1. Law presentation BY (GROUP7) VINOD JAISHY RONAK PUROHIT JATIN AGARWAL UTKARSH BHATNAGAR OM PRAKASH LALJI TIWARI ANKIT JAIN
2. Contents ALTERNATIVE DISPUTE RESOLUTION EFFICACY OF ADR MECHANISM OF ADR ARBITRATION CONCILIATION RECONSTRUCTION & AMALGAMATION MERGERS AND ACQUISITIONS WINDING UP
3. 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
4. EFFICACY OF ADR ADR can be speedierADR can save moneyADR can permit more participationADR can be flexi+ADR can be cooperativeADR can be more satisfying
5. DISADVANTAGES OF ADR Second class justice Encourages compromise Settlement are private and not in public record or expose to scrutiny.
6. MECHANISM OF ADRThe four commonly known dispute resolution methodsare:ARBITRATIONCONCILIATIONMEDIATIONNEGOTIATION
7. ARBITRATIONAs per Section 2(1)(a) of the The Indian Parliament in the 47th yearAct, “ arbitration” means of the Republic has enactedAny arbitration, The Arbitration and Conciliation Act, 1996Whether or not administered (to establish a unified legalBy the permanent arbitral framework for the fair and efficient settlement ofinstitution disputes arising in international trade relations)
8. Objectives of the Act 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.
9. 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.
10. A dispute arose among A, B and C, three neighbors, onthe distribution of wages paid to the street watchman. Aand B decided to refer the dispute to X for arbitration. Cnever gives his consent to the arbitration. X, by anaward, fixed the liability of A, B and C to contributewages in the ratio of 3:2:2.Is the award binding on C ? is award dependent on CNo, as C had not given his consent to refer the dispute toarbitration.
11. 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.
12. 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.
13. 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 .
14. PROCEDURE TO BE FOLLOWED Sec.394Approval of scheme by holders of three-fourths in value of sharesCourts SanctionTransfer of the undertaking,property,liabilityAllotment or appropriation of any shares,debentures,policiesLegal proceedingsDissolution of transferor companyCertified copy of Tribunal order to be filed with registrar
15. Acquisition of Shares of dissenting shareholdersSec.395 Scheme may involve transfer of shares Approval of holders not less than 9/10ths value of shares required within 4 months Right to acquire the shares of dissenting shareholders Notice to dissenting shareholders Registration of transferee company as holder of shares in transferor company Deposit of money received into a separate bank account
16. Amalgamation of Companies in NationalInterestsec396 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
17. 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 companys ownership stakes in order to assume control of the target firm. for example Bharti Airtel acquired Kuwait based Zain Telecoms African business for USD 10.7 billion
18. 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.
19. 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
20. 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.
21. 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 andVoltas Ltd are examples of such mergers.
22. 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)
23. Compulsory winding up Section 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
24. 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.
25. Voluntary Winding up Voluntary 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 resolutionTypes of Voluntary Winding up - Voluntary winding up may be of two types, namely, a) Members’ voluntary winding up b) Creditors’ voluntary winding up
26. 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.
27. Winding up under supervision of thecourt 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.
28. References www.investopedia.com www.indiancourts.nic.in Elements of mercantile law ( N D KAPOOR)