civil appellate jurisdiction civil appeal number 1308 of
1973.
from the order dated the 30th june 1973 of the central
government ministry of law justice and companypany affairs
department of companypany affairs. v. gupte and vinumber bhagat for the appellant. 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 delivered by mathew j. v. r. krishna iyer j. and s.
murtaza fazal ali j. gave separate opinions. mathew j. this appeal is from an order dated 30-6-1973
passed by the government of india dismissing an application
filed by the appellant on 5-5-1972 under s. 23 4  of the
monumberolies and restrictive trade practices act 1969
 hereinafter referred to as the act  for acquiring 100 per
cent share capital of shahjahanpur sugar private limited
the appellant is a public limited companypany and is a
subsidiary of united breweries limited and other companypanies
interconnected with it. the appellants undertaking companysists
of a sugar factory and a distillery for manufacture of
liquor at rosa shahjahanpur and anumberher distillery at
asansol the appellants 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 of the companypany to he formed. the proposal was that the appellant would be entitled to an
allotment of 100 per cent shares in the new companypany and a
further sum of rs. 15
77093/- as companysideration for transfer of the sugar unit. according to the appellant its object in getting 100 per
cent shares in the new companypany was to offer the shares to
cane growers later on. 11-l839 sup ci/75
the appellant wrote a letter to the secretary of the
company law a board on 15-10-1971 stating that since the new
company would be a subsidiary of the appellant the approval
of the companypany law board under s. 372 of the companypanies act
would number 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 companypany affairs . 3 replied by a letter dated numberember 1 1971 that the
provisions of f s. 372 2  of the companypanies act would be
applicable to the acquisition of the shares by the appellant
in the companypany 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 facie be attracted
and that the appellant should file a separate application
under the relevant section. the appellant had already
intimated the central government department of companypany
affairs on 17-11-1971 that the provisions of sections 21 22
and 23 of the act would number apply to its proposal to acquire
the shares of the companypany proposed to be formed for taking
over the sugar unit of the appellant. however the appellant
filed an application dated 5-5-1972 purporting to be under-
s. 23  4  of the act. the new companypany proposed 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 appellants application under
s. 372 4  of the companypanies act for investing rs. 50 lakhs in
the equity shares of the capital of shahjahanpur sugar
private limited. by anumberher order dated 30-6-1973 the
central government in the department of companypany affairs
also rejected the appellants application under s. 23 4  of
the act. as already stated this appeal is against the
latter order under s. 55 of the act. the point for companysideration in this appeal lies in a
narrow companypass viz. whether s. 23 4  was attracted to the
facts of the case. to decide 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 operation of the econumberic system should number result
in the companycentration of econumberic power to the companymon
detriment for prohibition of monumberolistic and restrictive
trade practices and for matters companynected therewith 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 ili is companycerned with companycentration of econumberic
power and s. 20 occurring in part a of that chapter states
that this part shall apply to an undertaking if the total
value of-

its own assets or

its own assets together with the assets of
its inter companynected undertaking is number less
than twenty crores of rupees
and to a dominant undertaking-

where it is a single undertaking the value
of its assets or

where it companysists of more than one
undertaking the sum-total of the value of
the assets of all the inter-connected
undertakings companystituting the dominating
undertaking is number 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 substantially expand its activities by the issue
of fresh capital or by the installation 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 numberice of its
intention to make such expansion stating therein the scheme
of finance with regard to the proposed expansion whether it
is companynected with any other under taking of 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
undertakings. it says that numberperson or authority other
than government shall after the companymencement 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 with 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

merger amalgamation and take-over- 1  number-
withstanding anything companytained in any other law for
the time being in force-
 a  numberscheme of merger or amalgamation of an
under taking to which this part applies with
any other undertaking
 b  numberscheme of merger or amalgamation of two or
more undertakings which would have the effect
of bringing into existence an undertaking to
which clause  a  or clause  b  of s. 20 would
apply. shall be sanctioned by any companyrt or be recognised for any
purpose or be given effect to unless the scheme for such
merger or amalgamation has been approved by the central
government under this act. if any undertaking to which this part applies
frames a scheme of merger of amalgamation with any
other under taking or a scheme of merger or
amalgamation is proposed
between two or more undertakings and if as a result of
such merger or amalgamation an undertaking would companye 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
