CAREW AND COMPANY LTD. versus UNION OF INDIA

CAREW AND COMPANY LTD,

UNION OF INDIA

August 22, 1975

[A N, RAY, C.J-, K K MATHEW, V, R KRISHNA !YER AND S. M. FAZAL A.LI, JJ.]

Monopolies and Restrictire Trade Practices Act, 1969, Sections 2(v). 22 a1ul 23 ( 4 )-Undertaki{1g, 111eani11g of-Appellant proposing to for11i new conzpany for taking over suf?ar unit owned bv it-New co1npa11y, if can be said to be en~ ~aged in production.

Section 2(v) of the Monopolies and Restrictive Trade Practices Act. 1969, defines an "undertaking" as an undertaking which is engaged in the production, supp1y, distr~bution or control of goods of any description or the provision of service of anv kind. Section 22 provides for the establishment of new under-takings. It says that no person or authority, other than government, shaU, after the co~ncement of this Act, establish anv new undertaking which. when esta-blished would become an inter-connected undertaking of an undertaking to which clause (a) of s. 20 appl!.es, except under, and in accordance 'vith the previous oermission of the Central Government, Sub-section (2) of the section provides for an application for that purpose to the Central Government. Section 23 ( 4) Jays down that if an undertaking to which Part of Ch. III applies proposes to acquire by purchase, take over or otherwise the whole or part of an undertaking which will or mav result ehher (a) in the creation of an undertaking to which Part would apply; or (b) in the undertaking becoming an inter-connected undertaking of an undertaking to which Part applies. it shall, before giving any effect to its proposals, make an appEcation in writing to the Ceritral Government in the prescribed form of its intention to make such acquisition. stating therein information regarding its inter-connection with other undenakings the scheme of finance with regard to the proposed acquisition and such other information as may be prescribed.

The appellant is public limited company and is subsidiary of Un:.ted Breweries Ltd. and other comoanies interconnected with it. The appeIIant's undertaking consists of sugar factory and distillery for manufacture of liquor at Rosa, Shahjahanpur and another d~stillery at AsansoI. The appellant's sugar factory at Rosa had been facing difficulties for some years on account of inade-quate supply of sugarcane and to ensure regular and adequate supply of sugar-cane, the appellant prooosed to float company with share capital of Rs. 50 lakhs for the puroose of taking over the sugar unit of the aonellant and for work-F ing it as arr ·undertaking of the company to be formed. The proposal was that the ;ppellant would be entitled to an allotment of 100 per cent shares in the nelv companv and further sum of Rs. 15.77.093/~ as consideration for transfer of the sugar unit. The aope11ant apolied to the respondent for perm'.ssion under s. 372 of the Companie". Act to acquire the 100 oer cent shares of the new com-pany uoon its incorooration. The ~wellant was told by the Central Government in ito letter dated 5-1-1972 that sections 22 and 23 of the Monopolies and Res-trictive Trade Practices Act, 1969, would vrhna facie be atlracted and that the appellant should file separate application under the relevant section. The appellant fil»<l an application dated 5-5-1972 purporting to be under S. 23(4) of the Act. The new cornnany proooc;ed to be set uo by the apoellant was incor-porated on June 15, 1973 under the name of Shahiahannur Sugar Private Limit-ed. 'By order dated July, 2, 1973, tha Central Government, in the Department of Comoanv Affairs reiected the apoeltant"S anplication under s. 372(4) of th"' Com-panies Act for inveS.tinl! R". 50 Iakhs in the equity shares of the Canital of <::bnh-jahanpur Sugar Private Limited. Bv another order dated 30-6-1973, the Central Government, in the Department of Company Affairs also rejected the annellant'~ aoolication under s. 23 ( 4) of the Act. This appeal is against the order dated 30-6-1973 under s. 55 of the Act.It was contended for the appellant that, (i) in order that an enterprise may become an 'undertaking' within the definition of the word 'undertaking' in s. 2(v) of the Act, it !s necessary that the enterprise must be engaged in produc-

. [1976} 1 S.C.R.

SUPREME C.OURT REPORTS

tion,. supply, distribution Or control of goods of any descriptiod or ihe -provis\on of service of any kind and that when the appellant proposed to form the new company for taking ovc.r the sugar unit of the appellant in consideration of 100 per cent shares in the new company, that company had not acqu:.red the sugar unit of the appellant nor \Vas it engaged in the production, supply, distribution or cont.rel of goods, etc. as an enterprise of Shahjahanpur Sugar Private Limited and so there was no proposal to acquire by purchase, take over or othervrise o! ~ v.:hole or pti.rt of any undertaking_ within the the mean!ng of s. 23(4); and (u) tn any event the prorosfil to acquire 100 per cent shares in Shahjahanpur Sugar Private Limited by the appellant would not involve proposal to acquire an undertaking to be owned or even ov:ned _ by Shahjahanour Sugar Private Limited,, ~·the acqu~sition of_ 100 per cent"shares would onl:Y.vest in the appel-"' !ant, the right to controt· and manage the affairs of Shahjahanpur-Sugar Private Limited.

Accepting the .contentions and allowing the appeal,

HEW;_ (Per_ Ray, C.J. and hfathew J.) _(i) The sugar unit of the appellant . \\'a'i no doubt engaged in production of goods. etc., when the proposal was made and was. therefore. an undertaking; but it was only an undertaking of the appellant as the sugar un.'..t had not been transferred and had not biconu an enterprise of Shahja~anpur Sugar Private Limited. The sµgar unit did. -·not become an undertaking of Shahjahanpur Sugar Private Limited as it was not and could not be engaged irt th.: production of goods, etc., on· it-; behalf before it v:as transferred to iL Sub-section (4) of s. 23 :S confined to the case of proposal to acquire an undertaking by purc\l.."lSe, take over or O'ther\vi_se but, to become . an undertaking, it must presently be engaged in the production of g(Jods, et::. The mere fact that the ~lemorandum of A~sociation of Shahjahanpur Sugar ·Private Limited contained an object clause v,:hich provided for product:.On of sugar ~·oul<l not necessarily mean that the company would go into production . and thu1 become .the owner of an undertaking as defined in s. 2(v) of the Act. Even if the phrase •engaged in business' in the definition conveys the !dea of embarking on it, it is not correct to say that Shabjahanpur Sugar Private Limited had embarked on the business of production of sugar merely because· its memo--. randum of associat'.on provided that the object of the compri.ny was to produce segar. [3878-C, E-FJ

