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A Division Bench of the Bombay High Court comprising Justice G S Patel and Justice N K Gokhale on Tuesday disposed off a plea filed by debenture trustees challenging the jurisdiction of Competition Commission of India (CCI).
Disposing the plea, the Bench relegated the debenture trustees back to CCI and now the competition watchdog will first rule on its jurisdiction in the matter.
Cartelisation by debenture trustees
In 2022, CCI ordered a probe against debenture trustees and their association for suspected cartelisation on fees. The regulations framed by SEBI mandate that companies raising debt appoint a ‘debenture trustee’ to protect the interests of investors. The trustees charge a fee from the companies issuing the debt and make due-diligence checks on them.
A leading non-banking finance company from South India had complained to both SEBI and CCI, alleging that leading debenture trustees were cartelising the debenture issuance market and charging exorbitant fees.
Turf war
The debenture trustees challenged CCI’s order, initiating an investigation by moving the Bombay High Court and sought a stay on the CCI proceedings on the ground that SEBI was the sectoral regulator and hence it had exclusive jurisdiction to act against them.
Inter-regulatory coordination
The Competition (Amendment) Bill 2022, recently introduced in the Parliament, seeks to widen the scope of consultations between CCI and sectoral regulators, Ashok Kumar Gupta, former Chairperson, CCI had said in a recent interview to businessline. The existing statutory framework already provides an inter-regulatory coordination mechanism where CCI and sectoral regulators can interact and seek each other’s opinion on a non-binding basis. The problem with this is that the threshold for triggering such mechanism for consultation is high, Gupta had then added.
Legal experts are, however, divided on the issue of the Bill solving all issues around inter-regulatory coordination. Though they agreed that the proposed amendments are steps in the right direction, it was pointed out that they are not sufficient to solve the conflicts.
In case of divergence of opinion between CCI and sectoral regulator, there is no body like a Financial Stability and Development Council (FSDC) which can deliberate on such conflicts.
The proposed Bill only enhances cooperation and exchange of thought between CCI and sectoral regulators and, in the absence of a body like FSDC to resolve actual conflicts, the amendments may not be sufficient, legal experts said.
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