We know that Mergers and Acquisitions (M&A) play an important role in
management of company's establishment. The companies Act, 2013 consists to all
these provisions related to M & A. Let us look at few case laws related to few
mergers & acquisitions with respect to banking companies.
In Shrikant Bhujaballi Bahirshet and others vs Shamrao Vithal Co - Operative
Bank Limited, Mumbai
, the facts of the case are appellant was employee of
Mahavir Co-operative Bank Ltd. (MCBL) was not doing well and was in financial
doldrums and was merged into Respondent Bank.
As Appellant was superannuated in year 2003 and had been paid his retirement
benefits on such superannuation. Jurisdictional errors or error resulting in
miscarriage of justice committed by subordinate Courts or Tribunals can be
corrected by exercising powers u/art. 226 of Constitution, and that it is not
lawful to hold that jurisdictional errors or error resulting in miscarriage of
justice committed by subordinate Courts or Tribunals can be corrected only by
exercising powers under article 227 of Constitution.
The court held Labour Court did not answer issue of liability of Respondent Bank
on ground that said issue did not survive for consideration as it had come to
conclusion that claim of Appellants was not based on any pre-existing right and
therefore Application u/s. 33C(2) of Industrial Disputes Act was not
It is also required to be noted that Respondent Bank had opposed application
filed by Appellants inter alia on grounds mentioned in its Written Statement
which included denial of its liability to pay amount claimed by Appellants. Also
no such issue was raised and contentions advanced as regards existence or
non-existence of pre existing right in Appellants.
In Re: Equitas Finance Limited, represented by its Chief Financial Officer
Vasudevan S, Chennai and others, Petitioner Companies, i.e., Transferor
Company no. 1, Transferor Company no. 2 and Transferee Company, jointly filed
petitions seeking sanction of Scheme of Amalgamation. Whether, Scheme of
Amalgamation, as proposed, could be sanctioned with or without modification.
Sanctioning of compromise or arrangement does not necessarily fetter Court from
delaying date of actual amalgamation/merger of entities.
In this case, amalgamation of transferor Company nos. 1 and 2 with transferee
Company is dependent on issuance of banking licence by RBI and, in turn,
issuance of licence is dependent on HC sanctioning Scheme. The court held that
the scheme envisages merger of transferor Company nos. 1 and 2 with transferee
Company. Shareholders and secured creditors of each of petitioner companies have
given their consent to Scheme.
However, Scheme can neither provide clear appointed date nor can it fix share
exchange ratio. What adds further twist to the situation is that Scheme by
itself cannot provide for dissolution of transferor Company nos. 1 and 2,
albeit, without winding up, perhaps, for the same reason that there is
possibility, that RBI may not issue licence to amalgamated company/ merged
entity. s. 394 (1) of Act gives such leeway to Court Therefore, since affidavit
of RD and report of OL indicate that affairs of transferor Company nos. 1 and 2
are not carried out in a manner prejudicial to its member or public, Scheme can
be sanctioned, with caveat, that transferor Companies will move applications for
their dissolution, albeit, without winding up within 30 days of effective
In Aruna Dixit D/o Late Y. D. Dixit v State of Chhattisgarh
Chief Secretary, Chhattisgarh and others, A bank was registered under
Chhattisgarh Cooperative Societies Act,1960. On committing defaults and
mismanagement, Board of Directors of Bank was superseded. Authorized officer
convened annual general meeting of shareholders of Bank and resolution was
passed for amalgamation of Bank with another Bank despite objection raised by
shareholders of Bank including petitioner.
Registrar sent proposal of amalgamation for approval by Reserve Bank of India
wherein RBI issued statutory No Objection Certificate. Registrar, Cooperative
Societies passed order directing merger of Bank. Petitioner was filed appeal
before State Government to set aside Registrar's order. Whether respondents have
violated provisions of s.16 of the Act and r.11 of the Rules, and such non
compliance of provisions has vitiated entire exercise.
The court held that order dt.2-1-2010 clearly mentions that order of
supersession passed on 13-9-2006 is extended for another one year on 12-9-2007,
however, since situation has not changed, order of supersession requires to be
continued and extended for further one year.
Thus, order nowhere ratifies working of authorized officer during 12-9-2008 till
2-1-2010 includes date i.e.7-11-2009 when annual general meeting of members of
Bank is convened by authorizes officer. Apparently, officer is not authorized on
that day to convene annual general meeting of Bank because, there is no order in
existence, even ex post facto order approving his appointment as authorized
officer during period of 12-9-2008 till 2-1-2010. Hence, order dt.18-1-2011 and
subsequent actions taken by respondents is quashed.