The Union of India· v. Tata £11gineerit1g and Loconiotive Co.~Ltd .• [1972] 74 Bombay.Law Reporter; 1 and In l'e Canara Bank Ltd.,-A.1.R. 1973 Mysore, 95. referred to_ ·

(ii) Jt is \Veii settled ihai company has sePerate Itigal _ pe'rso-nalitf . apaft · from its shareholders and it is only the company as juristic person- that could own the undertaking. -. Beyond obtain:ng control and the right of management . of Shahjahanpur Sugar Private Limited, the purchase of 100 per _cent shares had · nOt the effe=t of ·an a£quisition of. the undertaking owned by it. [388F·Gl

Per Krishna Iyer. I. (cOncurri11g) (1) An •ufidcrtaking' is defined as an un-·deftaking .... ·which itself d:Scloses the ditTiculty felt _by the draftsmen in de-lineating the precise content. _Obviously~ dynamic economic concept cannot be : imprisoned into ineffectua1nes:i by_ static· strict - co_nstructic~_n.-•1s ·engaged in -. product'..on·, in the context ta~es 1n not merely P\OJects w~1ch hav~ !Jeen com-. pleted and gone in!-0 J?rod~ct1on but. also blue:pnnts. It. 1s. dcsr;nptive _of the series of steps culminating in production. On~ IS engaged tn an undertaking; for . ·production of certain goods whe~· he seriously ~et about. t~e job of ·gett~ng e~e_ry­thin"" essential to enable production. Economists, administrators and tndu~.na­lists0 UnderstanJ the expression in that sen'3e and_. Often .times project~ in imme-. d'..ati prospect are legitimately Set. down ~ undertakings ~ngaged _i~ th~ particular line. Not the tense used but the 1ntegratton of the steps 1s \vhat ts decisive. What -, v.ill materialse as productive enterprise in futuro can be regarded currently ~s a~ undertaking. in the industrial sense. [391F-H]

-.-\t~sa~h;;.1etts B.& ·f,uur'1n~e Co.· v. U.S. 351, U.S. 128. 138, anJ. Gyn11.!tana,_ Club, [1968] 1 S.C.R. 742, referred to.

(2) Sections 22 and 23 ( 4), when placed in juxtaposi.tion suggest that the appellant's operation is to establish new undertaking (out of its old sugar uait, though) which, in view of the share-holding, will inevitably become an inter-connected. undertaking of Carew & Co. (the original undertaking, i.e., the ap-pellant). Not rto much to acquire an existing undertaking as to establish, by concealed expansionist objective, new un4ertaking with sugar manufacture is the core of the operation. Therefore, it is not s. 23 ( 4) that magnetizes the ap-pellant's proposal but, prima fa:ie, Sec. 22. [395EF]

Per Fazal Ali, J. (Concurring) The object of the Act appears to be to pre-B vent concentration of wealth in the hands of few and to curb monopolistic tendencies or expansionist industrial endeavours. This objective is soughl tu be achieved by placing three-ti.er curb on industrial activities to which the Act ap-plies, namely :-(1) By providing that if it is proposed to substantially expand the activities of Company by issue of fresh capital or by installation of new machinery, then not~.ce to the· Central Government and its approval must be taken under s. 21 of the Act. (2) In the case of establishment of new Company by !insisting on the previous permission of the Central Government under s .. 22 of the Act. (3) In the case of acquisition of an existing Company by another Company by requ.iring the sanction of the Central Government to be taken by such Company under s. 23 of the Act. The present case may fall within the second cMegory. [398-H, 399ABJ

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1308 of 1973.

From the Order dated the 30th June, 1973 of the Central Govern-ment, Ministry of Law, Justice and Company Affairs, Department of Company Affairs.

S. V. Gupfe and Vinoo Bhagat, for the appellant.

P. P. Rao and S. P. Nayar, for respondent.

Shri Narain, for interveners.

The Judgment of A. N, Ray, C,J., and K. K. Mathew, J. was deli-E vered by Mathew, J. V. R. Krishna Iyer, J. and S. Murtaza Fazal Ali, J. gave separate Opinions.

MATHEW, I. This appeal is from an order dated 30-6-1973 pasied by the Government of India dismissing an application filed by the appel-lant on 5-5-1972 nnder s. 23(4) of the Monopolies and Restrictive Trade Practices Act, 1969 (hereinafter referred to as the 'Act') for acquiring 100 per cent share capital of Shahjahanpur Sugar Private Ltd.

The appellant is public limited company and is subsidiary of United Breweries Ltd. and other companies interconnected with it. The appellant's nndertaking consists of sugar factory and distillery for manufacture of liquor at Rosa, Shahjahanpur and another distillery at Asansol. The appellant's sugar factory at Rosa had been facing diffi-culties for some years on account of inadequate supply of sugarcane and to ensure regular and adequate supply of sugarcane, the appellant pro-posed to fioat company with 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 of the company to be formed. The proposal was that the appellant would be entitled to an allotment of 100 per cent shares in tho new company and further sum of Rs. 15,77.093(-as consideration for transfer of the sugar unit. According to the appel-H lant, its object in getting 100 per eent shares in the new company was to offer tho aharCi to cane growers later on.

11-U39SupCl[75

The appellant wrote letter to the Secretary of the Company Law Board on 15-10-1971 stating that since the new company would be subsidiary of the appellant, the approval of the Company Law Board under s. 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 Affair; replied by letter dated November 1, 1971, that the provi;ions o! s. 372(2) of the Companies Act would be applicable to the acquisi~iO'l of the shares by the appellant in the company proposed to be formed. The appellant, therefore, applied for permission under s. 372 of the: Companies Act to acquire the 100 per cent shares of the new company upon its incorporation. The appellant was also told by the Central Government in its letter dated 5-1-1972 that sections 22 and 23 of the Act would prima jacie be attracted and that the appellant should file separate application under the relevant section. The appellant had already intimated the Central Government, Department of Company Affairs on 17-11-1971 that the provisions of sections 21, 22 and 23 o[ the Act would not apply to its proposal to acquire the shares of the com-pany proposed to be formed for taking over the sugar unit of the appel-lant. However, the appellant filed an application dated 5-5-1972 pur-porting to be under s. 23 ( 4) of the Act. The new company propc<cd to be set up by the appellant was incorporated on June 15, 1973 under the name of Shahjahanpur Sugar Private Limited. By order dated July 2. 1973, the Central Government, in the Department of Company Affairs rejected the appellant's application under s. 372(4) of the Com-panies Act for investing Rs. 50 lakhs in the equity shares of the capit:ii of Shahjahanpur Sugar Private Limited. By another order datc·l 30-6-1973, the Ccntra.l Government, in the Department of Companv Affairs also rejected the appellant's application under s. 23 ( 4) of tl:c Act. As already stated, this appeal is against the latter order, t1mLl· s. 55 of the Act.The point for consideration in this appeal lies in narrow compa's yiz., whether s. 23 ( 4) was attracted to the facts of the case. To decil'e the question it is necessary to refer to certain provisions of the Act.

