CCI Imposes Rs. 1 Cr. Penalty on Airtel for Acquiring Shareholding of Target-Co. Without Giving Notice to Commission

Case Details: Bharti Airtel Ltd. and Lion Meadow Investment Ltd., In Re - [2023] 155 taxmann.com 356 (CCI)

Judiciary and Counsel Details

• • Ms Ravneet Kaur, Chairperson, Ms Sangeeta Verma & Bhagwant Singh Bishnoi, Member
  • Rajshekhar Rao, Sr. Adv., Ms Hemangini Dadwal, Nitin Nair, Ms Ruchi Khanna, Ms Shivangi Pradhan, Areeb Amanullah, Advs., Ms Shraddha Jha, Arun Kathpalia, Sr. Adv., Aditya Dhupar, Gaurav Bansal, Shivam Jha, Varun Thakar & Deepanshu Poddar, Advs. for the Appearing Parties.

Facts of the Case

In the instant case, parent company ‘B’ held 80% shareholding of its subsidiary company ‘BT’ (Target Company) and company ‘L’ held the remaining 20% shareholding in ‘BT’. An investment agreement was executed between ‘L’, ‘B’ and ‘BT’, to acquire shareholding of ‘L’ in ‘BT’ by ‘B’ (transaction 1) and to acquire some shares in company ‘B’ by ‘L’ (transaction 2).

The CCI observed that the acquisition transaction was not notified by ‘B’ or ‘L’ and the same was consummated prior to the approval of CCI and since ‘B’ was not having sole control in ‘BT’ prior to the acquisition transactions, the said acquisitions could not avail benefit under Item 2 of Schedule 1 of Combination Regulations, 2011 and, hence, the said acquisitions had to be notified as a composite notice to the CCI.

The CCI issued a show cause notice to ‘L’ and ‘B’ under regulation 48 of Competition Commission of India (General) Regulations, 2009 read with section 43A of the Competition Act, 2002.

‘B’ and ‘L’ submitted that there was no transfer from joint to sole control as ‘L’ did not have any such right to materially influence the affairs of ‘BT’.

It was found that both transactions of acquisition were interconnected as transaction 2 was a part payment for transaction 1. The CCI observed that since in the instant case, rights held by ‘L’ in ‘BT’ prior to transactions, conferred upon its ability to exert material influence i.e. control over the management of ‘BT’, such transactions were not eligible for benefit under item 2 of Schedule 1 of Combination Regulations, 2011.

CCI Held

The CCI held that one composite notice ought to be filed to CCI jointly by ‘B’ and ‘L’ prior to consummating any acquisition transaction and, thus, a penalty of Rs. 1 crore was to be imposed on ‘B.