Corporate Law II

Project - Write more footnotes - 1500 words matter needed but just don’t stop there, there’s
another 1500 words you can fill up in the footnotes to show you have read something.

Acts
IBC - https://ibbi.gov.in//uploads/legalframwork/e9cca2f4d2cf3508f3c823f070429be8.pdf

Basic readings
 Massimo Motta, Competition Policy, CUP 2004.
 Paul L Davies and Sarah Worthington, Gower’s Principles of Modern Company Law,
10th edn, Thomson Reuters 2018.

CE also die - liquidation, reorganisation, etc

In Corporate Law I we looked at foundations of corporate law. Most cases were governance
issues and did not deal with finance. That was the focus of last term.

Three things we will focus on - corporate governance in and as - Rescue; Requiem; and
Regulation.

Laws to be focused upon - Insolvency, Mergers and Acquisitions (MNA), and Competition law.

NSE Case - Chitra Ramakrishna - Himalayan Yogi case - one word - ‘amazing’.

Clients ask you to predict what is the law - can they act in a certain manner or not -

Module 1
We are hardwired to look for perfection. But the idea is to make models that work in most
conditions.

We will explore if the meld model is workable vis-a-vis the corporate law.

Will all corporate law cases be looked at from ELP and Law and Economics perspective - we
don't know - known unknowns - we can only make predictions based on the precedents.

The Meld Model: The Holy Grail of Indian Corporate Jurisprudence

 ( https://www.nlsblr.com/_files/ugd/fc6957_7273d64478ba4c668cee838b6e7e86ce.pdf )

As a human society we are constantly trying to figure out what is going on in the world outside?
All the disciplines are essentially trying to do this. In law and economics literature scholars
create models to understand empirical phenomena.

In corporate law the idea is to look for a workable model, not a perfect one - which essentially
means that it should be descriptive and normative

 Descriptive- a model should be able to describe what is going on (the ‘is’ question)
 Normative- should be able to answer what should be ?

What does it mean to say that there is synthesis between ELP and L&E? - Example - Essar Steel

Essar Steel
Facts - IBC says that there is a timeline for the purpose of finishing the insolvency process- it is
330 days. The SC says the timeline has been amended. The question is can you mandate this i.e.
the tribunals must finish the judicial process within this timeline? INsolvency involves quite a lot
of formalities involving multiple agencies. It is being argued that the timeline is
unconstitutional.

Section 12 - proviso - “....Provided further that the corporate insolvency resolution process shall
mandatorily be completed within a period of three hundred and thirty days from the insolvency
commencement date, including any extension of the period of corporate insolvency resolution
process granted under this section and the time taken in legal proceedings in relation to such
resolution process of the corporate debtor:.....”

There is something called CIRP - There is a timeline for the same - SC says you cannot use the
term ‘mandatorily’.

So in this example, how do we apply the model? - SC is interpreting the term ‘mandatorily’. And
they go on to term it unconstitutional. But where is this understanding coming from? What is the
source?
Source thesis question - how is the SC holding that the use of the term mandatory is
unconstitutional.
The judge, RF Nariman uses the term ‘manifest arbitrariness’ - where is he bringing this notion
from? His own judgements from the past. If a person is citing himself and no one else is, then
isn’t this a problem? Doesn't this make his opinion less acceptable?

Example of crypto assets - what is the relevance here? Crypto enthusiasts are trying to change
the norm. Every challenger however has the onus to prove why the change is justified. In this
case the onus was on the SC to justify striking down the mandatory limit based on a doctrine
which was developed by the judge himself 6 months ago. The precedent, shayara bano itself is ot
binding because there multiple judges had different things to say- ratio is not clear.

Just like crypto needs common consensus to be taken to be a currency, even things like ‘manifest
arbitrariness’ need consensus to be usable (consensus - it had happened in past, other ppl have
used it).

Now we come to the source thesis - what is happening from the perspective of the source thesis.

So in the backdrop of this example, meld model is not something which will work just because
RS is saying it. He shows (cites) previous articles pointing in the same direction. He is taking
from previously accepted models - on - ELP and Law and Eco - and building upon the same, in
the Indian context.
 ELP academics constantly urge us to look at sources.
 So in the given case, you can’t cite manifest arbitrariness to strike down ‘mandatory’-
need stare decisis
 Wasn’t there another judgement on manifest arbitrariness? There was - COAI - But he
doesn’t cite this because it's not a constitutional bench.
 Should we be concerned how many judges are on the bench?
 We should always ask the process questions. Why did justice nariman ignore his own
judgement (COAI) ? We should ask these questions irrespective of the outcome.

ELP and Law and Eco have been melted and welded together.
 What is the consequence of a statute? Incentives are set for the parties.
 The importance of ‘costs’- Paresi- understand law as a combination of fixed costs and
variable costs. Recall the rule v standard dichotomy. The more specific you are with the
legislation the more fixed costs you pay but less variable costs to be borne by court in
interpreting provisions. (And vice versa).
 What has the supreme court done? It has unsettled the fixed costs determined by the
legislators. They are saying that you cannot prescribe a specific limit for completion of
CIRP. The alteration of the equation ensures that variable costs increase. It is a
reallocation of resources.
 Example- Vishu is circulating notes beforehand- this can be understood through fixed
cost v variable cost model. Giving notes beforehand means incurring fixed costs. On the
other hand if readings are given a day before class- variable costs will be high.
 Rent Seeking. Example- Political lobbying in India- (Relevance?)- IBC is amended
almost every year- it means that someone is lobbying for it. The problem is that there will
be misallocation of resources to lobbying/litigation rather than investing the money in
productive assets. Litigation for the sake of litigation is rent seeking. Interpretation of
courts sometimes leads to rent seeking behavior among litigants. In a case like Essar
Steel, if a supreme court is striking down something based on a vague standard- it is
unsettling and restructuring a lot of incentives.
 Saumya’s question- there can be regulatory capture in certain cases and therefore judicial
interpretation is not necessarily bad?
Answer- look at the purpose of IBC in the preamble.
Preamble of CA doesn’t give its purpose, IBC does.
An Act to consolidate and amend the laws relating to reorganization and insolvency resolution of
corporate persons, partnership firms and individuals in a time bound manner for maximization
of value of assets of such persons, to promote entrepreneurship, availability of credit and
balance the interests of all the stakeholders including alteration in the order of priority of
payment of Government dues and to establish an Insolvency and Bankruptcy Board of India, and
for matters connected therewith or incidental thereto.

 They are talking about four different aims^. The legislation itself is trying to tell us why
they have enacted - it may be true that somebody might have lobbied for it but courts are
not supposed to be bothered about who has lobbied. They merely have to interpret.
 Why is L&E coming in when CA doesn’t even talk about it? - Kraakman - Kaldor Hicks
 Maximization of value of assets - Similar to ‘aggregate welfare’ which Kraakman talks
about. (Kaldor hicks efficiency)
 How does one maximize the value of assets during insolvency?
 Before this we need to ask- why is it called Insolvency and Bankruptcy ‘Code’ (and not
‘Act’)?
Answer- Code is trying to say that it is self-contained.
 Insolvency is about corporate, bankruptcy is personal - we’ll only deal with insolvency of
corporate persons

 Who is it (IBC) applicable to ?- It applies to corporate person -

3(7) “corporate person” means a company as defined in clause (20) of section 2 of the
Companies Act, 2013 (18 of 2013), a limited liability partnership, as defined in clause (n)
of sub-section (1) of section 2 of the Limited Liability Partnership Act, 2008 (6 of 2009),
or any other person incorporated with limited liability under any law for the time being
in force but shall not include any financial service provider.

Can you think of any other context in which a body corporate has limited liability?
Government companies- most of them are companies but not all of them. Quite a few of
them are set up under specific legislation. Example- LIC

So long as you _______, IBC applies.

Zweiten, Corporate Rescue in India: The Influence of the Courts

 Zwetien reading- legislative history context of IBC (relate to mischief rule of
interpretation). example- metal detectors in the library (mischief rule).
 The 5 innovations (??)-the kind of interplay between VIPER(??) and the courts continue
even today.
 Something about ‘residual equity’ (figure it out)
  The piece is also interesting because of the role of the world bank in insolvency law.-
Why is WB interested in corp insolvency law in India? It was one of the reforms
promised in 1991. Lobby can be international as well
 For the world, India is a big market, to ensure MNCs globally get access to this market
and that the law is predictable, WB lobbies

 If some companies are sick why don’t you just allow them to shut down (SICA)? Why
are so many stakeholders interested?
Answer- its about resources. Resources of creditors are stuck (creditor protection as
framework for understanding corporate law). Creditors could be anybody. You can by
shylock the merchant of venice.
 What is market mechanism?- where private parties decide how resources are to be
allocated. The state will play no role
 First innovation - ‘Rehabilitation’- Under SICA the courts are concerned that if a
company is in front of them there are going to be job losses. So they are thinking, should
we not intervene. This is ‘rescue’.
 Page 31- last paragraph- rescue, rehabilitation, revival. In corp law I our focus was on
formation of companies. In insolvency law context companies are a contract between
equity and debt. Pick any company- they will have certain amount of equity and certain
amount of debt. Companies raise money from both sources. Shareholder money there is
no agency costs (how??) in the debt context however its different. Banks lend money to
businesses. Company essentially is talking public savings- the money doesn not belong to
the bank but to us who deposit money in banks.
 Once you have money from banks the company does not have much incentive because
shareholders are not losing the money. It can be seen as ‘expendable’.
 Example- Balance sheet of JSW steels. 49,000 crore of debt. 300 crore is the equity.
 So long as companies continue to service the debt (pay interest) the equity shareholders
can retain control.
 Example- EMI for house loans. Most of the houses in india are on debt. So long as you
keep paying EMI you retain control of the house. The moment you stop servicing it you
near insolvency. What is insolvency? - its about cash flow. So long as your incoming
cash is more than outgoing cash you are okay but the moment it reverses you are in
trouble. It means that you cannot meet your day to day obligations.

Madhusudan Godhandas v Madhu Woollen Industries

 Relates to CA
 Pull out 1956 Companies Act- Section 453(e)

433. Circumstances in which company may be wound up by Court. A company may be

wound up by the Court
(e) if the company is unable to pay its debts;
  Section 271 of 1956 Act

271. Circumstances in Which Company May be Wound Up by Tribunal

1
[ “ A company may, on a petition under section 272, be wound up by the Tribunal,—

(a) if the company has, by special resolution, resolved that the company be wound up by the
Tribunal;

(b) if the company has acted against the interests of the sovereignty and integrity of India,
the security of the State, friendly relations with foreign States,public order, decency or
morality;

(c) if on an application made by the Registrar or any other person authorised by the Central
Government by notification under this Act, the Tribunal is of the opinion that the affairs of
the company have been conducted in a fraudulent manner or the company was formed for
fraudulent and unlawful purpose or the persons concerned in the formation or management
of its affairs have been guilty of fraud, misfeasance or misconduct in connection therewith
and that it is proper that the company be wound up;

(d) if the company has made a default in filing with the Registrar its financial statements or
annual returns for immediately preceding five consecutive financial years; or

(e) if the Tribunal is of the opinion that it is just and equitable that the company should be
wound up.”.]

Recent example of Antrix corporation- the company made certain claims against the government
of india. But the government of India is taking some ingenious steps to wind up the company in
india. The shareholders in turn have started litigation in the US. However, the SC has already
started winding up of the company.

In the insolvency and bankruptcy code the inability to pay its debts as grounds of winding up has
been done away with -tells u=you a lot about the goal of the legislation.

Section 53.(IBC) Distribution of assets. - (1) Notwithstanding anything to the contrary

contained in any law enacted by the Parliament or any State Legislature for the time being in
force, the proceeds from the sale of the liquidation assets shall be distributed in the following
order of priority and within such period as may be specified, namely: - (a) the insolvency
resolution process costs and the liquidation costs paid in full; (b) the following debts which
shall rank equally between and among the following: (i) workmen’s dues for the period of
twenty-four months preceding the liquidation commencement date; and (ii) debts owed to a
secured creditor in the event such secured creditor has relinquished security in the manner set
out in section 52; (c) wages and any unpaid dues owed to employees other than workmen for the
period of twelve months preceding the liquidation commencement date; (d) financial debts owed
to unsecured creditors; (e) the following dues shall rank equally between and among the
following: - (i) any amount due to the Central Government and the State Government including
the amount to be received on account of the Consolidated Fund of India and the Consolidated
Fund of a State, if any, in respect of the whole or any part of the period of two years preceding
the liquidation commencement date; (ii) debts owed to a secured creditor for any amount
unpaid following the enforcement of security interest;

Clause (e) is about debts

 What are debts due to the government? Taxes. They are way below. From an exclusive
legal positivism perspective there is a choice that the government has made vis a vis dues
to the government. They are trying to achieve maximization of assets.
 The law is saying that merely because a company is unable to pay its debts you cant file a
case for winding up. Earlier a lot of cases used to be about winding up of a company due
to inability to pay its debts. Example- cheque bounce cases against individuals- courts
flooded with these cases (S 138 NIA)- look at it from an efficiency perspective- solves
the problem of crowding out - if you take away the ground itself more time for other
cases (crowding out).
 If you are a creditor and the debtor is unable to pay its debt you can initiate proceedings
under IBC (this is not easy).

Facts of Madhusudhan-
Para 6 - The appellants filed a petition for winding up in the month of January, 1970. The
appellants alleged that the company was liable to be wound up under the provisions of
section 43 3 (e) of the Companies Act, 1956 as the company is unable to pay the following
debts.

The appellants claimed that they were the creditors of the company for the following sums of
money :-

A.(a) Expenses incurred by the appellants in connection with the erection of the plant and
machinery. . . Rs. 1,14,344.97

(b) Interest on the sum of Rs. 1,14,344.97 from 1 April, 1966 till 31 December, 1969 at 1%
per mensem. Rs. 51,453.13

(c) Commission on the sum of Rs. 1,14,344. 97 due to the appellants at the rate of Ipercent
per mensem from 1 April 1966 till 13 December,1969. Rs. 51,453.12

B. (a) Compensation payable by the company to the appellants at the rate of Rs. 3,100 per
month for 22 months and 14 days in respect of occupation of the portion of the shed given by
the appellants to the company on the basis of leave and licence. . . Rs.69,600.00

(b) Interest on the amount of com-

pensation from time to time by the said company to the appellants till 12 April, 1967. Rs.
7,857.00

(c) Further interest on compensation from 13 April, 1967 to 31 December, 1969. Rs.
21,576.00
C. (a) Invoices in respect of 3 machines. Rs. 85,250.00

(b) Interest on Rs. 85,250 Rs. 37,596.00

(c) Commission at the rate of 1% per cent or Rs.85,250 Rs. 37,596.00 The appellants alleged
that the company failed and neglected to show the aforesaid indebtedness in the books of
account save and except the sum of Rs. 72,556.01.

Para 29- The appellants contended that the- shortfall in the assets of the company by about
Rs. 2,50,000 after the sale of the machinery would indicate first that the substratum of the
company was gone and secondly that the company was insolvent. An allegation that the
substratum of the company is gone is to be alleged and proved as a fact, The sale of the
machinery was alleged in the petition for winding up to indicate that the substratum of the
company had disappeared. It was also said that there was no possibility of the company
doing business at a profit. In determining whether or not the substratum of the company has
gone, the objects of the company and the case of the company on that question will have to
be looked into. In the present case the, company alleged that with the proceeds of sale the
company in-, tended to enter into some other profitable business. The mere fact that the
company has suffered trading losses will not destroy its substratum unless there is no
reasonable prospect of it ever making a profit in the future, and the court is reluctant to
hold that it has no such prospect.

Are judges experts on how business can be done? What is a substratum? The underlying
value of the business. The court is saying that so long as the underlying fundamentals of the
company are sound it cannot be wound up even though it is temporarily unable to pay its
debt. However this is not legal reasoning. Note that this is impossible under IBC .

Paragraph 10- the case went to Bombay HC initially

Para 11 both the parties are making claim about debt of the company

SC is looking at the substratum of the company.

Para 29 continued- The company alleged that out of the proceeds of sale of the machinery the
company would have sufficient money for carrying on export business even if the company
were to take into consideration the amount of Rs 1,45,000 alleged to be due on account of
rent. Export business, buying and selling yarn and commission agency are some of the
business which the company can carry on within its objects. One of the Directors of the
Company is Kishore Nandlal Shah who carries on export business under the name and style
of M//'s. Nandkishore & Co. in partnership with others. Nandkishore & Co. are creditors 'of
the company to the extent of Rs. 4,95,000. The company will not have to meet that claim
now. On the contrary, the Nandkishore group will bring in money to the company. This
Nandkishore group is alleged by the company to help the company in the export business.
The company has not abandoned objects of business. There is no such allegation or proof. It
cannot in the facts and circumstances of the present case be held that the substratum of the
company is gone. Nor can it be held in the facts and circumstances of the present case that
the company is unable to meet the outstandings of any of its admitted creditors. The
company has deposited in court the disputed claims of the appellants. The company has not
ceased carrying on its business. Therefore, the company will meet the dues as and when they
fall due. The company has reasonable. prospect of business and resources.

This para tells us that the supreme court is getting into questions of fact. IBC will look at this
case very differently. Role of the courts is very limited. These decisions are taken by a
committee of creditors (will study later).

Innoventive Industries v ICICI Bank

Facts -

Section 238 of IBC. Provisions of this Code to override other laws. - The provisions of this Code
shall have effect, notwithstanding anything inconsistent therewith contained in any other law for
the time being in force or any instrument having effect by virtue of any such law.

What are instruments having the effect of law? Contract, Wills (?),
What is the question of law in Innoventive?-Conflict between Maharashtra Act and Insolvency
Code.
What is the conflict? -
Example on Temples- Temples are business - didn’t get how this is relevant
Example on Schools during Covid- reduction of fee

Section 53 - gives priority to the salary of employees. This is perhaps because salary is paid after
service has been rendered.

The maharashtra act however says that you can pay less to employees- however employees are
saying that there is IBC under which you have to pay employees.

S. 238 IBC – in case of inconsistency with any other law, IBC will prevail.
Para 16: “The limited liability company is a contract between equity and debt. As long as debt
obligations are met, equity owners have complete control, and creditors have no say in how the
business is run. When default takes place, control is supposed to transfer to the creditors; equity
owners have no say.”

IBC has changed the SICA model- this is what the Committee report is pointint out.
Rs’s claim- we looked at the preamble, a few cases and some committee report and a few
provisions. Go back to where we started from- law and economics has a role to play here. Why is
it that so many people are interested in insolvency? Simply because resources are scarce and they
are stuck in the company. The idea of capitalism is that the resources should keep moving. If it
gets stuck, its a waste. Example- 23,000 crore stuck in ABG shipyard. There are opportunity
costs to such a huge amount of money lying idle.

Law of triarch - in emergency cases where a hospital doesn’t have resources, they divide patients
into categories of chance of survival and allocate resources accordingly. ^Innoventive is drawing
from this

Haircut- in insolvency you won’t necessarily get all your money- you get a certain amount of the
amount you are owed. However, see the counterfactual- if the IBC process does not take place
you dont get anything. Something is better than nothing (law of triarch). The market mechanism
decides what you may possibly get given the desperate situation.

Example- Jet airways owed 25,000 crore but creditors will only get around 12,000 crore.

The claim is that IBC is about efficiency - kaldor hicks efficiency- maximisation of resources. A
large part of resolution is a property rule model.

Lokhandwala Kataria

Facts - The Sc uses article 142 for the purpose of IBC to do complete justice.

The question which arises is what are the outer contours of the power to do complete justice?
Another question is what is the impact on stare decisis?

In the world of commerce you need certainty. Gray areas in precedent are not good for the
commercial world.You never know when SC will utilize its powers to do complete justice.

What is the rationale to do complete justice? - There is consent. Why should we bother?
Since parties have given consent, even courts do not want to waste their time and energy. (para 4
in the order)

Stage 1: Corporate Insolvency Resolution Process (CIRP)

Look at IBC from four different stages-

Stage 1 - Initiation- Actors- CD, FC, OC, NCLT, NCLAT, SC

Stage 2 - Commencement- NCLT, NCLAT
Stage 3 - Formulation and Finalisation of Resolution Plan- COC, IRP, RP, RA
 Stage 4 - Liquidation and dissolution-
IBBI?
In Goverdhandas era stages 1, 2 and 3 did not exist. You could jump straight to Stage 4. What
IBC is saying is that before dissolution there should be a shot at resolution.

Behavioral law and eco perspective - if someone is not paying their debt the intuitive response is
to wind up. However, with time the thinking changes. With SICA legislators are thinking can we
somehow revive these companies. By the time IBC is here the understanding has gone a drastic
change- it is not about revival or winding up. It is more deliberative and reflective which
suggests that something else should be done.

In each of these stages there are different actors. Under IBC there are 12 actors in toto who play
different roles in different stages. By the end of the module on IBC the goal should be to know
the role of each of these actors in their corresponding stages.

Mobilox Innovations Private Limited v Kirusa Software Private Limited

(Civil Appeal 9405/2017, SC)
- Trying to analyse the importance of IBC in an international context. It is a reflective judgement.

Facts - Applelents (Mobilox) sub contracted some contract services to Kirusa and asked the latter
to not disclose the job they had undertaken. The contract had an NDA clause to the same effect.
Kirusha breaches the non-disclosure.
Essentially, sign the contract but do not honour it. Kind of what is happening in Amazon v.
Future. While Future and Amazon had a deal, Reliance isn’t honouring it. It has already entered
stores. [It is our (my) country, I’ll do whatever i wish to].

Section 6 - Persons who may initiate a CIRP

Section 6. Persons who may initiate a corporate insolvency resolution process. – Where any
corporate debtor commits a default, a financial creditor, an operational creditor or the
corporate debtor itself may initiate corporate insolvency resolution process in respect of such
corporate debtor in the manner as provided under this Chapter.

 Defined terms - underlined

 Section 3 (8) “corporate debtor” means a corporate person who owes a debt to any
person;
 Section 3 (12) “default” means non-payment of debt when whole or any part or
instalment of the amount of debt has become due and payable and is not 1[paid] by the
debtor or the corporate debtor, as the case may be.
 Debt should be both due and payable (as there might be some dues which are unpayable).
  Even the corporate debtor is allowed to self-commence the CIRP. Don’t have to wait for
someone else; since who knows your financial condition better than yourself. Though this
option is seldom exercised as there are reputational costs.

We won’t do financial service this time.

Section 3 (10) “creditor” means any person to whom a debt is owed and includes a financial
creditor, an operational creditor, a secured creditor, an unsecured creditor and a decree-
holder;
 Who is a decree-holder? - Court/arbitration order entitling someone to a claim. However,
in the Indian context, just because you hold a decree does not mean you will get your
dues. Takes years to enforce the decree.

Section 3 (11) “debt” means a liability or obligation in respect of a claim which is due from any
person and includes a financial debt and operational debt;

Section 5 (7) - Financial creditor” means any person to whom a financial debt is owed and
includes a person to whom such debt has been legally assigned or transferred to;

(8) “financial debt” means a debt alongwith interest, if any, which is disbursed against the
consideration for the time value of money and includes–

(a) money borrowed against the payment of interest;

(b) any amount raised by acceptance under any acceptance credit facility or its dematerialised
equivalent;
(c) any amount raised pursuant to any note purchase facility or the issue of bonds, notes,
debentures, loan stock or any similar instrument;
(d) the amount of any liability in respect of any lease or hire purchase contract which is deemed
as a finance or capital lease under the Indian Accounting Standards or such other accounting
standards as may be prescribed;
(e) receivables sold or discounted other than any receivables sold on non-recourse basis;
(f) any amount raised under any other transaction, including any forward sale or purchase
agreement, having the commercial effect of a borrowing;
[Explanation. -For the purposes of this sub-clause, - (i) any amount raised from an allottee under
a real estate project shall be deemed to be an amount having the commercial effect of a
borrowing; and (ii) the expressions, “allottee” and “real estate project” shall have the meanings
respectively assigned to them in clauses (d) and (zn) of section 2 of the Real Estate (Regulation
and Development) Act, 2016 (16 of 2016);] (g) any derivative transaction entered into in
connection with protection against or benefit from fluctuation in any rate or price and for
calculating the value of any derivative transaction, only the market value of such transaction
shall be taken into account; (h) any counter-indemnity obligation in respect of a guarantee,
indemnity, bond, documentary letter of credit or any other instrument issued by a bank or
financial institution; (i) the amount of any liability in respect of any of the guarantee or
indemnity for any of the items referred to in sub-clause (a) to (h) of this clause;
Section 5 (9) “financial position”, in relation to any person, means the financial information of a
person as on a certain date;

Section 5 (10) “information memorandum” means a memorandum prepared by resolution

(20) “operational creditor” means a person to whom an operational debt is owed and
includes any person to whom such debt has been legally assigned or transferred;

(21) “operational debt” means a claim in respect of the provision of goods or services including
employment or a debt in respect of the [payment] of dues arising under any law for the time
being in force and payable to the Central Government, any State Government or any local
authority;

 Financial debt is about time value of money - Example - Bank stamp

 Exercise - HDFC website - emi calculator - Understand the time value of money. If you
take a loan for 20 years the amount of money you end up paying ultimately will be lesser
than when you take a loan for 30 years. The longer the time the more the payout.
 Operational debt is about provision of goods and services. You eat at a mess and pay
afterwards at the end of the month. This is operational debt.
 The section does not say anything about the interest - however, the late payment fine can
be equated to an interest while it is meant to disincentivize delayed payments.
 Islamic Banking - Payment of interest is ‘haraam’ - a sum of money is included towards
services provided, etc. - amount of money charged is equal to or more than interest.

Mobilox involves an operational creditor. Thus look at Section 8.

Section 8 - Insolvency resolution by operational creditor.

Section 8. Insolvency resolution by operational creditor. - (1) An operational creditor may, on
the occurrence of a default, deliver a demand notice of unpaid operational debtor copy of an
invoice demanding payment of the amount involved in the default to the corporate debtor in such
form and manner as may be prescribed.
(2) The corporate debtor shall, within a period of ten days of the receipt of the demand notice or
copy of the invoice mentioned in sub-section (1) bring to the notice of the operational creditor -

(a) existence of a dispute, [if any, or] record of the pendency of the suit or arbitration
proceedings filed before the receipt of such notice or invoice in relation to such dispute;

(b) the 2 [payment] of unpaid operational debt-

(i) by sending an attested copy of the record of electronic transfer of the unpaid amount
from the bank account of the corporate debtor; or
(ii) by sending an attested copy of record that the operational creditor has encashed a
cheque issued by the corporate debtor.
Explanation. – For the purposes of this section, a “demand notice” means a notice served by an
operational creditor to the corporate debtor demanding 3 [payment] of the operational debt in
respect of which the default has occurred.

Section 5 (6) “dispute” includes a suit or arbitration proceedings relating to– (a) the existence of
the amount of debt; (b) the quality of goods or service; or (c) the breach of a representation or
warranty;

Section 9. Application for initiation of corporate insolvency resolution process by

operational creditor. – (1) After the expiry of the period of ten days from the date of delivery of
the notice or invoice demanding payment under sub-section (1) of section 8, if the operational
creditor does not receive payment from the corporate debtor or notice of the dispute under
subsection (2) of section 8, the operational creditor may file an application before the
Adjudicating Authority (AA) for initiating a corporate insolvency resolution process………

 Section 5 (1) “Adjudicating Authority”, for the purposes of this Part, means National
Company Law Tribunal constituted under section 408 of the Companies Act, 2013

(2) The application under sub-section (1) shall be filed in such form and manner and
accompanied with such fee as may be prescribed.

(3) The operational creditor shall, along with the application furnish-
(a) a copy of the invoice demanding payment or demand notice delivered by the
operational creditor to the corporate debtor;
(b) an affidavit to the effect that there is no notice given by the corporate debtor relating
to a dispute of the unpaid operational debt;
(c) a copy of the certificate from the financial institutions maintaining accounts of the
operational creditor confirming that there is no payment of an unpaid operational debt [by the
corporate debtor, if available;]
[(d) a copy of any record with information utility confirming that there is no payment of
an unpaid operational debt by the corporate debtor, if available; and
(e) any other proof confirming that there is no payment of any unpaid operational debt by
the corporate debtor or such other information, as may be prescribed.]

(4) An operational creditor initiating a corporate insolvency resolution process under this section,
may propose a resolution professional to act as an interim resolution professional.

(5) The Adjudicating Authority shall, within fourteen days of the receipt of the application under
sub-section (2), by an order–

(i) admit the application and communicate such decision to the operational creditor and
the corporate debtor if, -
(a) the application made under sub-section (2) is complete;
(b) there is no 3 [payment] of the unpaid operational debt;
 (c) the invoice or notice for payment to the corporate debtor has been delivered by
the operational creditor;
(d) no notice of dispute has been received by the operational creditor or there is
no record of dispute in the information utility; and
(e) there is no disciplinary proceeding pending against any resolution professional
proposed under sub-section (4), if any.

(ii) reject the application and communicate such decision to the operational creditor and
the corporate debtor, if -
(a) the application made under sub-section (2) is incomplete;
(b) there has been 1 [payment] of the unpaid operational debt;
(c) the creditor has not delivered the invoice or notice for payment to the
corporate debtor;
(d) notice of dispute has been received by the operational creditor or there is a
record of dispute in the information utility; or
(e) any disciplinary proceeding is pending against any proposed resolution
professional: Provided that Adjudicating Authority, shall before rejecting an
application under subclause (a) of clause (ii) give a notice to the applicant to
rectify the defect in his application within seven days of the date of receipt of
such notice from the Adjudicating Authority.

(6) The corporate insolvency resolution process shall commence from the date of admission of
the application under sub-section (5) of this section.

So the tribunal can either reject or accept the application under this section. In para 4 given that
tribunal dismissed the application. In appeal (para 5), NCLAT said - While there seems to be a
dispute, this is more of an excuse to not make a payment.

In Para 56, reversal of standard of existence of dispute is given -

SC disagreed with the Appellate tribunal wherein the latter held that appeal is vague. In terms of
the case, the court is saying that there is a plausible contention there is a dispute irrespective of
the merits of the case there would be

Para 33
“What is important is that the existence of the dispute and/or the suit or arbitration proceeding
must be pre-existing – i.e. it must exist before the receipt of the demand notice or invoice, as the
case may be”

Is it pre-existing in this case? Yes. in para 56 they do not say that the dispute should be pre-
existing. Look at the definition of dispute- it includes either an arbitration or a suit. In this case
there is none. The definition does not tell you whether it is necessary that there must be a dispute

Section 5 (6) - Dispute

Section 5 (6) “dispute” includes a suit or arbitration proceedings relating to–
(a) the existence of the amount of debt;
(b) the quality of goods or service; or
(c) the breach of a representation or warranty;

Para 9 - ‘efficient’ is used many times

Read Paragraph 61 -

 Important part is the one which has been italicised-

 Paragraph 15 - the court looks at legislative history
 Paragraph 16- ibid

They cite various reports and committees to trace legislative history in all these paras. (Side note:
Look at how slow the changes are). They cite Madhusudhan case in para 18. Then interim report
in para 19, 20. In para 23 looking at the older version, bona fide was there which is not there in
the present code.
Para 23In an earlier version of the Bill the definition of dispute had a bona fide standard which
had been omitted in the final code. According to court this tells us that the court should not go
into the merits of the dispute and should merely ensure that there is a plausible argument to be
made.

Para 47 - ‘genuine dispute’

Para 44 - The same point reiterated. The court is making an effort to be textual. They trace all
this history to say the changes in the statute are not overnight. It has been a well-thought process.
They are suggesting that there has been a lot of deliberation in making this legislation and
therefore every word matters.

Para 57 - because there is a pre existing dispute, IBC does not have any role. Mobilix cant
initiate. Can't pass stage 1. Note that the UN general assembly does not make a distinction
between commencement and initiation. They talk about commencement as if it is initiation.
However in IBC this distinction exists. In fact ‘initiation’ has been defined.

Initiation v Commencement
Section 5 (11) “initiation date” means the date on which a financial creditor, corporate applicant
or operational creditor, as the case may be, makes an application to the Adjudicating Authority
for initiating corporate insolvency resolution process 1 [or pre-packaged insolvency resolution
process, as the case may be];

Section 5 (12) “insolvency commencement date” means the date of admission of an application
for initiating corporate insolvency resolution process by the Adjudicating Authority under
sections 7, 9 or section 10, as the case may be:

Fancy RS latin term for initiation - legis actio - the moment you have filed, there is initiation
(stage 1) - initiation is a property rule. But commencement (stage 2) is liability rule - it is upon
the NCLT to make that decision.

In stage 3, the role of NCLT changes drastically. There may be many actors involved.

Actors in Stage 1 - Operational creditor, financial creditor, NCLT, NCLAT, SC.

Question - When was IBC notified? November 30, 2016 (given to para 2) -
[Para 2 ] 30.1.2015 - The transactions were prior to IBC’s enactment. So, is IBC
retrospective?
Should the SC deal with the retrospectivity aspect? The Constitution only bars criminal
retrospective action. In re civil matters, it is okay to apply new legislation(s) retrospectively.
There is a lack of effort towards this facet of the case. Neither parties or the court (suo moto)
deal with this.

Section 6 (GCA) Effect of repeal.

Section 6 (GCA) Effect of repeal. —Where this Act, or any 1 [Central Act] or Regulation made
after the commencement of this Act, repeals any enactment hitherto made or hereafter to be
made, then, unless a different intention appears, the repeal shall not—
(a) revive anything not in force or existing at the time at which the repeal takes effect; or
(b) affect the previous operation of any enactment so repealed or anything duly done or suffered
thereunder; or
(c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any
enactment so repealed; or
(d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed
against any enactment so repealed; or
(e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege,
obligation, liability, penalty, forfeiture or punishment as aforesaid, and any such investigation,
legal proceeding or remedy may be instituted, continued or enforced, and any such penalty,
forfeiture or punishment may be imposed as if the repealing Act or Regulation had not been
passed.
Section 271 was about winding up - in IBC the entire scheme has changed - the process is
different - so can we actually say IBC is saving the provision in CA, 2013? Well, no one can
really tell because the court did not deal with this issue.

Saumya asked a question-

Does India have an adversarial legal system? No. Look at section 165 of Evidence Act (sources
thesis).

Phoenix ARC Private. Ltd. v Spade Services Ltd 2021 SCC OnLine SC
51 [Emphasis on Part G]
Legal issue -

Part (g) -Assessment of preliminary submissions

Para 2 - AAA Landmark and Spade were excluded from the committee of creditors because they
were not financial creditors.
Para 3- Phoenix submits that they are related financial creditors.

G.3 - Analysis
Starts with definition of financial creditor - Section 5 (7), IBC - and the definition of financial
debt .
Para 45 - Differentiate between financial and operational debt -

This para says, erroneous finding that they are finding creditors. Who are financial creditors?
Part G- deals with who are financial creditors?

G3-
Paragraph 43-

G.3.2-

Macquarie Bank v Shilpi Cable Technologies Ltd (2018)

Facts: Macquarie Bank entered into an agreement with Hamera International to purchase the original
supplier’s right, title and interest to recover from Shilpi Cable. These are actionable claims under the
sale of goods act. Look at factoring regulation at - if an sme enterprises has rendered services but the
payment is after 40-45 days but they need cash now - so they assign their right to receive the
payment to someone else and take money from them.

Who is the creditor, debtor and assignee in this case?

Creditor- Hamera International
Debtor- Shilip
Assignee- Macquire Bank

Subsequently, they send a demand notice under section 9 of the IBC.

9. Application for initiation of corporate insolvency resolution process by operational creditor.
– (1) After the expiry of the period of ten days from the date of delivery of the notice or invoice
demanding payment under sub-section (1) of section 8, if the operational creditor does not receive
payment from the corporate debtor or notice of the dispute under subsection (2) of section 8, the
operational creditor may file an application before the Adjudicating Authority for initiating a
corporate insolvency resolution process.

Who

Definition of factoring - A business in need of cash sells its accounts receivable for a discounted
price.

Para 2-

What is a bill of lading? In a shipment contract the carrier issues a bill mentioning the nature of
goods, destination. In international law, generally, the goods are not paid for until the
consignment reaches the buyer, so this bill is important to protect such at-risk sellers. Based on
this bill of lading, Banks transfer the amount to the seller. They act as operational/trade creditors.
They’ve been forced to become creditors because of the absence of trust between the seller and
the buyer.

Last week we made a distinction between financial and operational creditor based on the text of
the statute. But there is another way to look at it. The operational creditors are those people who
don't intend to be creditors. They are in the business of supplying goods and services. They are
also known as trade creditors.

Also note that the bargaining position of OC vis a vis CD may be very different (it may be even
better than FC but still different). There is a concern among some people that operational
creditors are being short changed under the IBC regime- the recovery amount for OC is much
higher than FC.

IBBI Data -
6.77 Thousand Cr. - FC
78 Thousand Cr. - OC
 Financial creditors are the ones who intend to be creditors, operational creditors just
intend to be paid.
 See the outstanding credit for both
The main issues in the case were:
1. Whether Section 9(3)(c) of the Code is mandatory or directory in nature, especially in the
context of foreign operational creditors.
2. Whether a demand notice of an unpaid operational debt under Section 8(1) can be issued
by a lawyer on behalf of an operational creditor. (Basically who can issue demand
notice?)

Section 9 (3) The operational creditor shall, along with the application furnish- (a) a copy of the
invoice demanding payment or demand notice delivered by the operational creditor to the
corporate debtor; (b) an affidavit to the effect that there is no notice given by the corporate
debtor relating to a dispute of the unpaid operational debt; (c) a copy of the certificate from the
financial institutions maintaining accounts of the operational creditor confirming that there is no
payment of an unpaid operational debt [by the corporate debtor, if available;

Para3-

Para 4- NCLAT also agreed that there was a non-compliance with the mandatory requirements of
9(3)(c).

Both NCLT and NCLAT agree that sec 9 (3)(c) has not been followed in para 4.

At the time this question came before the supreme court the phrase ‘if available’ did not exist.

Para 16 - SC interprets the Section to mean that the Certificate is not a mandatory precondition
for CIRP.
  The argument of the SC is that 9(3)(c) uses the word ‘confirming’ which means that this
is merely an evidentiary rule and therefore procedural. Therefore it shouldn’t be
necessary because it is just one piece of evidence among others.

Nature of Section 9(3)(c) of the Code: A Certificate by a Financial Institution is merely

confirmatory evidence- It was held that the expression “confirming” appearing in Section 9(3)(c)
of the Code, made it clear that although the certificate is a very important piece of evidence, it
only confirms that there is no payment of an unpaid operational debt. Even Form 5 under Rule 6
of the Adjudicating Authority Rules clarifies that item 7 of Part V is only one of the documents
to be submitted as evidence of default. Further, annexure III in the Form also speaks of copies of
relevant accounts kept by banks/financial institutions maintaining accounts of the operational
creditor, confirming that there is no payment of the unpaid operational debt, only “if available”.
Therefore, a certificate under Section 9 is not a pre-condition to trigger the Code. The true
construction of Section 9(3)(c) is that it is a procedural provision, which is directory in nature, as
the Adjudicatory Authority Rules read with the Code clearly demonstrate.

Another argument- definition of financial institutions- in this case the foreign bank will not be a
FI as per the definition. If they are not FI then their certificate will not have a meaning anyway.
If the certificate requirement is read to be mandatory then it would be discriminatory.

Section 9(3) (d) -Section 3 (21) “information utility” means a person who is registered with the
Board as an
information utility under section 210;
Section 210. Registration of information utility. – (1) Every application for registration shall
be made to the Board in such form and manner, containing such particulars, and accompanied by
such fee, as may be specified by regulations: Provided that every application received by the
Board shall be acknowledged within seven days of its receipt. (2)....... (5).
 Until now there is only one company established as an information utility - NeSL -
National e-Governance Services Ltd - https://nesl.co.in/ .
 NeSL makes sure there is real time data on default.

Now look at the second issue: whether under section 8, demand notice can be delivered by a
lawyer of operational creditor.

SC said-

Why is SC extracting forms under IBC like form 3. They are looking at the structure of the form
attached and then saying how the section needs to be interpreted. They are saying that there is a
space for signature of person acting on behalf of operational creditors in the Demand notice and
application. Hence, lawyer can also issue demand notice.

Who has drafted these forms? These are rules drafted by the central government and MCA. But
then how can IBC drafted by IBBI be interpreted through rules that came later and that too by
MCA. Maybe we can say that SC did it in early days to settle the issues related to new law, so it
is valid.
241. Rules and Regulations to be laid before Parliament. –

Every rule and every regulation made under this Code shall be laid, as soon as may be

after it is made, before each House of Parliament, while it is in session, for a total period of

thirty days which may be comprised in one session or in two or more successive sessions, and

if, before the expiry of the session immediately following the session or the successive sessions

aforesaid, both Houses agree in making any modification in the rule or regulation or both

Houses agree that the rule or regulation should not be made, the rule or regulation shall

thereafter have effect only in such modified form or be of no effect, as the case may be; so,

however, that any such modification or annulment shall be without prejudice to the validity of

anything previously done under that rule or regulation.

Whether it is a rule drafted by central government or central agency, it has to be laid before the
parliament.

Issuance of Notice by Lawyers- Relying on earlier judgments, it was held that the
expression “in relation to” is very wide and specifically includes a position, which is
outside or indirectly related to the operational creditor. It was also observed that the
expression “practice” under Section 30 of the Advocates Act has a very wide import and
this would include all preparatory steps leading to the filing of an application before the
Tribunal. Therefore, by reading Section 30 of the Advocates Act and Sections 8 and 9 of
the Code together with the Adjudicatory Authority Rules and Forms thereunder
harmoniously, the Court concluded that a notice sent on behalf of an operational
creditor by a lawyer would be valid, proper and “in order”.

Legitimacy issues in interpreting text of the statute using rules and regulations. ‘

A related issue- does the IBC allow foreign entity to recover the amount owed by Indian
companies?
Para 21-
They are tryign to figure if IBC is discriminatory? Does it have a different procedure for
financial creditor insider India to those outside India?S
The SC is saying that the IBC does envisage foreign parties because the definitions clause S 3
(23) talks about ‘person’ includes a person resident outside India.. Therefore persons not in India
can also use IBC .
However, refer to section 6 - does it use the word ‘person’. Section 6 is where everything starts.
Do the people referred in section 6 use the word ‘person’? - Yes but only in the marginal
heading. The section uses operational creditors and other creditors.

IBC is not supposed to be a debt recovery tool- for example- someone issues aan invoice and
says that if you don’t pay up i will start insolvency proceedings- but this is not the intent of IBC.
Example- CIRP against OYO was mala fide.
What could be an alternative to Para 21- if IBC is not meant for foreign operational creditors
then what is the alternative? -Civil suit?
SEction 63-
63. Civil court not to have jurisdiction. - No civil court or authority shall have jurisdiction to
entertain any suit or proceedings in respect of any matter on which National Company Law
Tribunal or the National Company Law Appellate Tribunal has jurisdiction under this Code.
Civil court not to have jurisdiction.

Is it really discriminatory if foreign entities are included? Example of COPRA>

Consolidated Construction Consortium (Con Con Con) v Hitro Energy

Solutions Private Limited (the concept of operational debt continues to
occupy the time of the court)
Facts - Chennai Metro Rail Limited ordered supply of lights worth 50 lakhs. The contract is
between Con COn COn and Chennai Metro. Con con con in turn places the orders with
proprietary concern. Propo concern ask for advanced payment which is issued. However, later on
the project is stalled by state government. Conconcon asks for payment but prop concern says
that they will give money only if Chennai Metro asks them to.

A portion of this judgement [para 10] is devoted to MoU. Hithro in its MoU says that one of its
purposes is to take over Prop concern.

Respondent was incorporated in 2014 on the basis of a MoA - Corporate entity took over the
proprietorship.

Procedural history- Conconcon moves the NCLT. THey argue that it is an operational debt. But
the question is what service did Conconcon provide? NCLT says that it is an operational debt.
NCLAT sets it aside.

Definition of operational debt-

Sec 5 (21) “operational debt” means a claim in respect of the provision of goods or services
including employment or a debt in respect of the [payment] of dues arising under any law for the
time being in force and payable to the Central Government, any State Government or any local
authority;

SC interpret ‘in respect of’. Why do they focus on this phrase?

They look at a host of reports (BLRC, Expert committee report etc) and past precedents ( part of
the outline).
They are trying to figue out what the purpose behind operational and financial debt is . One
paragraph is important-
‘Unlike other jurisdictions IBC does not make a distinction between secured and unsecured
creditor but makes a distinction between operational and financial creditors’.
Para - 40-
We can’t rely on foreign jurisdictions since they make a different distinction. (how is this related
to interpretation of ‘in respect of’??)

Why has India chosen to depart from foreign jurisdiction? Operational creditors are seen as trade
creditors- i.e. you don’t intend to become a creditor. In the course of business you end up
becoming a creditor. CM is not in the business of lending money but they end up becoming one
anyway.

Extract from BLRC-

Para 41 - The primary source is Volume I of the Report of the Committee 16 Bankruptcy Law
Reforms . It notes that “[e]nterprises have financial creditors by way of loan and debt contracts
as well as operational creditors such as employees, rental obligations, utilities payments and
trade credit” 17 . It provides that a corporate debtor will have financial and operational liabilities,
and explains the difference as follows 18 : “Liabilities fall into two broad sets : liabilities based
on financial contracts, and liabilities based on operational contracts. Financial contracts involve
an exchange of funds between the entity and a counterparty which is a financial firm or
intermediary. This can cover a broad array of types of liabilities : loan contracts secured by
physical assets that can be centrally registered; loan contracts secured by floating charge on
operational cash flows; loan contracts that are unsecured; debt securities that are secured by
physical assets, cash flow or are unsecured. Operational contracts typically involve an
exchange of goods and services for cash. For an enterprise, the latter includes payables for
purchase of raw-materials, other inputs or services, taxation and statutory liabilities, and
wages and benefits to employees. ”

Para 44. The Joint Parliamentary Committee Report on the IBC differentiates between
financial and operational creditors in the following terms : “Clause 21 appended with the Bill
which states as under:— “ 20 The committee has to be composed of members who have the
capability to assess the commercial viability of the corporate debtor and who are willing to
modify the terms of the debt contracts in negotiations between the creditors and the corporate
debtor. Operational creditors are typically not able to decide on matters relating to
commercial viability of the corporate debtor, nor are they typically willing to take the risk
of restructuring their debts in order to make the corporate debtor a going concern.