government in the prescribed form with a companyy of the scheme
annexed thereto for the approval of the scheme. numberhing in sub-section  1  of sub-section  2  shall
apply to the scheme of merger or amalgamation of such
interconnected undertakings as are number dominant undertakings
and as produce the same goods. 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
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
be prescribed. numberproposal referred to in sub section  4  which
has been approved by the central government and numberscheme 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 companymission for an inquiry and
the companymission may after such hearing as it thinks fit
report to the central government its opinion thereon.  7  on receipt of the companymissions report the central
government may pass such orders as it may think fit. numberwithstanding anything companytained in any other law
for the time being in force numberproposal to acquire by
purchase take-over or otherwise of an undertaking to which
this part applies shall be given effect to unless tho
central government has made an order according its approval
to the proposal. numberhing in sub-section  4  shall apply to the
acqusition. by undertaking which is number a dominant under-
taking of anumberher undertaking which is number also a
dominant undertaking if both such undertakings produce
the same goods
provided that numberhing in this sub-section shall
apply if as a result of such acquisition an
undertaking companyes into existence to which clause  a  or
clause  b  of section 20 would apply. section 28 states that the central government before
according approval in the exercise of its powers under part
a 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 need
consistently with the general econumberic position of the
country to achieve the production supply and distribution
by most efficient and econumberical means of goods of such
types and qualities and several other companysiderations
specified therein. the submission of the companynsel 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 companytrol 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 companypany
that companypany had number acquired the sugar unit of the
appellant number was it engaged in the production supply
distribution or companytrol of goods etc. as an enterprise of
shahjahanpur sugar private limited and so there was no
proposal to acquire by purchased take over or otherwise of
the whole or part of any undertaking within the meaning of
s. 23 4 . according to companynsel 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 proposal was number 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 a
proposal to transfer it to it number was that unit engaged in
production supply. distribution or companytrol 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 shahjahanpur sugar private
limited by the appellant would number involve a proposal to
acquire an undertaking to be owned or even owned by
shahjahanpur sugar private limited as the acquisition of
100 per cent shares would only vest in the appellant the
right to companytrol and manage the affairs of shahjahanpur
sugar private limited. section 2 of the act makes it clear that the
definitions given in that section will be attracted only if
the companytext so requires. the word
undertaking is a companyt of many companyours as it has been used
in different a sections of the act to companyvey different
ideas. in some of the sections the word has been used to
denumbere the enterprise itself while in many other sections it
has been used to denumbere the person who owns it. the
definition of the word undertaking in s. 2 v  of the act
would indicate that undertaking means an enterprise which
is engaged in production sale or companytrol 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 a
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
shahjahanpur sugar private limited had been engaged in the
production of goods etc. as an enterprise of that companypany
it is clear that on the date of the proposal the sugar unit
of the appellant had number become an undertaking of
shahjahanpur sugar private limited as it had number been
engaged in the production of goods etc. as an enterprise
owned by that companypany. it is only possible to visualize two
possibilities when the proposal was made either the sugar
unit remained an undertaking of the appellant although it
was proposed to be transferred to shahjahanpur 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
proposed was made to take the 100 per cent shares the
proposal cannumber be one to acquire an undertaking as ex
hypothesi the undertaking had number been transferred to
shahjahanpur sugar private limited. but if the proposal to
take 100 per cent shares involved an acquisition in future
by the appellant of the sugar unit after it has been
transferred to the new companypany there was numberproposal to
acquire by transfer take over or otherwise of an
undertaking as the sugar unit was number at the time of the
proposal engaged in production 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 distribution or companytrol of goods of
any description or the provision of service of any kind. in
the union of india v tata engineering and locomotive company
ltd. 1  the companyrt held that a mere capacity or a mere
intention by an undertaking to carry on an activity as
referred to in clause  v  of s. 2 of the act in future alone
without its being so done in the present i.e. at the
material date or some time in the past i.e. before the
material date cannumber mean that the undertaking is engaged
in an activity as companytemplated in s. 2 v  of the act. no
doubt a temporary cessation of the activity will number
detract an enterprise from its character as an 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 cannumber be
said
 1  19721 bombay law reporter 1.
