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2025 (3) TMI 632 - AT - Companies LawRequirement of prior approval under Section 35(1) of the Insurance Act 1938 at the stage of amalgamation of the Respondent Companies - HELD THAT - The Transferor Companies were holding major portion of the Transferee Companies which are in Life Insurance and Non-life Insurance business respectively. It has been held by respective Tribunals that upon merger / amalgamation the Shareholders of the Holding Companies will hold Shares of the Transferee Companies which are Insurance Companies the same number and same per centage and hence this will not attract the provisions contained under Section 6A of the Insurance Act. There is another important aspect which is required to be considered that in all these Company Appeals by virtue of the Impugned Orders the Transferor Companies which were not engaged in Insurance Business have been permitted to be merged with the Transferee Companies which are Insurance Companies and it has been done strictly in accordance with the provisions contained under Section 230 to 232 of the Companies Act which prescribes for an amalgamation and which is not in contravention to or in consistent with any of the provisions of the Insurance Act. 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. On perusal of the respective notices it is quite clear that the notices thus published had specifically invited from the concerned Authorities objection if any as against the proposed Scheme of Arrangement for Amalgamation - The Petitioner Companies had also filed the Affidavit of Compliance through their Authorized Signatories along with the relevant documents. As there happens to be no statutory bar created under the Insurance Act which could have called for a prior compliance of Section 35 of Insurance Act for Amalgamation in the instant cases to be carried under Section 230 to 232 of the Companies Act 2013 the Amalgamation as made by the Impugned Orders do not suffer from any apparent legal error which could call for an interference in the exercise of our Appellate powers under Section 421 of the Companies Act 2013. Conclusion - The amalgamations were conducted in compliance with the Companies Act and did not contravene the Insurance Act. Appeal dismissed.
1. ISSUES PRESENTED and CONSIDERED
The core legal issue considered in these appeals was whether the amalgamation of the respondent companies required prior approval under Section 35(1) of the Insurance Act, 1938. The appellant contended that such approval was mandatory for the amalgamation of an insurance company with a non-insurance company. The tribunal also examined whether the provisions of the Companies Act, 2013, specifically Sections 230 to 232, were applicable in these cases and whether they were inconsistent with Section 35 of the Insurance Act. 2. ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents Section 35 of the Insurance Act mandates that no insurance business of an insurer shall be transferred or amalgamated with another insurer without a scheme approved by the Authority. The Companies Act, 2013, under Sections 230 to 232, provides a framework for the amalgamation of companies, including insurance companies, unless inconsistent with the Insurance Act. Court's Interpretation and Reasoning The tribunal interpreted that Section 35(1) of the Insurance Act requires approval for amalgamation only between two insurance companies. It does not extend to amalgamations involving an insurance company and a non-insurance company. The tribunal reasoned that the Insurance Act does not explicitly prohibit such amalgamations without prior approval, and thus, the Companies Act provisions apply. Key Evidence and Findings The tribunal noted that the amalgamations in question involved holding and subsidiary companies where the transferor companies were not engaged in insurance business. The amalgamations were conducted under the Companies Act framework, with compliance to procedural requirements, including notices to regulatory authorities and public invitations for objections. Application of Law to Facts The tribunal applied the Companies Act provisions to the amalgamations, noting that the procedural requirements under Sections 230 to 232 were met. It found no statutory bar under the Insurance Act against such amalgamations without prior approval, as the amalgamations did not involve two insurance companies. Treatment of Competing Arguments The appellant argued that the absence of prior approval contravened Section 35 of the Insurance Act, particularly affecting shareholding structures under Section 6A. The tribunal rejected this, stating that Section 35 applies only to amalgamations between insurance companies. The respondent's argument that the amalgamations were lawful under the Companies Act was upheld. Conclusions The tribunal concluded that the amalgamations were valid under the Companies Act and did not require prior approval under the Insurance Act. It dismissed the appeals, affirming the legality of the amalgamations. 3. SIGNIFICANT HOLDINGS Preserve Verbatim Quotes of Crucial Legal Reasoning The tribunal held that "the Insurance Act does not per se necessitate taking of an approval from the Authority, in those situations where an insurance company is being sought to be amalgamated with a Company, which is not engaged in the insurance business." Core Principles Established The tribunal established that the requirement for prior approval under Section 35 of the Insurance Act is limited to amalgamations between two insurance companies. The Companies Act provisions apply to other types of amalgamations involving insurance companies unless explicitly inconsistent with the Insurance Act. Final Determinations on Each Issue The tribunal determined that the amalgamations were conducted in compliance with the Companies Act and did not contravene the Insurance Act. The appeals were dismissed, and the schemes of amalgamation were confirmed.
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