TMI Blog1974 (9) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 each; 7,00,000 7 % cumulative second preference shares of Rs. 100 each; 3,75,000 7 % cumulative "A" second preference shares of Rs. 100 each and 60,00,000 ordinary shares of Rs. 75 each. The issued capital of the petitioner-company is Rs. 50,20,87,125 divided into 50,000 6% cumulative preference shares of Rs. 150 each; 7,00,000 7 % cumulative second preference shares of Rs. 100 each; 3,71,909 7 % cumulative "A" second preference shares of Rs. 100 each; 51,65,283 ordinary shares of Rs. 75 each; while the subscribed capital of the company is Rs. 49,98,22,189 divided into 50,000 6% cumulative preference shares of Rs. 150 each; 6,93,819 7 % cumulative second preference shares of Rs. 100 each ; and 3,71,384 7 % cumulative "A" second preference shares of Rs. 100 each and 51,027 (?) ordinary shares of Rs. 75 each (less calls unpaid Rs. 136). The petitioner-company was formed for the several objects as are set out in its memorandum of association, and the principal objects are: ( a )To carry on in India and elsewhere the trade or business of iron masters, steel makers, steel converters, manufacturers of ferro-manganese, colliery proprietors, coke manufacturers, minders, smelters, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the transferor-company is to acquire by lease, sub-lease, grant, assignment, transfer or otherwise any leases, prospecting licences, grants or concessions of any coal and mineral lands, coal or other mines, mining rights, concessions and property believed to contain coal or other minerals from any person or persons, firm, syndicate, company, corporation, Government, municipality and to perform and fulfil the condition thereof and particularly to obtain a sub-lease from Bokaro and Ramgur Ltd., a company incorporated under the Indian Companies Act, 1882, and to work the same and perform and fulfil the conditions thereof. It appears that one of the terms of the arrangement for obtaining by the transferor-company of the sub-lease from Bokaro and Ramgur Ltd. was that Messrs. Anderson Wright Company, the managing agents of Bokaro and Ramgur Ltd., who had been managing the colliery, be appointed the managing agents of the new company, West Bokaro Ltd., i.e. , the transferor-company, and they were accordingly so appointed for a term of 20 years from 27th March, 1945, subject to termination of the agreement by either party at any time after the expiration of 10 years from that date, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any will be affected by the proposed amalgamation. Since the board of directors of both the companies were of the opinion that no useful purpose will be served by the said companies continuing as separate entities, and in fact their amalgamation would be advantageous to both as the same would result in economic working and would also save expenses of running the transferor-company as an independent unit, the board of directors of both the companies, therefore, decided to amalgamate the transferor-company with the petitioner-company with effect from 1st of April, 1973. Accordingly, a scheme of amalgamation of the transferor-company with the petitioner-company was evolved and the same has been approved by the board of directors of both the companies. The salient features of the proposed scheme of amalgamation have been set out in sub-paras. ( i ) to ( viii ) of para. 6( g ) of the petition, and briefly stated, the scheme of amalgamation provides that upon sanction being obtained from this court, the same will become effective from 1st of April, 1973 (which has been termed as the "appointed day") from which day the undertaking and all the property, rights and powers of the transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dification the proposed scheme of amalgamation, and one of the directions so given was that over such meeting of its members, either Mr. J. R. D. Tata or Mr. N. A. Palkhivala, and failing both, Mr. S. Moolgaonkar should act as the chairman and that the chairman should report the result of the meeting to this court. Accordingly, a meeting of all the members of the petitioner-company was duly convened on 21st August, 1973, at Birla Motushri Sabhaghar, 19, Marine Lines, Bombay, whereat Mr. J. R. D. Tata acted as the chairman. Suffice it to say that by an overwhelming majority of the members who were present and entitled to vote, the scheme of amalgamation that was put before the meeting was approved, and the necessary resolution approving the same was passed, and in due course the chairman of that meeting filed his report in this court on 14th September, 1973. It appears that the transferor-company had also made an application under section 391 of the Companies Act to the Calcutta High Court for an order for convening a meeting of its members to consider the scheme of amalgamation and had obtained direction for convening the meeting, and in accordance with the directions given by that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was explained as to how the proposed scheme of amalgamation fell within the exception provided for by sub-section (3) of section 23. Notwithstanding this correspondence, Mr. Rajagopalan filed his affidavit raising the aforesaid contentions by way of reply to the petitioner-company's prayer that this court should accord its sanction to the proposed scheme of amalgamation. The petition came up for hearing before the learned single judge of this court on its original side, and the same has been referred to this Bench for disposal. At the outset, it may be stated that the scheme of amalgamation, a printed copy whereof has been annexed to the petition at exhibit C, has not been opposed on merits by anyone, not even by Mr. Rajagopalan, the Regional Director, Western Region. In fact, as stated earlier, the members of the petitioner-company have approved it with an overwhelming majority, while the members of the transferor-company have approved it unanimously, and no defect or deficiency on merits has been pointed out even by the Regional Director who has filed his affidavit in reply to the petition. The only ground on which the prayer for according sanction to the scheme at the hands ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concentration of economic power to the common detriment by putting restriction on mergers, amalgamations and take-overs of certain undertakings to which Part A of Chapter III would apply. However, before dealing with the provisions of section 23 it would be desirable to note some of the definitions given in section 2. The expression "undertaking" is defined in section 2( v ) as follows : " '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". We are not concerned with any service in this case but with goods which are manufactured by both the petitioner-company and the transferor-company and section 2( e ) defines "goods" as follows: " 'Goods' includes goods produced in India, and, in relation to any goods supplied, distributed or controlled in India, also includes goods imported into India". Section 2( d ) defines the concept of "dominant undertaking" and the material part of the definition runs as follows: " 'Dominant undertaking' means an undertaking which either by itself or along with inter-connected undertakings, ( i )produces, supplies, distribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erger, amalgamation or take over and restrictions or limitations that are placed upon the same. Sub-sections (1),(2) and (3) of section 23, which are material, run as follows: "(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 or merger or amalgamation of two or more undertakings 