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TMI Blog1973 (3) TMI 149X X X X Extracts X X X X X X X X Extracts X X X X ..... . Central Government made a reference under Section 22(3)(b) of the said Act to the said commission to make necessary inquiries and report its opinion such application. On February 4, 1971 the said commission issued a notification inviting informations from all concerned over such reference and then started its inquiries. Obviously in its endeavour to find out whether the undertaking proposed to be established would be interconnected undertaking within the meaning of the said Act with the present petitioner the Hindusthan Motors Limited, the commission first issued a summons under Rule 12 of the said Act on December 29, 1971, for production of certain documents referred to in the summons. Though the petitioner first objected production of such documents on the ground of irrelevancy, it produced certain documents in answer to the summons. Then followed certain correspondence between the said commission and the petitioner -- the commission either asking for disclosure of more documents and informations or seeking more clarifications and the petitioner complying with the same but not without protest. 3. In the background of such correspondence on March 10, 1972 the Director of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mons and the order of the said Commission. 5. It appears from the order of the Commission that the issue of relevancy was debated more with a reference to the scope of the inquiry than on the documents themselves before the Commission. In this Court however, the learned Counsel for the petitioner has raised a serious dispute about the relevancy of the documents irrespective of the scope of the inquiry and I shall deal with the same hereinafter. The principal point raised and contended before the said Commission was that when Keshoram Industries as also the petitioner company are both corporate bodies, interconnection, if any, must be within the meaning of Section 2(g)(iii) and not otherwise; it was further contended that in order to attract Section 2(g)(iii) the control contemplated must be de jure control capital wise, finance wise or management wise; accordingly it was argued that the said Commission must limit itself in its inquiries on the reference with reference to the above aspect and the documents asked for would be wholly relevant if the inquiry is so limited. The said Commission, however, did not accept this position. The Commission refused to read the different sub-cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred to as Monopolies Commission) and that by the later committee, namely, Dutta Committee. With reference to this difference he has argued very strongly that when the said Act under which the inquiry is now being conducted by the Commission is now based on the report of the Monopolies Commission the respondent Commission was in error in relying on the report of the Dutta Committee furnishing an irrelevant basis altogether. Lastly, Mr. Roy Choudhury has contended that the documents asked for are so grossly irrelevant that they can have no bearing on any inquiry whatsoever under the said Act. 7. Apart from contesting the points raised by Mr. Roy Chowdhury, the learned Additional Solicitor General appearing for the respondents raised an objection against the maintainability of the present application -- not on the ground of lack of any jurisdiction of this Court, but on the ground of impropriety of entertaining such an application against an interlocutory order of the commission in the facts and circumstances of the case. According to the learned Additional Solicitor General the said commission has not yet come to any final conclusion as to whether the petitioner company is an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the points. The object recited in the preamble is as follows:-- An Act to provide that the operation of the economic system does not result in the concentration of economic power to the common detriment, for the control of monopolies, for the prohibition of monopolistic and restricted trade practices and for matters connected therewith or incidental thereto. To achieve this object the Act provides for a scheme of control over expansion of existing and establishment of new undertakings. The Statute makes a distinction between ordinary undertakings and dominant undertakings. Subject to certain exceptions dominant undertaking bears a statutory definition to mean an undertaking which either by itself or along with inter-connected undertakings either produces, supplies, distributes or controls one-third of total goods of any description or provides or otherwise controls one-third or more of any services. Chapter III provides measures for avoidance of concentration of economic power: This chapter applies to ordinary undertakings whose own assets or such assets together with the assets of its inter-connected undertakings are worth not less than twenty crores and to dominant un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions are ancillary. Chapter 7 provides for power to obtain information and appointment of inspectors to investigate into the affairs of an undertaking to find out whether any such undertaking is indulging in any monopolistic or restrictive trade practices. Chapter 8 provides for offences and penalties for contravention of certain provisions of the Act or the orders made under the Act. Chapter 9 provides for miscellaneous provisions. Before concluding the study of the provisions of this Act one more thing has to be noted. Section 5 provides for establishment of an important but powerful commission consisting of a Chairman and not less than two and not more than eight other members to be appointed by the Central Government. As pointed out earlier the