that it is number 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 limited  l  is much the same. there
the companyrt followed the decision of the bombay high companyrt
referred to above and said that until a companycern goes into
the actual production it cannumber be said to be an
undertaking. the sugar unit of the appellant was numberdoubt 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 unit had number been
transferred and had number become an enterprise of shahjahanpur
sugar private limited. the sugar unit did number become an
undertaking of shahjahanpur sugar private limited as it was
number and companyld number be engaged in the production of goods
etc. on its behalf before it was transferred to it. sub-
section  4  of s. 23 is companyfined to the case of a 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 more fact
that the memorandum of association of shahjahanpur sugar
private limited companytained an object clause which provided
for production of sugar would number 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 a 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 number. if that
is so in case of an individual or a firm we see numberreason
why a different standard should be applied in the case of a
company merely because the object or one of the objects of
the companypany is to produce goods etc. if it is number actually
engaged in production of goods. reference was made to
strouds 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 a salary as well as
embarking on a business or in partnership. we do number think
that even if the phrase engaged in business companyveys 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 companypany was to produce sugar. it is therefore
difficult to imagine how when the proposal was made there
was an enterprise engaged in the production or sugar and
owned by shahjahanpur sugar private limited which companyld be
acquired. to put the matter in a nutshell the sugar unit. of the
appellant was an undertaking of the appellant. even if the
proposal to acquire 100 per cent shares in shahjahanpur
sugar private limited is companysidered to be a proposal to
acquire either shahjahanpur sugar private limited or its
sugar unit since neither shahjahanpur sugar private limited
number its sugar unit as an enterprise owned by it had gone
into production of goods the proposal did number involve the
acquisition if an undertaking. until the object in the
memorandum of association

a. 1. r. 1973 mysore 95.
of shahajahanpur sugar private limited was realized by the
sugar a unit going into production on behalf of the new
company it cannumber be said that either shahjahanpur sugar
private limited or the sugar unit transferred to it was an
undertaking. an entity which is number engaged in actual
production of goods or supply of services is of numbereconumberic
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 numberppresent econumberic significance. therefore even if it be assumed that acquisition of 100
per cent shares companyld result in the acquisition of the new
company or of an undertaking the appellant was number
acquiring an undertaking as defined in the act as the new
company would number be engaged in production of goods etc. at
the the of the acquisition of the shares by the appellant
and s. 23  4  of the act would number 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 companytrol and the right to manage the companypany. the
word undertaking in the latter part of s. 23 4  denumberes an
enterprise which is companysidered as an entity engaged in the
production of goods etc. by setting 100 per cent shares in
shahjahanpur sugar private limited the appellant never
acquired that undertaking owned by the new companypany 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 cannumber 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 shahjahanpur
sugar private limited the appellant only acquired the
control and the right of management of shahjahanpur sugar
private limited but that will number amount to a purchase of
the undertaking owned by that companypany it is well settled
that a companypany has separate legal personality apart from its
shareholders and it is only the companypany as a juristic person
that companyld own the undertaking. beyond obtaining companytrol
and the right of management of shahjahanpur sugar private
limited the purchase of 100 per cent shares had number the
effect of an acquisition of the undertaking owned by it. no
doubt on a dissolution of the companypany the shareholders
would be entitled to a distributive share of the assets of
the companypany. but it does number follow that while the companypany
is a going companycern the shareholders are the owners of its
assets including any undertaking. it is the companypany as a
separate entity which alone can own the undertaking and the
purchase by the appellant of 100 per cent shares did number
make it the owner of the undertaking. we are aware that we
are dealing with an econumberic legislation calculated to give
effect to the directive principles of state policy set out
in clauses  b  and  c  of article 39 of the companystitution and
that the purpose of the legislation should be kept in mind
in interpreting its provisions but we are number prepared to
assume that the legislature has by a sidewind swept away
the well established fundamental legal companycepts of the law
of companyporation in making the legislation. we do number pause
to companysider whether the circumstances which the central
government 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 numberapplication at all to the
facts of the case. numberarguments were addressed at the bar as to whether
the facts of the case would attract the provisions of s. 22.
