Case Notes – Indian Supreme Court Condemns The Practice Of Transferring Property Through The Grant Of A General Power Of Attorney

By Aseem Chawla and Surabhi Singhi

On October 11, 2011, the Supreme Court of India condemned the increasingly frequent malpractice of transferring immovable properties without a registered deed of conveyance in the case of Suraj Lamp and Industries Pvt. Ltd. v State of Haryana [2011 (11) SCALE 438]. The court, assisted by amicus curiae Mr. Gopal Subramanian, Solicitor General, investigated the rampant practice of transferring property through a general power of attorney]. The States of Delhi, Haryana, Punjab and Uttar Pradesh were also notified to submit their views in the form of affidavits.

According to the court, the modus operandi behind these transactions is the avoidance of stamp duty payments, registration charges, income tax (capital gains on transfers) as well as unaccounted “black” money or illegal money. Therefore, property vendors with imperfect title and purchasers aiming to invest “black money” are the chief propagators of such transactions.

In order to address this issue, the Court clarified that Section 17 of the Registration Act, 1908 has made the transfer of property legitimate only through a registered deed and Section 49 prohibits the use of such documents as evidence to prove title. Thus, the documents in the nature of power of attorney cannot convey any title or create any interest in an immovable property. [The court also stated the ill effects of such transfers by stating that bona fide purchasers may in future be threatened by the ever growing land mafia. Further, the Court emphasized that the vendors are tempted to resell the property due to lack of evidence with the purchaser and owing to an imperfect title and an inevitable consequence is the criminalization of real estate transactions.

The Court highlighted the importance and benefits of transfer of immovable property through a registered instrument such as safety and security of transactions due to publicity of documents and creation of a permanent record in the event of loss or destruction of documents, prevention of fraud and forgeries and easier verification of a marketable title. Further, the court stated that the states may take necessary steps such as reduction of stamp duty, which would encourage the public to get their sale deeds registered. The Court further noted that this may lead to a loss of revenue, yet it would be significant in reducing generation of black money and undervaluation of property.

The Court pointed out, however, that the validity of a power of attorney or a sale agreement in a genuine transaction is not disputed since a person may, for the better management of his property, execute such documents.

Therefore, in the absence of a registered deed, such transactions in the nature of power of attorney are not completed transfers or do not create any interest / title in the property (except to the extent mentioned in Section 53A of the Transfer of Property Act, 1882) and would only protect the transferee against the transferor.

Mr. Aseem Chawla is a Partner, and Ms. Surabhi Singhi is an Associate, Amarchand & Mangaldas & Suresh A. Shroff & Co., based out of Delhi, India. Mr. Chawla leads the tax practice group of the firm and can be contacted at Ms. Singhi is an Associate with the tax practice group of the firm and can be contacted at




Competition Commission Takes Hold Of M&A Activity


            The Competition Commission of India (“CCI”) stepped into a new regulatory role with the release of the CCI (Procedure in regard to transaction of business relating to combination) Regulations, 2011 (“Combination Regulations”) on May 11, 2011. This was a sequential step to the notification of combination provisions (sections 5 and 6) of the Competition Act, 2002 (“Act”) issued on March 4, 2011. As a result, the CCI is now equipped with a complete set of substantive and procedural rules to scrutinize mergers and acquisitions which cross the prescribed assets or turnover based thresholds. Effective June 1, 2011, no transaction that is likely to have an “appreciable adverse effect on competition in relevant market in India” can be consummated without a prior approval from the CCI. After implementing the Combination Regulations for almost nine months, CCI has brought some significant changes through the CCI (Procedure in regard to transaction of business relating to combination) Amendment Regulations, 2012 (“Combination Amendment Regulations”) on February 23, 2012.

This article analyses this new regulatory framework, highlighting the potential impact of the Combination Regulations as well as the Combination Amendment Regulations on mergers and acquisitions in India.

Transactions covered under the Competition Act

Section 5 of the Act has been very broadly cast and defines “combination” to include an acquisition of shares, voting rights, assets, or control of an enterprise or merger or amalgamations of enterprises. Essentially, all transactions crossing the following prescribed monetary threshold would require a prior notification to the CCI. All figures are approximations.

Threshold referencing India:

  • Acquirer and target having assets worth $330 million or turnover of $1 billion.
  • Acquiring “group” and target having assets worth $1.33 billion or turnover of $4 billion.

Threshold with world-wide reference:

  • Acquirer and target having assets worth $0.75 billion (out of which at least $167 million in India) or turnover of $2.25 billion (out of which at least $500 million in India).
  • Acquiring “group” and target having assets worth $3 billion (out of which at least $167 million in India) or turnover of $9 billion (out of which at least $500 million in India).

Interestingly, on March 4, 2011 (the same date on which the combination provisions under the Act were notified) the government also issued an array of investor friendly notifications, including: (i) an increase of 50% in asset/turnover based monetary thresholds to reach the present levels mentioned above; (ii) amendment to the definition of “group” whereby groups exercising less than 50% of voting rights in the other enterprise are exempt from the purview of the Act and Combination Regulations for a period of five years starting June 1, 2011; and (iii) a similar exemption of five years to enterprises having assets below $56 million or a turnover of not more than $167 million.

In our view, the monetary criterion alone is not appropriate to define the contours of a combination in every case. But, if the financial triggers are attracted that would compel parties to notify even small combinations having no appreciable adverse effect on competition, just on account of their size. On the other hand, dilution of the definition of “group” is a welcome move as it would ensure safe harbor for many more transactions involving group companies, than would have been the case with the earlier threshold of 26%.

Process of filing notice with CCI

Trigger Point: 30 days!

The Act mandates that a notice is to be filed with CCI within 30 days of an approval by the board of directors in case of intended mergers or amalgamations or execution of any agreement or “other document” in case of acquisitions. According to the definition inserted now in the Combination Regulations, “other document” will mean any “binding document” conveying or exhibiting the intention to acquire. In the context of “hostile takeovers,” mere execution of such a document by the acquirer itself would trigger the deadline of 30 days. The CCI will not interfere with transitory transactions where the relevant trigger event has occurred before June 1, 2011.

Form and fee

The CCI is to be normally notified in Form I (a short form prescribing entries with respect to products/services, market share, etc.) with a stipulated fee of approximately $20,000. This amount is a result of the Combination Amendment Regulations, whereby the fees has been increased almost 20 times. Regulation 5(2) provided an inclusive list of transactions, where in most cases only Form I (Part I) was required to be filed. The recent amendment deleted the reference to transactions for which Form I (Part I) had to be filed. This implies that it is now mandatory to file the complete Form I (Part I and Part II) in every instance.

