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The National Company Law Appellate Tribunal (NCLAT) has stayed a Competition Commission’s order that imposed a ₹40 lakh fine on NTPC Ltd for the latter’s failure to notify the competition watchdog about its share purchase in Ratnagiri Gas & Power Pvt Ltd (RGPPL).
In December 2020, NTPC had acquired a 35.47 percent stake in RGPPL, but the transaction was consummated without filing a notice with the Commission prior to acquisition. This ‘Gun Jumping’ had prompted CCI to levy a penalty of ₹40 lakh on NTPC in August this year.
Gun jumping occurs when parties to a combination fail to notify the CCI about a combination prior to its consummation or violate the 210-day standstill obligation. Gun jumping also occurs when a false declaration is made on the notice sent to the CCI.
While providing a stay on the CCI order, a two-member NCLAT Bench has now directed that the matter be listed on February 27, 2024.
“Till next date of hearing, the operation of the impugned order dated 22.08.2023 passed by the CCI shall remain stayed”, said NCLAT.
NCLAT has also directed CCI to file a reply over NTPC appeal within four weeks. NTPC can file its rejoinder within four weeks thereafter.
Under the competition law, the penalty for gun jumping can be up to one per cent of the turnover of the combination or one per cent of the assets of the combination entities, whichever is higher.
Most competition regimes, including India’s, require pre-merger notification (in India, it will be CCI) and in the process of investigation, expect parties not to proceed with merger till the standstill period is over.
- Also read: NTPC net profit up 38% Y-o-Y in Q2 FY24
In its 10-page order in August this year, the CCI has noted that NTPC, at the time of this transaction, already held 25.51 per cent equity shareholding in RGPPL. Post its acquisition of 35.47 per cent in RGPPL, the shareholding of NTPC increased from 25.51 per cent to 60.98 per cent. As its stake exceeded 50 per cent, the transaction was not eligible for exemption from notifying the Commission.
The transaction ought to have been notified to CCI, even if NTPC did not get any additional control conferring rights or if the transaction did not result in a change in control from joint to sole control, the CCI order had said.
CCI had also rejected the arguments of NTPC that this transaction did not result in Appreciable Adverse Effect on Competition (AAEC) in India.
The competition watchdog observed that the mandatory regime for notifying a proposed combination to the Commission is applicable, irrespective of whether the combination causes any AAEC in India or not.
This legal position has been already clarified by the CCI in the Intellect Design Arena Ltd case, the CCI order highlighted.
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