9911796707
TMI Blog1971 (12) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... scribed and paid up capital of the Calico is Rs. 5,29,33,350 consisting of 4 lakhs ordinary shares of Rs. 125 each fully paid, 1,600 6.43% cumulative first preference shares of Rs. 125 each fully paid, 16,000.6% diamond jubilee cumulative second preference shares of Rs. 50 each fully paid, and 38,677 6% cumulative third preference shares of Rs. 50 each fully paid. The respondent, Bank of India Ltd. (hereinafter referred to as "the transferor company"), was carrying on banking business along with its allied business. Its paid capital was Rs. 4,05,00,000 consisting of 7 lakhs ordinary shares each of Rs. 100 on which Rs. 50 were paid, 10,000 ordinary shares of Rs. 100 each with Rs. 50 credited as paid up and one lakh "A" shares of Rs. 50 each fully paid. Prior to the introduction of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1969 (hereinafter referred to as "the Bank Nationalisation Act") the transferor-company was mainly carrying on the business of banking with its head office in Bombay and branches and agencies spread all over the country and in some foreign countries too. On the introduction of the Bank Nationalisation Act, the undertaking of the transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was offered for consideration of the members, and, by a show of hands, it was approved by a unanimous vote. The respondent then filed Company Petition No. 61 of 1971 in the Bombay High Court on April 12, 1971, under section 391(2), praying for sanctioning the scheme so as to make it binding on all the members of the respondent. To this petition, the petitioner was impleaded as a respondent and, at the hearing of the petition, the present petitioner as the respondent appeared and submitted to the orders of the court. The scheme provided that it would come into operation on April 1, 1971, that being set out as the appointed day. The directors, however, being aware of the fact that some time would be spent in going through the legal formalities before the scheme is finally sanctioned, a provision is made that the effective date would be the date by which the scheme stands finally sanctioned and no more legal proceedings survive in that behalf. However, notice must be taken of the appointed day from which the scheme became effective and, in the event of the scheme being finally sanctioned, certain rights and obligations arise under the scheme with effect from the appointed day, that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company is situate within the jurisdiction of this High Court. Accordingly, the petitioner filed Company Application No. 101 of 1971, under section 391(1) of the Companies Act, praying for directions to convene a meeting of the members of the petitioner-company to approve, if thought fit, with or without modification, the scheme of amalgamation. By the order, dated September 8, 1971, the court gave a direction for convening a meeting of the members of the company on October 28, 1971, and appointed Shri M. H. Rana, Deputy Registrar (II), to preside over the meeting and submit his report to this court. The chairman appointed by the High Court submitted his report on November 1, 1971. Thereafter, the petitioner filed the present petition under section 391(2) for sanctioning the scheme of amalgamation, as approved by the members of the petitioner-company and as sanctioned by the Bombay High Court. The report of the chairman would show that the scheme of amalgamation has been approved by more than the statutory majority of members of the petitioner-company. The issued, subscribed and paid-up capital of the petitioner, amongst others, interests of 4 lakhs ordinary shares and they are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve. I would, therefore, not dilate on this topic save saying that the petitioner has strictly complied with all the statutory requirements. The figures set out hereinabove would show that the class of ordinary share-' holders of the petitioner was fairly represented at the meeting and, looking to the infinitesimally small minority opposing the scheme, it can be said with reasonable certainty that the majority was not able to coerce the minority to fall in line with them. It may also be pointed out that those minority shareholders, who opposed the scheme at the meeting, did not think fit to appear at the hearing of this petition to put forward their views as to why the scheme would not be beneficial and why the court should withhold its sanction to such a scheme. If the opposition was legitimate and founded on some rational ground, the court would have examined the scheme critically. After examining the scheme from the point of view of the petitioner, that is the transferee company, it must be said, without the least fear of being contradicted, that the scheme of amalgamation by which a huge sum of Rs. 14 70 crores with its accumulated interest would be available to the petitioner, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r making certain verbal changes. This scheme in its broad outline provides for the amalgamation of the transferor company with the transferee company. The shares of the respondent-company will stand cancelled on certain shares of the petitioner company, in the proportion set out in the scheme, being allotted to the members of the respondent-company, along with certain convertible and redeemable bonds. Without setting out all the details for working out the transfer of shares, it may be stated that, in return for 4 shares of the transferor company, the transferee company will allot to the holders of 4 shares as under. ( a )One " A " ordinary share of Rs. 25 credited as fully paid and an out settlement to two fractions of 1/10 each of such "A" ordinary share aforesaid ; ( b )One eight per cent, convertible bond of Rs. 100 credited as fully paid ; ( c )Four eight per cent, redeemable bonds of Rs. 116 each credited as fully paid. On the scheme being effective, all the properties wherever they are situate of the transferor company shall stand transferred and get vested in the transferee company and the transferor company shall stand dissolved without winding up. The consequenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the good of a few and to the evil and detriment of many. The grounds of monopolies must not only be arrested but, wherever they do exist, attempts must be made to so control them as not to permit them to work to the disadvantage of a large section of the community. Monopolies have a tendency to restrict competition with the result that the monopolistic concerns have a hold on the prices of commodities in the market and it ultimately results in the exploitation of many at the hands of a few. Such a thing must be presumed to be detrimental to the interest of. a large section of the community and, therefore, opposed to the common interest and must be kept under strict control. The Act, undoubtedly, seeks to achieve this object. In effect, it seeks to give effect to the directive principles of State policy, as enunciated in article 39( c ) of the Constitution. Therefore, when an attempt is made to bypass such an Act, the court must put its foot down upon it. In effect, if there are two interpretations possible of a provision of a statute like the Monopolies Act, one permitting an escape from the provisions of the Act, and the other bringing it within the operation of the Act, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o whether this Part does or does not apply to the undertaking referred to in clause ( a ) or clause ( b )." Then comes section 23. The relevant portion of section 23 reads as under: "23. (1) Notwithstanding anything contained in any other law for the time being in force, ( a )no scheme of merger or amalgamation of an undertaking to which this Part applies with any other undertaking, ( b )no scheme of merger or amalgamation of two or more under takings which would have the effect of bringing into existence an undertaking to which clause ( a ) or clause ( b ) of section 20 would apply, shall be sanctioned by any court or be recognised for any purpose or be given effect to unless the scheme for such merger or amalgamation has been approved by the Central Government under this Act. (2) If any undertaking to which this Part applies frames a scheme of merger or amalgamation with any other undertaking, or a scheme of merger or amalgamation is proposed between two or more undertakings, and, if as a result of such merger or amalgamation, an undertaking would come into existence to which clause ( a ) or clause ( b ) of section 20 would apply, it shall, before taking any action t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )( a ) would not apply. Mr. M. R. Barot, learned advocate for the Central Government, did not dispute the fact that before section 23(1)( a ) could be attracted, the transferor company must be an undertaking within the meaning of the Act. Mr. Barot wanted to urge that as the transferee is already an undertaking registered under section 26 of the Act and it is an undertaking to which Part A applies, the scheme of amalgamation of the transferor company with such transferee company would attract section 23(1)( a ). But, as the learned Advocate-General has not pressed the second limb of his argument, I need not examine the second part of his submission. The question, therefore, posed is whether the respondent, transferor company, is an undertaking within the meaning of the Monopolies Act. In order to be an undertaking within the meaning of the Act, it must be an undertaking "which is engaged in" the production, supply, distribution or control of goods of any description or the provision of service of any kind. Mr. Barot did not suggest that the respondent, transferor company, is engaged in the production, supply, distribution or control of goods of any description. It was urged that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia Ltd. v . Ahmedabad Mfg Calico Printing Co. Ltd. [1972] 42 Comp. Cas. 211 (Bom.) , for sanctioning the scheme of amalgamation, it would be necessary to find out whether the respondent was an undertaking within the meaning of the Monopolies Act on that date. Now, it must be conceded that the petitioner is an undertaking within the meaning of the Monopolies Act to which Part A applies as its net assets exceed 30 crores. Similarly, the respondent, transferor company, even if it is an undertaking, would not be an undertaking to which Part A applies, because its net assets do not exceed 20 crores of rupees. Its only assets are compenation bonds of the aggregate value of Rs. 14 70 crores, which from April 1, 1971, would have to be handed over to the petitioner-company, if the scheme is finally sanctioned, as the counter obligation of paying dividends and interest is undertaken, under the scheme, by the petitioner from April 1, 1971. The question whether the respondent is an undertaking within the meaning of the Monopolies Act will have to be decided by the factual aspect placed before the court. To be an undertaking, it must be engaged in the provision of service of any kind an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany, loans granted by the transferor company and investments in shares of companies made by the transferor company. I submit that from what is stated hereinabove, it is clear that the respondent-company has been carrying on the business of an investment and finance company by purchasing shares by making fixed deposits with banks and companies and advancing loans to companies." It would appear