Parties to the transaction also have an option to file Form II with a prescribed fee of approximately $80,000. The amended regulations also provide for some instance where filing of Form II is recommended. These recommendations include combinations involving horizontally or vertically aligned entities with combined market share of more than 15% or 25% in each case. Form II is longer and contains detailed requests for information regarding (among other things) relevant market structure, demand and supply in the market, entry and exit conditions. It is apparent that the type of detailed information required by the CCI would necessitate filing certain confidential information that could, eventually, be leaked out to the market and competitors and may not be in the best interest of the transacting parties. In order to claim confidentiality, parties are required to formally request and specify cogent reasons, including the implications on the business for protecting confidentiality regarding any information supplied to the CCI. Complete discretion rests with the CCI in granting any such request for confidentiality. Unless addressed properly, this could become a thorny issue as there will be inevitable reluctance to share confidential information without adequate security that it shall be preserved.

Any acquisition by a public financial institution, foreign institutional investor, bank or venture capital fund, pursuant to a covenant under a loan or investment agreement does not require a prior approval from the CCI. Such bodies are just required to notify the CCI in a simplified Form III along with a certified copy of the executed loan or investment agreement, without any fee, in seven days post such acquisition. The Combination Amendment Regulations have inserted a new sub regulation whereby CCI may permit filing of Form III even beyond the seven day period. This is inconsistent with section 6(5) of the Act, which specifically limits the filing period to seven days.

Onus of filing notice

In the acquisition of shares, voting rights, or control in an enterprise, the acquirer is under an obligation to file the relevant form with the CCI. In case of a merger or amalgamation, the transacting parties are required to jointly file the appropriate form with the CCI. The recent amendment has also authorized the company secretary of the company, duly authorized by its board, to do filing with the CCI in the aforementioned cases. In a scenario, where the intended objective of a business transaction is achieved through a series of individual transactions (inter–connected or inter–dependant), one or more of which may amount to a combination, the Combination Regulations provide that a single notice can be filed with the CCI. For example, in the recently proposed acquisition of UTV Software Communications by Walt Disney Company , the complete transaction as proposed by the parties involved two steps: firstly, acquisition of shares held by public shareholders through a delisting offer under the Delisting Regulations, 2009 and, secondly, a subsequent acquisition from promoters. The acquirer filed a single notice in Form I and CCI approved the entire transaction through an order dated August 25, 2011.             

Failure to file any of the prescribed forms can result in a penalty of up to 1% of the combined assets or turnover of the combined entity, whichever is higher, on the enterprise(s) that is under the obligation to file the relevant form in a particular case.

Evaluation of Proposals by the CCI

            Prima facie opinion: the CCI is obligated to make a prima facie opinion regarding whether there will be an appreciable adverse effect of the proposed transaction on the Indian market within 30 days of filing the notice. There were apprehensions in the industry on the competence of the CCI to approve proposed combinations within the short span of 30 days. However, on July 26, 2011, the CCI came out with its first order approving an acquisition by Reliance Industries Limited and Reliance Industrial Infrastructure Limited of a 74% stake held by the Bharti Group in each of two joint venture insurance companies, namely Bharti AXA Life Insurance and Bharti AXA General Insurance. The order approving the transaction was passed in a record time of just 18 days. Further, the competition regulator has already given its nod to twenty seven more proposed transactions, and most of them well within the timeframe of 30 days. Certainly, the CCI has started out well and it remains to be seen if such time frames shall be maintained going forward.

Detailed Investigations: If unsatisfied at the preliminary stage, the CCI could go for a detailed investigation, and, in such a case, would endeavor to pass an order within 180 days as opposed to 210 days. It is noteworthy that despite the global concern there is no commitment to approve within the reduced period of 180 days. The obligation of the CCI is merely confined to best efforts. There is also a provision for deemed approval in case the CCI does not pass an order within 210 days.

It remains unclear when the clock will start and the 210-day period will commence because chances are that the CCI will seek additional clarifications/information and that process could prove to be time consuming. Only time will tell whether the 210-day period will be extended or curtailed and respected. So far, the prognosis appears to be encouraging.

Another conundrum remains in case of takeovers or the substantial acquisition of shares of listed entities. In case parties execute an agreement to acquire more than 25% of voting rights in a listed company, this would trigger the “open offer” obligation under the Takeover Regulations. At the same time, notice would also need to be filed with the CCI under the Combination Regulations. This may lead the transacting parties embroiled between the competition and securities law, as they might not be able to complete the open offer within the time stipulated under the Takeover Regulations for want of clearance from the CCI which can, in turn, lead to payment of interest on the offer price to tendering shareholders at a rate decided by the Securities and Exchange Board of India (“SEBI”).             

The Regulations under Schedule I enumerate a list of transactions that are unlikely to cause any appreciable adverse effect on competition in India. The list includes:

  • An acquisition of shares or voting rights of an enterprise solely for the purpose of investment or in the ordinary course of business. In this case, the total share holding or voting rights of the acquirer should not exceed 25% and should not lead to the acquisition of control over the enterprise. The limit has been recently increased from 15% to 25% through the Combination Amendment Regulations. This amendment ensures that the threshold of 25% is in consonance with the new Takeover Regulations announced on October 22, 2011.
  • Any consolidation of holding where the acquirer already has more than 50% of share holding or voting rights in the target except when such acquisition leads to sole control from joint control. The Combination Regulations are silent upon any acquisition or consolidation of shareholding between 25–50%. This is in contrast to the new Takeover Regulations, which allow the consolidation of shareholding in a listed entity through the “creeping acquisition” of 5% in a financial year without getting indented by open offer requirements, in case the acquirer holds 25% or more in the target and until he transgresses the maximum permissible non-public shareholding limit of 75%. The Combination Regulations, on the other hand, do not provide for such leverage. A clarification on this particular point is very much required, as an acquisition of 5% of voting rights in a financial year in cases where it does result in change of “control” in an enterprise, would not cause any significant appreciable adverse effect on competition in the relevant market and should be exempted.
  • An acquisition of stock-in-trade, raw material, stores, etc. in ordinary course of business.
  • An acquisition of bonus or right shares not leading to control. The recent amendment has extended this exemption to buy back of shares as well.
  • Intra-group acquisitions are exempted. The Combination Amendment Regulations have now specifically exempted intra-group mergers or amalgamation between (i) wholly owned subsidiaries of the parent company inter-se or (ii) wholly owned subsidiary with the parent company. This change will facilitate consolidation of group companies with lesser statutory compliance. Further, the erstwhile regulations provided for a definition of “group” while determining any intra-group acquisition. The amendment has curiously deleted this definition leaving stakeholders with little guidance on interpretation of the term “group.”
  • A combination taking place entirely outside India with “insignificant local nexus” and effects on relevant market in India. Regrettably, no objectives or parameters are provided to determine “insignificant local nexus.”

