CONTENTS

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Certificate i
Declaration ii
Acknowledgement iii-iv
Preface v-vii
List of Abbreviations viii-xiii
List of Cases xiv-xxix

I. INTRODUCTION 1-93

1.1. Introductory 1
1.2. Basic Concepts 7
1.2.1. Corporate Restructuring 7
1.2.2. Mergers 8
1.2.3. Acquisition 10
1.2.4. Takeovers 12
1.2.5. Types of Takeovers or Acquisitions 14
1.2.6. Bail-out Takeovers 16
1.2.7. Categories or Types of Mergers 17
1.2.8. Difference between Merger and Acquisition 25
1.2.9. Amalgamation 26
1.2.10. Difference between Merger and Amalgamation 28
1.3. Motives and Reasons for Mergers 29
1.3.1. Synergy 30
1.3.2. Growth 34
1.3.3. Enhanced Profitability Due to Economies of Scale 35
1.3.4. Diversification of Risk 35
1.3.5. Tax Considerations 36
1.3.6. Increase in Market Power and Market Entry 37

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1.3.7. Access to Inputs and Technology 38

1.3.8. Global Competitiveness 39
1.3.9. Other Benefits 39
1.4. Advantages of Mergers and Acquisitions 42
1.5. Disadvantages of Mergers 43
1.6. Evolution and Trends of Mergers and Acquisitions in India 44
1.6.1. Mergers and Acquisitions during Pre-independence Period 44
in India
1.6.2. Mergers and Acquisitions during Post-independence Period 45
in India
1.6.3. Post-1990 Period 48
1.6.4. Recent Emerging Scenario 54
1.7. Significance of the Study 63
1.8. Object and Purpose of the Study 64
1.9. Review of the Existing Literature 65
1.10. Research Gap 88
1.11. Data Base and Methodology 89
1.12. Hypothesis of the Study 89
1.13. Research Questions 90
1.14. Chapterisation Plan 91

II. LEGAL AND REGULATORY FRAMEWORK FOR 94-195

MERGERS AND AMALGAMATIONS

2.1. Introductory 94
2.2. Provisions of the Companies Act, 1956 Regulating Mergers 96
and Amalgamations
2.3. Important Definitions 96
2.3.1. Amalgamation and Reconstruction 96
2.3.2. Arrangement and Compromise 97
2.4. Power to Compromise and Make Arrangements with 99
Creditors and Members

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2.4.1. Persons who are Competent to Make an Application under 100

Section 391
2.4.2. Classes of Members and Creditors 102
2.4.3. Requirement as to Majority for Passing a Scheme of 105
Compromise or Arrangement
24.4. Courts to Ensure Compliance with Statutory Provisions 106
before Sanction
2.4.5. Reasonableness and Fairness of a Scheme 107
2.4.6. Effect of Court’s Order 108
2.4.7. Effect of Proviso in Section 391(2) 109
2.4.8. Other Relevant Provisions of Section 391 111
2.4.9. Separate Petition to be Filed by the Transferor and 111
Transferee Companies
2.4.10. Dispensing with Meeting in Schemes of Arrangement 112
2.4.11. Relevant Case Law Explaining the Scope of Section 391 114
2.5. Supervisory Power to Enforce Compromise or Arrangement 116
2.5.1. Underlying Principle of the Section 117
2.5.2. Meaning of the term ‘Modification’ 118
2.5.3. Judicial Interpretation of Section 392 119
2.5.4. Winding up order under Section 392 120
2.5.5. Changes brought by the Companies Act, 2013 122
2.6. Information as to Compromises or Arrangement with 122
Creditors and Members
2.6.1. Interpretation by Courts on the Scope of Section 393 123
2.6.2. Disclosures to be Proper under Section 393 126
2.6.3. Judicial Interpretation of the Term ‘Material Interest’ and 127
‘Like Interest of Other Persons’
2.7. Provisions for Facilitating Reconstruction and 128
Amalgamation of Companies
2.7.1. Power of Amalgamation 128
2.7.2. Scope of Section 394 130
2.7.3. Effect of Court Order Passed under Section 394 139

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2.7.4. Filling of the Order with the Registrar 140

2.8. Valuation Aspects of Mergers and Amalgamations 140
2.8.1. Methods of Valuation of Shares 142
2.8.2. Determination of Exchange Ratio 144
2.8.3. Valuation by Experts 145
2.8.4. Judicial Pronouncements on Disputes in Valuation of Shares 146
and Determination of Fair Exchange Ratio
2.8.5. Recent Judicial Trends 149
2.9. Notice to Central Government 150
2.9.1. Powers Delegated to Regional Directors 151
2.9.2. A Supplementary Role under Section 394A of the Act 151
2.9.3. Case Law to Explain the Scope of the Section 152
2.9.4. Changes Introduced by the Companies Act, 2013 154
2.10. Take-over and Acquisition of Minority Interest 155
2.10.1. Fairness of Takeover Bids 156
2.10.2. Object and the Underlying Principle behind this Section 158
2.10.3. Further Opportunity for Non-accepting Minority 159
2.10.4. Dissenting Shareholder Rights 159
2.10.5. Contrary Order by the Tribunal 159
2.10.6. Treatment of Consideration Received 160
2.10.7. Other Procedural Requirements 160
2.11. Amalgamation by the Order of Central Government 162
2.11.1. Pre-conditions of Making the Order 163
2.11.2. Order to be Notified in the Official Gazette 163
2.11.3. Interests of Members or Creditors 163
2.11.4. Right of Appeal by Members a Creditors 164
2.11.5. Parliamentary Control 164
2.11.6. Some Important Observations on this Section 164
2.12. Preservation of Books and Papers of the Amalgamated 165
Company
2.13. Amalgamation/Merger without Court’s Order 166

