In an unprecedented move, Competition Commission of India(CCI) is likely to resume clearance of M&A deals without quorum by invoking ‘doctrine of necessity’ from next week. The move follows opinion given by the Attorney General of India.
This would in a way break the logjam of CCI being quorum-less and head-less for over three months, which had put various PE/VC and FDI deals besides insolvency resolutions in limbo due to lack of approvals.
After waiting for over three months, CCI decided to take the plunge and had recently sought the opinion of the top law officer. After a positive opinion from Attorney General, CCI is likely to examine the opinion and proceed with its regulatory task from next week, sources said. Once the ‘doctrine of necessity’ is invoked, the existing members of CCI would be empowered to approve pending merger notifications with or without modifications, as appropriate.
Around 20 M&A deals worth $ 1.5 billion are on hold since October 26 last year when Ashok Kumar Gupta, the then Chairperson demitted office leaving CCI without quorum.
Apex industry chambers had written to the government recently, highlighting that delays in M&A approvals at the CCI end was having significant impact on investors confidence in India for doing business. They had highlighted that timely completion of transactions had been jeopardised on account of approval delays from CCI, with some cases running the risk of potentially getting abandoned.
Currently, CCI has only two members with one of them doubling up as Acting Chairperson. The quorum for approval of M&A deals requires a minimum of three members. Given the absence of quorum, the decision making powers of CCI have come to a pause until a full time Chairperson of Member is appointed.
Legal experts pointed out that it is not uncommon for regulatory and adjudicatory bodies to be without the requisite quorum as the Governments often delay appointments to such Bodies.
To overcome the vacuum created by vacancies, constitutional courts have invoked ‘doctrine of necessity’ to enable regulators to carry out essential regulatory and adjudicatory functions, they had submitted.
To resolve for the quorum absence issue, the Centre had also received multiple representations from stakeholders calling for promulgation of an Ordinance to amend competition law to deal with the requirement.
One suggestion that came from industry to resolve the quorum logjam was to expand the scope of transactions that would qualify for ‘green channel’ mechanism, whereby certain eligible transactions will benefit from a “deemed approval” from the CCI on notification provided certain criteria were met.
There was also suggestion to appoint a ‘Temporary Member’ by way of additional charge till the time the regular appointment of the Chairman is officially made.
Recently MCA had invited applications to fill three member posts in CCI and requires that the applications be submitted by March 9.
The MCA had last week extended the tenure of CCI Acting Chairperson Sangeeta Verma until a new Chairperson is appointed or till any further orders.
Verma, who is from the 1981 batch of the Indian Economic Service (IES), joined CCI as a Member on December 24, 2018.
Earlier, Verma was appointed as Acting Chairperson on October 25 last year for a period of three months or till the appointment of a regular Chairperson or till any further orders, whichever is the earliest.
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