The Combination Regulations state that these transactions are “ordinarily not likely” to cause an appreciable adverse effect in the relevant market, leaving it on the parties to assess the implication of their proposed combination and make a decision on notifying the CCI.

Pre -Merger Consultation

The Combination Regulations failed to provide any pre–notification consultation. But, in conformity with international practices and paying regard to the demands from industry, the CCI has recently started a separate mechanism, offering an informal and verbal consultation with the CCI staff by appointment. It is unclear at this stage what assistance the staff would provide, but in essence it could be confined to clarifications or guidance for the completion of forms. The CCI has also upfront clarified that such consultation should not be construed as its opinion and would not have any binding effect on it. At the very least, the CCI staff should review the relevant form and intimate parties of changes, if any, or any additional information/documents that ought to be supplied to avert delays at a later stage.


            The combination provisions under the Act have finally gathered full force after being in abeyance for almost a decade. There is some jurisprudence that exists with regard to anti-competitive agreements and abuse of dominant position in India, and now specific merger control regulations are a step in the right direction for healthier competition in the market. The industry anticipates a slowdown in the mergers and acquisitions due to the time the CCI will take in issuing its approval. The CCI is required to make sure that it strengthens the pre-merger consultation mechanism and regularly comes out with clarifications and amendments, as the recent one, to remove ambiguities. Nonetheless, the CCI has gathered the right momentum by approving most of the initial combination proposals within the stipulated 30 days, and this could be the harbinger of favourable and efficient regulatory action in days to come.

Ankush Goyal is an associate with Priti Suri & Associates. His specific area of practice includes general corporate, competition, project finance, M&A, banking and infrastructure. Ankush can be reached by e-mail at



By Ankush Goyal


Equipping Competition Laws To Protect An Innovative Economy: Can Canada Assist India?

Is it good for the Indian economy if Wipro starts purchasing all of the promising small, entrepreneurial firms in India? Do Indian consumers benefit if Cipla and Ranbaxy engage in joint ventures for the research and production of new drugs? These types of questions are characteristic of a technologically advanced economy and are the types of questions India’s new Competition Commission (the “CCI”) will confront, as the CCI seeks to protect India’s marketplaces. This article seeks to identify whether India’s competition law is sufficiently equipped to resolve these questions, and where areas of concern are identified, looks to Canadian competition law for possible assistance.

  1. The (Collaborative) Innovation Imperative

As various panels appointed by governments in both India and Canada have identified, technological innovation is critical to the prosperity of each nation and its citizens. According to the OECD, technological innovation is typically defined as the implementation or commercialization of an invention arising from research and development work (OECD, Oslo Manual). It can range in significance from a mere incremental improvement to disruptive technologies, such as electric power.

The economic research driving this call to action could not be more compelling, as seven-eighths of economic growth in the United States between 1909 and 1949 according to economist Robert Solow, and three-quarters of economic growth since then according to the United Stated Department of Commerce, is attributable to technological innovation. This relationship has only grown stronger, such that today, one could look to any number of countries, especially those without significant amounts of natural resources, spending heavily to build domestic capability for technological innovation. China is a poignant example. Domestic technological innovation is therefore imperative if India is to achieve its national ambitions, as illustrated by Vannevar Bush in 1945 with reference to the United States. Innovation in high-technology industries, such as information and communications technology and pharmaceuticals, is especially important because these industries are responsible for major disruptive change to the global economy, such as through the development of the Internet. Technological innovation in high-technology industries often generates tremendous wealth and prosperity.

The “secret sauce” for technological innovation depends on a wide range of factors, and sometimes differs between industries and the stage of development of an industry. Innovation has historically been primarily the result of intra-firm research and development. However, as experience has demonstrated there is a range of potential benefits if the innovation process includes activity outside the firm, it is increasingly becoming a collaborative activity between and among firms in similar industries, dissimilar industries, universities and governments. The mechanisms permitting this transfer of technology include contractual arrangements, joint ventures and especially mergers and acquisitions, a frequent event in the ever-innovative Silicon Valley. However, especially since its modern genesis in the United States at the beginning of the 20th century, competition law has been particularly concerned with conspiring competitors, as consumers are usually harmed by these arrangements, such as in the event of price-fixing. Rapidly changing high-technology industries are no different, and harm to consumers, innovation and the economy is still very much of concern (Barnett, Competition Enforcement in an Innovative Economy).

In India, harmful anti-competitive conduct has historically remained free from government intervention, as the previous competition law, the Monopolies and Restrictive Trade Practices Act, 1969, was antiquated and rarely enforced. In May 2009, a modernized Competition Act, 2002 (the “Act”) came into effect, as did the provisions governing combinations, or mergers, on June 1, 2011.

Are India’s new competition laws and the enforcer of those laws, the CCI, equipped to deal with the nuances of protecting consumers, innovation and the economy, while still permitting the collaboration required for innovation to take place?

  1. Competition Laws Relevant To Collaborative Innovation

Competition law is a policy lever to facilitate technological innovation; however, it is not of the same type as patent law, tax law, or other levers that provide an explicit incentive to innovate. Instead, much as property rights do, competition law is a way of protecting the marketplace, including participants in the marketplace, by seeking to avoid the deterrence or prevention of innovation that can be caused by a range of harmful behaviours.

The Act created the CCI and empowered it with wide powers of investigation and the ability to levy significant financial penalties. Two provisions are of particular relevance to collaborative innovation: anti-competitive agreements and dealing with business combinations. Similar provisions exist in Canada’s Competition Act (the “Canada Act”).

  1. Anti-Competitive Agreements

Preventing conspiracy between competitors (the indicia of which are common in many countries, effectively consisting of competitors agreeing not to compete, typically through the fixing of prices, outputs or geographical markets) is a longstanding pillar of competition law. Whether referred to as a conspiracy or a cartel, the static economic effects are typically the same: prices are higher, output is reduced and consumer welfare is harmed. The dynamic effects, or the “impact on the optimal introduction or improvement of products and production processes” according to Canada’s counterpart to the CCI, the Competition Bureau (Competition Bureau, Efficiencies in Merger Review), are less well studied, but typically the static harm will outweigh any potential benefit created by increased innovation, and further, a competitor that is not competing has little incentive to innovate.

