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Article Published in the Express Magazine Dated
February 03, 2002
General Attorney : Rajiv K. Luthra
There is a growing wave of mergers and
amalgamations in the country. Why is it so? What
are they? What is the concept behind acquisitions?
Raghu Raj Singh, Delhi
The extent of excess capacity in almost all
industrial segments increases competition, erodes
profits and reduces growth. Mergers and
acquisition's (M&A's) provide the companies a
route to insulate themselves from competition
induced pressures in order to achieve improved
earnings, growth and competitiveness. The terms
merger and amalgamation are not defined in the
Companies Act, 1956. Broadly speaking a merger
maybe defined as a combination of two or more
companies into a single company, where one
survives and the other loses its corporate
existence. It is an arrangement whereby the assets
of two or more companies become vested in or under
the control of one company, which may or may not
be one of the original two companies. Such company
has as its shareholders, all or substantially all
the shareholders of the two or more merging
companies. Mergers are also considered as revival
measures for industrial sickness.
Amalgamation is a legal process by which two or
more companies are joined together to form a new
entity or one or more companies are to be absorbed
or blended with another and as a consequence the
amalgamating company loses its existence and its
shareholders become the shareholders of the new or
amalgamated company. The terms merger and
amalgamation are generally used interchangeably.
For the purposes of the Companies Act the term
merger and amalgamations are synonymous. Normally
the process of mergers and amalgamation of
companies takes place through a specified process,
which amongst others involves the drawing of an
implementation scheme, which amongst others
addresses issues like arrangements with creditors
and the shareholding pattern post
merger/amalgamation. Both mergers and
amalgamations require approval from a court of
law.
Acquisition in general sense is acquiring the
ownership in a property. In the context of
business combinations, an acquisition is the
purchase by one company of a controlling interest
in the share capital of another existing company.
Companies also go in for international
acquisitions for a number of strategic or tactical
reasons, like growth orientation; access to raw
materials, technology, cheaper labour,
innovations; exploitation of unique advantages
like company brands, designs etc; reduction in
dependence on exports; exploitation of temporary
advantages.
I am selling my vehicle. Will its insurance go
along with the sale?
Sohan Agarwal, New Delhi
According to Section 157 of the Motor Vehicle Act,
1988, ("Act") when the owner of the vehicle in
relation whereto a certificate of insurance is
issued transfers to another person the ownership
of the motor vehicle, the certificate of insurance
together with the policy described therein shall
be deemed to have been transferred in favour of
the new owner of the vehicle with effect from the
date of the transfer. Sub-section 2 of the same
requires the transferee to apply within 14 days
from the date of transfer to the insurer for
making necessary changes in the certificate of
insurance and policy described therein in his
favour. It may be relevant to highlight that this
Section is a part of Chapter XI of the Act which
provides for compulsory insurance to cover third
party risk, and the Hon’ble Supreme Court has held
that “the fiction of Section 157 of the New Act
must be limited thereto”. It is, therefore, only
in respect of third party risk that Section 157
provides that the certificate of insurance
together with the policy of insurance described
therein “shall be deemed to have been transferred
in favour of the person to whom the motor vehicle
is transferred”. If the policy of insurance covers
other risks as well e.g. damage caused to the
vehicle of the insured himself, that would be a
matter falling in the realm of the contract for
which there must be an agreement between the
insurer and the transferee, the former undertaking
to cover the risk or damage to the vehicle.
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