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TMI Blog1975 (8) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... f Ray, CJ and Mathew, J. was delivered by Mathew, J. Krishna Iyer, J. and Murtaza Fazal, Ali J., delivered separate judgment.] Mathew, J This appeal is from an order dated June 30, 1973, passed by the Government of India dismissing an application filed by the appellant on May 5, 1972, under section 23(4) of the Monopolies and Restrictive Trade Practices Act, 1969 (hereinafter referred to as "the Act"), for acquiring 100 per cent. share capital of Shahjahanpur Sugar (P.) Ltd. The appellant is a public limited company and is a subsidiary of United Breweries Ltd. and other companies interconnected with it. The appellant's undertaking consists of a sugar factory and a distillery for manufacture of liquor at Rosa, Shahjahanpur and another distillery at Asansol. The appellant's sugar factory at Rosa had been facing difficulties . for some years on account of inadequate supply of sugarcane and to ensure regular and adequate supply of sugarcane, the appellant proposed to float a company with a share capital of Rs. 50 lakhs for the purpose of taking over the sugar unit of the appellant and for working it as an undertaking 1 of the company to be formed. The proposal was that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s against the latter order, under section 55 of the Act. The point for consideration in this appeal lies in a narrow compass, viz ., whether section 23(4) was attracted to the facts of the case. To decide the question it is necessary to refer to certain provisions of the Act. The object of the Act, as is clear from the preamble, is that the operation of the economic system should not result in the concentration of economic power to the common detriment, for prohibition of monopolistic and restrictive trade practices and for matters connected therewith or incidental thereto. " Undertaking " is defined under section 2( v ): "'undertaking' means 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."' Chapter III is concerned with concentration of economic power and section 20 occurring in Part A of that Chapter states that this Part shall apply to an undertaking if the total value of (i)its own assets, or (ii)its own assets together with the assets of its inter-connected undertakings is not less than twenty crores of rupees; and to a dominant undertaking (i)where it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtaking would come into existence to which clause (a) or clause (b) of section 20 would apply, it shall, before taking any action to give effect to the proposed; scheme, make an application to the Central Government in the prescribed form with a copy of the scheme annexed thereto, for the approval of the scheme. (3)Nothing in sub-section (1) or Sub-section (2) shall apply to the scheme of merger or amalgamation of such inter-connected undertakings as are not dominant undertakings and as produce the same goods. (4)If an undertaking to which this Part applies proposes to acquire by purchase, take-over or otherwise the whole or part of an undertaking which will or may result either (a)in the creation of an undertaking to which this Part would apply; or (b)in the undertaking becoming an inter-connected undertaking of an undertaking to which this Part applies, it shall, before giving any effect to its proposals, make an application in writing to the Central Government in the prescribed form of its intention to make such acquisition, stating therein information regarding its inter-connection with other undertakings, the scheme of finance with regard to the proposed acquisition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant in consideration of 100 per cent. shares in company, that company had not acquired the sugar unit of the appellant nor was it engaged in the production, supply, distribution or control of goods, etc., as an enterprise of Shahjahanpur Sugar P. Ltd. and so there was no proposal to acquire by purchase, take-over or otherwise of hole or part of any undertaking within the meaning of section 23(4). According to counsel, it is only when an " undertaking " to which Part III applied proposes to acquire by purchase, take-over or otherwise, the whole or part of an undertaking which would result in the creation of an under taking to which that Part applies that section 23(4) would be attracted. In other words, the argument was that as the proposal was only for acquiring 100 per cent. shares in Shahjahanpur Sugar P. Ltd. the proposal was not to acquire the whole or any part of an undertaking since neither Shahjahanpur Sugar P. Ltd. had become the owner of the sugar unit of the appellant as there was only a proposal to transfer it to it, nor was that unit engaged in production, supply, distribution or control of goods as an enterprise owned by Shahjahanpur Sugar P. Ltd. The further submis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... new company, there was no proposal to acquire by transfer, take-over or otherwise of an "undertaking" as the sugar unit was not at the time of the proposal engaged in production of goods, etc., as an enterprise of Shahjahanpur Sugar P. Ltd. An enterprise can be characterized as un undertaking within the definition of the term only when it is engaged in the production, supply, distribution or control of goods of any description or the provision of service of any kind. In Union of India v. Tata Engineering and Locomotive Co. Ltd . [1972] 42 Comp. Cas. 72 (Bom.), the court held that a mere capacity or a mere intention by an undertaking to carry on an activity as referred to in clause (v) of section 2 of the Act in future alone without its being so done in the present, i.e. , at the material date, or some time in the past, i.e. , before the material date, cannot mean that the undertaking is engaged in an activity as contemplated in section 2( v ) of the Act. No doubt, a temporary cessation of the activity will not detract an enterprise from its character as un undertaking, if the animus to resume the activity as soon as possible is there. If a factory has had to close down its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... embarking