While conspiracy between competitors is almost always harmful, there are a wide range of agreements involving the sharing of, development of, or transfer of, technology between and among competitors. Some of these may be, on a net basis, anti-competitive. Many of them, however, are pro-competitive, owing to the technological innovation or dynamic efficiencies that are created. Policing these agreements correctly is an exceedingly difficult task.

Looking first to India, section 3 of the Act is the primary tool for stopping conspiracies. It provides that no person, enterprise or association thereof may enter into an agreement in respect of production, supply, distribution, storage, acquisition or control of goods or services, which causes or is likely to cause an appreciable adverse effect on competition within India. Sub-section 3(3) of the Act presumes that particularly harmful behaviour, such as price-fixing, satisfies this threshold.

This provision is similar to one of the two principal provisions of the Canada Act targeting anti-competitive agreements. The first is a flexible analysis similar to section 3 of the Act, in section 90.1 of the Canada Act. Instead of “appreciable adverse effect on competition”, the Canada Act imposes a similar threshold, although only of “competitors” of one another: whether an agreement “prevents or lessens, or is likely to prevent or lessen, competition substantially in a market…” (Canada Act, s. 90.1(1)). Under this flexible approach, this analysis considers a range of factors set out in the Canada Act, as well as an accompanying enforcement guideline created by the Competition Bureau (Competition Bureau, Competitor Collaboration Guidelines).

The Canada Act’s second principal provision combating conspiracy, section 45, requires no such flexible analysis. If a person is found to have engaged in the fixing of price, output or the production or supply of a product with a competitor, criminal sanctions will be applied. In a way, this is similar to section 3(3) of the Act, in that both target these particularly harmful activities and pay no regard to competitive effects, although section 3(3) carves out “joint ventures” from the presumption of an appreciable adverse effect.

  1. Business Combinations / Mergers

A firm wishing to expand or acquire a new competency typically faces a binary choice: grow organically or acquire an existing firm. It is the latter that permits a firm to rapidly accumulate market power and potentially even monopoly power, which attracts the attention of an enforcement body such as the CCI. In any developed economy, business combinations are a frequent occurrence. As noted above, they have also increasingly become a common vehicle for acquiring technology and the talented people that create and commercialize that technology.

Business combinations occur so frequently, in fact, that much of the merger review provisions under the Act are procedural in nature (Act, s. 5), to enable the CCI to gather relevant information quickly and assess whether a proposed merger will have an appreciable adverse effect on competition within a relevant market in India (Act, s. 6(1)). The Canada Act is largely similar in structure, by setting out procedure of merger review and only requiring medium and large firms to submit to the merger review process and governing the timing of the merger review. Also similar is the test for whether to approve or challenge a merger, based on whether it prevents or lessens, or is likely to prevent or lessen, competition substantially in a trade, industry or profession in Canada. One difference is that in Canada, the Competition Bureau will analyze a range of factors, contained in both the Canada Act and in an accompanying enforcement guideline, to assess whether the transaction will pass the test.

III.       Is India Equipped For Nuances In This Analysis?

The law relating to conspiracies and merger reviews is quite similar in Canada and India, subject to some subtle differences. However, applying these laws is the difficult part of safeguarding the marketplace, and doing so requires economic analysis of a given situation.

Unfortunately, the economic tools available to analyze the nuances of whether a particular arrangement or merger is pro-competitive or will increase technological innovation, are not nearly as well established as they are for static price or output effects, according to Gwill Allen and Alan Gunderson (19). As both the Act and the Canada Act are relying on this common body of economic theory, these challenges are common to both the CCI and the Competition Bureau.

In seeking to ensure that the CCI is best able to effectively enforce the Act, I offer three suggestions which may be of assistance.

  1. Insulate Non-Cartel Type Agreements From Serious Penalties to Avoid a Chilling Effect on Innovators

Currently, section 27 of the Act enables the CCI to apply onerous financial penalties, among a range of other remedies, against any type of agreement it determines to have an appreciable adverse impact on competition in India. While the ability to levy significant penalties may be desirable on occasion, the threat of penalties as significant as criminal sanctions in other countries can discourage firms from engaging in potentially beneficial alliances. This was a recognized shortcoming in Canadian competition law relating to anti-competitive agreements, which until 2009, was a regime built around criminal sanctions. In 2009, it was revised such that most agreements are analyzed under a flexible framework, considering a broad range of factors, usually with no potential criminal sanctions. The new framework acts to (i) prevent any chilling effect on most collaboration, since they don’t involve problematic behaviours, such as price-fixing, and (ii) identify and protect specific positive arrangements, including commercialization and joint selling agreements, research and development agreements, information sharing agreements and joint production agreements. Accordingly, while creating a flexible analysis, it retained a provision for criminal sanctions against serious conspiracies, in recognition that the harmful effects of such an arrangement will outweigh the benefits potentially created.

The CCI’s broad discretion in applying section 3, including levying significant penalties for a common technology transfer transaction, can create uncertainty amongst firms in arranging their affairs. An interpretive or enforcement guideline to provide similar safeguards could inspire confidence among firms, such as reserving serious penalties permitted by section 27 of the Act for serious anti-competitive conduct addressed in sub-section 3(3) and outlining types of agreements presumed to be beneficial, such as certain types of joint research and development agreements.

  1. Address The Shortcomings of Economic Analysis for High-Technology Industries

Competition law relies on economic theory to identify anti-competitive harm. However, in rapidly changing high-technology industries, traditional economic tools, such as an analysis of static price and output effects, can be misleading. For example, by focusing on traditional price or output effects, an analysis could entirely miss the dynamic effects of an arrangement, either positive or negative, and intervention by the CCI could significantly harm innovation (Rosch). Unfortunately, at the same time, the potential for anti-competitive harm is still very much a reality.

Various studies have identified that to better analyze high-technology industries, one should consider: (i) dynamic efficiencies, as defined above, (ii) qualitative factors, perhaps including incentives for innovating, and (iii) the presence of vigorous, innovative competitors, known as “mavericks”, who are generally beneficial to consumers because they often create downward pressure on prices, innovate and come up with new products, which disrupts the power of incumbents in a particular market.