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2.13.1. Amalgamation under Section 494 166

2.13.2. Right of Dissentient Shareholders 167
2.13.3. Last Few Words on Section 494 168
2.14. Procedure/Steps for a Merger or Amalgamation 168
2.15. Important Changes Made by the Companies Act, 2013 177
2.16. An Overview of Judicial Attitude towards Mergers in India 186
2.16.1. Power to Look into Commercial Merits/Demerits of the 186
Scheme
2.16.2. Section 391-394 a Complete Code on Amalgamation 188
2.16.3. Courts are not a Rubber Stamp 189
2.17. Conclusion 194

III. LEGAL AND REGULATORY FRAMEWORK FOR 196-283

TAKEOVERS AND ACQUISITIONS IN INDIA

3.1. Introductory 196

3.2. History of Takeover Law in India 197
3.3. The Provisions of the Companies Act, 1956/Companies Act, 198
2013
3.3.1. Internal Rate 199
3.3.2. Effect of Default 200
3.3.3. Maintenance of Register 200
3.3.4. Exemptions in Case of Certain Companies 200
3.3.5. Government Guidelines 200
3.3.6. Default 201
3.3.7. Restriction on Multi-Layered Structures 201
3.4. The Provisions of Listing Agreement (In Case of Listed 202
Companies)
3.4.1. Minimum Level of Public Shareholding (Clause 40A) 203
3.4.2. Take-over Offer (Clause 40B) 206
3.5. SEBI Takeover Code 2011 206

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3.5.1. Constitution of TRAC 209

3.5.2. Necessity, Purpose and Object of the Code 210
3.5.3. Objectives of the 2011 Code 212
3.5.4. Acquisition 213
3.5.5. Acquirer 214
3.5.6. Person Acting in Concert 215
3.5.7. Dilemma Over the Term ‘Control’ 220
3.5.8. Substantial Acquisition of Shares, Voting Rights or Control 225
3.5.9. Creeping Acquisition under the New Takeover Code 231
3.5.10. Indirect Acquisition 238
3.5.11. Analysis of the Voluntary Offer Provision 238
3.5.12. The Open Offer-Offer Size 239
3.5.13. Delisting 242
3.5.14. Pricing of Open Offers 243
3.5.15. Analysis of the Change in the Provision of Non-Compete 246
Fees
3.5.16. Mode of Payment 250
3.5.17. Timing of the Public Announcement 251
3.5.18. Publication of Public Statement 253
3.5.19. Contents of Public Offer 255
3.5.20. Conditional Offer 256
3.5.21. Competing Offers 257
3.5.22. Provision of Escrow 259
3.5.23. Completion of Acquisition 260
3.5.24. Withdrawal of Open Offer 260
3.5.25. Withdrawal of Voluntary Offer 262
3.5.26. Exemptions from the Open Offer Obligations 264
3.5.27. Disclosures of Shareholding 272
3.5.28. Continual Disclosures 277
3.5.29. Disclosure of Encumbered Shares 278
3.5.30. Lifting the Corporate Governance Standards 280
3.6. Conclusion 282

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IV. COMPETITION ACT AND ITS IMPACT ON 284-337

MERGERS AND ACQUISITIONS

4.1. Introductory 284

4.2. Background and Evolution of Competition Law in India 285
4.3. Rationale for Merger Control 289
4.3.1. Horizontal Mergers 291
4.3.2. Vertical Mergers 292
4.3.3. Conglomerate Mergers 294
4.4. Remedies for Merger Control 298
4.5. Competition Act in Reference to Mergers and Acquisitions 298
4.6. Analysis of Provisions of Competition Act Relevant to 303
Mergers and Acquisitions
4.6.1. Combination 306
4.6.2. Threshold Limits 307
4.6.3. Exemption from the Provisions of Section 5 309
4.6.4. Regulation of Combinations 310
4.6.5. Mandatory Reporting or Notification 316
4.6.6. Exemption Gateway 322
4.6.7. Intra-group Mergers and Amalgamations 324
4.6.8. Assessment of Combination 325
4.6.9. Appointment of Independent Agencies to Oversee 329
Modification
4.6.10. Combination Ordered Void is Void under other Laws Also 329
4.6.11. Penalties under the Competition Act 330
4.6.12. Confidentiality of Information Furnished by Parties 331
4.6.13. Appeals from the Order of CCI 331
4.7. Cross Border Mergers and the Competition Act 332
4.8. Conclusion 335