Chairman shall be a person who is or has been or is qualified to be a Judge of the Supreme Court or of a High Court and the members shall be persons of ability, integrity and standing conversant with economics, law, commerce, accountancy, industry, public affairs or administration. Sections 10 to 19 provide for jurisdiction, powers and procedure of the commission. Section 12 vests in the commission certain powers of a Civil Court for enf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... become an inter-connected undertaking of an undertaking to which Clause (a) of Section 20 applies, except under, and in accordance with, the previous permission of the Central Government. (2) Any person or authority intending to establish a new undertaking referred to in sub-section (1) shall, before taking any action for the establishment of such undertaking, make an application to the Central Government in the prescribed form for that Government's approval to the proposal of establishing any undertaking and shall set out in such application information with regard to the inter-connection, if any, of the new undertaking (which is intended to be established) with every other undertaking, the scheme of finance for the establishment of the new undertaking and such other information as may be prescribed. (3) (a) The Central Government may call upon the person or authority to satisfy it that the proposal to establish a new undertaking or the scheme of finance with regard to such proposal is not likely to lead to the concentration of economic power to the common detriment or is not likely to be prejudicial to the public interest in any other manner and thereupon the Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous disposal of a proposal like the one under consideration both by the Central Government and by the commission which would be frustrated if this Court starts interfering with interlocutory orders like the present one passed by the commission. 11. Mr. Roy Chowdhury, on the other hand, in meeting this objection has submitted that a person in the position of the petitioner has no remedy under the Act. Tt is not the applicant nor a person interested within the meaning of Section 29: It has got no right of appeal under Section 55. Mr. Roy Chowdhury points out that Section 165 of the Evidence Act authorises only a Judge in contradistinction to the court to ask an irrelevant question; this again according to him does not sanction any forced production of a document without any right to object on the ground of irrelevancy. According to him provisions of Order 16 of the Code of Civil Procedure do not debar any objection being raised as in the present case, when under Section 12 of the Act the said provisions can be taken recourse to only for the purpose of the Act. Mr. Roy Chowdhury relies on authorities to support his contention that any objection to relevancy must and should be raise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to requirement for that of the commission. The scope of interference by this Court, therefore, must necessarily be very limited being limited to reasons which must be compelling. This position also follows from the scheme of the Act. The learned Additional Solicitor General is right in contending that unless such a view is taken the entire object of the time schedule provided by Section 30 (2) (3) would be frustrated and even the proposal under enquiry may be defeated by the resultant delay. Mr. Roy Chowdhury may be right that in the present case the time schedule was infringed even earlier by the commission. But in finding the true intention behind the Statute we must look into its scheme and not the particular facts of an individual case. Furthermore, it should also be noted that an erroneous decision of the commission in this respect is not likely to affect adversely the person from whom the document is called for to any great extent--the only prejudice which may be suffered is to be compelled to produce a document which may not otherwise be relevant according to him, but subject to protection under Section 60 of the Act. In my opinion the benefit that would follow from rest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied its terms are to be materially altered by reading into it words like by owning or controlling corporate bodies who, in their turn, own or control the undertakings. He has taken me through the different sub-clauses and has submitted that each sub-clause contemplates different circumstance and one cannot overlap the other. 14. This contention of Mr. Roy Chowdhury is, however, not considered acceptable by me as it was not by the commission. In my view such a construction is neither in consonance with the object of the Statute nor does it follow from the language of the section. I think the statute thought of inter-connection in the widest range and such a concept is in consonance with the object of avoidance of economic powers being concentrated in a few hands. The opening words of Section 2(g), therefore, provide that inter-connection may be in any of the manners set out thereunder and not in a manner one alternative to the other. The inter-connection thought of has been given the widest connotation and it would not be proper to restrict the same by adopting the construction suggested by Mr. Roy Chowdhury. I am unable to agree with Mr. Roy Chowdhury that in order to apply S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hould not be taken to be limited to de jure control only; it should be given a wider meaning as given by the commission. 