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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 ..... ahjahanpur 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 the appellant would be entitled to an allotment of 100 per cent. shares in the new company and a further sum of Rs. 15,77,093 as consideration for transfer of the sugar unit. According to the appellant, its object in getting 100 per cent. shares in the new company was to offer the shares to cane growers later on. The appellant wrote a letter to the Secretary of the Company Law Board on October 15, 1971, stating that since the new company would be a subsidiary of the appellant, the approval of the Company Law Board under section 372 of the Companies Act would not be necessary in view of the provisions of clause (d) of sub-section (14) of the said section. The Central Government, in the Ministry of Industry and Company Affairs, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 is a single undertaking, the value of its assets, or (ii)where it consists of more than one undertaking, the sum total of the value of the assets of all the inter-connected undertakings, constituting the dominating undertaking, is not less than one crore of rupees. Section 21 deals with expansion undertakings. It provides that where an undertaking to which this Part applies proposes to substantially expand its activities by the issue of fresh capital or by the installation of machinery or other equipment or in any other manner, it shall, before taking action to give effect to the proposal for such expansion, give to Central Government notice of its intention to make such expansion, stating-therein the scheme of finance with regard to the propos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )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 and such other information as may prescribed. (5)No proposal referred to in sub-section (4) which has been approved by the Central Government and no scheme of finance with regard to such proposal shall be modified except with the previous approval of the Central Government. (6)On receipt of an application under sub-section (2) or sub-section (4), the Central Government may, if it thinks fit, refer the matter to the Commission for an enquiry and the Commission may, after such hearing as it thinks fit, report to the Central Government its opinion thereon. (7)On receipt of the Commission's report the Central Government may pass such orders as it may think fit. (8)Notwithstanding anything contained in any other law for the time being in force, no proposal to ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. 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 submission was that in any event the proposal to acquire 100 per cent, shares in Shajahanpur Sugar P. Ltd. by the appellant would not involve a proposal to acquire an undertaking to be owned or even owned by Shahjahanpur Sugar P. Ltd., as the acquisition of 100 per cent, shares would only vest in the appellant, the right to control and manage the affairs of Shahjahanpur Sugar P. Ltd. Section 2 of the Act makes it clear that the definitions given in that section will be attracted only if the context so requires. The word " under-taking " is a coat of many colours, as it has been used in different sections of the Act to convey different ideas. In some of the sections, the word has bean used to denote the enterprise itself while in many other sections it has been used to denote the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial 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 operations on account of a strike, lock-out, shortage of raw materials, shortage of power, or even want of finance, it cannot be said that it is not engaged in the productions of goods, if the intention of the owner is to resume its activities. The review taken in In re Canara Bank Ltd. [1973] 43 Comp. Cas. 157 (Mys.) is much the same. There the court followed the decision of the Bombay high Court referred to above and said that until a concern goes into the actual production, it cannot be said to be an " under-taking". The sugar unit of the appellant was no doubt engaged in production of goods, etc., when the proposal was made and was, therefore, an under -taking; but it was only an undertaking of the appellant as the sugar unit had not been transferred and had not become and enterprise of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posal 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 goods or supply of services is of no economic significance and has to be excluded from the purview of the Act. Hence, what may be done by an individual, firm or company in future has no present economic significance. Therefore, even if it be assumed that acquisition of 100 per cent. Shares could result in the acquisition of the new company or of an undertaking, the appellant was not acquiring an "undertaking" as defined in the Act as new company would not be engaged in production of goods, etc., at the time of the acquisition of the shares by the appellant and section 23(4) of the Act would not be attracted. We also think that by the proposal to acquire the 100 per cent. Shares in Shahjahanpur Sugar P. Ltd. or by the actual acquisition of the shares the appellant acquired only the control and the ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 provisions of section 22, it goes without saying that the appellant will have to apply and obtain the approval as visualized in that section. We allow the appeal but make no order as to costs. Krishna Iyer, J.--I have had the advantage of perusing the judgment of my learned brother, Mathew J., but, while concurring in the conclusion desire to append a separate opinion since the strands of my reasoning differ. Mathew, J.'s judgment presents the necessary facts in the simplest form, sets out the scheme and the object of the Monopolies and Restrictive Trade Practices Act (for short, "the Act") whose construction falls for decision, but perhaps tends to petrify the pivotal concepts of "undertaking" defined in section 2(v) and acquisition in the: context of Part A of Chapter III of the Act, if I may say so with resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of glaring error on the merits and clear excess or absence of jurisdiction being made out by the appellant. Shri Gupte has, however, bypassed the controversial area of facts by a line of legal reasoning which is attractive but specious. He contends that section 23(4) cannot apply save where the dominant undertaking (in this case, the appellant) proposed to acquire "the whole or part of an undertaking which will or may result either in the creation of an undertaking to which Part A will apply or in the undertaking becoming an inter-connected undertaking of an undertaking to which Part A applies". Therefore, runs the argument, what is sought to be acquired must be an undertaking. In the present case the sugar unit is already an asset of the appellant's