In two similarly worded merger control penalty orders issued in February, the Competition Commission of India (CCI) has provided further clarity on the relaxations provided in Schedule I of the CCI (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (Combination Regulations), especially with reference to the acquisition of less than 25% of shares or voting rights.
The CCI previously issued a penalty order against Thomas Cook in similar circumstances, i.e. market purchases of stock of acquisition target Sterling Resorts, without notifying the CCI.
Hostile takeover bid
The backdrop transaction for the current orders was the hostile takeover bid for Mangalore Chemicals & Fertilizers. The penalty was imposed on Zuari Fertilisers and Chemicals and Zuari Agro Chemicals, and separately on SCM Soilfert and its subsidiary Deepak Fertilisers and Petrochemicals Corporation, for not notifying the market purchases of shares in the target.
The two sets of acquirers were involved in a competitive bid for a majority stake, and although their respective applications to the CCI pursuant to the public announcement for the open offer were approved, they were penalized for market purchases made almost a year prior to the open offer.
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Kunal Chandra is a counsel at Trilegal and Gautam Chawla is an associate. The views expressed are their personal views. Trilegal is a full-service law firm with offices in Delhi, Mumbai, Bangalore and Hyderabad.
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