TaxTMI 
TaxTMI 
2025 (3) TMI 632
X X X X Extracts X X X X
X X X X Extracts X X X X
.... JUDGMENT ( Hybrid Mode ) Per : Justice Sharad Kumar Sharma , Member ( Judicial ) : 1. These are a bunch of four Company Appeals preferred under Section 421 of the Companies Act, 2013. Each of them has been respectively preferred being aggrieved against the Judgments, which are commonly involving a question, as raised by the Appellant; "As to whether, at the stage of amalgamation of the Respondent Companies, whether at all any prior approval was required to be taken under Section 35(1) of the Insurance Act". The details of the instant Appeals are given below:- (A) Company Appeal TA (AT) No. 4 / 2024 (Company Appeal (AT) No. 278 / 2024), which challenges the Impugned Judgment of 07.06.2024 as it has been passed in CP (CAA) / 01 / 230 - 232 (JPR) / 2024 with CA (CAA) / 7 / 230 - 232 / JPR / 2023, has been received by this Appellate Tribunal upon its transfer by the Principal Bench, NCLAT, New Delhi, vide its Order dated 12.09.2024; (B) Company Appeal (AT) (CH) No. 31 / 2024 challenges the Impugned Judgment dated 02.05.2024, as it was passed in CP (CAA) / 01 / 230 / HDB / 2024 in CA (CAA)/ 63 / 230 / HDB/ 2023; (C) Company Appeal (AT) (CH) No. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lance sheets in respect of the insurance business of each of the insurers concerned in such amalgamation or transfer, prepared in such forms as may be specified by the regulations; (c) actuarial reports and abstracts in respect of the life insurance business of each of the insurers so concerned, prepared in conformity with the regulations specified in this regard. (d) a report on the proposed amalgamation or transfer, prepared by an independent actuary who has never been professionally connected with any of the parties concerned in the amalgamation or transfer at any time in the five years preceding the date on which he signs his report; (e) any other reports on which the scheme of amalgamation or transfer was founded. The balance-sheets, reports and abstracts referred to in clauses (b), (c) and (d) shall be prepared as at the date at which the amalgamation or transfer if approved by the Authority is to take effect, which date shall not be more than twelve months before the date on which the application to the Authority is made under this section: Provided that if the Authority so directs in the case of any particular insurer th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....estion, as to what the term "Amalgamation" would actually mean, in the context of the Companies Act, since it is not contained under the Statute i.e. Insurance Act, we will have to base our principles on the general law as applicable. 9. Taking its literal connotation into account, as far as the word "Amalgamate" is concerned, no very precise meaning can be given to it; it would broadly mean an activity where either two or more Companies are so joined to form a new Company or, one is absorbed into or blended with another, to carry on business of the Companies that is absorbing the other. 10. What is important to note is that, an "Amalgamated Company" is the resultant Company formed after the process of Amalgamations, it germinates from the merger of two or more Companies, which upon formation could be treated as to be an "Amalgamated Company" as defined under Section 2 (1B) of the Income Tax Act of 1961. 11. Under the Income Tax Act, the term "Amalgamation" has been defined under Section 2 (1B) which reads as under: "Section 2(1B) "amalgamation", in relation to companies, means the merger of one or more companies with another company or the merger of two or more c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....amating 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." 14. In other words, it could be said that amalgamation is nothing but a blending of two or more existing undertakings into composite undertaking where "the Shareholders of each blending Company become substantially the Shareholders of the Company which is carrying on the blended undertaking". This is the concept, which has been laid down by (Halsbury IV Edition Vol. VII Para 1539 P 855). 15. The said principle has been considered and further elaborated by the Division Bench of Hon'ble High Court of Andhra Pradesh while dealing with the provisions contained under Section 394 of the Companies Act, 1956, in the matters of S.S. Somayajulu v. Hope Prudhomme And Co. Ltd., Madras, which has ultimately analysed and has observed that the two Companies are so joined to form a third entity or one is absorbed and loses its existence with the another. The relevant paragraph is extracted hereunder: "(26) WE have little doubt in ou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at, as a result of an identified amalgamation accepted by the two merging entities and the consequential taking over of an existing Company by another Company, as a consequence of its restructuring, no precise or straight- jacketed conception could be given to the concept of amalgamation and it could be summarized as; (a) Blending of two or more existing undertakings; (b) Resulting into a formation of a one undertaking; (c) The shareholders of each blending Company become substantially the shareholders of the Company which is thus created. 17. There are various processes and procedures under which the amalgamation of the two or more companies can be carried out, resulting in the assets and liabilities of the amalgamating Companies becoming the assets and liabilities of the amalgamated Company. But, according to the judicial precedence, amalgamation in its strict interpretation will not mean acquisition by a company of the Share Capital of the other (amalgamated) Company which remains in existence and continues with the undertaking. 18. In yet another Judgment as reported in 1975 (99) ITR 211 (Cal), the definition of "Amalgamation" as given under Sec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ppellant challenges the Impugned Order contending thereof that, the process of amalgamation carried by the Impugned Order, would be dehors to law, due to non-compliance of the provisions contained under Section 35(1) of the Insurance Act, as extracted above and on the grounds that since the said provisions start with a non-obstante clause, there would be a bar created against amalgamation of the Companies in the instant cases and the amalgamation of the companies could be carried only after taking a prior approval by the Authority, as per Section 35(1) of the Insurance Act. 26. Owing to the word "Authority" being used under the Insurance Act, it becomes inevitable for us to deal with as to how the Authority has been defined with under the Insurance Act. The Insurance Act of 1938 in its Sub-Section (1A) of Section 2 defines the "Authority", which means the "Insurance Regulatory & Development Authority of India", as established under sub-section 1 of Section 3 of the Insurance Regulatory & Development Authority Act of 1999 i.e. the Appellant herein. Based upon the said strength, the Appellant contends that, since the order of amalgamation of the Insurance Companies has been issued....