Final law 12

Law presentation BY (GROUP7)

VINOD JAISHYRONAK PUROHITJATIN AGARWALUTKARSH BHATNAGAROM PRAKASHLALJI TIWARIANKIT JAIN

ContentsALTERNATIVE DISPUTE RESOLUTIONEFFICACY OF ADRMECHANISM OF ADRARBITRATIONCONCILIATIONRECONSTRUCTION & AMALGAMATIONMERGERS AND ACQUISITIONS WINDING UP

Alternative Dispute Resolution(ADR) refers to:

Process other than judicial determination, In which an impartial person, assists those in dispute, to resolve the issue between them

EFFICACY OF ADR

 ADR can be speedier

ADR can save money 

ADR can permit more participation

ADR can be flexi+

ADR can be cooperative

ADR can be more satisfying

DISADVANTAGES OF ADR

Second class justice

Encourages compromise

Settlement are private and not in public record or

expose to scrutiny.

The four commonly known dispute resolution methods are:

ARBITRATION

CONCILIATION

MEDIATION

NEGOTIATION

MECHANISM OF ADR

ARBITRATION

The Indian Parliament inthe 47th year

of the Republic has enacted

The Arbitration and Conciliation Act, 1996

(to establish a unified legal framework for the fair and efficient settlement of disputes arising in international trade relations)

As per Section 2(1)(a) of the Act, “ arbitration” means

Any arbitration,Whether or not administeredBy the permanent arbitral institution

To comprehensively cover international and domestic arbitration and conciliation.

To make provision for an arbitral procedure which is fair, efficient and capable of meeting the needs of the specific arbitration.

To minimize the supervisory role of Courts in the arbitral process.

Objectives of the Act

Essentials of arbitration agreement It must be in writing though it need not be contained in a

formal document It must have all essential elements of a valid contract and

the parties must be ad idem. It must be refer to a dispute, present or future, between the

parties to arbitration. It may be in the form of an arbitration clause in a contract

or in the form of a separate agreement. Stamp duty is chargeable on an agreement to refer a dispute

to arbitration.

A dispute arose among A, B and C, three neighbors, on the distribution of wages paid to the street watchman. A and B decided to refer the dispute to X for arbitration. C never gives his consent to the arbitration. X, by an award, fixed the liability of A, B and C to contribute wages in the ratio of 3:2:2.Is the award binding on C ? is award dependent on C

No, as C had not given his consent to refer the dispute toarbitration.

CONCILIATIONIt means bringing the opposite parties or individuals

into an undisputed territory of harmony.

It may:Advise or determine the process of conciliation

whereby resolution is attempted,Make suggestions for terms settlement,Give expert advice or likely settlement terms, and Actively encourage the participants to reach an

agreement.

Commencement of Conciliation ProceedingsInvitation : The party initiating conciliation shall send to the other party a

written invitation to conciliate, briefly identifying the subject of the dispute.

Conciliation shall commence when the other party accepts in writing the invitation to conciliate

If the other party rejects the invitation, there will be no conciliation proceedings.

Rejection:

If the party initiating the conciliation does not receive a reply

within 30 days from the date on which he sends the invitation, or within such other period of time as specified in the invitation, he may elect to treat this as a rejection of the invitation to conciliate and if he so elects, he shall inform in writing the other party accordingly.

RECONSTRUCTION & AMALGAMATION

Sections 394 and 395 provide for facilitating Arrangements for the purpose of ‘Reconstruction’ or ‘Amalgamation’ of companies .

The term Reconstruction implies the formation of a new company to take-over the Assets of an existing company with the idea that the persons interested and the nature of business substantially remains the same .

The term Amalgamation is taken to mean as the union of two or more companies , so as to form a third entity or one company is absorbed into another company .

PROCEDURE TO BE FOLLOWEDSec.394

Approval of scheme by holders of three-fourths in value of shares

Courts Sanction

Transfer of the undertaking,property,liabilityAllotment or appropriation of any shares,debentures,policiesLegal proceedingsDissolution of transferor company

Certified copy of Tribunal order to be filed with registrar

Acquisition of Shares of dissenting shareholdersSec.395

Scheme may involve transfer of sharesApproval of holders not less than 9/10ths value of shares required within 4 monthsRight to acquire the shares of dissenting shareholdersNotice to dissenting shareholdersRegistration of transferee company as holder of shares in transferor companyDeposit of money received into a separate bank account

Amalgamation of Companies in National Interestsec396

If the central govt. is satisfied that it is essential in the public interest that two or more companies should be Amalgamated .

the order aforesaid may provide for the continuation by or against the transferee company of any legal proceedings pending by transferee company.

