1972 (2) TMI 60 - HC - Companies Law

Court approves merger scheme, exempting company from Monopolies Act, deeming it not an 'undertaking.'

The court granted sanction to the amalgamation scheme, ruling in favor of the company and allowing it to proceed with the merger. The court held that the ... Amalgamation Issues:Petition under sections 391 and 394 of the Companies Act, 1956 for sanction of a special resolution for amalgamation. Opposition by Central Government based on non-approval under section 23(1) of the Monopolies & Restrictive Trade Practices Act, 1969 and violation of section 21 of the Act.Analysis:The petition sought the court's sanction for a special resolution passed by the company regarding its amalgamation with another entity. The company had previously obtained directions for a meeting of its members to consider and approve the amalgamation scheme. The Central Government raised objections, contending that approval under section 23(1) of the Monopolies & Restrictive Trade Practices Act, 1969, was necessary for the merger. The Act mandates Central Government approval for schemes of merger or amalgamation involving specific types of undertakings.The company argued that the provisions of the Act did not apply to the present case as the company, having ceased its banking operations, did not meet the criteria of an 'undertaking' as defined by the Act. The court confirmed the company's authority to amalgamate with the other entity, emphasizing that the company's lack of business activities rendered it ineligible to be classified as an undertaking or a dominant undertaking under the Act. Consequently, sections 20 and 23(1) of the Act were deemed inapplicable to the company in this context.The Central Government further contended that the merger scheme violated section 21 of the Act by not obtaining its approval. However, the court ruled that section 21, which pertains to the expansion of an undertaking through specific means, did not encompass mergers or amalgamations. The court interpreted the Act restrictively, emphasizing that the Act's provisions must be strictly construed. Drawing parallels to a similar case in the High Court of Bombay, the court rejected the argument that the merger scheme breached section 21.In conclusion, the court found no valid grounds to deny sanction to the amalgamation scheme, as it had been duly approved by the company's members and followed all necessary procedures. The court deemed the scheme reasonable and in the best interests of the company and all stakeholders. The court granted sanction to the amalgamation scheme and allowed the company to seek further directions if needed.