1971 (3) TMI 129 - HC - Companies Law

Summary

Issues Involved:
1. Whether the scheme of amalgamation required prior approval from the Central Government under Section 23(1) of the Monopolies and Restrictive Trade Practices Act, 1969 (Monopolies Act).
2. Whether the old Central Bank was an "undertaking" engaged in the provision of service under Section 2(v) of the Monopolies Act.
3. Interpretation of the term "undertaking" in Section 23(1) of the Monopolies Act.

Detailed Analysis:

1. Requirement of Central Government Approval under Section 23(1) of the Monopolies Act:
The main dispute revolves around the provisions of Section 23, particularly sub-section (1), of the Monopolies Act. Section 23(1) states that no scheme of merger or amalgamation of an undertaking to which Part A of Chapter III applies with any other undertaking shall be sanctioned by any court unless the scheme has been approved by the Central Government under the Act. The court examined whether the old Central Bank and Telco fell under the categories described in Section 20, which would necessitate such approval.

2. Status of the Old Central Bank as an "Undertaking":
Mr. Bhabha argued that the old Central Bank was an "undertaking" under Section 2(v) of the Monopolies Act because it had the capacity to carry on business activities such as investment, underwriting, and guaranteeing, even after its banking business was nationalized. He pointed to various activities and powers in the old Central Bank's memorandum of association to support this claim. However, the court found that mere legal capacity to carry on business does not equate to actually being "engaged in" such business. The court noted that the old Central Bank's activities post-nationalization, such as receiving compensation and making deposits, did not amount to carrying on business. Therefore, the old Central Bank was not an "undertaking" engaged in the provision of service at the material time.

3. Interpretation of "Undertaking" in Section 23(1):
The court examined whether the term "undertaking" in the phrase "any other undertaking" in Section 23(1) should be interpreted according to its definition in Section 2(v) or its ordinary dictionary meaning. Mr. Bhabha argued for the latter, suggesting that the context of preventing concentration of economic power required a broader interpretation. However, the court held that the term "undertaking" should be interpreted as defined in Section 2(v), as there was no repugnancy or inconsistency in applying this definition in Section 23(1). The court emphasized that the Monopolies Act distinguishes between an "undertaking" and its "owner" and that the context did not necessitate a departure from the statutory definition.

Conclusion:
The court concluded that the old Central Bank was not an "undertaking" engaged in the provision of service under Section 2(v) of the Monopolies Act. Consequently, the scheme of amalgamation did not require prior approval from the Central Government under Section 23(1) of the Monopolies Act. The appeals were dismissed with costs, but the respondents agreed not to enforce the cost order if the appellants did not file an appeal to the Supreme Court within eight weeks.

Miscellaneous:
The court noted that although the appellants were not made parties to the petitions before the company judge, the respondents waived their objection to the maintainability of the appeal. Therefore, the court did not address this point, leaving it open for future consideration. Additionally, the respondents agreed not to implement the order sanctioning the scheme of amalgamation before 24th April 1971, following the appellants' request for a stay.