The object of the Act as is clear from the preamble is that the opera-tion of the economic system should not result in the concentration economic power to the comn1on detriment, for prohibition of taonopo-listic and restrictive trade practices and for matters connected thercwich or incidental thereto.

"Undertaking" is defined under s. 2 (v) :

"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".

Chapter III is concerned with concentration of economic power and s. 20 occurring in Part 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 undertaking is not Jess than twenty crores of rupees;

and, to dominant undertaking-

( i) where it is single undertaking, the value of its asset» or

(ii) where it consists of more than one undertaking, the sum-total of the value of the assets of all the inter-con-nected undertakings constituting the dominating undertaking, is not less than one crore of rupees .

Section 21 deals with expansion of undertakings. It provides that where an undertaking to which this Part applies proposes to substan-tially expand its activities by the issue of fresh capital or by "Lhe instal-lation of new machinery or other equipment or in any other manner, it shall, before taking any action to give effect to the proposal for such expansion, give to the Central Government notice of its intention to make such expansion stating therein the scheme of finance with regard to the proposed expansion, whether it is connected with any other under-taking or undertakings and, if so, giving particulars relating to all the inter-connected undertakings and such other information as may be prescribed. Section 22 provides for the establishment of new under-takings. It says that no person or authority, other than g11yernment, shall, after the commencement of this Act, establish any new under-taking which, when established would become an inter-connected undertaking of an undertaking to which clause (a) of s. 20 applies, except under, and in accordance \Vith the previous permission of the Central Government. Sub-section (2) of that section provides for an application for that purpose to the Central Government. Section 23 provides:

"23. Merger, amalgamation and take-over-(!) Not-withstanding anything contained in any other law for the time being in forcc,-

(a) no scheme of merger or amalgamation of an under-taking to which this Part applies with any other undertaking,

(b) no scheme of merger or amalgamation of two or more undertakings which would have the effect of bring-ing into existence an undertaking to which clause (a) or clause (b) of s. 20 would apply.

shall be sanctioned by any Court or be recognised for any purpooe 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 scheme of merger of amalgamation with any other under-taking or scheme of merger or amalgamation is proposed

between two or more undertakings, and, if as result of such merger or amalgamation, an undertaking would come into existence to which clause (a) or clause (b) of s. 20 would apply, it shall, before taking any action to give effect to the proposed scheme, make an application to the Central Govern-ment in the prescribed form with copy of the scheme anmixed thereto, for the approval of the scheme.

(3) Nothing in sub-section (1) of sub-section (2) shall apply to the scheme of merger or amalgamation of such inter-counected undertakings as are not dominant undertakings and as produce the same goods.

(4) If an undertaking to which this Part applies proposes to acquire by purchase, take over or otherwise the whole or part of an undertaking which will or may result either-

(a) in the creation of an undertaking to which this Part would apply; or

(b) 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 pres-cribeli form of its intention to make such acquisition, stating therein information regarding its inter-<:onnection with other undertakings, the scheme of finance with regard to the proposed acquisition and such other information as may be 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 inquiry 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 G~vernment may pass snch orliers as it may think fit.

( 8) Notwithstanding anytltliig contained in any other law for the ti.Jne bein~ in force, no proposal to acquiro bv purchase, take-over or otherwise of an undertaking to which thill part appliei: 'hall be given effect to unless the Central Government has made an order according its approval to the proposal.

(~>. Nothing in sub-~ection ( 41) shall apply to the acqms1t1on by an undc11aking which is not dominant under-

shall apply to the

CAREW & co. LTD. v. UNION (Mathew, J.)

taking, of another un,l:lertaking which is not also dominant undertaking, if both such undertakings produce the same good~:

Provided that nothing in this sub-section shall apply, if, as result of such acquisition, an undertaking coll!-cs into existence to which clause (a) or clause (b) of sectJon 20 would apply." ·

Section 28 states that the Central Government before accoAfing approval in the exercise of its powers under Part or Part · of Chapter III shall take into account all matters which appear in the particular circumstances to be relevant and enjoins that regard shall be had to the neelcl _consistently with the general economic position of the country to achieve the production, supply and distribution, by most efficient and economical means, of goods of such types and qualities and several other c_:onsiderations specified therein.

The submission of the coµnsel for the appellant was that in order that an enterprise may become an 'undertaking' within the definition of the word 'undertaking' in s. 2(v) of the Act, it is necessary that the enterprise must be engaged in production, supply, distribution or control of goods of any description or the provision of service of any kind and that when the appellant proposed to form the new company for taking over the sugar unit of the appellant in consideration of 100 per cent shares in the new company, that company had not acquired the sugar unit of the appellant nor was it engaged in the production, supply, l:listribution or control of goods, etc. as an enterprise of Shah-iahanpur Sugar Private Limited and so there was no proposal to acquire by purchase, take over or otherwise of the whole or part of any undertaking within the meaning of s. 23 ( 4). According to counsel, it is only when an 'undertaking' to which Part III applied proposes to acquire by purchase, take over or otherwise, the whole or part of an undertaking which would result in the creation of an undertaking to which that Part applies that s. 23 ( 4) would be attracted. In other words, the argument was that as the proposal was only for acquirising 100 per cent shares in Shahjahanpur Sugar Private Limited, the pro-posal was not to acquire the whole or any part of an undertaking since neither Shahjahanpur Sugar Private Limited had become the owner of the sugar unit of the appellant as there was only 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 Private Limited. The further submission was that in any event the proposal to acquire 100 per cent shares in Shahjahan-pur Sngar Private Limited by the appellant would not involve pro-nosal to acauire an undertaking to be owned or even owned by Shahiahanpur Sugar Private Limited, as the acquisition of 100 per cent shares would onlv vest in the appellant, the right to control ant! manage the affairs of Shahjahanpur Sugar Private Limited.

