Carew & Co. Ltd. v. Union of India

Main point: Under the MRTP Act, an entity is an “undertaking” only when it is actually doing business—producing, supplying, distributing, or controlling goods, or providing services. Buying 100% shares gives control over a company but is not the same as acquiring the undertaking owned by that company. Here, the new company was not yet operational, so Section 23(4) did not apply; the Supreme Court allowed the appeal.

• Does “undertaking” under the MRTP Act include non-operational enterprises?
• Is purchase of all shares equivalent to acquisition of the undertaking itself?

• MRTP “Undertaking”: Only an enterprise that is engaged in production/supply/distribution/control of goods or provision of service qualifies.
• 100% Shares ≠ Undertaking: Share purchase gives control/management rights, not ownership of the undertaking itself.
• Section 23(4) MRTP: Applies to acquisition of undertakings that are already operational; not to dormant or pre-operative entities.
• Section 22 MRTP: May govern the setting up of new undertakings; Government must examine that separately.

The Supreme Court held that Shahjahanpur Sugar Pvt. Ltd. was not an “undertaking” under Section 2(v) MRTP because it was not yet engaged in any business activity. Therefore, Section 23(4) (acquisition of an undertaking) did not apply. Buying 100% shares gives control, but it is not equal to acquiring the undertaking. The Court allowed the appeal and noted that Section 22 (new undertakings) may be relevant for Government to examine.

• Functional test: “Undertaking” requires actual business activity; preparation is not enough.
• Control ≠ acquisition: 100% shareholding gives control/management, not transfer of the undertaking itself.
• Section 23(4) targets acquisitions of running undertakings, not pre-operative structures; Section 22 may cover new setups.

The decision draws a clear boundary for MRTP regulation: it prevents overreach into non-operational or preparatory ventures and separates share control from asset/undertaking acquisition.

• “Undertaking” = doing business now, not planning to do it later.
• 100% shares ≠ undertaking acquisition.
• Use Section 22 for new undertakings; Section 23(4) for existing ones.

Mnemonic: WORK → THEN UNDERTAKING

1. Is the entity working now (producing/supplying/servicing)?
2. If yes → it can be an undertaking.
3. If no → share purchase isn’t undertaking acquisition.

Issue: Do non-operational entities count as MRTP “undertakings,” and does buying all shares mean acquiring the undertaking?

Rule: Undertaking exists only with active operations; 100% shares give control but not the undertaking.

Application: New company was not operational; Section 23(4) inapplicable; Section 22 may apply to new setup.

Conclusion: Appeal allowed; no acquisition of an undertaking occurred.

Undertaking (MRTP)

A business that is actually producing, supplying, distributing or controlling goods, or providing services.

Section 23(4) MRTP

Regulates acquisitions of existing undertakings to prevent concentration of economic power.

Section 22 MRTP

Covers new undertakings; requires Government scrutiny before establishment.