They are saying that if you are an operational creditor your incentives are different- they are
short term. To get the money back asap. FC incentives are very different because they are
interested in long term reorganisation of the CD. Refer to Swiss ribbons on this-

Para 40 - In Swiss Ribbons (P) Ltd. v. Union of India (“ Swiss Ribbons ”)... - “50. … Financial
creditors generally lend finance on a term loan or for working capital that enables the corporate
debtor to either set up and/or operate its business. On the other hand, contracts with operational
creditors are relatable to supply of goods and services in the operation of business. Financial
contracts generally involve large sums of money. By way of contrast, operational contracts have
dues whose quantum is generally less. In the running of a business, operational creditors can be
many as opposed to financial creditors, who lend finance for the set-up or working of business.
Also, financial creditors have specified repayment schedules, and defaults entitle financial
creditors to recall a loan in totality. Contracts with operational creditors do not have any such
stipulations. Also, the forum in which dispute resolution takes place is completely different.
Contracts with operational creditors can and do have arbitration clauses where dispute resolution
is done privately. Operational debts also tend to be recurring in nature and the possibility of
genuine disputes in case of operational debts is much higher when compared to financial debts.
A simple example will suffice. Goods that are supplied may be substandard. Services that are
provided may be substandard. Goods may not have been supplied at all. All these qua
operational debts are matters to be proved in arbitration or in the courts of law. On the other
hand, financial debts made to banks and financial institutions are well documented and defaults
made are easily verifiable.”

Focus on incentives - as an FC the assumption is that the incentive is to focus on long term
survival. FC are interested in the long term value of the CD rather than immediate inability to
pay up. However, CD does not care about this at all.
Holding of the court-

Para 58. “First, Section 5(21) defines ‘operational debt’ as a “claim in respect of the provision
of goods or services”. The operative requirement is that the claim must bear some nexus with a
provision of goods or services, without specifying who is to be the supplier or receiver. Such an
interpretation is also supported by the observations in the BLRC Report, which specifies that
operational debt is in relation to operational requirements of an entity….”

Para 61. Similarly, in the present case, the phrase “in respect of” in Section 5(21) has to be
interpreted in a broad and purposive manner in order to include all those who provide or receive
operational services from the corporate debtor, which ultimately lead to an operational debt. In
the present case, the appellant clearly sought an operational service from the Proprietary Concern
when it contracted with them for the supply of light fittings. Further, when the contract was
terminated but the Proprietary Concern nonetheless encashed the cheque for advance payment, it
gave rise to an operational debt in favor of the appellant, which now remains unpaid. Hence, the
appellant is an operational creditor under Section 5(20) of the IBC.

Counterfactual - What if this is not an operational debt? COnconcon will not be able to use IBC.
But they can also approach a trial court. In fact the court itself says that we are conscious of the
fact that IBC is not a debt recovery tool (Swiss Ribbons).

There is a penchant among the judges to take IBC matters - J. Chandrachud, who is otherwise a
constitutional law aficionado, has been taking IBC matters since the last seven-eight months.

Para 47-
what is unique to real estate developers vis-à-vis operational debts, is the fact that, in operational
debts generally, when a person supplies goods and services, such person is the creditor and the
person who has to pay for such goods and services is the debtor. In the case of real estate
developers, the developer who is the supplier of the flat/apartment is the debtor inasmuch as the
home buyer/allottee funds his own apartment by paying amounts in advance to the developer for
construction of the building in which his apartment is to be found. Another vital difference
between operational debts and allottees of real estate projects is that an operational creditor has
no interest in or stake in the corporate debtor, unlike the case of an allottee of a real estate
project, who is vitally concerned with the financial health of the corporate debtor, for otherwise,
the real estate project may not be brought to fruition.

In the real estate business, they also provide service. The phrase ‘in respect of’ is very very
broad. It is possible to fit all claims as an operational debt.

Who can initiate CIRP? OC or FC. If you don't fall under these categories, you can't initiate.
There are other issues in this case -

MoA Issue

Section 3 (7) “corporate person” means a company as defined in clause (20) of section 2 of the
Companies Act, 2013 (18 of 2013), a limited liability partnership, as defined in clause (n) of sub-
section (1) of section 2 of the Limited Liability Partnership Act, 2008 (6 of 2009), or any other
person incorporated with limited liability under any law for the time being in force but shall not
include any financial service provider;

SC says Hitro has taken over the proprietary concerned - based on the MoA - because MoA said
that the purpose is to take over prop concern it means that prop concern has already been taken.

Para 64. The dispute revolves around the MOA of the respondent, dated 24 January 2014, which
states: “(A) THE MAIN OBJECTS OF THE COMPANY TO BE PURSUED BY COMPANY
ON ITS INCORPORATION:
[…]
4. To take over the existing Proprietorship firm Viz. M/S. Hitro Energy Solutions having its
registered office at Chennai.”

Para 77- Consequently, the MOA of the respondent still stands and the presumption will
continue to be in favor of the appellant. Thus, it can be concluded that the respondent took over
the Proprietary Concern and was liable to re-pay the debt to the appellant. Hence, the application
under Section 9 of the IBC was maintainable.

Phoenix ARC Private. Ltd. v Spade Financial Services Ltd 2021 SCC
OnLine SC 51
[Part G] Financial debt vs Operational debt
[, ,52]

Phoenix ARC Private Ltd v Ketulbhai Ramubhai Patel 2021 2 SCC 799
Facts- [2] - L&T advanced a financial facility to CD. What is a financial facility agreement?
Basically a debt.

[21-28]
Para 22- Definition of financial debt
Para 25 - Definition of Contract of Guarantee

[22]- Whether the corporate debtor owed any financial debt to the appellant so as to treat the
appellant as financial creditor is the question to be answered. The definition of ‘financial debt’ as
contained in Section 5(8) contains the expressions “means” and “includes”. The definition begins
with the words “financial debt” means 'a debt alongwith interest, if any, which is disbursed against
the consideration for the time value of money and includes'... The main part of the definition, thus,
provides that financial debt means a debt “which is disbursed against the consideration for the time
value of money”. The definition in the second part gives instances which also includes financial debt.
Learned counsel for the appellant in his submission has relied on Section 5(8)(i) to support his claim
that the appellant is the financial creditor. Learned counsel for the appellant has referred both sub-
clause (b) and sub- clause (i) and submits that credit facility which was extended to the borrower is
referable to Section 5(8)

[36]- This Court held that a person having only security interest over the assets of corporate debtor, even if falling within
the description of 'secured creditor' by virtue of collateral security extended by the corporate debtor, would not be covered
by the financial creditors as per definitions contained in sub-section (7) and (8) of Section 5. What has been held by this
Court as noted above is fully attracted in the present case where corporate debtor has only extended a security by pledging
40,160 shares of GEL. The appellant at best will be secured debtor qua above security but shall not be a financial creditor
within the meaning of Section 5 sub-sections (7) and (8).

Is there a time value of money in this case or not? There is a monthly installment that the debtor
has to pay, since there is no interest that is why there is no financial interest.
Para 36 -
The sc is saying that this is not a financial creditor situation.

There is a pledge of security and there are monthly payments as well. Still there is no time value
of money because there was no interest.

Orator Marketing Pvt. Ltd. v Samtex Desinz Pvt. Ltd

Question of law - Para 2 - The short question involved in this Appeal is, whether a person who
gives a term loan to a Corporate Person, free of interest, on account of its working capital
requirements is not a Financial Creditor, and therefore, incompetent to initiate the Corporate
Resolution Process under Section 7 of the IBC.

Is there interest or not? No, there isn’t. However, here the SC says that it's immaterial whether
there is interest or not.

Para 22 - The NCLT and NCLAT have overlooked the words “if any” which could not have been
intended to be otiose. ‘Financial debt’ means outstanding principal due in respect of a loan and
would also include interest thereon, if any interest were payable thereon. If there is no interest
payable on the loan, only the outstanding principal would qualify as a financial debt. Both
NCLAT and NCLT have failed to notice clause (f) of Section 5 (8), in terms whereof ‘financial
debt’ includes any amount raised under any other transaction, having the commercial effect of
borrowing.

Section 5 (8)(f) - any amount raised under any other transaction, including any forward sale or
purchase agreement, having the commercial effect of a borrowing;

Definitional conundrum- Shouldn’t basic terms such as these be settled by now? Why are there
so many cases which are attempting to define the same terms? There are incentives to be
Financial Creditor - coz then you get to be part of committee of creditors

But then OCs also have incentives, so why not be happy with that? Parties want to use IBC
because the remedy under the same will be received in a shorter span of time in comparison to
civil court where matters will drag on for a decade or more.

In Macquarie Bank, SC held the statute would not have meant to exclude a foregin bank. But
what if it did? The battle would be a long one in the trial court. SC itself is encouraging parties to
approach court and contest this idea of financial or operational creditors. Are there any policy
reasons why they are doing this?

The moment we define something, it includes and excludes certain things. Both FC and OC are
defined in a broad manner which gives discretion to courts. This discretion also gives litigants
the incentive to approach courts and contest/challenge the norm - whether or not they are
included in the definition.
If we look at policy reasons from a Law and Eco perspective - settled/ right dichotomy. Not
necessary to get everything right. There is an anxiety to see who an OC or FC is right. But SC is
just trying to settle things. If you try to get it right and read it narrowly only a few cases will

RS - Both Macquarie and Hithro should have gone to the trial court. Parliament is alive to IBC
and has been amending it constantly. SC looks at these amendments as a good thing. In Law and
Eco, however, it is undesirable. The meaning is not settled if a statute is amended often.
Engenders more cost. The parties are incentivised to lobby more and more for amendment, laws
will be unsettled, litigation will be further encouraged.

Connect this to Gordhandas - companies will incur some debt and not all debts should lead to a
situation where they have to be wound up. See Gordhandas on one hand and Mobilox and others
on the other ? are the latter cases responding to the former?

Q- if sundry creditors go to trial court how will the potential conflict with IBC proceedings be
resolved?

Q by RS- why not strengthen TC so that this conflict does not arise at all ?

Automatic initiation of CIRP process

Gujarat Urja Vikas Nigam Limited v Amit Gupta (Tricky)

Facts - Aster Field is Corp debtor - enter into Power Purchase Agreement (PPA) with GUVN -
GUVN thus are the purchaser and then distributor of power - generation of power done by Aster
(power generating co.) - set up solar plant - floods prevent generating sufficient power -
insolvency process initiated by power generator (s.6 allows corp debtor to initiate insolvency
proceedings) - but PPA terms says if insolvency initiated by Corp Debtor, PPA automatically
gets terminated

^Ipso facto clause

Court is inclined to revive as shown in Zweiten

"9.2. 1 Power Producer‘s Default: The occurrence of any of the following events at any time
during the Tariff [sic term] of this Agreement shall constitute an Event of Default by Power
Producer:

e. If the Power Producer becomes voluntarily or involuntarily the subject of proceeding under
any bankruptcy or insolvency laws or goes into liquidation of [sic or] dissolution or has a
receiver appointed over it or liquidator is appointed, pursuant to law, except where such
dissolution of the Power producer is for the purpose of a merger, consolidated [sic
consolidation] or reorganization and where the resulting entity has the financial standing to
perform its obligations under this Agreement and creditworthiness similar to the Power
Producer and expressly assumes all
For initiation of insolvency proceedings, some role by the NCLT is required - liability rule
model.

Section 14. Moratorium. - (1) Subject to provisions of sub-sections (2) and (3), on the
insolvency commencement date (date of admission of application for initiating CIRP), the
Adjudicating Authority shall by order declare moratorium for prohibiting all of the following,
namely: -
(a) the institution of suits or continuation of pending suits or proceedings against the
corporate debtor including execution of any judgement, decree or order in any court of law,
tribunal, arbitration panel or other authority;
(b) transferring, encumbering, alienating or disposing off by the corporate debtor any of
its assets or any legal right or beneficial interest therein;
(c) any action to foreclose, recover or enforce any security interest created by the
corporate debtor in respect of its property including any action under the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002);
(d) the recovery of any property by an owner or lessor where such property is occupied
by or in the possession of the corporate debtor

[Explanation.-For the purposes of this sub-section, it is hereby clarified that

notwithstanding anything contained in any other law for the time being in force, a licence,
permit, registration, quota, concession, clearance or a similar grant or right given by the
Central Government, State Government, local authority, sectoral regulator or any other
authority constituted under any other law for the time being in force, shall not be
suspended or terminated on the grounds of insolvency, subject to the condition that there is
no default in payment of current dues arising for the use or continuation of the license or a
similar grant or right during moratorium period;]

(2) The supply of essential goods or services to the corporate debtor as may be specified shall not
be terminated or suspended or interrupted during moratorium period.

[(2A) Where the interim resolution professional or resolution professional, as the case may be,
considers the supply of goods or services critical to protect and preserve the value of the
corporate debtor and manage the operations of such corporate debtor as a going concern, then the
supply of such goods or services shall not be terminated, suspended or interrupted during the
period of moratorium, except where such corporate debtor has not paid dues arising from such
supply during the moratorium period or in such circumstances as may be specified.]

[(3) The provisions of sub-section (1) shall not apply to —

[(a) such transactions, agreements or other arrangement as may be notified by the Central
Government in consultation with any financial sector regulator or any other authority;]
(b) a surety in a contract of guarantee to a corporate debtor.]

(4) The order of moratorium shall have effect from the date of such order till the completion of
the corporate insolvency resolution process:
Provided that where at any time during the corporate insolvency resolution process period, if the
Adjudicating Authority approves the resolution plan under sub-section (1) of section 31 or passes
an order for liquidation of corporate debtor under section 33, the moratorium shall cease to have
effect from the date of such approval or liquidation order, as the case may be

Section 5 (12) “insolvency commencement date” means the date of admission of an application
for initiating corporate insolvency resolution process by the Adjudicating Authority under
sections 7, 9 or section 10, as the case may be:

The BLRC called the moratorium ‘calm period’.

14(1) (a) to (d) - (a) In the calm period, certain suits cannot go on. There cannot be any kind of
recovery either. (b) Can’t suppose assets. (c) Enforcement under SARFESI (d)

Explanation deals with a specific calm period

 Imagine a telecom company- Vi- they are in a danger zone - if it gets into insolvency
DoT terminates their licence (say). Then there is no scope for resolution since they can’t
run their business anymore.
 So the explanation in a way gives a mechanism - since the company has unpaid dues
pending, from now on, they have to pay upfront
 What do you think should happen to ipso facto clauses?-

What does the court do?

THe court uses its residuary powers under section 60(5)(c) to stay the termination of the contract
by Gujarat Urja Vikas Nigam Limited. It acknowledges that there is a vacuum insofar as IBC is
concerned. But just because there is a vacuum it does not mean that the supreme court cannot do
anything- they can give ‘dialogical remedy’.

A dialogical remedy is a workable formula -

Para 169- ”The core of constitutional dialogue between the judiciary and the legislature is that
they engage in a conversation about constitutional meaning, in which both actors (should) listen
in order to learn from each other‘s perspectives, which can then lead to modifying their own
views accordingly... In this way, dialogue‘ represents the middle way between judicial
supremacy on the one hand, and legislative supremacy on the other‘.”
Para 170- “when presented with a novel question on which the legislature has not yet made up
its mind, we do not think this Court can sit with folded hands and simply pass the buck onto the
Legislature. In such an event, the Court can adopt an interpretation – a workable formula – that
furthers the broad goals of the concerned legislation, while leaving it up to the legislature to
formulate a comprehensive and well-considered solution to the underlying problem. To aid the
legislature in this exercise, this Court can put forth its best thinking as to the relevant
considerations at play, the position of law obtaining in other relevant jurisdictions and the
possible pitfalls that may have to be avoided.”

What is the role the court can play?

The judgement interprets ‘arising out of ‘ and in relation to- these are very broad remedies.

On Dialogical remedies (Para 178, 179)-

There is a role that SC , NCLT , NCLAT might play in case the statute is silent on an issue.

Why does the supreme court want to give a dialogical remedy? If there is not, then it is possible
that the company will go straight into liquidation. The judge has a pro-revival approach to
insolvency (Zweiten). There will be no formulation and finalization of the resolution plan.
However, the SC by using its residuary power is changing the rules of the game. Important to
remember that liquidation itself is part of the IBC, nothing extraordinary. Then why the
hesitation to liquidate? Shouldn’t there be some sanctity to the contract signed by the CD?

IBC as a ‘triage’ law? - what does this mean?

 “Corporate triage in the shadow of liquidation”
^Court in Gujarat Urja ignores this aspect of liquidation

Question- Is this situation covered by section 14(2A) added in 2020?- Not really. It deals with
supply to CD not supply by CD. In this case, the issue is supply of electricity by CD.

TCS v Vishal Jain

Facts - Tata entered into a facilities agreement with SKF - former wanted to terminate on ground
of material breaches since corporate debtor was unable to fulfil its requirements - CD already
commenced insolvency proceedings prior to termination - CD approached NCLT to set aside
termination - NCLT quashes the termination - NCLAT agrees - SC does not agree
 SC held that termination on ground of insolvency is not allowed. In this case it was
because of material irregularities.
 The exception in Gujarat Urja must be applied cautiously - NCLT can only intervene
when the termination is on grounds of insolvency


Dharini Sugars v Union of India

Facts - RBI issued a notification which said that in certain cases of default by a debtor, there will
be automatic initiation of CIRP. SC trying to figure out whether this notification is constitutional
or not.

35AA. Power of Central Government to authorise Reserve Bank for issuing directions to
banking companies to initiate insolvency resolution process.--The Central Government may, by
order, authorise the Reserve Bank to issue directions to any banking company or banking
companies to initiate insolvency resolution process in respect of a default, under the provisions
of the Insolvency and Bankruptcy Code, 2016 (31 of 2016).

Explanation.--For the purposes of this section, "default" has the same meaning assigned to it in
clause (12) of section 3 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016).

Held - Sine qua non not followed. The sine qua non here is that the central gov should authorise.

The court held that you cannot generally ask Banks to initiate CIRP in case of a default. YOu
must have a specific cause to direct a particular bank to initiate CIRP with respect to a default.

Nariman - although manifest arbitrariness, they haven’t explained what the manifest arbitrariness
is in this matter. Parties have just made bald statements. So the argument is discarded by the
bench.
 The onus lies on the parties to point at manifest arbitrariness.

Stage 2: Commencement of CIRP

SICAL Logistics case

10A. Suspension of initiation of corporate insolvency resolution process. Notwithstanding

anything contained in sections 7, 9 and 10, no application for initiation of corporate insolvency
resolution process of a corporate debtor shall be filed, for any default arising on or after 25th
March, 2020 for a period of six months or such further period, not exceeding one year from such
date, as may be notified in this behalf: Provided that no application shall ever be filed for
initiation of corporate insolvency resolution process of a corporate debtor for the said default
occurring during the said period. Explanation. - For the removal of doubts, it is hereby clarified
that the provisions of this section shall not apply to any default committed under the said sections
before 25th March, 2020.]

 What happened on 25th march 2020? Covid-19 nationwide lockdown.

 Notice the term ‘ever’ - “...no application shall ever be filed …” Initiation was a
property rule mode. But this entitlement is partially taken away here.
 There was a disproportionate impact of Covid-19. While the large enterprises became
richer. A lot of medium and small businesses suffered due to the lockdown.
 IBC responded in its own way to this challenge. Whatever happened in that one year
cannot be undone.

What is the issue in this case?

There was a notification by which the pecuniary jurisdiction of IBC was increased from
minimum l lakhs to minimum Rs. 1 crore. This was done on 24th March. However, in this case
the claim was filed before it but it was listed after lockdown. The argument by CD is that this
notification applies retrospectively.

Sec 4 proviso allows to enhance the limit till 1 crore. They increased the limit to maximum to
reduce the number of cases during pandemic.

Section 4. Application of this Part. – (1) This Part shall apply to matters relating to the
insolvency and liquidation of corporate debtors where the minimum amount of the default is one
lakh rupees:
Provided that the Central Government may, by notification, specify the minimum amount of
default of higher value which shall not be more than one crore rupees.

Why would the parliament do so? RS is not sure about this.

Stage 3: Formulation and finalization of resolution plan

K Sashidhar v Indian Overseas Bank (Civil Appeal 10673/2018, 5
February 2019, Supreme Court of India)
Facts -

Till Stage 2- NCLT & NCLAT were actors. In stage 3, new actors- resolution professionals.
They control corporate debtors after initiation.
Resolution Professionals (RP) - responsible for management and running of the company once
CIRP sets in.

They are the ones who run a company on a day to day basis after commencement of CIRP. MDs
and directors are thrown out. This could be one of the reasonss behind lobbying the government
to suspend IBC- the consequences are drastic.

Committee of creditors - they are another actor in stage 3 after commencement of CIRP.
Their duties have been written down but the manner in which they have been written is not so
good. They give directions to RPs.
Section 18 - Duties of interim resolution professional - The interim resolution professional
shall perform the following duties, namely: -
(a) collect all information relating to the assets, finances and operations of the corporate debtor
for determining the financial position of the corporate debtor, including information relating to
-
(i) business operations for the previous two years;
(ii) financial and operational payments for the previous two years;
(iii) list of assets and liabilities as on the initiation date; and
(iv) such other matters as may be specified;
(b) receive and collate all the claims submitted by creditors to him, pursuant to the public
announcement made under sections 13 and 15;
(c) constitute a committee of creditors;
(d) monitor the assets of the corporate debtor and manage its operations until a resolution
professional is appointed by the committee of creditors;
(e) file information collected with the information utility, if necessary; and
(f) take control and custody of any asset over which the corporate debtor has ownership rights as
recorded in the balance sheet of the corporate debtor, or with information utility or the
depository of securities or any other registry that records the ownership of assets including -
(i) assets over which the corporate debtor has ownership rights which may be located in
a foreign country;
(ii) assets that may or may not be in possession of the corporate debtor;
(iii) tangible assets, whether movable or immovable;
(iv) intangible assets including intellectual property;
(v) securities including shares held in any subsidiary of the corporate debtor, financial
instruments, insurance policies;
(vi) assets subject to the determination of ownership by a court or authority;

(g) to perform such other duties as may be specified by the Board.

Explanation. – For the purposes of this 1 [section], the term “assets” shall not include the
following, namely: -
(a) assets owned by a third party in possession of the corporate debtor held under trust
or under contractual arrangements including bailment;
(b) assets of any Indian or foreign subsidiary of the corporate debtor; and
(c) such other assets as may be notified by the Central Government in consultation with
any financial sector regulator.

RPs in a way act as trustees of the company. Have a duty tot work in the best interest of the
company.

Compare this with CoC- Section 21-

Section 21. Committee of creditors. - (1) The interim resolution professional shall after
collation of all claims received against the corporate debtor and determination of the financial
position of the corporate debtor, constitute a committee of creditors.
(2) The committee of creditors shall comprise all financial creditors of the corporate
debtor:

Provided that a [financial creditor or the authorised representative of the financial creditor
referred to in sub-section (6) or sub-section (6A) or sub-section (5) of section 24, if it is a related
party of the corporate debtor,] shall not have any right of representation, participation or voting
in a meeting of the committee of creditors:

[Provided further that the first proviso shall not apply to a financial creditor, regulated by a
financial sector regulator, if it is a related party of the corporate debtor solely on account of
conversion or substitution of debt into equity shares or instruments convertible into equity shares
[or completion of such transactions as may be prescribed], prior to the insolvency
commencement date.]

RPs, CoC (Committee of Creditors), RA (Resolution Applicant) - RA needs to submit a

resolution plan under section 30.
Resolution plan - assesses the amount owed by the company and submits a resolution plan. The
resolution plan should be approved by the CoC.
 Important to note that only financial creditors get to vote on CoC.

Section 30 Submission of resolution plan. - (4) The committee of creditors may approve a
resolution plan by a vote of not less than [sixty-six] per cent. of voting share of the financial
creditors, after considering its feasibility and viability, 3 [the manner of distribution proposed,
which may take into account the order of priority amongst creditors as laid down in sub-section
(1) of section 53, including the priority and value of the security interest of a secured creditor]
and such other requirements as may be specified by the Board:

 When shashidhar happened, it was 75 %. Changed to 66% when the case was pending.
 Operational Creditors have no vote.

The question before the court in this case is whether 75% includes the ones who are not voting or
just the ones who are present and voting? SC said 75% of all and not just present and voting.

The provision itself is silent on this issue. But why is there a doubt on this issue? Why would
anybody go to court and argue that you need to exclude the people who are not voting?
 SBA Constitution - Removal from Office - Says 2/3rd of the 50% SBA members, present
and voting. So it’s clear. So is the case for impeachment of judges.

Not allowed to be present - defenestration

Not allowed to vote - disfranchised

The assumption is that OC don’t have a stake in the long term survival of the CD. THey just
want to get paid. However, it cannot be denied that they have a stake.
 Notice that the SBA constitution does not say that some students need to be present when
faculty council deliberates whether there is sufficient cause to impeach SBA president.
  For operational creditors, they don’t have voting rights- they only have right to attend the
meeting.

21/03
Till now we’ve read about the following actors in CIRP under IBC -
Operational Creditor,
Financial Creditor,
Corporate Debtor,
RA,
Resolution Professional,
Committee of Creditors,
NCLT,
NCLAT,
HC,
SC,
Insolvency and Bankruptcy Board of India.

Karad Urban v Swwapnil (2020) 9 SCC 729

Facts -

NCLAT order setting aside resolution plan has been challenged before the SC.

See Section 30(4) -

[(4) The committee of creditors may approve a resolution plan by a vote of not less than 2 [sixty-
six] per cent. of voting share of the financial creditors, after considering its feasibility and
viability, 3 [the manner of distribution proposed, which may take into account the order of
priority amongst creditors as laid down in sub-section (1) of section 53, including the priority
and value of the security interest of a secured creditor] and such other requirements as may be
specified by the Board:

Section 31. Approval of resolution plan. - (1) If the Adjudicating Authority is satisfied that the
resolution plan as approved by the committee of creditors under sub-section (4) of section 30
meets the requirements as referred to in sub-section (2) of section 30, it shall by order approve
the resolution plan which shall be binding on the corporate debtor and its employees, members,
creditors, 1 [including the Central Government, any State Government or any local authority to
whom a debt in respect of the payment of dues arising under any law for the time being in force,
such as authorities to whom statutory dues are owed,] guarantors and other stakeholders involved
in the resolution plan

Section 32. Appeal. - Any appeal from an order approving the resolution plan shall be in the
manner and on the grounds laid down in sub-section (3) of section 61.

Section 61. Appeals and Appellate Authority. - (3) An appeal against an order approving a
resolution plan under section 31 may be filed on the following grounds, namely: – (i) the
approved resolution plan is in contravention of the provisions of any law for the time being in
force; (ii) there has been material irregularity in exercise of the powers by the resolution
professional during the corporate insolvency resolution period; (iii) the debts owed to operational
creditors of the corporate debtor have not been provided for in the resolution plan in the manner
specified by the Board; (iv) the insolvency resolution process costs have not been provided for
repayment in priority to all other debts; or (v) the resolution plan does not comply with any other
criteria specified by the Board.

RP takes copies of the Resolution plan and presents it to CoC.

In this case there is breach of confidentiality by the resolution professional.

What is the breach here?

The outstanding amount of Rs. 13.53 Crore. This is confidential information. But the allegation
is that the RP has leaked this amount. The proposal itself is more than the outstanding amount.
It's twice as much- 29.74 crore.

The SC is reasoning that if i were a RA and i had access to confidential information about the
outstanding amount why would i inflate the value? Seems irrational. Compare this judgement to
Kalparaj v. Kotak. Both of them are identical. After leaking confi info, the RP proposed an
almost identical sum.
Another argument is that the CoC has went over the proposal so why should the court second
guess CoC?

This is a three judge bench. Are they bound by Essar Steel? Because the bench strength is same -
coordinate bench - Dawoodi Bohra (5J) held that the coordinate bench is bound and if at all there
is a disagreement there should be reference to a higher bench.

Kalpraj v Kotak Investment Advisors Ltd

Facts - Insolvency of a company was initiated by FC under section 7of the IBC. IRP and RP
wasappointed and they issued an advertisement. Two plans were submitted one by the CD and
the other by SIA. NCLT accepted the plan proposed by SIA agro industry and rejected the plan
of CD. NCLAT said that the plan was rejected on the ground that
I. there was no feasibility and viability
II. Violation of regulation 35 in terms of maintaining the confidentiality of the RP.
III. It was subject of another dispute pertaining to some ethanol plant.
IV. The Advertisement issued by RP was not in compliance with regulation 39.
SC overturns:
I. The court cannot overturn the findings of the CoC’s wisdom. It can only see if all relevant
factors were placed before CoC.
II. Breach of confidentiality was being alleged on the basis of mere typographic errors and thus,
they were not maintainable.
III. Ethanol plant was considered and it was not a matter of a separate dispute.
IV. Regulation 36 (A) was amended in 2018 before that divide not mandate the publication of
the plan in the newspaper. At the point when the plan was presented, there was no need to
publish it.

The case deals with submission of two Resolution Plans -

Para 138 -

Para 172- on ‘material irregularity’

The purpose of comparing these cases- when we did Essar steel what we were left with is that
CoC is the supreme body when it comes to commercial wisdom- Nclt and NClat have limited
role to play. IN karad urban however, there is an allegation of leaking of RP - even then the SC is
not impressed that the RA has received any benefit (they don’t rely on supremacy of CoC). IN
Kalpraj however, the court says that even material irregularity is subject to what CoC says.
Material irregularity can be whitewashed by the seal of approval of CoC.

Also, compare the benches in Karad urban and Essar steel- V Ramasubramaniam is the
common.
Who is on the bench in Kalpraj?- no one is common.
What is the liquidation value in Kalpraj case?

Is there any difference between the LV and RP? RP is 20% less than liquidation value.

Missed a few points- something about liquidation of assets, cashify, the ideal difference between
LV and RP.

Unrelated point - :) - What is an information memorandum? - background information on a

corporate entity. How much does the company make in the last three years, what is the
profitability, cities they operate in, their staff.

What is the alleged material irregularity in this case?

If there is a deadline - both the parties file a plan - then if the deadline is extended and the plan of
1 is leaked to the other, and the latter has the opportunity to file a revised offer, will it amount to
‘material irregularity’?
 What does ‘material irregularity’ mean? -
 In Kalpraj they say, although there is material irregularity, it is approved by CoC.
 According to RS the supreme court should have interpreted
 What is regular? What is irregular? (Typical RS)
 RP has done something which is not regular. A regular aspect would be to follow the
procedure in the code and delegated legislation(s).

See Section 18 . Duties of interim resolution professional. - The interim resolution

professional shall perform the following duties, namely: - (a) collect all information relating to
the assets, finances and operations of the corporate debtor for determining the financial position
of the corporate debtor, including information relating to - (i) business operations for the
previous two years; (ii) financial and operational payments for the previous two years; (iii) list of
assets and liabilities as on the initiation date; and (iv) such other matters as may be specified; (b)
receive and collate all the claims submitted by creditors to him, pursuant to the public
announcement made under sections 13 and 15; (c) constitute a committee of creditors; (d)
monitor the assets of the corporate debtor and manage its operations until a resolution
professional is appointed by the committee of creditors; (e) file information collected with the
information utility, if necessary; and (f) take control and custody of any asset over which the
corporate debtor has ownership rights as recorded in the balance sheet of the corporate debtor, or
with information utility or the depository of securities or any other registry that records the
ownership of assets including - (i) assets over which the corporate debtor has ownership rights
which may be located in a foreign country; (ii) assets that may or may not be in possession of the
corporate debtor; (iii) tangible assets, whether movable or immovable; (iv) intangible assets
including intellectual property; (v) securities including shares held in any subsidiary of the
corporate debtor, financial instruments, insurance policies; (vi) assets subject to the
determination of ownership by a court or authority; (g) to perform such other duties as may be
specified by the Board. Explanation. – For the purposes of this 1 [section], the term “assets” shall
not include the following, namely: - (a) assets owned by a third party in possession of the
corporate debtor held under trust or under contractual arrangements including bailment; (b)
assets of any Indian or foreign subsidiary of the corporate debtor; and (c) such other assets as
may be notified by the Central Government in consultation with any financial sector regulator.]

17. Management of affairs of corporate debtor by interim resolution professional. - (1) From the
date of appointment of the interim resolution professional, - (a) the management of the affairs of
the corporate debtor shall vest in the interim resolution professional; (b) the powers of the board
of directors or the partners of the corporate debtor, as the case may be, shall stand suspended and
be exercised by the interim resolution professional;

 Why does (b) talk about partners of corporate debtors? Does the code apply to partners?
No. only applies to Limited Liability (depends on definition of corporate persons) the
point to remember is that whenever there is limited liability CIRP process applies.

Section 17(c) the officers and managers of the corporate debtor shall report to the interim
resolution professional and provide access to such documents and records of the corporate debtor
as may be required by the interim resolution professional;

The role of RP is like a trustee - the control is with RP. There is a relationship of trust and
confidence.

However, a more complex question is what is the role of RP vis a vis CoC?

Other important provisions -

Section 25. Duties of resolution professional. - (1) It shall be the duty of the resolution
professional to preserve and protect the assets of the corporate debtor, including the continued
business operations of the corporate debtor. (2) For the purposes of sub-section (1), the
resolution professional shall undertake the following actions, namely: - (a) take immediate
custody and control of all the assets of the corporate debtor, including the business records of the
corporate debtor; (b) represent and act on behalf of the corporate debtor with third parties,
exercise rights for the benefit of the corporate debtor in judicial, quasi-judicial or arbitration
proceedings; (c) raise interim finances subject to the approval of the committee of creditors
under section 28; (d) appoint accountants, legal or other professionals in the manner as specified
by Board; (e) maintain an updated list of claims; (f) convene and attend all meetings of the
committee of creditors; (g) prepare the information memorandum in accordance with section 29;
[(h) invite prospective resolution applicants, who fulfil such criteria as may be laid down by him
with the approval of committee of creditors, having regard to the complexity and scale of
operations of the business of the corporate debtor and such other conditions as may be specified
by the Board, to submit a resolution plan or plans.] (i) present all resolution plans at the meetings
of the committee of creditors;

 Again a trustee type relation of RP can be seen in (1).

S. 24 (4) The directors, partners and one representative of operational creditors, as referred to in
sub-section (3), may attend the meetings of committee of creditors, but shall not have any right
to vote in such meeting

Relationship between IRP and RP -

 For FC an CD, it is mandatory to suggest an IRP whereas it is optional for OC -
 Duties of IRP are differen from RP.

Section 22. Appointment of resolution professional. -

(1) The first meeting of the committee of creditors shall be held within seven days of the
constitution of the committee of creditors.
(2) The committee of creditors, may, in the first meeting, by a majority vote of not less than
[sixty-six] per cent. of the voting share of the financial creditors, either resolve to appoint the
interim resolution professional as a resolution professional or to replace the interim resolution
professional by another resolution professional.

IRP can be removed in the first meeting itself. They seem to be working under the instruction of
CoC. But they are supposed to work together!

Two models of Insolvency law-

Debtor imposition model (SICA) and Creditor imposition (when debtor lose control and creditor
takes it)
However, is there a mid-way between these two extreme models (David Hahn’s article).

Important to note that duties of a particular actor or any actor etc might be spread across the
whole statute.

IRP has separate duties, can it be considered a separate actor? If yes, then the total number of
actors would be 12.

Anuj Jain v Axis Bank

Facts
Jil was declared insolvent. IDBI wished to initiate CIRP against JIL. The IRP was appointed.
He found that preference was given to JAL. JAL had taken JIL’s assets. This was preferential
transaction under section 43. JIL was a special purpose vehicle. JIL is the subsidiary and JAL
was the parent recommendation was that the security interest in the JIL’s lenders like Axis
bank etc, had to be discharged. The property was to be vested with JIL. NCLT agreed. Lenders
filed an appeal before NCLAT. The order of NCLT was set aside. JAL’s lender could proceed
under IBC against JIL.

SC had to examine if this transaction was a preferential transaction.

JIL said that I. transaction JAIL (OC) in a beneficial position and its liability got reduced. It
received benefits to the exclusion of other creditors. This whole benefit had to be given before
the look back period. JIL claimed that the mortgages given were re-mortgage. There was a fresh
mortgage. Thus, they came within a look-back period.

Exemption: if the transaction is within the usual course of business, then it won’t be PEUF. Now,
they argued that exemption applied to them. It was in the ordinary course of CD’s business.
Respondent argued otherwise I. look back period was 1 year not 2-year period. Under section 43
(2) – antecedent financial debt and there was to be benefit to the party. None of these conditions
were satisfied. Even if we were creditors, there was no benefit as we were our OC. Exemption
was applicable. It was given in the ordinary course of business.

Plus, preferential transactions should be avoided when the CD is about to be liquidated. They are
not being liquidated. They are financially strong. So, preferential transaction should not be
applied to their case.

SC upheld the decision of NCLAT. They looked at the preamble of the act etc. to say section 43
is not attracted in this case. It was within the look back period. Further, it was not a transaction in
the ordinary course of business. They also said that JAL was not the FC of JIL. FC is involved in
ensuring that the life of the company continues. But that is not the case here.

PUEF transaction - preferential, undervalued, extortionate and fraudulent transactions.

What is the transaction in question?- JAL took a loan and put the assets of its subsidiary as
security. HOwever, the subsidiary itself becomes the CD.

Statutory provisions on PUEF -

Section 43. Preferential transactions and relevant time. - (1) Where the liquidator or the
resolution professional, as the case may be, is of the opinion that the corporate debtor has at a
relevant time given a preference in such transactions and in such manner as laid down in sub-
section (2) to any persons as referred to in sub-section (4), he shall apply to the Adjudicating
Authority for avoidance of preferential transactions and for, one or more of the orders referred to
in section 44.

(2) A corporate debtor shall be deemed to have given a preference, if– (a) there is a transfer of
property or an interest thereof of the corporate debtor for the benefit of a creditor or a surety or a
guarantor for or on account of an antecedent financial debt or operational debt or other liabilities
owed by the corporate debtor; and (b) the transfer under clause (a) has the effect of putting such
creditor or a surety or a guarantor in a beneficial position than it would have been in the event of
a distribution of assets being made in accordance with section 53

(3) For the purposes of sub-section (2), a preference shall not include the following transfers–
(a) transfer made in the ordinary course of the business or financial affairs of the corporate
debtor or the transferee; (b) any transfer creating a security interest in property acquired by the
corporate debtor to the extent that – (i) such security interest secures new value and was given at
the time of or after the signing of a security agreement that contains a description of such
property as security interest, and was used by corporate debtor to acquire such property; and (ii)
such transfer was registered with an information utility on or before thirty days after the
corporate debtor receives possession of such property: Provided that any transfer made in
pursuance of the order of a court shall not, preclude such transfer to be deemed as giving of
preference by the corporate debtor.
(4) A preference shall be deemed to be given at a relevant time, if –
(a) It is given to a related party (other than by reason only of being an employee), during the
period of two years preceding the insolvency commencement date; or
(b) a preference is given to a person other than a related party during the period of one year
preceding the insolvency commencement date.

How to interpret ‘or’ present in 3 (a)?

What is the role of IRP in all this? - section 43. Plus one of the jobs of IRP is to determine who
FC of a CD are? This is relevant because some FC of The holding company want to be classified
as FC of the subsidiary.

What does the supreme court say on interpretation of ‘or’? - they interpret it as ‘and’ They do
this because there is a purpose that needs to be served.
 What is that purpose? -

If you remove some transactions from the CD then the pool of assets will increase, consequently,
the interest of RA will increase.

“Looking to the scheme and intent of the provisions in question and applying the
principles aforesaid, we have no hesitation in accepting the submissions made on behalf
of the appellants that the said contents of clause (a) of sub-section (3) of Section 43 call
for purposive interpretation so as to ensure that the provision operates in sync with the
intention of legislature and achieves the avowed objectives. Therefore, the expression
“or”, appearing as disjunctive between the expressions “corporate debtor” and
“transferee”, ought to be read as “and”; so as to be conjunctive of the two expressions i.e.,
“corporate debtor” and “transferee”. Thus read, clause (a) of sub-section (3) of Section
43 shall mean that, for the purposes of sub-section (2), a preference shall not include the
transfer made in the ordinary course of the business or financial affairs of the corporate
debtor and the transferee. Only by way of such reading of “or” as “and”, it could be
ensured that the principal focus of the enquiry on dealings and affairs of the corporate
debtor is not distracted and remains on its trajectory, so as to reach to the final answer
of the core question as to whether corporate debtor has done anything which falls foul
of its corporate responsibilities.”

Para 17.1?

If the CD is in the vicinity of insolvency the promoters start syphoning off the assets to other
entities.
Even before officially there is commencement of CIRP some people get to know what’s going
on. So in case of a RPT you need to look at transactions occurring in the past two years and in
case of an unrelated party the timeline is one year. (which provision says this?)

What is ‘ordinary course of business’ in 43 (3) (a)? Examples- OCB for NLSIU- education, for
Tata sons- investment, for Future Retail- retailing business.

In this case, the question is who is the transferee? JAL - By reading ‘or’ as ‘and’, the authorities
make sure the funds are not syphoned off. This protects the assets.

An additional strand of reasoning- *ask Aditi*

Para 24
We may now take up the question as to which of the transactions in question would entail in
giving preference at a relevant time or otherwise. As noticed, the preference is given to JAL
who is a related party of JIL. Hence, the look-back period is two years preceding insolvency
commencement date i.e., 09.08.2017 per clause (a) of sub-section (4) of Section 43; and
accordingly, the point of enquiry would be as to whether the preference had been given
during the period of two years preceding 09.08.2017. Therefore, the transactions
commencing from 10.08.2015 until the date of insolvency commencement shall fall under
the scanner. As noticed, it has been one of the major contentions of the respondents that most
of the impugned transactions were not of creation of any new encumbrance by JIL and in
fact, most of the properties in question had already been under mortgage with the respective
lenders much before the period under consideration i.e., much before 10.08.2015.

24.1. It may at once be noticed that the transaction that was clearly falling beyond the period
under consideration was, in fact, kept out of the purview of Section 43 of the Code by NCLT
itself, being that relating to Property No. 7 (as mentioned in paragraph 4.5 hereinbefore).

24.2. So far as the transaction relating to Property No. 6 is concerned, being the mortgage
deed dated 04.03.2016, towards Short-Term Loan Facility to JAL of Rs. 1000 crores by State
Bank of India, the same obviously falls within the look-back period. Even if JAL had
allegedly entered into the facility agreement with this lender bank on 26.03.2015, this date is
hardly of any bearing so far as transaction by the corporate debtor JIL is concerned, which
was made only on 04.03.2016.

RS wants us to read a para (25.3??)to show how much money can be impacted if or is read as
and.

Binani Industries Ltd v Bank of Baroda

Binani cement is a corporate debtor. Other applicant is Raj Prop. Raj Prop got approved
resolution plan of 2,224 cr from CoC. Ultra tech’s plan was of 2427 cr. There is a discriminatory
treatment to some of the financial creditors. Exim bank and SBHK are getting just a fraction of
that amount. However, one of the other resolution plans gave them their whole claim.
Para 31- Why is the CoC not with Ultratech.
“At the same time the ‘Committee of Creditors’ discriminated with the other ‘Resolution
Applicants’ which will be evident from the fact that the proposal for negotiation and better
proposal given by the ‘Ultratech Cement Limited’ was not at all considered though it was
submitted on 8th March, 2018 i.e. much prior to the approval of the plan (14th March, 2018).
The ‘Committee of Creditors’ have taken plea that the revised offer given by ‘Ultratech Cement
Limited’ was merely an e-mail with an offer. The other plea taken was that the offer was not
made in accordance with the ‘process document’ and if it is considered then it would be a
deviation of the process laid down in the ‘process document’ by the ‘Committee of Creditors’.
Third objection was that the offer was beyond the time as stipulated under the ‘I&B Code’.“

If we go purely by Essar steel we should not second guess CoC even if there is departure from
procedure (the grounds taken by CoC were rejected by NCLT). SC remands the case as well.
India Resurgence ARC v Amit Metaliks
Facts - The Corporate Debtor is VSP Udyog. Then there is India Resurgence ARC- how did they
become a creditor? One of the creditors assigned their dues to India resurgence. ARC buys
debts which are non-performing. Their admitted claim is 13 crore- their security interest is 12
crore but in the final resolution plan they have only been given Rs. 2 crore.

An application for initiation of corporate insolvency resolution process (“CIRP“) against V.S.P.
Udyog Private Limited (“Corporate Debtor“) was admitted in the National Company Law
Tribunal (“NCLT“) and a Committee of Creditors (“CoC“) was constituted.
One of the financial creditors viz. India Resurgence ARC Private Limited (“Appellant“), with
3.94% of voting share in the CoC, was the assignee of the rights and interest carried by Religare
Finvest Limited as secured financial creditor of the Corporate Debtor. A resolution plan was
proposed by M/s Amit Metaliks Limited (“Respondent“).

INdia arc argues that CoC is not following procedure under section 30(4) that requires coc to
take into account priority of claims as per section 53.

