act) though this voluminous piece of legislation contains 69
definitions in Section 2. The concept paper recently issued by the Ministry of Company Affairs,
the fate of which is still unknown, contained 100 such definitions but still stopped short of
defining merger or amalgamation.
The provisions relating to merger and amalgamation are contained in sections 391 to 396A in
Chapter V of Part VI of the Act. Any proposal of amalgamation or merger begins with the
process of due diligence, as the proposal for merger without due diligence is like entering a
tunnel with darkness growing with each step.
The Act and the relevant rules pertaining to amalgamation are to be followed scrupulously. The
provisions of the Act also deal with compromise or arrangement within or without amalgamation
or merger. Presently, the High Court enjoys powers of sanctioning amalgamation matters under
section 394 of the Act though it is a matter of time when this power will be exercised by National
Company Law Tribunal, a forum where Chartered Accountants shall be authorized to appear..
AMALGAMATION UNDER INCOME TAX ACT, 1961
However, the Income-tax Act, 1961 (Act) defines amalgamation as follows:
Amalgamation, in relation to companies, means the merger of one or more companies with
another company or the merger of two or more companies to form one company (the company or
companies which so merge being referred to as the amalgamating company or companies and the
company with which they merge or which is formed as a result of the merger, as the
amalgamated company) in such a manner that
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All the property of the amalgamating company or companies immediately before the
amalgamation becomes the property of the amalgamated company by virtue of the

amalgamation;
All the liabilities of the amalgamating company or companies immediately before the
amalgamation become the liabilities of the amalgamated company by virtue of the

amalgamation;
Shareholders holding not less than three-fourths in value of the shares in the
amalgamating company or companies (other than shares already held therein immediately
before the amalgamation by, or by a nominee for, the amalgamated company or its
subsidiary) become shareholders of the amalgamated company by virtue of the
amalgamation,

and not as a result of the acquisition of the property of one company by another company
pursuant to the purchase of such property by the other company or as a result of the distribution
of such property to the other company after the winding up of the first-mentioned company;
Thus, the above three conditions should be satisfied for a merger to qualify as an amalgamation
within the meaning of the Income-tax Act 1961.

CHAPER-2 MERGER REGIME UNDER

THE COMPANIES ACT, 2013
INTRODUCTION
Merger is a restructuring tool available to Indian conglomerates aiming to expand and diversify
their businesses for various reasons whether it is to gain competitive advantage, reduce costs or
unlock values. In commercial parlance, merger essentially means an arrangement whereby one or
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more existing companies merge their identity into another existing company or form a distinct
new entity. Company law in India is undergoing a complete overhaul and a new law was finally
passed in 2013. However, only 98 sections of the new Companies Act, 2013 (2013 Act) have
been brought into force and the provisions relating to mergers covered in
Sections 230 to 240 are yet to be notified. Until then, this court driven process will continue to be
governed by Section 391-396A of the Companies Act, 1956 and the Companies (Court) Rules,
1959 (collectively referred to as 1956 Act).
THE FRAMEWORK1
In this chapter, the Act consolidates the applicable provisions and related issues of compromises,
arrangements and amalgamations; however, other provisions are also attracted at different stages
of the process. Amalgamation means an amalgamation pursuant to the provisions of the Act. In
an amalgamation the undertaking comprising of property, assets and liabilities, of one (or more)
company are absorbed by and transferred either to an existing company or a new company.
Simply put, the transferor integrates with the transferee and the former loses its entity and
dissolves without winding-up. The 2013 Act creates a new regulator, the National Law Company
Tribunal (Tribunal) who, upon its constitution, will assume jurisdiction (the High Courts will
no longer have any jurisdiction) of the court for sanctioning mergers. Once the Tribunal is
constituted, expected to be formed sometime this year, and related rules finalized, the provisions
under the 2013 Act would be implemented.
. Under the 1956 Act, companies which have reached a consensus to merge must prepare a
scheme of amalgamation/merger (Scheme). The lenders 2 of the transferor and the transferee
must approve13 the Scheme in principle, followed by the subsequent approval of the respective
Board of Directors of the merging entities. If the merging entities are listed companies, then the
1 Chapter XV of the 2013 Act deals with Compromises, Arrangements and
Amalgamations.
2 financial institutions or banks
3 Clearance of the lenders is essential to void any major change in the meeting of creditors
convened at theinstance of the company courts under section 391 of the 1956 Act