Section 2 of the Act makes it clear that the definitions ~ven in that section will be attracted only if the context so requires. The word

'undertaking' is 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 been used to denote the enterprise itself while in many other sections it has been used to denote the person who owns it. The definition of the word 'undertaking' ins. 2(v) of the Act would indicate that 'undertaking' means an enterprise which is engaged in production, sale or control of goods, etc.

We think that the question to be asked and answered in this case in terms of s. 23 ( 4) is : Did the appellant make proposal to acquire any undertaking of Shahjahanpur Sugar Private Limited by purchase, take over or otherwise? To answer this question, it is necessary to see whether the sugar unit which was proposed to be transferred to Shah-jahanpur Sugar Private Limited hatl been engaged in the production of goods, etc., as an enterprise of that company. It is clear that on the date of the proposal the sngar unit of the appellant had not become an undertaking of Shahjahanpur Sugar Private Limited as it had not been engaged in the production of goods, etc., as an enterprise owned by that company. It is only possible to visualize two possibilities when the proposal was made : either the sugar nnit remained an undertaking of the appellant, although it was proposed to be transferred to Sha-iahanpur Sugar Private Limited or that the sugar unit became an enterprise of Shahjahanpur Sugar Private Limited. If the sugar unit remained part of the undertaking of the appellant when the proposal was made to take the 100 per cent shares, the proposal cannot be one to acauire an undertaking, as ex hypothesi the undertaking had not been transferred to Shahjahanpur Sugar Private Limited. But, if the proposal to take 100 per cent shares involved an acquisition in future by th,: appellant of the sugar unit after it has been transferred tu the new company, there was no proposal to acquire by transfer, take over or otherwise of an 'undertaking' .as the sngar unit was not at the time of the proposal engaged in prolduction of goods, etc. as an enterprise of Shahjahanpur Sugar Private Limited.

An enterprise can be characterized as an undertaking within the definition . of. the. term only when it is engaged in the production, supply, d1stnbut1on or control of goods of any description or the provision of service of anv kind. In The Union of India v. Tat<: EnRineerin.~ and Locomotive Co. Ltd. ( [1]), the Coun held that more capacity or !Uere intention by an undertaking to carry on an activit'· ?s referred tom ~lause (v) of s. 2 of the Act in future alone without its bcmg so done m the present, i.e., at the material date or some time in :he past i.e., before the material date, cannot mean that the undcr-takrng 1s engaged in an activity as contemplated ins. 2(v) of the Ac:. No tloc;bt, temporary cessation of the activity will not detract an enterpr~s~ from its character as an undertaking, if the animus to resume the ac~1v1ty as s?on as possible is there. If factory has had to close tlown. its operations on account of strike, lock out, shortage of raw materials, shortage of power, or even want of finance, it cannot be said

(!) [1972] Bombay Law Reporter 1.

that it is not engaged in the production of goods, if the intention of the owner is to resume its activities. The view taken in In re Canara Bank Ltd. ( [1]) is much the same. There the Court followed the decision of the Bombay High Court referred to above and said that until concern goes into the actual production, it cannot be said to be an 'Undertaking'.

The sugar unit of the appellant was no doubt engageld in production of goods, etc., when the proposal was made and was, therefore, an undertaking; but it was only an undertaking of the appellant as the sugar unit had not been transferred and had not become an enterprise of Shahjahanpur Sugar Private Limited. The sugar unit did not become an undertaking of Shahjahanpur Sugar Private Limited as it was not and could not be engaged in the production of goods, etc., on its behalf before it was transferred to it. Sub-section ( 4) of s. 23 is confined to the case of proposal to acquire an undertaking by purchase, take over or otherwise but, to become an undertaking, it must presently be engaged in the production of goods, etc. The mere fact that the Memorandum of Association of Shahjahanpur Sugar Private Limiteld contained an object clause which provided for pro-duction of sugar would not necessarily mean that the company would go into production and thus become the owner of an undertaking as defined in s. 2 ( v) of the Act. Take for instance the case of an individual or firm. Does he or it become an 'undertaking' merely because he or it entertains an object to produce goods unless he or it is actually engaged in production of goods, etc.? .Certainly. not. If that is so in case of an individual or firm, we see no reason why different standard should be applied in the case of company merely because the object or one of the olijects of the company is to produce goods, etc., if it is not actually engaged in production of goods. Reference was made to Stroud's Judicial Dictionary, 4th edition, Vol. 1, p. 909 where it is stated that the phrase "engaged in any business" is apt to include employment at salary as well as embarking on business or in partnership. We do not think that even if the phrase 'engaged in business' conveys the idea of embarking on it, Shahjahanpur Sugar Private Limited had embarked on the business of production of sugar merely because its memorandum of association provided that the object of the company was to prolduce sugar. It is, therefore, difficult to imagine how when the proposal was made there was ?n enterprise engaged in the production of sugar and owned by Shahjaha'n-pur Sugar Private Limited which could be acquired .

To put the matter in nutshell : The sugar unit of the appellant was an undertaking of the appellant. . Even if the proposal to acquire 100 per cent shares in Sh:J4jahanpur Sugar Private Limited is con-sidered to be proposal to acquire either Shahjahanpur Sugar Private Limited or its sugar unit, since neither Shahjahanpur Sugar Private Limited nor its sugar .unit as an enterprise owned by it had gone into production of goods, the proposal did not involve the acquisition of an undertaking. Until the object in the memorandum of association

(I) A. T. R. 1973 Mysore 95.