Section 30(4)-
[(4) The committee of creditors may approve a resolution plan by a vote of not less than 2
[sixty-six] per cent. of voting share of the financial creditors, after considering its feasibility
and viability, 3 [the manner of distribution proposed, which may take into account the
order of priority amongst creditors as laid down in sub-section (1) of section 53, including
the priority and value of the security interest of a secured creditor] and such other
requirements as may be specified by the Board:

What is the Supreme court’s reasoning-

Section 30(4) is merely a guidance.

But what is the logical reason?- if you allow financial creditors to enforce their security interest
then the whole IBC process will collapse. The moment you have FCs invoking their security -
the process will collapse.
Para 22-
“It needs hardly any emphasis that if the propositions suggested on behalf of the appellant were
to be accepted, the result would be that rather than insolvency resolution and maximisation of the
value of assets of the corporate debtor, the processes would lead to more liquidations, with every
secured financial creditor opting to stand on dissent. Such a result would be defeating the very
purpose envisaged by the Code; and cannot be countenanced. We may profitably refer to the
relevant observations in this regard by this Court in Essar Steel as follows:—
“85. Indeed, if an “equality for all” approach recognising the rights of different classes of
creditors as part of an insolvency resolution process is adopted, secured financial creditors will,
in many cases, be incentivised to vote for liquidation rather than resolution, as they would have
better rights if the corporate debtor was to be liquidated rather than a resolution plan being
approved. This would defeat the entire objective of the Code which is to first ensure that
resolution of distressed assets takes place and only if the same is not possible should liquidation
follow.”

Association of aggrieved Workmen of Jet Airways (India) Limited v Jet

Airways (India) Limited

Facts- The only question involved is whether the appellant (employees who are the OCs) is entitled for a copy
of the resolution plan or any part of it. Notably, the resolution plan is already approved by the Adjudicating
Authority.
Conclusion- Resolution plan after its approval by the Adjudicating Authority is no more a confidential
document. It is true that the Resolution Plan, even though it is not a confidential document after its approval,
cannot be made available to each and to anyone who has no genuine claim or interest in the process. Held that
the Appellant is entitled for the relevant part of the Resolution Plan relating to the claim of the workmen and
employees. It is directed that the appellant should be provided, within a period of three weeks, with that part of
the Resolution Plan which deals with claims of workmen and employees.

Why do they only give part of the resolution plan and not full copy? There are so many
employees, what if everyone starts asking for the copy.
IN the end, employees get just the relevant parts of the resolution plan. Is this a fair outcome?
You can just give them a soft copy.

Ebix Singapore Private Limited v Committee of Creditors

Facts-
Three CorporateDebtors- Educomp, Astonfield, Arya.

Ebix is resolution applicant for Educomp. What happens is that after approval by CoC but before
approval by AA, the RA wants to withdraw their offer. The question is whether they can
withdraw prior to approval by AA. this is stage 3- approval of the Resolution plan. The issue is
can you withdraw?
They look at a lot of things - Parliamentary committee report, legislative history, etc. to
determine whether withdrawal is possible.

The Supreme Court in the Ebix case conclusively held that a resolution plan, once approved by
the CoC of the corporate debtor, cannot be withdrawn from consideration. This observation was
founded on, firstly, the treatment of a resolution plan as not an ordinary contract but a creation of
the IBC, and secondly, the lack of addressal of a situation of withdrawal of an approved
resolution plan in the legislative framework.

WHy cannot withdraw?

1. No provision of law in IBC which allows withdrawal. Therefore you cannot withdraw
2. There are consequentialist reasons as well. If allowed to withdraw, then the timeline of
330 days would be meaningless.
3. This is not a contract. Once you succeed you are bound by your plan.
It seems that stage 3 is not a property rule model but a liability rule model (contrary to what had
been suggested earlier in the class)

Arguments-
1. No textual hook- two ideas. No provision and casus omissus.
What is casus omissus– the judiciary can fill in gap in the statute. But there are condition
precedent to exercise of this power. The condition is that while you are filling the gap you cannot
do violence to the statute i.e. cannot go against its goal. So the casus omissus does not apply in
this case.

What is the implication of this holding- you cannot walk home (hotel california- you can check
in but can’t check out). The roach motel tale. The moment you succeed, you cannot withdraw.

Therefore, if you are a RA you should keep in mind that you will not be able to walk away.

Ebix is saying that at the time of applying for Resolution, we did not know that there was going
to be an SFIO investigation. However, the court is saying that look at section 32- once the
resolution is successful there is no liability.

Section 32A. (1) Notwithstanding anything to the contrary contained in this Code or any other
law for the time being in force, the liability of a corporate debtor for an offence committed prior
to the commencement of the corporate insolvency resolution process shall cease, and the
corporate debtor shall not be prosecuted for such an offence from the date the resolution plan has
been approved by the Adjudicating Authority under section 31, if the resolution plan results in
the change in the management or control of the corporate debtor to a person who was not-
(a) a promoter or in the management or control of the corporate debtor or a related party of such
a person; or
(b) a person with regard to whom the relevant investigating authority has, on the basis of
material in its possession, reason to believe that he had abetted or conspired for the commission
of the offence, and has submitted or filed a report or a complaint to the relevant statutory
authority or Court:
Provided that if a prosecution had been instituted during the corporate insolvency resolution
process against such corporate debtor, it shall stand discharged from the date of approval of the
resolution plan subject to requirements of this sub-section having fulfilled:

Rs calls this the ‘ganga provision’. Washes away all the sins once you get approval.

What happens if the resolution plan is not followed?

What are the sanctions/ penalties if the resolution applicant fails to follow through?
List of provisions- ask Kunal.
Sec 74- Punishment for contravention of moratorium or the resolution plan. -
(1) Where the corporate debtor or any of its officer violates the provisions of section 14, any
such officer who knowingly or wilfully committed or authorised or permitted such contravention
shall be punishable with imprisonment for a term which shall not be less than three years, but
may extend to five years or with fine which shall not be less than one lakh rupees, but may
extend to three lakh rupees, or with both.
(2) Where any creditor violates the provisions of section 14, any person who knowingly and
wilfully authorised or permitted such contravention by a creditor shall be punishable with
imprisonment for a term which shall not be less than one year, but may extend to five years, or
with fine which shall not be less than one lakh rupees, but may extend to one crore rupees, or
with both.
(3) Where the corporate debtor, any of its officers or creditors or any person on whom the
approved resolution plan is binding under section 31, knowingly and wilfully contravenes any of
the terms of such resolution plan or abets such contravention, such corporate debtor, officer,
creditor or person shall be punishable with imprisonment of not less than one year, but may
extend to five years, or with fine which shall not be less than one lakh rupees, but may extend to
one crore rupees, or with both.

Section 31. Approval of resolution plan. -

(1) If the Adjudicating Authority is satisfied that the resolution plan as approved by the
committee of creditors under sub-section (4) of section 30 meets the requirements as referred to
in sub-section (2) of section 30, it shall by order approve the resolution plan which shall be
binding on the corporate debtor and its employees, members, creditors, 1[including the Central
Government, any State Government or any local authority to whom a debt in respect of the
payment of dues arising under any law for the time being in force, such as authorities to whom
statutory dues are owed,] guarantors and other stakeholders involved in the resolution plan.

Who are these other stakeholders? Following the principle of ejusdem generis it can be argued
that other stakeholders include only those people who were associated with the CD prior to
CIRP.

Question- the supreme court proceeds on the assumption that there is no provision which allows
withdrawal- however is there an argument against this?

Pull up CIRP regulations- IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016
Regulation 36 B [(4A) The request for resolution plans shall require the resolution applicant, in
case its resolution plan is approved under sub-section (4) of section 30, to provide a performance
security within the time specified therein and such performance security shall stand forfeited if
the resolution applicant of such plan, after its approval by the Adjudicating Authority, fails to
implement or contributes to the failure of implementation of that plan in accordance with the
terms of the plan and its implementation schedule.
Explanation I.– For the purposes of this sub-regulation, “performance security” shall mean
security of such nature, value, duration and source, as may be specified in the request for
resolution plans with the approval of the committee, having regard to the nature of resolution
plan and business of the corporate debtor.
Explanation II. – A performance security may be specified in absolute terms such as guarantee
from a bank for Rs. X for Y years or in relation to one or more variables such as the term of the
resolution plan, amount payable to creditors under the resolution plan, etc.]

If you are a successful RA and you contribute to the failure of resolution you will face certain
consequences (performance security). The judgement talks about performance bank guarantee.

They say that there is a timeline which has been provided and if we allow withdrawal then it will
be disturbed. They pull out a model timeline in the judgement (find it) they draw it from
regulations- so they are aware of it. So why are they not looking at regulations more closely.

The regulations provide consequences in case there is failure by resolution applicant- this implies
that withdrawal is possible but the security will be forfeited (he is not saying this explicitly but
that’s where he is going imo).
Why is this regulation not sufficient?

Union Bank of India v Mr Kapil Wadhawan

Facts - Corp debtor is DHFL and its promoter is Mr. Kapil Wadhawan (KW). since this is a
financial company, RBI initiates insolvency proceedings. A resolution plan is approved by the
coc and it is submitted for approval before AA. However, before approval KW floats a
settlement offer before the CoC which is of a greater amount. The RP is worth Rs. 37k crore.
However, the settlement proposal is 91k crore (he is sending this proposal from jail).

Our focus- modification of the plan.

The NCLT is entertaining the request of Mr. Wadhawan to present the SP before CoC. the
question is whether NCLT has the power to force CoC to consider the settlement proposal
especially when it has already approved a RP?

Another way of framing the question - given the goal of maximisation of the value of assets can
the NCLT force CoC to consider a proposal which has a higher value than the RP approved by
them?

The NCLAT relies heavily on Ebix, but why? Bcz many of these cases are appealed to SC, so
they rely heavily on Ebix which is a SC judgement.
Is it a contract?

9.8 Considering the ratio of the Judgement of the Hon'ble Supreme Court in the case of Ebix
Singapore (supra), "there was no scope for negotiations between the parties once the CoC has
approved the Resolution Plan. Thus, contractual principles and common law remedies, which do
not find a rope in the wording or the intent of the IBC, cannot be imported in the intervening
period between the acceptance of the CoC Approved Resolution Plan and the Approval by the
Adjudicating Authority."

So this is not a contract, there is no scope for negotiation once it is approved by CoC.

Perhaps one reason why they want to rely on Ebix is that one of the judges is going to become
CJI.

How does one compare this in contrast with Binani Industries?

Binani Industries uses Essar Steele to do the opposite of what the court is doing here. The sc
remanded the case and held that since there is discrimination it is a fit case for reconsideration.

Does Kapil Wadhawan cite Binani? (in the context of revisiting/second guessing the CoC)
No. in any case Binani is not binding because it is a remand case.

THis case also relies on Essar Steele-

In Essar Steel (supra), a three judge Bench of this Court, affirmed a two judge Bench decision in
K Sashidhar (supra), prohibiting the Adjudicating Authority from second-guessing the
commercial wisdom of the parties or directing unilateral modification to the Resolution Plans.
These are binding precedents. Absent a clear legislative provision, this court will not, by a
process of interpretation, confer on the Adjudicating Authority a power to direct an unwilling
CoC to renegotiate a submitted Resolution Plan or agree to its withdrawal, at the behest of the
Resolution Applicant. The Adjudicating Authority can only direct the CoC to reconsider certain
elements of the Resolution Plan to ensure compliance under Section 30(2) of the IBC, before
exercising its powers of Approval or rejection, as the case may be, under Section 31.

Sec 30 (2) The resolution professional shall examine each resolution plan received by him to
confirm that each resolution plan -
(a) provides for the payment of insolvency resolution process costs in a manner specified by the
Board in priority to the 3[payment] of other debts of the corporate debtor;
(b) provides for the payment of debts of operational creditors in such manner as may be
specified by the Board which shall not be less than-
(i) the amount to be paid to such creditors in the event of a liquidation of the corporate debtor
under section 53; or
(ii) the amount that would have been paid to such creditors, if the amount to be distributed under
the resolution plan had been distributed in accordance with the order of priority in sub-section
(1) of section 53, whichever is higher, and provides for the payment of debts of financial
creditors, who do not vote in favour of the resolution plan, in such manner as may be specified
by the Board, which shall not be less than the amount to be paid to such creditors in accordance
with sub-section (1) of section 53 in the event of a liquidation of the corporate debtor.

Explanation 1. — For removal of doubts, it is hereby clarified that a distribution in accordance

with the provisions of this clause shall be fair and equitable to such creditors.
Explanation 2. — For the purpose of this clause, it is hereby declared that on and from the date
of commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2019, the
provisions of this clause shall also apply to the corporate insolvency resolution process of a
corporate debtor-
(i) where a resolution plan has not been approved or rejected by the Adjudicating Authority;
(ii) where an appeal has been preferred under section 61 or section 62 or such an appeal is not
time barred under any provision of law for the time being in force; or
(iii) where a legal proceeding has been initiated in any court against the decision of the
Adjudicating Authority in respect of a resolution plan;]
(c) provides for the management of the affairs of the Corporate debtor after approval of the
resolution plan;
(d) The implementation and supervision of the resolution plan;
(e) does not contravene any of the provisions of the law for the time being in force
(f) confirms to such other requirements as may be specified by the Board.

Unrelated point- a lot of judgements extract tables documenting what each creditor will get.
Didn’t get what he said after this.

Section 60 (5) Notwithstanding anything to the contrary contained in any other law for the time
being in force, the National Company Law Tribunal shall have jurisdiction to entertain or
dispose of -
(a) any application or proceeding by or against the corporate debtor or corporate person;
(b) any claim made by or against the corporate debtor or corporate person, including claims by or
against any of its subsidiaries situated in India; and
(c) any question of priorities or any question of law or facts, arising out of or in relation to the
insolvency resolution or liquidation proceedings of the corporate debtor or corporate person
under this Code.

Section 29A-
[29A. Persons not eligible to be resolution applicant. - A person shall not be eligible to submit a
resolution plan, if such person, or any other person acting jointly or in concert with such person
— (a) is an undischarged insolvent; (b) is a wilful defaulter in accordance with the guidelines of
the Reserve Bank of India issued under the Banking Regulation Act, 1949 (10 of 1949); (c) 2 [at
the time of submission of the resolution plan has an account,] or an account of a corporate debtor
under the management or control of such person or of whom such person is a promoter,
classified as non-performing asset in accordance with the guidelines of the Reserve Bank of
India issued under the Banking Regulation Act, 1949 (10 of 1949) 3 [or the guidelines of a
financial sector regulator issued under any other law for the time being in force,] and at least a
period of one year has lapsed from the date of such classification till the date of commencement
of the corporate insolvency resolution process of the corporate debtor: Provided that the person
shall be eligible to submit a resolution plan if such person makes payment of all overdue
amounts with interest thereon and charges relating to nonperforming asset accounts before
submission of resolution plan: 4 [Provided further that nothing in this clause shall apply to a
resolution applicant where such applicant is a financial entity and is not a related party to the
corporate debtor.
Explanation I.- For the purposes of this proviso, the expression "related party" shall not include
a financial entity, regulated by a financial sector regulator, if it is a financial creditor of the
corporate debtor and is a related party of the corporate debtor solely on account of conversion or
substitution of debt into equity shares or instruments convertible into equity shares 1 [or
completion of such transactions as may be prescribed], prior to the insolvency commencement
date.
Explanation II.— For the purposes of this clause, where a resolution applicant has an account, or
an account of a corporate debtor under the management or control of such person or of whom
such person is a promoter, classified as non-performing asset and such account was acquired
pursuant to a prior resolution plan approved under this Code, then, the provisions of this clause
shall not apply to such resolution applicant for a period of three years from the date of approval
of such resolution plan by the Adjudicating Authority under this Code;]
2
[(d) has been convicted for any offence punishable with imprisonment –
(i) for two years or more under any Act specified under the Twelfth Schedule; or
(ii) for seven years or more under any law for the time being in force:
Provided that this clause shall not apply to a person after the expiry of a period of two years
from the date of his release from imprisonment:
Provided further that this clause shall not apply in relation to a connected person referred to in
clause(iii) of Explanation I];
(e) is disqualified to act as a director under the Companies Act, 2013 (18 of 2013):
3
[Provided that this clause shall not apply in relation to a connected person referred to in clause
(iii) of Explanation I;]
(f) is prohibited by the Securities and Exchange Board of India from trading in securities or
accessing the securities markets;
(g) has been a promoter or in the management or control of a corporate debtor in which a
preferential transaction, undervalued transaction, extortionate credit transaction or fraudulent
transaction has taken place and in respect of which an order has been made by the Adjudicating
Authority under this Code

Note that Wadhawan cannot give a RP because he is disqualified under section 29A. He is
offering a ‘settlement’.

We will do Jagatramka later but it says that once you are ineligible under IBC to float a RP, you
care ineligible to pitch a scheme of arrangement under section 230 of Companies Act.
Though it is true that public money is involved and maximum value of assets can be derived by
accepting Wadhawan’s proposal, someone has to act on behalf of the public. In a short term to
go with Wadhawan might look like a good idea but in the long term it sets a bad precedent.

“If you want to fail, fail fast, so that you can move on” [RS]

The question is, will the revival of the CD be sustainable if Wadhawan is back in control? In
certain contexts it might be efficient to change control at the cost of low value of resolution
plan.

Bank of Baroda v MBL infrastructure

Facts- CD had taken credit from a consortium of lenders. The third respondent is the founder
promoter of CD had extended personal guarantees on these loans. All these banks applied for
CIRP on default.

Relevant provision-
29A (h) has executed 1 [a guarantee] in favour of a creditor in respect of a corporate debtor
against which an application for insolvency resolution made by such creditor has been admitted
under this Code 2 [and such guarantee has been invoked by the creditor and remains unpaid in
full or part]

As per 29A(h) the promoter was barred from applying for resolution but he did anyway. THe
court held that he could not but since a lot of time has passed they will allow it in the facts and
circumstances of this case.

Doctrine of Ex turpi causa (clean hands)- section 29A is the example of this. It is assumed that
the promoter is the cause of the problem.

In this case it is clear that section 29A(h) applies. However, they decide not to intervene-

Having held so, we would like to come to the last part of our order. Though the very resolution
plan submitted by the Respondent No. 3, being ineligible is not maintainable, much water has
flown under the bridge. The requisite percentage of voting share has been achieved. We may
also note that the percentage has been brought down from 75% to 66% by way of an amendment
to Section 30(4) of the Code. 62. Secondly, majority of the creditors have given their approval to
the resolution plan. The adjudicating authority has rightly noted that it was accordingly
approved after taking into consideration, the techno-economic report pertaining to the viability
and feasibility of the plan. The plan is also put into operation since 18.04.2018, and as of now
the Respondent No. 1 is an on-going concern. Though, the Respondent No. 11 has taken up the
plea that its offer was conditional, it has got a very minor share which may not be sufficient to
impact by adding it with that of the appellant and Respondent No. 7. The Respondent No. 7 and
the Respondent No. 11 did not choose to challenge the order of the appellate tribunal. 63. We
need to take note of the interest of over 23,000 shareholders and thousands of employees of the
Respondent No. 1. Now, about Rs. 300 crores has also been approved by the shareholders to be
raised by the Respondent No. 1. It is stated that about Rs. 63 crores has been infused into the
Respondent No. 1 to make it functional. There are many on-going projects of public importance
undertaken by the Respondent No. 1 in the nature of construction activities which are at different
stages. 64. We remind ourselves of the ultimate object of the Code, which is to put the corporate
debtor back on the rails. Incidentally, we also note that no prejudice would be caused to the
dissenting creditors as their interests would otherwise be secured by the resolution plan itself,
which permits them to get back the liquidation value of their respective credit limits. Thus, on the
peculiar facts of the present case, we do not wish to disturb the resolution plan leading to the on-
going operation of the Respondent No. 1.

https://www.marketscreener.com/quote/stock/MBL-INFRASTRUCTURES-LIMIT-46730478/
news/Guarantor-Barred-From-Being-A-Resolution-Applicant-Under-Section-29A-h-Of-IBC-If-
Guarantee-Invoked-37604617/
“There are advantages of clarity, you change your behaviour accordingly” RS

Stage 4: Liquidation and dissolution

Arun Kumar Jagatramka v Jindal Steel and Power Ltd
Facts - It's not in doubt that section 29A exists. In this case, the promoter is trying to say
something but not about resolution, about liquidation. In this case, we are concerned with
liquidation.
There are two entities- GNCL and ???. these two entities are undergoing liquidation and the
promoter wants to take part in it. The promoter is invoking section 230 of the companies act.

The question is whether in ex turpi causa cases can the promoters rely on section 230 to retain
control?

33. Initiation of liquidation. -

(1) Where the Adjudicating Authority, -
(a) before the expiry of the insolvency resolution process period or the maximum period
permitted for completion of the corporate insolvency resolution process under section 12 or the
fast track corporate insolvency resolution process under section 56, as the case may be, does not
receive a resolution plan under sub-section (6) of section 30;
or
(b) rejects the resolution plan under section 31 for the non-compliance of the requirements
specified therein, it shall -
(i) pass an order requiring the corporate debtor to be liquidated in the manner as laid down in
this Chapter;
(ii) issue a public announcement stating that the corporate debtor is in liquidation; and
(iii) require such order to be sent to the authority with which the corporate debtor
is registered.
(2) Where the resolution professional, at any time during the corporate insolvency resolution
process but before confirmation of resolution plan, intimates the Adjudicating Authority of the
decision of the committee of creditors 1[approved by not less than sixty-six per cent. of the
voting share] to liquidate the corporate debtor, the Adjudicating Authority shall pass a
liquidation order as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of sub-section (1).

The question is whether promoters can participate in liquidation process?

Section 35 (f)
(f) subject to section 52, to sell the immovable and movable property and actionable claims of
the corporate debtor in liquidation by public auction or private contract, with power to transfer
such property to any person or body corporate, or to sell the same in parcels in such manner as
may be specified:
1[Provided that the liquidator shall not sell the immovable and movable property or actionable
claims of the corporate debtor in liquidation to any person who is not eligible to be a resolution
applicant.]

Ex turpi causa provision. If you are not eligible to be a resolution application you cannot buy
assets during liquidation.

What about section 230 and 232 of companies act?

Section 230
(1) Where a compromise or arrangement is proposed—
(a) between a company and its creditors or any class of them; or
(b) between a company and its members or any class of them,

the Tribunal may, on the application of the company or of any creditor or member of the
company, or in the case of a company which is being wound up, of the liquidator appointed
under this Act or under the Insolvency and Bankruptcy Code, 2016, as the case may be, order a
meeting of the creditors or class of creditors, or of the members or class of members, as the case
may be, to be called, held and conducted in such manner as the Tribunal directs.

The IBC does not say anything about companies act. However, it has section 238- Supremacy
clause
238. Provisions of this Code to override other laws. - The provisions of this Code shall have
effect, notwithstanding anything inconsistent therewith contained in any other law for the time
being in force or any instrument having effect by virtue of any such law.

IBC prevails over other laws- companies act does not have a supremacy clause.

But if IBC doesn’t say anything about 230, what to do?

Disqualification in Sec 29A (stage 3), Disqualification in Sec 35 (stage 4), can we extend it to
company law?

In mbl infrastructure the court says that there are only two actors- CD and CoC.

One could argue that SC’s reasoning makes Section 238 redundant

If you are a promoter, you don’t get the benefit of 32A - you can’t participate in liquidation,
resolution – but Jagatramaka isn’t analysing 32A.

32A. (1) Notwithstanding anything to the contrary contained in this Code or any other law for
the time being in force, the liability of a corporate debtor for an offence committed prior to the
commencement of the corporate insolvency resolution process shall cease, and the corporate
debtor shall not be prosecuted for such an offence from the date the resolution plan has been
approved by the Adjudicating Authority under section 31, if the resolution plan results in the
change in the management or control of the corporate debtor to a person who was not- (a) a
promoter or in the management or control of the corporate debtor or a related party of such a
person; or (b) a person with regard to whom the relevant investigating authority has, on the
basis of material in its possession, reason to believe that he had abetted or conspired for the
commission of the offence, and has submitted or filed a report or a complaint to the relevant
statutory authority or Court: Provided that if a prosecution had been instituted during the
corporate insolvency resolution process against such corporate debtor, it shall stand discharged
from the date of approval of the resolution plan subject to requirements of this sub-section
having fulfilled:

Another way to look at it through the lens of control - it envisions change in control of the CD. It
is trying to increase cost of the promoters. It is a corporate governance issue. It incentivises
promoters to be careful because if they are not, then they will lose control.

4.4.22

Lalit Kumar Jain v UoI

Facts- case arises in the context of section 1(3) - some provisions of the IBC were notified at a
later date by the central government. Some partnerships added personal guarantors as corporate
debtors (or creditor?).
Other relevant provisions - section 2(e)
So far we have focused on Part II (corporate insolvency) however in this case Union of india is
saying that bankruptcy provisions have not been notified but they want to notify it insofar as
personal guarantors are concerned.
The counter -argument however, is that how can you distinguish between personal guarantors
and individual debtors? (who’s making this argument)
IN individual bankruptcy cases the institutional authority changes from NCLT to DRT.
Individual bankruptcy provisions do not seem to be on the horizon- RS thinks that this is because
of Moral hazard. If individuals know beforehand that there are bankruptcy provisions then it
might lead to perverse incentives.

A Guarantor is someone who is a surety- section 128 of the Indian contract act.
The liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise
provided by the contract. —The liability of the surety is co-extensive with that of the principal
debtor, unless it is otherwise provided by the contract." Illustration A guarantees to B the
payment of a bill of exchange by C, the acceptor. The bill is dishonoured by C. A is liable, not
only for the amount of the bill, but also for any interest and charges which may have become due
on it. A guarantees to B the payment of a bill of exchange by C, the acceptor. The bill is
dishonoured by C. A is liable, not only for the amount of the bill, but also for any interest and
charges which may have become due on it."

Sec 5 (22) “personal guarantor” means an individual who is the surety in a contract of
guarantee to a corporate debtor
Sec 128 Indian Contract Act. Surety’s liability.—The liability of the surety is co-extensive
with that of the principal debtor, unless it is otherwise provided by the contract
A triangular relationship- personal guarantor [5(22)]/surety (s. 128 ICA)- liability is coextensive
with the debtor -
How to resolve this? -
Paragraph 125 of the judgment- the court is clarifying that if there is formulation and finalization
of resolution plan then itsnot necessary that the liabilit yof the surety is absolved.

“In view of the above discussion, it is held that approval of a resolution plan does not ipso facto
discharge a personal guarantor (of a corporate debtor) of her or his liabilities under the
contract of guarantee. As held by this court, the release or discharge of a principal borrower
from the debt owed by it to its creditor, by an involuntary process, i.e. by operation of law, or
due to liquidation or insolvency proceeding, does not absolve the surety/guarantor of his or her
liability, which arises out of an independent contract.”

On double proof- paragraph 124.

Do you agree with the ad hoc approach of notifying provisions? -

The court observed that in economic legislations there should be deference to the government.
The government should have latitude in these types of legislation. However, neither side argues
this.
GBK’s point- since resolution is binding on guarantors it means that guarantor's liability is
extinguished after approval of resolution plan.

GCCL Infrastructure & Projects Ltd (on Pre-packaged Insolvency Resolution regime under sec.
54A)
Facts-
Section 54A. Corporate debtors eligible for pre-packaged insolvency resolution process.
(1) An application for initiating pre-packaged insolvency resolution process may be
made in respect of a corporate debtor classified as a micro, small or medium enterprise under
sub-section (1) of section 7 of the Micro, Small and Medium Enterprises Development Act,
2006.

A lot of insolvency applications for resolution of MSmEs. The government quickly amended the
IBC. In PPIRP the procedure is mostly the same. However, one point of distinction is that in
PPIRP- unlike CIRP (where resolution of professional runs the show- immediate change in
control)

Section 54H. Management of affairs of corporate debtor.

During the pre-packaged insolvency resolution process period,—
(a) the management of the affairs of the corporate debtor shall continue to vest in the
Board of Directors or the partners, as the case may be, of the corporate debtor, subject to such
conditions as may be specified;

Bank of Maharashtra v Videocon Industries

It involves group insolvency- can 10 entities that are part of the same group be resolved
together? For example- videocon had a lot of sister concerns who were controlled by a single
promoter.

Section 31 [(4) The resolution applicant shall, pursuant to the resolution plan approved under
sub-section (1), obtain the necessary approval required under any law for the time being in force
within a period of one year from the date of approval of the resolution plan by the Adjudicating
Authority under sub-section (1) or within such period as provided for in such law, whichever is
later:
Provided that where the resolution plan contains a provision for combination, as referred to in
section 5 of the Competition Act, 2002, the resolution applicant shall obtain the approval of the
Competition Commission of India under that Act prior to the approval of such resolution plan by
the committee of creditors.]

Cross border insolvency- some of the assets of the Cd are abroad- for example- jet airways. If jet
airways obtains a decree from foreign courts then can they enforce it in india.

David Hahn, Concentrated Ownership and Control of Corporate

Reorganisations
Debtor in possession model- management continues to stay in control after initiation of insolvency.
Management has to take into account concerns of other stakeholders like creditors (rather than
shareholders- traditional model of corporate governance).

Creditor in possession model- management is ousted upon initiation of insolvency. However, this
incentivizes the management to delay the initiation of insolvency.
Therefore he argues for a codetermination model - both management and independent trustee get a
say in management after initiation of insolvency.
Which model applies in India? Not falls in any of these categories.
Section 17 - RP is not supreme.

Sectio n30 (4) - CoC has to approve resolution plan.

23 read with 27-
Section 28- prior approval of CoC before taking certain
This is a modified version of codetermination of model- as CoC is working in conjunction with
trustees.

Under ibc insolvency can only be triggered in case there is a default- however, what if a company is
on the verge of default. Here scheme of arrangement becomes important.

Section 230: Power to compromise or make arrangements with creditors and members.
(1) Where a compromise or arrangement is proposed—
(a) between a company and its creditors or any class of them; or
(b) between a company and its members or any class of them,
the Tribunal may, on the application of the company or of any creditor or member of the
company, or in the case of a company which is being wound up, of the liquidator,
1[appointed under this Act or under the Insolvency and Bankruptcy Code, 2016, as the case
may be,] order a meeting of the creditors or class of creditors, or of the members or class of
members, as the case may be, to be called, held and conducted in such manner as the
Tribunal directs.
Explanation.—For the purposes of this sub-section, arrangement includes a re-organisation
of the company’s share capital by the consolidation of shares of different classes or by the
division of shares into shares of different classes, or by both of those methods.

Once a company decides to enter into such a scheme a BoD approval is needed- after that it must
approach the nclt. NCLT has to divide creditors, debtors into classes. The test is whether there is a
homogenous group with common interest.

Section 230 (6)- Where, at a meeting held in pursuance of sub-section (1), majority of persons
representing three-fourths in value of the creditors, or class of creditors or members or class
of members, as the case may be, voting in person or by proxy or by postal ballot, agree to
any compromise or arrangement and if such compromise or arrangement is sanctioned by the
Tribunal by an order, the same shall be binding on the company, all the creditors, or class of
creditors or members or class of members, as the case may be, or, in case of a company
being wound up, on the liquidator 1[appointed under this Act or under the Insolvency and
Bankruptcy Code, 2016, as the case may be,] and the contributories of the company.
So it needs more than 50% in terms of number and 75% in terms of value for approval of BoD,
then NCLT, sent notice to every regulator- very high threshold.

Varottil argues that the scheme fails because the threshold is very high so even if a class of
members do not vote in favour of the scheme, the scheme fails. For these reasons SoA is not
generally used to restructure companies.

Solution- cramdown mechanism- even if one class dissents the NCLT should have the power to
enforce the scheme provided that the minority is compensated in a just and fair manner. Might
seem unfair but as a whole will be beneficial.

What is the issue with the cramdown mechanism?

Possibility of abuse of power by the majority.
Cramdown is not something new- IBC itself has a cramdown mechanism in a way because
operational creditors are not even part of CoC- just like in iBC there is a safeguard for OC - there
should be a safeguard for protecting minority class of members in scheme of arrangement.

Law and economics perspective-

Two model to analyse cramdown mechanism

Cathedral model -
There would be transaction costs in case there is no cramdown- no adjudication costs but high
transaction costs because there would need to be extensive negotiation. However, in case there is
statutory cramdown - there would be no transaction costs but high adjudication costs.
Missed after this.

2nd model- …
Because transaction cost is not zero, the state intervention is needed, so that it can impose
scheme on every member of class.

Module 2: Regulation and goals of corporate

and competition laws

Daniel A Crane, The Institutional Structure of Antitrust Enforcement,

OUP 2011 (chapter 1)
Core ideas-

Crime tort model of anti-trust- post facto enforcement of law

Regulatory model- ex ante enforcement of law

Companies/ corporations -they are very important in the modern world. At this point of history,
there is a tussle between state and the company (akin to church v state).

How do you rein them in? Who reins them in? The us example, deals with the dilemma of
federal v state dichotomy. The states in us compete with each other to attract companies to
incorporate themselves in their jurisdictions. Most companies incorporated in Mumbai, Delhi
some in bangalore, kolkata. In india, we don’t have competition.

In the US, company law is state based but antitrust is federal. Similarly in india companies and
antitrust is federal.

Some companies may be too big to be handled by the state.

Pay attention to the title and the effort of the author to explain.

-Dichotomy of ex ante (regulation) v ex post antitrust (crime/tort model)

Machines next to the gate of our class- they are trying to regulate our behaviour. Its based on
RFID technology - you don’t even need to show your face- it will sense you in a certain range. It
started out with keeping track of cattle.

THe idea is that human beings behaviour needs to be regulated is ubiquitous.

The Competition Act was passed in 2002- however enforcement started only from 2009. A
decade of enforcement. We should have an idea of what the purpose of competition law.

Excel corp case-

Paragraph 21- Consumer welfare? Look at the preamble (go to place to figure out aims of a
legislation)

An Act to provide, keeping in view of the economic development of the country, for the
establishment of a Commission to prevent practices having adverse effect on competition, to
promote and sustain competition in markets, to protect the interests of consumers and to ensure
freedom of trade carried on by other participants in markets, in India, and for matters connected
therewith or incidental thereto.

Before this we had MRTP act. 150 countries around the world have competition law. There is an
international push towards enacting competition law. Unlike IBC, there is no unctad model law.
Most of these countries copy it from western jurisdictions (just like indian constitution).

Go back to preamble- ‘freedom of trade’- article 19, article 301-304.

Asean guidelines- para 21- economic efficiency as a goal-however, India is not even a member.
In addition to this shouldn't you look for the purpose in the preamble. WHat does efficiency even
mean?-

“2.2 Main Objectives and Benefits of Competition Policy 2.2.1.1 Economic efficiency: Economic
efficiency refers to the effective use and allocation of the economy's resources. Competition tends
to bring about enhanced efficiency, in both a static and a dynamic sense, by disciplining firms to
produce at the lowest possible cost and pass these cost savings on to consumers, and motivating
firms to undertake research and development to meet customer needs.”

Another way to look at the goal of competition law is to go to CCI website-fair competition for
greater good.

What does unfair competition mean in the context of US?- advertisement of sensodyne
(misleading)- so it refers to consumer protection issues (misleading deceptive advertisements).
India had it in MRTP but after it was repealed it was put in consumer law.

Read section 18-

18. Duties of Commission - Subject to the provisions of this Act, it shall be the duty of the
Commission to eliminate practices having adverse effect on competition, promote and sustain
competition, protect the interests of consumers and ensure freedom of trade carried by other
participants,in markets in India:

Provided that the Commission may, for the purpose of discharging its duties or performing its
functions under this Act, enter into any memorandum or arrangement with the prior
approval of the Central Government, with any agency of any foreign country.

How is this different from the preamble? - preamble uses the term prevent and section 18 uses
the term eliminate.

HOwever, if you eliminate all these practices, then what will be your job?

Important to acknowledge that there is always a workaround to rules. Therefore according to RS

the word prevent captures the idea better. Moreover, we need to enforce only if the cost of
enforcement is less than the cost of market failure. ‘

Look at section 19 (legis actio)- how does everything begin?

Inquiry into certain agreements and dominant position of enterprise 19. (1) The Commission
may inquire into any alleged contravention of the provisions contained in subsection (1) of
section 3 or sub-section (1) of section 4 either on its own motion or on—

a) 29[receipt of any information, in such manner and] accompanied by such fee as may be
determined by regulations, from any person, consumer or their association or trade association;
or (b) a reference made to it by the Central Government or a State Government or a statutory
authority.

l) “person” includes—

(i) an individual; (ii) a Hindu undivided family; (iii) a company; (iv) a firm; (v) an
association of persons or a body of individuals, whether incorporated or not, in India or outside
India; (vi) any corporation established by or under any Central, State or Provincial
Act or a Government company as defined in section 617 of the Companies Act, 1956 (1
of 1956); (vii) any body corporate incorporated by or under the laws of a country outside India;
(viii) a co-operative society registered under any law relating to co-operative societies; (ix) a
local authority; (x) every artificial juridical person, not falling within any of the
preceding sub-clauses;

Even artificial persons can approach the CCI. Contrast this with IBC, the legis actio entitlement
is with CD, Creditor and OC

Compare this with MRTP act- what is the legis actio- section 10 -does not say any person- you
need a trade association (not a single trade, but the whole association)

Informant in lifestyle equities case-

Facts- Who is the informant - BHPC. Who is the opposite party? - Amazon India. What are their
issues with Amazon?-

1. Predatory pricing- low prices. Which product- nothing particular- a general complaint

Roger D Blair and D Daniel Sokol, ‘Welfare Standards in US and EU Antitrust

Enforcement’, (2013) 81 Fordham L Rev 2497

Now look at Blair and Sokol- what are the goals of competition law?

Two ideas- total welfare and consumer welfare.

Consumer welfare-consumer surplus? What is consumer surplus?- the difference between the
price you are willing to pay and the price you end up paying. Consumer surplus is verifiable.
What is producer surplus? The difference between the price at which you are willing to sell it at
and the price at which you actually sell.

But consumer surplus is equivalent to consumer welfare? No. What makes consumer surplus
equivalent to CW- what is that additional element?- it should be moral (for example- market
deliver drugs as well). Producer surplus example- apple produces iphones for around 5-6k but
sells it at 80k- astonishing producer surplus.

Total surplus = Consumer surplus + producer surplus.

However, preamble is talking about total surplus not just consumer surplus.

Look at the definitions of consumer - different from copra. Under copra producer cannot be a
consumer however under ca producer can be a consumer as well.

2(f) “consumer” means any person who— (i) buys any goods for a consideration which has been
paid or promised or partly paid and partly promised, or under any system of deferred payment
and includes any user of such goods other than the person who buys such goods for
consideration paid or promised or partly paid or partly promised, or under any system of
deferred payment when such use is made with the approval of such person, whether such
purchase of goods is for resale or for any commercial purpose or for personal use; (ii) hires or
avails of any services for a consideration which has been paid or promised or partly paid and
partly promised, or under any system of deferred payment and includes any beneficiary
of such services other than the person who hires or avails of the services for consideration paid
or promised, or partly paid and partly promised, or under any system of deferred payment, when
such services are availed of with the approval of the first-mentioned person whether
such hiring or availing of services is for any commercial purpose or for personal use;

Benefits of competition -decrease in prices, increase in quantity, increase in quality.

However, does consumer surplus take into account all of this? Not quality necessarily.

Back to lifestyle equities case- what does the CCI hold?

It is saying that the market is pretty competitive- there are so many other companies. If consumer
welfare is seens as lower prices the nin this cse the complaint itself seems to be that the prices
are too low- ironic. INterestingly, the prices which are low are not of the product of the
informant but products of the competitions (what's wrong with this)

Aren’t lower prices good for consumers?

On counterfeiting- this might be true but this is not a competition issue at all- go somewhere
else.

28-

The Informants’ primary allegation pertains to counterfeiting/unlicensed/unauthorised selling of

its products on the OP’s platform at a price which allegedly is significantly lower than the price
of the original product. Though it is understood that online sale of counterfeits could be a matter
of concern for brands and consumers alike, given that OP-1 is not dominant in the relevant
market, the issue does not lend itself to antitrust scrutiny. The Commission observes that besides
antitrust law, the issue of alleged sale of counterfeits on online platforms is amenable to be
addressed through other legal/regulatory instrumentalities as well. Thus, though the Commission
is statutorily constrained from looking into this issue because of the absence of OP-1’s
dominance, the issue of counterfeit may be addressed through other regulatory instruments in
view of the adverse implications it has on sellers and buyers in general.
30. The Commission notes that the Informants have relied upon the observations of the
Commission made in the order dated 13.01.2020 in Case No. 40 of 2019 i.e. Delhi Vyapar
Mahasangh and Flipkart Internet Private Limited and ors. for similar issues of vertical
agreements entailing preferential listing, discounts etc. in the online smartphone market.
However, prima facie, there appears to be differences between the two cases in terms of the
potential effect on competition. Firstly, the online market structures for smartphones and fashion
products in India are different with fashion being more diverse and dispersed. Besides the
horizontal, multi-product platforms such as Amazon and Flipkart, there are a number of vertical,
fashion-only platforms which provide significant avenues for fashion brands and retailers to
place their offerings before online consumers. This fact is reflected in the combined market share
of Amazon and Flipkart in online fashion sales in India, which is estimated to be around 35%,
while the fashion verticals collectively account for an estimated 50% (as per Redseer Report
cited above). In the case of smartphones, besides the brand-owned, single-brand websites, the
only third party, multi-brand platforms available for brands and retailers to access online
consumers are Amazon and Flipkart, with their collective share relatively much higher.
Secondly, the instant information, as clarified by additional information, does not allege
platform-specific exclusive launch of fashion products by brands unlike the smartphone case,
thereby not having the same effect on consumer choice and inter-platform competition. Thus, the
prima facie observations and findings of the Commission in Case No. 40 of 2019 are not
applicable to the facts of the present case

Are you persuaded by this?- in case of smartphones companies have exclusive arrangement iwth
Amazon/flipkart. However, this is not true in case of fashion companies.

Next question- is the CCI influenced by consumer welfare in smartphone case? - yes.

They write to Director Genral and then it submits …may or may not accept. This is how process
goes. In other country such cases do not go to SC

Daniel A Crane, The Institutional Structure of Antitrust Enforcement,

OUP 2011 (chapter 11)
He looks at preamble, look at economic dev of country. Then he stops there, this is what primary
purpose he says. One is means that INdia is not concerned of consumer dev, not about
infrastructure dev. Purpose of CCI is infrastructure dev.
How many types of agencies- multi agency model (US) have two agencies, while in India its
unified agency model (CCI) one agency. CCI performs both investigation and adjudication.

Sec 60- Act to have overriding effect- The provisions of this Act shall have effect
notwithstanding anything inconsistent therewith contained in any other law for the time being in
force.
Section 62- Application of other laws not barred- The provisions of this Act shall be in addition
to, and not in derogation of, the provisions of any other law for the time being in force.

Apparent contradiction between 60 and 62.

How is this relevant for unified agency points?

 Executive v administrative dichotomy-

INdia is hybrid according to him.

Samir Agarwal v Competition Commission of India

Facts- complaint against Uber and OLa on the grounds that they allow setting up of prices between
drivers. Something related to resale price maintenance.

The issue is (a) who can approach the CCI? (b) what is the nature of the Commission?
Crane talks about a specialized tribunal- he looks at COMPAT . He looks at whether they are experts
in competition law. The other thing he is trying to determine is whether damages can be awarded

Uber/Ola- they are cab aggregators. However, in this case the claim is not against either ola or uber
at all. HIs claim is against the drivers of uber and ola. The claim is that drivers are colluding with
each other. They multihome- they use ola and uber together.
Hub and spoke - all the drivers are spoke and uber is acting as a hub and they are enabling collusion.

The claim is not against Ola and Uber, rather it's against drivers.

The SC characterises the CCI as an inquisitive body. They are justifying the locus standi point by
this.

Back to Crane- this is an institutional design question- he deals with it.

If we see Sec 27, CCI also has adjudicating power, it can give punishment.

In corporate Law I we saw telecom cellular operater case- it was looking at TRAI. TRAI,
however , does not have adjudicatory power. TDSAT has it. HOwever, in this case , the CCI
itself has the power. CCI is not just a regulator but an adjudicator. It is a hybrid vis a vis
executive and adjudicatory body. However, its a hybrid between a lot of other things (like
inquisitorial body).

Steele authority of india extract in samir agarwal-

Section 19 says that any person has an entitlement to legis actio.

HOwever, lets read section 26-

Section 26- [Procedure for inquiry under section 19]- (1) On receipt of a reference from
the Central Government or a State Government or a statutory authority or on its own
knowledge or information received under section 19, if the Commission is of the opinion that
there exists a prima facie case, it shall direct the Director General to cause an investigation
to be made into the matter: Provided that if the subject matter of an information received is,
in the opinion of the Commission, substantially the same as or has been covered by any
previous information received, then the new information may be clubbed with the previous
information-

Trying to capture all of the legis actio possibilities.

Under Sec 19, any person can file, central or state gov can file. There is third way as well i.e.
suo moto by CCI. Statistically however, very few suo motu cases. Under sec 26, if CCI finds
prima facie case, they shall direct the Director general, so its not discretionary power.

What does this mean to say that some body is inquisitorial? That CCI job is not to be a
neutral third party.
QUestion of precedent- Samir Agarwal is bound by SAIL case. That’s why they are
extracting it.

Crane is talking about a hybrid agency. THe moment you have adjudicatory power you
become a judge. However, samir agarwal and Sail are not concerned about adjudicatory
power - they are concerned about inquisitorial powers of the CCI.

