1982 (9) TMI 243 - HC - Indian Laws

Summary

Issues Involved:
1. Whether the requirements of Section 23(3) of the MRTP Act, 1969, were fulfilled to allow the amalgamation without the prior approval of the Central Government.
2. Interpretation of the term "undertaking" under Section 23(3) of the MRTP Act, 1969.
3. Whether the two companies can be considered as producing the "same goods" under Section 23(3) of the MRTP Act, 1969.

Issue-wise Detailed Analysis:

1. Requirements of Section 23(3) of the MRTP Act, 1969:
The primary issue was whether the amalgamation of Hindusthan General Electrical Corporation Ltd. with Karam Chand Thapar Ltd. required prior approval from the Central Government under Section 23(3) of the MRTP Act, 1969. The petitioners argued that both companies were inter-connected undertakings and not dominant undertakings, thus fulfilling the conditions of Section 23(3). The trial judge agreed, stating that the companies met all three requirements: being inter-connected, not being dominant undertakings, and producing the same goods.

2. Interpretation of "Undertaking" under Section 23(3):
The appellant contended that the term "undertaking" should be understood as a unit of production rather than a company. They argued that Section 23(3) contemplates amalgamation of two undertakings, not companies, and the term "inter-connected undertakings" should not be interpreted as inter-connected companies. However, the court held that the term "undertaking" in Section 23(3) should be understood in the context of the entire Act, which includes individuals, firms, and corporate bodies. The court concluded that "undertaking" in Section 23(3) refers to companies, not just units of production.

3. Production of the "Same Goods":
The core issue was whether the two companies produced the "same goods" as required by Section 23(3). The appellant argued that the common production of iron ore and manganese ore was insufficient since both companies produced a variety of other goods. The court agreed, stating that the phrase "as produce the same goods" should be interpreted to mean that the companies produce all the same goods, not just some common items. The court emphasized that the statute's objective was to prevent concentration of economic power, which would be undermined if companies producing a wide range of dissimilar goods could merge simply because they share a single common product.

Conclusion:
The court concluded that the two companies did not produce the "same goods" as required by Section 23(3) of the MRTP Act, 1969. Therefore, the proposed scheme of amalgamation could not be sanctioned without prior approval from the Central Government. The appeal was allowed, setting aside the trial judge's order, and it was certified as a fit case for appeal to the Supreme Court due to its significant legal implications.