from the passage quoted above that three factual averments are lumped together in this paragraph. Each of them may be separately examined. The first contention is that the respondent, transferor company, is capable of carrying on non-banking business and is not prevented from carrying on even banking business provided it applies for and obtains a licence. The very language in which the contention is couched shows that there is unqualified admission that the respondent is not presently engaged in the provision of service but it has a legal capacity to carry on some business. The actual carrying on of some business and a legal capacity to carry on business are entirely two distinct things. There is capacity in every adult human being to carry on business subject to the conditions to whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... known. It is equally well known that the compensation is not paid in cash but by bonds. If the recipient of the bonds sells them it cannot be said that the very sale would be indicative of carrying on of business. It can be said to be carrying on business if day-in and day-out bonds are sold and purchased. But, ordinarily, when compensation is paid in bonds and in a given case the recipient of the bonds, if he sells the same, and in this case they are sold at a discount, it would not indicate that thereby some business was being carried out. The third allegation is that the respondent had deposited by 14th June, 1971, Rs. 1,17,50,000 out of the realisation of sale of bonds with various companies for periods of 12 to 13 months at interest varying between 9 % and 10% and has also advanced loans, by 5 th June, 1971, amounting to Rs. 1,74,88,050 to various companies including the petitioner-company for periods of 12 to 13 months and at interest varyring between 9% and 9 %. It is an admitted fact that, by 4th June, 1971, the respondent, transferor-company, has sold, at a discount, part of compensation bonds. The directors had in their hands a huge cash of rupees three and odd crores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osit a part of its sale proceeds of bonds with the aforesaid companies, the respondent was forced to purchase the aforementioned three shares, so that it can deposit its amount as a member in respect of whom there existed no restriction except of the upper limit. Such a transaction, only for a limited purpose of acquiring status for doing something incidental to preservation of the assets, till the period the scheme is finally sanctioned, cannot be said to be carrying on of business. The contention stands negatived by the aforementioned facts being placed on record by the affidavit of Mr. Bastikar, secretary of the petitioner-company. In the affidavit of the Regional Director, Company Law Board, Western Region, a general statement is made that the business of financiers is analogous to the provision of facilities in connection with the banking and that on such construction, the petitioner, transferor-company, is rendering service and/or in any way is engaged in the provision of service of financing. This is a vague statement. In support of this statement, reliance was placed only on the aforesaid three allegations, each of which has been separately dealt with by me. As against th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, were placed before the Bombay High Court and Vimadalal J., after examining those contentions, held that the respondent, which was the petitioner before him, was not an undertaking within the meaning of the Monopolies Act. In reaching this conclusion, Vimadalal J. referred to the earlier decision of the Division Bench of the Bombay High Court, in Appeals Nos. 33 and 34 of 1971 Union of India v. Tata Engineering and Locomotive Co. Ltd. [1972] 42 Comp. Cas. 72, 85 (Bom.), arising from Company Petitions Nos. 159 and 161 of 1970. The Division Bench was examining the scheme of amalgamation between Tata Engineering and Locomotive Co. Ltd. and the Central Bank of India Ltd. It was also contended before the Division Bench that the Central Bank of India Ltd. was an undertaking within the meaning of the Monopolies Act. To substantiate this contention, these very identical facts were alleged, namely, that it had sold compensation bonds and deposited the sale proceeds or advanced loans. It was also contended that it had a capacity to start any business. The contention was negatived observing that legal capacity to carry on business must be clearly distinguished from the company being at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontention of Mr. Barot must be negatived. I have examined the scheme on its merits. It deserves to be sanctioned. Therefore, I would hereby accord sanction to the scheme of amalgamation, as sanctioned by the Bombay High Court with the amendment made in clause (1) at the request of the New Bank of India and retaining the directions given at the instance of the New Bank of India. I would give the following further directions, in terms of the prayer contained in paragraph 38 of the petition: ( a )The arrangement of amalgamation between the transferor, Bank of India Ltd., and the transferee-company, Ahmedabad Manufacturing and Calico Printing Company Ltd., as set out at page 32, exhibit "D", is here by sanctioned. ( b )All property, rights and powers of the transferor company and all the estate and interest of the transferor-company therein to the extent transferred by or vested under the scheme of amalgamation shall, by this order, stand transferred and vested in the transferee-company without any further act or deed with effect from the 1st day of April, 1971. ( c )All proceedings now pending by or against the transferor- company to be continued by or against the transferee-c ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