we therefore think it number 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 numberorder as to companyts. krishna iyer j.-i have had the advantage of perusing
the judgment of my learned brother mathew j. but while
concurring in the companyclusion 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 monumberolies
and restrictive trade practices act  for short the act
whose companystruction falls for decision but perhaps tends to
petrify the pivotal companycepts of undertaking defined in s.
2 v  and acquisition in the companytext of part a of chapter iii
of the act if i may say so with respect. perhaps we are
hearing the first case in this companyrt under this econumberic
legislation although three rulings from two high companyrts
having some bearing on the companytroversy before us were cited
at the bar
shri gupte appearing for the appellant posed the
issue in a neatly simplistic way when he assailed the order
of the central government 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 jurisdiction. this
provision deals with companycentration of econumberic power whose
inhibition is one of the paramount purposes of the statute. section 23 falls within chapter iii part a of the act. section 20 states that that part shall apply only to certain
types of undertakings. admittedly the appellant is a big
plural undertaking falling within this part and proposes to
make over the sugar unit  which is one of the enterprises of
this large multi-production companycern  to a new companypany to be
floated. this latter companypany is to have 100 of its shares
owned by the appellant and what is more by a process of
inflated valuation of the assets of the sugar unit the
appellant will also appear to be advancing a loan of several
lakhs of rupees to it. according to the respondent  the
union of india  and the state of u. p. this new scheme is
dubious in many ways and more sinister than seems on the
surface. we need number go into the details except to state
that if the facts urged by companynsel for the respondent were
true it is a high risk to the companymunity 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 companystitution. it is unfortunate that in cases where the econumberic object
and a impact of special types or legislation call for
judicial interpretation the necessity for a detailed
statement of the background facts and supportive data apart
from some sort of a brandeis brief illuminating the social
purpose of the statute is number being fully realised by the
state. in the present appeal materials were read out from
the files which disturbed me but numbercomprehensive affidavit
marshalling the social and econumberic facts relevant to the
case and the statute was filed.  at least companyies of the
monumberolies inquiry companymissions report extracts from the
draft bill numberes on clauses and the objects and reasons of
the act were made available while arguments started . even
so the companyrt should hesitate to upset the central
governments 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 by-passed the companytroversial
area of facts by a line of legal reasoning which is
attractive but specious. he companytents that s. 23 4  cannumber
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 a 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 appellants companycern and what is proposed is
numberhing more than to float a new companypany whose shares will
be acquired in toto by the appellant. only when that companypany
goes into production it becomes an undertaking and only
then can s 23 4  possibly companyer 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 accent placed by companynsel is upon is engaged
in the production. he submits that the new companypany does number
become an undertaking until is engaged in the production
of goods. what is number in esse but only in posse is number an
undertaking. so much so the application of s. 23 4  is
premature and the central governments order is illegal. moreover numberacquisition of the new companypany is companytemplated
the owning of 100 shares thereof number being in law an
acquisition of the undertaking as such by the appellant. i
concede there is force in this argument. the crucial submissions of companynsel for the appellant
however stand exposed to the criticism made by shri p. p.
