Combination proposal to be notified

In two separate judgments involving several companies, the Supreme Court has emphasised that a proposal to enter a combination must be notified before the agreement, in order to prevent practices having an adverse effect on competition. “The combination cannot be entered into and shall come into effect before the order is passed by the Competition Commission of India (CCI) or lapse of certain time from the date of the notice,” the court stated in the judgment, SCM Solifert Ltd vs CCI. Explaining the impact of Section 6(2) of the CCI Act and the Sebi regulations on the acquisition of shares and take-overs, the court stated that “ex post facto notice is not contemplated under the Act. The same would be violation of the rules.” In this case, the company was imposed upon a penalty of ~20 million by the CCI for non-furnishing of information on combination when it acquired substantial shares of Mangalore Chemicals and Fertilisers Ltd. The company’s appeal against the penalty was dismissed as it was a negligible amount in the circumstances and no criminality was involved. In the second judgment, CCI vs Thomas Cook (India) Ltd, the Supreme Court applied the same principles and set aside the tribunal’s decision which went against it. There were amalgamation, demerger and other transactions involving three hospitality companies. The CCI found some purchases of shares from the market were not notified, calling for a penalty. The tribunal quashed the show cause notice, but the Supreme Court, on appeal, set aside the tribunal’s order and confirmed the penalty.