CCI set to start clearing M&A deals this week | The Financial Express

CCI set to start clearing M&A deals this week

To address quorum issue, govt to invoke ‘doctrine of necessity’

India Inc, CCI
A notification to this effect may be issued soon so that the regulator could start clearing M&A deals from this week itself, according to official sources.

The government is set to allow the Competition Commission of India (CCI) to take decisions on mergers and acquisitions (M&As) with its current board strength of two, pending the regulator reaching the quorum of three members. This will be done by invoking the “doctrine of necessity” clause, which gives the government overarching powers to take measures that may not be part of the law concerned, but it could still use at a particular time to deal with an exigency or to restore stability.

A notification to this effect may be issued soon so that the regulator could start clearing M&A deals from this week itself, according to official sources.

The move comes at a time when a clutch of mergers and acquisition (M&A) deals with combined transaction value of over `10,000 crore are pending approval from the CCI for its lack of quorum. Industry has expressed concerns over the situation, and cited that even some foreign direct investment proposals are hanging fire due to the regulatory delay.

The commission has been without a full-time chairperson since the retirement of Ashok Kumar Gupta on October 25, 2022.

Under Sections 5 and 6 of the Competition Act, 2022, mergers and acquisitions above certain thresholds require the CCI’s approval. Thee sections pertain to regulation of “combinations”.

According to the sources, the law ministry has given a favourable legal opinion for the use of the “doctrine of necessity” clause to the ministry of corporate affairs.

Under the new temporary dispensation, two members would be considered to make the quorum. The exact contours would be provided in the guidelines to be notified.

According to the CCI website, there are 18 deals “under review” dating as far back as September 2022 that are yet to be approved. These include the acquisition of Metro Cash and Carry by Reliance Retail, acquisition by Saudi Aramco of Valvoline’s global products business and Dalmia Cement’s acquisition of clinker, cement and power plants belonging to Jaiprakash Associates.

Legal experts, too, have asked the government to address the issue as the delay is impacting expansion plans and is also halting international M&As where there is an India connect. Options such as an ordinance or expanding the green channel or automatic route for approvals had been suggested. The issue was also raised at a post-Budget interaction of finance and corporate affairs minister Nirmala Sitharaman at industry chamber FICCI last week.

Augustine Peter, former member, CCI, and founder and head of APRLP Law, said, “In the case of approvals for combinations, invoking the doctrine of necessity is justified at this point of time. The preamble to the Competition Act says the CCI is being established for ‘the economic development of the country’. Approval of combinations in a time bound manner, as envisaged in the Act, is essential for growth and development as well as creating confidence in industry,” he said.

Significantly, in a case relating to Cadd Systems and Services versus the CCI, the Delhi high court in its decision had in July 2019 permitted the CCI to take decisions without a legal member.

The government had appointed CCI member Sangeeta Verma as the regulator’s acting chairperson for a three month period initially when Gupta retired but her term has been extended again last month “until the date on which new chairperson is appointed or till any further orders in this regard”. Meanwhile, the ministry of corporate affairs has also initiated the process for appointing three members to the CCI. The deadline for applications is March 3 and it is expected that the process will be completed in would take at least another two months after that to be completed.

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First published on: 06-02-2023 at 05:30 IST