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntended to bring such class of amalgamation under Insurance Act, and to impose restrictions, that would have been done by the legislature by incorporating suitable explicit provisions under Section 35 of Insurance Act itself and not otherwise, and that, absence of suitable explicit provisions in the Insurance Act for treatment of amalgamation of an Insurance Company with a Company not engaged in Insurance Business cannot be interpreted to claim that since no exclusion is provided, prior approval from the Authority has to be taken. 30. The learned counsel for the Appellant in further elaboration of his argument has argued, that since the consequential effect of the amalgamation will have a bearing on the Share configuration of the respective insurance Companies, it will attract section 6A of the Insurance Act and therefore, without the compliance of the provisions contained under Section 35 of Insurance Act, the merger cannot be done without the approval of authority, because of the provisions contained under Section 6A of the Insurance Act. He further contends that since there happens to be a change in the Capital Structure, Voting Rights and other such allied activities in the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ter any transfer of its shares- (i) unless, in addition to compliance being made with the provisions of section 56 of the Companies Act, 2013 (18 of 2013), the transferee furnishes a declaration in the prescribed form as to whether he proposes to hold the shares for his own benefit or as a nominee, whether jointly or severally, on behalf of others and in the latter case giving the name, occupation and address of the beneficial owner or owners, and the extent of the beneficial interest of each; (ii) where, after the transfer, the total paid-up holding of the transferee in the shares of the company is likely to exceed five per cent. of its paid-up capital unless the previous approval of the Authority has been obtained to the transfer; (iii) where, the nominal value of the shares intended to be transferred by any individual, firm, group, constituents of a group, or body corporate under the same management, jointly or severally exceeds one per cent. of the paid-up equity capital of the insurer, unless the previous approval of the Authority has been obtained for the transfer. Explanation.-For the purposes of this sub-clause, the expressions "group" an....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... total paid-up holding in such shares held by such person in the name of others; and (ii) if any shares of the company are held- (a) by a public limited company, of which such person is a member holding more than ten per cent of the paid-up capital, or (b) by a private limited company, of which such person is a member, or (c) by a company, of which such person is a managing director, manager, 1*** or in which he has a controlling interest, or (d) by a firm in which such person is a partner, or (e) by such person jointly with others, such part of the total paid-up holding of the company or firm or of the total joint holding in those shares, as is proportionate to the contribution made by such person to the paid-up capital of the company, the paid-up capital of the firm or the joint holding, as the case may be." 31. This artificial distinction, which has been attempted to be carved out by the learned counsel for the Appellant for opposing the amalgamation alleging it to be in contravention to Section 6A of the Insurance Act is misconceived, owing to the various precedences, which have already been discussed above and t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....35 of Insurance Act and hence provisions of Companies Act with respect to amalgamation will not apply in the instant cases. 35. The learned counsel for the Respondent counters this by stating that it could not be argued under the Companies Act under the provisions contained under Chapter XV, provides for the "Compromises, Arrangements and Amalgamations" and it will be applicable in the instant cases and the respective learned Tribunals are right in conducting the proceedings on the Petitions preferred under Section 230 to 232 of the Companies Act by the Respondents seeking for an amalgamation of their respective Companies, on Section 35 of Insurance Act limits itself only to the field of amalgamation of two Insurance Companies. 36. In the light of the provisions contained under Section 230 to 232 of the Companies Act, the learned counsel for the Respondent argues, that when the Companies Act, which has a feature of being a special Statute and has a self- contained provision, in respect of amalgamation in the light of the provisions contained under Section 230 to 232, the restrictions contemplated by Section 35(1) of the Insurance Act, cannot be held to be an inconsistent with....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntravention to or in consistent with any of the provisions of the Insurance Act. 43. In accordance to the provisions contained under Section 230 to 232 of the Companies Act as referred to hereinabove, there are certain prescribed procedures, which are required to be followed in accordance with the rules as framed thereunder i.e. "Companies (Compromises, Arrangements and Amalgamations) Rules, 2016" before it is contemplated to sanction a Scheme of Arrangement for amalgamation of the two Companies irrespective of the fact that whether it is between two Insurance Companies or only one of them being engaged in insurance business. 44. It is borne out from record and the findings, which has been recorded in the respective Impugned Orders, that various steps and compliances as prescribed in the procedure have been strictly followed by the Transferor Companies and the Transferee Companies in accordance with the provisions contained under Section 230 to 232 of the Companies Act and the aforesaid Rules. First Motion applications were filed for convening / dispensing with the Meeting of the Shareholders, Secured Creditors and Unsecured Creditors of the Petitioner's Company, before the r....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... with the Report of the Registrar of Companies vide its communication placed on record intimated to the Learned Tribunal that there are no pending Complaints or Enquiries or Inspection or Investigation or Prosecution against the Petitioner Company, and it has no objection subject to the condition that the Petitioner Company has been adequately preserving the Books of Accounts, papers and records and they shall not be disposed of, without the prior permission of the Central Government as per Section 239 of the Companies Act, 2013, that the Petitioner Company has given a written undertaking for adherence of all procedural law and will not be absolved from any Statutory liabilities, if the Scheme of Arrangement was sanctioned, and that the requisite Stamp Duty on the Transfer of Property / Assets of the Transferor Company to the Transferee Company is to be paid before the implementation of the Scheme. 51. Except for the Appellant herein who had filed their objection against the Scheme of Amalgamation owing to the non-compliance of the provisions contained under Section 35 of the Insurance Act. All other Authorities i.e. the Regional Director, Official Liquidator - Chennai, Income T....