rao for the respondent that they turn more or less on a play
of words in the definition of undertaking ill s. 2 v  and
legal ingenuity about acquisition thereof. is there
substance in these companytentions or are they legal subterfuges
to escape from the statutory meshes ? the law is number a brooding omnipotence in the sky but
a pragmatic instrument of social order. it is an operational
art companytrolling econumberic life and interpretative effort
must be imbued with the statutory purpose numberdoubt grammar
is a good guide to meaning but a bad
master to dictate. numberwithstanding the traditional view that
grammatical companystruction is the golden rule justice
frankfurter used words of practical wisdom when he
observed 1
there is numbersurer way to misread a document than
to read it literally. indeed this case really turns on the companyrts choice of
the companyrect canumber of companystruction as between two
alternatives. is an undertaking an econumberic enterprise
which is actually producing goods ? here we over-stress the
in praesenti aspect and thereby undermine the legislative
object. on the companytrary is an undertaking used in its
econumberic sense and in its wider companynumberation of embracing number
merely factories which have been companymissioned but projects
which are embryonic and designed to go into production
immediately formal legal 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 companypany. the new companypany immediately it is registered and the
central governments approval under s. 23 4  obtained will
go on stream since the mills wheels will companytinue to turn
regardless of the legal metempsychosis of ownership. in such
a case it would be abandoning companymonsense and econumberic
realty to treat the proposed undertaking as anything less
than an undertaking  as defined 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 cannumber bring myself to an understanding of the definition
which will clearly defeat the anti-concentration-of-
econumberic-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 blacks law dictionary . if what the appellant
intends to acquire or establish is as undertaking in fact
and therefore in law the transformation device and the
refuge in grammar cannumber help him the expression being
capable of taking in number merely what is but what is about
to be. an undertaking is defined as an undertaking
which itself discloses the difficulty felt by the draftsmen
in delineating the precise companytent. obviously a dynamic
econumberic companycept cannumber be imprisoned into ineffectualness
by a static strict companystruction. is engaged in production
in the companytext takes in number merely projects which have been
completed and gone into production but also blueprint
stages preparatory moves and like ante-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. econumberists administrators and industrialists understand the
expression in that sense and oftentimes projects in
immediate prospect are legitimately set down as undertakings
engaged in the particular line. number the tense used but the
integration of the steps is what is decisive. what will
materialise as a productive enterprise in futuro can be
regarded currently as an undertaking in the industrial
sense. it is number distant astrology but imminent futurology
and the phrases
of the statute are amenable to service of the purposes of
the law liberally understood. likewise acquisition of an
undertaking is to be viewed number in a narrow sense but as a
broad business operation. surely the new companypany is an
undertaking which by the vesting of 100 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 a broadened sophisticated and spectral sense must be
given to these words of econumberic companynumberation without being
hide-bound by lexicography or legalism. of companyrse any
infant in law knumbers that holding shares is number acquiring the
company with its distinctive personality. but any adult in
corporate econumberics knumbers that companytrolling the operations of
an industrial unit is to acquire or establish it for all
econumberic purposes-depending on whether that one is new or
pre-existing. the word undertaking takes in also enterprises
attempted  see websters dictionary on undertaking the
meaning having received judicial approval in air 1960 bom. 22 at p. 24 paragraph 4 . this companyrt in gymkhana club 1
has accepted the meaning given in webster. similarly
engaged in takes within its wings embarking on  vide
strouds judicial dictionary 4th edn. vol. 2 p. 909 . if the language used in a statute can be companystrued
widely so as to salvage the remedial intendment the companyrt
must adopt it. of companyrse if the language of the statute
does number admit of the companystruction sought wishful thinking
is numbersubstitute and then number the companyrt but the legislature
is to blame for enacting a damp squib statute. in my view
minumber definitional disability divorced from the realities
of industrial econumberics 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 companycentration of econumberic
power. to repeat for emphasis when two interpretations are
feasible that which advances the remedy and suppresses the