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 recognized 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 to give effec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be considered is whether having regard to the definition of the expression "dominant undertaking" given in section 2( d ) of the Act, none of the undertakings respectively owned by the two companies either singly or jointly is a dominant undertaking or not. In this regard, it would be pertinent to mention certain undisputed facts. The coking coal production of the transferor-company is about 0.5 million tonnes which is 3 per cent, of the total production of the country which is about 16.65 millions tonnes per annum, while the total production of coking coal of the petitioner-company is about 1.50 million tonnes per year which is 9 per cent, of the country's total production. The combined production of the transferor-company and the petitioner-company of this particular item of goods is about 12% of the total production of this item. It seems that the total requirement of coking coal of the petitioner-company is 2.6 million tonnes per annum of which 1.50 million tonnes is produced by the petitioner-company, while 0.50 million tonnes is obtained by it from the transferor-company. The above figures and the factual data about coal production have nowhere been disputed by Mr. Rajag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the proposed scheme of amalgamation or merger between such inter-connected undertakings is taken out of the purview of sub-section (1) or sub-section (2) of section 23. In other words, to such a scheme of merger or amalgamation, no prior approval of the Central Government will be necessary and no application for obtaining such approval of the Central Government need be made before the court is called upon to accord its sanction thereto. We would also like to observe that in each of the three conditions specified in sub-section (3), certain expressions have been used. For instance, the first condition requires that the amalgamation or merger must be of "interconnected undertakings". The second condition requires that such interconnected undertakings should not be "dominant undertakings" and that these must be such as produce the same "goods". Now, each one of these expressions, viz ., inter-connected undertakings, dominant undertakings, and goods must be given the same meaning which has been accorded to each by the definitions in section 2 of the Act, and it is in the light of these definitions given in section 2 that the court will have to consider whether, in a given case, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commercially marketed, and that expression cannot be so construed as to include production of any intermediate product like a raw material intended to be used for producing the end-products or marketable goods; and if the expression "as produce the same goods" is so construed, then the undertaking of the petitioner-company as well as the undertaking of the transferor company cannot be regarded as such undertakings as are producing the same goods. He pointed out that, so far as the transferor-company is concerned, it cannot be disputed that it is producing coal as an end-product, that is, a product intended for being marketed. But, so far as the petitioner-company is concerned, the goods which its undertaking is producing would be iron and steel which are intended for being marketed and the petitioner-company cannot be said to be producing coal, for, after all, such coal as is produced by the petitioner-company is not intended for being put on the market and is being actually used for home consumption, that is to say, used for producing the end-products like iron and steel. He urged that in the context of the entire provision of section 23(3) and the several expressions used therei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... z ., end-products or goods intended for being marketed are the only goods to which either the provisions of the Act would apply or the exception contained in section 23(3) would apply. There being nothing to limit the connotation of the phrase "goods of any description" occurring in the definition of the concept of "undertaking", it seems to us difficult to accept Mr. Advani's contention that the words "same goods" should mean end-products only, and not goods of any kind. The expression "goods of any description" would include not only end-products but also intermediate products, or products which come into existence as and by way of raw material. It cannot be suggested that concentration of economic power in the matter of production of any raw material was not intended to be prevented by the provision of the Monopolies Act. In other words, neither the language of section 23(3) nor any of the objects of the Monopolies Act warrants any such restricted meaning to be given to the expression "same goods" occurring in sub-section (3) of section 23 of the Act. In our view, therefore, since the undertaking of the petitioner-company as well as the undertaking of the transferor-company are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question that arose for determination before the trial court as well as the appeal court was whether the old Central Bank with no business left was an undertaking within the meaning of the expression as defined in section 2(v) of the Act. The contention on behalf of the Tata Engineering and Locomotive Co. Ltd., who were the petitioners seeking the sanction of the court to the proposed merger of the old Central Bank with itself, was that the old Central Bank was not an undertaking and, therefore, there was no question of the proposed merger falling within the substantive provisions of section 23(1) and (2) of the Act. The rival contention was that the old Central Bank should still be regarded as an undertaking, and that contention was sought to be supported on various grounds, but the learned trial judge positively came to the conclusion that none of the grounds urged in support of that contention gave the old Central Bank the character of an undertaking within the meaning of section 2( v ) read with section 23(1) of the Act, and that, therefore, the merger or amalgamation of the old Central Bank with Telco did not require approval of the Central Government under section 23(1) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e general provision which is contained in sub-sections (1) and (2). The very fact that an exception has been carved out, whatever be the ambit of that exception, shows that in trying to achieve the avowed object and intention of the Monopolies Act, the Act makes a distinction between an undertaking and an undertaking". In fact the above observations clearly indicate that the court of appeal was not concerned with the real scope and ambit of the exception and the main reason why the provisions of sub-section (3) of section 23 were taken into consideration by the appeal court was to refuse Mr. Bhabha's contention that the expression "undertaking" appearing a second time in subsection (1) should be given the ordinary dictionary meaning and not the meaning given to it in section 2( v ) of the Act and for the purpose of showing that though the object and intention of the legislature in enacting the measure generally was to prevent the concentration of economic power, the very fact that an exception had been carved out in sub-section (3) of section 23 indicated that in trying to achieve the avowed object, the Act had made a distinction between an undertaking and an undertaking. In ou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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