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W.H. Targett and Co. Ltd. Vs. Wall Street Investment P. Ltd. - Court Judgment

LegalCrystal Citation
SubjectMRTP
CourtKolkata High Court
Decided On
Case NumberCompany Petition No. 533 of 1982
Judge
Reported in[1986]59CompCas335(Cal)
ActsCompanies Act, 1956 - Sections 391(2), 392 and 394; ;Monopolies and Restrictive Trade Practices Act, 1969 - Section 23(4)
AppellantW.H. Targett and Co. Ltd.
RespondentWall Street Investment P. Ltd.
Cases Referred(ii) Ahmedabad Mfg. & Calico Printing Co. Ltd. v. Bank of India Ltd.
Excerpt:
- .....practices act, 1969, do not apply to the said arrangement.4. this application is opposed by the central government. an affidavit affirmed on february 11, 1983, by the regional director, company law board, calcutta, has been filed on behalf of the central government in opposition to the petition. it is, inter alia, alleged in this affidavit that the arrangement is really a sale of a portion of the property of w.h. targett & co. ltd. and, therefore, the petitioner is not entitled to invoke the provisions of sections 391(2), 392 and 394 of the companies act, 1956. it is contended further that the proposed transfer being for consideration other than cash, the aforesaid sections cannot apply in the facts of this case.5. it is alleged that w. h. targett & co. ltd. is an undertaking.....
Judgment:

Dipak Kumar Sen, J.

1. W.H. Targett and Co. Ltd., the petitioner, seeks to transfer about 1 bigha, 5 cottahs and 19 sq. ft. land in premises No. 20; Burdwan Road, Calcutta, to Wall Street Investment P. Ltd. against allotment of a number of shares of the latter in favour of the former by way of an arrangement under Chap. 3 of the Companies Act, 1956.

2. The present application under Sections 391(2), 392 and 394 of the said Act was moved on September 24, 1982, pursuant whereto meetings of the shareholders of the two companies were held. The shareholders of both the companies approved the arrangement unanimously.

3. It is now prayed that the arrangement may be sanctioned by this court with effect from April 1, 1982, and that consequential directions in respect thereof be made in favour of the said Wall Street Investment P. Ltd. and that the latter be directed to issue and allot 40,000 equity shares of Rs. 100 each credited as fully paid up to W. H. Targett & Co. Ltd. In the petition it is, inter alia, alleged that the provisions of the Monopolies and Restrictive Trade Practices Act, 1969, do not apply to the said arrangement.

4. This application is opposed by the Central Government. An affidavit affirmed on February 11, 1983, by the Regional Director, Company Law Board, Calcutta, has been filed on behalf of the Central Government in opposition to the petition. It is, inter alia, alleged in this affidavit that the arrangement is really a sale of a portion of the property of W.H. Targett & Co. Ltd. and, therefore, the petitioner is not entitled to invoke the provisions of Sections 391(2), 392 and 394 of the Companies Act, 1956. It is contended further that the proposed transfer being for consideration other than cash, the aforesaid sections cannot apply in the facts of this case.

5. It is alleged that W. H. Targett & Co. Ltd. is an undertaking registered under the Monopolies and Restrictive Trade Practices Act, 1969, and that an application of W. H. Targett & Co. Ltd. for cancellation of their registration is pending before the authority under the Monopolies and Restrictive Trade Practices Act, 1969. The said application is under consideration and W. H. Targett & Co. Ltd., not yet being deregistered,continues to be registered under the Monopolies and Restrictive Trade Practices Act of 1969. It is contended that sanction under Section 23(4) of the said Act is required from the Central Government before the arrangement can be sanctioned by this court.

6. At the hearing, the learned counsel for the petitioners drew my attention to Clause 3(22) of the memorandum of association of W.H. Targett & Co. Ltd. which reads as follows :

'The objects for which the company is established are......

(22) To sell or dispose of the undertaking of the company or any part thereof for such consideration as the company may think fit and in particular for shares, debentures or securities of any other company.'

7. He also drew my attention to Clause IIIA(4) of the memorandum of association of Wall Street Investment P. Ltd. which reads as follows :

'' The objects for which the company is established are .....

(4) To deal in real and personal property and rights of all kinds, and in particular, lands, buildings, hereditaments, businesses, concerns and undertakings, debenture-stocks, mortgages, debentures, produce, concessions, options, contracts, patents, annuities, licences, privileges and choices in action of all kinds, including any interest in real or personal property.'

8. He also referred to Section 23 of the Monopolies and Restrictive Trade Practices Act, 1969, the relevant portion of which reads as follows :

'23. Merger, amalgamation and take-over.--.....

(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 interconnected 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 interconnection with other undertakings, the scheme of finance with regard to the proposed acquisition and such other information as may be prescribed...

(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 Government may pass such orders as it may think fit.

(9) Nothing in Sub-section (4) shall apply to the acquisition by an undertaking which is not a dominant undertaking, of another undertaking which is not also a dominant undertaking, if both such undertakings produce the same goods;

Provided that nothing in this sub-section shall apply if, as a result of such acquisition, an undertaking comes into existence to which Clause (a) or Clause (b) of Section 20 would apply.'