Inquisitorial as opposed to what?- Adversarial. The question is, what is the role of the judge
in a judicial proceedings? IN the continental legal systems judge can do more than be just a
mere spectator. Sc is saying that cci is not a neutral body - its job is much momre than that.

However, go back to paragraph 4- the CCI is saying that the claim is not against uber/ola and
they have gone by this. So is this really inquisitorial? Why didnt they suo moto ask questions
to Ola and Uber? If it is inquisitorial body, they have more power, they can so this. They can
suo moto take cases, they can make investigation, they can ask questions, but they dont seem
to use these powers in this case. Why dont CCI behave like inquisitorial?
.
SEction on relevance in IEA; definition of facts in issue- according to RS Facts in issue are
any facts about your entitlement. So CCI need not bother about relevance while exercising its
suo motu power.
The concern of RS seems to be that if CCI is an inquisitorial body why doesn’t it behave like
one?

They have to be inquisitorial, its their duty under Section 18.

RS- Samir agarwal is saying you are inquisitorial, Sail is saying you are inquisitorial-
therefore shouldn’t you do something more than just look at the claim made by the
claimants?

Competition Advocacy 49. 78[(1) The Central Government may, in formulating a policy on
competition (including review of laws related to competition) or any other matter, and a
State Government may, in formulating a policy on competition or on any other matter, as the
case may be, make a reference to the Commission for its opinion on possible effect of such
policy on competition and on the receipt of such a reference, the Commission shall, within
sixty days of making such reference, give its opinion to the Central Government, or the State
Government, as the case may be, which may thereafter take further action as it deems fit.]

Steel Authority of India Limited (2010)

One of the first cases under the competition act. Jindal is claiming that SAIL has an
agreement with Railway that they buy steel only from SAIL thereby leading to anti-
competition mahol.
This case went to compat- it was a truly specialised tribunal because it was only meant for
competition appeals. There was a time when it used to decide cases very quickly. One
rationale for having a specialised tribunal is expediency- at least in the context of COMPAT
it made sense (so long as Justice Sikri was leading it).

Compat was a truly specialised tribunal until it was merged with NCLAT. SPecialization is
not just about expertise- its about the fact that there is one body dedicated to hearing issues
related to competition law (specialised as opposed to specialist).

In terms of institutional design, look at section 418A in companies act- look at the proviso -
it says that the government of india can in consultation with the chair of nclat set up a
dedicated panel for competition cases- similar to compat. This hasn’t been done yet.
What is the issue in SAIL?- audi alteram partem- at the stage of prima facie hearing is there
an obligation related to audi alteram partem. Section 26 does not talk about principles of
natural justice. Does not say after hearing parties.

Section 36- Power of Commission to regulate its own procedure

(1) In the discharge of its functions, the Commission shall be guided by the principles of
natural justice and, subject to the other provisions of this Act and of any rules made by the
Central Government, the Commission shall have the powers to regulate its own procedure.
(2) The Commission shall have, for the purposes of discharging its functions under this Act,
the same powers as are vested in a Civil Court under the Code of Civil Procedure, 1908 (5 of
1908), while trying a suit, in respect of the following matters, namely:- (a) summoning and
enforcing the attendance of any person and examining him on oath; (b) requiring the
discovery and production of documents; (c) receiving evidence on affidavit; (d) issuing
commissions for the examination of witnesses or documents; (e) requisitioning, subject to the
provisions of sections 123 and 124 of the Indian Evidence Act, 1872 (1 of 1872), any public
record or document or copy of such record or document from any office.

Under section 26, is there audi alteram partem obligation- just on this ground the SAIL goes
all the way to the SC.

Practically, CCI gets a chair from bureaucracy.

Executive v adjudicatory dichotomy- practical implications in india-retired bureaucrats being

appointed as members, and chairs.

Interestingly, the new SEBI chair is not a retired bureaucrat- first time government is
experimenting with appointing a private sector person as head of a regulatory body.
Section 8. Composition of Commission- (1) The Commission shall consist of a Chairperson
and not less than two and not more than six other Members to be appointed by the Central
Government.
(2) The Chairperson and every other Member shall be a person of ability, integrity and
standing and who has special knowledge of, and such professional experience of not less
than fifteen years in, international trade, economics, business, commerce, law, finance,
accountancy, management, industry, public affairs or competition matters, including
competition law and policy, which in the opinion of the Central Government, may be useful
to the Commission.

Back to SAIL- should there be audi alteram partem obligation on CCI under Sec 26 (1)?
Should they hear SAIL?

Yes-
a. Reputational concerns- countered by RS using Efficient capital market hypothesis
b. Section 41 of CA
Section 41- Director General to investigate contravention- (1) The Director General shall,
when so directed by the Commission, assist the Commission in investigating into any
contravention of the provisions of this Act or any rules or regulations made thereunder.
(2) The Director General shall have all the powers as are conferred upon the Commission
under subsection (2) of section 36.
(3) Without prejudice to the provisions of sub-section (2), sections 240 and 240A of the
Companies Act, 1956 (1 of 1956), so far as may be, shall apply to an investigation made by
the Director General or any other person investigating under his authority, as they apply to
an
inspector appointed under that Act.

What does the SC say on this? -

Paragraph 131- the sc is saying that section 26 does not have any audi alteram partem
obligation. ITs more like a discretion of the commission not obligation. What is the logic
behind this?
It is not adjudicating anything at this stage. No right or duty is being determined. They are
ensuring that there is no time lag so that CCI can function in an expeditious fashion. Is there
any part of the judgement where you can see where CCI is characterising CCI as an expert
body?

They are citing Brahma Dutt to say that CCI is an expert body. (segue into Brahma dutt)
They are saying bcz Brahm Dutt case said that CCI is an expert body, we cannot impose audi
alteram partem obligaiton on CCI.

“this Court in the case of Brahm Dutt v. Union of India [(2005) 2 SCC 431], while
considering the constitutional validity of Section 8 of the Act observed that the Commission
is an expert body which had been created in consonance with international practice. The
Court observed that it might be appropriate if two bodies are created for performing two
kinds of functions, one, advisory and regulatory and other adjudicatory. Though the Tribunal
has been constituted by the Competition (Amendment) Act, 2007, the Commission continues
to perform both the functions stated by this Court in that case. Cumulative effect of the
above reasoning is that the Commission would be a necessary and/or a proper party in the
proceedings before the Tribunal.”

Brahm Dutt (2005) 2 SCC 431

Brahm Dutt’s claim is that since CCI is an adjudicatory body, how can you appoint retired
bureaucrats, you should appoint only retired judges. The Sc is saying that the union of india
is going to amend the CA so we are not gonna say anything.
They have left all questions open, but if we look at the SAIL case, they have relied on this
case to say that CCI is an expert body.

In addition to being an expert body it is supposed to decided cases expeditiously (specialised

body). The sc is persuaded that the expert body is supposed to move very quickly - have to
avoid delays at any cost. In fact, the problem of delays existed in MRTP (a 1990 case
decided in 2005). IMportant to note that MRTP does not have power to impose penalties-
they could only pass cease and desist orders. This is what they ordered.

Therefore when they rely on idea of expertise, expediency, they are not just relying on trial
court experience but regulatory experience of MRTP and other commissions.

Interestingly, MRTP had power to impose criminal penalties (a power which CCI does not
have).

Advisory, - section 46
Adjudicatory,- section 20 something (27?)
Regulatory- merger control
Section 26- [Procedure for inquiry under section 19]- (1) On receipt of a reference from
the Central Government or a State Government or a statutory authority or on its own
knowledge or information received under section 19, if the Commission is of the opinion that
there exists a prima facie case, it shall direct the Director General to cause an investigation to
be made into the matter:
Provided that if the subject matter of an information received is, in the opinion of the
Commission, substantially the same as or has been covered by any previous information
received, then the new information may be clubbed with the previous information

tHe dg has the duty to record in his report whether there has been contravention of the
provisions of the competition act.

There may be 4 scenarios-

1. DG and CCI both find violation
2. DG and CCI both do not find
3. DG finds, CCI doesnt
4. CCI finds, DG doesnt
NOt all of these contingencies are contemplated in section 26.

26(2) Where on receipt of a reference from the Central Government or a State Government
or a statutory authority or information received under section 19 the Commission is of the
opinion that there exists no prima facie case, it shall close the matter forthwith and pass such
orders as it deems fit and send a copy of its order to the Central Government or the State
Government or the statutory authority or the parties concerned, as the case may be.

This is closure of the case- no prima facie case. Recently CCI started proceedings against
Zomato and Swiggy based on prima facie case however, two years ago they’d held that there
is no prima facie case.
If there’s no prima facie case, it's appealable.

Section 26 (6)- If, after consideration of the objections and suggestions referred to in sub
section (5), if any, the Commission agrees with the recommendation of the Director General,
it shall close the matter forthwith and pass such orders as it deems fit and communicate its
order to the Central Government or the State Government or the statutory authority or the
parties concerned, as the case may be.- this is scenario no. 2 (both don’t find)

Both of these closures appealable.

Scenario 1 and 4 are appealable under section 27- easier to follow.

Scenario 3 is missing. How do you deal with such a scenario? Is this casus omissus? Is this a
feature or a bug of CA?
Back to Ebix case- casus omissus- its not the job of the court to supply each and every word
that might be missing. In certain exceptional cases it can be done.

Lafarge
Facts- The chairperson signed a judgement even though he hadn’t heard the arguments in
that case. This is a PNJ problem- only the person who hears me should pass the order. The
case arose because a bunch of builders' associations approached the CCI against cement
manufacturers on the grounds of cartelization (two or more entities come together to decide
prices).

Section 8 -Composition of Commission- (1) The Commission shall consist of a

Chairperson and not less than two and not more than six other Members to be appointed by
the Central Government. (2) The Chairperson and every other Member shall be a person of
ability, integrity and standing and who has special knowledge of, and such professional
experience of not less than fifteen years in, international trade, economics, business,
commerce, law, finance, accountancy, management, industry, public affairs or competition
matters, including competition law and policy, which in the opinion of the Central
Government, may be useful to the Commission. (3) The Chairperson and other Members
shall be whole-time Members.]

In this case for some reason, the CCI itself is party to the appeal - unlike trial courts. If their
judgments are appealed they are not made party to the appeal. SAil had held that in case of
suo motu investigation by the CCI - it is a necessary party. In other cases it might be a
proper party.

The commission’s lawyer is saying that the chairperson signed it just to authenticate.
Para 69-
The signing of each page by the Chairperson is strongly indicative of the fact that the orders
were authored by him and not by any of the six Members, who had heard the arguments on
the above noted three dates.During the course of hearing, Shri VaibhavGaggar, learned
counsel assisting Sri Pallav Shishodia, Senior Advocate for the Commission made a
statement that by putting initials on each 158 page of the order, the Chairperson had
authenticated the signatures of the remaining six Members but Shri Shishodiadid not endorse
this assertion and,in our view, he rightly did so because it is beyond comprehension that the
signatures of the Members, most of whom are former Class-I officers of the Government and
one is a former Judge of the High Court, are required to be authenticated by someone.In this
context, it is necessary to remember that the Members of the Commission are not minions.
They are part of an important body, whose powers have few parallels in the country. While
exercising adjudicatory powers, all the Members and the Chairperson act as coordinates. If
for any reason, the Chairperson is absent then the senior most Member is required to preside
over the meeting of the Commission. Therefore, it is naïve to suggest that the Chairperson
had put initials on each page of orders dated 20.06.2012 to authenticate the signatures of six
Members.

The Appellate body is saying that members are not subordinate to the chairperson- no need
for authentication by the Chairperson.
An additional point to note is that even though there’s a retired delhi hc judge on the panel
even then there’s a PNJ issue- therefore having judges not a guarantee that PNJ will be
followed.

According to compat- the rationale behind signing is different.

*This is very unlike the USA. The FTC chairperson Lina Khan wrote an article as a student
in 2017. In 4 years she is the chair of the FTC.

Compat on expertise of CCI-

Para 51-
51. At this stage, we consider it appropriate to mention that till mid-sixties, the Courts
having power of judicial review did not readily interfere with the orders passed by the
administrative bodies and authorities. However, with the proliferation of the Regulatory
Bodies like Commissions and Tribunals, which have been clothed with enormous powers to
pass orders adversely affecting the rights of the parties, it became necessary for the Courts
to exercise power to correct substantive and procedural errors committed by such bodies
and the thin line between the exercise of the administrative power and quasi-judicial power
got gradually obliterated. One of the main reasons for this shift in the Court’s approach is
that even though the Legislations under which these bodies have been created envisaged
appointment of experts and persons possessing specialised knowledge in the particular
fields, most of these bodies i.e. the Commissions and Tribunals are packed with retired civil
servants and former members of judiciary, who may have acquired sufficient knowledge and
experience of working in their respective organisations but can hardly be called experts and
at times, they adopt procedure and pass orders, which lack minimum fairness and judicious
approach.

Strong observations- this is rare. The fact that the appellate tribunal has put this in writing
means that they are really frustrated. According to compat the rationale behind these expert
regulatory bodies was to have expertise but most of these bodies are packed by retired
bureaucrats who are not experts necessarily.

Refer to section 8(2) - expertise.

(2) The Chairperson and every other Member shall be a person of ability, integrity and
standing and who has special knowledge of, and such professional experience of not less
than fifteen years in, international trade, economics, business, commerce, law, finance,
accountancy, management, industry, public affairs or competition matters, including
competition law and policy, which in the opinion of the Central Government, may be useful
to the Commission

*Lina khan cannot become chair/member because she doesn't have 15 years of experience.

Section 9 (whom does the blame lie on?)-

[Selection Committee for Chairperson and Members of Commission-
(1) The Chairperson and other Members of the Commission shall be appointed by the
Central Government from a panel of names recommended by a Selection Committee
consisting of – a) the Chief Justice of India or his nominee - Chairperson
b) the Secretary in the Ministry of Corporate Affairs - Member
c) the Secretary in the Ministry of Law and Justice - Member
d) two experts of repute who have special knowledge of, and professional experience in
international trade, economics, business, commerce, law, finance, accountancy, management,
industry, public affairs or competition matters including competition law and policy

The compat doesn’t take its observations to its logical conclusion- who’s appointing these
bureaucrats? The chief justice of india along with other officials of the central government.
Note that if CJI insists on an appointment then these bureaucrats don’t disagree- they’re
scared. Therefore, it is wrong to blame just the government.
After saying all these harsh words, the logical thing to do is to reverse the CCI judgment-
however, the compat doesnt reverse it- rather it remands the case back.

Section 53B- (3) On receipt of an appeal under sub-section (1), the Appellate Tribunal
may, after giving the parties to the appeal, an opportunity of being heard, pass such orders
thereon as it thinks fit, confirming, modifying or setting aside the direction, decision or order
appealed against

Where do you fit in remand? Perhaps ‘pass such order as it thinks fit’. Does this make
sense ?

What can the first appellate court do under CPC?

Section 107 CPC Description

(1) Subject to such conditions and limitations as may be prescribed, an Appellate Court shall
have power-

(a) to determine a case finally;

(b) to remand a case;

(c) to frame issues and refer them for trial;

(d) to take additional evidence or to require such evidence to be taken.

(2) Subject as aforesaid, the Appellate Court shall have the same powers and shall perform
as nearly as may be the same duties as are conferred and imposed by this Code on Courts of
original jurisdiction in respect of suits instituted therein

However, CPC apply to the appellate tribunal? It is not bound by it?

Appellate tribunal seems to have ignored the fact that they do not have power to remand.
Luckily, the order hasn’t been appealed.

Section 33- Power to issue interim orders- Where during an inquiry, the Commission is
satisfied that an act in contravention of sub-section (1) of section 3 or sub-section (1) of
section 4 or section 6 has been committed and continues to be committed or that such act is
about to be committed, the Commission may, by order, temporarily restrain any party from
carrying on such act until the conclusion of such inquiry or until further orders, without
giving notice to such party, where it deems it necessary.]

This can be done without giving notice as per notice, thus allows ex parte orders, however
this is just an interim order.
SAI was categorical about audi alteram partem. In S26 they didnt say anything about audi
alteram partem. Thus it seems Parliament is clear on when audi alteram partem is required.

Moreover, section 33 does not talk about prima facie standard for granting interim orders-

Distinction between prima facie in Section 26 and prima facie standard in CPC? (SAIL
judgement) -

According to RS prima facie in section 26 is a demurrer standard. A demurrer standard is

that you have to assume every allegation in the complaint to be true and then decide whether
it would violate the provisions of the act.

However, the moment there is an interim injunction you can’t just rely on prima facie
standards. YOu have to look at the consequences. It's not clear whether the three prongs of
the test for interim injunction are in lexical priority.

Moreover, it should be noted that the CCI has a lot of resources- can undertake its own
independent research to go beyond the demurrer standard.

Sunil Bansal
Facts- informants are individuals who purchased three apartments of Jaypee Associates.
They contend that they have abused their dominant position. What did the DG say in its
investigation report?
1st report- No contravention. CCi is not satisfied
2nd report- Contravention but the CCi disagrees.

This is scenario x which has not been contemplated under section 53B.

However, the Appellate tribunal characterises it as an order under section 26(6). Whats the
reasoning? It falls under scenario 2.
Is this persuasive? - not really.
The compat wants it to be appeable because if its not then where will litigants go?
They can in fact go to high court by filing a writ petition.

Section 53T- Appeal to Supreme Court- The Central Government or any State Government
or the Commission or any statutory authority or any local authority or any enterprise or any
person aggrieved by any decision or order of the Appellate Tribunal may file an appeal to
the Supreme Court within sixty days from the date of communication of the decision or order
of the Appellate Tribunal to them; Provided that the Supreme court may, if it is satisfied that
the applicant was prevented by sufficient cause from filing the appeal within the said period,
allow it to be filed after the expiry of the said period of sixty days.

So SC might not have choice sometimes, they are bound to hear the case.
Financial Software
Who is deciding this case? - Rajiv Km - he is a member not a chairperson. The other person
is Anita Kapoor. (GS singhvi has retired)

Facts-The DG did not find a violation and the CCI disagreed.

Reference to Sunil Bansal case-

Para 22. As far as the period of limitation is concerned it is quite clear from the language of
proviso of Section 53B of the Act that it is entirely similar to Section 5 of the Limitation Act.
A plethora of case law given above establishes that though under Section 5 of the Limitation
Act the power to condone delay is discretionary it has to be exercised judiciously. Further
condonation of delay should not encourage multiple litigation. To the extent condonation
helps in delivery of justice, it is relevant that a practical view is taken. On the distinction
drawn by the Applicant that in the cases of limitation pragmatism should prevail over a
pedantic approach, we are of the view that while pragmatism should prevail there should be
a frame within which pragmatism should be encouraged. It is not the scheme of the
legislation that inordinate delays without appropriate explanation are condoned leading to
unnecessary litigation. If a provision is stipulated in the law it has to be applied with
sincerity and pragmatism would not give the courts a liberty to extend what is prohibited by
law to an extent that it will negate the very objective of the relevant provision. Applying
these principles to the present case it was clearly brought out by Shri Amitabh Kumar that
once the decision in the Faiveley case was given by this Tribunal, going by the Applicant’s
understanding, the window for seeking relief in an appeal before the Tribunal had been
opened. If that be so the Applicant should have sought the remedy under Section 53B of the
Act immediately after the Faiveley case was decided. Therefore, even though the Applicant
was pursuing a legitimate remedy under writ jurisdiction of the High Court, and we have no
reasons to suspect the bonafide of the Applicant till the point he became conscious of this
Tribunal having exercised authority to deal with decisions under Section 26 (8) of the Act, he
should have exercised the option of preferring an appeal immediately after this tribunal’s
decision in the Faiveley case. On the contrary the applicant continued to pursue the writ
and even sought an interim remedy in the writ in the nature of a direction to this Tribunal
without having even filed an appeal before this Tribunal. It showed ambivalence and
inaction on the part of the Applicant. Further between the decisions of the Tribunal in the
Faiveley case and the Sunil Bansal case precious eight months had been lost. During the
course of his argument, Shri Sibal mentioned that the Applicant counsels were keeping an
eye in the proceedings in the Sunil Bansal case therefore, it cannot be said they were not
conscious of the potential right of appeal in the Tribunal. We find this argument
unsustainable because it cannot be expected that a litigant should have the luxury to choose
the time of his filing a dispute beyond the prescribed period of limitation, spending his time
watching the trend of decisions that a certain Court would be giving. We are conscious that
a day wise explanation for the delay may not be possible and not even required but in the
present case a good eight months had elapsed without the Applicant explaining the way in
which those eight months were spent. It was argued by the learned senior counsel that
during the period of these eight months it was not only the Faiveley and Sunil Bansal cases
but they were also following the Inter-globe and other cases where this tribunal had remitted
the cases to the commission for following due procedure in line with the principles of natural
justice in similar situations and facts. Somehow this argument does not impress us for the
same reasons as stated above. The Applicant’s action only shows either an effort at
camouflaging their real intent at forum shopping or their lack of decision and inaction. We
are already pragmatically inclined but in absence of an acceptable explanation for delay of
eight months between the Faiveley decision and filing of the first appeal in this tribunal we
find ourselves constrained to show any further discretion. It is also to be noted that it is not
as if the Applicant in absence of a favourable decision on this application, would be left with
no remedy at all. He was pursuing the remedy under the Writ jurisdiction of the High Court
and had sought reliefs similar in effect as in the appeal before us, and the High Court has
allowed him to file this appeal with the liberty to come back and seek remedy under the Writ
jurisdiction in case the appeal fails. Therefore, he will not be left high and dry if this delay is
not condoned.

Para 23. Therefore, we are not fully convinced with the reasons advanced by the applicant in
support of his condonation application and in the consequence the application is rejected.

Para 22- someone read the statute and realised that an order is not appealable and therefore
went to HC. During HC sunil bansal happened and they decided to go to tribunal instead.
The limitation period is 60 days. Sec. 53B Proviso says that limitation can be waived if it is
satisfied that there was sufficient cause.
Sec 53B proviso- Provided that the Appellate Tribunal may entertain an appeal after the
expiry of the said period of sixty days if it is satisfied that there was sufficient cause for not
filing it within that period.

Faiveley-
Facts-
[missed]

Para 5.20-
Be that as it may, the main issue in this case is whether the identical pricing by OPs in EP1,
EP2 and EP3 was because of collusion or otherwise. After having perused all the facts placed
on record and the submissions made by OPs, the Commission is of the view that the evidence
available on record is insufficient to hold OP 1 and OP 2 responsible for having colluded in
EP1, EP2 and/or EP3. The contention of OPs that the price quoted by OP 1 in EP1 for both
items was done at the informal suggestion of the Informant has not been countered by the
Informant convincingly

DG finds a violatio nof competition act based on identical prices and bids. The DG finds
vioatio but the CCI doesn’t. Something like 25% of cases in cci involve such disagreement
between CCI and DG- therefore this disagreement is very important.
COMPAT notices one interesting thing in this case- the CCI was not made a party. THey cite
SAIL case and holds that CCI is either necessary or proper. Since in this case it wasn’t
impleaded the appeal fails at the outset.

Para 22. Before adverting to the merits of the case, we deem it necessary to mention that the
appeal suffers from a fatal defect of non-impleadment of the Commission as a party
respondent. Undisputedly, the appeal is directed against the order passed by the
Commission. The latter is entitled to contest the appeal and for that purpose, it can
authorise any of the persons enumerated in Section 53-S(3) of the Act. The judgement of the
Supreme Court in Competition Commission of India Vs. Steel Authority of India Limited
[(2010) 10 SCC 744] also shows that the Commission is a necessary party in an appeal filed
under Section 53-B. Therefore, its non-impleadment is fatal to the maintainability of the
appeal.

‘Non impleadment is fatal’- that the appeal will not be successful

29. We are in complete agreement with the reasons assigned by the Commission for not
approving the conclusion recorded by the Jt. DG on the issue of cartel formation by the
respondents and by applying the ratio of the Supreme Court judgement in Union of India Vs.
Hindustan Development Corporation and others [(1993) 3 SCC 499] and order dated
18.12.2015 passed by the Tribunal in Appeal Nos.13, 15 and 20 of 2014, 43 we hold that the
Commission did not commit any illegality by refusing to approve the findings recorded by
the Jt. DG on the issue of formation of cartel/bid-rigging by the respondents and violation of
Section 3(3)(d) read with Section 3(1) of the Act.

They decide on merit even though the appeal itself is not maintainable.
In Financial Software Justice SInghvi has retired and the technical member was sitting- the
argument was that we were waiting for you to decide Faiveley. However, note that Faiveley
doesn’t clarify that they are making non-appealable orders appealable. Moreover, CCI does
not clarify under which provision they have made the original order. A lot of obfuscation
going on.
CCI can review facts as well as law. (53B (c))- ‘Full merit review’
CA allows any appeal to SC. (However, Company act and IBC allows only for the questions
of law). So there is a distinction.

The compat doesn’t clarify how exactly they have decided the appeal.

Kingfisher (Compat)
This case interprets sec 43.
Section 43- Penalty for failure to comply with directions of Commission and Director General-
If any person fails to comply, without reasonable cause, with a direction given by— (a) the
Commission under sub-sections (2) and (4) of section 36; or
(b) the Director General while exercising powers referred to in sub-section (2)of section 41, such
person shall be punishable with fine which may extend to rupees one lakh for each day during which
such failure continues subject to a maximum of rupees one crore, as may be determined by the
Commission.]
Sec 36 is about commission will follow PNJ and Sec 41 is about powers of DG.
Does the commission have the power to punish for contempt?

Facts- Kingfisher used to be an airline. It shut down in 2012. One investigation was going on against
kingfisher - they simply refused to comply with CCI. the DG gave them repeated extensions but they
simply refused to cooperate. They argue that by giving these reminders to comply, the DG
effectively gave them extensions.

IBBI discussion paper on information utility and timelines.

How does the Compat respond-

Para 28. The CCI failed to distinguish the conceptual difference between “failure to comply” and
“belated compliance”. In the former case, it is non-compliance and in the latter case, it is belated
compliance. In a given case, when the compliance is to be done within a particular time and it is not
done, there is failure. But when the time is extended, the failure does not occur till the extended time
occurs. The submission of learned counsel for CCI and the stand taken in Written Submission that
the letters in question do not amount to “extension of time” and are “only reminders” are clearly
untenable. A reference to the last letter dated 21.09.2010. As noted at para-10 supra it speaks of
“one more opportunity” and “submit replies”, “each of the allegations mentioned in the notice” and
“furnish requisite details”. It is a clear case of extension of time.

So everytime DG sends them letter, this is extension of time.

Compare and contrast with Samir agarwal- it also dealt with section 45 of the Act. Read para 16 of
the samir agarwal- using section 45 as a safeguard (guard gate) against abuse of locus standi situation
in competition act.
Refer to para 16 of Samir Agarwal case-

If there is ever a fact situation where the informatnt abuses the CCI in mala fide manner - secoitn 45
should be abPenalty for making false statement or omission to furnish material information

Section 43 is about when you are already in front of the DG and you refuse to cooperate.
Section 43-A - merger control- obligation to notify commission and penalty
Section 44- If any person, being a party to a combination,—
(a) makes a statement which is false in any material particular, or knowing it to be false; or
(b) omits to state any material particular knowing it to be material, such person shall be liable to a
penalty which shall not be less than rupees fifty lakhs but which may extend to rupees one crore, as
may be determined by the Commission.
le to come to rescue.

In the amazon- future case, they have said that amazon failed to disclose certain information and
therefore the prior approval given to acquire stake in future needs to be set aside.

Note that appellate tribunal (which provision) has contempt power but does the cci?
Section 42- Contravention of orders of Commission-.(1) The Commission may cause an inquiry to be
made into compliance of its orders or directions made in exercise of its powers under the Act. (2) If
any person, without reasonable clause, fails to comply with the orders or directions of the
Commission issued under sections 27, 28, 31, 32, 33, 42A and 43A of the Act, he shall be
punishable with fine which may extend to rupees one lakh for each day during which such non-
compliance occurs, subject to a maximum of rupees ten crore, as the Commission may determine. (3)
If any person does not comply with the orders or directions issued, or fails to pay the fine
imposed under sub-section (2), he shall, without prejudice to any proceeding under section 39,
be punishable with imprisonment for a term which may extend to three years, or with fine
which may extend to rupees twenty-five crore, or with both, as the Chief Metropolitan
Magistrate, Delhi may deem fit: Provided that the Chief Metropolitan Magistrate, Delhi shall not
take cognizance of any offence under this section save on a complaint filed by the
Commission or any of its officers authorized by it.]

But this is at the last stage when order has been passed. If during investigation there is no cooperation
then other provisions will apply.

What RS is asking is is there an analogous Section 53U

?

Section 53U Power to Punish for contempt- The Appellate Tribunal shall have, and exercise, the
same jurisdiction, powers and authority in respect of contempt of itself as a High Court has and may
exercise and, for this purpose, the provisions of the Contempt of Courts Act, 1971 (70 of 1971) shall
have effect subject to modifications that,--
(a) the reference therein to a High Court shall be construed as including a reference to the Appellate
Tribunal;
(b) the references to the Advocate-General in section 15 of the said Act shall be construed as a
reference to such Law Officer as the Central Government may, by notification, specify in this behalf.

CCI doesn’t have an analogous provision to sectio n53U- what it does have is a host of other
provision to ensure compliance.

Sec 42 isnt used much bcz it has criminal sanction, also it only has locus standi to CCI. While Sec
53.U is broad

Section 45- suprresio something and suggestio falsi

Penalty for offences in relation to furnishing of information 74[45.(1) Without prejudice to the
provisions of section 44, if a person, who furnishes or is required to furnish under this Act any
particulars, documents or any information,— (a) makes any statement or furnishes any document
which he knows or has reason to believe to be false in any material particular; or (b) omits to state
any material fact knowing it to be material; or (c) wilfully alters, suppresses or destroys any
document which is required to be furnished as aforesaid,
45 (a) is suppresio
45 (b) is suggestio falsi

IBC does not have these provisions- neither does company act.

Flipkart Internet Pvt Ltd v. Competition Commission of India

Section 57- Restriction on disclosure of information- No information relating to any enterprise,

being an information which has been obtained by or on behalf of the Commission or the Appellate
Tribunal] for the purposes of this Act, shall, without the previous permission in writing of the
enterprise, be disclosed otherwise than in compliance with or for the purposes of this Act or any
other law for the time being in force.

There is a statutory obligation over the commission to be confidential but this cannot be interpreted
to say that the whole order can be confidential.
In re- debenture trustee case before bombay high court.

Facts- the point to note is that just because something is not appealable under CA does not mean
there will be no review at the appellate level. increasingly,

At the end of the judgement- HIgh court is saying that why are you scared of the investigation ify ou
have done nothing wrong.

Para 47. In the light of the aforesaid, in the considered opinion of this Court, by no stretch of
imagination, the process of enquiry can be crushed at this stage. In case, the appellants are
not at all involved in violation of any statutory provisions of Act of 2002, they should not feel
shy in facing an enquiry.

Why do parties go to HC? Bcz they have got relief in some cases.

Faiveley Transport (CCI Judgement)

Para 7- Before parting with the order, the Commission, however, is of the view that the policy of the
Railways with regard to procurement of Item 1 and 2, as noted by the DG also, may be made more in
harmony with competition law principles. It is quite apparent that the procurement policies of the
Railways, which have been dealt with in detail in the preceding paragraphs also contributed to the
lack of competition between the suppliers in the present case. Vide its letter dated 20.04.2015, the
Informant intimated the Commission that with regard to the findings of the DG vis-à-vis the
procurement policy of the Railways, the Informant has referred the same to the Ministry of Railways
for further action. It appears from the said response of the Informant that Ministry of Railways is
responsible for the formulation of such policies. In view thereof, the Commission hereby advise the
Ministry of Railways to modify the said policies to incentivise the present as well as prospective
suppliers of the items under consideration in this case. The role and working of RDSO also needs to
be reassessed so as to subserve the objectives of competition.

CCI doesn't agree with DGI finding, regardless they are advising railways on the manner of
procurement etc.

The conduct that the Act targets-

4 broad aspects of competition act-

1. ACA- Anti Competitive Agreement (S 3)
2. AoDP- Abuse of Dominant Position (S4)
3. Merger (S5,6)
4. Competition advocacy (S 49)
First two aka conduct related aspects of competition law/ enforcement aspects of competition law

MErger is known as merger control in most jurisdictions

CA is relatively small legislation- however, the number of cases under competition law is staggering.
CA is not there in the USA, but the first three are very common all around the world.

Procedure that NCLT and NCLAT is supposed to follow- section 424.

Read with section 36(2) of the Competition act-

(2) The Commission shall have, for the purposes of discharging its functions under this Act, the same
powers as are vested in a Civil Court under the Code of Civil Procedure, 1908 (5 of 1908), while
trying a suit, in respect of the following matters, namely:- (a) summoning and enforcing the
attendance of any person and examining him on oath; (b) requiring the discovery and production of
documents; (c) receiving evidence on affidavit; (d) issuing commissions for the examination of
witnesses or documents; (e) requisitioning, subject to the provisions of sections 123 and 124 of the
Indian Evidence Act, 1872 (1 of 1872), any public record or document or copy of such record or
document from any office

What is the difference between the two? See clause (e) and ex parte default; also doesn’t have
(competition act) the catch all provision.

Focus on 36(2) (e)- Companies act also has it.

We discussed this in corporate law as well-

What do Section 123 and 124 of IEA say?

Sec 123. Evidence as to affairs of State.—No one shall be permitted to give any evidence derived
from unpublished official records relating to any affairs of State, except with the permission of the
officer at the head of the department concerned, who shall give or withhold such permission as he
thinks fit.
Sec 124. Official communications.—No public officer shall be compelled to disclose communications
made to him in official confidence, when he considers that the public interests would suffer by the
disclosure.

So it is saying, when you are trying to procure document from office, it is subject to 123 and 124, but
what about the rest of the IEA? Does it apply?
Does the IEA apply to CCI?

Similar question can be asked in the context of IBC- section 7 of the IBC- financial creditor is
supposed to give some information upon application for insolvency - what is that information - refer
to section 8-
OC needs to send Demand notice.
Sec 8. (1) An operational creditor may, on the occurrence of a default, deliver a demand notice of
unpaid operational debt or copy of an invoice demanding payment of the amount involved in the
default to the corporate debtor in such form and manner as may be prescribed.

(2) The corporate debtor shall, within a period of ten days of the receipt of the demand notice or
copy of the invoice mentioned in sub-section (1) bring to the notice of the operational creditor—

(a) existence of a dispute, 1[if any, or] record of the pendency of the suit or arbitration proceedings
filed before the receipt of such notice or invoice in relation to such dispute;
(b) the 2[payment] of unpaid operational debt—
(i) by sending an attested copy of the record of electronic transfer of the unpaid amount from the
bank account of the corporate debtor; or
(ii) by sending an attested copy of record that the operational creditor has encashed a cheque issued
by the corporate debtor.

Explanation.—For the purposes of this section, a “demand notice” means a notice served by an
operational creditor to the corporate debtor demanding 2[payment] of the operational debt in
respect of which the default has occurred.

What happens to IEA? Does it apply or not?

Interestingly, one of the members of the Law Commission said that time has come to repeal IEA and
replace it with Shastras.

If indian evidence act doesn't apply then what applies?

Look at the IEA itself- applicability provision-

It extends to the whole of India and applies to all judicial proceedings in or before any Court,
including Courts-martial, 4 [other than Courts-martial convened under the Army Act (44 & 45 Vict.,
c. 58)] 5 [the Naval Discipline Act [29 & 30 Vict., 109]; or the Indian Navy (Discipline) Act, 1934
(34 of 1934),] 7 [or the Air Force Act (7 Geo. 5, c. 51)] but not to affidavits8 presented to any Court
or officer, nor to proceedings before an arbitrator
One interpretation of this provision is that CCI is a court for the purposes of this act.

Also sec 62 of the CA, it says

Sec 62- Application of other laws not barred- The provisions of this Act shall be in addition to, and
not in derogation of, the provisions of any other law for the time being in force.

So IEA is the law time being in force.

Another question- is the DG a ‘person’ under competition law? Can the DG sue or get sued?

Sec 2 (l)- “person” includes—

(i) an individual;
(ii) a Hindu undivided family;
(iii) a company;
(iv) a firm;
(v) an association of persons or a body of individuals, whether incorporated or not, in India or outside
India;
(vi) any corporation established by or under any Central, State or Provincial Act or a Government
company as defined in section 617 of the Companies Act, 1956 (1 of 1956);
(vii) any body corporate incorporated by or under the laws of a country outside India;
(viii) a co-operative society registered under any law relating to co-operative societies;
(ix) a local authority;
(x) every artificial juridical person, not falling within any of the preceding sub-clauses;

(g) “Director General” means the Director General appointed under sub- section (1) of section 16 and
includes any Additional, Joint, Deputy or Assistant Directors General appointed under that section;

They are talking about the office in this sub clause (g) and not the person.

Sec 7 (2) The Commission shall be a body corporate by the name aforesaid having perpetual
succession and a common seal with power, subject to the provisions of this Act, to acquire, hold and
dispose of property, both movable and immovable, and to contract and shall, by the said name, sue or
be sued.
The CCI is a separate legal entity, they have the ability to sue and to be sued. All the underlined
phrases above shows characteristic similar to that of a company.
We do not have similar provision for DG.

Sec 37 of CA before it was omitted-

Sec 37 (omitted)- Review of orders of Commission Any person aggrieved by an order of the
Commission from which an appeal is allowed by this Act but no appeal has been preferred, may,
within thirty days from the date of the order, apply to the Commission for review of its order and the
Commission may make such order thereon as it thinks fit: Provided that the Commission may
entertain a review application after the expiry of the said period of thirty days, if it is satisfied that
the applicant was prevented by sufficient cause from preferring the application in time:
Provided further that no order shall be modified or set aside without giving an opportunity of being
heard to the person in whose favour the order is given and the Director General where he was a
party to the proceedings.
So is DG a person or not?

What are the consequences of DG being a person or not? Go back to Indian evidence act- applies to
all judicial proceedings before court.
Look at the definition of court- in IEA-
“Court”.––“Court” includes all Judges8 and Magistrates9 and all persons, except arbitrators, legally
authorized to take evidence.
If the dg is not a person then he is not legally authorised to take evidence.
Question- person in IEA needs t o be person in the context of IEA - cannot conflate it with person
under competiton law

Response- in statutory interpretation- you never stop at the statute - can look for same words in other
statues.

Look at Sec 2 (z)- words and expressions used but not defined in this Act and defined in the
Companies Act, 1956 (1 of 1956) shall have the same meanings respectively assigned to them in that
Act.

CA has reference to IEA -section 36(2) .

Doubt- however, the context in which IEA is mentioned is very different.

SO if DG is not a person for the competition act, then the taking of evidence under evidence act is
problematic. So IEA applies to commission not to arbitrators.

[missed the first ten minutes]

Module 3: Anti-competitive agreements

Anti-competitive agreements 3. (1) No enterprise or association of enterprises or person or
association of persons shall enter into any agreement in respect of production, supply, distribution,
storage, acquisition or control of goods or provision of services, which causes or is likely to cause an
appreciable adverse effect on competition within India. (2) Any agreement entered into in
contravention of the provisions contained in subsection (1) shall be void. (3) Any agreement entered
into betweenenterprises or associations of enterprises or persons or associations of persons or
between any person and enterprise or practice carried on, or decision taken by, any association of
enterprises or association of persons, including cartels, engaged in identical or similar trade of goods
or provision of services, which— (a) directly or indirectly determines purchase or sale prices; (b)
limits or controls production, supply, markets, technical development, investment or provision of
services; (c) shares the market or source of production or provision of services by way of allocation
of geographical area of market, or type of goods or services, or number of customers in the market or
any other similar way; (d) directly or indirectly results in bid rigging or collusive bidding, shall be
presumed to have an appreciable adverse effect on competition: Provided that nothing contained in
this sub-section shall apply to any agreement entered into by way of joint ventures if such agreement
increases efficiency in production, supply, distribution, storage, acquisition or control of goods or
provision of services. Explanation.—For the purposes of this sub-section, “bid rigging” means any
agreement, between enterprises or persons referred to in sub-section (3) engaged in identical or
similar production or trading of goods or provision of services, which has the effect of eliminating or
reducing competition for bids or adversely affecting or manipulating the process for bidding (4) Any
agreement amongst enterprises or persons at different stages or levels of the production chain in
different markets, in respect of production, supply, distribution, storage, sale or price of, or trade in
goods or provision of services, including— (6) (a) tie-in arrangement; (b) exclusive supply
agreement; (c) exclusive distribution agreement; (d) refusal to deal; (e) resale price maintenance,
shall be an agreement in contravention of sub-section (1) if such agreement causes or is likely to
cause an appreciable adverse effect on competition in India. Explanation.—For the purposes of this
sub-section,— (a) “tie-in arrangement” includes any agreement requiring a purchaser of goods,
as a condition of such purchase, to purchase some other goods; (b) “exclusive supply agreement”
includes any agreement restricting in any manner the purchaser in the course of his trade from
acquiring or otherwise dealing in any goods other than those of the seller or any other person; (c)
“exclusive distribution agreement” includes any agreement to limit, restrict or withhold the output or
supply of any goods or allocate any area or market for the disposal or sale of the goods; (d) “refusal
to deal” includes any agreement which restricts, or is likely to restrict, by any method the persons or
classes of persons to whom goods are sold or from whom goods are bought; (e) “resale price
maintenance” includes any agreement to sell goods on condition that the prices to be charged on the
resale by the purchaser shall be the prices stipulated by the seller unless it is clearly stated that prices
lower than those prices may be charged. (5) Nothing contained in this section shall restrict— (i)
the right of any person to restrain any infringement of, or to impose reasonable conditions, as may be
necessary for protecting any of his rights which have been or may be conferred upon him under—
(a) the Copyright Act, 1957 (14 of 1957); (b) the Patents Act, 1970 (39 of 1970);
(c) the Trade and Merchandise Marks Act, 1958 (43 of 1958) or the Trade Marks Act,
1999 (47 of 1999); (d) the Geographical Indications of Goods (Registration and Protection)
Act, 1999 (48 of 1999); (e) the Designs Act, 2000 (16 of 2000); (f) the Semi-
conductor Integrated Circuits Layout-Design Act, 2000 (37 of 2000); (ii) the right of any person to
export goods from India to the extent to which the agreement relates exclusively to the production,
supply, distribution or control of goods or provision of services for such export

 subsection (3)(d) - "shall be presumed to have an appreciable adverse effect on

competition" (AAEC) - also used in (1), but there it was "likely to cause" - in (3)(d),
there is a presumption that it will cause an appreciable adverse effect on competition
 3 agreements it won't apply to -
o (i) joint ventures
o (ii) intellectual rights
o (iii) exports from India

Coordination Committee-
Facts- Hart video assigned rights to telecast mahabharata in bengali. They entered into agreement
with two channels for broadcast. However, the OP opposed this telecast. OPs included EIMPA and
coordination committee. These two associations were supposed to protect interest of artists and
actors of west bengal. THese associations send threatening letters to informants and the channels.
THe informant then goes to CCI and argue that the action of these two associations violate the
competition act.
CCI look at the allegation and finds prima facie violation. DG states that the two association directly
stopped them from produciton / broadcast- section 3(3) (b).

What does the majority hold- there has been violation of competition act.
Minority- relevant market is film and tv industry. and the associations are not enterprises you cannot
apply section 3.
COmpat agrees with minority

Supreme court-
Whether section 3 applies? For this determine the nature of CC and EIMPA.

As per section 3 it has to be either person or association thereof or enterprise or association of

enterprise
What is ‘enterprise’?-
Sec 2 (h)- “enterprise” means a person or a department of the Government, who or which is, or has
been, engaged in any activity, relating to the production, storage, supply, distribution, acquisition or
control of articles or goods, or the provision of services, of any kind, or in investment, or in the
business of acquiring, holding, underwriting or dealing with shares, debentures or other securities of
any other body corporate, either directly or through one or more of its units or divisions or
subsidiaries, whether such unit or division or subsidiary is located at the same place where the
enterprise is located or at a different place or at different places, but does not include any activity of
the Government relatable to the sovereign functions of the Government including all activities
carried on by the departments of the Central Government dealing with atomic energy, currency,
defence and space.

It is a exhaustive definition.
Person or a government department which performs ‘economic activity’ except ‘sovereign
function’-

e=p or g.d. + e.a - s.f.

Para 46 of the judgment -

As long as any entity engages in economic activity, it is not the same as pursuing profit. THerefore
NGOs can also fall within this category provided that they are engaging in economic activity.
Example- indian railway is an enterprise.
What do you think about the association of film artists (EIMPA and CC)- their constituent members
do engage in economic activity but the entity itself is not performing any economic activity - they are
not engaged in production/distribution or broadcasting.

Next focus on person- Sc says that there needs to be an element of ‘economic activity’- which is not
the case in this case

However, the Sc says that because the members of these associations engage in economic activity
these bodies themselves can be called association of enterprise.

The next argument is that trade unions cannot fall within the ambit of the competition act. The MRT
P act did exempt trade unions but the Competition act didn’t . They are actively stopping the
production, economic activity. As long as they are just engaged in strikes etc, it is ok because this is
their fundamental right .

IN conclusion- the SC finds violation of the competition act.

Para 47-

They are looking at not just functions, but also actions of the trade union which is affecting the
economic activity i.e. production.

Next issue- what is an agreement ?

b) “agreement” includes any arrangement or understanding or action in concert,— (i) whether or
not, such arrangement, understanding or action is formal or in writing; or (ii) whether or not such
arrangement, understanding or action is intended to be enforceable by legal proceedings;

Compare and contrast with definition in INdian contract act.

In contract act it talks about agreement enforceable by law however, in competition law legal
enforceability has not been mentioned. It does not need to show that there was any consideration for
entering into the contract.