Every member , debenture holder or any other creditors of the Amalgamation companies , continue to have the same interest in the new company

Mergers and Acquisitions

Merger- A merger is a combination of two or more businesses into one business.

Acquisition- A corporate action in which a company buys most, if not all, of the target company's ownership stakes in order to assume control of the target firm. 

for example Bharti Airtel acquired Kuwait based Zain Telecom's African business for USD 10.7 billion

Laws in India for MergingIncome Tax Act,1961 [Section 2(1A)]

Laws in India use the term ‘AMALGAMATION’ for merger

All assets and liabilities of the amalgamating companies become assets and liabilities of the amalgamated company.

Companies become shareholders of the amalgamated company.

Forms of Merger Merger through Absorption:- An absorption is a combination of

two or more companies into an 'existing company'. All companies

except one lose their identity in such a merger

Merger through Consolidation:- A consolidation is a

combination of two or more companies into a 'new company'. In

this form of merger, all companies are legally dissolved and a new

entity is created

Examples:Absorption:For example, absorption of Tata Fertilizers Ltd (TFL) by

Tata Chemicals Ltd. (TCL). TCL, an acquiring company (a buyer), survived after merger while TFL, an acquired company (a seller), ceased to exist. TFL transferred its assets, liabilities and shares to TCL.

Consolidation:For example, merger of Hindustan Computers Ltd,

Hindustan Instruments Ltd, Indian Software Company Ltd and Indian Reprographics Ltd into an entirely new company called HCL Ltd.

Types of Merger HORIZONTAL MERGER For example, combining of two book publishers or two

luggage manufacturing companies to gain dominant market share.

VERTICAL MERGER  For example, joining of a TV manufacturing(assembling) company

and a TV marketing company or joining of a spinning company and a weaving company.

When a company combines with the supplier of material, it is called backward merger and when it combines with the customer, it is known as forward merger.

CONGLOMERATE MERGER For example, merging of different businesses like manufacturing

of cement products, fertilizer products, electronic products, insurance investment and advertising agencies. L&T and Voltas Ltd are examples of such mergers.

Winding Up Winding up of a company is the process whereby

its life is ended and its property administered for the benefit of its creditors and members.

Modes of Winding up -

compulsory winding up ie., by Court (s.433) voluntary winding up; (s 484) voluntary winding up subject to the

supervision of the Court.(s 522)

Compulsory winding upSection 433 provides that a company may be wound up by the Court : if the company has, by special resolution, so resolved

if default is made in delivering the statutory report to the Registrar

if the company within a year from its incorporation, or does not commence its business suspend its business for a whole year

if the number of members is reduced- in the case of a public company, below 7, and in the case or a private company, below 2 if the company is unable to pay its debts

if the Court is of the opinion that it is just and equitable

Case:GERMAN DATE COFFEE COMPANY Object clause of the

company stated that it was form for the working of a German patent which would be granted for making a partial substitute for coffee from dates and for the acquisition of invention thereto and also other inventions for similar purposes. The German patent was never granted but the co. did acquire and work a Swedish patent and carried on business at Hamburg where a substitute coffee was from dates but not under the protection of patent.

The objects of the company were specific in that it was to make coffee from dates using a German patent. The patent was never granted and coffee was made with a Swedish patent. the company was solvent and the majority of shareholders wanted it to continue. However two shareholders petitioned for a winding up on the grounds that its objects had failed.

Voluntary Winding upVoluntary Winding up - Winding up by the members or creditors

without any intervention of the Court is called voluntary winding up.

As per section 484, a company may be wound up voluntarily by Ordinary resolution or by Special resolution

Types of Voluntary Winding up - Voluntary winding up may be of two types, namely,

a) Members’ voluntary winding up

b) Creditors’ voluntary winding up

Members’ Voluntary Winding up –

Members’ voluntary winding up is possible only in case of solvent companies.

Creditors’ voluntary winding up -

Where the Board of directors does not file a declaration as to solvency of the company, the voluntary winding up is called ‘ the Creditors ‘ voluntary winding up.

Winding up under supervision of the court

A voluntary winding up may be effected under supervision of the Court where an application to that effect is made by a creditor or a contributory or the company or the liquidator and the Court makes an order that the voluntary winding up should continue subject to the supervision of the Court.

Referenceswww.investopedia.comwww.indiancourts.nic.inElements of mercantile law ( N D KAPOOR)

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