16. Before I go on to consider the points so raised by Mr. Roy Chowdhury and controverted by the learned Additional Solicitor General, I must refer to a much debated controversy raised before me which, however, appears to me not to merit the importance given to it by the learned counsel for the petitioner. The controversy is over the contention of Mr. Roy Chowdhury that the ratio of the Bench decision of this Court in the case of AIR1972Cal105 (supra) is what he contends to be the meaning of the concept of control and that such decision is now binding on me. The learned Additional Solicitor General has contended on the other hand that that was not the ratio of the decision nor could an interlocutory judgment as it is, be conclusive enough to be binding on this Court. 17. The decision of the appeal Court in AIR1972Cal105 (supra) relied on by Mr. Roy Chowdhury was one in appeal against an order granting injunction pending disposal of the suit by the trial Court. In that case one shareholder instituted a suit allegedly in representative character against Swade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22 of the said Act had been taken or not would not render the notice illegal. Mr. Justice Mitra, in his separate judgment agreed with the learned Chief Justice in holding that the balance of convenience was not in favour of granting an injunction; that prima facie the new company was established -before the said Act and as such Section 22 was not attracted at all and above all there was no material infringement of Section 173(2) of the Companies Act by the alleged omission of the disputed information. 19. Although the ultimate decision rested on the above findings, Mr. Justice Mitra in dealing with an argument of the counsel for the respondents made an observation which has been strongly relied on by Mr. Roy Chowdhury as the ratio in the decision. Referring to Section 2(g)(iii)(d) he observed, It is true that Clause (d) of Section 2(g)(iii) of the Act merely provides 'if one exercises control over the other in any other manner'. It is also true that the control as contemplated by the Act has not been defined in the Act itself but in construing a provision such as this, certain considerations must be borne in mind. In the first place, the concept of control implies a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finance or capital. But, he never went into the question as to whether such control as is contemplated by Section 2(g) must be restricted to de jure control and cannot be extended to include de facto control. Though I hold that the observations relied on have no binding effect I agree with Mr. Roy Chowdhury that those observations are entitled to greatest respect from me even sitting singly and for reasons given hereinafter Jt will be clear that the view which I am now taking does not derogate in any manner even from the said observation. 22. In considering the different decisions of the House of Lords it must be noted that those were cases where the term control or controlling interest came up for construction as in the Finance Acts with or without special explanatory clauses. It was observed that normally control over a company must mean exercise of power by voting rights and a person is said to have controlling interest if he has power by exercise of voting rights under the constitution of the company to carry a resolution at a general meeting. In my considered opinion the underlying principles of construction in the cases relied on by Mr. Roy Chowdhury would be inappropr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Principles of Modern Company Law, Third Edition, Chapter X page 197). It is exactly this point which the commission is trying to ascertain whether the real control lies in the hands of one or more wielding powers over the Board of Directors. 23. Therefore, I am unable to accept the contention of Mr. Roy Chowdhury that in interpreting Section 2(g) the control must be taken to mean de jure control only which can be effected by the majority of voting rights. In my view on the object and scheme of the Statute and in view of the wide and comprehensive nature of the definition clause control means and includes effective control in any manner including de facto control. This was the view which was taken by the learned trial Judge in the case of Sitaram v. Banwarilal, AIR1972Cal105 , and the appeal Court including Mr. Justice Mitra had not disapproved that part of the view expressed by the learned trial Judge. The view so taken also does not derogate from the observations of Mr. Justice Mitra relied on by Mr. Roy Chowdhury inasmuch as control management-wise may be de jure as also de facto. In any event if such a view was taken prima facie at this interlocutory stage by the comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible purpose. The learned Additional Solicitor General has rightly pointed out that under the provisions of Section 60 of the Act the documents and information called for cannot be used for any collateral purpose. This part of the submission of Mr. Roy Chowdhury is his inference from the alleged irrelevancy of the document so that if relevancy be found the submission would lose its foundation. On the complaint of in application of mind it must be said that when the commission passed a speaking order overruling the objection or irrelevancy it can no longer be said that the commission had not applied its mind on the question of relevancy. Mr. Roy Chowdhury may challenge the decision as erroneous as he had earlier done, but hardly there is any scope for a complaint that the commission had not applied its mind to the issue of relevance. 26. Let me now consider how far the documents called for are relevant. On March 10, 1972, the Director of Investigation called for from the petitioner copies of report, if any, submitted by Sri B. M. Birla on return of his foreign tours in 1969, 1970 and 1971. It is not in dispute that Shri B. M. Birla went on such tour and at least in part they were ..... X X X X Extracts X X X X X X X X Extracts X X X X
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