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The Corporate Affairs Ministry-appointed panel to review the Competition Act should look at aligning the law with the Insolvency and Bankruptcy Code (IBC) 2016, say legal experts.
There are still grey areas such as adherence with CCI-specified merger control procedures for cases going through insolvency process, they added.
Aligning the competition law with IBC could help in faster resolution of non-performing assets (NPAs) in the banking system
As on date, any acquisition of stressed assets or shares under the Corporate Insolvency Resolution Process(CIRP) is not exempted from the mandatory clearance from the Competition Commission of India (CCI).
Manas Kumar Chaudhuri, Partner, Khaitan & Co, a law firm, said: “We have to harmonise between IBC and merger control so that both the laws survive without causing any fuss to the industry. You have to make both laws meet where combination regulation of the Competition Act should foreclose any abuse of dominance and IBC should see that banks and financial institutions get their dues”.
The Government might have decided to constitute a committee so that all the grey areas can be sorted, he said.
The Ministry of Corporate Affairs (MCA) had on September 30 set up a committee to review Competition Act, 2002 to ensure that the legislation is in sync with the changing business environment. The committee comprises Secretary, MCA, and other key personnel such as the Chairperson of Insolvency and Bankruptcy Board of India and Aditya Bhattacharjea, Professor of Economics, Delhi School of Economics.
Since the implementation of the Act in 2002, the Act was amended twice in 2007 and 2009. Dhruv Gupta, Partner, Lakshmikumaran & Sridharan Attorneys, said, “Much has changed since 2009 – revolution in mobile technology, Internet penetration, greater integration of Indian market with global market and other aspects such as legislation and implementation of IBC.”
As per the Insolvency and Bankruptcy Code, 2016 (IBC), the Corporate Insolvency Resolution Process (CIRP) should be completed within 270 days (initial 180 days plus additional 90 days) from the data of submission of the application at the National Company Law Tribunal (NCLT).
The CCI mandates that all combinations should be notified under the Competition Act 2002 if the proposed combination meets the threshold set by the regulator. “There are complex issues such as lack of clarity on approvals for potential bidders to acquire assets under insolvency resolution process,” Gupta said.
Citing an example, Chaudhuri said: “Let us take a company that has six subsidiaries and is undergoing IBC process. There is a strong acquirer who is interested in buying and wants to buy only the best subsidiary that makes commercial sense. This should mean that the acquirer has to deal with only the parent and the subsidiary. Then there is a question of what happens to the remaining subsidiaries.”
Chaudhuri said, “These processes when it comes to CCI, we lawyers interpret in different ways. When CCI comes to a bottleneck, they either agree with us or not. If they do not agree with us there is a process of appeal.”
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