concern and what is proposed is nothing more than to float a new company whose sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 stream since the mill's wheels will continue to turn regardless of the legal metempsychosis of ownership. In such a case it would be abandoning common sense and economic reality to treat the proposed undertaking as anything less than an "undertaking" (as denned in the Act) because it is only in immediate prospect. For certain purposes, even a child in the womb is regarded as in existence by the law and I cannot bring myself to an understanding of the definition which will clearly defeat the anticoncentration-of-economic-power objective of the legislation. Moreover "to undertake" is to set about; to attempt to take upon oneself solemnly or expressly; to enter upon; to endeavour to perform (See Black's Law Dictionary). If what the appellant intends to acquire or establish is an undertaking in fact and therefore in law, the transformation device and the refuge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra). 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, 4th edition, volume 2, page 909). If the language used in a statute can be construed widely so as to salvage the remedial intendment, the court must adopt it. Of course, if the language of the statute does not admit of the construction sought, wishful thinking is no substitute and then, not the court but the legislature is to blame for enacting a damp squib statute. In my view, minor definitional disability, divorced from the realities of industrial economic, if stressed as the sole touchstone, is sure to prove disastrous when we handle special types of legislation like the one in this case. I admit that viewed from one standpoint the logic of Shri Gupte is flawless, but it also makes the law lifeless, since the appellant is thereby enabled neatly to nullify the whole object of Chapter III which is to inhibit concentration of economic power. To repeal for emphasis, when two interpretations are feasible, that which advances the remedy and suppresses the evil, as the legislature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 jurisprudence. I must, however, emphasize that court supervision and correction, within well-recognised limits, is not an expendable item since the rule of law is our way of constitutional life. In our jural order, "the ethos of adjudication" or independent court scrutiny is too quintessential to be jettisoned without peril to those founding values of liberty, equality and justice, even though judges considering complex and technical legislations, may often leave the executive and other specialised bodies as the "untouchable" controllerate There is power for the court to interfere, but it will be exercised only when strong circumstances exist, or other basic guidelines for control come into play. Even so, this function, so vital to cry a halt when executive powers exceed their bounds or are obliquely, oppressively or illegally used, has meaningful dimensions and creative directions when disputes de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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-a consequence which this court should thwart because thereby the law will be condemned to a pathetic futility. But in the view I take, may be section 22-though not section 23(4)-is possibly attracted. I have already indicated my view on this issue. In the instant case, the move is to de-link the sugar unit and re-incarnate it as the Shahjehanpur Sugar P. Ltd. We have two provisions which come up for consideration in this expansionist and acquisitive situation. Section 22 reads: "22. (1) No person or authority, other than Government, shall, after the commencement of this Act, establish any new undertaking which, when established, would 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 investigation from the angle of that provision. The problem of interpretation of statutes raised in this case is far too important for me to ignore the manner in which jurists have been viewing the question in Anglo-Saxon Jurisprudence. I, therefore, extract relevant excerpts from Harry Bloom who wrote on this topic in the Modern Law Review, page 197, volume 33, March, 1970 : "The Law Commission (of England) and the Scottish Law Commission have dealt with one aspect of this problem, but on the whole they have prudently steered clear of wider issues. Their white paper is a trenchant essay on the shortcomings of the present techniques and rules of interpretation, and a mild rebuke of judges who are still too faithful to the literal rule. Its main burden, however, is to make the case for the use of extraneous documentary aids to interpretation, and it does so, I should think, in a way that puts the answer to this long-debated que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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 and polishers of legislation which comes to them in a state requiring varying degrees of further processing,' said Donaldson J. in Corocraft Ltd. v. Pan American Airways Inc. [1968] 3 WLR 714, 732 (QB) and indeed it is no secret that courts constantly give their own shape to enactments.... How do the present rules help, when a statute passed ad hoc, to deal with a situation clearly envisaged by the legislature, is then applied to a whole new state of affairs that were never originally contemplated ?" To conclude on the point with which I began, "undertaking" is an expression of flexible semantics and variable connotation, used in this very statute in different senses and defined in legal dictionaries widely enough. In sum, what the appellant proposed to the Central Government was to establish a new undertaking, if we throw aside legal camouflages built around a verb and pierce the corporate veil. Therefore, while jurisdiction in the respondent t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 (4)that after the establishment of the new company the appellant would become the owner of the new company as well as Carew & Company Ltd. and thus the proposed new company would be an inter-connected undertaking at the appellant ; These facts, therefore, may attract the essential ingredients of section 22 of the Act and, if so, the appellant could not be allowed to float a new company without complying with the statutory requirements of section 22 of the Act in which case fuller facts may have to be investigated for that purpose. The object of the Act in my opinion appears to be to prevent concentration of wealth in the hands of a few and to curb monopolistic tendencies or expansionist industrial endeavours. This objective is sought to be achieved by placing three-tier curb on industrial activities to which the Act applies, namely: (1)by providing that if it is proposed to substantially expand the activities of a company by issue of fresh capital or by installation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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