1993 (2) TMI 235 - Commission - Companies Law

Unfair trade practices - Whether failure to mention circumstances of pendency of winding up petition and a suit instituted against company for recovery of a substantial amount of money in company s prospectus, amounted to an unfair trade practice - Held, yes

Summary

Issues:
Violation of Monopolies and Restrictive Trade Practices Act, 1969 by a public limited company in a public issue.

Analysis:
The judgment involves an application under section 12 A of the Monopolies and Restrictive Trade Practices Act, 1969, seeking a temporary injunction against a respondent-company's public issue. The complaint alleged that the public issue was tainted by misrepresentations and suppression of material facts, constituting unfair trade practices. The respondent-company, engaged in courier services, faced litigations by TNT Skypak, which were not disclosed in the prospectus. The respondent's defense included challenging the complainant's bona fides and claiming that the litigations did not affect the company's operations or finances.

The Commission found that the omission of litigations in the prospectus prima facie attracted section 36A as unfair trade practices. The failure to disclose the winding-up petition and pending suit threatened transparency and misled prospective buyers. The Commission emphasized the importance of disclosing all material facts to allow buyers to make informed decisions. Despite the issue already being open, the Commission granted an ad interim injunction to prevent the use of funds from the public issue until the completion of share allotment or the inquiry's disposal.

The judgment highlighted the necessity of transparency in public issues and the duty to disclose all relevant information to protect the interests of prospective buyers. The Commission's decision to grant an ad interim injunction aimed to safeguard the public from potential harm arising from the lack of disclosure in the prospectus. The judgment refrained from making final conclusions on all aspects but emphasized the significance of disclosing material facts for the benefit of investors and maintaining fairness in trade practices.