of Shahajahanpur Sugar Private Limited was realized by the sugar unit going into production on behalf of the new company, it cannot be said that either Shahjahanpur Sugar Private Limited or the sugar unit transferred to it was_ an 'undertaking'. An entity which is not engaged in actual productio_n 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 the new company would not be engaged in production of goods etc. at the time of the acquisition of the shares by the appellant and s. 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 Private Limited or by the actual 'acquisition of the shares, the appellant acquired only the control and the right to manage the company. The word 'undertaking' in the latter part of s. 23 ( 4) denotes an enterprise which is considered as an entity engaged in the production of goods, etc. By getting: 100 per cent shares in Shahjahanpur Sugar Private Limited, the appellant never acquired that undertaking owned by the new company by purchase. take over or otherwise. The undertaking remained the undertaking of Shahjahanpur Sugar Private Limited. In other words, the purchase of 100 per cent shares in Shahjahanpur Sugar Private Limited cannot be eQuated to the purchase of the undertaking owned by Shahjahanpur Sugar Private Limited. What s_ 23 ( 4) requires is the acquisition by purchase, take over or otherwise of an undertaking. As we said, by getting the 100 per cent shares in Shahjahanpnr Sugar Private Limited, the appellant only acquired the control and the right of management of Shahjahanpur Sugar Private Limited; but that will not amount to purchase of the undertaking owned by that company. It is wcil settled that company has separate legal personality apart from its share-holders an:l it is only the company as juristic person that could own the undertaking. Beyond obtaining control and the right of manage-ment of Shahjahanpur Sugar Private Limited, the purchase of 100 per cent shares had not the-effect of an acquisition of the undertaking owned by it. No doubt, on dissolution of the company, the share-holders would be entitled to distributive share of the assets of the company. But it does not follow that while the company is going concern, the sharehoWers are the owners of its assets including any undertaking. It is the company as separate entity which alone can own the nndertaking and the purchase by the appellant of 100 per cent shares did not make it the owner of the undertakinp:. We ~re aware that we are dealing with an economic legislation calculated to give effect to the Directive Principles of State Policy set out in clauses (b) and ( c) of Article 39 of the Constitution and that the purpose of the legislation shonld be kept in mind in interpreting its provisions; but we are not prepared to assume that the le!!islature has, bv side-wind, swept awav the well established fundamental legal concepts of the law of corporation in making the legislation. We do not pause

to consider whether the circumstances which the Central Gove=ent took into account in passing the order were germane in the light of the provisions of s. 28 of the Act as we hold that s. 23 ( 4) has no application at all to the facts of the case.

No arguments were addressed at the bar as to whether the facts of the case would attract the provisions of s. 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 s. 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.-1 have had the advantage of perush1g the judgment of my learned brother, Mathew J. but, while concurring in the conclusion, desire to append 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 s. 2(v) and acquisition in the comext of Part of Chapter III of the Act, if I may say so with respect. Perhaps we are hearing the first case in this Court under this 'economic' legislation, although three rulings from two High Courts, having some bearing on the controversy before ns, were cited at the bar.

Shri Gupte, appearing for the appellant, posed the issue in neatly simplistic way when he assailed the order of the Central Govern-ment under s. 23 ( 4) of the Act on the score that, absent acquisition of an 'undertaking' in terms of s. 2(v), the order was devoid of jurisdic-tion. This provision deoals with concentration of economic power whose inhibition is one of the paramount purposes of the statute. Sec-tion 23 falls within Chapter III, Part A, of the Act. Section 20 states that that Part shall apply oaly to certain types of undertakings. Admit-tedly, the appellant is big, plural undertaking falling within this Part and proposes to make over the sugar unit (which is one of the enter-prises of this large multi,production concern) to •a new company to be floated. This latter company is to have 100% of its shares owned by the appellant and, what is more, by process of inflated valnatida of the assets of the sugar unit, the appellant will also appear to be advancing loan of several lakhs of rupees to it. According to the res-pondent (the- Union of India) and the State of U. P., this new scheme is dubious in many ways and more si,1ister than seems on ·the surface. We need not go into the details except to state that if the facts urged by counsel for the respondent were true, it is high risk to the com-munity to approve of the proposed scheme from the point of view of the purposes of the Act and the Directive Principle enshrined in Art. 39(c) of the Constitution.

It is unfortunate that in cases where the economic object and impact of special types of legislation call for judicial interpretation, the nece5'ity for detailed statement of the background facts and sup-portive data, apart from some sort of Brandeis brief illuminating the social purpose of the statute, is not being fully realised by the State. In the present appeal materials were read out from the files which dis-turbed me but no comprehensive affidavit marshalllag the social and economic facts relevant to the case and the statute was filed. (At kast copies of the Monopolies Inquiry Commission's Report, extracts from the draft Bill, Notes on Clauses c.:1d 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 with-out strong case of glaring error oa the merits and clear excess or absence of jurisdiction being made out by the appellant.

Shri Gupte, has, however, by-passed the controversial area of facts by line of legal reasoning which is attractive but specious. He contents that s. 23'( 4) cannot apply save where the dominant under-taking (in this case, the appella'at) proposed to acquire 'the whole or part of an undertaking which will or may result either in the creation of undertaking to which Part will apply or in the undertaking becom-ing an inter-connected undertaking of a'a undertaking To which Part applies'. Therefore, runs the argument, what is sought to be acquir-ed must be an undertaking. In the present case the sugar unit is already an asset of the appellant's concern a'ad what is proposed is nothing more than to float i;ew company whose shares will be acquired i11 toto by the appellant. Only when that company goes into produc-tion it becomes an 'undcctaking' and onlv then can s. 23(4) poss'blv cover the case, the reason being that an 'undertaking', by definition in s 2 ( v). 'means an undertaking which is engaged in the production .... of goods .... '. The acce'at placed by counsel is upon 'is engaged in the production'. He submits that the new company does not become an 'undertaking' until is is 'engaged in the production of goods'. What is not in esse but only in posse is not an undertaking. So much so the application of s. 23 ( 4) is premature and the Central Government's order is illegal. Moreover, no acquisition of the new company is contemplated, the owning of 100% shares thereof not being in law an acquisition of the undertaking as such by the appellant. I concede there is force in this argume•at.

The crucial submissions of counsel for the appellant, however, stand exposed to the criticism made by Shri P. P. Rao for the rcspon-dent that they turn more or less on play of words in the definition of 'undertaking' in s. 2(v) and legal ingenuity about acquisition there-of. Is there substance in these contetionc;; or are thev Ic,gn! suhter-fuges to escape from the statutory meshes ?

The law is not 'a brooding omnipotence in the sky' but pragmatic instrument of social order. It is an operational art controlling econo-mic life, and interpretative effort must be imbued with the statutory tmrpose. No doubt, grammar is good guide to meaning but bad

master to dictate. Notwithstanding the traditional view that gramma-tical construction is the golden rule, Justice Frankfurter used words of practical wisdom when he observed : (1)

'There is no surer way to misread document than to read it literally".

