With no full-time chairperson and a lack of quorum at the competition regulator for over three month halting approvals of mergers and acquisitions, India Inc and experts have called for an alternative mechanism to clear pending deals.
Industry chambers are expected to approach the government in the coming weeks to flag the delay in clearance of mergers and work out a solution until a full time chairperson is appointed at the Competition Commission of India (CCI).
“Post-Budget, we will be taking up the issue with the government. Many transactions are held up as there is no quorum at the CCI at present. A lot of foreign investment is also held up. This gives a negative image of the country and indicates that there is a slow decision-making process. We will convey that there is a need for a full time Chairman at the CCI at the earliest and perhaps till then the transactions that can go through the green channel can be expanded,” said an industry expert.
The green channel is an automatic system for approval of combinations.
According to the CCI’s website, 16 deals are pending for approval, including the acquisition by Saudi Aramco of Valvoline’s global products business as well as Dalmia Cement’s acquisition of clinker, cement and power plants belonging to Jaiprakash Associates. Industry estimates peg these at at least Rs 100 billion.
Former head of the CCI, Vinod Dhall noted that due to the lack of quorum, the Commission’s decision making is stalled, affecting both merger and enforcement cases. “The Commission has a credible track record in mergers but this hiatus is hitting the Commission’s image and the country’s reputation for ease of doing business. It is understood that the authorities are mulling over measures to alleviate this crisis until the new chairperson is appointed, and it is hoped that some solution will emerge sooner rather than later.”
The CCI’s previous chief Ashok Kumar Gupta demitted office on October 25 last year and since then the competition watchdog is without a full-time head and functioning with only two members.
The government had appointed CCI member Sangeeta Verma as its acting chairperson for a three-month period in October and it was expected that the new chief would be appointed in the time period.
However, Verma’s tenure has been once again extended “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 atleast another two months after that to be completed.
The delay is also significant given that the government is looking to expand the role of the CCI to also regualte high value transactions in the digital economy. Amendments to the Competion Act are expected to be taken up in the Budget session of Parliament.
Law firm Cyril Amarchand Mangaldas has also flagged the issue and had suggested that the Centre promulgate and ordinance for specific cases since the CCI is without a validly constituted quorum under the Competition Act, 2002.
In a representation to the ministry of corporate affairs, Avaantika Kakkar, Head, Competition Practice, Cyril Amarchand Mangaldas, had recommended that the Centre should consider passing an ordinance for an interim arrangement of six months suspending the quorum requirement under Section 22(3) of the Competition Act for the operation of CCI’s functions only under Sections 31 and 33 of the Act.
“This is an imminent requirement considering that CCI is inquorate and the necessity for non-contentious and urgent issues (including notified combinations/merger matters) to be dealt with appropriately by the CCI (often on an urgent basis),” she had said.
The competition regulator needs to have a quorum of three members to carry out business, including the approval of mergers and acquisitions.
“The lack of quorum at the CCI and its consequent inability to pass any valid orders approving such notified combinations is affecting multiple stakeholders negatively, including acquirers, financial investors, creditors and lenders, shareholders, employees of relevant parties,” Kakkar said, adding that a total of 15 combinations (transactions notified to the CCI) are pending CCI’s review, including multiple global transactions and those under the ambit of the Insolvency and Bankruptcy Code, 2016.