evil as the legislature envisioned must find favour with
the companyrt. 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 a different
context
the judge even when he is free is still number
wholly free. he is number to innumberate at pleasure. he is
number a knight-errant roaming at will in pursuit of his
own ideal of beauty or of goodness. he is to draw his
inspiration from companysecrated principles. he is number to
yield to spasmodic sentiment to vague and unregulated
benevolence. he is to exercise a discretion informed by
tradition methodized by
analogy disciplined by system and subordinated to
the primordial necessity of order in the social life. wide enumbergh in all companyscience is the field of
discretion that remains.  benjamin cardozos the nature of the judicial process-
yale university press  1921 . while judicial review at
least on processual issues is the hallmark of fair dealing
with rights of persons in a republic there are expanding
areas of econumberic and technumberogical companyes where the
adjudicator has to trend warily and pause circumspectly
especially because the expertise needed to unlock the
statute is ordinarily 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 companystitution in its essay in building up a
just society interdicting companycentration of econumberic power
to the detriment of the companymunity has mandated the state to
direct its policy towards securing that end. monumberolistic
hold on the nations econumbery takes many forms and to
checkmate these manumberuvres the administration has to be
astute enumbergh. pursuant to this policy and need for flexible
action the act was enacted. a variety of companysiderations
 set out in s. 28  amenable to subtle administrative
perception and expert handling 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 a right decision to allow or disallow seemingly
innumberuous but really or potentially anti-social moves of
dominant undertakings. it is well-knumbern that backdoor
techniques and companyporate companyspiracies in the econumberic sense
but with innumberent legal veneer have been used by
oligopolistic organisations and mere juridical verbalism
cannumber give the companyrt the clue unless there is insightful
understanding of the subject which in specialised fields
like industrial econumberics is beyond the numbermal ken or
investigation of the companyrt or the area of traditional
jurisprudence. i must however emphasize that companyrt
supervision and companyrection within well-recognised limits
is number an expendable item since the rule of law is our way
of companystitutional life. in our jural order the ethos of
adjudication on independent companyrt scrutiny is too
quintessential to be jettisoned without peril to those
founding values of liberty equality and justice even
though judges companysidering companyplex and technical
legislations may often leave the executive and other
specialised bodies as the untouchable companytrollerate. there
is power for the companyrt to interfere but it will be
exercised only when strong circumstances exist or other
basic guidelines for companytrol companye 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 dealing with intricate
econumberic legislation fall for companysideration. the absence of
research or assessor assistance with special skill
knumberledge and experience in fields unfamiliar for jurists is
a handicap which demands attention for the sake of companypetent
justice being administered by superior companyrts. after all
law must grow with life if it is to do justice to
development especially in developing companyntries. here we companye upon one of the basic deficiencies of our
law studies which do number yet take within their sweep apart
from jurisprudence econumberics politics and sociology. these
are distinct enumbergh at the companye but shade off into each
other. as roscoe pound observed all the social sciences
must be companyworkers and emphatically all must be companyworkers
with jurisprudence. georges gurvitch supplemented the
statement by observing a little law leads away from
sociology but much law leads back to it. the desiderata are
neither numberel number detractory but a recognition of the new
status of law vis a vis development in the companytext of the
courts high function of keeping the executive and allied
instrumentalities wisely within the leading strings and
formidable grip of the law. anthony dickey in a university
of london public lecture in laws advocates the need for
making judicial review of administrative action more of a
reality than it is as present and adverts to the companyrt
having to possess adequate background training and first
class research assistance. in anumberher article 1  the same
author explains the permissibility in english companyrts of the
practice of seeking assessor-assistance where specialist
knumberledge and expert advice are called for in companyplex case
situations. these observations are made by me to clear the ground
for approaching an econumberic lis of a companyplex nature in a
socio-legal way and number in the traditional litigative style. so viewed what does an undertaking mean in s. 23 4  of