Indeed, this case really tur,1s on the Court's choice of the correct canon of construction as between two alternatives. Is an 'undertak-ing' an economic enterprise which is actually producing goods ? Here we <Dvcr-stress the 'in praesenti' aspect and thereby undermine the legislative object. Oa the contrary, is an 'undertaking' used in its economic sense and in its wider connotation of embracing not merely factories which have been commissioned but projects which are em-bryonic and designed to go into production immediately formal legal personality is acquired and statutory approval under the Act secured ? fa the present case there is already 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 Govern-ment's approval under s. 2314) obtained. will go on stream since the mill's wheels will continue to turn regardless of the legal metempsy-chosis of ownership. In such case it would be aba'adoning com-1nonsense and economic realitv to treat the proposed uEdc1·taking as anything less than an 'undertaking' (as defined in the Act) because it is only in immediate prospect. For certain purposes, evea 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 anti-concentration-of-ecoaomic-power objective of the legislation. Moteovcr, 'to undertake' is to set about; to attempt to take upon one-self solemnly or expressly; to enter upon; to endeavour to perform (sec Black's Law Dictionary). If what the appellant intends to acquire or establish is as undertaking in fact and therefore in law, the :ransformation device and the .. refuge in grammar cannot I1elp hin.1. the expression being capable of taking in not merely what is, but what is c-bow to be. An 'undertaking' is defined as an undertaking ..... . which itself discloses the difficulty felt by the draftsmen in delineating the precise content. Obviously, dynamic economic concept cannot be imprisoned into ineffectualness by static strict constructida. 'Is engaged in production', in the context, takes in not merely projects which have been completed and gone into production but also blue-print stages, preparatory moves and like a'ate-production points. It is descriptive of the series of steps culminating in production. You are engaged in an undertaking for production of certain goods when you seriously set about the job of getting everything essential to enable production. Ecol10mists, administrators and industrialists understand the expression in that sense and oftentimes projects in immediate pros-pect are legitimately set down as undertakings engaged in the particular line. Not the tense used but the integration of the steps is what is decisive. What will materialise as productive enterprise in futuro can be regarded curreJ,1tly as an undertaking, in the industrial sense. l_:_!_"__not distant astrology but imminent futurology, and the phrases

(I) Massachusetts B. &Insurance Co. v. U.S. 352 U.S. 128, 138.

of the statute are amenable to service of the purposes of the law, libera-lly understood. Likewise, acquisition of an undertaking is to be viewed not in narrow sense but as broad business operation. Surely, the new company is an undertaking which, by the vesting of l 00% of its share-holding in the appellant, is going to belong to the latter. It is either acquiring or establishing the new adventure. That is the plain truth and law must accord with it. After all, broaclened, sophisticated and spectral sense must be given to these words of econo-mic connotatio,1 without being hide-bound by lexicography or legalism. Of course, any infant in law knows that holding shares is not acquiring the companv with its distinctive personality. But any adult in cor-porate economics knows that controlling the operatici;is of an industrial unit is to acquire or establish it for all economic purposes-depending on whether that one is new or pre-existing.

The word 'undertaking' takes in also enterprises attempted (See Webster's Dictionary on 'undertaki'ag', the meaning having received judicial approval in AIR 1960 Bom. 22 at p. 24, paragraph 4). This Court in Gymkhana Club([1]) has accepted the meaning given in Webs-ter. Similarly, 'engaged in' takes within its wings 'embarking on' (Vide : Stroud's Judicial Dictionary, 4th Edn. Vol. 2, p. 909).

1f the language used in statute ca<a 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 construc-tion sought, wishful thinking is no substitute and then, not the Court but the Legislature is to blame for enacting damp squib statute. In my view, minor defi;iitional disability, divorced from the realities of industrial economics, if stressed as the sole touchstone, is sure to prove disastrous when we handle special types of legislation like the one in this case. 1 admit that viewed from one stal}dpoint 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 conc<Jatration of economic power. To repeat for emphasis, when two interpretations are feasible, that whlch advances the remedy and suppresses the evil, as the legislature envisioned, must find favour with the Court. Are there two interpretations possible ? There are, as I have tried to show· and I opt for that which gives the law its claws.

I am alive to and have kept within the limitations of judicial ·Options indicated by Cardozo in different context :

"The Judge, even when he is free, is still not wholly free. He is not to innovate at pleasure. He is not knight-errant roaming at will in pursuit of his own ideal of beauty or of goodness. He is to draw his inspiration from cO'ase-crated principles ae is not to yield to spasmodic senti-ment, to vague and unregulated benevolence. He is to exercise discretion informed by tradition, methodized by

(I) [1968] l S. C.R. 742.

' [.... ]

analogy, disciplined by system, and subordinated to 'the primordial necessity of order ia the social life'. Wide enough in all conscience is the field of discretion that rcmaini-."

(Benjamin Cardozo's 'The Nature of the Judicial Proceis'-Yale Uai-· versity Press (1921). While judicial review, at least on processual issues, is the hallmark of fair dealing with rights of persons in Re-public, there are expanding areas of economic and techno!ogical codes where the adjudicator has to tread warily alild pause circumspectly, especially because the-expertise needed to unlock the statute is ordi-narily unavailable to the judicial process and the subject matter is too sensitive and fundamental for the uninstructed in the special field to handle with confidence. The Constitution, in its essay in building up just society, interdicting 'concentration of economic power to the. detriment of the community, has mandated the State to direct its policy towards securing that end. Monopolistic hold on the nation's economy takes many forms and to checkmate these manouvres, the administration has to be astute enough. Pursuant to this policy and need for flexible actiO'a, the Act was enacted. variety of considerations (set out in s. 28) amenable to subtle administrative perception and expert hand!-ing but falling beyond the formalised processes unaided by research· and study that the Court is prone to adopt, may have to be examined before reaching right decision to allow or disallow seemingly inno-. cuous but really or potentially anti-social moves of domrrrant under-takings. It is well-known that backdoor techniques, and corporate conspiracies in the economic sense but with innocent legal veneer, have been U$ed by oligopolistic organisations and mere juridical verbalism. ca:.mot 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 super-vision and correction, within well-recognised limits, is not an expend-able item since the rule of law is our way of constitutional l.ife. In our jural order, 'the ethos of adjudication' on independent court scru-tiny is too qur,1tessential to be jettisoned without peril to those found-ing values of liberty, equality and justice, even though Judges consider-ing comp]e)( a;ad 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 01aly when strong circumstances erist, or other basic guidelines for control come· into play.