on it, Shahjahanpur sugar P. Ltd. had embarked on the business of production of sugar merely because its memorandum of association provided that the object of the company was to produce sugar. It is, therefore, difficult to imagine how when the proposal was made there was an enterprise engaged in the production of sugar and owned by Shahjahanpur Sugar P. Ltd. which could be acquired. To put the matter in a nutshell: The sugar unit of the appellant was an undertaking of the appellant. Even if the proposal to acquire 100 per cent. Shares in Shahjahanpur Sugar P. Ltd. is considered to be a proposal to acquire either Shahjahanpur Sugar P. Ltd., or its sugar unit, since neither Shahjahanpur Sugar P. Ltd. nor its sugar unit as an enterprise owned by it had gone into production of goods, the proposal did not involve the acquisition of an undertaking. Until the object in the memorandum of association of Shahjahanpur Sugar P. Ltd. was realized by the sugar unit going into production of behalf of the new company, it cannot be said that either Shahjahanpur Sugar P. Ltd or the sugar unit transferred to it was an "undertaking". An entity which is not engaged in actual production of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lone can own the undertaking and the purchase by the appellant of 100 per cent. shares did not make it the owner of the undertaking. We are aware that we are dealing with an economic legislation calculated to give effect to the directive principles of State policy set out in clauses ( b ) and ( c ) of article 39 of the Constitution and that the purpose of the legislation should be kept in mind in interpreting its provisions; but we are not prepared to assume that the legislature has, by a side-wind, swept away the well-established fundamental legal concepts of the law of corporation in making the legislation. We do not pause to consider whether the circumstances which the Central Government took into account in passing the order were germane in the light of the provisions of section 28 of the Act as we hold that section 23(4) has no application at all to the facts of the case. No armaments were addressed at the Bar as to whether the facts of the case would attract the provisions of section 22. We, therefore, think it not proper to express any definite opinion about the applicability of that section and we refrain from doing so. If, however, the facts of the case attract the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd move sinister than seems on the surface. We need not go into the details except to state that if the facts urged by counsel for the respondent were true, it is a high risk to the community to approved of the proposed scheme from the point of view of the purposes of the Act and the directive principle enshrined in article 39( c ) of the Constitution. It is unfortunate that in cases where the economic object and impact of special types of legislation call for judicial interpretation, the necessity for a detailed statement of the background facts and supportive data, apart from some sort of a Brandies brief illuminating the social purpose of the statute, is not being fully realised by the State. In the present appeal materials were read out from the files which disturbed me but no comprehensive affidavit marshalling the social and economic facts relevant to the case and the statute was filed. (At least copies of the Monopolies Inquiry Commission's Report, extracts from the draft Bill, Notes on Clauses and the Objects and Reasons of the Act were made available while arguments started). Even so, the court should hesitate to upset the Central Government's order without a strong case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bad master to dictate. Notwithstanding the traditional view that grammatical construction is the golden rule, Justice Frankfurter used words of practical wisdom when he observed : Massachusetts Bonding Insurance Co. v. U.S. (352 U.S. 128, 138): "There is no surer way to misread a document than to read it literally." Indeed, this case really turns on the court's choice of the correct canon of construction as between two alternatives. Is an "undertaking" an economic enterprise which is actually producing goods ? Here we overstress the in praesenli aspect and thereby undermine the legislatives object. On the contrary, is an "undertaking" used in its economic sense and in its wider connotation of embracing not merely factories which have been commissioned but projects which are embryonic and designed to go into production immediately formal legal personality is acquired and statutory approval under the Act secured ? In the present case there is already a sugar unit which is working and this mill is being transferred as the asset of the new company. The new company, immediately it is registered and the Central Government's approval under section 23(4) obtained will go on str ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng which, by the vesting of 100% of its shareholding in the appellant, is going to belong to the latter. It is either acquiring or establishing the new adventure. That is the plain truth and law must accord with it. After all, a broadened, sophisticated and spectral sense must be given to these words of economic connotation without being hide-bound by lexicography or legalism. Of course, any infant in law knows that holding shares is not acquiring the company with its distinctive personality. But any adult in corporate economics knows that controlling the operations of an industrial unit is to acquire or establish it for all economic purposes depending on whether that one is new or pre-existing. The word "undertaking" takes in also enterprises attempted (See Webster s Dictionary on "undertaking", the meaning having received judicial approval in M.R. Meher s case ( supra ). The court in Gymkhana Club [1968] 1 SCR 742; AIR 1968 SC 554 has accepted the meaning given in Webster. Similarly, "engaged in" takes within its wings "embarking on" (vide Stroud s Judicial Dictionary, 4 th edition, volume 2, page 909). If the language used in a statute can be construed widely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st society, interdicting concentration