ABSTRACT

The Economic reforms of 1991 by the government drastically changed the growth of corporate
sector in India. The reforms liberalised corporate laws thereby opening up a smooth but long road
for the development of Indian corporate sector. These laws have encouraged different strategies for
growth and expansion of the business where mergers and acquisition (M&A) have become a norm.
The M&A is a path taken by business enterprises to refocus and expand their competition and
market share.

Needless to say, expediency is an essential element in successful implementation of an M&A. The

growth in number and the need of simpler provisions to expedite the regulatory procedures made it
compelling to introduce new regime of corporate laws with respect to M&A. On this backdrop a
chapter on M&A was included with few important changes in the Companies Act, 2013 as against
the Companies Act, 1956.

The new regime also considered the potential of cross border mergers and did not hesitate to bring
it under the M&A regime for its promotion as well as regulation. Several concepts of new regulations
such as fast track mergers and minority buyout were adopted from the laws of other countries. The
Adjudicatory bodies under the Companies Act, 2013 are overburdened and the composition of those
bodies raises the question as to the ability of it decide the commercial and financial viability of a
given M&A plan. The Companies Act, 2014 also fails to explicitly mention the liabilities and
immunities of the directors of the companies in case of failure of an M&A plan thereby causing the
financial loss to the company. However, only the Companies Act, 2013 cannot make the visible
difference to the current difficulties faced by business enterprise in M&A. There is need for
amendments to competition law and other sectoral laws governing M&A.

Chapter 1

Introduction

1.1 Background

The eroding lines between national and international markets due to the globalization has led the
companies to undergo the process of restructuring of business through strategies such as mergers
and acquisition to ensure their growth in the competition. This race to tap into international market
has also forced the Indian companies to accept and embrace mergers and acquisition as best option
successfully expand their business throughout the world. Mergers and acquisitions vary from
acquisition of market share to restructuring of companies to face global competition. With the
liberalization of the economic and legal environment, the rapid growth of the global economy has
led commercial entities to restructure in a more profitable direction to sustain in global competition
and strengthen business to maximize shareholder value.1

1
'Praveen Medikundam, Current Legal Issues In Mergers, Acquisitions And Take-Overs Of Indian Companies -
Goals for Corporate Law In The Millennium, Mondag, (FEB, 2019 10.20 AM).
Firms today need to be efficient as well as fast growing. It is critical for such business organizations
to have a dominant market position and at the same time be profitable, without which such
organizations believe that they would stop being competitive in the current global economy. Firms
can choose to grow incrementally by enhancing their sales, outputs or both. This kind of growth in a
firm is known as organic growth. However, this kind of growth, although core to a firm may have a
high gestation period and be considered as slow. The counterpart to organic growth is inorganic
growth which can be achieved through mergers, acquisition, alliances, and joint ventures etc.2
Inorganic growth strategy of Mergers and Acquisition (M&A) has become a critical strategic element
for driving business growth. This has increasingly become a dominant mode of growth for firms
seeking competitive advantage in a global market. There are many crucial elements for a business
choose M&A such as to explore a new market or geography, to increase the market shares in an
already established market or to overcome growing competition. Regardless of reasons, it is
essential to mention that in the 21st century global competition scenario. M&A is a necessary tool
for companies to expand their business and grow and can be differentiating factor for a successful
organization.

1.2 Statement of Problems

The expediency is a key for deriving full benefit out of the M&A transaction. In the absence of an
explicit definition for the word "mergers' amalgamation combination controversy arises as to the
and for certain business transaction among companies (such as transaction which is "solely made as
investment" from merger control regulation under CCI (Procedure in Regard to the Transaction of
Business Relating to Combinations) Regulations 2011. The failure of the Competition Act in clearly
stating the authority and jurisdiction of the CCI in relation to M&A among companies which are in
the sectors already governed by respective sectoral regulators creates confusion and also the
regulation by both the sectoral regulator and the CCI makes the M&A procedure cumbersome. As
the Competition Act, 2002 already mandates serving of notice to the CCI prior to the completion of
M&A transaction, the necessity of serving notice to the CCI again under the provision of the
Companies Act, 2013 prior to taking approval for M&A by NCLT makes the procedure time
consuming and also burdens the CCH with unnecessary additional task of replying to NCLT within 30
days from the date of such notice. The extension of jurisdiction of NCLT and the NCLT to adjudicate
the disputes under the Competition Act, 2002 and Insolvency and Bankruptcy Code, 2016 has
severely affected its ability to decide the disputes within the reasonable time thereby leading to
further delay in M&A.

2
Rabi Minakshi, Mergers Acquisitions Corporate Restructuring - Strategies & Practices. 73 – 74
1.3 Research Question

1. Whether the exemption provided under CCI (Procedure in Regard to the Transaction of
Business Relating to Combinations) Regulations 2011 must be interpreted strictly?

2. What is the need and extent of Competition Act, 2002 to be construed harmoniously with
the Companies Act, 2013 to avoid multiplicity of procedures required prior to the approval
of M&A.

3. Whether the Competition Act, 2002 must be amended to clarify explicitly the jurisdiction
and power of the CCI to avoid jurisdictional overlap between other sectoral regulators and
CCI?

1.4 Objectives

1. To critically analyse the provisions of Companies Act, 2013 and Competition Act 2002
concerned with regulation of M&A find out the loopholes and drawbacks.
2. To study the functions of Competition Commission of India and to determine its role
M&A.

3. To examine the role and functions of the NCLT and the NCLAT in completion of M&A
procedures.

4. To propose suggestion and recommendation to enact or amend rules and regulation that
favours M&A.

1.5 Research Methodology

This research methodology is descriptive in nature and is doctrinal. The research will be
based upon secondary sources that are bibliographic research. Various books, articles,
reports and judgments have been relied to know the working of mergers and acquisition in
India.