‘Arrangement, understanding , - example 1- ola and uber hike its prices but there is no
communication between them - understanding bcz the other decided to increases bcz its competitor
increased.

Example 2- ola hikes its prices, informs uber and then latter also raises its price- one way information
therefore ‘arrangement’

Example 3- ola and uber come together and hike their prices simultaneously- this is ‘action in
concert’.

In all the three cases the focus is on the behaviour of the parties. They look for signalling effects. In
all three cases the differential factor is the extent of signalling. It's the least in understanding and the
most in acting in concert (bc direct communication). Even indirect communication would fall within
the definition.
It will mostly be word in mouth some person will come to CCI and inform them about he price hike.
It is mostly ‘agreement’.

In the present case, as there is clear arrangement between the two associations.

Next issue- Appreciable adverse effect on competition-

Sec 19 (3)- The Commission shall, while determining whether an agreement has an appreciable
adverse effect on competition under section 3, have due regard to all or any of the following factors,
namely:—
(a) creation of barriers to new entrants in the market;
(b) driving existing competitors out of the market;
(c) foreclosure of competition by hindering entry into the market;
(d) accrual of benefits to consumers;
(e) improvements in production or distribution of goods or provision of services; or
(f) promotion of technical, scientific and economic development by means of production or
distribution of goods or provision of services.

Even if one of the factors is shown then AAEC is satisfied.

Para 48-
So this action falls within (a) of sec 19 as it is creating barriers.
4 presumption of AAEC-
1. There has been some agreement
2. Its between enterprises, association of enterprise, body of persons
3. Entities Engaged in similar/identical
4. Agreement leads to control, price fixing, market control/production etc

To fall within sec 3, it is imp to understand what is relevant market. But CCI deosnt look at it. So for
now we need not worry about what relevant market is, we will look at it later.

Film Employees Federation of Kerala case

Facts-
Information is a director in kerala movie industry. THere are two other org that are trade unions that
represent director and producers. Informant claiming that these two associations preventing
professionals working for/with him.

Two issues- what is the nature of the two association

What kind of evidence are they looking for for determination of agreement

Section 3(D) of MRTP excludes trade union but no such exclusion in Competition act.

There should be an appreciable adverse effect on competition and therefore not every strike will
amount to violation of ca. In this case, since the action is limiting the supply, it is amounting to anti-
competitive.
What kind of evidence was the DG looking at-

Section 36 deals with power of the commission to regulate its own procedure-
Sec 36 (2) The Commission shall have, for the purposes of discharging its functions under this Act,
the same powers as are vested in a Civil Court under the Code of Civil Procedure, 1908 (5 of 1908),
while trying a suit, in respect of the following matters, namely:-
(a) summoning and enforcing the attendance of any person and examining him on oath;
(b) requiring the discovery and production of documents;
(c) receiving evidence on affidavit;
(d) issuing commissions for the examination of witnesses or documents;
(e) requisitioning, subject to the provisions of sections 123 and 124 of the Indian Evidence Act, 1872
(1 of 1872), any public record or document or copy of such record or document from any office.

DG has the same power by virtue of section 41.

It looks at documentary and oral evidence- the associations put out letters and circulars to thier
members not to engage with the informant. Further the DG relies on oral evidence of a lot of artists
wherein they affirm that they were asked not to work with informant.

CCI v State of Mizoram

Facts- state of mizoram called for bids for distribution of lottery tickets. Four companies were
granted the tender. But the informant alleged that the four companies submitted identical bids and
therefore bid rigging.

Two issues- definition of enterprise and high court’s jurisdiction

The State of Mizoram had issued an Expression of Interest for appointment of lottery distributors and
selling agents for state lotteries. As per the EOI, five bids were placed which surprisingly quoted
identical rates, in compliance with the minimum rate fixed by the government. A complaint was
made to the CCI under Sections 3 and 4 read with S. 19(1)(a) of the Competition Act, alleging
cartelization on part of the identical bidders. Complaint was also made against the State of Mizoram,
alleging abuse of dominant position by the state of Mizoram as it compelled the distributors to
deposit a large sum in form of security and advance payment even before the lotteries were held.

The CCI prima facie found merit in the complaint and an investigation was conducted by the
Director General. However, the complaint against the state was rejected, as it is not an
‘enterprise’ or a ‘group’ within the meaning of the Competition Act. The Director General in its
report found a case of collusion and bid rigging in violation of S.3 of the Competition Act
against the accused bidders.
The report of the DG was challenged before the Gauhati High Court and the same was set aside,
primarily on the ground that since lottery comes under the ambit of res extra commercium, it is
not amenable to the clutches of the Competition Act, hence the DG had no jurisdiction in this
matter. The decision of the High Court was challenged before the Supreme Court.

THe DG had made certain adverse remarks against state government officials. Against these
observations a WP is filed against the Guwahati high court

This is not a sovereign power, so technically it should fall within the definition of enterprise. But SC
does not answer this question?

CCI does not find violation.

Sec 26 (2)- Where on receipt of a reference from the Central Government or a State Government or a
statutory authority or information received under section 19,the Commission is of the opinion that
there exists no prima facie case, it shall close the matter forthwith and pass such orders as it deems fit
and send a copy of its order to the Central Government or the State Government or the statutory
authority or the parties concerned, as the case may be.
(5) If the report of the Director General referred to in sub-section (3) recomends that there is no
contravention of the provisions of this Act, the Commission shall invite objections or suggestions
from the Central Government or the State Government or the statutory authority or the parties
concerned, as the case may be, on such report of the Director General.

Even if someone has an objection to DG report they can go to cci no need to go to HC or NCLAT.
There was alternate remedy in this, first of all CCI is saying that we would not go against Gov, even
if they decide to challenge this bcz DG has made adverse remarks, what is the need to go to HC.

Kovacic et al, ‘Plus factors and Agreement in Antitrust Law’

Try and see the article from the perspective of the economic factors which make something an
agreement. Agreement has arrangement, understanding or action in concert. Info exchange which
remove uncertainty, which are otherwise unknown. These uncertainties are inherent in market, when
you exchange info, you remove those uncertainties.

Kovacic is talking about plus factor- it is something addition.

Additional to what? Legal factors.

Refer to the conclusion - is he talking about legal or economic factors?

In closing, we offer a review of the partial list of super plus factors discussed in Part III:
1. A subset of firms restricts production when prices and profits are relatively high or increasing.
2. Among a subset of producers, market shares, customer incumbency, or geographic dominance is
stable when the firms have excess capacity, and prices and profits are relatively high or increasing.
3. A reliable predictive econometric model that accounts for all material noncollusive effects on
price, estimated using benchmark data where conduct was presumed noncollusive, produces
predictions of prices that do not explain the path of actual prices in the period or region of potential
collusion, at a specified high confidence level.
4. A firm or subset of firms has knowledge of the details of another firm's transactions, production,
sales, and/or inventories where the latter firm would be competitively disadvantaged by conveying
that information unilaterally.
5. Firms engage in interfirm transactions that are transfers of resources and are largely void of
productive noncollusive motivations.
6. In an industry where the product made by different firms is largely homogeneous, there is a
discrete change in the intrafirm incentives of sales forces, across a subset of firms during a given
period, that shifts from the pursuit of market share to maintenance of elevated prices (such as a shift
to "price before volume").
7. A subset of firms with an aggregate market share large enough to have dominant-firm market
power jointly engage in a dominant-firm conduct when no single firm has the market power to act
unilaterally as a dominant firm by engaging in that dominant-firm conduct.

They are all about economic factors. Unlike statute which talks about understanding. These all are
talking about how to make more profits.

CCI however understands plus factors to be whatsapp chats and CDRs. But literature understands the
plus factor as economic activity.

Go to section 33 of MRTP Act-

Then go back to kerala film industry case- this provision does not apply.

Section 33A

Kerala movie case would fall under (a).

There is no provision for registration of your agreement under the MRTP act. liberalisation in that
you don’t have to register bcz its not possible to register oral agreement.
Sec 2 (O) of MRTP act-
Kerala film industry case will fall under (i). This means that although in kerala case RTP is involved
trade union would not have been held liable. In comopetition act however, there are no rigid
requirements and you can prove it without registration.
Kovacicis saying it is also possible to look at agreement from economic perspective. He is talking
about collusion.

Collusiton/ ACA- there are two types of collusion - explicit and implicit.
Explicit- you have an agreement in writing for example. Look at the statute and see if this agreement
is valid or not.
Passive- harder part of comp law. How do you prove passive collusion- that’s why we need to
understand State of mizoram case. There are officials against whom DG passes adverse remark -
however no remark against the state itself. SO why is it that the state is keen on challenging the
remarks. The DG says that these officials have colluded passively. The assumption seems to be that
these officials gave out information based on which identical bids were received. THey are not
saying that some of the officials are bribed.
Its a tacit collusion situation not explicit.

Kovacic is trying to look at the outcome and try to work it backwards to infer whether there has been
collusion rather than relying on communication written or oral between the parties.

Factors- there are letters which the coordination committee wrote, in kerala case some of them were
in writing and DG asks them are you boycotting. Oral bit is there in front of DG, but this is not a
economic factor.

There might not be explicit agreement between OLA And Uber, but can there be understanding
between them in the absence of any written or oral communication is what kovacic? He is looking
beyond the formal communication/ agreement.

His concern is based on economic factors, can be deduce back if there is agreement between them. Its
an agreement of plus factor. How do these entities behave the moment there is a competitor. Thats
why he gives those 7 factors. All of them are economic factors to see if there is ‘agreement’ or not,
notwithstanding whether there is oral or written agreement or not.
Horizontal Restraints

Sec 3(3) Anti-competitive agreements- Any agreement entered into between enterprises or
associations of enterprises or persons or associations of persons or between any person and enterprise
or practice carried on, or decision taken by, any association of enterprises or association of persons,
including cartels, engaged in identical or similar trade of goods or provision of services, which— (a)
directly or indirectly determines purchase or sale prices; (b) limits or controls production, supply,
markets, technical development, investment or provision of services; (c) shares the market or source
of production or provision of services by way of allocation of geographical area of market, or type of
goods or services, or number of customers in the market or any other similar way; (d) directly or
indirectly results in bid rigging or collusive bidding, shall be presumed to have an appreciable
adverse effect on competition:

Section 3(3) tells us that there are a wide range of agreements that could be anti competitive.

CoCo equation-e= p(g.d) = ea -s

CoCo tells us that enterprise is central to the idea of section 3. However, compare section 3 with
section 4 - section 3 uses the word person whereas the latter does not.
Section 5- uses the word enterprise. So the target is enterprise (economic activity). Also uses the
word person - means that acquirer can be a person (natural person). The assumption seems to be that
only an enterprise can abuse its dominant position.

Section 3(3) says that agreement can be between both enterprise and person. When it says person, it
refers to person doing economic activity.

Section 3 of MRTP Act- Act not to apply in certain cases - The default norm was that the MRTP Act
was not to apply to government departments, unless notified.
As opposed to this provision- look at the definition of enterprise in the new act- it includes
government departments by default.

We need to understand that cartel is merely one kind of anti competitive agreement.

Definition of cartel-
Section 2 (c) “cartel” includes an association of producers, sellers, distributors, traders or service
providers who, by agreement amongst themselves, limit, control or attempt to control the production,
distribution, sale or price of, or, trade in goods or provision of services;

 They do not use the word person or enterprise. Why?

 OPEC is the most famous cartel organisation - they control the supply of oil in the world
market - this eventually affects the price.
 Since we don’t have an international competition law OPEC persists.
 Interestingly, Indian competition law does have its reach outside India ( section 32).
 OPEC is a producer and seller and through an agreement, they are limiting the supply.
 WTO has been pushing for a competition law in a global setting, but India has constantly
opposed the idea even though such a law would help us vis-a-vis OPEC. Nobody quite knows
why though.

Definition of cartel does not talk of persons or enterprises - the way a cartel has been defined, it
indicates that you as a consumer can come together as an association or a group and negotiate. End
user consumer cartel not envisaged under Competition law- this is important because there is some
committee that is looking to amend this definition. It is of the opinion that consumer cartels should
be included.

Sectio n3 can be characterised as horizontal restraints (not horizontal agreement) why???

The consequence of section 3 violation is given in section 27.

Section 46 of the competition act.

Sec 46. Power to impose lesser penalty- The Commission may, if it is satisfied that any producer,
seller, distributor, trader or service provider included in any cartel, which is alleged to have violated
section 3, has made a full and true disclosure in respect of the alleged violations and such disclosure
is vital, impose upon such producer, seller, distributor, trader or service provider a lesser penalty as
it may deem fit, than leviable under this Act or the rules or the regulations:

[Provided that lesser penalty shall not be imposed by the Commission in cases where the report of
investigation directed under section 26 has been received before making of such disclosure.]

Provided further that lesser penalty shall be imposed by the Commission only in respect of a
producer, seller, distributor, trader or service provider included in the cartel, who [has] made the
full, true and vital disclosures under this section.

[Provided also that lesser penalty shall not be imposed by the Commission if the person making the
disclosure does not continue to cooperate with the Commission till the completion of the proceedings
before the Commission.]

Provided also that the Commission may, if it is satisfied that such producer, seller, distributor, trader
or service provider included in the cartel had in the course of proceedings,—
(a) not complied with the condition on which the lesser penalty was imposed by the Commission; or
(b) had given false evidence; or
(c) the disclosure made is not vital, and thereupon such producer, seller, distributor, trader or
service provider may be tried for the offence with respect to which the lesser penalty was imposed
and shall also be liable to the imposition of penalty to which such person has been liable, had lesser
penalty not been imposed.

The section does not use the term person.

Moreover, if one of the members of the cartel cocoperaties with the CCI there is scope for lesser
penalty. (the extent of reduction of the penalty depends on the whether there is true and full
disclosure that is vital)

There is a case of leniency application underSec 46 in Cartelization in Industrial and Automotive

Bearings case. (for application of Sec 46, one has to show that there is full disclosure, true disclosure,
info is vital and CC?)

Automotive Bearings - Given the peculiar facts, we are not going to impose a penalty.
Also note that there are leniency regulations that are supposed to be followed while granting
leniency( sectio n64 is supposedly the source of power to make regulations- however, section 46 has
not been specified. The commission seems to simply have used the general provision i.e. clause h)
.

Under Sec 64 h, commission has general power to to make regulations for leniency.

Open the regulations and see to whom do the regulations apply

[―applicant‖ means an enterprise, as defined in clause (h) of section 2 of the Act, who is or was a
member of a cartel and includes an individual who has been involved in the cartel on behalf of an
enterprise, and submits an application for lesser penalty to the Commission];

HOwever, this goes against the competition act in a way because the parent act itself does not use the
word person.

Cartelization in Industrial and Automotive Bearings

Facts- the market involved is market of bearings. What are bearings?

There was an allegation that 5 entity colluded in this market. Two of them cooperated with CCI and
filed leniency applications. Other piece of evidence is CDR which suggested that the representatives
of the entities met in Delhi. Privacy violation because these companies do not ask the user
themselves.

“However, the Commission notes that in his statement before the DG, Mr. Sanjiv Mohan made no
such averment that he came to Delhi to meet any channel partners; rather he evasively stated that he
does not recall such a visit. It is strange to note that though Mr. Sanjiv Mohan could recall some
other meeting he attended in Bhubaneshwar which had taken place even prior to the present meeting,
it was only this particular Delhi visit that he could not recall. In view of the Commission, this points
to the fact that Mr. Sanjiv Mohan‟s visit to Delhi was for nothing but to attend the said meeting and
the contention of Tata Bearing that he was in Delhi to meet few channel partners is just an
afterthought aimed to hide the real purpose of Mr. Sanjiv Mohan‟s visit. ”

Commission says this is strange.

CCI, based on the DG’s findings in the DG Report, and the submissions of the Opposite Parties,
concluded that a ‘cartel’ in terms of Section 3(3) of Competition Act existed between NEI,
Schaeffler, SKF and Tata Bearing. With respect to the Opposite Parties’ argument that regardless
of the exchange of confidential information between them no AAEC was caused as a result, the
Opposite Parties relied on: (i) the price analysis in the DG Report; (ii) statements of OEM
Customers exonerating them of cartelisation; and (iii) the substantial countervailing buying
power which existed with the OEM Customers.
CCI rejected the contentions raised by the Opposite Parties and observed that the Competition
Act prohibits both kinds of the agreements, i.e., those that cause AAEC and those that are likely
to cause AAEC. CCI also clarified that once an agreement in terms of Section 3(3) of the
Competition Act was established between the Opposite Parties, the fact that it would result in
AAEC in the concerned markets was to be presumed. This presumption of AAEC could be
rebutted. However, none of the Opposite Parties were able to demonstrate the existence of any of
the rebuttable factors listed under clauses (a) to (c) of Section 19(3) of the Competition Act. It
also noted that the fact that the Opposite Parties did not implement the collusive decision was not
sufficient to rebut the statutory presumption of AAEC under the Competition Act.
Based on the above, CCI directed the Opposite Parties (excluding Timken since there were no
findings against it) to cease the cartel and desist from colluding on the prices in the future.
However, given the specific circumstances of the case (discussed above) CCI did not impose a
penalty on the Opposite Parties.
However, one of the parties alleges that he wasn’t in Delhi. However, the company itself says that he
was in Delhi but for some other purpose. Company might have said this because usually the
companies themselves book tickets and the CCI gets a copy of these tickets directly from the airlines.
Difficult to lie because of electronic evidence.

Also the case deals with evidence act section 65B- the need for certification under evidence act. This
case involved electronic evidence

Express Industry Council case

Facts- informant is express industry council of india that manages courier services (cargo industry)
and has filed against airlines. EI is alleging that airlines have connived to impose a Fuel Surcharge
(FSC).

Jet, Indigo and Spicejet are found in violation.

Focus on the evidence that the Commission uses in order to determine whether there is an
agreement-

Paragraph 109-
109. In view of the foregoing, it is opined that the OPs have acted in parallel and the only plausible
reason for increment of FSC rates by the airlines was collusion amongst them. Such a conduct has, in
turn, resulted into indirectly determining the rates of air cargo transport in terms of the provisions
contained in Section 3 (3)(a) of the Act. It may be noted that in terms of the provisions contained in
Section 3(1) of the Act, no enterprise or association of enterprises or person or association of persons
can enter into any agreement in respect of production, supply, distribution, storage acquisition or
control of goods or provision of services, which causes or is likely to cause an appreciable adverse
effect on competition within India. Section 3(2) of the Act declares that any agreement entered into
in contravention of the provisions contained in subsection (1) shall be void. By virtue of the
presumption contained in subsection (3), any agreement entered into between enterprises or
associations of enterprises or persons or associations of persons or between any person and enterprise
or practice carried on, or decision taken by, any association of enterprises or association of persons,
including cartels, engaged in identical or similar trade of goods or provision of services, which(a)
directly or indirectly determines purchase or sale prices; (b) limits or controls production, supply,
markets, technical development, investment or provision of services; (c) shares the market or source
of production or provision of services by way of allocation of geographical area of market, or type of
goods or services, or number of customers in the market or any other similar way; (d) directly or
indirectly results in bid rigging or collusive bidding, shall be presumed to have an appreciable
adverse effect on competition.

There is something called fuel surcharge.there is identical pricing except Air India- price parallelism
(conscious parallelism). Essentially, every airline was charging the same amount as FSC. We
discussed that there should be information exchange in order to remove uncertainties of the market.
Is there an agreement between Jet, Indigo and Spice Jet?

The CCI says that the obvious reason why there is conscious parallelism is because there is an
agreement among them. This is circular reasoning.

Moreover, this case is in a particular way. Why does the commission frame certain cases in cartels
and other cases as anti competitive agreement?
For this refer to section 27 -

Orders by Commission after inquiry into agreements or abuse of dominant position 27.
Where after inquiry the Commission finds that any agreement referred to in section 3 or action of an
enterprise in a dominant position, is in contravention of section 3 or section 4, as the case may be, it
may pass all or any of the following orders, namely:— (a) direct any enterprise or association of
enterprises or person or association of persons, as the case may be, involved in such agreement, or
abuse of dominant position, to discontinue and not to re-enter such agreement or discontinue such
abuse of dominant position, as the case may be;
(b) impose such penalty, as it may deem fit which shall be not more than ten percent of the average of
the turnover for the last three preceding financial years, upon each of such person or enterprises
which are parties to such agreements or abuse: Provided that in case any agreement referred to in
section 3 has been entered into by a cartel, the Commission may impose upon each producer,
seller, distributor, trader or service provider included in that cartel, a penalty of up to three times
of its profit for each year of the continuance of such agreement or ten percent. of its turnover for
each year of the continuance of such agreement, whichever is higher

A very heavy penalty is provided in (b). Penalty in (b) is for every kind of anti competitive conduct
however, the proviso applies to just the cartel. It tells us that cartel are really bad- worse than other
types of anti competitive agreement. So the penalty for anti-competitive agreement, the penalty is
lower. Therefore, it is tried to frame the charge as a cartel.

From the perspective of evidence it should be really persuasive as to the existence of cartel.

In this case they also impose a penalty- they also give us a legal standard for determining agreement (
the only reason??0- the source of the standard is Woodpulp case (EU).

SO the test is the presence of agreement (though not said explicitly)

There is an additional allegation related to employment of common cargo agents-

Para 105-
105. The Commission is of the opinion that in a competitive market, to have an edge over the other
competitors, a player will have incentive to hide any change in its price. Further, an increase in price
may affect the customers and hence, any collusion to increase the price may only be profitable for
OPs. In such a situation, having the same market intelligence/ agents associated amongst the airlines,
negates the case of OPs further. These communications with rivals should be avoided in a
competitive market, let alone be used to justify a concerted action.

This could have been used as evidence of information exchange. It seems that the commission is
convinced that there is agreement but they simply can’t prove it. Eve if you're using circumstantial
evidence you need to establish a chain of events.

Back to section 3- if there is price, output, market allocation and bid rigging then there is a
presumption however for the presumption to kick you first need to show an agreement.

Neeraj Malhotra

Facts- the allegation is against 17 banks for Prepayment penalty- loan agreement say that if you pre
pay your loan then you will have to pay a penalty. The allegation is that all these banks have an
agreement to impose a prepayment penalty. Only axis banks that didn’t have prepayment penalty
clause. Moreover , the penalty was quite high.

What does the commission say on agreement- very simplistic understanding. They say that each
banks has an agreement with consumer but agreement under CA does not envisage agreement
between consumer and an enterprise (very simplistic bc this is an agreement under the contract act)

Para 17.5- “Agreement” mentioned in Section 3 refers to any agreement entered into by parties in
respect of activities as mentioned above. These activities being quintessentially on the supply side of
a market, do not include “agreement” between a producer/service provider on the one hand and the
end consumer on the other because no consumer can be said to be involved in activities such as
production, distribution or control of any goods or services. ”

Para 17.8 They also say that the agreement should be conscious and congruent.
But this is not what CA says. They are saying competition act should function along with Contract
act as all these agreements were entered into under Contracts Act. So there is no consistent test to
determine what is an agreement.
In this case the commission found no agreement but still we don t get a standard for future cases.

In re alleged cartelization by steel producers

Facts- The allegation against them is that there prices are very similar when they sell it to end user.
But the commission does not find any violation. Why?
Bcz they are importing, so the base line price is same. Now since all of them know what the base line
price is, the price in which they sell is also similar.

Para 123-
123. As has been seen above, the DG found price parallelism amongst the producers under
investigation during the relevant period. But without additional evidence i.e. ‘plus factors’, proof
of conscious parallel behavior, such parallel behavior, is not enough to establish a violation. The
additional evidence or plus factors need not take the form of direct evidence of an explicitly illegal
agreement. Parallel pricing or other matching behaviour does not in itself establish the existence of a
combination or conspiracy, nor should it, if it is equally consistent with the lawful behaviour of firms
acting separately and independently of one another. Additional evidence is instead necessary to
further bolster the inference of collusion. A wide range of circumstantial evidence can be used to
establish the needed plus factors. Plus factors are economic actions and outcomes, above and beyond
parallel conduct by oligopolistic firms,that are largely inconsistent with unilateral conduct but largely
consistent with coordinated action. Possible plus factors are typically enumerated without any
attempt to distinguish them in terms of a meaningful economic categorization or in terms of their
probative strength for inferring collusion. Generally it is observed that in an oligopolistic industry,
the firms recognize their mutual interdependence, acknowledge that they are players in a repeated
game, and act according to it. In antitrust decisions, mere conscious parallelism does not suffice for
determination of firms engaged in concerted action because such pricing can emerge from firms
acting noncollusively where they understand their role as players. In such cases, it is required that
economic circumstantial evidence go beyond the parallel movement in price to reach a finding that
the firms have crossed that line thereby violating the provisions of the Act.

A lot of things going on - but major takeaways-

1. There is a spectrum with one end being independent behaviour
2. Sometimes this independent behaviour might become interdependent behaviour
3. Then inter-dependent behaviour could become collusion. Collusion itself can be tacit or
explicit.

Note that most markets are oligopolistic. They are saying that in an oligopolistic market it is
inevitable that behaviour of firm is interdependent. However, in order to hold companies liable for
anti competitive agreement you need additional economic factors (in an oligopolistic market). These
additioanl factors are what makes an inter dependent factors, passive collusion.

In order to figure out whether this interdependent behaviour has become tacit collusion, then you
have to look at additional economic factors.
Explicit collusion when you are making calls, or writing letters to your counterpart on prices etc.
These additional economic factors or plus factors are what Kovacic piece talked about.

There are two parts to s. 3(1)- the first part exhorts person/enterprises not to do something.
Second is causation.
(2)- declares it to be void read with S 27 (illegal).
(3)- Horizontal restraints- goes beyond agreements - there is a presumption of AAEC
(4)- non horizontal agreement (not restraint)
(5) - export and IP exclusion (not of much use for now)
NOte that presumption under subsection 3 is not about causation but about appreciable adverse effect
on competition (AAEC). Presumption of AAEC implies that the onus is on the opposite party to
prove that there is no AAEC.

The Act has four parts- ACA,AoDP , R and CA. for ACA and MR there is a standard called ‘aaec’.
The phrase is same but the factor for both are different. FOr Aca its in section 19(3) and for MR it is
in s. 20(4).

If the obligation is on me under s. 3(3), am i confined to section 19(3) or can i go beyond while
rebutting the presumption?
RS seems to think that you can go beyond section 19(3). Example- covid 19- crisis cartel.
His reasoning is that the presumption is not with respect to causation but with respect to AAEC.
according to him for proving/disproving causation you can bring in any fact which logically makes
the commission thinks that there is no causation.

Example- production impacted due to protests in Telangana. Production is impacted for all players in
the market in such a way that there is price parallelism amongst them. But have they caused it?
Obviously not. These are exogenous factors.
Correlation is not causation.

What is meant by horizontal restraints? Horizontal implies that all the players are in the same market.
Example -Apple as a player and amazon as a player in the market for reading devices. Then there are
publishers. An agreement between apple and amazon is a horizontal agreement. An agreement
between a publisher and a publisher is s horizontal agreement. An agreement between publisher and
apple/amazon is a vertical agreement because different markets.

Remember that horizontal means same market.

This example is borrowed from RObert Bork- anti trust paradox.

In re: Alleged Cartelization by Cement Manufacturers

Facts- Case transferred from MRtp act. The allegation was that cement prices were the same between
2003 -2006 but after 2006 there has been an unusual and unjustified increase in prices of the cement.
There has been a meeting between cement manufacturers- the commission trying to figure out what
they discussed in this meeting. Is the meeting about prices, output etc. the cement manufacturers are
able to give no justification as to why they met.

Para 120-

120. The Commission notes that price parallelism in itself may not be decisive of cartelisation or
concerted action in any industry, yet the same in conjunction with other plus factors may indicate
and establish cartelisation. In the present case, the Commission, apart from noticing price
parallelism in the industry, has also considered various other factors such as platform of CMA, as
discussed earlier, and other economic evidence by way of low capacity utilisation, production and
dispatch parallelism etc., as discussed hereinafter
Parallelism- Similar or identical behaviour. Like prices going up or down in a similar fashion.

Note that they have imposed a penalty of Rs. 397 crore but MRT only has cease and desist so how
come this penalty? What law applies in a transfer case? According to Commission the competition
act applies.

Builders Association of India v Cement Manufacturers’ Association &

Ors.

Facts-
What is the evidence in the builders association case?
One aspect of evidence is price parallelism. Are they confined this ? do they go beyond?

Focus on Cement Manufacturers Association - DIPP had delegated the task of collecting information
on price to CMA. TheyThey are arguing that how can you hold us liable for collecting information
when the government itself has asked us to do so.

FICCI- Multiplex
Facts- Multiplex owners were boycotting some of the movies. In turn, the producers were boycotting
multiplexes. There were issues relating to prices. The commission finds violation.

The commission calls the producers association ‘cartel like’ . This is a new category.

Para 34- The Commission after considering cumulative effect of all the mitigating factors in the
context of peculiar facts and circumstances of the instant case, is of the opinion that ends of justice
would be met if a penalty of Rs.1, 00,000/- (Rupees One Lac only) is imposed upon each of the
opposite parties under section 27(b) of the Act in addition to cease and desist order under section
27(a) of the Act.

Section 53N Awarding compensation- (1) Without prejudice to any other provisions contained in
this Act, the Central Government or a State Government or a local authority or any enterprise or any
person may make an application to the Appellate Tribunal to adjudicate on claim for compensation
that may arise from the findings of the Commission or the orders of the Appellate Tribunal in an
appeal against any findings of the Commission or under section 42A or under sub-section(2) of
section 53Q of the Act, and to pass an order for the recovery of compensation from any enterprise for
any loss or damage shown to have been suffered, by the Central Government or a State Government
or a local authority or any enterprise or any person as a result of any contravention of the provisions
of Chapter II, having been committed by enterprise.

Besides section 27/48 provision you have one more thing i.e. compensation. So long as you can show
to the appellate tribunal that you suffered harm you can ask for compensation.
(4) Where any loss or damage referred to in sub-section (1) is caused to numerous persons having
the same interest, one or more of such persons may, with the permission of the Appellate Tribunal,
make an application under that sub-section for and on behalf of, or for the benefit of, the persons so
interested, and thereupon, the provisions of rule 8 of Order 1 of the First Schedule to the Code of
Civil Procedure, 1908 (5 of 1908), shall apply subject to the modification that every reference
therein to a suit or decree shall be construed as a reference to the application before the Appellate
Tribunal and the order of the Appellate Tribunal thereon.

Clause 4 also talks about representative suit. This is not a class suit bcz you still need locus standi
and require an identifiable class.
Identifiable v identified dichotomy. This is the difference between class action and representative
suit.
One of the arguments of producers is IPR- the argument is that can you force producers who own the
copyright to share it with multiplexes.
The commission responds to this-

In the present case, neither any question of infringement of rights of producers/distributors conferred
under the Copyright Act, 1957 arises nor does the question of imposing reasonable conditions to
protect such right arise. In the light of the facts of the case and the evidence gathered during the
course of the investigation, it is clear that the producers/ distributors acted in concert to determine
revenue sharing ratio with multiplex owners and to this end they also limited/controlled supply of
films to multiplex owners. Such a conduct on their part squarely falls within the mischief of section
3(3)(a) and (b) of the Act and any plea based on copyright is wholly misplaced and has to be
rejected.

Sec 3 (5)- Nothing contained in this section shall restrict—

(i) the right of any person to restrain any infringement of, or to impose reasonable conditions, as may
be necessary for protecting any of his rights which have been or may be conferred upon him under—
(a) the Copyright Act, 1957 (14 of 1957);
(b) the Patents Act, 1970 (39 of 1970);
(c) the Trade and Merchandise Marks Act, 1958 (43 of 1958) or the Trade Marks Act, 1999 (47 of
1999);
(d) the Geographical Indications of Goods (Registration and Protection) Act, 1999 (48 of 1999);
(e) the Designs Act, 2000 (16 of 2000);
(f) the Semi-conductor Integrated Circuits Layout-Design Act, 2000 (37 of 2000);

The commission is saying that since there is no allegation of infringement IPR legislation does not
apply.

Railway Brake blocks Cartel

Facts-
Page 61-
There are so many people but all of them have happily confessed that they were exchanging
information. But even then the commission does not impose a penalty bcz there is COVID, they are
MSMEs, they have been cooperative with DG etc.

Para 51. So far as the issue of imposition of penalty is concerned, the Commission has carefully
examined the matter. It is observed that in the present matter, initially 4 Reference Cases were
received from different Railway Zones/ Divisions and the same were clubbed on different occasions.
Accordingly, a common investigation was carried out by the DG in these cases and also a
consolidated investigation report was submitted. During the final stage of investigation, the
Commission received one more Reference Case from a Railway Zone with similar set of allegations
and accordingly, the Commission kept this Reference Case in abeyance to await the investigation
report in the clubbed cases. As such, after receipt of consolidated investigation report, the
Commission clubbed this subsequent Reference Case with the initial batch of 4 Reference Cases and
forwarded the investigation report to the parties in all the 5 Reference Cases. Further, apart from
examination of various tenders covering a period starting from 2009 to 2017, the present matter also
involved 12 OPs and their 28 individuals. In such a wide ranging and complex investigation carried
by the DG spanning across various tenders floated by various Zones/ Divisions of Indian Railways
over a long period of time, the concerned parties have not only cooperated but have even admitted
their respective role/ conduct in the said tenders as brought out by the DG. It cannot be gainsaid that
cooperation to such an extent by the parties concerned is one of the consideration which may be
taken into account by the Commission in quantifying the penalties. Moreover, the Commission notes
that some of the OPs are Micro Small and Medium Enterprises (MSMEs). In fact, the Commission
has also looked at the relevant turnover arising out of Composite Brake Block (CBB) in the present
matter and observes that most of the OPs are having small annual turnover in this segment. At the
same time, the Commission is also cognizant of the prevailing economic situation arising due to the
outbreak of global pandemic (COVID-19) and the various measures undertaken by the Government
of India to support the liquidity and credit needs of viable MSMEs to help them withstand the impact
of the current shock. In this backdrop, considering the matter holistically and cumulatively, the
Commission, in the interest of justice, refrains from imposing any monetary penalty in the peculiar
circumstances of the case, as noted above. As pointed out earlier, the Commission is also persuaded
of the fact that the OPs have fully cooperated during investigation and inquiry before the DG and the
Commission respectively by not denying the material confronted by the DG. Needless to add, such
cooperative conduct optimizes the resources of the DG as also expedites the adjudicatory process
besides lessening the regulatory burden. The ultimate object of the Act is to correct the market
distortions and to discipline the behaviour of the market participants. In such backdrop, the
Commission holds that the objectives of the Act would be met if the parties in the present matter
cease such cartel behaviour and desist from indulging in similar behaviour in future, as directed
earlier. The parties are however, cautioned to ensure that their future conduct is strictly in accord
with the provisions of the Act, failing which any such future behaviour would be viewed seriously
constituting recidivism with attendant consequences.

Interesting judgement because so many people have simply confessed- seems like they knew that
there would be no penalty. However, they seemed to have ignored S. 53N- every single victim (any
end user) can file a compensation. They have confessed, now anyone can go and claim
compensation. So far such claims have not taken off in India however, when they do the people who
have confessed will be in trouble.
Cartelization by Tyre Manufacturers
We will compare and contrast this case with cement builders case.
Facts- ATMA. In this case commission did not find a violation. Why?

Information being collected by ATMA. However, the information was being collected to file an anti
dumping case. Anti dumping is when one country (like china) sells a product below normal value.
Normal value is usually the price prevailing in a country- if you sell below that price then its
dumping. So if in china the price prevailing price is x and and china is selling a product below x in
other countries then its dumping.

The commission says that its true that you collected info but did not disseminate it. So there is no
info exchange in this case.

Sec 3 (3)
Explanation.—For the purposes of this sub-section, “bid rigging” means any agreement, between
enterprises or persons referred to in sub-section (3) engaged in
identical or similar production or trading of goods or provision of services, which
has the effect of eliminating or reducing competition for bids or adversely affecting
or manipulating the process for bidding

They are back to agreement in this proviso, do not talk about association of enterprises, there has to
be one market so it requires competitive market.
1. Requires persons or enterprise
2. Agreement
3. Look at the ‘effects’ of eliminating or reducing competition (so the focus is on the effects-
due to some kind of manipulation, bidding) eg for manipulative bidding can be when bidders
decide that you may win A bidding, I will win B bidding.

[missed- take notes from someone]

Rajasthan Gas Cylinder (Supreme Court)

Facts- Allegation against suppliers of LPG (IOC) that they engaged in cartelization.

COMPAT and CCI imposed penalty, but SC doesnt. So two authorities below which are supposed to
look at facts have found violation of CA, but SC doesnt.
Its not very clear whether SC is making a distinction between bid rigging, collusive bid rigging and
cartel- it seems that they are using these words interchangeably.

In terms of facts what really is going on relates to LPG gas cylinder. IOCL is a state owned
enterprise- they don’t make these cylinders but they merely import gas. THey contract out
manufacturing of these cylinders from MSMEs and all they do is to fit the gas in the cylinder. The
case is about procurement of these cylinders.
There are only 3 buyers namely, IOCL, Bharat Petroleum Corporation Limited (BPCL) and
Hindustan Petroleum Corporation Limited (HPCL), which are public sector companies. But we
are concerned with IOCL.

SC is saying that there is no violation- but why given that CCI and compat found violation?

IOCL floats tender for supply of cylinders (how many entities apply- 19 acc to Sc however total
entities are 46. These 19 entities are unique met in mumbai before submission of offer). The sc
court surprisingly reasoned that since only 19 out of 46 met- how can there be an agreement?
Surprising because communication can happen through mobile phone.

Para 92) Insofar as meeting of bidders in Mumbai just before the date of submission of tender is
concerned, some aspects pointed out by the appellants are not considered by the CCI or the
COMPAT at all. No doubt, the meeting took place a couple of days before the date of tender. No
doubt, the absence of agenda coming on record would not make much difference. However, only 19
appellants had attended that meeting. Many others were not even members or did not attend the
meeting. In spite thereof, even they quoted almost same rates as the one who attended the meeting.
This would lead us to the inference that reason for quoting similar price was not the meeting but
something else. The question is what would be the other reason and whether the appellants have
been able to satisfactorily explain that and rebut the presumption against them?

Moreover, it is not necessary that all 46 need to be part of an agreement- an agreement requires two
people. However, the SC has an all or nothing approach to the whole issue.

What happens at CCI and Compat is also interesting?

CCI issues notice to 45 entities - these entities interestingly hire one single lawyer. This lawyer is
arguing before the CCI that his clients don’t even know each other how can there be an agreement.

Before the COMPAT - the panel asks how come you have hired one single lawyer? - however,
before COMPAT they had different lawyers.

For cartel, there is leniency in sec 46, but there is no leniency for bid rigging. (ofc there is higher
penalty for cartel as well)

Note that there is some evidence in case of bid rigging (dont confuse with collusive bid rigging and
cartel- therefore law deals with them differently

Difference between bid rigging and collusive bid rigging-

Refer to Rajasthan cylinder case- paragraph on types of bid rigging (OECD extract) -

various forms of collusive bidding/bid rigging, which include:

(a) Level tendering/bidding (i.e. bidding at same price — as in the present case). (Para?????)
(b) Cover bidding/courtesy bidding.
(c) Bid rotation.
(d) Bid allocation.
What is courtesy bidding? Bcz you have to reach 3 bidding, some player place a bid reach number 3,
it is courtesy and not collusion.

“(iii) The manner in which the tenders are floated by IOCL and the rates at which these are awarded,
are an indicator that it is the IOCL which calls the shots insofar as price control is concerned. It has
come in evidence that the IOCL undertakes the exercise of having its internal estimates about the
cost of these cylinders. Their own expert arrived at a figue of Rs. 1106.61 paisa per cylinder. All the
tenders which have been accepted are for a price lesser than the aforesaid estimate of IOCL itself.
That apart, the modus adopted by the IOCL is that that final price is negotiated by it and the contract
is not awarded at the rate quoted by bidder who turns out to be L-1. Negotiations are held with such
a bidder who is L-1 which generaly leads to further reduction of price than the one quoted by L-1.
Thereafter, the other bidders who may be L-2 or L-3 etc. are awarded the contract at the rate at
which it is awarded to L-1. Thus, ultimately, all the bidders supply the goods at the same rate which
is fixed by the IOCL after negotiating with L-1 bidder. The only difference is that bidder who is L-1
would be able to receive the order for larger quantity than L-2 and L-2 may get an order of more
quantity than L-3.”

They are saying IOCL has internal expert, every single bidder followed what expert said, so this is
not bid rigging. Is this good reasoning? IOCL is an intermediate consumer, what happens to
consumer surplus in this case? But SC does not seem to concern about consumer surplus in this case.

Para 103-
103) We are emphasising here that in such a watertight tender policy of IOCL which gave IOCL full
control over the tendering process, it was necessary to summon IOCL. This would have cleared
many aspects which are shrouded in mystery and the dust has not been cleared.

They are saying lot of things could have been cleared by COMPAT or CCI. Then why didnt they
remand case back? They have power under s 107 (b) of CPC.

In the CCI judgment, they also talk about plus factor-

“26. What is important is not whether a particular appellant was a member of the association or not.
The existence of an association is by itself sufficient, as it gives opportunity to the competitors to
interact with each other and discuss the trade problems. There will be no necessity to prove that any
party actually discussed the prices by actively taking part in the meeting. If there is a direct evidence
to that effect that is certainly a pointer towards the fact that such party had a tacit agreement with its
competitors. However, the existence of an association and further holding of the meetings just one or
two days prior to the last date of making offers and further admission that the parties had appointed
common agents with the instructions to keep watch on the prices quoted by the competitors would go
a long way in providing plus factors in favour of the agreement between the parties. All these factors
would form a back drop, in the light of which, the further evidence about agreement would have to be
appreciated. We have seen the comments of Director General as also the findings of the CCI. We are
convinced that CCI has not committed any error in considering all these factors as plus factors to
come to the conclusion that there was a concerted agreement between the parties on the basis of
which the identical or near identical prices came to be quoted in tenders for the supply of cylinders
to the 25 States. In view of this, we need not dilate on the individual claims by some of the appellants
that they were not the members of the association or that they were only the dormant members or
that they had abdicated their membership. We also need not go on the claim that while the meeting
was attended by the 19 parties as held by the D.G. and confirmed by the CCI, it was not18 attended
by the rest of the appellants because that would be of no consequence. Once there was a meeting,
there was every opportunity to discuss or to communicate to each other whatever transpired in the
meeting.

Just look at how they understand the plus factor in this para.

Western Coalfields-
Facts- Allegation of identical pricing in the coal market. Public procurement constitutes a significant
chunk of the GDP therefore it's very important. 22% of GDP is just public procurement.

What is the price of one bag of cement? - Rs. 400 assuming the cost is Rs. 300. Profit of rs. 100.
Even if we assume that 10% of the indian population requires cement- the consumser harm will
amount to Rs. 13,000 crore.

Coal India Limited making an allegation wanted to procure ??

All the bidders come with identical pricing. CCI imposes a penalty on all of them together and also
individually under S 48.

Section 48.Contravention by companies- (1) Where a person committing contravention of any of the
provisions of this Act or of any rule, regulation, order made or direction issued thereunder is a
company, every person who, at the time the contravention was committed, was in charge of, and was
responsible to the company for the conduct of the business of the company, as well as the company,
shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and
punished accordingly:
Provided that nothing contained in this sub-section shall render any such person liable to any
punishment if he proves that the contravention was committed without his knowledge or that he had
exercised all due diligence to prevent the commission of such contravention.
In this case do they clarify that they are holding people liable under section 48? Yes but they don’t
specify which clause.

The amount of penalty seems small but recall in companies act directors can be disqualified if they
are convicted under certain statutes (is competition act part of that list in schedule V??-
disqualification under this might lead to negative publicity.

In the UK the competition and markets authority proactively uses director disqualification- every
time they impose a penalty under Competition act they seek disqualification- CCI on the other hand
doesn’t actively pursue disqualification.

Railways Anti-theft clips Tender Case: Re: Reference

Facts- identical pricing again. Who are the entities? - MSMEs mostly

The commission directs parties to cease and desist. Bcz if they dont breach the threshold of 1000 rs
under companies act, there is no disqualification. They do not impose penalty and say do not do it in
future. Reasons behind such order is in para 44-

Para 44. As regards penalty under section 27 of the Act, the Commission notes that there are
circumstances in this case which require the issue of penalty to be looked into somewhat differently.
The facts as projected in the present reference reveal a complete lack of awareness by the opposite
parties which are small and micro enterprises. The replies of many of these parties are effectively
incriminating in nature. Further, none of these parties quoted for more than 50% quantity which was
a requirement under the tender. Thus, right in the beginning the offers made by these parties were not
in accordance with the requirement of the tender and hence they could not have got supplies as per
the tender conditions. Moreover, the bid given by these parties was not the lowest and so they could
not have been awarded the contract.

Are these reasons persuasive ?

They say bcz they are MSMEs? But then what is the definition of this term? S7 of MSME act
provides when one qualifies as MSME. But even in Western Coal fields case there were MSMEs but
they impose monetary penalties there. Here they are only passing cease and desist order. So why
these inconsistent judgement by SC?

Such inconsistent judgement creates transaction costs - as lawyers we should be able to tell our
clients that because you are an msme you will face a particular punishment. But such inconsistent
decision only create confusion.

PES Installations
Facts- Tender issued for two different kinds of medical equipment. The tender wanted one company to
provide both the medical equipment. It was argued this combination requirement excluded companies
which specialise in one of them. All of this led to a situation wherein some firms were able to hijack the
whole process. However, this is not a case of identical pricing, the pricing is different. However, the
evidence is that there are identical mistakes in offer documents.
Technical specifications in their offer. It means that you explain the technical working of your product.
All of these bidders have identical mistakes in the technical specifications of their offers. The
commissioner is asking why do you have identical mistakes.