With respect to combinations, encouragingly, the Act refers the CCI to a list of factors when determining whether a combination will result in an appreciable adverse effect on competition in the relevant market (Act, s. 20(4)). Explicit reference is made to considering the “nature and extent of innovation” likely to be generated or destroyed by the combination, as is any removal of “vigorous and effective competitors” (Act, ss. 20(4)(l) and (m)). The Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (No. 3 of 2011) (the “Regulations”) note that information must be disclosed by the combining parties to speak to these considerations, including any new technologies in an industry, research and development and intellectual property rights (Regulations, ss 11.10(d) and (e), 11.18-11.20). Finally, just as Canadian merger review provisions provide for a “defense” if pro-competitive efficiencies outweigh anti-competitive effects (Canada Act, s. 96), the Act includes such considerations by analyzing the contribution to economic development and any outweighing of adverse impact (Act, s. 20(4)(n)).

With respect to anti-competitive agreements, the Act is similarly equipped to incorporate these factors into the analysis of whether harm has occurred. Sub-sections 19(3)(e) and (f) of the Act address the consideration of “improvements in production or distribution of goods or provision of services”, a functional definition of innovation, and “promotion of technical, scientific and economic development by means of production or distribution of goods or provision of services”, which also captures innovation and broader dynamic and qualitative effects.

The CCI should make full use of these provisions, in conjunction with the latest in economic theory, as the result will be a much better analysis of competitive benefits and harm.

  1. Provide Explicit Guidelines Around Patents and the Use of Patents

Intellectual property, and in particular, patent law, is a core component of a nation’s innovation policy. A patent is the statutory incentive for innovation, offering a temporary monopoly on an invention in exchange for disclosure of that invention into the public domain. However, as it is charged with protecting the economy, partially through hostility towards monopolies, competition law is inherently in tension with patent law. At the same time, keen management of this tension is in order, as both patent law and competition law have goals of promoting innovation.

The use of patents engages competition law in a variety of ways. As a contemporary example, for a hardware manufacturer in the information and communications technology industry, a major aspect of a firm’s business is the accumulation of patents to protect the ability to sell products and the incorporation of technological standards, such as 3G wireless technology, into their products. Building a product that is compatible with a standard often involves the declaration of patents covering that particular standard standard to the particular standard setting organization (“SSO”). There are a number of competition law issues with SSOs, some owing to the fact that a SSO is a collection of competitors or firms in similar industries agreeing to adopt particular technologies and engage in other conduct which can sometimes look like a conspiracy and the fixing of prices for key inputs. Typically, however, SSOs are pro-competitive.

Similarly, a firm participating in a standard can “ambush” that standard by not informing the SSO about a relevant patent which covers part of the standardized technology, then suing the other firms using the standardized technology afterwards for patent infringement, for a much higher amount than would otherwise be possible.

Another way that patent law is increasingly engaging competition law around the world is in considering how to deal with an increasing amount of “patent troll” litigation, particularly in the United States. A patent troll is an entity which does not produce products and instead acquires and holds patents simply to assert them for royalties or settlements in court. It is far from clear that such patent assertion is pro-competitive or that it encourages innovation, and indeed, many academic authors suggest this behaviour is likely harmful to innovation.

Unlike Canadian competition law, with a set of enforcement guidelines which provide limited direction to firms (Competition Bureau, Intellectual Property Enforcement Guidelines), or United States competition law, with a set of enforcement guidelines and a substantial body of relevant court decisions and, there is little guidance offered to firms operating in India under the Act. In fact, sub-section 3(5) of the Act offers protection for anti-competitive conduct simply because it “restrain[s] any infringement of… [an intellectual property right]”. This provision, and the lack of other applicable guidance, does not appear to equip the CCI with the ability to thoroughly identify competitive effects caused by certain uses of patents, analyze whether harm is occurring, and intervene accordingly. The CCI may find it helpful to refer to the body of analysis in other jurisdictions, especially Canada and the United States to remedy this shortcoming in the Act.

  1. Conclusion

Technological innovation is imperative to national development. The tricky question for the CCI is that collaboration is increasingly required for maximum technological innovation, yet collaboration may very easily cause anti-competitive harm. India’s new competition laws generally provide the tools necessary to successfully navigate around discouraging innovation, between the Scylla of “heavy handed” enforcement, and the Charybdis of no enforcement at all. For the particularly difficult problems, drawing upon experience with these issues in Canada and in the United States is helpful, and in particular, Canada’s recent amendments and enforcement guidelines offer the CCI guidance when applying the Act to novel situations.

Chris Hannesson is a Student-at-Law, Davies Ward Phillips & Vineberg LLP.

Chris graduated from the University of Western Ontario, Faculty of Law, in 2011 and from the Beedie School of Business at Simon Fraser University in 2008. Chris currently resides in Toronto, Ontario, Canada. Chris can be contacted at


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By Chris Hannesson

Merger Control In India


Merger control is considered to be one of the most important pillars of competition law and policy worldwide. The main purpose behind merger control is to ensure that mergers do not create adverse conditions for competition in the relevant market. For a long period of time, this important aspect of competition law was not made effective in India. However, after much debate and deliberation, the merger control provisions under the (Indian) Competition Act, 2002 (“Act”) and the allied Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (the “Combination Regulations”) which set out the scheme for implementing the merger control provisions under the Act, came into effect from June 1, 2011. The merger control regime has been in force for nine months. The CCI, on 23 February 2012, has amended the Combination Regulations, by way of the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Amendment Regulations, 2012 (the “Amendment Regulations”) to inter alia make them consistent with the SEBI Takeover Regulations amongst other key changes which include substantial increase in filing fees, limited exemption to intra group re-organizations by way of merger and amalgamations and changes to the notification forms.

Merger Control Provisions Under the Act

Section 5 and 6 of the Act are the operative provisions dealing with merger control in India. Section 5 prescribes worldwide and Indian assets and turnover thresholds for transactions involving the acquisition of an “enterprise” or mergers and amalgamations of an enterprise that will be subject to merger control (i.e., require prior approval of the Competition Commission of India (the “CCI”)). An “enterprise” under the Act means a person or a department of the Government, who or which is, or has been, engaged in any activity, relating to 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 body corporate, either directly or through one or more 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. Section 6 prohibits combinations that cause or are likely to cause an appreciable adverse effect on competition (“AAEC”) within the relevant market in India and treats such combinations as void.

Consequently, any acquisitions of shares, voting rights, control, assets, merger or amalgamation meeting the specified asset/turnover thresholds (“Combination”) require prior notification to, and approval from, the CCI. Section 5 enumerates three types of transactions necessitating prior approval from the CCI:

  • acquisition of control, shares, voting rights or assets of one or more enterprises by one or more persons (Section 5(a));
  • acquisition of control by a person over an enterprise when such person already hasdirect or indirect control over an 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 (Section 5(b)); and
  • merger or amalgamation (Section 5(c)).