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V. TAXATION ASPECTS OF MERGERS AND 338-440

ACQUISITIONS

5.1. Introductory 338

5.2. Tax and Amalgamations/Mergers in India 339
5.3. Implications under the Income Tax Act, 1961 of Mergers 340
and Amalgamations
5.3.1. Meaning of Amalgamation for Tax Purposes 341
5.3.2. Circumventing the Definition under Section 2(1B) 344
5.3.3. Tax Reliefs and Benefits in Case of Amalgamation 346
5.3.4. Carry forward and Set off of Losses in Case of Closely Held 367
Transferee Company
5.3.5. Other Implications 370
5.3.6. Meaning and Significance of Appointed Date 371
5.3.7. Role of Judiciary in Checking Tax Evasion in a Scheme of 373
Amalgamation
5.4. Tax Perspective in Cross-Border Mergers and Acquisitions 375
5.4.1. Tax Treaty Considerations 376
5.4.2. Transfer Pricing Considerations 379
5.5. General Anti-Avoidance Rule and Mergers and Acquisitions 385
5.5.1. Scope of Provisions 387
5.5.2. Lack of Commercial Substance 388
5.5.3. Consequences if GAAR Triggered 388
5.5.4. Impact on Reconstruction Exercises such as Mergers and 389
Acquisitions
5.5.5. Final Words on GAAR 391
5.6. Tax Implications in Case of Acquisitions 392
5.7. Tax Implication of Acquisitions in Case of Share 393
Acquisition
5.7.1. Tax Implications for the Seller 394
5.7.2. Tax Implications for the Buyer 413
5.8. Tax Implications of Acquisitions in Case of Business 415
Acquisition

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5.8.1. Slump Sale 415

5.8.2. Itemised Sale 419
5.9. Stamp Duty Implications in Mergers and Amalgamations 420
5.9.1. The Indian Stamp Act, 1899 421
5.9.2. Nature of Such Transfer 422
5.9.3. Essentials for the Levy of Stamp Duty 424
5.9.4. Meaning of the Term Instrument 424
5.9.5. Stamp Duty on Merger/Amalgamation 426
5.9.6. Judicial Opinion 429
5.9.7. Rates of Stamp Duty 435
5.10. Conclusion 436

VI. EMERGING DIMENSIONS IN THE FIELD OF 441-528

MERGERS AND ACQUISITIONS

6.1. Introductory 441

6.2. Rise of Cross-border Mergers and Acquisitions in India 442
6.2.1. Trends of Cross-border Mergers and Acquisitions in India 444
6.2.2. Cross-border Mergers and Acquisitions: The Rising Mode of 453
FDI Entry Across the Globe and in India
6.2.3. Reasons for Cross-border Mergers and Acquisitions 454
6.2.4. Difficulties in Cross-border Mergers 456
6.2.5. Policy Changes and Regulatory Reforms 456
6.2.6. Role of WTO in Promoting Cross-border Mergers and 458
Acquisitions
6.2.7. Applicable Law in Cross-border Mergers 460
6.2.8. The Foreign Direct Investment Policy of India 462
6.2.9. Foreign Exchange Management Act, 1999 468
6.2.10. Foreign Exchange Regulations 469
6.2.11. Case Study-Fallout of the Bharti-MTN Deal 472
6.3. Intellectual Property Issues in Mergers and Acquisitions 480

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6.3.1. Meaning of the Term ‘Intellectual Property’ 481

6.3.2. Importance of Intellectual Property as a Business Asset in 482
Mergers and Acquisitions
6.3.3. Need of Intellectual Property Valuation in Mergers and 483
Acquisitions
6.3.4. Difference in Valuation Techniques of Tangible and 484
Intangible Assets
6.3.5. Various Approaches to the Financial Valuation of 485
Intellectual Property Rights
6.3.6. Risk Assessment 486
6.3.7. Intellectual Property Due Diligence in Mergers and 487
Acquisitions
6.3.8. Due Diligence of Intellectual Property Assets in Mergers 493
and Acquisitions with Respect to Indian Laws
6.3.9. Tax Considerations 502
6.4. Human Dimensions in Mergers and Acquisitions 503
6.4.1. Corporate Reorganisation and Employees 505
6.4.2. Possible Impact of Merger on Employees 507
6.4.3. Confronting the Barriers: Turning Challenge to Opportunity 509
6.4.4. Case Studies 513
6.4.5. Terms of Agreement of Employment in Merger 518
6.4.6. Relevant Case Laws 519
6.4.7. Extent of the Rights of the Employees in a Merger Scheme 522
6.5. Conclusion 525

VII. CONCLUSIONS AND SUGGESTIONS 529-596

? ANNEXURES xl-lvii

& BIBLIOGRAPHY lviii-xcv

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