In Chinmay Premalkumar Gandhi vs Adarsh Multi State Cooperative Bank Limited,
Shri Deesa Nagrik Sahkari Bank Ltd. decided to merge with Madhav Nagrik Sahakari
Bank Ltd., multi state co- operative bank. The Registrar-Co-operative Societies,
Gujarat State passed order dated 23/04/2009 under Section - 17 of the Act
approving merger of Shri Deesa Nagrik Sahakari Bank Ltd. with Madhav Nagrik
Sahakari Bank Ltd. which subsequently changed its name to Adarsh Multi State Co-
operative Bank, the respondent no.1.
What is the effect of merger of a co-operative society registered under the
Co-operative Societies Act, 1961 with multi state co-operative society
registered under the Multi State Co-operative Societies Act, 2002 on the pending
proceedings of Lavad Suit instituted by the state co-operative society before
the Board of Nominee for the disputes under Section 96 of the Act.
In fact, when specific provision is made for continuation of legal proceedings
after merger especially with the phrase transferee
, the legislature
clearly intended to continue legal proceedings by or even against other kind of
the society on merger of the state cooperative society. Such being clear
intention of the legislature emerging from Sub Section 4 of Section 17 of the
Act, the Tribunal could be said to have come to correct conclusion on
interpretation of Section 17 of the Act that the Board of Nominee committed
grave error in returning the plaint to the plaintiff. No interference in such
order of the Tribunal is called for in exercise of powers under Article 226/227
of the Constitution of India.
In Hindustan Commercial Bank Limited and another v British Motor Car Company
(1934) Limited, The tenant had sublet/assigned/parted with possession of the
suit premises in favour of Punjab National Bank (PNB) without obtaining the
written consent of the petitioner. It is not in dispute that M/s HCB had since
been amalgamated with PNB by virtue of a Gazette Notification issued by the
Ministry of Finance, Govt. of India; necessary effect was that M/s HCB became
non-existent and its complete power and control vested with the transferee
company i.e. PNB.
The only question which now has to be answered by this Court is whether the
merger of M/s HCB with the PNB by virtue of a Gazette Notification dated
18.12.1986 issued by the Government of India under Section 45 (7) of the Banking
Regulation Act, 1949 sanctioning the scheme of amalgamation of the HCB (Kanpur)
with the PNB amounted to a subletting under Section 14 (1)(b) of the Delhi Rent
The Gazette notification dated 18.12.1986 specifically postulates that the
Central Government has sanctioned the scheme under Section 45(7) of the Banking
Regulation Act, 1949 and all rights, powers, claims, interests, authorities,
privileges including movable and immovable properties including premises subject
to all incidents of tenure, of the transferor bank (HCB) shall stand transferred
and become properties/assets of the transferee bank (PNB). In these
circumstances, the ground of subletting was rightly held to be not available to
the landlord. The impugned judgment holding otherwise thus suffers from an
In Bank of Madura Shareholders Welfare Association v Governor, Reserve Bank
of India, and Others
, The Respondent no. 2 announced extraordinary
general meeting for amalgamation to Banks. Hence, Petition was filed for
postponement of extraordinary general meeting of shareholders for considering
scheme of amalgamation between Petitioner's Bank and ICICI Bank Ltd.
Whether scheme of amalgamation proposed by banking companies with ultimate
control vested with RBI, should grant their approval or not. The court held that
petitioner association had not produced any letter to show that any shareholder
had made complaint to effect that he was not allowed to inspect documents.
Companies proposed to merge were banking companies and considering nature and
scope of banking transaction which involved great deal of confidential
information, appointment of chartered accountants of transferee-bank could not
HC did not accept that petitioner association had not made out any case to order
probe into merger scheme proposed by Board of directors of transferor-bank and
transferee-bank. However, it was for shareholders either to accept or to oppose
scheme of amalgamation, and when requisite majority shareholders of transferor -
bank had accepted and approved scheme of amalgamation, question of ordering
probe by HC into scheme of amalgamation did not arise.
Thus, when petitioner association had not made out any prima facie case for
admitting petition, question of admitting petition did not arise. Expression
made in judgment would not bind RBI while considering scheme of amalgamation of
Petitioner's Bank with ICICI Bank Ltd. Therefore, petitioner had not made out
any case calling for interference by HC and did not incline to admit petition
and issue notice to respondents.
In Commissioner of Income Tax v Trichy United Bank Limited
, Long after
merger of three banks, respondent bank had distributed dividends out of credited
reserves and claimed that it was entitled to relief u/s.236 of the Act. Income
Tax Officer (ITO) held that relief could not be claimed in respect of taxed
profits declared as dividends u/s.236 of the Act. Appellate Authority allowed
claim for relief u/s.236 of the Act in its entirety.
Tribunal affirmed order of Appellate Authority. Whether Tribunal is right in
holding that assessee is entitled to relief u/s.236 of the Act.
