Analysing Amalgamation in India

Arjun Chakladar and Devanshi Prasad


Amalgamation, as a construct refers to the process wherein multiple entities combine into one finalized unit or structure. In the wide spectrum of the business world and the context of the corporate ecosystem, amalgamation is merely the process of consolidation where independent and separate business entities unite or combine in order to form an entirely distinct entity.[1]

The process of amalgamation can transpire in one of two fashions, one being the literal construct of the process where two or more companies combine to form an entirely new business entity.[2] The second being the process of absorption,[3] whereby the preceding entity now ceases to exist, as the absorbing company has imbibed all its assets, liabilities as well as ownership.[4]

As a concept, the Scheme of Amalgamation was first introduced in India by the advent of the Companies Act, 1956.[5] The same was codified under sections 390 to 396A of Chapter V of Part VI of the said Act. Though the 1956 Act did not define either of the two terms, the two words “merger” and “amalgamation” were used interchangeably. Any merger of the transferor companies into the transferee company was to be effectuated only when such process did not contravene to public interest.[6]

The implementation of the Companies Act, 2013[7] replaced and transformed the prior 1956 Act. An attempt was made to revitalize the subsisting corporate legal mechanism relating to mergers and acquisitions under the new Act. This Act modified and eliminated any complexities, ensuring the smooth functioning of the statutory device of mergers and amalgamation.

Although no concrete definition is provided for the term ‘merger’ in the 1956 act, it can be understood as a combination of two or more entities into one. The desired by-product of such organization of separate institutions into a singular business unit is the accumulation of their individual assets and liabilities. Amalgamation on the other hand is defined under section 2(1b) of Income Tax Act, 1961[8] as a merger of one or more Companies with another Company or merger of two or more Companies to form a new Company.

1956 Act vs. 2013 Act

One of the major changes brought about by the fresh Act was the entrustment of the National Company Law Tribunal with the ability to ratify any arrangement under Sections 230 to 240 of the aforementioned Act;[9] a power initially vesting solely with the High Courts under the old Act. This can be said to have paved the way for the recognition of fast track mergers between small companies, an important faceted change brought in by the amendment, without the mandatory involvement of the Courts and Tribunals for such small-scale mergers and acquisitions. It provides enterprises with an accelerated solution to their commercial issues with the purview of improving their holistic working condition and position in the business sector.

The 1956 Act was silent on the requirement of any valuation report but the freshly implemented Act made it mandatory to disclose such a report to the stakeholders. The codification safeguards good corporate governance and creates transparency in the process of mergers and acquisitions, in order to ensure abidance of a uniform standard.

Changes were also made to widen the scope of cross-border mergers with the Scheme of Arrangement being expanded to give effect to outbound mergers. Previously under the 1956 Act, only inbound mergers were allowed i.e., a foreign company could legally merge into an Indian company. Under the 2013 Act, an Indian Company looking to diversify their field of business in order to increase the value of their enterprises so as to limit foreign competition, could also merge into a foreign company with RBI approval. This gives domestic organizations an opportunity to enter into the foreign markets and play with the bigger international units so as to establish their might in the global scheme of corporate and commercial environment.

India’s commercial environment benefitted hugely from the aforementioned revolutionary changes brought in by the amending Act of 2013. The process led to an increase in the availability of resources at the disposal of the transferor companies increasing scales of economies and thereby ensuring rapid growth of our business sector.

A prevalent feature of the 1956 Act that remains unaltered in the amended incumbent act pertains to the power given to the Central Government empowered with the role of the Official Liquidator (OL) or the Regional Director in the Ministry of Company Affairs; to order mergers and amalgamations in the interest of the nation.[10] This feature was retained in order to safeguard the interests and welfare of society as a whole while protecting it from self-serving private individuals sitting at the head of large companies. In recent times improvements have been made all due the fast tracking of decisions owing to the technological revolution known as the rise of ‘Digital India’ in contemporary times.

Important Amalgations

For the first time in 2014, the Ministry of Corporate Affairs had initiated as well as invoked the amalgamation of National Spot Exchange Limited and its holding company Financial Technologies Limited (now officially “63 Moons”) under section 237 of the 2013 Act so as to revive and repay the investors of the prior company.[11]

In 2017, India recorded over 1,000 major mergers and acquisitions, and in the past few years there has been a surge of mergers and acquisitions such as the Idea-Vodafone Merger which would make it one of the largest cellular networks in India. Online retailers have also engaged in the process such as Flipkart and Myntra, Snapdeal and Freecharge and even Ola and TaxiForSure, widening the scope for each of their respective markets.                                    

The driving force of the corporate world is the desire for any form of profit. Now how does the process of amalgamation ensure profit for the new combined business identity? The best example till date of amalgamation in the context of India is the Maruti Suzuki amalgamation in 1981.  This amalgamation not only changed the future of both respective entities, but gave India one of its undisputed leading automobile manufacturers, Maruti Suzuki Limited. Maruti Udyog gained superior Japanese Technology for the manufacturing of automobiles, and Suzuki Motor Corporation gained access to a diverse market, which currently is one of the largest consumers of automobiles in the world. The two distinct entities together, revamped from an Indian government owned company and a Japanese car company to an automobile giant in the Indian subcontinent and have ruled the market absolutely, capitalizing on their individual strengths such as Japanese technology and an untapped vast domestic market, brought together by Amalgamation.


In conclusion, Amalgamation as a concept in the Indian context has evolved from a mere codification in the early decades of our country’s independent history to a new generation where Indian markets have become a game-changer in today’s corporate global economy.

This transformation of the incumbent act remodeled any associative process regarding mergers, making it a desirable option to various enterprises seeking an expeditious remedy in relation to commercial obstacles and hindrances such as the aversion from long, drawn-out litigations. 

Since the inception of the Companies act, it has reconstructed into an integral and indivisible part of the Indian business sector and plays one of the most influential role in regulating both domestic and international activities of the economic sector. Courts have held that any amalgamation procedure is to be done in a prudent and bona fide manner reasonable to any ‘man of business’ and in adherence to all provisions of the statute.[12] Amalgamation was codified in India’s independent history and since 1956 it has provided potential as well as a platform to corporations seeking favourable outcomes through regulating and restructuring their businesses in order to improve their surrounding operations and organizations.

The authors are 3rd Year Students of NLIU, Bhopal

[1] Dheeraj Vaidya, Amalgamation vs Merger, Wall Street Mojo,

[2] Id.

[3] Amalgamation explained in detail, Edupristine (Jan. 11, 2018),

[4] Id.

[5] The Companies Act, 1956, No. 1, Acts of Parliament, 1956 (India).

[6] Hindustan Lever Employees’ Union v. Hindustan Lever Ltd., (1995) Supp. 1 S.C.C. 499,

[7] The Companies Act, 2013, No. 18, Acts of Parliament, 2013 (India).

[8] Income Tax Act, 1961, No. 43, Acts of Parliament, 1961 (India).

[9] Karan Gandhi and Mukesh Arora, Key Comparison Between Companies Act, 1956 & Companies Act, 2013 – Merger & Amalgamation Perspective, Mondaq (Jul. 14, 2015),

[10] Narendra Kumar, Merger Amalgamation Companies Act, 2013, ENTERSLICE (Aug. 28, 2017),

[11] Unnita Bhattacharya and Asis Panda, Analysis of Section 396 of the Companies Act, 1956 in the light of NSEL merger order, Novo Juris (May 21, 2019),

[12] Miheer H. Mafatlal v. Mafatlal Industries Ltd., (1997) 1 S.C.C. 579,