Even so, this functioN, so vital to cry halt wllen executive powers exceed their bounds or are obliquely, oppressively or illegally used, has meanin~ful dimensions and creative directioni wlien disp11tes deal-ing with futricate economic legislation fall for consideratfon. The absence of research or 11.Ssessor assistance with special skill, knowledge and experience in fields unfamiliar for jurists is handicap which demands attention for the sake of competent justice beittg administered by superior Courts. After aJI, law must grow with life, if it is to do justice to Developmeat, e'pecially in developing countries.Here -w·e come upon one of the basic deficiencies of our hnv studies which do not yet take within their sweep, apart from jurispru-dence, economics, politics and sociology. These arc distinct enough at the core but shade off into each other. As Roscoe Pouud observed : "All the social sciences must be co-workers, and emphatically all must be co-workers with jurisprudence". Georges Gurvitch suppkmentecl the statemeat by observing : "A little law leads away from sociology but much law leads back to it". The desiderata arc neither nuvel nor detractory but n:<:ognilion of the new status of Law i';s vis Development in the context of the Court's high function of :.<eeping the Executive and allied instrumentalities wisely within the leading strings and formidable grip of the law. A[1]athony Dickey, in Univer-sity of London Public Lecture in Laws, advocates the need for making judicial review of administrative action more of reality than it is as present and adverts to the court having to possess 'adequat•o back-ground training' and 'first class research assistance'. In another .article,(') the same author explains the permissibility in English Courts of the practice of seeking asscssor-•assistance where specialist kn<)\vle<lge and expert advice arc called for in complex case situations.

These observations are made by me to clear the ground for approaching an 'economic' /is of complex nature in socio·kgal way and not in the traditional liligative style. So viewed, what does on 'undertaking' mean in s. 23 ( 4) of the Act? Surely, 'definitions in the Act are sort of statutory d'ctionarv to be departed from when the context stronglv suggests it. The central problem on which Shri Gupte, appearing for the appellant, staked his whole case largely is as to whether an undertaking covers only going concern, running frldustry and not one in the offing or process of unfolding. The decisions of the High Courts cited before us do not convince 1ne. On the other hand, the reasoning based on the present tens(: is faulty as alreadv elaborated. lf this Court accepts the legalis:ic con-notation of 'undertaking' disi[1]agcnuous crop of ne\V co1npanics \Vi.:h ~dterior designs n1ay v,:cll be floated taking the cuc~a c::inscqu-:;ncc which this Court should thwart because lhcrcbv the law will be ccn-demned to pathetic futility. But in the view I take, may be s. 22-though not s. 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 a[1].1d re-incarnate it as t~12 Shahjahanpur Sugar (P) Ltd. We have two provisions which come up for consider•ation 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 accorda\1ce with, the previous permission of the Centml Government.

---------

(1) P. 497 Modern Law Review. Vol. 33, Septeo1ber 1970.

(2) Any person or authority intending to establish new undertaking referred to in sub-section (1) shall, before taking a11y action for the establishment of such 1'.ndertakmg, make an application to the Central Government m the pres-cribed form for that Government's approval to the proposal of esrablishing any undertaking and shall set out in such appli-cation information with regard to the i',1ter-connection, if any, of the new undertaking (which is intended to be estab-lished) with every other undertaking, the scheme of finance for the establishment of the new undertaking and such other informatiO'a as may be prescribed. (emphasis, mine)

Section 23 ( 4) runs :

"If an undertaking to which this Part applies proposes to acquire by purchase, take-over or otherwise the whole or part of an undertaking which will or may result either-

(a) in the creation of an undertaking to which this Part would apply; or

(b) in the undertaking becoming '1<1 inter-connected under-taking of an undertaking to which this Part applies,

it shall, before giving any effect to its propos'als, make an application in writing to the Central Government in the pres-cribed form of its inte[1]i1tion to make such acquisition, stating therein information regarding its interconnection with other undertakings, the scheme of finance with regard to the pro-posed acquisition and other information as may be prescrib-ed." (emphasis, mine)

The sections when placed in juxtaposition, suggest that the appel-lant's operation is to establish new undertaking (out of its old sugdr unit, though) which, in view of the share-holding, will inevitably bo-come an inter-cO'.mected undertaking of Carew & Co. (llK original undertaking, i.e., the appellant). Not so much to acquire an existing undertaking as to establish, by concealed expansioaist objective, new undertaking with sugar manufacture is the core of the opcratioa. Therefore, it is not s. 23 ( 4) that magnetizes the appel!<1nt's proposal but, prima facie, Sec. 22. The $pecial provision must exclude the gene-G ral and. in this view, the acquisition of an existing undertaking stands repelled. The scheme of the Act deals both with establislzi11g new undertaking and acquiring (by contrast) an existing undertuking. So J airee with my learned brother Mathew J. that the order under s. 23 ( 4) is beyond its pale but add that this looks like case for the appli-cati0'.1 of s. 22. If the appellant intends to go ahead with the new adventure, he is trying to establish, he may, prima facie have to apply for and get the previous permission of the Central Government under s. 22. I am not pnrsuing this aspect of the application of Sec. 22 as that will be decided, if found necessary, ufter fuller investigation fro.n the angle of that provision.

The problem of interpretation of statutes raised ia 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 Low Review, p. 197, Vol. 33, March 1970:

"The Law Commission (of Bagland) 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 Papor is trenchant essay on the short-comings of the present techniques & rules of interpretation, and mild rebuke of judges who arc still too faithful to the Literal Rule. Its main burden, however is to make the case for the use of extraneou_s docum~atary aids to interpretation, and it does so, I should think, in way that puts the answer to this long-debated question beyond doubt. Among the re-commendations (summed up in draft clauses at the end of the Report} are that courts when interpreting statutM, should be allowed to consider the following :

(oa) all iadications provided by the Act as printed by autho-rity including punctuation and side-notes, and the short title of the Act;

(b) any relevant report of Royal Commission, Committee or other body which has been presented or made to or laid before Parliament pr either House before the time when the Act was passed; (c) any relevant treaty or other international oagreement which is referred to in the Act or of which copies had been presented to Parliament by command of Her Majesty before that time, whether or not the United Kingdom were bound by it at that time;

(d) any other document bearing upon the subject-matter'of the legislation which had been presented to Parlia-ment by command of Her Majesty before that time; (e) any document (whether falling within the foregoing paragraphs or not) which is declared by the Act to be relevant documei,1t for the purpose of this section."