Only requirement of s.236 of the Act is that what are distributed as dividends
must be profits prior to date in question. Expression actually
in s.236 of the Act only rules out non-distribution of taxed profits and it does
not rule out process of tracing, or of attribution of profits which subsequently
get distributed as dividends to that of accumulated reserves. Thus, Tribunal is
right in holding that assessee is entitled to relief u/s.236 of the Act.
Reference answered in favour of assessee. Therefore, order u/s.236 of the Act to
extent that it goes against assessee-company is appealable order. Further,
because u/s.236 of the Act does not provide for refund application, it does not
mean that where one is filed it must be rejected as not maintainable. Order
passed by ITO was in fact order passed by way of disposal of application by
assessee. Since order refused relief asked for, it must be considered as one
passed u/s.237 of the Act.
In Himalaya Bank Limited, Kangra v L. Roshan Lal Mehra
were borne as share-holders of Bank and called for unpaid share capital on every
share but failed to make payment of called money. Shares were forfeited as per
clause 4 of scheme. Arrears were due from respondents as debt. As petitioner -
bank was working under scheme sanctioned by High Court; list of debtors could be
settled with permission of High Court.
Whether High Court had jurisdiction to pass orders u/ss. 45M, 45D of 1949 Act
for settlement of list of debtors? Section 392 of 1956 Act gave power to HC to
supervise carrying out of arrangement or modify same and to order winding up of
company if deemed necessary. S. 392 of 1956 Act applied to all companies
including banking companies.
Thus, provisions of s. 45-K (1) of 1949 Act was surplus and omitted. When s.45-K
of 1949 Act was enacted 1956 Act did not contain similar provision, and 1949 Act
conferred additional power on HC to enforce scheme of arrangement and to
sanction compromise in respect of banking company. HC had jurisdiction to
entertain petition and to pass appropriate order in view of provisions of s. 392
of w/r s. 391 of 1956 Act.
In United Bank of India Limited v United India Credit and Development Company
, This is an application under sections 391, 392, 393 and 394 of
the Companies Act, 1956, for sanction of a scheme of amalgamation and other
consequential orders and directions. That the petitioner, United Bank of India
Ltd. was incorporated in the year 1918 and carried on banking business in the
Eastern region of India.
Three other banking companies, Comilla Banking Corporation Ltd., Comilla Union
Bank Ltd., and Hooghly Bank Ltd. were amalgamated and/or merged with the
petitioner - bank with effect from 18th December, 1950, under the provisions of
section 44A of the Banking Companies Act, 1949. The objects of the petitioner -
bank for which it was incorporated as appears from the memorandum of association
of the company was mainly for carrying on banking business.
Held, scheme of amalgamation has been approved by requisite majority of
shareholders present and voted at statutory meeting convened. Statutory majority
were acting bona fide and scheme of amalgamation was such that intelligent and
honest shareholder of petitioners might reasonably approve. Opposition party did
not seem to be bona fide and for interest of shareholders or petitioners as
Resolution had passed by statutory majority and scheme of amalgamation appears
to be reasonable, feasible and to the interest of shareholders present and
voting in meeting and there was substantial compliance with statutory
requirements of serving notice on shareholders and setting out statements as
required u/s.393 of 1956 Act.
This was well recognised method of re - organisation and reconstruction of
company & there was no wrong in scheme of shareholders approving scheme and
directors are actuated by any sinister motive as sought to be imputed by
opposing group of shareholders.
- Shrikant Bhujaballi Bahirshet and others vs Shamrao Vithal Co-Operative
Bank Limited, Mumbai, 2017 Indlaw MUM 1495
- Re: Equitas Finance Limited, represented by its Chief Financial Officer
Vasudevan S, Chennai and others, 2016 Indlaw MAD 4440
- Aruna Dixit D/o Late Y. D. Dixit v State of Chhattisgarh, Through Chief
Secretary, Chhattisgarh and others, AIR 2015 CHH 170
- Chinmay Premalkumar Gandhi vs Adarsh Multi State Cooperative Bank
Limited, 2013 Indlaw GUJ 945
- Hindustan Commercial Bank Limited and another v British Motor Car
Company (1934) Limited, 2012 Indlaw DEL 528
- Bank of Madura Shareholders Welfare Association v Governor, Reserve Bank
of India, and Others, 2001 Indlaw MAD 25
- Commissioner of Income Tax v Trichy United Bank Limited, 1981 Indlaw MAD
- Himalaya Bank Limited, Kangra vs L. Roshan Lal Mehra, AIR 1961 PUNJAB
- United Bank of India Limited vs United India Credit and Development
Company Limited 1973 Indlaw CAL 52
- Dhuli Venkata Krishna , Student of B.A.,LLB (Hons.) DSNLU,
- Kadimisetty Sai Sreenadh, Student of B.A.,LLB (Hons.) DSNLU,