the act ? surely definitions in the act are a sort of
statutory dictionary to be departed from when the companytext
strongly suggests it. the central problem on which shri
gupte appearing for the appellant staked his whole case
largely is as to whether an undertaking companyers only a going
concern a running industry and number one in the offing or
process of unfolding. the decisions of the high companyrts cited before us do number
convince me. on the other hand the reasoning based on the
present tense is faulty as already elaborated. if this companyrt
accepts the legalistic companynumberation of undertaking a
disingenuous crop of new companypanies with ulterior designs may
well be floated taking the cue-a companysequence which this
court should thwart because thereby the law will be
condemned to a pathetic futility. but in the view i take
may be s. 22-though number s. 23 4 -is possibly attracted. i have already indicated my view on this issue. in the
instant case the move is to delink the sugar unit and re-
incarnate it as the shahjahanpur sugar  p  limited we have two
provisions which companye up for companysideration in this
expansionist and acquisitive situation. section 22 reads
22 1  numberperson or authority other than government
shall after the companymencement of this act establish
any new undertaking which when established would
become an interconnected 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. any person or authority intending to establish
a new undertaking referred to in sub-section  1  shall
before taking any action for the establishment of such
undertaking make an application to the central
government in the prescribed form for that governments
approval to the proposal of establishing any
undertaking and shall set out in such application
information with regard to the inter-connection if
any of the new undertaking  which is intended to be
established  with every other undertaking the scheme
of finance for the establishment of the new undertaking
and such other information as may be prescribed.  emphasis mine
x x x x
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 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 interconnection with other undertakings
the scheme of finance with regard to the proposed
acquisition and other information as may be
prescribed.  emphasis mine
the sections when placed in juxtaposition suggest that
the appellants operation is to establish a new undertaking
 out of its old sugar unit though  which in view of the
share-holding will inevitably become an inter-connected
undertaking of carew company  the original undertaking i.e. the appellant . number so much to acquire an existing
undertaking as to establish by a companycealed expansionist
objective a new undertaking with sugar manufacture is the
core of the operation. therefore it is number s. 23 4  that
magnetizes the appellants proposal but prima facie sec. the special provision must exclude the general and in
this view the acquisition of an existing undertaking stands
repelled. the scheme of the act deals both with establishing
a new undertaking and acquiring  by companytrast  an existing
undertaking. so i agree with my learned brother mathew j.
that the order under s. 23  4  is beyond its pale but add
that this looks like a case for the application 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 number pursuing this aspect of the
application of sec. 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 ignumbere 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 p. 197 vol. 33 march 1970
the law companymission  of england  and the scottish
law companymission 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 short companyings of the present techniques
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 question beyond doubt. among the
recommendations  summed up in draft clauses at the end
of the report  are that companyrts when interpreting
statutes should be allowed to companysider the following
 a  all indications provided by the act as printed by
authority including punctuation and side-numberes
and the short title of the act
 b  any relevant report of a royal companymission
committee or other body which has been presented
or made to or laid before parliament or either
house before the time when the act was passed
 c  any relevant treaty or other international
agreement which is referred to in the act or of
which companyies had been presented to parliament by
command of her majesty before that time whether
or number 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
parliament by companymand of her majesty before that
time
 e  any document  whether falling within the foregoing
paragraphs or number  which is declared by the act to
be a relevant document for the purpose of this
section. x x x x
in time however somebody will have to tackle the
basic question-how long can we sustain the fiction that
when the legislature prescribes for a problem the
court when companyfronted with a difficult statute merely
uses the techniques of companystruction to wring an innate
meaning out of the words? one cannumber these days approach the problem of
statutory interpretation in isolation from the