The Ministry of Corporate Affairs has, on March 4, 2011, also published a series of notifications, increasing the asset/turnover thresholds by 50% (on the basis of wholesale price index) and providing for an exemption to certain categories of enterprises from the scope of the merger control provisions (“Notifications”).

Exempted Transactions

The Notifications exempt Combinations from the mandatory filing requirement for a period of 5 years where the target enterprise, including its divisions, units and subsidiaries has:

  • either assets not exceeding Rs. 250 crores (USD 50 million approximately*) in India; or
  • turnover not exceeding Rs. 750 crores(USD 150 million approximately*) in India; (“Target Exemption”).

* The Combination Regulations provide that the exchange rate to be used to determine whether thresholds are met is the average of the spot rate published by the Reserve Bank of India for the six months prior to the trigger event. However, for ease of reference, the exchange rate used throughout this article is 1 USD = Rs. 50.

The intent behind the Target Exemption is to provide a ‘local nexus’ requirement thereby excluding global transactions having ‘insignificant’ local nexus and impact on the relevant market in India. Interestingly, the Combination Regulations separately provide an exemption for Combinations occurring outside India having an insignificant local nexus and impact on the relevant market in India (as discussed below). However, the term ‘insignificant’ remains undefined thus leaving scope for interpretation.

The Notifications also exempt, for a period of 5 years, enterprises exercising less than 50% of voting rights in the other enterprise to be treated as part of the same ‘Group’. Consequently, the asset and turnover figures of an enterprise in which the other enterprise holds less than 50% voting rights will not be aggregated for the purposes of determining the notifiability of a proposed Combination under the “Group test” (as discussed below).

The Combination Regulations also list out (under Schedule I) various Combinations which are not “ordinarily” likely to cause AAEC in India and would not “normally” require a notification to the CCI:

  • Direct or indirect acquisitions, which do not entitle the acquirer to hold 25% or more of shares or voting rights of a target company (including through shareholders’ agreements or articles of association), solely for investment purposes or in the ordinary course of business, not leading to acquisition of control;
  • Acquisitions above 50%: Acquisitions where the acquirer already holds 50% or more of the shares or voting rights in the target, except in cases where the transaction results in transfer from joint to sole control. In the case of the proposed acquisition of UTV Software Communications Limited by Walt Disney Company (Southeast Asia) Private Limited (“Walt Disney”) (C-2011/08/02), resulting in transfer of joint control to sole control, the CCI granted its approval on the basis that the relevant market was wide and fragmented with low entry and exit barriers and that the parties to the transaction operated in different segments, i.e., there were no horizontal or vertical overlaps;
  • Asset acquisitions: Acquisition of assets, not directly related to the business of the acquirer or made solely as an investment, or in the ordinary course of business, not leading to control of the target, except where the assets represent substantial business operations in a particular location or for a particular product/service of the target, irrespective of whether such assets are organized as a separate legal entity or not. As of December 2011, the CCI has cleared three merger filings in relation to an acquisition of assets on a going concern basis by another enterprise by way of a slump sale. (See G&K/Wockhardt (C-2011/08/03), AICA Laminates/BBTCL (C-2011/09/04), NHK Automotive/BBTCL (C-2011/10/05) ) ;
  • Amended/renewed tender offers: An amended or renewed tender offer, where notice has been filed by the party making such an offer;
  • Routine business acquisitions: Acquisition of stock-in-trade, raw materials, stores and spares in the ordinary course of business;
  • Bonus/rights issue/stock-split: Acquisition of shares or voting rights pursuant to bonus issue, stock splits, consolidation of face value of shares, subscription to rights issue (beyond the extent of entitlement) or buy-backs, not leading to acquisition of control;
  • Underwriting/stock-broking: Acquisition of shares by a securities underwriter or registered stock broker (on behalf of its clients), in the ordinary course of business;
  • Intra-group acquisitions: Acquisition of control, shares, voting rights or assets by a person or enterprise of another person or enterprise within the same group. In the Alstom Holdings/Alstom Projects case (C-2011/10/06.), Alstom Holdings (India) Limited proposed to merge into Alstom Projects India Limited pursuant to a scheme of amalgamation under the Companies Act, 1956. The CCI approved the proposed Combination by taking into account the fact that both parties were engaged in completely different business activities, and also that there would be no change in the management of the companies, as the parties to the proposed Combination were part of the same group. The CCI has further approved fourteen intra-group reorganizations by way of merger or amalgamation. However, the Amendment Regulations have amended the Combination Regulations to provide a partial exemption to intra-group reorganizations by way of mergers or amalgamations of a parent and its subsidiary wholly-owned within the same group or subsidiaries wholly owned by enterprises within the same group;;
  • Current assets: Acquisition of current assets, in the ordinary course of business; and
  • Purely offshore: Combinations taking place entirely outside India with “insignificant” local nexus and effect on markets in India.

The usage of term(s) “ordinarily” and “normally” leads to uncertainty leaving the onus on parties to determine whether a transaction is “extra-ordinary” and thus likely to cause an AAEC in India. Such ambiguous wording allows the parties two choices: (a) notify all transaction(s) which to the best of their judgment is likely to cause an AAEC in India; or (b) to take a gamble of not notifying the transaction, in which case the CCI may use the “look back” provision under Section 20(1) of the Act. This provision provides the power to the CCI to inquire, within one year of the Combination taking effect, whether the Combination has caused or is likely to cause an AAEC in India. However, the erstwhile Chairman of the CCI has publicly stated that Schedule I would operate as exemptions and parties can derive some comfort from this statement.

Notification Thresholds

The merger control provisions under the Act, prescribe the following thresholds, for notification of a transaction:

  • Target Test – Any enterprise, whose control, shares, voting rights or assets are being acquired, has either assets of the value of not more than Rs. 250 crores (approximately USD 50 million) in India or turnover of not more than Rs. 750 crores (approximately USD 150 million) in India, is exempt from the purview of the merger control provisions under the Act, for a period of five years (“Target Exemption”).
  • Parties Test – In order to determine as to whether the thresholds (provided in the table below) are breached, in case of an acquisition, the combined value of the acquirer (on a standalone basis) and target enterprise (including its subsidiaries, units, or divisions) is to be considered. However, in case of a merger or amalgamation, the asset/turnover figures for the enterprise remaining after the merger or enterprise created pursuant to an amalgamation has to be taken into consideration. Further, if as a part of a series of steps in a proposed transaction, particular assets of an enterprise (i.e., a business or a division) are moved to another separate enterprise which is then acquired by a third party, the entire assets and turnover of the selling enterprise (from which these assets and turnover were hived off) would be attributed to the second separate enterprise when calculating the assets and turnover for the purpose of Section 5.
  • Group Test: The Group test is applicable to the group to which the target enterprise would belong post the acquisition or merger or amalgamation.

