1980 (10) TMI 165 - HC - Companies Law

Issues Involved:
1. Calculation of the value of assets under Section 2(w) of the Monopolies & Restrictive Trade Practices Act, 1969.
2. Registrability of an undertaking under Section 26 of the Act.
3. Interconnection of undertakings.
4. Inclusion of liabilities and advance tax in the value of assets.
5. Maintainability of the writ petition against a show-cause notice.

Issue-wise Detailed Analysis:

1. Calculation of the Value of Assets:
The court addressed how to calculate the value of assets under Section 2(w) of the Monopolies & Restrictive Trade Practices Act, 1969. The definition of "value of assets" was to be construed by itself and not by relying on other statutes like the Companies Act or the Income-tax Act. The value of assets must be shown in the books of account after making provisions for depreciation, renewals, or diminution in value. The court affirmed that the value of assets includes both free assets and assets subject to a charge or lien. The respondent's argument to deduct liabilities from the value of assets was rejected, emphasizing that the Act's objective is to regulate economic power, not merely to account for liquidation proceedings.

2. Registrability of an Undertaking:
The appeal contested the registrability of the respondent under Section 26 of the Act. The respondent had initially disputed its liability for registration, arguing that neither interconnection was established nor did its assets exceed Rs. 20 crores. The court found that the respondent had indeed crossed the asset threshold and had registered itself under Section 26 following the single judge's judgment. The Union of India sought a decision on merits to clarify the legal position for future cases.

3. Interconnection of Undertakings:
The court examined the interconnection of various undertakings as defined under Section 2(g) of the Act. The Central Government claimed interconnection based on shared management and directorships among the undertakings. The court upheld that the interconnected undertakings' total assets exceeded Rs. 20 crores. The respondent's argument that interconnection should not be based on majority shareholding by a sub-caste was dismissed, as the Union of India clarified that interconnection was based on directorships and management control.

4. Inclusion of Liabilities and Advance Tax:
The court rejected the respondent's plea to exclude the value of investments in subsidiaries from the value of assets. It was clarified that shares held in subsidiaries are investments with value and should be included in the asset calculation. The court also addressed the treatment of advance tax paid, agreeing that it should be excluded from the value of assets as it is no longer available to the company. However, a mere provision for advance tax was considered an asset until actually paid out. The court disagreed with the single judge's view that even a provision for tax should reduce the value of assets.

5. Maintainability of the Writ Petition:
The court upheld the maintainability of the writ petition against the show-cause notice. It was justified on the grounds that the threatened prosecution for non-registration under misconstrued legal provisions warranted judicial intervention. The court found that the respondent's invocation of the court's jurisdiction was appropriate to prevent unjust prosecution.

Conclusion:
The court dismissed the appeal but provided clarifications on the calculation of the value of assets, the inclusion of liabilities, and the treatment of advance tax. It confirmed the interconnection of undertakings based on management control and upheld the maintainability of the writ petition. The respondent's initial non-registrability was validated, but the practical impact was nullified as the respondent had subsequently registered under the Act. No costs were awarded.

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