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TMI Blog2025 (3) TMI 632X X X X Extracts X X X X X X X X Extracts X X X X ..... stice 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. 66 / 2024, puts a challenge to the Impugned Order of 09.08.2024 as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... repared 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 there may be substituted respectively for the balance-sheet, report and abstract referred to in clauses (b) and (c) prepared in accordance with this sub-section ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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 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 forme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 our minds that the evidence of these witnesses was trumped up to suit the plaintiff's case and must be rejected. Exhibit A- 17 is a letter dated 16th April, 1952 from E. G. S. as director of the first defendant company and the managing agent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld 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 Section 2 (1B) of the Income Tax Act, the features and the consequences of amalgamation has been attempted to be explained which is that it is an Arrangement by which the Assets and Liabilities of the two or more amalgamating Companies, become vested in or under the contro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce 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 without its prior approval, it is in contravention to Section 35, and hence it cannot be upheld in the eyes of law. 27. On the contrary, it has been argued by the learned counsel for the Respondent is, that if the concept of amalgamation as dealt hereinabove is taken into considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 respective insurance companies, no amalgamation ought to have been permitted, as the very objective of Section 6A of the Insurance Act is being defeated. Provisions of section 6A is extracted hereunder: "6A. Requirements as to capital structure and voting rights and maintenance of registers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atter 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" and "same management" shall have the meanings respectively assigned to them in the Competition Act, 2002 (12 of 2003).] (5) Every person who has any interest in any share of a company referred to in sub-section (4) which stands in the name of another person in the register of members of the company, shall, within thirty days from the commencement of the Insurance (Amendment) Act, 1950, or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st, 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 the very concept of amalgamation, which has been dealt with. In the instant case, the amalgamation of the two Companies i.e. the Insurance Company with the company engaged in a non-insurance activity, will automatically result into the merger of the Share Capital and the Shareholding of the non-insurance company with the insurance company, and there is no change in shareholding as a whole as a consequence of amalgamation because the Merging Company (Transferor Company) is only the holding compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the provisions of the Companies Act governing amalgamation of Companies. 37. What is relevant to be considered is, that in each of these Company Appeals, challenge is being given to the Order of respective Learned Tribunal approving the Scheme of Amalgamation proposed by the respective Respondents / Applicants in Company Appeal (AT) (CH) No. 31 / 2024, approval of Scheme of Amalgamation of the Petitioner "Shriram Life Insurance Company Ltd." with its "holding Company" i.e. "Shriram LI Holdings Private Ltd." which is the "Transferor Company" is b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 respective Tribunals. The said First Motion applications were disposed of by the respective Tribunals dispensing with the holding of a Meeting with of the Equity Shareholders and Secured and Unsecured Creditors of the Petitioner's Companies. No objection of any kind since was ever raised at the stage of dispensation of carrying the First Motion and hence, no plea under Section 6A of Insurance Act would be attracted. 45. While moving to the "second stage" of Amalgamation, the Respondent Companies as respectively involved in each of these Company Appeals, had filed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence 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 Tax Department, Competition Commission of India, Reserve Bank of India and Valuers Report had supported the Scheme of Amalgamation and conveyed their no objection to the Scheme. 52. The objection raised by the learned counsel for the Appellant before Learned Tribunals during the consideration of the said Schemes of Amalgamation, had confined their argument from the perspective that the Insurance Companies have been registered under Section 3 of the Insurance Act, and since the object of their Registration is contemplated under Section 2 (7A) (c) of the Insurance Act, as their sole objective is to pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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