of economic power to the detriment of the community, has mandated the State to direct its policy towards securing that end. Monopolistic hold on the nation's economy takes many forms and to checkmate these manoeuvres, the administration has to be astute enough. Pursuant to this policy and need for flexible action, the Act was enacted. A variety of considerations (set out in section 28) amenable to subtle administrative perception and expert handling but falling beyond the formalised processes unaided by research and study that the court is prone to adopt, may have to be examined before reaching a right decision to allow or disallow seemingly innocuous but really or potentially anti-social moves of dominant undertakings. It is well-known that backdoor techniques, and corporate conspiracies in the economic sense but with innocent legal veneer, have been used by oligopolistic organisations and mere juridical verbalism cannot give the court the clue unless there is insightful understanding of the subject which, in specialised fields like industrial economics, is beyond the normal ken or investigation of the court or the area of traditional jurispr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her article (P. 497, Modern Law Review, volume 33, September, 1970), the same author explains the permissibility in English courts of the practice of seeking assessor-assistance where specialist knowledge and expert advice are called for in complex case situations. These observations are made by me to clear the ground for approaching an " economic" lis of a complex nature in a socio-legal way and not in the traditional litigative style. So viewed, what does an "undertaking" mean in section 23(4) of the Act ? Surely, definitions in the Act are a sort of statutory dictionary to be departed from when the context strongly suggests it. The central problem on which Stiri Gupte, appearing for the appellant, staked his whole case largely is as to whether an undertaking covers only a going concern, a running industry and not one in the offing or process of unfolding. The decisions of the High Courts cited before us do not convince me. On the other hand, the reasoning based on the present tense is faulty as already elaborated. If this court accepts the legalistic connotation of "undertaking", a disingenuous crop of new companies with ulterior designs may well be floated taking the cue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r unit, though) which, in view of the shareholding, will inevitably become an interconnected undertaking of Carew Co. (the original undertaking, i.e. , the appellant). Not so much to acquire an existing undertaking as to establish, by a concealed expansionist objective, a new undertaking with sugar manufacture as the core of the operation. Therefore, it is not section 23(4) that magnetizes the appellant's proposal but, prima facie , section 22. The special provisions must exclude the general and, in this view, the acquisition of an existing undertaking stands repelled. The scheme of the Act deals both with establishing a new undertaking and acquiring (by contrast) an existing undertaking. So I agree with my learned brother, Mathew J., that the order under section 23(4) is beyond its pale but add that this looks like a case for the application of section 22. If the appellant intends to go ahead with the new adventure he is trying to establish he may, prima facie , have to apply for and get the previous permission of the Central Government under section 22. I am not pursuing this aspect of the application of section 22 as that will be decided, if found necessary, after fuller in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... One cannot, these days, approach the problem of statutory interpretation in isolation from the legislative process. And I do not think the proposal to allow the court to consult parliamentary documents meets this objection. As long as the fiction persists that the courts merely ' interpret' statutes, Parliament will continue to put out legislation of ever increasing detail and complexity in the belief that it must provide a complete set of answers. This is a self-defeating ambition. Where does one look for the intention of the legislature in today's monster Acts, with their flotillas of statutory instruments and schedules, the plethora of boards, tribunals committees, with delegated powers, which they set up, the myriad of subjects they deal with, their confusing cross-references to other statutes, and their often opaque and tortured language that defies translation into intelligible ideas?... What exactly are the respective roles of Parliament and the courts as regards legislation? Since it is a fiction that the courts merely seek out the legislative intent, there must be a margin in which they mould or creatively' interpret legislation. The courts are ' finishers, refiners a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the appellant for setting up a new company may be extracted thus: "Resolved that the board of directors be and is hereby authorised to form a separate company to be called 'Shahjahanpur Sugar (Private) Limited', as a wholly-owned subsidiary of this company, to ultimately take over and operate the sugar factory undertaking of this company at Rosa (Uttar Pradesh) as a going concern. Further Resolved that the transfer of the assets of the sugar factory undertaking to the newly formed subsidiary, viz . ' Shahjahanpur Sugar (Private) Limited ', be made on the basis of the valuation of the respective assets made by Messrs. Lees Dhawan, Chartered Surveyors on May 29, 1970." This resolution unmistakably reveals the following essential features : (1)that the appellant intended to establish a new company and this proposal was approved by virtue of the resolution quoted above ; (2)that the new company was to be floated by transferring 100 per cent. shares from the sugar unit of the company so that the appellant could retain effective control over the new company ; (3)that the new company after being established was to be known as "SHAHJAHANPUR SUGAR (PRIVATE) LIMITED" ; and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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