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listing agreements executed with the stock-exchanges require the company to communicate
price-sensitive information to the stock exchange immediately, to seek an approval from the
capital market regulator, Securities and Exchange Board of India (SEBI) simultaneous with the
public notification. This essentially happens after the approval of the Board to the Scheme. The
next step is to apply4 to the High Court having jurisdiction over the registered office of the
company seeking an order to convene shareholders and creditors meeting. Without getting into
further details of the process, the key point is that any objector amongst the stakeholders can
object to the Scheme in the court proceedings.
The element of preparing the Scheme has been retained under the 2013 Act. Unlike the 1956 Act,
the new regime (a) recognizes cross border mergers, (b) sets out separate procedure for merger of
small companies and those of holding with wholly-owned, (c) prescribes thresholds for
objections, and (d) describes mandatory filings to ensure legal compliance.

4 The transferor and the transferee should make separate or joint applications to
the High Court
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CHAPTER-3 INTRODUCTION TO
LEGAL PROCEDURES FOR MERGER
AND AMALGAMATIONS
The basis law related to mergers is codified in the Indian Companies Act, 1956 which works in
tandem with various regulatory policies. The general law relating to mergers, amalgamations and
reconstruction is embodied in sections 391 to 396 of the Companies Act, 1956 which jointly deal
with the compromise and arrangement with creditors and members of a company needed for a
merger.
Section 396 deals with the power of the central government to provide for an amalgamation of
companies in the national interest. In any scheme of amalgamation, both the amalgamating
company or companies and the amalgamated company should comply with the requirements
specified in sections 391 to 394 and submit details of all the formalities for consideration of the
Tribunal. It is not enough if one of the companies alone fulfils the necessary formalities. Sections
394, 394A of the Companies Act deal with the procedures and the requirements to be followed in
order to effect amalgamations of companies coupled with the provisions relating to the powers of
the Tribunal and the central government in the matter of bringing about amalgamations of
companies.
After the application is filed, the Tribunal would pass orders with regard to the fixation of the
dates of the hearing, and the provision of a copy of the application to the Registrar of Companies
and the Regional Director of the Company Law Board in accordance with section 394A and to
the Official Liquidator for the report confirming that the affairs of the company have not been
conducted in a manner prejudicial to the interest of the shareholders or the public. Before
sanctioning the scheme of amalgamation, the Tribunal has also to give notice of every
application made to it under section 391 to 394 to the central government and the Tribunal
should take into consideration the representations, if any, made to it by the government before
passing any order granting or rejecting the scheme of amalgamation. Thus the central
government is provided with an opportunity to have a say in the matter of amalgamations of
companies before the scheme of amalgamation is approved or rejected by the Tribunal.
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The powers and functions of the central government in this regard are exercised by the Company
Law Board through its Regional Directors. While hearing the petitions of the companies in
connection with the scheme of amalgamation, the Tribunal would give the petitioner company an
opportunity to meet all the objections which may be raised by shareholders, creditors, the
government and others. It is, therefore, necessary for the company to keep itself ready to face the
various arguments and challenges. Thus by the order of the Tribunal, the properties or liabilities
of the amalgamating company get transferred to the amalgamated company. Under section 394,
the Tribunal has been specifically empowered to make specific provisions in its order
sanctioning an amalgamation for the transfer to the amalgamated company of the whole or any
parts of the properties, liabilities, etc. of the amalgamated company. The rights and liabilities of
the employees of the amalgamating company would stand transferred to the amalgamated
company only in those cases where the Tribunal specifically directs so in its order.
SECTION 394A: NOTICE TO BE GIVEN TO CENTRAL GOVERNMENT FOR
APPLICATION UNDER SECTION 391 AND 394.
The court is duty bound to give notice of every application under section 391 and 394 to the
Central Government and also to consider the representation made to it before passing any order.
However, the Calcutta and Madras high courts have held that at the first stage while considering
the application under section 391(1) no notice to central government is necessary. Powers and
functions of the Central Government under section 394A have been delegated to the Regional
Directors at Mumbai, Kolkata, Chennai and Kanpur. 5.

SECTION 396: POWERS OF CENTRAL GOVERNMENT TO PROVIDE FOR

AMALGAMATION OF COMPANIES IN NATIONAL INTEREST.

