Ex­perts call for align­ing com­pe­ti­tion law with IBC for faster NPA res­o­lu­tion

The Hindu Business Line - - NEWS - SWATHI MOOR­THY

The Cor­po­rate Af­fairs Min­istry-ap­pointed panel to re­view the Com­pe­ti­tion Act should look at align­ing the law with the In­sol­vency and Bank­ruptcy Code (IBC) 2016, say le­gal ex­perts.

There are still grey ar­eas such as ad­her­ence with CCIspec­i­fied merger con­trol pro­ce­dures for cases go­ing through in­sol­vency process, they added.

Align­ing the com­pe­ti­tion law with IBC could help in faster res­o­lu­tion of non-per­form­ing as­sets (NPAs) in the bank­ing sys­tem

As on date, any ac­qui­si­tion of stressed as­sets or shares un­der the Cor­po­rate In­sol­vency Res­o­lu­tion Process (CIRP) is not ex­empted from the manda­tory clear­ance from the Com­pe­ti­tion Com­mis­sion of In­dia (CCI).

Manas Ku­mar Chaud­huri, Part­ner, Khai­tan & Co, a law firm, said: “We have to har­monise be­tween IBC and merger con­trol so that both the laws sur­vive with­out caus­ing any fuss to the in­dus­try. You have to make both laws meet where com­bi­na­tion reg­u­la­tion of the Com­pe­ti­tion Act should fore­close any abuse of dom­i­nance and IBC should see that banks and fi­nan­cial in­sti­tu­tions get their dues”.

The Gov­ern­ment might have de­cided to con­sti­tute a com­mit­tee so that all the grey ar­eas can be sorted, he said.

The Min­istry of Cor­po­rate Af­fairs (MCA) had on Septem­ber 30 set up a com­mit­tee to re­view Com­pe­ti­tion Act, 2002 to en­sure that the leg­is­la­tion is in sync with the chang­ing busi­ness en­vi­ron­ment. The com­mit­tee com­prises Sec­re­tary, MCA, and other key per­son­nel such as the Chair­per­son of In­sol­vency and Bank­ruptcy Board of In­dia and Aditya Bhat­tachar­jea, Pro­fes­sor of Eco­nom­ics, Delhi School of Eco­nom­ics.

Amended twice

Since the im­ple­men­ta­tion of the Act in 2002, the Act was amended twice in 2007 and 2009.

Dhruv Gupta, Part­ner, Lak­sh­miku­maran & Srid­ha­ran At­tor­neys, said, “Much has changed since 2009 – rev­o­lu­tion in mo­bile tech­nol­ogy, In­ter­net pen­e­tra­tion, greater in­te­gra­tion of In­dian mar­ket with global mar­ket and other as­pects such as leg­is­la­tion and im­ple­men­ta­tion of IBC.”

The CCI man­dates that all com­bi­na­tions should be no­ti­fied un­der the Com­pe­ti­tion Act 2002 if the pro­posed com­bi­na­tion meets the thresh­old set by the reg­u­la­tor.

“There are com­plex is­sues such as lack of clar­ity on ap­provals for po­ten­tial bid­ders to ac­quire as­sets un­der in­sol­vency res­o­lu­tion process,” Gupta said.

Cit­ing an ex­am­ple, Chaud­huri said: “Let us take a com­pany that has six sub­sidiaries and is un­der­go­ing IBC process. There is a strong ac­quirer who is in­ter­ested in buy­ing and wants to buy only the best sub­sidiary that makes com­mer­cial sense. This should mean that the ac­quirer has to deal with only the par­ent and the sub­sidiary. Then there is a ques­tion of what hap­pens to the re­main­ing sub­sidiaries.”

Chaud­huri said, “These pro­cesses when it comes to CCI, we lawyers in­ter­pret in dif­fer­ent ways. When CCI comes to a bot­tle­neck, they ei­ther agree with us or not. If they do not agree with us there is a process of ap­peal.”

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