9. As a precedence showing that arrangement similar to that involved in the instant case has been sanctioned by this court under the Companies Act, learned counsel for the petitioners cited A.W. Figgis & Co. Pvt. Ltd., In re [1980] 50 Comp Cas 95 (Cal). Here, a similar arrangement for transfer of property was objected to by the Company Law Board, inter alia, on the grounds that the scheme had been propounded for avoiding capital gains tax, court fees, stamp duty and sanction of the Urban Land Ceiling Authority. Such objections were overruled by a learned judge of this court who held that the scheme having been passed by the majority of the shareholders complying with all the statutory requirements and there being no illegality or fraud on the face of the same, the same must be sanctioned. It was also noted that there was no law barring such a scheme for transfer of a part of the company's properties to another company formed for that purpose as a wholly owned subsidiary and that it was open to a person to arrange matters in accordance with law in such a way as to avoid other consequences following from other provisions of law.

10. Learned counsel next submitted that W.H. Targett & Co. Ltd., admittedly an undertaking to which the Monopolies and Restrictive Trade Practices Act, 1969, applied was not seeking to acquire by purchase or otherwise any part of any undertaking. It was Wall Street Investment (P.) Ltd., an undertaking to which the said Act did not apply, which was seeking to acquire a part of the assets of W.H. Targett & Co. Ltd. It was contended that Section 23(4) of the said Act had no application in the facts of the instant case.

11. Learned counsel for the petitioner also cited Union of India v. Tata Engineering & Locomotive Co. Ltd. [1972] 42 Comp Cas 72 (Bom). In this case, after the nationalisation of banks, the defunct Central Bank of India Ltd. sought to enter into a scheme of amalgamation with Tata Engineering and Locomotive Co. Ltd. The Central Government and the Regional Director of the Company Law Board contended that such a scheme cannot be sanctioned by the court without prior approval of the Central Government required under Section 23(1) of the Monopolies and Restrictive Trade Practices Act,1969. It was held by a Division Bench of the Bombay High Court that the expression 'any other undertaking ' in Section 23(1) of the said Act had to be given the meaning under Section 2(v) thereof. The Central Bank of India not being engaged in production, supply, distribution or control of goods of any description or providing service of any kind at the material time did not come within the definition of an 'undertaking' within the meaning of Section 2(v) of the said Act.

12. The following cases, viz., (i) Bank of India Ltd. v. Ahmedabad Mfg. & Calico Printing Co. Ltd. [1972] 42 Comp Cas 211 (Bom), (ii) Ahmedabad Mfg. & Calico Printing Co. Ltd. v. Bank of India Ltd. [1972] 42 Comp Cas 493 (Guj), were also cited for similar views expressed by the Bombay and the Gujarat High Courts.

13. Learned counsel for the Central Government submitted, on the other hand, that under the proposed arrangement, W. H. Targett & Co. Ltd., an undertaking to which the Monopolies and Restrictive Trade Practices Act, 1969, applied would become interconnected with Wall Street Investment Ltd. Therefore, the arrangement came within the mischief of Section 23(4) of the said Act. He submitted further that the matter was under consideration by the Central Government and the court should wait till the application was disposed of by the authority concerned.

14. In the facts and circumstances and in view of the express language of Section 23(4) of the Monopolies and Restrictive Trade Practices Act, 1969, I am unable to accept the contentions of the Central Government. Section23(4) comes into operation only if an undertaking to which the said Act applied proposes to acquire whole or part of any other undertaking.

15. In the instant case, it is nobody's case that Wall Street Investment Pvt. Ltd. which proposed to acquire the asset concerned is an undertaking to which the said Act applied. Therefore, even if an interconnection between it and W.H. Targett & Co. Ltd. which was an undertaking to which Chapter III of the said Act applied resulted from the arrangement, Section 23(4) would not come into operation. If I do not construe the Monopolies and Restrictive Trade Practices Act, 1969, strictly but look to the pith and substance of the legislation, even then the contentions of the Central Government cannot be sustained. The object of the said Act is prevention of concentration of economic power. In the instant case, the transaction results in divesting of an economic asset by a company which comes under the purview of the Act. Further, and in any event it is open to W.H. Targett & Co. Ltd. to sell its land to Wall Street Investment (P.) Ltd. and also acquire the shares of the latter in the ordinary course. The real object possibly is the avoidance of payment of fees,duties and taxes and this has been held to be permissible in A.W. Figgis & Co. Pvt. Ltd., In re [1980] 50 Comp Cas 95 (Cal).

16. For the reasons as aforesaid, this application succeeds. There will be an order in terms of prayers (a), (b), (c), (d), (e), (f) and (g) of the summons. Leave is given to W.H. Targett & Co. Ltd. to file its schedule of assets within a period of fortnight from date.

17. On an oral application made on behalf of the Central Government, operation of this order is stayed for three weeks from date.

18. There will be no order as to costs.


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