5 Notification No. G.S.R., dated 31-5-1991

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If the Central Government is satisfied that two or more companies be amalgamated the same
being essential in public interest. Then the Central Government shall provide for the
amalgamation of two companies into a single company. The validity of such order shall depend
upon the grounds showing that the Central Government is satisfied in issuing an order being
essential in public interest. The order of Central Government made so is to be notified in the
Official Gazette and shall state companys constitution, property, rights, interests, authorities and
privileges together with its liabilities, duties and obligations.
A member or creditor having interest in the company involved in amalgamation shall have same
rights and interest in the newly constituted company and to that extent he receives less than his
rights and interests from the new company, he shall be entitled to compensation. The
compensation is to be assessed by the prescribed authority.
Any member or creditor, being aggrieved by the award of compensation by the prescribed
authority under subsection (3) may file an application to Company Law Board within 30 days of
the date of publication of assessment on the Official Gazette.
In exercise of the powers conferred by section (1) & (2) of section 396 of Companies Act 1956
read with notification of Government of India in the department of company affairs. No.GSR
443(E), dated 18th October, 1972, the Company Law Board made Chandpur Sugar Co. Ltd. and
U.P. State Sugar Corporation Ltd. (Amalgamation) Order, 1989 to provide for the amalgamation
of two companies into a single company.
The assets and liabilities of the amalgamating company automatically gets vested in the
amalgamated company by virtue of the order of the Tribunal granting a scheme of amalgamation.
The Tribunal also make provisions for the means of payment to the shareholders of the transferor
companies, continuation by or against the transferee company of any legal proceedings pending
by or against any transferor company, the dissolution (without winding up) of any transferor
company, the provision to be made for any person who dissents from the compromise or
arrangement, and any other incidental consequential and supplementary matters to secure the
amalgamation process if it is necessary. The order of the Tribunal granting sanction to the
scheme of amalgamation must be submitted by every company to which the order applies (i.e.,

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the amalgamating company and the amalgamated company) to the Registrar of Companies for
registration within thirty days.

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CHAPTER-4 AMALGAMATION AND

MERGER UNDER COMPANIES ACT
1956
Section 396: Powers Of Central Government To Provide For Amalgamation Of Companies In
National Interest.
If the Central Government is satisfied that two or more companies be amalgamated the same
being essential in public interest. Then the Central Government shall provide for the
amalgamation of two companies into a single company. The validity of such order shall depend
upon the grounds showing that the Central Government is satisfied in issuing an order being
essential in public interest. The order of Central Government made so is to be notified in the
Official Gazette and shall state companys constitution, property, rights, interests, authorities and
privileges together with its liabilities, duties and obligations.
The order aforesaid may 6contain such consequential, incidental and supplemental provisions as
may in the opinion of the Central Government, be necessary to give effect to the amalgamation.
A member or creditor 7 having interest in the company involved in amalgamation shall have
same rights and interest in the newly constituted company and to that extent he receives less than
his rights and interests from the new company, he shall be entitled to compensation. The
compensation is to be assessed by the prescribed authority.
Any member or creditor, being aggrieved by the award of compensation by the prescribed
authority under subsection (3) may file an application to Company Law Board within 30 days of
the date of publication of assessment on the Official Gazette prefer an appeal to the [Tribunal]
and thereupon the assessment of the compensation shall be made by the [Tribunal].

6 provide for the continuation of by or against the transferee company of any legal
proceedings pending by or against any transferor company and may also
7 including a debenture holder
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No order shall be made under this section, unlessa) A copy of the proposed order has been sent in draft to each of the companies concerned
b) The Central Government has considered ,and made such modifications in the draft order as
may seem to it desirable in the lights of suggestions and objections which may seem to it
desirable in the lights of any suggestions and objections which may be received by it from any
such company within such period as the Central Government may fix in that behalf, not being
less than two months from the date on which the copy aforesaid is received by that company ,or
from any class of shareholders therein, or from any creditors or any class of creditors thereof.
(5) Copies of every order made under this section shall , as soon as it has been made, be laid
before both Houses of Parliament
COMPANIES ACT , 1956
Amalgamation in the National Interest-This is a new provision and it is intended to provide at the
instance to the Government, for the amalgamation for the amalgamation of two or more
companies in the national interest. It has been made clear that any order made by the
Government should provide for the old shareholders and the old debenture holders and the
creditors having the same interest in the company resulting from the amalgamation as they have
in the original companies. Any order made by the Government under this clause will be laid on
the table of both Houses of the Parliament and will be subjected to Parliamentary Scrutiny.
COMPANIES (AMENDMENT) ACT ,1960
The words public interest were substituted for the words national interest by section 152 of
the Companies (Amendment) Act ,1960.
COMPANIES (AMENDMENT) ACT ,1985
Sec 396 of the Companies Act empowers the Central Government to order amalgamation of the
company in the national interest.
COMPANIES (SECOND AMENDMENT) ACT ,2002-The powers of the company law board
has been conferred to the tribunal.
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CHAPTER-5 REQUIREMENT AND