The thresholds prescribed under Section 5 of the Act are provided below:






In India









For individual parties (i.e. acquirer and target)



Rs. 1,500 crores

(USD 300 million)*


Rs. 4,500 crores

(USD 900 million)*


For ‘Group’ (to which target belongs post- acquisition)


Rs. 6,000 crores

(USD 1.2 billion)*


Rs. 18,000 crores

(USD 3.6 billion)*










In India and Outside India











Minimum in India




Minimum in India


For individual parties

(i.e. acquirer and target)



USD 750 million


Rs. 750 crores

(USD 150 million)*


USD 2.25 billion


Rs. 2,250 crores

(USD 450 million)*


For ‘Group’ (to which target belongs post- acquisition)


USD 3 billion


Rs. 750 crores

(USD 150 million)*


USD 9 billion


Rs. 2,250 crores

(USD 450 million)*

* Assuming the exchange rate of 1 USD = Rs. 50.

Determination of the relevant market

From a merger control perspective, determination of the relevant market is critical to determine the effect of the proposed Combination. Under the Act, the term ‘relevant market’ includes both the ‘relevant product market’ (i.e., market comprising all those products/services which are regarded as interchangeable or substitutable) and the ‘relevant geographic market’ (i.e., market comprising the area in which the conditions of competition for demand or supply are distinctly homogenous and distinguishable). After the determination of the relevant market, the next step is to consider whether the proposed Combination causes or is likely to cause an AAEC in India or not. The factors for assessing an AAEC set out in Section 19(3) of the Act are as follows:

  • actual and potential level of competition through imports in the market;
  • extent of barriers to entry into the market;
  • level of Combination in the market;
  • degree of countervailing power in the market;
  • likelihood that the Combination would result in the parties to the Combination being able to significantly and sustainably increase prices or profit margins;
  • extent of effective competition likely to sustain in a market;
  • extent to which substitutes are available or are likely to be available in the market;
  • market share, in the relevant in market, of the persons or enterprise in a Combination, individually and as a Combination;
  • likelihood that the Combination would result in the removal of a vigorous and effective competitor or competitors in the market;
  • nature and extent of vertical integration in the market;
  • possibility of a failing business;
  • nature and extent of innovation;
  • relative advantage, by way of the contribution to the economic development, by any Combination having or likely to have an AAEC; and
  • whether the benefits of the Combination outweigh the adverse impact of the Combination, if any.


The Combination Regulations provide for three types of forms for the purpose of notification to the CCI:

  • Form I: All Combinations are “ordinarily” notifiable in Form I (short form), which is the default option. Further, the Amendment Regulations have increased the filing fee from Rs. 50,000 (approximately USD 1000)* to Rs. 1,000,000 (approximately USD 20,000).*
  • * Assuming the exchange rate of 1 USD = Rs. 50.
  • Form II: Parties to the Combination also have the option of filing Form II, which is a long form. While Form I is a very simple form and requires basic details of the parties to the Combination and the transaction, Form II is fairly extensive and requires minute details regarding the proposed Combination, including details such as analysis, reports, surveys, ownership details of the parties and groups, details of all the products of the parties, end use, etc. Form II is to be “preferably” filed in the following instances: (i) where the parties to the Combination are competitors and have a combined market share in the relevant market of more than 15%; and (ii) where the parties to the Combination share a vertical relationship, and the combined or individual market share of the parties in either the upstream or the downstream market is greater than 25%. In cases where the parties have filed Form I and the CCI is of the opinion that Form II should have been filed, it can direct the parties to re-file the notice in Form II. Further, the time taken by the parties to the Combination in having incorrectly filed Form I will not be taken into account. Therefore, it becomes significant for the parties (from the point of view of time and acquisition financing cost) to accurately determine the appropriate form in which the filing has to be made with the CCI. The filing fee for a Form II filing has increased from Rs. 1,000,000 (approximately USD 20,000) to Rs. 4,000,000 (approximately USD 40,000), by way of the Amendment Regulations.
  • Form III: This is a post-facto intimation form which is required to be filed in case of share subscription or financing facility or any acquisition by public financial institutions, foreign institutional investors, banks and venture capital funds, pursuant to any covenant of a loan agreement or investment agreement.

* Assuming the exchange rate of 1 USD = Rs. 50.

Trigger Events for notification of the Combination

Parties are required to file a notification with the CCI in either Form I or Form II within 30 days of:

  • approval of the proposed merger or amalgamation by the boards of directors of the enterprises concerned;
  • execution of any binding agreement or “other document” for acquisition or acquiring of control. The term “other document” refers to (a) any binding document, by whatever name called, conveying an agreement/decision to acquire control, shares, voting rights or assets; and (b) for hostile acquisitions, any document executed by the acquirer conveying a decision to acquire.

A copy of such documents or board approval, as the case may be, is now required to be submitted as a part of a Form filing. In case the documents have not been executed but the intention to acquire is communicated to the Central Government/State Government or any statutory authority, the date of such communication will be the date of execution of the other document. Under Section 20(1) of the Act, the CCI has the power to initiate a suo moto inquiry into a Combination which was not notified to it, for up to one year from the date the Combination has taken effect.


  • The Act provides for a 210 day period for the CCI to reach a final decision, failing which, the transaction is deemed to be approved. Given the mandatory suspensory regime, no transaction in which the merger filing has been made can be completed before receiving approval from the CCI.
  • However, the CCI is required to form a prima facie opinion on whether a Combination is likely to cause an AAEC, within the relevant market in India, within a period of 30 days from receipt of the notification. The CCI gets an additional period of 15 days in case the parties to a Combination propose a modification before the CCI forms a prima facie opinion in relation to the proposed Combination.
  • The CCI can ‘stop the clock’ for defects or until such time as any information requested from the parties remains outstanding. The timelines for the review process are therefore not absolute.
  • In case the CCI forms a prima facie opinion that a Combination is likely to cause an AAEC, a more detailed investigation will be conducted. Thus, the merger control process can be viewed as a two phase process:
  • Phase 1 (Prima Facie Opinion) – In the Phase 1 period, the CCI can take upto 30 calendar days to form a prima facie opinion on whether a Combination is likely to cause an AAEC, or subject it to further investigation (45 calendar days, if modifications are offered by the parties); and
  • Phase 2 – In Phase 2, clearance may take a further 180 calendar days where a detailed investigation will be carried out by the CCI in those transactions where the CCI in its prima facie opinion believes that an AAEC in India is likely to be caused.


