1983 (1) TMI 217 - HC - Companies Law

Issues Involved:
1. Amalgamation of companies under sections 391 and 394 of the Companies Act, 1956.
2. Compliance with the Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act).
3. Objection by the Union of India regarding the need for Central Government approval under the MRTP Act.
4. Determination of whether the companies involved are interconnected undertakings under the MRTP Act.

Detailed Analysis:

1. Amalgamation of Companies under Sections 391 and 394 of the Companies Act, 1956:
The petitioners in Company Petition No. 684 of 1981 (Swastik Textile Mills Ltd., referred to as "the transferor company") sought amalgamation with the petitioners in Company Petition No. 685 of 1981 (Apte Amalgamations Ltd., referred to as "the transferee company"). The authorized capital of the transferee company is Rs. 2,00,00,000, and its paid-up capital is Rs. 82,50,000. The transferor company was incorporated on October 22, 1946, and carried on business in processing textile goods. The transferee company was incorporated on March 8, 1933, and its main business was manufacturing sugar. The managements of both companies considered it desirable to amalgamate to improve business operations. A scheme of amalgamation was formulated and agreed upon by the requisite majority of members of both companies. The requirements of sections 391 to 394 of the Companies Act, 1956, were duly carried out, and the official liquidator reported that the affairs of the transferor company were not conducted prejudicially to the interest of its members or public interest.

2. Compliance with the Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act):
The Union of India, represented by Mr. Rao, raised an objection under section 394A of the Companies Act, arguing that the amalgamation could not be sanctioned without approval from the Central Government under section 23 of the MRTP Act. Mr. Rao contended that the transferor and transferee companies were undertakings to which the provisions of Chapter III, Part 'A' of the MRTP Act applied. Therefore, no scheme for merger or amalgamation could be sanctioned by the court without Central Government approval, which had not been sought or granted in this case.

3. Objection by the Union of India:
The objection by the Union of India was based on the premise that the amalgamating companies were undertakings under the MRTP Act. The relevant provisions cited included sections 20 and 23 of the MRTP Act, which stipulate that no merger or amalgamation of undertakings with assets exceeding Rs. 20 crores could be sanctioned without Central Government approval. The Union of India's affidavits, filed by Sarendra Kumar, claimed that 13 companies, including the transferor and transferee companies, were interconnected, and their combined assets exceeded Rs. 20 crores.

4. Determination of Interconnected Undertakings:
The court examined whether the companies were interconnected as defined under the MRTP Act. The affidavit by Sarendra Kumar on January 13, 1983, provided factual particulars supporting the claim of interconnection. However, the court found that the allegations lacked specific factual bases. For instance, the claim that M.S. Hardikar, a director of Apte Industrial and Management Services and chief executive of Laxmi Vishnu Textile Mills, indicated interconnection was unsupported by evidence of actual control or direction by Laxmi Vishnu Textile Mills. The court rejected the contention that mere positions held by individuals could establish interconnection without concrete instances of control or direction.

Conclusion:
The court concluded that the objection by the Union of India was not substantiated by sufficient factual evidence. The affidavits filed by the Union of India failed to demonstrate that the companies involved were interconnected undertakings under the MRTP Act. Therefore, the court sanctioned the scheme of amalgamation as prayed for in both petitions.

In Company Petition No. 684 of 1981, there was an order in terms of prayers (a) to (e) of the petition, and in Company Petition No. 685 of 1981, there was an order in terms of prayers (a) to (d) of the petition.

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