The quorum conundrum | The Financial Express

The quorum conundrum

An inquorate Competition Commission of India has had implications for the approval of M&As in the country. Currently, 17 transactions await the Commission’s approval, several of which have crossed the 30-working-days period

Competition Commission of India, India
Various stakeholders and industry bodies have reportedly written to the ministry and  the Commission, urging decisions in pending merger cases.

By Vinod Dhall & Apurva Badoni

The retirement of the chairman of the Competition Commission of India, Ashok Kumar Gupta, last October has left the Commission with only two sitting members, thus rendering it inquorate for over three months. Thus, the Commission is incapable of deciding any cases, whether these are merger cases or antitrust enforcement matters, since Section 22 of the Competition Act, 2002, prescribes a quorum of at least three members.    

While the enforcement cases do not specify any deadline for the final decision (though this does not imply indefinite delays), merger cases require the Commission’s approval or refusal decisions to be reached within prescribed time-limits. If the Commission is of the opinion that the merger has no likely anti-competitive effect, the approval must be accorded within 30 working days. Specified deadlines have been written into the Competition Act and the Combination Regulations with the avowed objective of facilitating efficiency-yielding mergers with no anti-competitive effect and thereby ‘ease of doing business’. In this respect, the Commission serves largely as a gate-keeper with the limited role to prevent mergers that can appreciably harm the play of competition in the markets. 

The Commission broadly has had a good track record in clearing merger applications. According to Commission sources, the average time consumed in merger approvals is barely 17 days—a credible achievement. This figure factors in the virtually instantaneous approval accorded to ‘green channel’ filings, which should be recognised as a notable innovation by the Commission and the ministry of corporate affairs. In fact, the ministry has incorporated this route in the Competition Amendment Bill, 2022 (which is currently under consideration). It has been supported also by the Parliamentary Standing Committee on Finance. 

When the Competition Act was being contemplated by the government in 2002-03, business representatives expressed apprehension that this might erect yet another bureaucratic behemoth that proves a roadblock for economic transactions and thereby prevents businesses from undertaking inorganic growth. To allay the fears expressed by business, it was agreed that the merger provisions of the Competition Act would be brought into force a full two years after its other provisions, which was in fact what happened.  

There are currently 17 transactions that are awaiting the Commission’s approval, several of which have crossed the 30-working-days period. Some of these are international deals, which cannot be closed globally for want of clearance in India, though these have received approval in other countries. Some deals might involve foreign direct investment, depriving the country of foreign investment; others might be insolvency cases.   

Various stakeholders and industry bodies have reportedly written to the ministry and  the Commission, urging decisions in pending merger cases. It is understood that the ministry along with the Commission has been actively considering what interim measures could be taken in the face of an inquorate Commission to allow at least the merger cases to be decided. Some interim measures that could be examined are: 

a) Invocation of the doctrine of necessity: The present deadlock justifies extraordinary measures to be considered, especially with regard to mergers, which cannot brook unwarranted delays. This doctrine has been recognised by courts and tribunals such as in Mylan Laboratories vs. Union of India & Ors. and Axis Bank vs. National Stock Exchange & Ors., etc. This should allow the Commission to adjudicate on stalled merger cases. The applicability of this measure would, however, have to be tightly circumscribed to limit its invocation only to relieve the current crisis; any open-ended resort to this doctrine could be open to question and even misuse. Going forward, of course, the government should also endeavour to have more than three members at any given time so as not to lead to a crisis as the present one. 

b) Direction under Section 54 of the Competition Act: This section inter alia allows the government to exempt any class of enterprises from the provisions of the Competition Act. Such an exemption could be crafted in consultation with the Commission for a limited period of time so as to allow appropriately defined class of enterprises, specifically the pending merger applications, from awaiting the Commission’s approval.

c) Amendment to the merger control regulations: Once again, either by invoking the doctrine of necessity or otherwise, the Commission could be empowered to amend the Combination Regulations to allow a new category of combinations to be “deemed to be approved” at the expiry of the 30-working-days period.  This could particularly cater to merger filings where such period has elapsed, and the Commission has not issued further requests for information. 

d) Appointment of a temporary member: A temporary appointment of a “member” could be considered  till the time the Chairperson (or an additional member) is officially appointed; 

No doubt, each of the above alternatives could raise tricky questions, including those of legal soundness. However, with high level legal advice, a solution could be crafted. It is believed that the ministry and the Commission have moved decisively to bridge the current vacuum and empower the Commission to decide the pending merger cases. This brings enormous relief to parties as the Commission will now be able to take the next steps in this direction.

Vinod Dhall & Apurva Badoni, respectively, former member, Competition Commission of India, and associate, Touchstone Partners, Delhi, Views are personal.

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First published on: 06-02-2023 at 03:45 IST