Power of central government for amalgamation of companies in the public interest

Every person in the entire nation wants to earn more and more profit as much as possible. When one does not fit into one’s own undertaking, he tries to do something better than can be possible. In the corporate world, many companies amalgamate into one another to get the benefits out of it. They generally share resources, management, and technology with one another. The companies merge or amalgamate for their benefit only but the government has the power to amalgamate two or more two companies for the public interest. The companies amalgamating through amalgamation in the public interest have to follow certain requirements before amalgamating. The central government has the power to amalgamate two or more companies in the public interest under the aegis of section 237 of the Companies Act 2013. It is under the provision of compulsory amalgamation by the central government to amalgamate two or more two companies in the public interest. This article has been authored with the purpose of providing insight pertaining to such by examining the driving force behind such amalgamations, legal procedures followed to execute the same, and examining the same through the lens of case studies. 


Amalgamation is the process of combining two or more two companies into a single entity. The process involves transferring of assets, liabilities and other things from the transferor company to transferee company. There are many reasons for the amalgamation of companies, these are saving resources, saving costs, sharing management in which one lacks, sharing technology, and gaining a greater advantage. Companies merge generally to get their benefit but in case of amalgamation in the public interest, it is compulsorily by the government to the companies. Accounting standard 14 deals with accounting for amalgamation and the treatment of the resulting goodwill or reserves. It basically applies to companies who want to amalgamate but some of its requirements are also applicable to the financial statements of other companies.   It does not cater to the cases where acquisition takes place. Whenever any company goes for amalgamation it should follow the requirement as provided in AS-14.


Amalgamation in the public interest is defined in section 237 of the Companies Act, 2013. It is different from a normal amalgamation of companies which is generally done for companies  own benefit but in case of amalgamation in the public interest is done for general public welfare. It is a forced amalgamation of companies. This scheme should be beneficial to every shareholder and creditor of the company and also the welfare and interest of the public is taken into utmost consideration before entering into any such scheme.

Public interest as per Black’s Law Dictionary, is defined as something wherein the public and community have pecuniary or any interest by which the legal rights and liabilities of communities are affected. This definition provides for a broader aspect of public interest. As per Companies Act 2013, the term public interest has been recognized in provisions  62 (4),129,210,221,233(5) and 237 in the Act . so, under the company law, public interest shall be given precedence even though the approval of the management and stakeholders are provided for the scheme of amalgamation. Section 237 provides the central government the power  for amalgamation of companies in the public interest. If the central satisfied that it is in the public interest, where two or more companies amalgamate into a single entity ,with such constitution, property, rights, powers, interests, privileges, liabilities and obligations as specified in the order by the government, then such amalgamation is considered to be valid and in the interest of public. Every member of the amalgamating company must be given equal, or near to equal, interest and rights in the amalgamated company as he/she originally held in the amalgamating company. In case any of such conditions is not complied by the amalgamated company, the member has the right to claim compensation from the amalgamated company. To enforce the order of amalgamation by the Central Government, a copy of order must be provided to the companies concerned; and modifications suggested or objected to by the concerned companies are considered by the government in the draft order.

In order to exercise power provided to the government under Section 237 of Companies Act 2013, the government should be satisfied that two or more companies need to be merged for the interest of the public or in case it becomes an essential requirement for the same. The government in any case cannot force a healthy company to merge with an unhealthy company just to benefit the latter. This does not amount to public interest but a forced merger. Forced merger does not count under public interest.


These are the following steps to be followed by the companies for amalgamation under section 237 of the Companies Act,2013.

·         The first and foremost is to conduct a board meeting where it resolves to amalgamate with the other company.

·         In the second step, the application must be filed in the stock exchange and shall obtain the approval letter from the stock exchange.

·         The company shall make an application to the NCLT (National Company Law tribunal of the relevant jurisdiction under form -1. Such application is to be accompanied by Form No. NCLT-2 (notice of admission), affidavit in Form no. NCLT-6, a copy of the scheme of amalgamation, Fees prescribed in the Schedule of Fees, and the companies shall disclose to NCLT the basis on which each class of creditor or member is identified for the approval of the scheme. It should be noted that it is at the concerned companies’ discretion if they want to make a joint application.

·         A notice of the meeting shall be sent to all the members or class of creditors and debenture holders of the company in prescribed form no. CAA2, by a chairperson appointed for the meeting. The notice shall be appointed by a copy of the scheme of amalgamation disclosing the effect of amalgamation and the statement disclosure of the effect of amalgamation upon directors, key managerial personnel, and debenture trustee; investigation of proceedings; details of prescribed documents for inspection by members and creditors; details of sanctions, approvals and NOCs from regulatory or other authorities required for the scheme of amalgamation; and a statement to the effect about the persons voting or in the meeting either in person or proxy.

  • Advertisement for notice of meeting as per Form No. CAA 2 in one English newspaper and one vernacular newspaper. A copy of the notice shall also be provided on the website of the company. Also, it is at the discretion of the companies to give a joint advertisement of notice.
  • Notice to statutory authority– notice along with a copy of the scheme shall be sent to the Central Government, IT authorities, RBI, Registrar of Companies (Form GNL- 1), Official Liquidator, Competition Commission of India, and other relevant authorities. This notice is sent under Form No. CAA 3.
  • Affidavit of service– an affidavit shall be filed before NCLT not less than seven days before the date fixed for the meeting or date of the first meeting, stating that the directions with respect to the issue of notice and advertisement shall be complied with.
  • A meeting of members and creditors shall be convened to accord the sanction of the scheme. The scheme shall be approved if three-fourths of the persons, consisting of creditors or class of creditors and member or class of members agree to it. The chairperson must file the Report in Form No. CAA 4 with NCLT within 3 days from the conclusion of the meeting.

·         Order on the petition– upon the agreement over the scheme by the members and creditors, the company shall file Form No. CAA 5 before NCLT within 7 days from the Chairperson’s report. NCLT shall fix the final date of the hearing. The advertisement should be made in the same newspaper as the notice in Form No. CAA 2. Approval from RBI and other authorities shall be obtained. The NCLT will pass a final order in Form no. CAA 7.

·         Post-Final order compliances– stamp duty as affirmed in the State Stamps Duty Acts shall be complied with. On receiving of final order’s certified copies, the company shall file such certified copies before ROC within 30 days from its receipt in Form INC-28 along with acknowledgment of Fee payment to the Official Liquidator and Regional Director. Shareholders shall be allotted shares as per the scheme; the application must be made to stock exchanges about the listing of new shares issued as consideration; intimation should be made to stakeholders regarding the effectiveness of the Scheme of amalgamation.


So, public interest is given a very wide understanding under company law. Here, the main focus is on the public interest. Apart from that, there should be welfare for all the members of the company. The company before amalgamation has to meet all the requirements provided under the company law. Also the company is required to take permission from NCLT.


Section 237 of Companies Act 2013

Section  62 (4),129,210,221,233(5) and 237 in the Act .

https://ca2013.com/237-power-of-central-government-to-provide-for-amalgamation-of-companies-in-public-interest/#:~:text=(1)%20Where%20the%20Central%20Government,such%20 constitution%2C%20 with%20such%20property%2C

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