1971 Supreme(Bom) 47

Bombay High Court
MODY,S.K.DESAI
Union of India - Appellant
Versus
Tata Engineering and Locomotive - Respondent
Decided On : 03/22/1971

The definition of "undertaking" in clause (v) of Section 2 of the Monopolies and Restrictive Trade Practices Act, 1969, requires that the undertaking must be engaged in production, supply, distribution or control of goods of any description or provision of service of any kind at the material time.

Headnote:

COMPANY - Scheme of amalgamation - Sanction - Whether prior approval of Central Government under Section 23(1) of Monopolies and Restrictive Trade Practices Act, 1969, is necessary - Held, no.

Fact of the Case:

The old Central Bank was nationalised by the Banking Companies (Acquisition and Transfer of Undertakings) Ordinance, 1970, succeeded by the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970. Under the provisions of Act V of 1970, a new corporation called "Central Bank of India", hereinafter referred to as "the New Central Bank", was constituted and all the rights and properties, as also the obligations and liabilities, of the old Central Bank got transferred to the new Central Bank. Upon such transfer as held by the Supreme Court in R.C. Cooper v. Union of India. AIR 1970 SC 564, the totality of the assets and liabilities of the old Central Bank vested in the new Central Bank and the only right which the old Central Bank acquired was the right to receive compensation in the sum of Rs.17.5 crores. Under sub-section (2) of Section 6 of Act V of 1970, the Old Central Bank had an option to receive that amount of compensation in cash or in four and a half per cent per annum promissory notes repayable after ten years or five and a half per cent per annum promissory notes repayable after thirty years in the manner as mentioned in that sub-section. After such acquisition of its business, the Old Central Bank has ceased to carry on banking business. Thereafter, as appearing from the Report of the Board of Directors of the old Central Bank for the year 1969, the Board applied its mind to the future of that company. Various views in that regard had been discussed at some length at the extraordinary general meeting of the old Central Bank held on 13th January 1970. It was thereafter that the Supreme Court gave its said Judgment. Thereafter, after doing some re-thinking, the Board of Directors reached the conclusion that there were three alternatives before the company, the first being a winding-up of the company, the second being the carrying on of fresh business as an investment Company or some other activity after obtaining powers by amendment of the company's constitution, and the third being an amalgamation with some other suitable undertaking. The Board then came to the conclusion that amalgamation of the old Central Bank with another company, preferably a large scale industrial undertaking, would be in the best interests of the company and its shareholders because, firstly, it was likely to avoid several implications in regard to the settlement of tax claims of the Company and the shareholders and would enable the carrying on of business pending such settlement; secondly, it would ensure a fair and steady return to the shareholders on their capital along with prospects of reasonable growth; and, thirdly if, as was the intention, the amalgamation was with a company whose shares commanded a ready market, the shareholders of the old Central Bank would be able, if they so chose, to liquidate their holding wholly or partially. The Board had thereafter carried on negotiations with the Directors of Telco and evolved a concrete scheme of amalgamation with Telco. As a matter of fact, on 29th July 1970, the Board of Directors of each of the two companies passed a resolution approving the scheme of amalgamation.

Finding of the Court:

The Court held that the old Central Bank was not engaged in production, supply, distribution or control of goods of any description or provision of service of any kind at any material time and that it therefore did not fall within the definition of "undertaking" in clause (v) of Section 2 of the Monopolies Act. The Court further held that the word "undertaking" in the phrase "any other undertaking" occurring in sub-section (1) of S.23 has the meaning given to it in clause (v) of S. 2 and that the context does not require any departure being made from it.

Issues: Whether the old Central Bank was an "undertaking" within the meaning of clause (v) of Section 2 of the Monopolies and Restrictive Trade Practices Act, 1969.

Ratio Decidendi: The Court held that the old Central Bank was not an "undertaking" within the meaning of clause (v) of Section 2 of the Monopolies and Restrictive Trade Practices Act, 1969, because it was not engaged in production, supply, distribution or control of goods of any description or provision of service of any kind at any material time.

Final Decision: The Court dismissed the appeals filed by the Union of India and the Regional Director, Company Law Board, Western Region, Bombay, against the common Judgment passed by the Companies Judge sanctioning the scheme of amalgamation between Tata Engineering and Locomotive Company Ltd. (Telco) and the old Central Bank of India.