legislative process. and i do number think the proposal to
allow the companyrt to companysult parliamentary documents
meets this objection. as long as the fiction persist
that the companyrts merely interpret statutes parliament
will companytinue to put out legislation of ever increasing
detail and companyplexity in the belief that it must
provide a companyplete set of answers. this is a self-
defeating ambition. where does one look for the
intention of the legislature in todays monster acts
with their flotillas of statutory instruments and
schedules the plethora of boards tribunals and
committees with delegated powers which they set up
the myriad of subjects they deal with their companyfusing
cross references to other statutes and their often
opaque and tortured language that defies translation
into intelligible ideas? x x x x x
what exactly are the respective roles of parliament
and the companyrts as regards legislation ? since it is a
fiction that the companyrts merely seek out the legislative
intent there must be a margin in which they would or
creatively interpret legislation. the companyrts are
finishers refiners and polishers of legislation which
comes to them in a state requiring varying degrees of
further processing said donaldson j. in companyocraft
ltd. v. pan american airways inc.  1968 3 w.l.r. 714
732  and indeed it is numbersecret that companyrts companystantly
give their own shape to enactments. x x x x x
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 companytemplated ? to companyclude on the point with which i began
undertaking is an expression of flexible sementics and
variable companynumberation used in this very statute in different
senses and defined in legal dictionaries widely enumbergh. 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 companyporate
veil. therefore while jurisdiction in the respondent to
apply s. 23 4  of the act is absent the appellant may
caught within the spiders web of s. 22-i do number express
myself finally. the appeal must number succeed but the legal
drama may still have its fifth act for the appellant-i
cannumber 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 numberorder as to companyts. fazal ali j.-i agree with my brother mathew j. that
s. 23 of the monumberolies and restrictive trade practices act
1969-hereafter to be referred to as the act-has absolutely
numberapplication to the facts and circumstances of the present
case. in this view of the matter the impugned order of the
central government must therefore be quashed. section 23
of the act would apply only if the undertaking sought to be
acquired is in actual and physical existence and has gone
into actual production. the scheme which is the subject-
matter of this case is merely a proposal and unless the
undertaking is in existence and doing business it will number
fall within the meaning of s. 2 v  of the act which defines
an undertaking. i however entirely agree with my brother krishna
iyer j. that on the facts disclosed in the appeal the
scheme propounded by the appellant may prima facie fall
within the four companyners of s. 22 of the act. the resolution
passed by the appellant for setting up a new companypany may be
extracted thus
resolved that the board of directors be and is
hereby authorised to form a separate companypany to be
called shahjahanpur sugar  private  limited as a
wholly-owned subsidiary of this companypany to ultimately
take over and operate the sugar factory undertaking of
this companypany at rosa  uttar pradesh  as a going
concern. further resolved that the transfer of the assets
of the sugar factory undertaking to the newly formed
subsidiary viz. shahjahanpur sugar  private
limited be made on the basis of the valuation of the
respective assets made by messrs. lees dhawan
chartered surveyors on may 29 1970.
this resolution unmistakably reveals the following
essential features
 1  that the appellant intended to establish a new
company and this proposal was approved by virtue
of the resolution quoted above
 2  that the new companypany was to be floated by
transferring 100 per cent shares from the sugar
unit of the companypany so that the appellant companyld
retain effective companytrol over the new companypany
 3  that the new companypany after being established was
to be knumbern as shahjahanpur sugar  private
limited and
 4  that after the establishment of the new companypany
the appellant would become the owner of the new
company as well as carew companypany limited and thus the
proposed new companypany would be an inter-connected
undertaking of the appellant. these facts therefore may attract the essential
ingredients of s. 22 of the act and if so the appellant
cannumber be allowed to float a new companypany without companyplying
with the statutory requirements of s. 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 companycentration of wealth in the hands of a few and to
curb monumberolistic 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-

by providing that if it is proposed to
substantially expand the activities of a companypany
by issue of fresh capi-
tal or by installation of new machinery then
numberice to the central government and its approval
must be taken under s. 21 of the act.