What defence do they take?- Since we are SMEs we use cyber cafes for making these offers and its
possible that different companies ended up using the same computer which is why mistakes of one
company ended up creeping into another.

However, look at the revenue numbers of these entities- does the claim of using cyber cafe stand?
Their revenues are very high, so this argument that they worked in the same cyber cafe doesnt sound
credible.
Is this collusion? There is no evidence related to pricing. So we have to figure out if there is bid
rigging.
Can we look at loss to the exchequer?- According to RS the definition of bid rigging is not concerned
about loss at all -look at explanation to section 3- ‘process of bidding’ (no focus on outcome). Very
difficult to determine loss in counterfactual.
ANother example- 5g auction- even if companies engaged in bid rigging, we cant figure out!

Is there a problem with proof? - yes.

In this case, there were required to have atleast 4-5 bidders, they didnt that much so they placed there
own bidders. So this is collusion.

Market economy assumes that people act independently of each other. Uncertainty is supposed to be
helpful- the more uncertainties there is the more competition there will be.

The standard of proof is more likely than not- the evidence before you is of identical mistakes-
parties are supposed to act independently of each other. If we apply this standard, there seems to be
bid rigging and violation of CA.

What is the consequence of there being an agreement- presumption that there is AAEC. So the onus
shifts to parties to discharge this presumption.

They imposed a penalty of 5% of turnover on parties in this case. They don't impose penalties on
individuals under S 48.
Note that not in all cases will the commission impose penalty on individuals- not clear why this
inconsistency.
Summary-
The case was filed under section 19 (1) of the act, where NGO had complained that these firms are acting in concert
in the process of supplying medical equipment by certain government hospitals. The tenders were floated for
procurement of Modular Operation Theatre (MOT) and other medical equipments.
At the time of passing an order the commission observed that, "MDD and PMS in their replies before the
commissions have submitted that their employees had accompanied director of PES to cyber cafe, a fact which was
not known to them at the time of recording their statesmen before DG."
As per CCI Act, the maximum penalty for a cartel violation is three times a company's profit or 10% of its turnover,
whichever is higher, the penalty for other anti-competitive agreements including the abuse of a dominant position
should not exceed 10 % of the average turnover of the last three preceding financial years.

Becker’s formula-
I the goal is deterrence and the probability of getting caught is low then you will have to keep the quantum of
punishment very high- d= f(p,q)
In justification to imposing a penalty without proof of loss.

Delhi Jal Board-

Facts- this case is not for understanding bid rigging.

It is here because of the concept of ‘single economic entity’. Two aditya birla entities are involved in
this case. GIM and ABCL. Delhi Jal board is responsible for supplying water to delhi. Water in india
needs to be purified - these companies take the bid for supplying chemicals needed for water
purification. The allegation is that there is bid rigging- but because of what? Similar pricing (not
identical).
However, we won’t focus on this.
Focus on the defence these two companies take- these companies argue that we are part of the same
group (aditya biral group) how can we agree when we are the same?

As an aside- think about the definition of enterprise- s. 2(h) - includes subsidiaries as well- which
would mean that if Aditya birla chemical is a subsidiary of GIm then they are just one company.

In para 121- The commission looks at the cases cited by GIM and ABCL and observe that in all the
cases of single economic entity doctrine penalty has been imposed.

Para 123-
123. In the instant case, DJB floated tenders for the procurement of PAC and LC in Ref. Case Nos.
03 & 04 of 2013, respectively. The Opposite Parties including ABCIL and GIL participated in the
tenders by submitting their respective technical and commercial bids as per the requirement of the
said tenders. After qualifying in the technical bids, bidders entered the second stage of financial
bidding wherein the rates quoted by them were examined by DJB. Thereafter, DJB negotiated the
prices with the selected bidders. Meanwhile, ABCIL purchased the chloro chemical division of KCIL
in 2011. It is noted that ABCIL did not participate in the tender for supply of PAC till 2010-11, i.e.
till the acquisition of the chloro chemical division from KCIL. However, pursuant to such
acquisition, rather than submitting a single bid, GIL and ABCIL continued to submit separate bids to
the invited tenders. It is clear that at every stage of the bidding process, suppliers including ABCIL
and GIL were treated as opponents/ competitors and these bids were assessed individually and not
collectively. Therefore, the Commission finds no reason not to treat ABCIL and GIL as competitors
irrespective of the fact that they are related to each other by virtue of common shareholders,
employees, etc., if any.

Its not clear what the relationship between the two entities is. What is the interrelationship between
the two entities- how are they related?

Section 5 Explanation.— For the purposes of this section,— (a) “control” includes controlling the
affairs or management by— (i) one or more enterprises, either jointly or singly, over another
enterprise or group; (ii) one or more groups, either jointly or singly, over another group or
enterprise; (b) “group” means two or more enterprises which, directly or indirectly, are in a position
to — (i) exercise twenty-six per cent or more of the voting rights in the other enterprise; or
(ii) appoint more than fifty per cent of the members of the board of directors in the other
enterprise; or (iii) control the management or affairs of the other enterprise;

They are talking about three things-

1. 26% shareholding - why is 26% important? - Special resolution. For the purpose of merger
control this threshold is increased to 50% (will cover later)
2. Ability to appoint board of directors (more than 50% of the board)-
3. Management control

The question is- are the two entities part of the same group?
However, the definition of bid rigging talks about agreement between enterprises (and not group).
What’s missing is the association of enterprises (didn’t get its relevance).

Try and find the ultimate parent entity of both the companies.
The commission seems to be relying on the (iii) part ‘control’ wherein Kumar Mangalam Birla is in
control of both the entities.

The commission is saying that now you are claiming to be the same but why did you separate bids
and pretended to be separate from each other. Find the paragraph-

At this stage, it is pertinent to note that had ABCIL and GIL been a single enterprise, it is not
understood as to why, in the first instance, they participated in the bidding process as separate
bidders instead of one entity. By bidding as separate entities, GIL and ABCIL were behaving like two
separate competing companies in the market and before the procurer. DJB cannot be expected to
know the intrinsic details of day to day management of the business of GIL and ABCIL. It appears
that GIL and ABCIL were giving DJB the impression that they are separate decision making centres.
To illustrate, in addition to submitting separate bids with separate costing, it is observed that GIL
and ABCIL have different units of manufacturing and different addresses for correspondence. It can
also be seen from the statement of Mr. Shailendra Deshpande, Senior Vice President (Sales &
Marketing Value Added Products) of GIL, that different individuals attend the bid negotiation
meetings with the DJB. However, the final price is concluded after consultation with the common
head. Mr. Deshpande attended the meeting on behalf of GIL while his assistant general manager,
Mr. Alok Singh, attended on behalf of ABCIL

Even if we assume that you are part of the same economic entity then why did you pretend to be
separate previously?
What is the commission not talking about? Standard for determining single economic entity- how
will it be decided in future cases.
The other thing they say that is that it is a doctrine of offense ( and not a defense)- the doctrine was
employed in order to impose penalty. Thus wholesale transportation of doctrine is not helpful.

HOwever, commission ignores section 27 (g) proviso

(g) pass such other order or issue such directions] as it may deem fit.
Provided that while passing orders under this section, if the Commission comes to a finding, that an
enterprise in contravention to section 3 or section 4 of the Act is a member of a group as defined in
clause (b) of the Explanation to section 5 of the Act, and other members of such a group are also
responsible for, or have contributed to, such a contravention, then it may pass orders, under this
section, against such members of the group

For the purpose of penalty, the CA does refer to group. This is not a strict liability provision-
commission has to show that member of the group entity has been responsible for or has contributed
to contravention of ca.

Does the commission impose penalty in this case? - confirm

Why doesn’t the commission have penalty guidelines?- commission functions as an adjudictory
authority (but how is this relevant)- even supreme court has no penalty guidelines- our job as lawyers
to follow the cases decided by an adjudicatory authority and figure out a pattern ( for example high
penalty in carte lcases)
Do they impose penalty on individuals in this case? - No they don’t. This is tricky. How does the
commission decide as to whether to impose penalty on individuals or not??

One of the things that used to be said about MRTP was that it was extremely outdated (no definition
of cartel, bid rigging etc). However, read section 33 of the MRTP Act.

1) 1[Every agreement falling within one or more of the following categories shall be deemed, for the
purposes of this Act, to be an agreement relating to restrictive trade practices and shall be subject to
registration] in accordance with the provisions of this Chapter, namely:—
(a) any agreement which restricts, or is likely to restrict, by any method the persons or classes of
persons to whom goods are sold or from whom goods are bought;
(b) any agreement requiring a purchaser of goods, as a condition of such purchase, to purchase
some other goods;
(c) any agreement restricting in any manner the purchaser in the course of his trade from acquiring
or otherwise dealing in any goods other than those of the seller or any other person;
(d) any agreement to purchase or sell goods or to tender for the sale or purchase of goods only at
prices or on terms or conditions agreed upon between the sellers or purchasers- Isn’t this similar to
a cartel?
(jb) any agreement as to the bids which any of the parties thereto may offer at an auction for the
sale of goods or any agreement whereby any party thereto agrees to abstain from bidding at any
auction for the sale of goods;- bid rigging??

Note that you will have to register these agreement- this is tricky (why?)

CP Cell, Directorate General Ordnance Service –

Handlooms and the price are almost identical in this case. Interesting point in this case is that they
do not find any violation of Section 3 in this case. There is a paragraph on individual liability under
section 48, read para 104-
The Commission also negatives the contention of OP-1 that Section 48 will not apply in respect of a
contravention under Section 3 of the Act,
but is confined only to contraventions mentioned under Chapter VI of the Act, or that an individual
covered under Section 48 of the Act
cannot fundamentally be punished under Section 27 of the Act. The Commission in this regard
observes that both Section 27 and Section 48
of the Act are cast in wide sweep. Also the language employed under Section 48(1) of the Act,
applies to contravention of any of the provisions
of the Act, including Section 3 of the Act, as well in its fold, and not merely the contraventions as
provided under Chapter VI as has been
contended by OP-1. The Commission observes that Hon’ble Delhi High Court has settled the issue in
the Monsanto judgment, which is as
under:
The Commission also does not find any merit in the argument of OP-1, that salaried individuals do
not have any ‘relevant turnover’ and as
such cannot be assessed under Section 27(b) of the Act. In this regard, the Commission notes that in
the Monsanto judgment, the argument
has already been repelled by the Hon’ble Delhi High Court- “37. …There cannot be any dispute that
if the Company and the Officers /
Directors are being proceeded against for violation of Sections 3 and 4, there has to be a consequence
for violation. Mr. Kapur and Mr. Rao’s
plea was that the word ‘turnover’ would not be applicable to Officers / Directors. The plea appears to
be appealing on a first blush, but on a deeper consideration, if we agree with the submission made by
Mr. Kapur and Mr. Rao then the very provision of penalty to be imposed on the
Officers / Directors being ‘persons’ in terms of Section 27(b) would be rendered otiose / nugatory. In
other words, there would not be any
stipulation of penalty to be imposed on Officers / Directors even if they are found to be violating
Sections 3 and 4. That cannot be the intent of
Sections 27(b) and 48. Such a stipulation surely requires a purposive interpretation.”

State Bank of India tender (CCI Suo Motu Case No. 02 of 2020, Order dated 03 February 2022
- in this case notice the legal standard used for agreement.

Facts-

Para 37-
The Commission is of the view that such striking similarity in the outcome projected in the e-mail
dated 04.06.2018 sent by Mr. Naresh Kumar Dasari and the actual outcome of reverse auction cannot
be a mere coincidence, and the same indicates meeting of minds between the OPs to fix prices,
geographically allocate the market, and rig the bids in the Impugned Tender.

They are talking about some email-

Para 29- (copy paste image)
Isn’t this email a textbook example of smoking gun evidence- it is literally conclusive of the whole
issue. For a balance of probabilities standard this is probably the best evidence you could get.
The relevant market is signs used by SBI in their offices.
The commission is doing is that there should be meeting of minds for agreement- however the
competition act does not say this- why doesn’t the commission fit this case in one of these
categories.

Note that different cases lay down different standard for agreement- will create problems in future
cases.

One of the defense in this case is interesting- the OP say that we might have agreed but we didn’t act
on our agreement. What does this mean? It means that there was no appreciable adverse effect on the
competition.
What does the commission say about this?- para 97
As pointed out previously, a bare reading of the provisions of Section 3(1) of the Act, would make it
evident that these provisions not only proscribe the agreements which cause AAEC but the same also
forbid the agreements which are likely to cause AAEC. Thus, any collusive or concerted conduct
amongst competitors by way of exchange of commercial information resulting in inter alia
determining price or geographical allocation of provision of services etc., itself stands captured
within the prohibition imposed and is presumed to have AAEC, by virtue of provisions of Section 3(1)
of the Act read with Section 3(3) thereof. Hence, the contentions of the OPs concerning absence of
AAEC seem to hold no water and are thus, rejected by the Commission.
Two points-
1. Go back to statute- it talks about likely to case AAEC - so outcome is irrelevant
2. Meaningless to say that you dind’t case aaec because there is presumption - but this would
amount to rebutting the presumption.

Relate to TYRe case- information was gathered for anti dumping case- not disseminated between the
companies themselves.
Analogy- i smoke but i do not inhale.
The defense is similar in SBI case- we shared these emails but we did not implement - however,
commission is not persuaded. Therefore, effectuation (or lack thereof) is irrelevant.

Do they impose penalty on individuals in this case?- 1%. But why not 5% or 8% which they have
imposed in other cases.

Is there anything about mitigating factors?

Para 16.9- covid 19??

In Re: Cartelisation by Shipping Lines (Suo Motu Case No. 10 of 2014, Order dated 20 January
2022

Large part of the order is redacted. Whatever is relevant is redacted. It seems to not follow the third
prong of natural justice as public cannot read this order. There is a confidential version and the public
version and the public version is redacted.

They are some sea cargo carriers in this case by name MOL and NMCC- there is some joint leniency
argument made in this case. If U is filing a leniency application then file it before DG. They are
arguing leniency because probability of detection is low and hence law encourages this but just file it
before the DG. They jointly filed the leniency application. The commission rejected their argument
in para 5-

During the pendency of investigation before the DG, MOL and NMCC also approached the Commission
on 29.07.2016 as lesser penalty applicants, by filing a joint application under the provisions of Section 46
of the Act read with Regulation 5(1) of the Lesser Penalty Regulations. The Commission, however, vide
order dated 03.08.2016, rejected the said application dated 29.07.2016 on the ground that two competing
companies have filed a joint application. It was observed by the Commission that under Lesser Penalty
Regulations read with Sections 46 of the Act, there is no provision whereby two or more parties can
jointly file an application under Section 46 of the Act. It was also noted that such joint application runs
counter to the spirit of the lesser penalty provisions. Thus, thereafter, MOL, followed by NMCC, filed
separate applications before the Commission on 04.08.2016, under Section 46 of the Act read with
Regulation 5(1) of the Lesser Penalty Regulations.

They said two thigs- firstly, there is no provision that allow such joint application and secondly such
joint applications go against the spirit of the business and hence, we cannot allow such an
application.
RS- this is antithetical to the problem of business dilemma hence judgment is right.

Large part of the public version of the order is redacted. Wherein the key names are deleted so we do
not know what is really going on in the case.

Look at argument of confidentiality ring.

RS- confidentiality ring in this case- herein only the lawyers will be part of the confidentiality
information and the lawyers are not allowed to share it with their clients coz if the parties are
confidential info, there will be sensitive info exchange. But the confidentiality ring came into effect
on 8 April 2022 and was not present during the case. Implementation even before legislation, Now
th

retrospective application is problematic. CR itself is problem coz it restricts access to info.

RS- they do not know whether the argument by the K-line is right or not, they are just somehow
unsatisfied with the argument, so they are citing many reasons. In terms of section 3(5)(ii), it is an
exemption to any person to export goods out of India, they are reading this exemption very narrowly,
which according to RS is fine. Exemptions should be read narrowly. They are focused on the word
‘person’, they are saying that exemption applies only to person who is exporting, since the shipping
companies are not directly exporting and are doing it indirectly through someone else, the exemption
does not apply to these shipping companies.

In this regard, at the outset, it is observed that the aforesaid provision does not oust the applicability
of the provisions of Section 3 of the Act as it merely declares that nothing contained in Section 3
shall restrict the right of any person to export goods from India to the extent to which the agreement
relates exclusively to the production, supply, distribution or control of goods or provision of services
for such export. Furthermore, it is selfevident that the limited protection granted thereunder, is
available only to a specified category of service providers i.e., “exporters” of goods, which is clearly
reflected in the phrase “right of any person to export goods from India”. In the present matter, the
Opposite Parties are not the exporters in terms of Section 3(5)(ii) of the Act; instead, they are
providing maritime transport services to OEMs who are actually the exporters. Merely because the
end product i.e., the vehicles manufactured by these OEMs, in India, were being exported out of
India, it would not accord any protection to the anti-competitive agreement entered into by the
Opposite Parties. Acceding to the plea raised by K-Line would render the entire scheme of the Act
redundant in respect of cartels entered into by the parties for supply of any input goods/ services,
where the ultimate product is being exported out of the country. This would not only be an absurd
proposition but agreeing tosuch interpretation would also make the country’s exports as well as India
as a manufacturing hub, uncompetitive. This would also have a negative impact on the “economic
development” of the country, which is one of the criteria laid down in under Section 19(3)(f) of the
Act for determining whether an agreement has an appreciable adverse effect on competition under
Section 3 of the Act has an AAEC in India. Therefore, the plea of KLine to invoke the purported
exemption provided to the export cartels under Section 3(5)(ii) of the Act, in the present matter, is
thoroughly misconceived, and thus, rejected.

They use section 19(3)(f) which is never used and use it to say that ‘economic development’ will be
impeded in this case.
Sections for reference-
3(5) Nothing contained in this section shall restrict—(ii) the right of any person to export goods from India to the
extent to which

the agreement relates exclusively to the production, supply, distribution or

control of goods or provision of services for such export.

19 (3) The Commission shall, while determining whether an agreement has

an appreciable adverse effect on competition under section 3, have due

regard to all or any of the following factors, namely:— (f) promotion of technical, scientific and economic development
by

means of production or distribution of goods or provision of services.

It has also been averred that K-Line has not caused AAEC in India, as the ‘ultimate consumer’ was
located outside India. In this regard, it is important to note the definition of ‘consumer’ as laid down
under the Act. The relevant extract of Section 2(f) is as follows: “consumer” means any person who
— (i) … (ii) hires or avails of any services for a consideration which has been paid or promised or
partly paid and partly promised, or under any system of deferred payment and includes any
beneficiary of such services other than the person who hires or avails of the services for
consideration paid or promised, or partly paid and partly promised, or under any system of deferred
payment, when such services are availed of with the approval of the first-mentioned person whether
such hiring or availing of services is for any commercial purpose or for personal use; (Emphasis
supplied) It is clear from the above provision that the Act makes no distinction between an ‘ultimate
consumer’ and an ‘intermediate consumer’ i.e., where the goods/services are used as an input in the
value chain. In the present matter, the OEMs with manufacturing bases in India availed the services
of the OPs for maritime transport of vehicles manufactured by them in India to their overseas
markets. Therefore, the OEMs located in India would constitute ‘consumer’ in terms of Section 2(f)
of the Act and collusion between the OPs to fix the price, allocate markets, limit supply, collusive
bidding, etc. is bound to have an impact on the said OEMs in India. Accordingly, the said plea of K-
Line also stands rejected.

In the Eu context, they are only concerned with the impact on the consumers residing in the EU.
They are only focused about their consumers and not to all consumers in general. But in the above
paragraph, the commission interprets it in a way that there are empathetic about outside consumers,
this is wrong. Coz passing of AAEC to outside consumer might or might not be possible, maybe their
country is highly competitive or coz of some reason such AAEC is not passed on to them, how is
CCI so sure that they are suffering, also why are they concerned about outside people.

But the commission notes here that if there is a passing on, then it is just an export cartel for which
there is no worry, however if there is no passing on, then there is a worry. The commission uses the
word AAEC in india, therefore they are majorly concerned with India.

In US, export cartels are permitted but on the other hand, there are extra territorial provisions.

Read section 3- In the relevant market of India- effects law the effect has to be in India.

K-Line has also averred that appropriate orders have already been passed in other affected
jurisdictions pertaining to the routes which are under investigation in the present matter. Therefore,
in the interest of comity between competition authorities worldwide, it would be expedient and
correct for the Commission to conclude the present investigation. In this regard, the Commission
notes that the mere fact that other competition authorities have already examined and passed
appropriate orders on the alleged conduct, may not be of much consequence in the present matter. If
the conduct of the parties is found to be violative of the provisions of the Competition Act in India,
the same needs to be examined as per the extant statutory framework. Accordingly, the said plea of
K-Line is also misplaced, and accordingly, rejected.

They are saying that there is International double jeopardy that since there is penalized elsewhere, do
not penalize them here. But all the laws are national, therefore under all the laws can punish the same
person multiple times.

There is also an argument on the respect rule-

The ‘Respect Rule’ was at the heart of the cartel activities that took place between the car carrier
shipping companies and is also a key focus of MOL’s lesser penalty application and additional
submissions. The Respect Rule worked in a way that each carrier was able to maintain its established
position within its main customer accounts. The carriers could also maintain or increase prices by
acting in concert with the other carriers to jointly resist requests for price reductions by the OEMs.

This rule actually helps the carriers in respecting each other’s customs. It is a Japanese way of saying
this.

Non- horizontal agreements-

Section 3(4)- (4) Any agreement amongst enterprises or persons at different stages or levels
of the production chain in different markets, in respect of production,

supply, distribution, storage, sale or price of, or trade in goods or provision

of services, including—

(a) tie-in arrangement;

(b) exclusive supply agreement;

(c) exclusive distribution agreement;

(d) refusal to deal;

(e) resale price maintenance,

shall be an agreement in contravention of sub-section (1) if such agreement causes

or is likely to cause an appreciable adverse effect on competition in India.

3(3)- proviso- Provided that nothing contained in this sub-section shall apply to any

agreement entered into by way of joint ventures if such agreement

increases efficiency in production, supply, distribution, storage,

acquisition or control of goods or provision of services.

But this provision of joint venture is not there in section 4 of the act.

See 2(z)- if definition not there in CA, then go to companies act.

In companies act, 2013, see definition of associate company- 2(6) ―associate company‖, in relation
to another company, means a company in which that other company has a significant influence, but
which is not a subsidiary company of the company having such influence and includes a joint venture
company.

Example of joint venture is Vodafone and Idea setting up VI. Hero Honda is also another example.
Why do parties come together, because there can have a shared pool of expertise.

So long as you have an entitlement to let assets pooled into another company then there can be a joint
venture.

There are some case laws prior to 2013 which define JV in terms of risks and rewards but the CA
2013 definition is broader.

Section 4 says that ‘any agreement amongst enterprises or persons’, then there is no use of
association of persons. Unlike 3(3)- there is a possibility of multiple markets and they need not be
competitors. Hero Honda for example was not competitors before they came together.
20 (4) For the purposes of determining whether a combination would have the

effect of or is likely to have an appreciable adverse effect on competition

in the relevant market, the Commission shall have due regard to all

or any of the following factors, namely:—

(a) actual and potential level of competition through imports in the

market

19(3) The Commission shall, while determining whether an agreement has

an appreciable adverse effect on competition under section 3, have due

regard to all or any of the following factors, namely:—

(a) creation of barriers to new entrants in the market;

(b) driving existing competitors out of the market;

(c) foreclosure of competition by hindering entry into the market;

(d) accrual of benefits to consumers;

(e) improvements in production or distribution of goods or provision

of services; or
(f) promotion of technical, scientific and economic development by

means of production or distribution of goods or provision of services.

20(4) says imports but 19(3) does not talk about imports. Therefore if they [hero and Honda] are
competitors in different foreign markets then they cannot be said to be competitors per se.

Hyundai motors

Allegations is that these Hyundai controls their spare parts, forcing the consumers to buy their spare
parts are exclusively with some distributors assigned by the Hyundai.

This can be an exclusive dealership agreement. They are fitting it under ‘exclusive supply’ in section
3.

3(4) explanation
(b) “exclusive supply agreement” includes any agreement restricting in any

manner the purchaser in the course of his trade from acquiring or

otherwise dealing in any goods other than those of the seller or any other

person;

Here there are talking about dealership between Hyundai and supplier. Because hyundai restricts the
supplier to keep only their spare parts. In 3(4)- it says that the consumer cannot rely on production
chain.

This case involved multiple markets; spare parts are on the production chain. In Hyundai, is there a
penalty, 0.3% i.e. 87 crore, but they peg majorly on the section 4 with which we are not concerned
now.

How does RPM have anti-competitive effect on inter brand competition?

Sonam Sharma- case is about the apple phones having only two service providers Airtel and Aircell.
Here is there any penalty-

We will take Maruti Suzuki case in detail after mid-term to ensure that everyone gets it, here they did
impose penalty under section 3(4).

3(4)- only talks about goods and not services.

All of these factors are 3(4) are copied from MRTP that is why they are quite old in that way.
a) tie-in arrangement;

(b) exclusive supply agreement;

(c) exclusive distribution agreement;

(d) refusal to deal;

(e) resale price maintenance,

shall be an agreement in contravention of

Why is it so that MRTP act only talks about goods because services are a relatively newer term
which came after 1990? There could be a legal logic over here.

Let us read 2(i)- (i) “goods” means goods as defined in the Sale of Goods Act, 1930 (8 of
1930) and includes—

(A) products manufactured, processed or mined;

(B) debentures, stocks and shares after allotment;

(C) in relation to goods supplied, distributed or controlled in India,

goods imported into India;

2(u)- “service” means service of any description which is made available to

potential users and includes the provision of services in connection with

business of any industrial or commercial matters such as banking,

communication, education, financing, insurance, chit funds, real estate,

transport, storage, material treatment, processing, supply of electrical or

other energy, boarding, lodging, entertainment, amusement, construction,

repair, conveying of news or information and advertising;

In theory, you can always go anywhere and buy spare parts, but when you do not buy authentic
Hyundai parts, then warranty lapses. Hyundai may say that relationship between me and that service
provider is only to the sale of spare parts. They are just providing services to the distributors to how
to provide service of those parts. Then service is not given in section 3(4). But the definition is
inclusive; therefore can we include services into it.
3(4) explanation-

(c) “exclusive distribution agreement” includes any agreement to limit, restrict

or withhold the output or supply of any goods or allocate any area or

market for the disposal or sale of the goods;

exclusive distributor is one who can sell but will sell only one company thing. Like apple stores sell
only apple products. There is also a geographical restriction on these distributors.

3(3)- Any agreement entered into between enterprises or associations of

enterprises or persons or associations of persons or between any person and

enterprise or practice carried on, or decision taken by, any association

of enterprises or association of persons, including cartels, engaged in identical

or similar trade of goods or provision of services, which— (c) shares the market or source of production or provision
of services by

way of allocation of geographical area of market, or type of goods or

services, or number of customers in the market or any other similar

way;

there is presumption when two competitors conclude of the AAEC, but when say apple enters ino
agreement with stores there might be AAEC but there is no presumption under the law.

3(4) explanation - “tie-in arrangement” includes any agreement requiring a purchaser of

goods, as a condition of such purchase, to purchase some other goods;

There are some cases when the purchaser cannot say the supplier to sell other products for example
in laptop you will get intel chips whether you like it or not.

29/4/2022
19(3) The Commission shall, while determining whether an agreement has

an appreciable adverse effect on competition under section 3, have due

regard to all or any of the following factors, namely

The section uses the word ‘shall’ and also the words ‘due regard to’. Both these words are opposite to
each other, ‘due regard’ diminishes the effect of ‘shall’.
(a) creation of barriers to new entrants in the market;

The new entrants in the food delivery market are Amazon eats, Danzo (that is basically a private
delivery service). Swiggy and Zomato actually creates barriers that prevent the entry of new entrants.
They can say that the restaurants cannot enter into any agreement with the new food delivery apps. If
the restaurants have a clause that they cannot enter into any agreement with the new apps, then that
can be a barrier for a new app.
19 (3) (c) foreclosure of competition by hindering entry into the market;

The difference between clause a and clause c, is that in clause c there is a barrier that is there even
before the entry of the new entrant i.e. even before you enter the market, there are barriers created
while in clause a the barriers are for the new entrants who have already entered.

During Covid times, ppl were thinking about oxygen cylinders, auto companies started
manufacturing medical equipment. But you need license before you change business; therefore
clause c is actually a barrier to a potential entrant/competitor and not an actual competitor.
Sometimes these licenses do not make any legal sense, they are often illegal.

19 (3) b) driving existing competitors out of the market;

In clause a, you are creating a barrier while in b you are throwing the competitor out of the market. Therefore the
degree of barriers is changing.

19 (3) (d) accrual of benefits to consumers; [very simple clause to understand]

19 (3) (e) improvements in production or distribution of goods or provision of services; [one word
for these sentences efficiency] [proviso to section 3(3) actually uses these words of efficiency-
Provided that nothing contained in this sub-section shall apply to any

agreement entered into by way of joint ventures if such agreement

increases efficiency in production, supply, distribution, storage,

acquisition or control of goods or provision of services.]

Commission have understood these clauses in the dichotomy of positive and negative clauses. Clause
a to c are negative clauses and d to f are positive clauses- and they believe that these clauses must be
balanced.

In Re: Alleged anti-competitive conduct by Maruti Suzuki India Limited

Cartel formed by MSIL within the dealership domain. They have a discount control policy wherein if
a dealer is found giving extra discounts, a penalty is levied upon the dealer by MSIL. They are
looking at one dealer in Maharashtra. In Pune, one distributor whose wife collects cheque for
violation of this discount policy and then she encashes those cheques and uses the money for the
advertisements.

Section 41 of the competition act- (3) Without prejudice to the provisions of sub-section (2), sections 240 and
240A of the Companies Act, 1956 (1 of 1956), so far as may be,

shall apply to an investigation made by the Director General or any

other person investigating under his authority, as they apply to an

inspector appointed under that Act.

Now look at the companies act 2013 [since 1956 act is repealed]- 206. Power to call for information,
inspect books and conduct inquiries.— (1) Where on a scrutiny of any document filed by a company
or on any information received by him, the Registrar is of the opinion that any further information or
explanation or any further documents relating to the company is necessary, he may by a written
notice require the company— (a) to furnish in writing such information or explanation; or (b) to
produce such documents, within such reasonable time, as may be specified in the notice.

(2) On the receipt of a notice under sub-section (1), it shall be the duty of the company and of its
officers concerned to furnish such information or explanation to the best of their knowledge and
power and to produce the documents to the Registrar within the time specified or extended by the
Registrar: Provided that where such information or explanation relates to any past period, the
officers who had been in the employment of the company for such period, if so called upon by the
Registrar through a notice served on them in writing, shall also furnish such information or
explanation to the best of their knowledge.

You have the power to conduct investigation as the inspector under these sections; the same power is
there for the competition inspector wherein a reference was made to this section of the company act.
Therefore, as pr this section even competition inspector requires a warrant before starting
investigation.

They are looking at the e-mails by these dealers to look at the intra-band and inter-brand competition.
They are saying that rather than fighting with the MSIL family let us fight with the competitors.

The moment you fight with competitors there is inter-brand competition. However, when you fight
with the family itself this is intra-band competition [between the two dealers of the same brand].

What does the commission says-

45. The Commission notes that RPM can prevent effective competition both at the intrabrand level as
well as at the inter-brand level. When a minimum RPM is imposed by the manufacturer upon the
distributors, the distributors are prevented from decreasing the sale prices beyond the imposed limit.
In other words, the mechanism does not allow the distributors to compete effectively on price. As
such, stifling intra-brand competition results in higher prices for consumers. 46. In the instant case,
the RPM enforced upon the dealers by MSIL has led to denial of benefits to the consumers in terms of
competitive prices being offered by MSIL dealers. When all the dealers are controlled by a Discount
Control Policy, they are forced to sell the same product at the same price which, to a large extent,
eliminates price competition amongst them. As such, due to almost nil intra-brand competition
amongst MSIL dealers, the consumers would have had to purchase MSIL vehicles at fixed prices
without flexible discounts being offered to them by MSIL dealers, thereby leading to charging of
higher prices/ denial of discounts in kind, to them. Such arrangements perpetuated by MSIL
restricted intra-brand competition amongst MSIL dealers, as it impaired their ability to compete with
respect to prices in the sale and distribution of MSIL brand cars. There are numerous instances
noted above whereby dealers have

Section 3 explanation (e) “resale price maintenance” includes any agreement to sell goods on

condition that the prices to be charged on the resale by the purchaser

shall be the prices stipulated by the seller unless it is clearly stated that

prices lower than those prices may be charged.

Also look at the MRTP act- RPM was a criminal penalty.

In 2007 US- RPM was not held to be violation of Sherman act. Huge departure from 100 years of
precedent.

Indian law was ahead of US as they say that RPM was under section 3(4) and not merely in 3(3).
Mystery shopper- these shoppers are disguised by the MSIL Company who ask for discounts to the
dealers, the moment they give discount- they impose penalty. The court said that had there been no
such policy the consumers would have got the discount therefore; there is a denial of discount and
consumer harm.

19(3)©- it is a inter brand competition

19(3) (a)- Inter brand, 19(3)(b)- again inter brand.

19(3)(d)- either inter or intra, (E)- either [if there is an improvement in efficiency does that benefit
needs to be passed onto the consumer?], (f)-

48. The Commission however, is of the view that, imposition and enforcement of RPM by a player
like MSIL, having a significant market share, not only thwarts intra-brand competition but also leads
to the lowering of inter-brand competition in the passenger vehicles market. When a significant
player such as MSIL imposes minimum selling price restrictions in the form of maximum discount
that can be offered by the dealers, RPM can decrease the pricing pressure on competing
manufacturers. This is more so in case of dealers who may be in an interlocking relationship with
multiple manufacturers. When all dealers of MSIL are selling vehicles at similar prices, the prices of
MSIL vehicle models can be easily comprehended by other players in the market. Being aware of the
similar prices of MSIL’s dealers due to prevalence of RPM in the passenger vehicle segment, the
other OEMs can easily monitor MSIL’s prices and also factor it in their pricing strategy, thereby
softening competition. As such, it relaxes competitive pressure upon them and they can price their
competing models accordingly, which due to the prevalence of RPM, may be priced higher than a
competitively determined price. This phenomenon creates an obstruction for consumers to avail the
benefit of competition in pricing across different brands as well.

How does intra band competition impact inter brand competition

Msil HAS significant market share and 50% of those buyers are affected (cci logic) but RS says that
they can anytime substitute.

Legin- Landmark case read it

3(1) is a standalone actionable provision.

29/04/2022

*missed the first five minutes

What does it mean to create barriers to new entrants? Example of the food delivery market.
Dunzo wants to compete with Swiggy and Zomato- what kind of barriers could these two companies
create?
section 19(3) -

A. Barriers to new entrants

B. Driving existing competitors out of the market-
C. Foreclosure of competition through hindering entry- different from a in that the new entrant
has not even entered the market yet- stage prior to a therefore should be a instead of c
according to RS.
Example- oxygen cylinders during the pandemic- auto companies could have immediately switched
over to manufacturing oxygen- but there might be barriers to entry because you need licenses- this is
a barrier to entry for potential entrants and not an actual competitor.
Example- foreclosure of competition by young advocates aspiring to litigate- no advertisement
allowed

*one can see an increasing degree of severity if we arrange it as CAB

A. Consumer surplus
B. Improvements in production or distribution of goods or provision of service- efficiency
C. Promotion of technical, scientific and economic development by means of production or
distribution of goods or provision of services- economic development

Maruti Suzuki
Facts- sales policy against the interest of consumers- dealers had to get prior approval from MSIL
(Maruti Suzuki India Limited) before offering discounts- they used to levy a penalty in case of non
approval.
MSIL has a discount control policy.
The evidence is interesting- one person used to levy penalty in case of violation of the policy - that
person said it on record that MSIL asked them to do it.

Look at section 41 (3)

Director General to investigate contravention

41. (1) The Director General shall, when so directed by the Commission, assist the Commission in
investigating into any contravention of the provisions of this Act or any rules or regulations made
thereunder. (2) The Director General shall have all the powers as are conferred upon the
Commission under subsection (2) of section 36. (3) Without prejudice to the provisions of sub-
section (2), sections 240 and 240A of the Companies Act, 1956 (1 of 1956), so far as may be,
shall apply to an investigation made by the Director General or any other person investigating under
his authority, as they apply to an inspector appointed under that Act.

What are these provisions in the companies act- Section 206

Unannounced inspection- investigators can enter into premises of any person. Very interesting
provision in both the companies act and competition act. THe CMM can give you permission to
conduct such raids all over the country - very wide power.
Yesterday DG conducted a raid on Cloudtail- follow this.

IN maruti case such a raid is conducted and the DG comes across emails which discussed why it is
important to not compete within the same brand- rather compete with other brands (intra brand v
interbrand competition).
They talk about MSIl family- all the distributors in india- why compete with each other and lower
prices? Rather, focus on competing with other brand.

Here CCI imposed penalty- however, look for reasons for penalty-
Para 45 - section 3(4)

Para 46-
-Mystery shoppers to see whether dealers are adhering to the discount control policy or not.
- the commission is concerned about intra brand competition

Look at section 19(3)- where do you fit intra brand competition-

©- inter brand
(a)- inter brand
(b) - inter brand
(d)- inter or intra brand
(e)- could be either (didn’t get)- is the improvement in efficiency needs to be passed on to the
consumers?
(f) -

e Commission notes that RPM can prevent effective competition both at the intrabrand level as well
as at the inter-brand level. When a minimum RPM is imposed by the manufacturer upon the
distributors, the distributors are prevented from decreasing the sale prices beyond the imposed limit.
In other words, the mechanism does not allow the distributors to compete effectively on price. As
such, stifling intra-brand competition results in higher prices for consumers. 46. In the instant case,
the RPM enforced upon the dealers by MSIL has led to denial of benefits to the consumers in terms of
competitive prices being offered by MSIL dealers. When all the dealers are controlled by a Discount
Control Policy, they are forced to sell the same product at the same price which, to a large extent,
eliminates price competition amongst them. As such, due to almost nil intra-brand competition
amongst MSIL dealers, the consumers would have had to purchase MSIL vehicles at fixed prices
without flexible discounts being offered to them by MSIL dealers, thereby leading to charging of
higher prices/ denial of discounts in kind, to them. Such arrangements perpetuated by MSIL
restricted intra-brand competition amongst MSIL dealers, as it impaired their ability to compete with
respect to prices in the sale and distribution of MSIL brand cars. There are numerous instances
noted above whereby dealers have Suo Motu Case No. 01 of 2019 35 offered additional discounts to
the MSAs assuming them to be genuine consumers, and have been levied financial penalties for their
such conduct by MSIL. As such, it is evident that had there been no Discount Control Policy enforced
by MSIL, customers of MSIL would have been able to buy MSIL vehicles at lower prices. This has
resulted in the denial of benefits to consumers, which would have otherwise been accrued to them in
a healthy competitive environment between dealers. The anti-competitive impact of such a practice of
MSIL is reinforced by the fact that MSIL has more than 50% market share in the passenger vehicles
segment, as observed by the DG. 47. MSIL has argued that its market share keeps fluctuating and
that if the prices of MSIL vehicles are kept high, consumers always have the choice of switching over
to vehicles of other brands. As such, high market share of MSIL holds no nexus with any AAEC being
caused. 48. The Commission however, is of the view that, imposition and enforcement of RPM by a
player like MSIL, having a significant market share, not only thwarts intra-brand competition but
also leads to the lowering of inter-brand competition in the passenger vehicles market. When a
significant player such as MSIL imposes minimum selling price restrictions in the form of maximum
discount that can be offered by the dealers, RPM can decrease the pricing pressure on competing
manufacturers. This is more so in case of dealers who may be in an interlocking relationship with
multiple manufacturers. When all dealers of MSIL are selling vehicles at similar prices, the prices of
MSIL vehicle models can be easily comprehended by other players in the market. Being aware of the
similar prices of MSIL’s dealers due to prevalence of RPM in the passenger vehicle segment, the
other OEMs can easily monitor MSIL’s prices and also factor it in their pricing strategy, thereby
softening competition. As such, it relaxes competitive pressure upon them and they can price their
competing models accordingly, which due to the prevalence of RPM, may be priced higher than a
competitively determined price. This phenomenon creates an obstruction for consumers to avail the
benefit of competition in pricing across different brands as well.

How does stifling of intra brand competition affect inter brand competition?- Maruti has a significant
market share (around 50%)- which means that if you are able to control prices for 50% of the market
then you can significantly affect competition. Moreover, other market participants are also influenced
by these prices and therefore there is inter brand competition.

Suprabhat v Saiful
Facts- sometimes the CCI finds that the case does not fall within either section 3(3) or section 3(4)
and therefore impose a penalty under section 3(1).

Somebody wants to set up a medical store- the association says that you need an NOC from a trade
association to set up the store.

Para 21.16-

The Commission observes that Section 3 (1) is the main provision and can be applied independently
of Section 3 (3) or Section 3 (4) of the Act. It prohibits all kinds of ‘anti-competitive agreements’ and
is not limited to or exhausted by Section 3 (3) or Section 3 (4) of the Act. Section 3 (1) of the Act
states that no enterprise or association of enterprises or person or association of persons shall enter
into any agreement in respect of production, supply, distribution, storage, acquisition or control of
goods or provision of services, which causes or is likely to cause an AAEC within India. Section 3 (2)
declares any agreement entered into in contravention of the provisions contained in sub-section (1)
as void.

Ramakant Kini-
Facts-
Stem cell case- stem cell collection from the baby- the women said that these cells can also be
collected from placenta so she wants them to be collected from placenta. Hospital said that use their
person who collects cell from placenta do not call your own person. The hospital has an agreement
with another company- therefore they wanted them to collect from there.
Commission says that 3(3) case as C1[women] and C2 [hospital] are not competitors.
In ramakant, they said that ‘production chain’ under section 3(4) must have an input output
relationship. Therefore, they said that since the cells are produced by the women and there is no
input from the hospital. Therefore no production chain. Hence no section 3(4)- so they used section
3(1).
You know there are presumption in section 3(3) and no presumption under 3(4) but then there is
nothing under section 3(1), so better fit it there.
SUMMARY-

112

The CCI first decided the issue regarding the standalone application of section 3(1) in the case
of Ramakant Kini v. Dr. Lh Hiranandani Hospital, wherein the commission categorically stated that
if the
agreement does not fall within the ambit of section 3(3) or 3(4) due to its nature, then resort shall be
made to section 3(1) r/w 19(3) to serve the purpose of the Act. Although the Ramakant case was
overruled by order of COMPAT, as the agreement in the specific case does not vitiate the principles
of
AAEC, it does not discuss the interpretation done by CCI regarding 3(1). After that, the CCI in P.K
Krishnan v. Paul Madavana, while referring to the Ramakant Kini Judgment, held that “in Dr. L. H.
Hiranandani Case (Ramakant Kini case) the position is quite clear that an agreement, even if it is not
falling under section 3(3) or 3(4) of the Act, is amenable to the jurisdiction of the Commission under
section 3(1) if the same has an appreciable adverse effect on competition.” CCI again accepted this
line
of reasoning in the case of Rohit Medical Store v. Macleods Pharmaceutical Ltd.

Do you agree with the logic that if an agreement does not fit either in subsection 3 or in subsection 4
then you can simply fit it in subsection 1?

PK Krishnan v Alkem Labs

Facts- NOC insisted upon (similar to suprabhat) - the commission says that this is not even an
agreement - this is refusal to get into an agreement- therefore fit it in section 3(1).

Read section 3(4) closely-

Two competing interpretations - too complicated ask someone. Something about revenue sine la sine

Any agreement amongst enterprises or persons at different stages or levels of the production chain
in different markets, in respect of production, supply, distribution, storage, sale or price of, or trade in
goods or provision of services, including— (6) (a) tie-in arrangement; (b) exclusive supply
agreement; (c) exclusive distribution agreement; (d) refusal to deal; (e) resale price maintenance,
shall be an agreement in contravention of sub-section (1) if such agreement causes or is likely to
cause an appreciable adverse effect on competition in India.

According to RS the words stages and levels qualify different words. Stages does not make sense for
the word ‘product chain’however, the word ‘level’makes sense for production chain.

Difference between vertical and non-horizontal- section 3(4) envisages both of them. Levels of
production chain refers to vertical restraint but different stages in different markets refers to non-
horizontal restraint.

An added complication- Section 19(3) is for the whole of section 3.

However, section 19(1) talks about just section 3(1)- (Doubt- but why is that a complication bc
section 3 is the catchall provision and subsection 3 and 4 are just examples?)

THen look at section 27- again talks about whole of section 3 (intratextually RS makes sense).

According to RS CCI interprets subsection (1) to be a sui juris provision.

We will also look at S28 to understand abuse of dominant position-

Sec 28 Division of enterprise enjoying dominant position- (1) The [Commission] may,
notwithstanding anything contained in any other law for the time being in force, by order in writing,
direct division of an enterprise enjoying dominant position to ensure that such enterprise does not
abuse its dominant position.
(2) In particular, and without prejudice to the generality of the foregoing powers, the order referred to
in sub-section (1) may provide for all or any of the following matters, namely:—
(a) the transfer or vesting of property, rights, liabilities or obligations;
(b) the adjustment of contracts either by discharge or reduction of any liability or obligation or
otherwise;
(c) the creation, allotment, surrender or cancellation of any shares, stocks or securities; 48(d)
[Omitted by Competition (Amendment) Act, 2007]
(e) the formation or winding up of an enterprise or the amendment of the memorandum of
association or articles of association or any other instruments regulating the business of any
enterprise;
(f) the extent to which, and the circumstances in which, provisions of the order affecting an
enterprise may be altered by the enterprise and the registration thereof;
(g) any other matter which may be necessary to give effect to the division of the enterprise.
(3) Notwithstanding anything contained in any other law for the time being in force or in any contract
or in any memorandum or articles of association, an officer of a company who ceases to hold office
as such in consequence of the division of an enterprise shall not be entitled to claim any
compensation for such cesser.