Section 32 of the Act empowers the CCI to initiate inquiry into a Combination taking place outside India if such Combination has or is likely to cause an AAEC in India and to pass such order as it may deem fit. However, the Combination Regulations provide for a local nexus and effects test on the relevant market in India.


  • The Act provides for severe penalties on parties for any non-compliance of its provisions. In case a person or enterprise fails to notify any Combination, the CCI has the power to impose a penalty which may extend up to 1% of the total turnover or assets, whichever is higher, of such Combination. In addition, where a Combination has or is likely to have an AAEC in India, the Combination (and presumably all acts in furtherance of the transaction) is void as a matter of Indian law.
  • Additionally, any non-compliance with the orders of the CCI can attract a monetary penalty up to Rs. 25 crores (approximately USD 5 million)* or imprisonment of up to three years or both. The Act also imposes personal liability on the persons in-charge and responsible for the conduct of the company, for contravention of any of the provisions of the Act.

* Assuming the exchange rate of 1 USD = Rs. 50.

Recent Trends

The recent trends emerging from the various Combination orders passed by the CCI are as follows:

  • No merger filing trigger on ‘option to acquire’

In the Reliance/Bharti AXA        case (C-2011/07/01), the proposed agreement for acquisition by Reliance Industries Limited (“RIL”) and Reliance Industrial Infrastructure Limited (“RIIL”) of a 74% stake in each of the joint venture companies between the Bharti entities and AXA contemplated an ‘option’ by which AXA would acquire up to 24% shareholding in the two joint ventures companies from RIL and RIIL as and when FDI Regulations permit such holding by AXA. The CCI order in relation to this merger approval suggests that in case of ‘option to acquire’, the determination from a competition perspective can only be made at the point when the transaction happens, for e.g. at the time the option is exercised and the “acquisition” takes place. Therefore, filing should, and can, be made only at the conversion stage (not at the time of grant). However, in this case, AXA’s option to acquire further shares was not an integral part of RIL’s and RIIL’s acquisition. Therefore, in a clearly inter-connected transaction the position may be different.

  • Joint to sole control is notifiable

In the Walt Disney/UTV case, it was stated that the acquisition of shares by an enterprise holding 50% or more shares in another enterprise resulting in transfer from joint control to sole control is notifiable under Section 6(2) of the Act and is excluded from exemption under Regulation 4, read with Item 2 of Schedule I of the Combination Regulations. This was also the case in the Tata Power Company/Tata BP Solar case (C-2012/01/26).

  • Intra-group reorganization by way of merger or amalgamation

An intra-group reorganization does not affect the competitive landscape and should not come under the purview of competition law. Also, the Combination Regulations exempt an intra-group reorganization by way of an acquisition. The availability of Intra-group exemption in case of internal re-organization by way of mergers and amalgamations was always a debatable topic considering the absence of the express wordings under Item 8 of Schedule I of the Combination Regulations in this regard. However, this debate was put to rest by the CCI in the Alstom Holdings/Alstom Projects case where an internal reorganization by way of a scheme of amalgamation was cleared by the CCI on merits. As a result of this ruling, 14 other intra-group reorganizations were notified to the CCI and cleared, to date, even though there is no distinction between an acquisition, merger or amalgamation as a mode of corporate reorganization. However, the Amendment Regulations have now brought in a partial exemption for intra-group reorganizations by way of merger or amalgamation.

  • Slump sale – the total asset/turnover of the transferor to be considered

The CCI, in three merger control reviews, has indicated that in the case of slump sales, or the sale of business divisions (i.e., less than an “enterprise” under the Act) the entire asset and turnover of the vendor enterprise has to be taken into consideration for determining the asset/turnover thresholds. Therefore, in such cases, the parties to the transaction cannot apply the thresholds for the Target Exemption or the Parties test to the business division being acquired, but to the vendor enterprise in its entirety. (i.e. G&K Baby Care Private Limited/Wockhardt Limited (C-2011/08/03), AICA Laminates /BBTCL (C-2011/09/04) and NHK Automotive/BBTCL, (C-2011/10/05).)

Grey Areas

As competition law in India is at a nascent stage, there are several grey areas under the Act and the Combination Regulations, with respect to merger control:

  • Treatment of Joint Ventures under Section 5

It is important to note that the formation of a joint venture is not specifically covered by Section 5 of the Act. The merger control provisions of the Act only cover acquisitions, mergers and amalgamations. The Act also does not make any distinction between “full function” and “non-full function” joint ventures. Further, there is no distinction as regards the treatment of ‘greenfield’ joint ventures and ‘brownfield’ joint ventures.

  • Insignificant local nexus exemption

Item 10 of Schedule I of the Combination Regulations exempts the notification of a combination taking place entirely outside India with insignificant local nexus and effect on markets in India. However, the word ‘insignificant local nexus’ has not been defined, leaving the parties with no guidance as regards the criteria to be applied determine the ‘insignificance’ of the Indian nexus of any combination taking place outside India.


Since June 1, 2011, the CCI has approved twenty eight merger filings at a swift pace, which has given Indian industry the much needed comfort that the CCI merger clearance process will not be unnecessarily long drawn. However, these are early days and the next few months are likely to see several merger filings which would be the true test of the CCI’s responsiveness. Also, the notifying parties are presently facing several interpretational issues from a merger filing standpoint due to ambiguities in the Act and the Combination Regulations. It is expected that the grey areas under the Act and the Combination Regulations in relation to merger control provisions would be addressed either through express clarifications or through the jurisprudence emerging from the orders of the CCI. Irrespective of that, merger control is here to stay in India and will have significant implications on inorganic growth through M&As, particularly India-centric M&A transactions, both within India and offshore.

Ashish Jejurkar is a Partner and Nisha Kaur Uberoi is a Principal Associate at Amarchand & Mangaldas & Suresh A. Shroff & Co. Ashish specializes in M&A, General Corporate and Securities law and Nisha specializes in Competition Law. They can be contacted at and



By Ashish Jejurkar and Nisha Kaur Uberoi