9911796707
TMI Blog1983 (1) TMI 217X X X X Extracts X X X X X X X X Extracts X X X X ..... he transferee company was incorporated on March 8, 1933, and its main business was to manufacture sugar. At one time, the transferee company had vast agricultural lands from which it was obtaining a good part of its requirements of sugarcane, but it is now dependent on supplies of sugarcane from the Maharashtra State Farming Corporation. The transferor company was incorporated as a public limited company on October 22, 1946. The transferor company carries on business in Bombay mainly of processing of textile goods. It was considered desirable by the managements of the two companies that the two companies should be amalgamated by the amalgamation of the transferor company with the transferee company in order to carry on these businesses in a better manner. A scheme was formulated for such amalgamation and agreed to by the requisite majority of the members of the transferor company and the transferee company and the present petitions were made to this court for sanctioning the scheme of amalgamation. The requirements of sections 391 to 394 of the Companies Act, 1956, have been duly carried out. The official liquidator has made a report stating on the basis of the findings recorded by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 under taking 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". The relevant portion of section 20 in Part A of Chap. III of the MRTP Act runs thus: "This Part shall apply to ( a )an undertaking if the total value of ( i )its own assets, or ( ii )its own assets together with the assets of its interconnected undertakings is not less than twenty crores of rupees ... Explanation. The value referred to in this section shall be ( i )in the case of an undertaking referred to in clause ( a ) or clause ( b ), as the case may be, the value of its assets on the last day of its financial year which closes during the calendar year immediately preceding the calendar year in which th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which have been mentioned in Exh. 'I' to the said affidavit, were interconnected companies, and the total assets of these interconnected companies, according to him, came to over Rs. 20 crores. It is curious that in this affidavit, no particulars whatsoever were given as to the factual basis on which these companies were alleged to be interconnected companies. I may at this stage set out the names of the 13 companies, which were alleged to be interconnected companies. The said names are as follows : (1)Swastik Textile Mills Ltd. (transferor company). (2)Phaltan Sugar Works Ltd. (transferee company). (3)Frozen Foods P. Ltd. (4)Matalors P. Ltd. (5)Plasto Crafts Industries P. Ltd. (6)Apte Industrial Management Services P. Ltd. (7)Laxmi Vishnu Textile Mills Ltd. (8)Real Estate Sales Agency. (9)V.S. Apte Sons. (10)Automobile Products of India Ltd. (11)Technical Services P. Ltd. (12)Gaikwad Printers P. Ltd., and (13)Pratap Investment P. Ltd. In the affidavit in rejoinder filed by one Muragendra S. Khadbai in Company Petition No. 684 of 1981, and the affidavit in rejoinder filed by Arvind D. Gupta in Company Petition No. 685 of 1981, it was contended that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing to the relevant previous correspondence. By their letter dated October 7, 1981, addressed to the Company Prosecutor for Regional Director, the petitioners' advocates, inter alia , set out that the petitioner companies in the said two petitions were not registered under the MRTP Act. By their letter dated November 18, 1981, addressed to the said Company Prosecution, Grade I, for Regional Director, the petitioners' advocates stated that the following Companies, viz ., the Phaltan Sugar Works Ltd., the Swastik Textiles Mills Ltd., Frozen Foods P. Ltd. Plasto Crafts Industries (P.) Ltd., Metalors P. Ltd. and Apte Industrial and Management Service P. Ltd., were interconnected undertakings within the meaning of the said term under the MRTP Act. The Regional Director by her letter dated February 16, 1982, addressed to the advocates for the petitioners contended that 14 companies, including the 13 companies set out earlier, and one Messrs Pratap Investment P. Ltd. were interconnected companies, but gave no factual basis on which this interconnection was alleged. In the further correspondence which followed, the petitioners' advocates pointed out that the Regional Director had not g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial and Management Services, and, hence, the entire contention was misconceived. It was pointed out by him that Hardikar resigned from the directorship of the said concern on January 27, 1982. The fact of resignation was not disputed by Mr. Rao but it was contended by him that the position, which has to be taken into account, is the position which prevailed at the time when the petitions were presented or as on January 1, 1982. It was, on the other hand, contended by Mr. Desai that for the purpose of determining the question of interconnection, one must examine the facts as they are today. In support of that contention, Mr. Desai placed strong reliance on the language of section 23, which clearly suggests that it is at the time of the granting of the sanction that the factual situation regarding interconnection has to be considered. It is true that section 20 of the MRTP Act lays down the dates on which the value of the assets of the undertakings in question has to be considered, but the determination of interconnection and the determination of valuation are different questions. There appears to me to be, therefore, considerable substance in the contention of Mr. Desai. However, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard of directors of the second company. It must be realised, as I have already pointed out, that the two capacities, in which Hardikar was acting, were completely different and there was nothing to show that in his capacity as a director of Apte Industrial and Management Services, he was acting in accordance with the directions given by the directors of Laxmi Vishnu Textile Mills of which he was the chief executive. Moreover, merely because company "A" can control a director of company "B", it could not be said that company "A" controls a part of the membership of the board of directors of company "B". Such a situation arises only when a company is in a position to nominate a certain number of directors or control the election of a certain number of directors in the other company. It is only in such a case that the former company can be said to control the total membership or a part of the membership of the board of directors of the latter company. No such case is made out in clause ( d ) of the aforesaid paragraph. This contention of Mr. Rao must also be rejected. Although some allegations are made in clauses ( e ) and ( f ) of paragraph 1 of the said affidavit of Surendra Kumar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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