In the US At&T was divided into several telecom companies. Even for microsoft there was such a
threat.
There is a supervision of Parliament in the US, not in India. These rules should be placed before
Parliament once they are made. Europeans are ok with imposing penalty on companies such as Meta
bcz they are American companies. But Americans know that these companies are job providers so
maybe that's why they need to regulate them.
What led to Divide in the US? AT&T actively tried to hinder innovations by other companies.
S 28 does not mean that if you abuse your dominant position, there is a divide. If you just divide
companies like this, then some companies might just stop functioning. (like Meta in Australia) You
might have to allow some abuse by companies.

SHould section 28 be interpreted to mean that the commission can divide a dominant enterprise
without any abuse to prevent it or is abuse of dominance necessary?
According to RS, abuse is necessary. However, the wording of section 28 is ambiguous because it
explicitly says ‘to ensure that such enterprise does not abuse its dominant position’.

Also note that this is a nuclear option, nothing more severe than this.

We looked at S28 to look at the consequences. Now we will look at the S4.

S4 (1) is that abuse can only be done by enterprise or group of enterprise. Enterprise is a person
including a government department which engages in economic activity minus sovereign function.
There is a relevant market, which was not there in S3.

Enterprise= person (government department) + economic activity - sovereign function

AoDP involves several step-
1. Figure out Relevant Market
2. Figure out whether an enterprise is dominant
3. FIgure out whether there is an abuse of the dominant position
4.

Abuse of dominant position 4. 3 [(1) No enterprise or group shall abuse its dominant position.] (2)
There shall be an abuse of dominant position 4 [under sub-section (1), if an enterprise or a
group].—- (a) directly or indirectly, imposes unfair or discriminatory— (i) condition in purchase or
sale of goods or service; or (ii) price in purchase or sale (including predatory price) of goods or
service. Explanation.— For the purposes of this clause, the unfair or discriminatory condition in
purchase or sale of goods or service referred to in sub-clause (i) and unfair or discriminatory price in
purchase or sale of goods (including predatory price) or service referred to in sub-clause (ii) shall not
include such discriminatory condition or price which may be adopted to meet the competition; or (b)
limits or restricts— (i) production of goods or provision of services or market therefor; or
(ii) technical or scientific development relating to goods or services to the prejudice of consumers;
or (c) indulges in practice or practices resulting in denial of market access 5 [in any manner]; or (d)
makes conclusion of contracts subject to acceptance by other parties of supplementary obligations
which, by their nature or according to commercial usage, have no connection with the subject of such
contracts; or (e) uses its dominant position in one relevant market to enter into, or protect, other
relevant market.
Explanation.—For the purposes of this section, the expression— (a) “dominant position”
means a position of strength, enjoyed by an enterprise, in the relevant market, in India, which
enables it to— (i) operate independently of competitive forces prevailing in the relevant
market; or (ii) affect its competitors or consumers or the relevant market in its favour. (b)
“predatory price” means the sale of goods or provision of services, at a. price which is below
the cost, as may be determined by regulations, of production of the goods or provision of
services, with a view to reduce competition or eliminate the competitors. [(c)“group” shall have
the same meaning as assigned to it in clause (b) of the Explanation to section 5.]

We are all dependent on relevant market-context depends.

Look at any of the cases - Example DLF. You don’t hear about dlf in bangalore. However, its very
popular in North India. THus geography matters for relevant market. There are 6 provisions for
relevant market. Why is it so important to understand relevant market?
Many cases are lost or won on this point- if you define it broadly the enterprise becomes small
therefore not even dominant. However, if you define it narrowly then the entity might become
dominant, therefore a very important step.

Step 2- factors of Dominant position are given in Section 19(4)

Step 3- section 4(2)- abuse - the provisions is exhaustive because it uses the word including.

What section 4 is saying is that a large entity has a responsibility not to engage in different types of
conduct. Like Spiderman (with great power comes great reponsibilities)

There are 4 parts in competition act, anti-competitive agreements ( section 3), abuse of dominance
(section 4), mergers and controls, one more (find it- it is given somewhere in notes)

Secion - 28 (1) The [Commission] may, notwithstanding anything contained in any

other law for the time being in force, by order in writing, direct division of an
enterprise enjoying dominant position to ensure that such enterprise does
not abuse its dominant position.
(2) In particular, and without prejudice to the generality of the foregoing
powers, the order referred to in sub-section (1) may provide for all or any
of the following matters, namely:—
(a) the transfer or vesting of property, rights, liabilities or obligations;
(b) the adjustment of contracts either by discharge or reduction of any
liability or obligation or otherwise;
(c) the creation, allotment, surrender or cancellation of any shares, stocks
or securities;
48(d) [Omitted by Competition (Amendment) Act, 2007]
(e) the formation or winding up of an enterprise or the amendment of
the memorandum of association or articles of association or any
other instruments regulating the business of any enterprise;
(f) the extent to which, and the circumstances in which, provisions of
the order affecting an enterprise may be altered by the enterprise
and the registration thereof;
(g) any other matter which may be necessary to give effect to the division of the enterprise.
(3) Notwithstanding anything contained in any other law for the time being in
force or in any contract or in any memorandum or articles of association,
an officer of a company who ceases to hold office as such in consequence of
the division of an enterprise shall not be entitled to claim any compensation
for such cesser.

Also look at MRTP act- section 27-

Something similar to the competition act,

Section 28- 28 (1) The 47[Commission] may, notwithstanding anything contained in any
other law for the time being in force, by order in writing, direct division of an
enterprise enjoying dominant position to ensure that such enterprise does
not abuse its dominant position.
There is a parliamentary supervision of these regulatory authorities in the US, but nothing like this
exists in India.
The moment these rules are formulated, they are supposed to be placed before the parliament- but
the parliament does not really analyze them in that sense.
Economist- read the secret of big tech,
The piece of about how these companies are making money and what is the rate of increase in that
profit.
European countries have an incentive to impose penalties on the big tech companies as these
companies are not Europeans but US. In the US, since these companies provide jobs, it is difficult
to impose penalties.
In US there was ATNT, non ATNT companies came up with innovations, ATNT made efforts that
these innovations does not work. Their radio waves does not work etc, this context led in the US to
this concept of abuse of the dominance position.
Section 28 uses the word ‘enjoying the dominance position’ and it is difficult to prove what is
enjoying meant by. You can prove dominance but providing enjoying dominance position is very
difficult.

If India uses section 28 against any of the foreign entity then these companies may refuse to operate
in the country. Then there will be problem for the country also.
Even big companies like Alibaba fades away then there is going to be a nuclear winter where neither
will these companies operate nor will their benefit accrue to the country.
Section 27- 10% penalty- no other law imposes such high penalty. Data protection act maybe also
impose similar penalty. Section 27 is very stark in that way. Other enactments also have individual
penalties but they are never imposed but under competition act- they do. Therefore these strict
sections in competition act means a lot.
Section 3 talks about association of persons, etc but nothing like this in section 4- it talks about
enterprise or group. Group we know? But what is ‘enterprise’, it means person including
government department and must include economic activity minus the sovereign function.
The first step in this case is to figure out the relevant market, second step is to find out whether
there is a dominant position and the last step in abuse. We have to read the section upside down to
understand these steps.
Expl. (a) “dominant position” means a position of strength, enjoyed by an enterprise,
in the relevant market, in India, which enables it to—
(i) operate independently of competitive forces
This dominance must be in the relevant market. For all of us, dominance is in relation to some
places.

DLF Case (Relevant Market)

In the DLF case, an argument was made that they are not enterprise. The statute categorically states
real estate businesses are enterprises. Not sure why such an argument was made. But we are not
concerned about this.

S2 (r)- “relevant market” means the market which may be determined by the commission with
reference to the relevant product market or the relevant geographic market or with reference to both
the markets;

If we read this, we get an idea that RM should be determined by commission, but DG gives his
opinion as well.
So what is RM?
The allegation is that DLF has abused its dominant position.

How does the commission define Relevant Market? Defines it as high end, low end apartments.
While DG defines it as something else.

12.40 In conclusion, on this issue, this Commission is of the view that the relevant market is the
market for services of 179 developer / builder in respect of high-end residential accommodation in
Gurgaon.

Section 2(r)- RM= RPM or RGM or (RPM + RGM)

But there is a contradiction of this formula that we will find in this case.

Definition of RPM- 2(t) “relevant product market” means a market comprising all those products or
services which are regarded as interchangeable or substitutable by the consumer, by reason of
characteristics of the products or services, their prices and intended use;
Consumer interchangeability and consumer substitutability (but there is a contradiction that we will
se in the case).

Focus on characteristics of products- \

Prices some companies target a wide range of consumers (Xiaomi) whereas others target a portion of
consumers ( Apple)
Intended use- some phones are just camera phones. You have to look at it from the consumer’s
perspective.

2 (s)- “relevant geographic market” means a market comprising the area in which the conditions of
competition for supply of goods or provision of services or demand of goods or services are
distinctly homogenous and can be distinguished from the conditions prevailing in the neighbouring
areas

S 19 (5), (6)(7) talks abt RPM RGM RM respectively.

5) For determining whether a market constitutes a “relevant market” for the purposes of this Act,
the Commission shall have due regard to the “relevant geographic market’’ and “relevant product
market”.

(6) The Commission shall, while determining the “relevant geographic market”, have due
regard to all or any of the following factors, namely:— (a) regulatory trade barriers; (b) local
specification requirements; (c) national procurement policies; (d) adequate distribution facilities; (e)
transport costs; (f) language; (g) consumer preferences; (h) need for secure or regular supplies or
rapid after-sales services. (20)
(7) The Commission shall, while determining the “relevant product market”, have due
regard to all or any of the following factors, namely:— (a) physical characteristics or
end-use of goods; (b) price of goods or service (c) consumer preferences; (d) exclusion of
in-house production; (e) existence of specialised producers; (f) classification of industrial
products.

There are contradictions in the definitions. Section 2 t says that RPM is from consumers’ perspective,
however, section 19(7) talks about existence of specialised producers- this cannot be from
consumers’ perspective.

(f) classification of industrial products- Something about NIC which i couldn't follow- government
has classified different sectors in which different businesses operate and each sector is assigned
code.
Therefore to say that RPM is limited to demand interchangeability/substitutability is not accurate.
There are factors which are not from demand perspective.

The point to note is that all the six provisions need to be read together. The job of the court is to read
the provisions in such a manner that the contradictions do not exist

How do supply factors affect determination of relevant market?

Exampl-e- suppose there is a sudden increase in demand for masks due to covid. There are existing
companies who make masks and some companies who can potentially make those masks but are not
currently doing so. So long as these potential competitors can likely enter the market in a timely and
sufficient manner they will be a part of relevant market.

ANother example- Kansan News case- it was a news channel in punjab. News channels were very
politically oriented. THis was a time of cable TV. government used to ban tv channels having
contrary opinions. However, in the age of dth it is easy for news channels to switch from DTH to
cable tv. Therefore in such a situation the relevant market will include DTH as well because DTH
suppliers can interfere in a timely, likely and sufficient manner.

RGM- e Commission shall, while determining the “relevant geographic market”, have due
regard to all or any of the following factors, namely:— (a) regulatory trade barriers; (b) local
specification requirements; (c) national procurement policies; (d) adequate distribution facilities; (e)
transport costs; (f) language; (g) consumer preferences; (h) need for secure or regular supplies or
rapid after-sales services. (20)

Kansan news

With respect to the question as to whether there was a denial of market access, the Supreme Court
emphasized that the inclusion of the words 'in any manner" in Section 4(2)(c ) of the Act
implies a
wide import and that the words must be given their natural meaning.
Therefore it was held that once the existence of a dominant position is established, the question as
to whether Kansan being a broadcaster is in competition with MSOs is a factor which is irrelevant
for the purpose of application of Section 4(2)(c ) of the Act. The Supreme Court held that Kansan is
denied market access on account of the unlawful termination of the agreement by the Respondents.
However, the Supreme Court declined to uphold the penalty imposed by the CCI, holding that since
Kansan's TRP is lower than that of other broadcasters, the Respondents were justified in
terminating the agreement mid-stream. The Hon'ble Court held that the CCI's finding that
the TRP
rating of Kansan was almost equal to that of other broadcasters is factually incorrect.
This case was cited by Grasim to say that same group companies cannot cartelise. However, CCI in
Jal Board at para 122 said that you cannot read these cases in isolation. But CCI Order in Kansan,
Page 68, Para 6.5.2: The OPs are part of the same group and there cannot be a cartel between
entities of the same group under Sec 3(3) [RS: This observation is inaccurate because the section
itself does not provide for such an exception]. In Kansan News after making this wrong observation
then went on to say that this was important only from the PoV of penalty but then it goes on to

MCX Stock Exchange v NSE

Facts- involves currency derivative segment. MCX were functioning in just this market. NSE
however, was functional in others (equity, debt etc). NSE does not charge any fee for transactions in
the currency derivative segment- it has other sources of revenue. However, MCX is functioning in
just this and can’t afford to charge no price at all.

The CCI says tat geographic market in this case is pan india.
Also notice that there is no AAEC component in dominant position- not really concerned about
competition.

Pull out section 19(4)

S 19 (4)(L) relative advantage,by way of the contribution to the economic development, by the
enterprise enjoying a dominant position having or likely to have an appreciable adverse effect on
competition;

IN a very tangential manner for assessing dominance one of the factors relate to AAEC. However, to
prove abuse there is no requirement of AAEC.

The onus is on commission under S4. therefore it has to determine RM, whether there is a dominant
position.

Q- Section 19(4) (l) is circular because it is supposed to help us determine dominance but the sub
section itself uses the phrase an enterprise enjoying dominant position ?
Response- didn’t get the response to this.

Determination of relevant market requires some expertise- interdisciplinary analysis is a necessity -

else there is no way to determine relevant market, dominance and abuse.

https://circ.in/competition-issues/case-study-05/

BCCI case
Is BCCI making an argument that it is not an enterprise?
S5 is 5 the acquisition of one or more enterprises by one or more persons or merger or amalgamation
of enterprises shall be a combination of such enterprises and persons or enterprises.

BCCI is a society registered under the society act Tamil Nadu. They say all our revenue goes to the
development of cricket. CCI imposes a penalty on them. They make a huge turnover. For an
enterprise, it is irrelevant whether you make profit, what your form is, whether you are a company.
You are an enterprise as long as you are a person, you are engaged in an economic activity minus
sovereign function.
S2 (h) “enterprise” means a person or a department of the Government, who or which is, or has been,
engaged in any activity, relating to the production, storage, supply, distribution, acquisition or control
of articles or goods, or the provision of services, of any kind, or in investment, or in the business of
acquiring, holding, underwriting or dealing with shares, debentures or other securities of any other
body corporate, either directly or through one or more of its units or divisions or subsidiaries,
whether such unit or division or subsidiary is located at the same place where the enterprise is located
or at a different place or at different places, but does not include any activity of the Government
relatable to the sovereign functions of the Government including all activities carried on by the
departments of the Central Government dealing with atomic energy, currency, defence and space.
Explanation.-For the purposes of this clause,—
(a) “activity” includes profession or occupation;
(b) “article” includes a new article and “service” includes a new service;
(c) “unit” or “division”, in relation to an enterprise, includes
(i) a plant or factory established for the production, storage, supply, distribution, acquisition or
control of any article or goods;
(ii) any branch or office established for the provision of any service;

It uses ‘who is or has been’ Lets say you have just started today, can you say you are an enterprise?
The explanation uses article. What is an article? S3 (1) does not use article. By including article in
definition of enterprise, they are suggesting that enterprise includes new enterprise as well.
CCI says that you are engaged in an economic activity, so you are an enterprise. Where you use your
revenue is not material.
Under MRTP act, all the gov functions are included unless you can say it is sovereign function.

In the 2nd case of BCCI,

What is relevant market?
BCCI enters into long term exclusive contracts with some Indian entity selling media rights. DG
found IPL as relevant market. CCI agrees. Because BCCI is not able to show substitutable or
interchangeable with cricket as given in definition of relevant product market.

“the Commission concludes that general entertainment programmes telecast on television are not
substitutable or interchangeable with cricket as the content of both these categories do not constrain
each other.”
BCCI says it is interchangeable. But CCI says BCCI is not to show that cricket is substitutable. They
are putting onus on BCCI. But its the job of CCI, why are they putting onus on BCCI? relevant
product market definition shows it is to be determined by CCI.
SSNIP- Small but significant and non-transitory increase in price.
How is it used? LEts say you have to find what is a relevant market? Eg. you have to find
whether Banana is a relevant product market? You will think of a hypothethical monopilistic
market of banana. If there is a small increase in price (SSNIP) in US and India, see if you are
able to increase you profit, then there is a relevant market.
Is laptop substitute of tab? Think of a HMM, increase in SSNIP, will they substitute to tab? It is
a relevant market when the producer reaches a level when it is able to increase the price of laptop
in small yet significant manner.
But there is an exception (Cellophane fallacy) to SSNIP, people might switch to inferior
product.
DLF case-
What do they say about SSNIP?
“a small but significant nontransitional increase in price of a unit in one category [termed SSNIP
test often applied in abuse of dominance cases] would not make the customer shift to another
category. A 5% increase in the price of a villa would not make the intending customer choose a
multi-storey apartment. The purchase may be deferred briefly or the choice may shift to a
slightly less comfortable villa but a person who has made a final consumer choice of preferring a
villa for the reasons of family size, need for privacy, demonstration effect etc. would not switch
to an apartment for a small increase in price”

In the MCX case-

They say it is unnecessary to do SSNIP test. They say there is other test.
In the BCCI case, they apply SSNIP test.
Why are being very selective? Why is there no consistency?
May be because enactment does not mandate them to use SSNIP test. It just uses interchangeable
or substitutability.

But if we see 20 (4)(e)-

(e) likelihood that the combination would result in the parties to the combination being able to
significantly and sustainably increase prices or profit margins;
This is about SSNIP test. But anyways, CCI have been incoherent. There are other tests as well,
but if we cant do SSNIP, we cant even think of doing other tests.

In the definition of enterprise in MRTP act includes ‘is proposed to be’. So new enterprise is also
included.

BCCI should have been able to say that there is an agency which collects data of TRP, therefore
that should be able to say whether people substitute or not. You are supposed to look a the
behaviour of marginal customers (who are on the edge).
We do not define relevant market on the basis of brand, rather we do it on the basis of product.

VeriFone case-
It's a case on abuse of dominant position.
The allegation is that there is one sided contract.
At what point does contract become abuse?
The relevant geographic market is all over India.
VeriFone says the relevant market should be considered as the "market for electronic payments
in India". So they are asking to broaden relevant market.

The moment you define relevant market, you either lose or win the case, because if it is broad you
win, if it is narrow you lose.

How is BCCI in dominant position?

“S4 explanation (a) “dominant position” means a position of strength, enjoyed by an enterprise, in
the relevant market, in India, which enables it to—
(i) operate independently of competitive forces prevailing in the relevant market; or
(ii) affect its competitors or consumers or the relevant market in its favour.

That you are so big that are able to function independently or affect your competitors.

S 19 (4) gives how CCI will access dominant market.

So CCI thinks that there is no competitor of BCCI. Why? Bcz they have the regulatory ability to
determine who gets to represent. No one else can make their own team. “BCCI has assumed the right
to sanction/approve cricket events in India.”
The market share of BCCI is 100%.

In VeriPhon case, the market share is 80% because they have defined relevant market. However, they
add other factors along with market share like market share, size, resources and economic power,
dependence of consumers.

UPSE Securities Limited v. National Stock Exchange

They ask for a deposit to become a member of NSE, which is accessible. CCI says there is no
competition issue. That deposit is required for investor’s security.
UPSE alleges that CCI has found NSE dominant in MCX case.

“The Commission has considered the submissions and materials provided by the parties. The
definition of relevant market proposed by the informant viz ‘securities market in India’ seems to be
correct. It may be relevant here to note that the Commission had held opposite party to be dominant
in the ‘Currency Derivative segment in India’ in an earlier case [MCX Stock Exchange Ltd. & Ors.
v. National Stock Exchange of India Ltd. & Ors (13 of 2009)]. Though the relevant market is much
broader in this case, the assessment done in that case and the information available in the public
domain indicates that opposite party was a dominant player in ‘securities market in India’ as well,
considering its market share, size & resources, its economic power, advantage over competitors,
absence of countervailing buying power and existence of entry barriers etc.”

What is countervailing buying power?

When you have few important power, like Railways is the only buyer, so the buyer can equally have
bargaining power.

Google case
The allegation against Google is that their search is biased. A Matrimonial website filed this case. Is
Google engaged in self-referencing? But it is unclear what the harm is caused to Matrimonial site.
But there is no question of locus standi, anyone can file the case.

WHat is abuse in this case?

Five instances of abuse under section 4(2)-

(2) There shall be an abuse of dominant position 4 [under sub-section (1), if an enterprise or a
group].—-
(a) directly or indirectly, imposes unfair or discriminatory—
(i) condition in purchase or sale of goods or service; or
(ii) price in purchase or sale (including predatory price) of goods or service.
(b) limits or restricts—
(i) production of goods or provision of services or market therefor; or
(ii) technical or scientific development relating to goods or services to the prejudice of
consumers; or
(c) indulges in practice or practices resulting in denial of market access 5[in any manner]; or
(d) makes conclusion of contracts subject to acceptance by other parties of supplementary
obligations which, by their nature or according to commercial usage, have no connection with the
subject of such contracts; or
(e) uses its dominant position in one relevant market to enter into, or protect, other relevant market

There are two types of abuse in EU context- Exclusionary v Exploitative Abuse-

(C) is example of exclusionary
Exploitative - Condition in purchase or sale of goods or service
Sometimes it can be both.
Whats the diff between 3 (4) and 4
In 3 (4) there is no concern of dominant position, even if you have significant market power (which
is lesser than dominant position) to affect the market thats enough. Only there is no idea of ‘market
share’ in 3 (4).

Where does google search bias fit in those 5 instances?

Paragraph 420 - they found it in contravention of Section 4(2)(a)(i) and 4 (2)(c).

a) Ranking of Universal Results prior to 2010 which was not strictly determined by relevance. Rather
the rankings were pre-determined to trigger at the 1st, 4th or 10 th position on the SERP. Such
practice of Google was unfair to the users and was in contravention of the provisions of Section 4(2)
(a)(i) of the Act. (b) Prominent display and placement of Commercial Flight Unit with link to
Google’s specialised search options/ services (Flight) amounts to an unfair imposition upon users of
search services as it deprives them of additional choices and thereby such conduct is in contravention
of the provisions of Section 4(2)(a)(i) of the Act.

The prohibitions imposed under the negotiated search intermediation agreements upon the publishers
are unfair as they restrict the choice of these partners and prevent them from using the search services
provided by competing search engines. Imposing of unfair conditions on such publishers by Google
amounts to violation of the provisions of Section 4(2)(a)(i) of the Act. Google is doing so because it
has dominance in the market for online general web search to strengthen its position in the market for
online syndicate search services. This amounts to violation of the provisions of Section 4(2)(e) of the
Act. Further, as competitors were denied access to the online search syndication services market,
contravention of Section 4(2)(c) of the Act is also made out

Steps to use in exam to find abuse of dominant position- 1.Find the enterprise 2. Find relevant
market 3.find dominant position 4. find abuse.

Meru Cabs (Compat )-

Facts- Look at section 26- the commission has no option but to order an investigation if they find a
prima facie case.
Meru used to charge 23 rs per km. Uber charge only 7 rs. Meru says this is predatory pricing and
hence this is abuse of dominant position.The commission does not find prima facie case. Meru appeal
to COMPAT, COMPAT orders DG investigation. However, they forget its the duty of commission to
direct DG to investigate under S26.

COmpat order has a lot of things to say about dominant position and its likely that Uber and OLA
are dominant.
Section 4. (1) No enterprise or group shall abuse its dominant position.]
(2) There shall be an abuse of dominant position 4 [under sub-section (1), if an enterprise or a group].
—-
(a) directly or indirectly, imposes unfair or discriminatory—
(i) condition in purchase or sale of goods or service; or
(ii) price in purchase or sale (including predatory price) of goods or service.
(b) “predatory price” means the sale of goods or provision of services, at a price which is below the
cost, as may be determined by regulations, of production of the goods or provision of services, with a
view to reduce competition or eliminate the competitors.
The baseline is cost- but the cost itself is determined by regulations (look up the regulations)
What is the meaning of cost according to regulations?

(2) They shall come into force on the date of their publication in the Official Gazette.

1. Definitions. - (1) In these regulations, unless the context otherwise require-

(a) "Act" means the Competition Act, 2002 (12 of 2003);

(b) "average variable cost" means total variable cost divided by total output during the referred
period;

(c) "Cost" as used in Regulation 3 and its derivation may have reference to:

(i) "total cost" means the actual cost of production including items, such as cost of material
consumed, direct wages and salaries, direct expenses, work overheads, quality control cost, research
and development cost, packaging cost, finance and administrative overheads attributable to the
product during the referred period ;

(ii) "total variable cost" means the total cost referred to in clause (i) minus the fixed cost and share
of fixed overheads, if any, during the referred period;

(iii) "total avoidable cost" means the cost that could have been avoided if the enterprise had not
produced the quantity of extra output during the referred period;

(iv) "average avoidable cost" is the total avoidable cost divided by the total output considered for
estimating ‘total avoidable cost;

(v) long run average incremental cost" is the increment to long run average cost on account of an
additional unit of product, where long run cost includes both capital and operating costs;

(vi) "market value" means the consideration which the customer pays or agrees to pay for a product
which is sold or provided or can be sold or provided, as the case may be;

(d) "Commission" means the Competition Commission of India established under subsection (1) of
section 7 of the Act;

(e) "product" means the goods or services, as the case may be, as defined in the Act;

(f) ‘marginal cost’ is the change in total cost that arises when the quantity produced changes by one
unit

The discretion is given to the commission to decide on cost. But it is difficult to find the baseline
cost. The discretion is given to CCI to choose from all of these costs because ex ante it is difficult to
determine which cost will be appropriate in a case.
Recall MCX v NSE- the currency derivatives segment. One of the allegations was that NSE’s
decision to waive transaction fee is predatory in nature. The argument is that there must have been
some ocost and the moment there is zero fee it must be below cost.
CCI pulls up reports from NSE websites - they started currency derivatives in late 90s, they said that
the difference between expenses in the years where there was no CD segment and the years where
there was.
What is predatory pricing? Exclusionary or exploitative? Exploitative.

In Re: Shri Shamsher Kataria v. Honda Siel Cars India Ltd. & Ors.
Facts- The allegation is that the OPs restricted the sale and supply of spare parts of their respective
cars. Very costly to get a car repaired- restricted to certain authorised dealers.

What is the relevant market?

Two markets- Markets for spare parts and market for services- both of them interlinked.
If someone owns a car the primary market is of car but once you have purchased a car you are stuck
with having to purchase spare parts of a particular company. In addition to this you will have to take
a host of services like maintenance etc.

Services become very important for aircrafts - there is MRO. A lot of money is made selling services
rather than aircrafts. Maintenance is complicated.

Do they talk abt RGM? Yes, Pan India.

You can buy spare parts and get services anywhere in India so long as there is an authorised dealer.

This case is different from Meru- compat disagrees with delineation of RGM by the CCI. Compat is
saying that the RGM in Meru is Delhi- NCR.

THe assumption is that once you have bought a car from accompany you are stuck with having to
purchase their spare parts only - is this assumption accurate?
What about the same assumption for services?
Usually, if you get services from elsewhere you lose warranty. But is this the problem with the car
service market?

Paragraph-

The concept of aftermarket- there might be plenty of competition in market for cars but once you
have bought a car the competition in the market for spare parts and services is non-existent. \

The market share of Maruti is 43% (in the market for purchase of car).

Do they impose penalty? Yes.

Different penalties on different manufacturers.
Why is penalty on Tata motors higher than Maruti despite the fact that Maruti has a greater market
share (and greater turnover? )

Under which clause of section 4 do they find violation?

Section 4(2)(a) and ©.
Interface of section 3(4) with section 4?
In the former you need at least two people whereas in the latter the conduct can be unilateral.
However, not that section 4 also talks about group dominance therefore its possible that more than
one parties are involved but its not necessary.

What does the CCI say in Shamsher Kataria wrt section 3(4)?-
Are They talking about an agreement between maruti suzuki and the dealers.

The aftermarket problem is not unique to cars. If you buy any product which requires services then
you are stuck with that product so there is dominance always there? So why is CCI bothered so
much about cars?

So there are 3 things that commission is trying to promote- quality, price, consumer choice.
If customers are not stuck with a particular company in the aftermarket then a new market for these
spare parts will emerge. This is the hope of the commission.

What is their reasoning on 3(4)?

Do they use interbrand v intra brand reasoning? -

“The OEMs: (a) by restricting access to genuine spare parts and diagnostic tools leads to the rise in
the usage of spurious spare parts and (b) by denying the independent repairers access to repair
manuals force them to work on inefficiently, jeopardizing consumer safety. Further, the Commission
is of the opinion that the clauses in agreements requiring authorized dealers to source spare parts only
from OEMs or their approved vendors is anti-competitive in nature. Based on the foregoing, there is
no doubt that by restricting access of independent repairers to spare parts and diagnostic tools and by
denying the independent repairers access to repair manuals, the agreements entered into between
OEMs and authorized dealers have fallen foul of the provisions of section 3(4)(b), 3(4)(c) & (d) read
with section 3(1) of the Act.”

The test is AAEC. But this test is not there for Dominant position. If we read this para, th CCI is
saying that there is high mark up price that the customers pay in comparison to spurious parts. But
high mark up can be addressed through section 4 - is high mark up a concern under section 19(3) (for
AAEC?)
ANswer- perhaps accrual of benefits to consumers section 19(3)(d)

But this can fit in 4 (2) explanation. Read explanation to section 4(2)(a) -

. Explanation.— For the purposes of this clause, the unfair or discriminatory condition in purchase or
sale of goods or service referred to in sub-clause (i) and unfair or discriminatory price in purchase or
sale of goods (including predatory price) or service referred to in sub-clause (ii) shall not include
such discriminatory condition or price (does not include unfair market condition so it is a violation in
any case) which may be adopted to meet the competition; or

Meeting the competition defence-

its excluding discriminatory condition or price.

Example- when you book your flights -do a test- ask what your neighbour pays. THe price will never
be the same this is discriminatory pricing. You can do this discriminatory pricing to meet up the
competition. This is not a violation of CA.
According to RS- high mark up can be seen as unfair pricing- CCI could have used 4(2)(A) if they
had used this provision meeting the competition defence would not have been valid. according to him
high mark up cannot fit under AAEC.

WhatsApp LLC (CCI Suo Moto Case No. 01 of 2021, Order dated 24 March 2021

Facts-

Is whatsapp interchangeable with signal? No. Because of network effects.

What is network effects?How will you figure it out?

Example- you are the only person in the whole world who has a mobile phone (or email).
Network effect- the value of the product increases bcz the no. of users increases.
“WhatsApp Messenger works on direct network effects where an increase in usage of a particular
platform leads to a direct increase in the value for other users — and the value of a platform to a
new user will depend on the number of existing users on that platform. Thus, given its popularity and
wide usage, for onetoone as well as group communications and its distinct and unique features,
WhatsApp seems to be dominant”

The cci relies on Harshita Chawla where they had defined network effects.
Refer to the definition of RPM-substitutability based on characteristics, price - But the price of
whatsapp is zero.

This is not to say that there are no costs- you give away your data.

Note that this is a suo motu case. Pull up the statistics on the number of suo motu case (the annual
report)- March 2020
Note that in suo motu cases the chances of penalty is very high.

Example- (not sure what the relevance i- Fortnite is suing apple on account of the 30% fee taken by
apple to host apps on appstore.
Back to case-
Disagreement about substitutability and interchangeability between whatsapp and signal. RS thinks
that lack of S and I is not about network effects but about the characteristics of both the products.

There are other characteristics that distinguish both of them- quality of voice, disappearing messages,
(but now even whatsapp has it).
Telegram takes the idea of privacy more seriously.

Paragraph-20- Commission says that even though there is a surge in the number of Telegram users,
whatsapp did not suffer any loss.
Based on the above, the Commission concluded that WhatsApp is dominant in the relevant market for
OTT messaging apps through smartphones in India. As such, in light of the said holding of the
Commission in Harshita Chawla case, there is no occasion to separately and independently examine
the issue of relevant market and dominance of WhatsApp therein, when there is no change in the
market construct or structure since the passing of the said order in August, 2020 and announcing of
the new policy by WhatsApp on January 04, 2021 – which itself seems to emanate out of the
entrenched dominant position of WhatsApp in the said relevant market, as detailed in this order. The
Commission has also taken note of the recent developments wherein the competing apps, i.e. Signal
and Telecom witnessed a surge in downloads after the policy announcement by WhatsApp. However,
apparently this has not resulted in any significant loss of users for WhatsApp. Further, as elaborated
in detail in succeeding paras, the network effects working in favour of WhatsApp reinforces its
position of strength and limit its substitutability with other functionally similar apps/platforms.

Where do they get this idea that loss is necessary? No such requirement in competition law.

Note that markets can be created- before launch of ipad there was no demand for such products but
after its launch its demand shot up. Companies keep on creating new market. THerefore, when we
say that the incumbents have not suffered any harm it implies that market pre exists. But its possible
that there is a completely new market.

Is network effects about the characteristics of the product itself ? Not necessarily.

Another example- education market- companies like Byju and Unacademy are doing things that were
done offline in an online mode. This has nothing to do with network effect however platforms like
reddit where you can ask questions have everything to do with network effects.

Paragraph - 30-
On a careful and thoughtful consideration of the matter, the conduct of WhatsApp in sharing of
users’ personalised data with other Facebook Companies, in a manner that is neither fully
transparent nor based on voluntary and specific user consent, appears prima facie unfair to users.
The purpose of such sharing appears to be beyond users’ reasonable and legitimate expectations
regarding quality, security and other relevant aspects of the service for which they register on
WhatsApp. One of the stated purposes of data sharing viz. targeted ad offerings on other Facebook
products rather indicates the intended use being that of building user profiles through cross-linking
of data S. M. Case No. 01 of 2021 19 collected across services. Such data concentration may itself
raise competition concerns where it is perceived as a competitive advantage. The impugned conduct
of data-sharing by WhatsApp with Facebook apparently amounts to degradation of non-price
parameters of competition viz. quality which result in objective detriment to consumers, without any
acceptable justification. Such conduct prima facie amounts to imposition of unfair terms and
conditions upon the users of WhatsApp messaging app, in violation of the provisions of Section 4(2)
(a)(i) of the Act.
According to the new policy data shared with whatsapp can be shared with other faceboook (now
meta) companies FB, Insta- further there is no opt out to this. These companies are non-pricing
competitive companies.

Non price aspects of competition in the market study report on telecom-

The report supports findings that demonstrate an important role for non-price factors in driving
competition in the Indian telecom market, partly reflecting the maturing nature of competition and in
part the recognition that price competition has its intrinsic limits. Even though the average consumer
remains pricesensitive, other factors such as QoS, data speeds and bundled offerings are shown to
influence consumer choice. Further, the increase in wireless data subscribers from 281.5 million in
2014 to 664.8 million at the end of 201942 points towards the shifting focus of competition from
voice to data. Data has several more dimensions than voice and has given rise to “bundled
offerings’’ which include, inter alia, voice, data, SMS, and content. Based on the stakeholder
interactions and interviews with sectoral experts, supported by secondary research, the study
envisages that bundled offerings will drive differentiation in the market. The dynamic nature of
telecom market ensures that what is a differentiator at one point in time becomes common at another

The report is saying that things are changing in the telecom sector- non price factors like the quality
of data itself might be a distinguishing factor.
In the whatsapp case they are saying that the non price factor is control over data. However, control
to some extent depends on the phone you have.
Moreover, is privacy a product? (public v private law question)-
Public law aspects- fundamental right
Private law- but despite all of this - is there really privacy in the age of big tech. If it's a property rule
model, then why is privacy more product based? Is it really a liability rule model?
Moreover, the data protection bill says that the government can access data- however, then it's not a
property rule model.

Non personal data v personal data-

What is a non personal data-

Open data network initiative by Nandan Nilekani- amazon for data.

AI=natural stupidity

Together We Fight Society v Apple case

The Competition Commission of India (CCI) ordered an investigation into Apple Inc’s business
practices in the country, saying it was of the initial view that the iPhone maker had violated
certain antitrust laws.
The order from the antitrust watchdog comes after a non-profit group alleged this year that Apple
was abusing its dominant position in the apps market by forcing developers to use its proprietary
in-app purchase system.
The CCI said Apple’s restrictions prima facie result in denial of market access for potential app
developers and distributors.

If we look back at Whatsapp case-

Legitimate expectations of the consumers- they are saying that as a user your expectation is quality
and security- in whats app your expectation is that your data will not be shared (in wha

There is a claim of personal hearing is made in this case.

But no such claim is made in the Apple case.

What is the relevant market in this case?

Market for app store for ios

Abuse -

Merger Control
There are 4 parts in CA, ACA, AODP. We will now look into Merger Control (MC), the last is CA.

Merger control is ex ante enforcement mechanism instead of e post. It is about potential violation of
the competition act.
Coordinated effects- didn’t get this.

There are plenty number of cases of merger in Europe, US, but not many in India.

Relevant law is S5 of CA- have to read with the regulations- they are quite detailed.

Paul L Davies and Sarah Worthington (Chapter 29)

Scheme of Arrangement- two different types of schemes- creditor scheme and member scheme.
Only the creditor scheme has not taken off.

There are only two rationales behind M&A-

1. Tax considerations
2. Competition-

Imagine a telecom company- three enactments apply to it- companies act, competition act, Trai act.
A lot of entities are involved in one simple merger.

Hindustan Lever Employees’ Union vs Hindustan Lever Limited And Ors., 1994
Facts- there is no CA because its 1994 case.

There used to be a competitor of Unilever- Tata owned company (TOMCO). Unilever is buying the
soaps business of this company. Note that this is 1990s- this is important as well. Tata’s export
matket was in Soviet Union as it collapsed its business also collapsed. Therefore the merger.

Whenever merger takes place, there is always concern of employees because if merger happens, you
dont need that many employees. The employees association of Uniliver is concerned about what will
happen to them because TOMCO’s employee’s association is more powerful.

If you see the MRTP act relevant provisions (S 22 & 26) related to Merger and Acquisition were
deleted right after the LPG reforms. This was because the government thought that since we are
allowing foreign companies to invest- allowing merger and acquisition of domestic entities will allow
them to compete. Earlier the procedure for merger used to be rigorous. Mandatory approval from the
MRTP commission was necessary.

The claim of the employees association is that although 22 & 26 are gone, the approval should still
be required for the merger of Unilever and TOMCO.
They made that claim because of section 27 of the MRTP Act which is very similar to section 28 of
the competition act.
THis argument is interesting-in comeptition at there was a gap of two years between notification of
Merger control provisions and other conduct based rules (ACA, AoDP)- does this argument imply
that entities that merged before the enforcement (2011) needed approval.

Those provisions are ex ante. Therefore the approval is still required. DSoes this mean notification is
still required? The claim is that it is required.
What do you think?
1. No, it is not necessary simply because the parliament has deleted the provision
2. Section 27 cannot be interpreted to impose a mandatory approval requirement
3.

SC agrees with all these claims. Something is deleted from the statute but the obligation continues.
So the need to notify parties is still required under MRTP.

By 2000s we have Raghavan committee which is quite concerned about Mergers for two reasons-
1. Are indian companies large enough to compete with MNCs?
2. Too many agencies looking at mergers.

What Raghavan deos is that there should be mandatory merger control. WHenever required, do an ex
ante. ALso, because timeline is imp, all of these requirements should be fulfilled quickly. Raghavna
says 90 days, but in the Act it is 210 days.

If we look at Sec 6, combination is not defined. There is AAEC in this section wihci was not there is
S4.
If we look at 6 (2), they have changed ‘may’ to ‘shall’ despite the concerns about timeline raised by
Raghvan. So made a mandatory notification requirement.
But they do not define what is a combination? In EU, they say concentration.

Section 5 gives us an idea of what could be combination. The acquisition of one or more enterprise
(not person).
The merger control regulations- the regulations give us a list of situations which are not mergers.

SCHEDULE I
(1) An acquisition of shares or voting rights, referred to in sub-clause (i) or sub-clause (ii) of clause
(a) of section 5 of the Act, solely as an investment or in the ordinary course of business in so far as
the total shares or voting rights held by the acquirer directly or indirectly, 56[does not entitle the
acquirer to hold twenty five per cent (25%) or more] of the total shares or voting rights of the
company, of which shares or voting rights are being acquired, directly or indirectly or in accordance
with the execution of any document including a share holders‟ agreement or articles of association,
not leading to acquisition of control of the enterprise whose shares or voting rights are being
acquired.

It is saying, so long as you acquire till 25% and not acquiring control, then you dont need to notify. If
we read it with regulation 4, it gives situations when notification is not required. They are just giving
instances of what is not an acquisition.

We will try to figure out

What is a combination? Why is it need notification? When does it require? How we notify?
Sec 5 tell us what is a combination.

If we look at S 230 of company act- even there tribunal is required to issue notice.
Under companies act when a tribunal is looking at a scheme (member or creditor). Umakanth
Varottil is arguing that creditor schemes are not taking off. But the member schmee is all over the
act.
Under section 5 the procedure is slightly different- not all acquisition is a combination- only certain
types of combinations are regulated.

But what is a combination? In india we try to figure out the size of the person who is acquiring along
with the target. What will be your size after acquisition? This is assessed on the basis of assets,
turnover, etc. Rs calls this size of the person test-
combination = size of the acquirer + size of the target.
Section 5 is essentially trying to figure out the size of the entities. This will help to ascertain whether
something is a combination or not.
In the US there is a size of the person test along with size of the transaction tist (triggered at 91
milllion dollars)

S5(1)
(a) any acquisition where—
(i) the parties to the acquisition, being the acquirer and the enterprise, whose control, shares, voting
rights or assets have been acquired or are being acquired jointly have,—
(A) either, in India, the assets of the value of more than rupees one thousand crores or turnover more
than rupees three thousand crores; or
(B) 7[in India or outside India, in aggregate, the assets of the value of more than five hundred million
US dollars, including at least rupees five hundred crores in India, or turnover more than fifteen
hundred million US dollars, including at least rupees fifteen hundred crores in India; or]

The threshold of Rs 1000 crore has been enhanced through delegated legislation- see revised
thresholds on the CCI website.
The revised threshold is 2000cr. which is way higher than the US context (only 600 cr there)
Also, there is an excpetion
We need to look at the size of the target, the assets should be below 350cr this is step 1, if it is below
350cr then it is not combination. (They are effectively changing the definition of combination).
Then step 2 is to combine the target and acquirer.

If the target is below 350, we will need to look whether the combination would be more than 2000cr.
This is coming through notification, there is a problem, why should there be no size of transaction
test?

Sec 5 is about what is a combination, S6 says that notification is required in case of combination.

We have to look at the size of the target first and then the size of the acquirer (why???)

6(2) says that notification should be in the form given. This gives answer of ‘how to notify’?
S 6(2A) mandates that no combination would take place till 210 days are passed. Under the merger
regulation, tey have reduced this to 150 days. .

(b) of that section. 15[(2A)No combination shall come into effect until two hundred and ten days
have passed from the day on which the notice has been given to the Commission under sub-
section(2) or the Commission has passed orders under section 31, whichever is earlier.]

What is the effect of this?

It is mandatory, the moment you notify, there is a suspension of transaction until the commission
notify.

So the answer of why notification is required is bcz it leads to suspension. Thats why Raghavan
suggested ex-ante. Becuase there is no way to go back.

Now coming to When to notify? 30 days requirement is not there, so when will they notify? Bcz
there is no suspension, so tehy will notify ASAP.
Also there is a penalty under S 43 A if the person fails to notify under S6.

S43A- Power to impose penalty for non-furnishing of information on combinations- If any person
or enterprise who fails to give notice to the Commission under sub- section(2) of section 6, the
Commission shall impose on such person or enterprise a penalty which may extend to one percent, of
the total turnover or the assets, whichever is higher, of such a combination.]

In case of failure to notify there is a pre-filing consultation.

Jaadu Holdings
What is a C(n) = Alpha(acquirer) [a1t] + Omega(Target) [a1t]o (lmao who made this alto, genius)

Acquirer is Jaadhu. Incorporated in Delaware, USA. They are an indirect subsidiary of FB (now,
Meta). [Jaadhu is a 100% subsidiary of a company. This latter company is a 100% subsidiary of
Meta]

Target is Jio Platform Ltd., a subsidiary of Reliance Industries.

Jaadhu is acquiring 9.99% of Jio Platforms Ltd. Throwback to Corporate Law I. Rajat talked about
shades of control. The shares acquired are below 10%, so is this control? No, control starts at 25.1%.
Having more than a quarter of ownership, you are a problem/can be one.

For the purposes of competition act, however, the idea of control is very different from IBC.

Schedule I, Item 1 tells us what is not an acquisition.

After acquisition, do they remain separate entity? In UK, the answer is simple, the test is whether
there is cessation of an entity.

When these combinations are happening, when can we say that two entities are competing? Under
competition law there are different standards.