"In time, however, somebody will hal'e to tackle the bask question-how long can we sustain the fiction that when the legislature prescribes for problem, the court, when eo10-fronted with difficult statute, merely uses the techniques of construction to wring an innate mcani[1]ag out of the word~?

One cannot, these days, approach the problem of statu-tory interpretation in isolation from the legislative proce&>. And I do not think the proposal to allow the court to consult parliamentary documeJ,1ts meets this objection. As long as the li:ction persist that the courts merely 'interpret' itatutes, Par-liament will co11ti11ue to put out legislation of ever increasing

detail and complexity in the belief that it mnst provide complete set of answers. This is self-defeating ambition. Wbere does one look for the intention of the legislature in today's monster Acts, with their flotillas of statutory instru-ments and schedules, the plethora of boards, tribunals and committees, with delegated powers, which they set up, the myriad of subjects they deal with, their confusing cross· references to other statutes, and their often opaque and tor-tured language that defies translation into intelligible ideas/" x x x x x

"What exactly are the respective roles of Parliament and the courts as regards legislation ? Since it is fictio,1 that the courts merely seek out the legislati~e intent, there must be margin in which they would or 'creatively' interpret legis-lation. The courts are 'finishers, refiners and polishers of legislation which comes to them in state requiring varying degrees of further processing,' said Donaldson J. in Corv-craft Ltd. v. Pan American Airways, Inc., (1968 3 W.L.R. 714, 732) and indeed it i£ no secret that courts constantly give their own shape to enactments."

. "How do the present rules help, when statute passzd ad-hoc, to deal with situation clearly envisaged by the legis-lature, is then applied to whole new state of affairs that were never originally cont~mplated ?"

To conclud~ on the poiat with which I began, 'undertaking' is an expression of flexible sementics and \•ariable conn9tation, used in this very statute in different senses and defined in legal dictionaries widely enough. In sum, what the appellant proposed to the Central Govern-ment was to establi$h new undertaking, if we throw aside legal cam-. ouflagcs built around verb •and pierce the corporate veil. Therefore, while jurisdiction in the respondent to apply s. 23.( 4) of the Act is absent, the appellant may caught within the spider's web of s. 22--I do not express myself finally. The appeal must now succ~ed, but the legal drama may still have its fifth Act for the appellant-I cannot be futuristic as the full facts will first be examined by Government for that purpose in case he chooses to apply.

For these reasons I allow the appeal but, in the circumstances, make· no order as to costs.

FAZAL Au,'J.-,---I agree with my brother Mathew, J., thats. 2~ of the Mo·nopolies and Restrictive Trade Practices Act, 1969--herea(ter to be referred to as 'the Act'-has absolutely no application to the facts and circumstances of the present case. In this view of the matter the impugned order of the Centml Gover.iment must, therefore, be quashed. · Section 23 of the Act would apply only if the undertr.king sought to be acquired is in actual and physical existence· and has gone iI into actual production. The scheme which is the subject-matter of this case is merely proposal and unless the undertaking is in existence mid doing business it wiU not fall within the meaning of s. 2(v) of the Act which defines an "undertaking".

12-1839 Sup. CI/75

I, however, entirely agree with my brother Krishna Iyer, J., that on the facts disclosed in the appeal the Scheme propounded by the appel-lant may prima facie fall within the four corners of s. 22 of the Act. The resolution passed by the appellant for setting up new Company may be extracted thus : "RESOLVED that the Board of Directors be and is hereby authorised to form separate Compa'ay to be called "SHAHJAHANPUR SUGAR (PRIVATE) LIMITED", as wholly-owned subsidiary of this Company, to ultimately take over and operate the Sugar Factory undertaking of this Company at Rosa (Uttar Pradesh) as going concern. FURTHER RESOLVED that the transfer of the assets of the Sugar Factory unde1:taking to the newly formed subsi-c • di•ary, viz. "SHAHJAHANPUR SUGAR (PRIVATE) LIMITED"', be made on the basis of the valuation of the re>-pective assets made by Messrs. LEES & HAW AN, Char-tered Surveyors on May 29, 1970." This resolution unmistakably reveals the following essential fea-tures : ( 1) that the appellant intended to establish new Company and this proposal was approved by virtue of the resolu-tion quoted above; (2) that the new Company was to be floated by transferring 100 per cent shares from the Sugar Unit of the Com-pany so that the appellant could retain effective CCJ1,1trol over the new Company; ( 3) that the new Company after being established was to be known -as "SHAHJAHANPUR SUGAR (PRI-VATE) 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. a'ad thus the proposed new Company would be an inter-connected under-taking of the appellant. These facts, therefore, may attract the essential ingredients of s. 22 of the Act and, if so, the appellant cannot be allowed to float & new Company without complyl,1g with the statutory requirements of s. 22 of the Act iri which case fuller facts may have to be investig~ted for that purpose. The object of the Act in my opinion appears to be to prevont con-centration of wrolth in the hands of 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 :-H

I, however, entirely agree with my brother Krishna Iyer, J., that on the facts disclosed in the appeal the Scheme propounded by the appel-lant may prima facie fall within the four corners of s. 22 of the Act. The resolution passed by the appellant for setting up new Company may be extracted thus :

(I) By providing that if it is proposed to substantially expand the activities of Company by issue of fresh capi-

. CAREW & co. LTD. v. UNION (Fazal Ali,!.)

ta! or by instoallation of new machinery, then notice to the Ce'atral Government and its approval must be taken under s. 21 of the Act.

(2) In the case of establishment of new Company by in-sisting on the previous permission of the Central Government under s. 22 of the Act. ·

(3) In the case of acquisition of an existing Company by another Company by requ'iring the sanction of the · Central Government to be taken by such Company under s. 23 of the Act.

The present case, in my opinion, may fall within the second cate-gory mentio.ned above.

Appeal allowed .