1994 (9) TMI 236 - Commission - Companies Law

Jurisdiction of Commission Restrictive Trade Practices - Exceptions to power of inquiry Temporary injunction - Power of Commission to grant Trade practice - Meaning of

Issues Involved:
1. Jurisdiction of the MRTP Commission.
2. Validity of the proposed scheme of amalgamation.
3. Grant of interim injunction.
4. Impact on competition and public interest.
5. Legal implications of the amendments to the MRTP Act.

Issue-wise Detailed Analysis:

1. Jurisdiction of the MRTP Commission:
The respondents raised several preliminary objections questioning the jurisdiction of the MRTP Commission to entertain the complaint. They argued that the proposed amalgamation does not constitute 'trade' or 'trade practice' under the MRTP Act and that the Commission's jurisdiction was nullified by the deletion of sections 20 to 26 of the MRTP Act in 1991. Additionally, they contended that the scheme of amalgamation falls exclusively under the jurisdiction of the Company Court as per the Companies Act, 1956.

The Commission, however, held that its jurisdiction to scrutinize the anti-competitive effects of the scheme remains intact. The powers and functions of the Company Judge under the Companies Act and those of the Commission under the MRTP Act are distinct. The Commission can examine the implications of the scheme on competition even after it has been sanctioned by the Company Court.

2. Validity of the Proposed Scheme of Amalgamation:
The complainants argued that the merger between HLL and TOMCO would eliminate competition in the market for soaps and detergents, leading to monopolistic practices and exploitation of consumers. They also alleged that the share price ratio was heavily loaded in favor of HLL and that the preferential allotment of shares to Unilever was discriminatory.

The Commission noted that the scheme of amalgamation is subject to the sanction of the Company Court and may undergo modifications. It emphasized that the Commission has the authority to scrutinize the scheme's potential anti-competitive effects and its impact on public interest.

3. Grant of Interim Injunction:
The complainants sought an interim injunction to restrain the respondents from implementing the proposed scheme during the pendency of the enquiry. The Commission declined to grant the injunction, stating that the scheme had not yet come into existence and was still subject to the Company Court's sanction. It also noted that issuing an injunction would interfere with the statutory jurisdiction of the Bombay High Court.

Moreover, the Commission highlighted that the undertaking offered by HLL, as incorporated in the scheme and approved by the Bombay High Court, provided sufficient safeguards for consumer interests during the enquiry.

4. Impact on Competition and Public Interest:
The Commission acknowledged the complainants' concerns about the potential anti-competitive effects of the merger. However, it emphasized that the assumptions regarding the merger's impact on competition and public interest needed to be tested through evidence. The Commission noted that mergers are not inherently anti-competitive and can have countervailing advantages such as economies of scale and innovation.

The Commission decided to conduct a thorough enquiry to determine whether the merger would lead to monopolistic or restrictive trade practices and whether it would be prejudicial to public interest.

5. Legal Implications of the Amendments to the MRTP Act:
The respondents argued that the 1991 amendments to the MRTP Act, which deleted sections 20 to 26, removed the Commission's power to review proposed mergers and amalgamations. They contended that the Commission could only make orders under sections 27 and 27A of the MRTP Act after the merger had taken effect.

The Commission rejected this contention, stating that the amendments did not take away its power to examine the anti-competitive effects of mergers and amalgamations. The Commission retains the authority to scrutinize such schemes under the MRTP Act and can make appropriate orders based on its findings.

Conclusion:
The Commission dismissed the application for interim injunction but directed that a Notice of Enquiry be issued against the respondents under section 10(a)(i) and (iv) read with sections 2(o) and 33(1) and section 37 as well as sections 27 and 27A of the MRTP Act. The enquiry will examine the potential anti-competitive effects of the merger and its impact on public interest. The Commission will abide by any conclusions reached and orders passed by the Supreme Court in related proceedings.

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