Explanation in the Item no.1 (Schedule I of the Regulations), its only up till 10% while the main
provision is up till 25%.

“Explanation:- The acquisition of less than ten per cent of the total shares or voting rights of an
enterprise shall be treated as solely as an investment
Provided that in relation to the said acquisition,-
(A) the Acquirer has ability to exercise only such rights that are exercisable by the ordinary
shareholders of the enterprise (Re Shanti Jain v Kalinga Tubes)whose shares or voting rights are
being acquired to the extent of their respective shareholding; and

(B) the Acquirer is not a member of the board of directors of the enterprise whose shares or voting
rights are being acquired and does not have a right or intention to nominate a director(very stark)
on the board of directors of the enterprise whose shares or voting rights are being acquired and does
not intend to participate in the affairs or management of the enterprise whose shares or voting rights
are being acquired.]”

The explanation also does not use ordinary course of business, only uses ‘solely as an investment’.
When you are not appointing a member of the board, you are not in control.
In Jaadhu,there the acquirer gets a seat on the board of directors of Jio platforms. The Moment you
have such a seat the explanation is not satisfied. For the purpose of the competition act the
commission understands this to be control - therefore acquisition of an enterprise.

Therefore, in competition law it seems that control is viewed in a very different way from how it is
viewed in company law- there are a lot of complications in SEbi takeover regulations (takeover code
etc). However, for competitoin law its about appointment of directors to some extent
Regulation 4-
4. Categories of transactions not likely to have appreciable adverse effect on competition in India. In
view of the duty cast upon the Commission under section 18 and powers conferred under section 36
of the Act, and having regard to the mandate given to the Commission to, inter- alia, regulate
combinations which have caused or are likely to cause appreciable adverse effect on competition in
terms of sub-section (1) of section 6 of the Act, it is clarified that since the categories of combinations
mentioned in Schedule I are ordinarily not likely to cause an appreciable adverse effect on
competition in India, notice under sub-section(2) of section 6 of the Act need not normally be filed

Regulation 4 merely says that a laundry list of combinations are not likely to have AAEC- this has
other implications-

Look at section 6-
Clause 1 says don’t enter into combinations likely to result in AAEC
Clause 2- says subject to provisions contained in sub section 1- obligation to notify

Implication of both of these is that you only have to notify only those combinations that are likely to
have AAEC. Therefore a voluntary notification mechanism that existed in the 2003 draft was
removed. In 2017 there had been an amendment to make it mandatory but they did not pay attention
to wording of sub section (1) and (2).

Question- if you just agree on an observer but do not notify (bc no director) then what is the
consequence-

Inquiry into combination by Commission 20.

(1) The Commission may, upon its own knowledge or information relating to acquisition referred to
in clause (a) of section 5 or acquiring of control referred to in clause (b) of section 5 or
merger or amalgamation referred to in clause (c) of that section, inquire into whether such a
combination has caused or is likely to cause an appreciable adverse effect on competition in India:
Provided that the Commission shall not initiate any inquiry under this subsection after the expiry of
one year from the date on which such combination has taken effect

1. Investment agreement
In the Jaddhu case, the argument is that they are entering into an investment agreement.

The proviso talks about a timeline for limitation- commission cannot start an enquiry after one year
of the combination. (just have to hide for one year). However, this does not stop from the
commission from initiating Section 3 or section 4 enquiry.

How does commission find out that there is no notification?- keep looking at newspapers and check
whether there is a notification.
“Gun jumping provision”- didnt get this.
This is a property rule model, so long you can take the risk of hiding this combination for 1 year from
the commission. So merely bcz law says, many do not notify.

Lets go back to FB case,

They assume that there is a combination.
In the CCI website we find many companies have been exempted from filing notification.

Notification regarding (a) de minimis exemption; (b) relevant assets and

turnover in case a portion of an enterprise or division or business is being
acquired, taken control of, merged or amalgamated with another
enterprise: S.O. 988(E), 989 (E)
002 (12 of 2003), the Central Government, in public interest, hereby exempts the enterprises being
parties to ––
(a) any acquisition referred to in clause (a) of section 5 of the Competition Act; (b) acquiring
of control by a person over an enterprise when such person has already direct or indirect control over
another enterprise engaged in production, distribution or trading of a similar or identical or
substitutable goods or provision of a similar or identical or substitutable service, referred to in clause

(b) of section 5 of the Competition Act; and

(c) any merger or amalgamation, referred to in clause (c) of section 5 of the Competition
Act,

where the value of assets being acquired, taken control of, merged or amalgamated is
not more than rupees three hundred and fifty crores in India or turnover of not more than
rupees one thousand crores in India, from the provisions of section 5 of the said Act for a period
of five years from the date of publication of this notification in the official gazette.

They are exercising this power under S54.

1. Master services agreement-

Net neutrality- the commission is concerned that users facebook will be provided faster access to
facebook by jio.
However, the TRAI stipulates an obligation of net neutrality- TSPs are not supposed to discriminate.

In conclusion, the Commission says that the proposed combination is not likely to have AAEC-
however, they use the term quite generically. They do not go into how each of the factors listed in
section 20(4) is affected.

4) For the purposes of determining whether a combination would have the effect of or is likely to
have an appreciable adverse effect on competition in the relevant market, the Commission shall have
due regard to all or any of the following factors, namely:—
(a) actual and potential level of competition through imports in the market (b) extent of barriers to
entry into the market; (c) level of combination in the market; (d) degree of countervailing power in
the market; (e) likelihood that the combination would result in the parties to the combination being
able to significantly and sustainably increase prices or profit margins; (f) extent of effective
competition likely to sustain in a market; (g) extent to which substitutes are available or arc likely to
be available in the market; (h) market share, in the relevant market, of the persons or enterprise in a
combination, individually and as a combination; (i) likelihood that the combination would result in
the removal of a vigorous and effective competitor or competitors in the market; (j) nature and extent
of vertical integration in the market; (k) possibility of a failing business; (I) nature and extent of
innovation; (m) relative advantage, by way of the contribution to the economic development, by any
combination having or likely to have appreciable adverse effect on competition; (n) whether
the benefits of the combination outweigh the adverse impact of the combination, if any.

One factor that is very different from the 19(3) is imports.

In Jaadhu case, they say they have looked at these factors and that there is no AAEC.

The Commission, however, analysed the incentives and ability of the parties. What do they mean by
this?

Proviso to Section 18 -
“Section 18. Subject to………in markets in India.
Provided that the Commission may, for the purpose of discharging its duties or performing its
functions under this Act, enter into any memorandum or arrangement with the prior approval of the
Central Government, with any agency of any foreign country.”
CCI has MoUs with a lot of other countries for training. Therefore you see reflections of standards in
these countries in the order s of the commission.
Additionally, the international competition network (ICN) - an interesting body because it exists only
in the virtual world. They do not have a physical office/HQ.

What do they say about ability and incentives in the context of this acquisition? Commission says
Whastapp might have ability but they are not convinced.
In the instant matter, it is noted that the Proposed Combination is an acquisition of 9.99% stake in Jio
Platforms by Facebook group. This may not result in unrestricted access to each other’s resources
including user data. Nevertheless, the parties may have incentives to engage in mutually beneficial
data sharing. In this regard, Jaadhu has submitted that “there is no data to be shared as part of the
Proposed Transaction” (i.e. proposed acquisition of shares in Jio Platforms by Jaadhu). It has been
further clarified in the response dated 12th June, 2020 by Jaadhu that: “It is clarified that data sharing
is NOT the purpose of the Proposed Commercial Arrangement, nor will either side be acquiring
ownership of the other’s data pursuant to the Proposed Commercial Arrangement. However, for
implementation of the Proposed Commercial Arrangement, WhatsApp and JioMart (which is owned
by RRL and operated by Jio Platforms) will receive or send limited data

Commission is persuaded with Jaadhu’s argument. Why? Huge chunk of money is coming so they
are being deferential.
THey are not concerned with any kind of scrutiny. They aren’t looking at the opinion of DG here.
There is no Role of the DG in this order or any of the merger control order. However, in the
competition act the Dg can be asked to investigate if the commission feels that it is necessary.
On timeline- obligation to notify has been done away with in one of the notifications.
What is the timeline for CCI to take prima facie view?
They have changed it to 30 working days.
They dont ask DG, they ask FB what is the purpose of the transaction. They are being so deferential
to them.

Sometimes the commission doesn't even initiate an investigation.

Question- under which sub clause of section 20(4) will you peg concerns about data sharing?
(e)-
(i)

Vertical integration - ???- complementary services offered by both the entities

3[5A. Notice for approval of combinations under Green Channel.-

(1) For the category of combination mentioned in Schedule III, the parties to such
combination may, at their option, give notice in Form I pursuant to regulation 5 along
with the declaration specified in Schedule IV.
(2) Upon filing of a notice under sub-regulation (1) and acknowledgement thereof, the
proposed combination shall be deemed to have been approved by the Commission under
sub-section (1) of section 31 of the Act:
Provided that where the Commission finds that the combination does not fall under
Schedule III and/or the declaration filed pursuant to sub-regulation (1) is incorrect, the
notice given and the approval granted under this regulation shall be void ab initio and
the Commission shall deal with the combination in accordance with the provisions
contained in the Act:
Provided further that the Commission shall give to the parties to the combination an
opportunity of being heard before arriving at a finding that the combination does not fall
under Schedule III and/or the declaration filed pursuant to sub-regulation (1) is
Incorrect.]

There is deemed approval (how is this regulation related to vertical integration???- refer to schedule
III). In practice however, unless there is a pre filing consultation there is no way you will get a green
channel approval.

SCHEDULE III [See sub-regulation (1) of Regulation 5A] Considering all plausible alternative
market definitions, the parties to the combination, their respective group entities and/or any entity in
which they, directly or indirectly, hold shares and/or control:- (a) do not produce/provide similar or
identical or substitutable product(s) or service(s); (b) are not engaged in any activity relating to
production, supply, distribution, storage, sale and service or trade in product(s) or provision of
service(s) which are at different stage or level of production chain; and (c) are not engaged in any
activity relating to production, supply, distribution, storage, sale and service or trade in product(s)
or provision of service(s) which are complementary to each other.

IN practice however, this doesn't work. Adani got a green channel approval for investment in
mumbai airport despite the fact that he had other investments in airports across the country.
We try to find the level of combination, we look at the market share of various players. Eg. in the
case of airline, looking at the market share of Indigo (1st), AIR India (2nd) and Vistara (5th) would
give us some idea.
HHI Index
Herfindahl H Index tell us the difference between the first and second largest market players.
How does this index work?
The horizontal merger guidelines in the US has one ofthe criteria based on this inde
This promotes certainty and lowers transaction costs for market participants because they can do the
analysis by themselves and take decisions accordingly.

But how does it work?-

Example- Airlines industry.
Indigo- 55%
AI- 12%
V= 7%
AA= 6%
SJ- 10.5%
GA- 8.8%

Pre combination HHI -

1. square of market share of every airline-
2. Add all the figures
The square of 55% = 3025, and if we add this with the square of all other numbers, it is 3446.
The moment you get an Hhi more than 2500 it indicates that the market is concentrated. Highly
concentrated means that the level of competition is low - one of the entities is dominant. T

Now, if we add the square of the 2nd 3rd and 4th entities i.e. AI, V and AA it is 625. If we add now
them with the square of other entities, the total is 3842. Post combination the HHI becomes way way
worse. The total is 3842- market has become more concentrated
The difference between post combination and pre combination HHI is the competition.

Sec 20 (4) (k)- possibility of a failing business;

If you dont allow the AIR India merger, then the firm would fail.

Amazon Future case-

Facts -
Three agreements-

1.

How many entities? - Total 3 entities. (FCPL, FCRPL and Amazon NV Hodings LLC )

In terms of ‘Part V: Description of the Combination’ of the aforesaid Notice, the Combination
notified by Amazon comprised the following three (3) transactions1 :
2.1. Transaction I: The issue of Nine Million One Hundred and Eighty Three Thousand Seven
Hundred and Fifty-Four (9,183,754) Class A voting equity shares of FCPL to Future Coupons
Resources Private Limited (FCRPL). Prior to, and immediately post issuance of such equity shares,
FCPL will be a wholly owned subsidiary of FCRPL; and
2.2. Transaction II: The transfer of Thirteen Million Six Hundred and Sixty Six Thousand Two
Hundred and Eighty Seven (13,666,287) shares of FRL held by FCRPL (representing Two decimal
Five Two Percent (2.52%) of the issued, subscribed and paid-up equity share capital of Future Retail
Limited (FRL), on a Fully Diluted Basis) to FCPL; and
2.3. Transaction III: The acquisition of the Subscription Shares representing Forty Nine percent
(49%) of the total issued, subscribed and paid-up equity share capital of FCPL (on a Fully Diluted
Basis) by Amazon, by way of a preferential allotment.

They impose penalty of 202 crore.

The consideration in this case is 24000 cr. Amazon pay this amount to get 49& in the FCPL. Why are
they paying a lot of money to FCPL, bcz there is somehting called Future Lim. behind it. They won't
be able to do the business alone.

Amazon is acquiring shares of FCPL in consideration for this they are asking promoters to not sell it
to reliance.

To impose penalty under 43A, it requires failure to give notice to commission. But there is no failure
to give notice here, then how do they impose penalty here?
But they suppressed important info. THe commission is saying that there has been a
misrepresentation- amazon ought to have told the CCI the purpose of the combination- the purpose is
strategic in nature. HOwever, that is not the obligation under competition law. This is not a legal
standard at all.
But all the agreement copies are in front of commission, then how does commission say that they are
being strategic. “Commission is being strategic while writing the judgement”- RS

While giving notice you can give it either through form I or Form II former is short latter is detailed
(depends on the size of the entity). You have to give more details in the notice, forms.

43A. If any person or enterprise who fails to give notice to the Commission under sub-
section(2) of section 6, the Commission shall impose on such person or enterprise a penalty which
may extend to one percent, of the total turnover or the assets, whichever is higher, of such a
combination.] Penalty for making false statement or omission to furnish material information

44. If any person, being a party to a combination,— (a) makes a statement which is false in any
material particular, or knowing it to be false; or (b) omits to state any material particular knowing it
to be material, such person shall be liable to a penalty which shall not be less than rupees fifty lakhs
but which may extend to rupees one crore, as may be determined by the Commission.

Anything that is material and you suppress it, it is problematic and you can be held liable under S45
as well.
45.(1) Without prejudice to the provisions of section 44, if a person, who furnishes or is required to
furnish under this Act any particulars, documents or any information,— (a) makes any statement or
furnishes any document which he knows or has reason to believe to be false in any material
particular; or (b) omits to state any material fact knowing it to be material; or (c) wilfully alters,
suppresses or destroys any document which is required to be furnished as aforesaid, such person shall
be punishable with fine which may extend to rupees one crore as may be determined by the
Commission.] (2) Without prejudice to the provisions of sub-section(1), the Commission may also
pass such other order as it deems fit

Connect this to Dnny crane’s framework-

In regulating corporate behaviour one can think of company act, ibc, competition law.

However, these entities are using these laws to their ends. At transaction level, litigation is
hampering closing of the deal.
Creditors on the other hand have filed for insolvency so that moratorium is imposed and the
arbitration is stayed.
In us context Danny Crane is writing -

‘Foot-in-the-door’

who needs to notify is not clearly given, however if we do literal interpretation of S6 (2), then we
may say whoever is proposing should give notice. It was clarified through regulation that for
acquisition, acquirer should notify. For merger and amalgamation, both should notify.
So the penalty under S43 should be imposed accordingly.

Its not Future’s job to notify or tell if there is anything strategic. Their foot is not in the door.

Important Paragraph - 71
71. The foregoing discussion brings out that Amazon had failed to disclose the fact that FRL SHA
was negotiated as a part of the Combination and an intrinsic element thereof to confer Amazon rights
over FRL. This is more so when Amazon had been considering these rights as strategic in the
Internal Correspondence. The learned counsel for Amazon alluded that a combined reading of FCPL
SHA, FRL SHA and other documents enclosed in the Notice clearly present the actual scope and
purpose of the Combination. However, no plausible explanation has been given as to why Amazon
failed to notify FRL SHA as an inter-connected part of the Combination; why the details of FRL
SHA was omitted in the disclosures against Items 5.1.1, 5.1.2 and 5.2 of Form I; and why the rights
over FRL were portrayed as limited investor protection rights when the Internal Correspondence
considers them essential to establish strategic alignments with FRL and its affiliates, which also
weighed in Amazon paying 25% premium over FRL Share price. The mention of FRL SHA in the
footnote as an agreement executed pursuant to Warrants Transaction, coupled with the assertions that
FRL SHA was negotiated independent of the acquisition of 49% shareholding in FCPL, the indirect
rights are for the limited purpose of protecting the investment in FCPL and the BCAs are not related
to the Combination, shows a deliberate design, not to state the true, correct and complete facts
regarding FRL SHA, but to suppress and misrepresent their inter-connection to the Combination.
Such conducts of Amazon are in contravention of the provisions contained in clause (b) of sub-
section (1) of Section 45 of the Act. The categorical statements that FRL SHA and BCAs were
independent of the Combination sufficiently establish that the same were not notified to the
Commission as a part of the Combination, which is a contravention of the obligation contained in
Section 6(2) of the Act, which attracts penalty under Section 43A of the Act.

Para 75-
75. A holistic appreciation of the Notice and material brought on record reveals that there has been a
wilful and deliberate design threaded across the Notice and subsequent submissions dated 15th
November, 2019 of Amazon, to suggest that the Combination consists of only Transaction I,
Transaction II and Transaction III; and that FCPL SSA and FCPL SHA are the only two agreements
entered into between the parties in relation to the Combination. The manner and extent of assertions
regarding FRL SHA is that the same was a pre-existing arrangement amongst the shareholders of
FRL, executed pursuant to the Warrants Transaction, and it was negotiated independent of
Transaction III i.e., acquisition of 49% stake in FCPL by Amazon. The inter-connection between
FRL SHA and the Combination was suppressed. Similarly, the BCAs, although disclosed, were
claimed as neither inter-connected with, nor a part of the Combination. However, the Internal
Correspondence brings out that BCAs and acquisition of strategic rights over FRL, through the
acquisition of shares in FCPL, had been considered together as parts of one composite package, viz.,
‘Project Taj [Future Group] – Investment in National Multi-category Copperfield Seller’. FCPL was
merely a vehicle for Amazon to acquire interest over FRL, and such interest was considered
necessary to implement strategic alignments between the business activities of Future and Amazon
groups in India.

Move to birla case-

Aditya Birla wanted to give notice but the commission refused to take notice saying that they do
want it this early. Commission is not passive and they can be pretty inquisitive. In most
contexts, the commission asks the acquirer for the money, the money to the bank. So they look
that if there is a large amount of money involved then there is a strategic investment involved.

In the amazon case the commission asks there were two negotiations of the agreement and the
SHA going on- you did not tell us because if they are contemporaneous then they are inter-
connected.
The commission said that the moment there are two agreements are contemporaneous this means
that they are inter-connected.
Look at regulation 9(4)- (4) Where the ultimate intended effect of a business transaction is
achieved by way of a series of steps or smaller individual transactions which are inter-connected
26[***], one or more of which may amount to a combination, a single notice, covering all these
transactions, 27[shall be filed by the parties] to the combination.
It is not interdependent but rather inter-connected. Because inter-connected is easier to
understand rather than interdependent

Section 30 (14) Nothing contained in this Chapter shall affect any proceeding initiated or which may
be initiated under any other law for the time being in force.

33[Reference by Commission] 34[21A. (1) Where in the course of a proceeding before the
Commission an issue is raised by any party that any decision which, the Commission has taken
during such proceeding or proposes to take, is or would be contrary to any provision of this Act
whose implementation is entrusted to a statutory authority, then the Commission may make
a reference in respect of such issue to the statutory authority: Provided that the Commission, may,
suo motu, make such a reference to the statutory authority. (2) On receipt of a reference
under sub-section (1), the statutory authority shall give its opinion, within sixty days of receipt of
such reference, to the Commission which shall consider the opinion of the statutory
authority, and thereafter give its findings recording reasons there for on the issues referred to in the
said opinion.]

Section 21A says that a statutory authority can refer the matter to the RBI. So why has the
commission not referred the matter to the RBI before approving the contract.
*note that the obligation to notify is on the acquirer.

L&T Schneider
The commission has not prohibited any transaction yet-
The obligation is on the acquirer.
Future is not interest in Amazon anymore, they have moved on, now they are with Reliance.

This L&T is interesting they approve the combination with a modification. Look at section 31.

31. (1) Where the Commission is of the opinion that any combination does not, or is not likely to,
have an appreciable adverse effect on competition, it shall, by order, approve that combination
including the combination in respect of which a notice has been given under sub-section (2) of
section 6.
(2) Where the Commission is of the opinion that the combination has, or is likely to have, an
appreciable adverse effect on competition, it shall direct that the combination shall not take effect.
(3) Where the Commission is of the opinion that the combination has, or is likely to have, an
appreciable adverse effect on competition but such adverse effect can be eliminated by suitable
modification to such combination, it may propose appropriate modification to the combination, to the
parties to such combination.

L&T case is like this (3).

In this case the commission proposed appropriate modification. They say that the entities have to sell
some businesses.

They appoint a monetary agency in this case.

Session #29:
B. Procedural concerns in mergers

M and A is ex ante step, there in the amazon case, they notified everything but commission said
that you have concealed something strategic.
Size of the target entity is the first step and if the size is below the threshold of 35- crore then no
combination and hence no question of M and A.
This means that there is no obligation to notify. We need prior notification and approval which is
an ex ante step in the process of M and A. There can be a prior notification but no approval, so in
the case of US- you wait for 30 days then assume automatic approval by the authority even if
they have not approved explicitly.
Let us look at section 6 (4)-
If you are a public financial institution or a bank or venture capital fund, the provision of this
section i.e. section 6 (means that you need not notify) will not apply to some of the transactions
made by such institutions.
Section 6 (4)- (4) The provisions of this section shall not apply to share subscription or
financing facility or any acquisition, by a public financial institution,
foreign institutional investor, bank or venture capital fund, pursuant to
any covenant of a loan agreement or investment agreement.

6(5)- (5) The public financial institution, foreign institutional investor, bank or
venture capital fund, referred to in sub-section (4), shall, within seven days
from the date of the acquisition, file, in the form as may be specified by
regulations, with the Commission the details of the acquisition including
the details of control, the circumstances for exercise of such control
and the consequences of default arising out of such loan agreement or
investment agreement, as the case may be.
It said that only notify within 7 days after acquisition (the shares that come after notification has
to be notified). Therefore it is not prior notification and approval, it talks about the shares that
come after notification. You can exercise control in such shares without approval .CCI
I don’t think we have reached the stage where we have understood the implication of 6(4) and
6(5). These factors in these sections do not need approval rather they just need disclosure via a
notification.
If the law is saying that not all transactions are ex ante, even those transactions that are
combinations and that need no notification, you can always use section 3 and section 4, which
talks about coordinated and uncoordinated effects. Therefore do not think that if notification
provisions are taken away then you do not have the power to investigate.

Notice given by Tesco Overseas Investments Limited, Order under Section 43A
TESCO has acquired Trent but they were notified after the execution of the joint venture agreement.
Tesco wanted to bring a bunch of money to India and they went to foreign investment authority, but
they did not go to commission, they went only after they executed the agreement.
So is there some delay in notifying or not.
Section 6 (2)- (2) Subject to the provisions contained in sub-section (1), any person or
enterprise, who or which proposes to enter into a combination, 13 [shall]
give notice to the Commission, in the form as may be specified, and
the fee which may be determined, by regulations, disclosing the details
of the proposed combination, within 14 [thirty days] of—
(a) approval of the proposal relating to merger or amalgamation, referred
to in clause (c) of section 5, by the board of directors of the
enterprises concerned with such merger or amalgamation, as the case
may be;
(b) execution of any agreement or other document for acquisition referred
to in clause (a) of section 5 or acquiring of control referred to in clause
(b) of that section.
I did not execute any agreement, I executed and hence I was notified. Like we notified to FITP
which is for a different purpose we do not need to immediately notify you from that time rather
the time must be notified from the time of execution.
The Commission said NO. The time you notify FITP, you need to notify us as well within the 30
days timeline.

Regulation 5A. Notice for approval of combinations under Green Channel.-

(1) For the category of combination mentioned in Schedule III, the parties to such
combination may, at their option, give notice in Form I pursuant to regulation 5 along
with the declaration specified in Schedule IV.
(2) Upon filing of a notice under sub-regulation (1) and acknowledgement thereof, the
proposed combination shall be deemed to have been approved by the Commission under
sub-section (1) of section 31 of the Act:
Provided that where the Commission finds that the combination does not fall under
Schedule III and/or the declaration filed pursuant to sub-regulation (1) is incorrect, the
notice given and the approval granted under this regulation shall be void ab initio and
the Commission shall deal with the combination in accordance with the provisions
contained in the Act:
Provided further that the Commission shall give to the parties to the combination an
opportunity of being heard before arriving at a finding that the combination does not fall
under Schedule III and/or the declaration filed pursuant to sub-regulation (1) is
incorrect.]

The commission can give approval on the agreement which is binding. Now a days commission
even gives approval on term sheets, but the point was that these term sheets itself were binding
and the time something is binding then the commission can give its approval
Move to teso, there is something missing in the regulation. Some parts are deleted after the tesco.
Actually there was a timeline and then it said that you need notify from the time you have
notified any statutory authority. Tesco is saying that notification to FITP is not a notification of
purpose of timelines because FITP is not a statutory authority. The commission thinks that
people should come fast to the CCI, though there are no timelines of 30 days anymore, but you
cannot wait, rather come as early as possible.
Sometimes, they say that you are coming too early, sometimes they say you are coming too late.
Very problematic thing.

You can read FAQ on the competition commission-

4. Which entities’ assets and turnover should I consider to ascertain whether a transaction
meets the jurisdictional thresholds?
In case of an acquisition of assets, shares, voting rights or control, the value of assets and
turnover of the acquirer(or acquirer group, for calculating group-level thresholds) and the target
enterprise, whose assets, shares, voting rights or control are being acquired, are required to be
taken into account for calculating jurisdictional thresholds. (See Section 5(a) of the Act) In case
of acquisition of control by a person over an enterprise when such person already has direct or
indirect control over another enterprise engaged in production, distribution or trading of a similar
or identical or substitutable goods or provision of a similar or identical or substitutable service,
the value of assets and turnover of the enterprise(or group to which the enterprise would belong,
for calculating group-level thresholds) over which control has been acquired along with the
enterprise over which the acquirer already has direct or indirect control, are required to be taken
into account for calculating jurisdictional thresholds. (See Section 5(b) of the Act) In case of
mergers / amalgamations, the value of assets and turnover of the enterprise (or group, for
calculating group-level thresholds) remaining after the merger or created as a result of the
amalgamation should be taken into account for calculating jurisdictional thresholds. (See Section
5(c) of the Act.

Explanation b to section 5-
(b) “group” means two or more enterprises which, directly or indirectly, are
in a position to —
(i) exercise twenty-six per cent or more of the voting rights in the
other enterprise; or
(ii) appoint more than fifty per cent of the members of the board of
directors in the other enterprise; or
(iii) control the management or affairs of the other enterprise;

They are talking about three different ways of what a ‘group’. In the case of TATA, there is a de
facto control or a de jure control. How to ascertain it? Exervie 26% of shareholding, more than
half of board and control in the management of the enterprise.
Look at the notification- I am not sure but this can be the notifiation
58[(1A) An acquisition of additional shares or voting rights of an enterprise by the acquirer or
its group, 59[***] where the acquirer or its group, prior to acquisition, already holds
twenty five per cent (25%) or more shares or voting rights of the enterprise, but does not
hold fifty per cent (50%) or more of the shares or voting rights of the enterprise, either
prior to or after such acquisition:
Provided that such acquisition does not result in acquisition of sole or joint control
of such enterprise by the acquirer or its group.

They are giving you hint that there is something called a notification, [same notification as that
of 10% investment in jadhu holding]
His explanation says that for the purpose of this section. The same group comes under section 4,
look at section 4 explanation c- 6[(c)“group” shall have the same meaning as assigned to it in
clause (b) of the
Explanation to section 5.]
They have not extended the definition beyond 2021 through the notification.
Sch I (9) 65[A merger or amalgamation of two enterprises where one of the enterprises has more
than fifty percent (50%) shares or voting rights of the other enterprise, and/or merger or
amalgamation of enterprises in which more than fifty per cent (50%) shares or voting
rights in each of such enterprises are held by enterprise(s) within the same group:
Provided that the transaction does not result in transfer from joint control to sole
control.]

Because of this schedule I, more transactions can be exempted.

Go back to section 5-
(ii) the group, to which the enterprise whose control, shares, assets or
voting rights have been acquired or are being acquired, would belong
after the acquisition, jointly have or would jointly have,—
(A) either in India, the assets of the value of more than rupees four thou
sand crores or turnover more than rupees twelve thousand crores;
or
(B) 8[in India or outside India, in aggregate, the assets of the value of more
than two billion US dollars, including at least rupees five hundred
crores in India, or turnover more than six billion US dollars,
including at least rupees fifteen hundred crores in India; or]
There is a group test in this section 5(ii), in the group test- if you do apply for a notification vis a
vis you do not apply. Say blackstone is acquiring a stake in some serum institute. After the
acquisition, serum may become part of the group, at 26%, they might become a group. F you are
looking at group numbers. Every company of the blackstone has to be looked at and their share
in a company. Because de jure and de facto numbers are so large that a company says musk
sharing is twitter so typically that will belong to musk’s group, but it is difficult to see whether
that threshold is breached or not.

What are Starbucks in India? They are joint venture between Tatas and Starbucks (50-50 share
both).

Is starbucks private limited part of the Tata Group?

Section 5- (b) “group” means two or more enterprises which, directly or indirectly, are in a position
to — (i) exercise twenty-six per cent or more of the voting rights in the other enterprise; or (ii)
appoint more than fifty per cent of the members of the board of directors in the other enterprise; or
(iii) control the management or affairs of the other enterprise;

If we apply (i) then we will say it is more than 26% then are in a group.

Item no. 8 - 2[An acquisition of shares or voting rights or assets, by one person or enterprise, of
another person or enterprise within the same group, except in cases where the acquired enterprise is
jointly controlled by enterprises that are not part of the same group.

Control is a combination of qualitative and quantitative metric.

(a) “control” includes controlling the affairs or management by— (i) one or more enterprises, either
jointly or singly, over another enterprise or group; (ii) one or more groups, either jointly or singly,
over another group or enterprise;

This does not give a proper definition - it s just an explanation. Therefore we should refer to
definition under the companies act (statutory basis for this reference because words not defined will
have the same meaning as assigned in companies act)
Companies act is talking about ability to appoint majority of board of directors (de jure)- also talks
about management control (de facto).

Item no. 6-1[An acquisition of shares or voting rights pursuant to a bonus issue or stock splits or
consolidation of face value of shares or buy back of shares or subscription to rights issue of shares,
not leading to acquisition of control.]

In corporate law I we discuss all of these concepts-

Section 2(a) “acquisition” means, directly or indirectly, acquiring or agreeing to acquire— (i) shares,
voting rights or assets of any enterprise; or (ii) control over management or control over assets of any
enterprise;

Several ways to acquire- this definition is talking about ownership control and management control

HOwever, section 5 is talking about acquisition of enterprise not just acquisition. Schedule I can be
understood as instances of acquisition but not of enterprises.

Item No. 3-
An acquisition of assets, referred to in sub- clause (i) or sub-clause (ii) of clause (a) of section 5 of
the Act, not directly related to the business activity of the party acquiring the asset or made solely as
an investment or in the ordinary course of business, not leading to control of the enterprise whose
assets are being acquired except where the assets being acquired represent substantial business
operations in a particular location or for a particular product or service of the enterprise, of which
assets are being acquired, irrespective of whether such assets are organized as a separate legal
entity or not.

Example- suppose starbucks buys the HQ buildig of LIC or Air India- this will breach the monetary
threshold of given in section 5 but as per this item will not be acquisition of enterprise

Item 5- [An acquisition of stock-in-trade, raw materials, stores and spares, trade receivables and other
similar current assets in the ordinary course of business

Any acquisition of shares or voting rights by a person acting as a securities underwriter or a

registered stock broker of a stock exchange on behalf of its clients, in the ordinary course of its
business and in the process of underwriting or stock broking, as the case may be

(10)Acquisition of shares, control, voting rights or assets by a purchaser approved by the

Commission pursuant to and in accordance with its order under section 31 of the Act.

Section 31 gives the power to the commission to nudge companies to divest their holdings or sell a
part of their business. THe acquirer of that business need not acquire-

Notice under Section 6(2) jointly filed by ABNL, PEFRL, ITSL, PRIL and FVFRL
ABNIL, pantaloons and other companies decided to amalgamate and filed joint notice to cci
under section 6(2), but the scheme was still under consideration and their bod has nyet not
approved the said scheme.
The Commission is saying that they do not know what the size of the transaction will be as your
board of directors have not yet approved the scheme. Therefore you have come early under
section 6(2).
10. It is also pertinent to note that in terms of Regulation 31 of the Combination Regulations, for
mergers or amalgamations referred to in clause (c) of Section 5 of the Act, the notice referred to in sub-
section (2) of section 6 of the Act shall have to be filed only in regard to the proposals approved by the
Board of Directors on or after the 1 st day of June, 2011 and that the approval by the Board of Directors in
this regard refers to the final decision of the Board of Directors. In this regard, it is observed from the
notice and other documents place on record that the final decision of the Board of Directors of the parties
involved is yet to be taken as regard the scheme of the proposed demerger and merger under Sections
391-394 of the Companies Act, 1956. Accordingly, it is observed that the notice for the proposed
combination, which has been jointly given by the parties pursuant to the execution of the MOU itself while
awaiting the final decision of the Board of Directors of the respective parties to the proposal of demerger
and merger is not in accordance with the provisions of the Regulation 31 of the Combinations
Regulations.
11. Therefore, in the instant case, as the parties have filed the notice of the proposed combination
after the execution of the MOU itself, while the approval of the Board of Directors of the respective parties
to the proposal of the scheme including the proposal of demerger and merger under Sections 391-394 of
the Companies Act, 1956 is yet to be taken, the Commission is of the view that the parties have given the
notice prior to the triggering of the relevant provisions of sub-section (2) of Section 6 of the Act. In view of
the foregoing, the notice given for the proposed combination, at this stage, is not in accordance with
subsection (2) of Section 6 of the Act and the provisions of the Regulation 31 of the Combination
Regulations.

Excel crop care-

The penalty bit is important here.
The moot question is as to whether penalty under Section 27(b) of the Act has to be on
‘total/entire turnover’ of the company covering all the products or it is relatable to ‘relevant
turnover’, viz., relating to the product in question in respect whereof provisions of the Act
are contravened. Section 27 of the Act stipulates the nature of the orders which the CCI can
pass after enquiry into agreements or abuse of dominant position.
Bid rigging is pernicious, moreover there were threats of not participating in the bid.

The supreme court is saying that there is aneed to look at the relevant turnover only to the
concerned business which in this case is turnover from aluminium phosphide.
They looked at EU guidelines, cited foreing precedents and said that since India does not have a
penalty guidelines like EU this is the problem and secondly they looked at the South African
judgement to look at the factor of proportionality. This is an equitable principle.
‘Relevant’ words from ‘relevant market’ should not be taken because that is not how the section
defines it. The section 4 uses the word ‘relevant’ and then it was never used.

Can you justify this interpretation of proportionality through ELP?

Commission actually read section 3(b) with 27(b)-
(a) Under Section 27(b) of the Act, penalty can be imposed under two contingencies, namely,
where an agreement referred to in Section 3 is anti-competitive or where an enterprise which
enjoys a dominant position misuses the said dominant position thereby contravening the
provisions of Section 4. In case where the violation or contravention is of Section 3 of the Act
it has to be pursuant to an ‘agreement’. Such an agreement may relate to a particular
product between persons or enterprises even when such persons or enterprises are having
production in more than one product. There may be a situation, which is precisely in the
instant case, that some of such enterprises may be multi-product companies and some may
be single product in respect of which the agreement is arrived at. If the concept of total
turnover is introduced it may bring out very inequitable results. This precisely happened in
this case when CCI imposed the penalty of 9% on the total turnover which has already been
demonstrated above.

We can also look at the purpose of section 27(b) and claim that the purpose of section 27(b) is
that of deterrence and their interpretation actually ignores deterrence. The legislature has
imposed a higher penalty for deterrence therefore no need to impose a penalty.
What is the problem with commission reasoning? The commission says that the contravention of
one agreement is related to one product therefore no need to look at turnover from other
products, look at turnover from aluminium phosphide only.
RS- but the probability of detection is very low. Therefore if you give a narrow interpretation to
the penalty, it may cause detection problems.
Legislature thinks that the cartel and big rigging are egregious violations of competition law,
therefore since their detection is also very low- the penalty should be very high.

The penalty makes up upto 10% of the total turnover.

43A. If any person or enterprise who fails to give notice to the Commission under
sub- section(2) of section 6, the Commission shall impose on such
person or enterprise a penalty which may extend to one percent, of the
total turnover or the assets, whichever is higher, of such a combination.]

The statute gives in this section a concept of total turnover in the context of merger, but this does
not apply to the case of section 3. What is the relevant turnover? Because in the context of big
companies if you look at their turnover of a single company or a product then it is very less and
will be discriminatory to those companies that make only one product because in that case the
turonver would be very high.

What is the ‘sources thesis’ in this case? The way section 27 is drafted, the moment you look at
proviso-
Provided that in case any agreement referred to in section 3 has been
entered into by a cartel, the Commission may impose upon each
producer, seller, distributor, trader or service provider included in
that cartel, a penalty of up to three times of its profit for each year
of the continuance of such agreement or ten percent. of its turnover for
each year of the continuance of such agreement, whichever is higher.]
‘Whichever is higher’- this also shows that the legislature is concerned with imposing higher
penalty in the case of cartels.
Some of the companies were making a claim because they will be shit in the case of such a
higher penalty therefore the court was more concerned. But still it is 10% of the turnover because
what about the remaining 90%.

NV ramana’s opinion
After the amendment [Central Act 39 of 2007] the proviso as it stands today has been quoted
above. The change which was brought about by the aforesaid amendment is that the mandatory
nature of the Proviso was made discretionary by substitution of ‘shall’ with ‘may’. This
amendment was done to bring the proviso in tune with the rest of Section 27, which uses the
expression “it may pass all or any of the following order” and main part of clause (b), which
confers discretion upon the Commission to impose penalty as it may deem fit, subject to the rider
that it shall not be more than 10% of the average of the turnover for the last three preceding
financial years. It is important to note that Clauses (c) and (d) of Section 27 also uses the word
‘may’, which signifies that the Commission has the discretion to pass a particular order, which it
may deem proper in the facts and circumstances of the case.
It is well settled that the Competition Act, 2002 is a regulatory legislation enacted to maintain
free market so that the Adam Smith’s concept of invincible hands operate unhindered in the
background.27 Further it is clear from the Statement of objects and reason that this law was
foreseen as a tool against concentration of unjust monopolistic powers at the hands of private
individuals which might be detrimental for freedom of trade. Competition law in India aims to
achieve highest sustainable levels of economic growth, entrepreneurship, employment, higher
standards of living for citizens, protect economic rights for just, equitable, inclusive and
sustainable economic and social development, promote economic democracy, and support good
governance by restricting rent seeking practices. Therefore an interpretation should be provided
which is in consonance with the aforesaid objectives.
10. At this point, I would like to emphasize on the usage of the phrase ‘as it may deem fit’ as
occurring under Section 27 of the Act. At the outset this phrase is indicative of the discretionary
power provided for the fining authority under the Act. As the law abhors absolute power and
arbitrary discretion, this discretion provided under Section 27 needs to be regulated and guided
so that there is uniformity and stability with respect to imposition of penalty. This discretion
should be governed by rule of law and not by arbitrary, vague or fanciful considerations. Here
we may deal with two judgments which may be helpful in deciding the concerned issue

Ramana is somehow proving that section 27 and section 27(b) proviso is actually highly
discretionary, therefore they have the discretion. By introducing this idea of ‘discretion’. They
are using this idea of providing a discretion to the subordinate authority. Isn’t it like a command
of the sovereign.

Look at the purpose of the amendment from ‘shall’ to ‘may’? SC ignored it, the problem in cartel
context is leniency, it has to discretionary because sometimes parties may ask for leniency and
commission can only allow if it has the discretion otherwise this concept of ‘leniency’ will be of
no use, therefore they amended the same.
In many of these contexts, this concept of leniency is the problem because the moment there is a
violation of penalty there needs to be a mandatory penalty or otherwise the other purposes of law
like deterrence will be violated. Therefore if you are concerned with the idea of justice then you
can say that the penalty should be a penalty.

The judges are pegging the case on the ‘discretion’, which essentially means cci discretion. They
said that then the supreme court will apply their discretion and want to make the section a little
more predictive. Therefore they actually looked at the idea of ‘relevant turnover’ as they thought
that this might make the provision a little more predictive.
The leniency is also important in that way because it makes the concept of cartel unstable
because according to game theory, there will be a doubt on the members of the cartel that what if
the other person confesses.
This is the need for confession.
Moreover, if there are no guidelines- it is not really the problem as CCI anyway has the
adjudicatory power so long as they are not incoherent. 1

Interface with sector specific regulators

CCI v Bharti Airtel-

Facts-

Section 60- the sc does not tell us what the inconsistency is.
Section 62-

What is the interplay between the two provisions? The Sc is silent on this.

Two other provisions- section 21 and 21A_

21. (1) Where in the course of a proceeding before any statutory authority an
issue is raised by any party that any decision which such statutory authority
has taken or proposes to take is or would be, contrary to any of the
provisions of this Act, then such statutory authority may make a reference
in respect of such issue to the Commission:
31[Provided that any statutory authority, may, suo motu, make such a
reference to the Commission.]
32[(2) On receipt of a reference under sub-section (1), the Commission shall
give its opinion, within sixty days of receipt of such reference, to such
statutory authority which shall consider the opinion of the Commission
and thereafter, give its findings recording reasons therefor on the issues
referred to in the said opinion.]

What is a statutory authority? It is a defined term-

w) “statutory authority” means any authority, board, corporation, council, institute, university or
any other body corporate, established by or under any Central, State or Provincial Act for the
purposes of regulating production or supply of goods or provision of any services or markets
therefor or any matter connected therewith or incidental thereto
Is NLSIU a statutory authority? Not really we don’t ‘regulate’ any thing. Other universities regulate
colleges affiliated to them but NLSIU does not.

TRAI however, regulates behavior of Telecom companeis. If before trai someone raises an issue
related to COmpetition law then the trai ‘may’ make a reference to CCI

21A. (1) Where in the course of a proceeding before the Commission an issue is raised by any party
that any decision which, the Commission has taken during such proceeding or proposes to take, is or
would be contrary to any provision of this Act whose implementation is entrusted to a statutory
authority, then the Commission may make a reference in respect of such issue to the
statutory authority: Provided that the Commission, may, suo motu, make such a reference to the
statutory authority. (2) On receipt of a reference under sub-section (1), the statutory
authority shall give its opinion, within sixty days of receipt of such reference, to the Commission
which shall consider the opinion of the statutory authority, and thereafter give its findings
recording reasons there for on the issues referred to in the said opinion.

THis is the vice versa provision of section 21. There is one difference though- whose implementation
is entrusted to a statutory authority,
The statutory authority itself should have competition mandate.

If we look at regulatory statutes the only statute that really conflicts with CA is the Electricity Act.

Section 60. (Market domination): The Appropriate Commission may issue such directions as it
considers appropriate to a licensee or a generating company if such licensee or generating company
enters into any agreement or abuses its dominant position or enters into a combination which is
likely to cause or causes an adverse effect on competition in electricity industry

What stopped the supreme court from just asking TRAI directly in court and be done with the
issue ???? they have the power to do so.
Something about sequencing-

Monsanto
Facts-Patent and competition law. They frame the decision of the Bharti airtel case in a very
different manner. Monsanto sells genetically modified seeds that have patent proteciton. The
question is whether the royalty is abuse of dominant position.

55. It is also relevant to note that the role of TRAI as a regulator is materially different from that of a
Controller. Telecom services are regulated and controlled and TRAI has a vital role in regulating the
industry. As noticed above, the nature of functions of TRAI are twofold. The first is recommendatory
in nature. TRAI is required to make recommendations to the licensor on the matters as specified in
Section 11(a) of the TRAI. Thus, matters that relate to licensing between the licensor and the service
provider are squarely covered at the said level. In addition to the above, TRAI is required to perform
other functions for regulating the telecom services. The TRAI’s scope of regulation is all pervasive.
In exercise of its powers, TRAI has made several Regulations, which are required to be complied
with. TRAI also fixes the tariff for interconnection. Thus, the issue whether adequate number of POIs
had been provided by service providers for connecting with the service rolled out by RJIL fell
squarely within the scope of regulatory powers of TRAI and TRAI was required to determine it. A
Controller does not regulate the exercise of patent rights in such pervasive manner. This is for an
obvious reason that patents is not an industry. Grant of a Patent recognizes and confers an
intellectual property right. The principal function of the Controller

TrAI is a regulator however controller is not- it is a different sort of person. It does not have power to
regulate as such. Controller of patents is an authority that grants patents.

THey are essentially distinguishing Bharti Airtel case and saying that it does not apply.
The implication is that cci can go ahead with the investigation. In bharti airtel as well this is the
simple implication- nothing too drastic.

Quite a lot of companies challenge the commission even before it starts investigating

The case itself arose under MRTp butthe state government which wanted to file the case faced a
problem under section 10 of the MRTP Act. Under section 10(b) reference could only be made by
the central government and not state government.

Constitutional law issue in Monsanto as well - ???