SCM SOLIFERT LIMITED & ANR. versus COMPETITION COMMISSION OF INDIA

Citation: [2018] 4 S.C.R. 302 · Decided: 17-04-2018 · Supreme Court of India · Bench: ARUN MISHRA · Disposal: Dismissed

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Judgment (excerpt)

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SUPREME COURT REPORTS
[2018] 4 S.C.R.
SCM SOLIFERT LIMITED & ANR.
v.
COMPETITION COMMISSION OF INDIA
(Civil Appeal No. 10678 of 2016)
APRIL 17, 2018
[ARUN MISHRA AND NAVIN SINHA, JJ.]
Competition Act, 2002 – ss.5(a)(i), (ii), 6(2), 43A – Appellants
acquired shares of a company (‘MCFL’) on two occasions – First
acquisition was for 24.46% paid up share capital and the second
acquisition was for a further 1.7% paid up share capital – Appellants
filed notice disclosing details of the first acquisition and notifying
second acquisition within 30 days of the second acquisition –
Competition Commission imposed penalty u/s.43A for failing to notify
the proposed combination before the acquisition as required u/s.6(2)
– Order upheld by appellate tribunal – On appeal, held: Under
s.6(2) the proposal to enter into combination is required to be notified
to the Commission – Notification has to be made before entering
into the combination – Notice of s.6(2) is to be given prior to
consummation of the acquisition – Ex post facto notice is not
contemplated u/s.6(2) – Further, Sch.1 to the Combination
Regulations, 2011 provides that acquisition of shares or voting rights
referred to in s.5(a)(i) or s.5(a)(ii) does not entitle the acquirer to
hold 25% or more of the total shares or voting rights of the company,
directly or indirectly – In the instant case, by the second transaction
appellant’s holding  exceeded more than 25%, as its total
shareholding increased to 25.3% and thus, prior permission was
required – Explanation to Sch.1 further states that acquisition of
less than 10% of the total shares or voting rights of an enterprise is
solely an investment – Beyond this threshold, the transaction is
required to be looked at carefully – Appellant’s first acquisition
was a part of the long-term plan to try and take over ‘MCFL’, which
was simply not an investment– Purchase of 24.46% equity stake,
vested power to exercise influence – Thus, there was a failure to
comply with s.6(2) in regard to the acquisition of 24.46% equity of
the shareholding – In the facts of the case, information was disclosed
belatedly – Imposition of penalty was right – CCI (Procedure in
  [2018] 4 S.C.R. 302
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regard to the Transaction of Business Relating to Combinations)
Regulations, 2011 – rr. 4,5 and Entry I of Schedule I – SEBI
(Substantial Acquisition of Shares and Takeovers) Regulations,
2011.
Competition Act, 2002 – s.6(2) – Legislative mandate of –
Discussed.
 Competition Act, 2002 – s.43A – Imposition of penalty under
– Discretion for – Held: Imposition of penalty u/s.43A is on account
of breach of a civil obligation – Thus, a penalty has to follow –
Discretion u/s.43A is with respect to quantum.
Competition Act, 2002 – ss.6(2),31(1) – Vide two transactions,
appellants acquired shares of a company (‘MCFL’) and filed notice
disclosing the details thereof within 30 days of the second
acquisition – Competition Commission approved the proposed
combination, however, imposed penalty for failing to notify the
proposed combination before the acquisition as required u/s.6(2) –
Plea of appellants that after approval of the proposed combination
u/s.31(1), penalty ought not to have been imposed – Held: Merely
by grant of approval by the Commission violation of provisions does
not become condonable ipso facto, when prior notice was not given
u/s.6(2).
Dismissing the appeal, the Court
HELD: 1.1 Section 6 of the Competition Act, 2002 deals
with regulation of combinations. Any person or enterprise before
entering into a combination, has to give notice to the Commission
disclosing the details within 30 days of (a) approval of the proposal
relating to merger or amalgamation as provided in the Act; (b)
execution of any agreement or other document for acquisition
referred to in Section 5(a) of the Act or acquiring of control under
section 5(b). Section 43A deals with the power to impose a penalty
for non-furnishing of information on combinations. Any person or
enterprise who fails to give notice under Section 6(2) of the Act
to the Commission, the Commission, in such an event, is
authorized to impose the penalty which may extend to 1% of the
total turnover or the assets, whichever is higher. [Paras 9, 10
and 11][308-E; 309-C-D, E-F]
SCM SOLIFERT LIMITED & ANR. v. COMPETITION
COMMISSION OF INDIA
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[2018] 4 S.C.R.
1.2 Regulation 5 of the CCI (Procedure in regard to the
Transaction of Business Rela

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