Competition Commission of India vs Thomas Cook (India) Ltd. & Anr.

HELD: 1. Once a particular transaction or a series of transactions falls within the purview of combination u/s. 5, it is obligatory to report the same to the Competition Commission under section 6 of the Act. Section 6(1) prohibits combinations which cause or likely to cause an adverse effect on the competition and such a combination shall be void. Section 6(2) of the Act requires that advance notice has to be given of the proposal to enter into a combination and that has to be given within 30 days of approval of the proposal relating to merger or amalgamation, execution of any agreement or other document or acquisition referred to in section 5(a). Section 6 (2) makes it clear that no combination shall come into effect until 210 days have elapsed from the date on which notice has been given to the Commission under section 6(2) and the Commission has passed orders under section 30(1), whichever is earlier. And once mandatory notice is given under section 6(2), the Commission has to deal with the same in accordance with the provisions contained in sections 29,

30 and 31. Certain exceptions are carved out as to Public Financial Institutions, Foreign Investment Institutions, Banks or Public Venture Funds etc. funds under section 6(4) of the Act. [Para 19] [403-A-C]

2. The Competition Act and Competition Commission of India (Procedure in Regard to the Transaction of Business Relating to Combinations) Regulations, 2011 clearly envisage that a combination can consist of one or more transactions. Under Regulation 9(4) of the Regulations, 2011, the parties have an option of giving either a single notice or multiple notices in respect of all the transactions. [Para 22] [404-B]

3. It is apparent in the present case that in the notification made under section 6(2) on 14.2.2014 notifiable transactions were shown regarding merger and amalgamation. It was also mentioned that parties have also contemplated certain other transactions in view of the notifiable transactions, they were the subscription of equity shares, SPA, open offer and market purchase. It is crystal clear from the aforesaid application itself that all these transactions were part of the same transactions and even before notifying the transactions of purchase from the market on 14.2.2014, it was consummated between 10.2.2014 to 12.2.2014. It is crystal clear that market purchases being a part of the composite combination was consummated before giving notice to the Commission. Joint Press Release dated 7.2.2014 clearly indicated SPA as an open offer. The Board of Directors of the respective parties authorized market purchases on the same day. All the said transactions are intrinsically connected and interdependent with each other and form part of one viable business transaction. [Para 26] [405-H; 406-A-C]

4. While it is open for the parties to structure their transactions in a particular way the substance of the transactions would be more relevant to assess the effect on competition irrespective of whether such transactions are pursued through one or more step/transactions. Structuring of transactions cannot be permitted in such a manner so as to avoid compliance with the mandatory provisions of the Act. For ensuring the compliance with the requirements of the Act it is open to considering whether the particular step was an individual transaction or part of the whole of the transaction. It was evident in the facts and circumstances of the case as respondent No.2 would not have made market purchase in the absence of any one transaction. Thus, market purchases could not have been termed to be independent transaction. [Para 28] [406-G-H; 407-A-B]

5. The provision of Regulation 9(4) of 2011 Regulations clearly acknowledges the possibility of the business transaction being interconnected or interdependent steps of such transactions. Technical interpretation to isolate two different steps of transactions of a composite combination would be against the spirit and provision of the Act. Market purchases were not independent and could not be used in isolation for the purpose of any exemption. Regulation 9(4) cannot be interpreted to enable consummation by a composite combination before giving notice to the Commission. That would be defeating the intent and purpose of the Act and in particular section 5 and 6 thereof. [Para 30] [407-E-F]

6. If the ultimate objective test is applied, it is apparent that market purchases were within view of the scheme that was framed. As such the subsequent change of law also did not come to the rescue of the respondents considering the substance of the transaction. The market purchases were part of the same transaction of the combination. [Para 31] [407-G]

7. It is not correct to say that there were no mala fides on the part of the respondent as such penalty could not have been imposed. The mens rea assumes importance in case of criminal and quasi criminal liability. For the imposition of penalty under Section 43A, the action may not be mala fide in case there is a breach of the statutory provisions of the civil law, penalty is attracted simpliciter on its violation. The imposition of penalty was permissible and it was rightly imposed. There was no requirement of mens rea under section 43A or intentional breach as an essential element for levy of penalty. Section 43A of the Act does not use the expression “the failure has to be willful or mala fide” for the purpose of imposition of penalty. The breach of the provision is punishable and considering the nature of the breach, it is open to impose the penalty. The imposition of penalty under section 43A is on account of breach of a civil obligation, and the proceedings are neither criminal nor quasi-criminal; the penalty has to follow. Only discretion in the provision under section 43A is with respect to quantum of penalty. [Paras 32, 33] [407-H; 408A-C; 409-B]

8. In the facts and circumstances of the case, the order passed by the Commission was just and proper and in accordance with law, which the Tribunal set aside on wrong premises. Thus, the order of the Tribunal cannot be said to be legally sustainable. There is no ground to interfere with the nominal penalty that has been imposed in the instant case. [Paras 34, 35] [409-C; 409-D] Hindustan Steel Ltd. v. State of Orissa AIR 1970 SC

253 : [1970] 1 SCR 753 – relied on.