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The Competition Commission of India (CCI) has imposed penalty of ₹40 lakh on NTPC Ltd for the latter’s failure to notify the competition watchdog before consummating its 35.47 stake acquisition in Ratnagiri Gas & Power Pvt Ltd (RGPPL) on December 31, 2020.
The competition watchdog has held that NTPC, by consummating this transaction without filing a notice with the Commission prior to acquisition, has contravened certain provisions of Competition law and is therefore liable to penalty under Section 43 A of Competition Act. NTPC has been given 60 days to pay the penalty.
Gun jumping occurs when parties to a combination fail to notify the CCI about a combination prior to its consummation or violate the 210-day standstill obligation. Gun jumping also occurs when false declaration is made on the notice sent to CCI.
10-page order
In its 10-page order, the CCI has noted that NTPC, at the time of this transaction, already held 25.51 per cent equity shareholding in RGPPL. Post its acquisition of 35.47 per cent in RGPPL, the shareholding of NTPC increased from 25.51 per cent to 60.98 per cent. As its stake exceeded 50 per cent, the transaction was not eligible for exemption from notifying the Commission. The transaction ought to have been notified to CCI, even if NTPC did not get any additional control conferring rights or the transaction did not result in change in control from joint to sole control, the CCI order said.
The CCI also rejected the arguments of NTPC that this transaction did not result in Appreciable Adverse Effect on Competition (AAEC) in India. The competition watchdog observed that the mandatory regime for notifying a proposed combination to the Commission is applicable, irrespective of whether the combination causes any AAEC in India or not. This legal position has been already clarified by the CCI in the Intellect Design Arena Ltd case, the CCI order highlighted.
Although NTPC has, in this case, extended cooperation and provided the material/documents as sought by the Commission, the company cannot be “exculpated” of its statutory obligation to file notice with the Commission of the concerned transaction, the CCI said.
Under the competition law, the penalty for gun jumping can be up to 1 per cent of the turnover of the combination or 1 per cent of the assets of the Combination entities, whichever is higher.
Most competition regimes including India requires pre-merger notification (here in India, it will be CCI) and in the process of investigation expect parties not to proceed with merger till the standstill period is over.
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