PROCEDURE OF AMALGAMATION
IN PUBLIC INTEREST
According to the Webster's New World Dictionary, Public interest means "the peoples general
welfare and well being; something in which the populace as a whole has a stake."
According to the Random House Dictionary, Public interest is "1. the welfare or well-being of
the general public; commonwealth.
In exercise of the powers conferred by section (1) & (2) of section 396 of Companies Act 1956
read with notification of Government of India in the department of company affairs. No.GSR
443(E), dated 18th October, 1972, the Company Law Board made Chandpur Sugar Co. Ltd. and
U.P. State Sugar Corporation Ltd. (Amalgamation) Order, 1989 to provide for the amalgamation
of two companies into a single company.
Existing Section 396 empowers Central Government to order amalgamation of two or more
companies in public interest. It has been suggested that these provisions should be reviewed. It is
felt that amalgamation should be allowed only through a process overseen by the
Courts/Tribunals. Therefore, instead of existing provisions of Section 396, provision should be
made to empower Central Government to approach the Court/Tribunal for approval for
amalgamation of two or more companies.

SECTION 396A: PRESERVATION OF BOOKS AND PAPERS OF AMALGAMATED

COMPANY.
The books and papers of a company which has been amalgamated with , or whose shares have
been acquired by another company under this Chapter ,shall not be disposed of without the prior
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permission of the Central Government and before granting such permission the Government may
appoint a person to examine the books and papers or any of them for the purpose of ascertaining
whether they contains any evidence of the commission of an offence in connection with the
promotion or the formation ,or the management of the affairs ,of the first mentioned company or
its amalgamation or the required of its shares.
In general, amalgamation is the process of combining or uniting multiple entities into one form.
Whereas Merger means the combining of two or more entities into one, through a purchase
acquisition or a pooling of interests. Differs from a consolidation in that no new entity is created
from a merger

The terms merger and amalgamation have not been defined in the Companies Act, 1956
(hereinafter referred to as the Act) though this voluminous piece of legislation contains 69
definitions in Section 2. The concept paper recently issued by the Ministry of Company Affairs,
the fate of which is still unknown, contained 100 such definitions but still stopped short of
defining merger or amalgamation. The terms merger and amalgamation are synonyms and the
term amalgamation, as per Concise Oxford Dictionary, Tenth Edition, means, to combine or
unite to form one organization or structure.

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Conclusion
In real terms, the rationale behind mergers and acquisitions is that the two companies are more
valuable, profitable than individual companies and that the shareholder value is also over and
above that of the sum of the two companies. Despite negative studies and resistance from the
economists, M&As continue to be an important tool behind growth of a company. Reason being,
the expansion is not limited by internal resources, no drain on working capital - can use
exchange of stocks, is attractive as tax benefit and above all can consolidate industry - increase
firm's market power.

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 in 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

The Government in order to the peoples general welfare and well being amalgamate two
companies in the National Interest. Occasionally some cases came up to the Government where
such amalgamation was clearly a necessity. The observance of the usual procedure prescribed by
the existing Act in such cases will lead to prolonged delays which will be detrimental to the
national interest.

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BIBLIOGRAPHY
BOOKS REFERRED
1. Dr. J.C.Verma; Corporate Mergers Amalgamations & Takeovers-Concept, Practice & Procedure,
2014
2. Ernst & Young, Master Guide to Mergers & Acquisitions in India Tax and Regulation,
2014
3. K.R. Sampath; Law and Procedure for Mergers/Joint Ventures Amalgamations Takeovers &
Corporate Restructure, 2015
4. S. Ramanujam; Mergers et al- Issues Implications and Case Law in Corporate Restructuring, 2015

WEBSITED REFERRED
1. http://www.mca.gov.in/MinistryV2/chapter10.html
2. http://www.psalegal.com/upload/publication/assocFile/ENewslineJanuary2014.pdf?
utm_source=Mondaq&utm_medium=syndication&utm_campaign=View-Original
3. http://www.ey.com/Publication/vwLUAssets/Assocham_White_paper_Companies_Act/

$File/Assocham_White_paper_Companies_Act.pdf

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