National Company Law Appellate Tribunal (“NCLAT”) has, collectively in the matters of:

The U.P. Glass Manufacturers Syndicate v. Competition Commission of India and Others [Competition Appeal (AT) No. 07 of 2023];

Independent Sugar Corporation Limited v. Competition Commission of India and Another [Competition Appeal (AT) No. 08 of 2023];

Geeta and Company v. Competition Commission of India and Others [Competition Appeal (AT) No. 09 of 2023]; and

HNG Industries Thozilalar Nala Sangam v. Competition Commission of India and Another [Competition Appeal (AT) No. 10 of 2023],

quashed all the four appeals filed against the order dated March 15, 2023 approving a combination by the Competition Commission of India (“CCI/ Respondent no. 1”), which was approved in response to a notice from AGI Greenpac Limited (“Impugned Order”).

Facts

The Corporate Insolvency Resolution Process (“CIRP”) under the Insolvency and Bankruptcy Code, 2016, was initiated against Hindustan National Glass and Industries Limited (“HNG/ Respondent no. 2”) in October, 2021. AGI Greenpac Limited (“AGI/ Respondent no. 3”) filed a resolution plan for HNG’s acquisition, which was approved by the Committee of Creditors (“CoC”).

During the pendency of resolution plan’s approval, AGI filed Form II (long form) with the CCI, announcing the proposed transaction for approval. U.P. Glass Manufacturers Syndicate (“Appellant/ UPGMS”) filed objection against the combination on October, 2022 before the CCI. Subsequent to the objection letters by the Appellant, CCI issued a show-cause notice (“SCN”) under Section 29(1) (Procedure for investigation of combinations) of Competition Act, 2002 (“Act”), to AGI directing it to respond within 30 days, enquiring as to why the investigation into the proposed transaction should not be carried out.

CCI formed a prima facie opinion that the proposed combination is likely to cause an appreciable adverse effect on competition in India’s relevant markets (“AAEC”). In March 2023, AGI filed its response to the SCN and proposed certain voluntary amendments to alleviated concerns about substantial AAEC, which was later recognized and accepted by the CCI vide Impugned Order,

CCI sent a letter addressing the Appellant’s objections and representations against the said combination. CCI noted concerns about the proposed combination but denied a personal hearing and inspection of case records. CCI concluded that the proposed combination addressed the AAEC concern and that it is not likely to have an AAEC.

Aggrieved by the Impugned Order, Appellants filed the present appeal before the NCLAT (“Appeal”).

Issues

• Whether the Appellant(s) have locus to challenge the Impugned Order within the scope of Section 53B (Appeal to Appellate Tribunal) of the Act.
• Whether CCI in the Impugned Order has examined the relevant aspects as contained in Section 29(2) of the Act or the Impugned Order suffers from non-compliance of the procedure.
• Whether the Impugned Order can be said to have been passed in violation of principles of natural justice.

Arguments

Contentions of the Appellant:

The Appellant contends that ambit and scope of ‘any person aggrieved’ under Section 53B of the Act has to be widely interpreted looking to the nature and purpose of the Act. The object of the Act is to eliminate practices having adverse effect on competition. The Impugned Order adversely affects the competition in the relevant market which shall affect the Appellant and hence it cannot be said that Appellant has no locus to file the Appeal. The proposed merger between AGI and HNG could lead to an AAEC, as the combined entity would have a 60% market share, increasing prices in the Indian container glass market. The Appellant also claimed that the acquisition would affect product pricing, encourage predatory pricing and cartelization, thereby negatively impacting smaller players like UPGMS.

The Appellant relied on the Supreme Court’s judgment in Samir Agarwal v. CCI and Others [2021 3 SCC 136], wherein the Supreme Court held that the expression ‘person aggrieved’ must be understood widely and not be constructed narrowly. The court also noted that the expressions used in Sections 53B and 53T (Appeal to Supreme Court) of the Act are ‘any person’, meaning all persons who bring information of practices contrary to the Act could be aggrieved by an adverse order of the CCI.

CCI formed a prima facie opinion that a merger is likely to cause an AAEC, which required further investigation under Section 29(2) of the Act. The case required a full investigation and CCI should have issued an order for a report from the director general. However, CCI skipped this procedure and did not direct the parties of the combination to publish details of the merger for public knowledge. This interpretation is not in accordance with the Act. Mandatory procedures must be followed even when modifications are offered under Regulation 25 (1A) of the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (“Combination Regulations”).

The Appellant further argued that the SCN was only issued to Respondent no. 3, which is not a party to the combination, as required by the Combination Regulations. CCI’s failure to hear Respondent no. 2 and issue notice to it vitiates the proceeding. The Appellant argued that the approval of the combination was done in breach of the Act. CCI accepted a unilateral modification proposed by Respondent no. 3, which absolves it of its statutory duty under Section 18 (Duties and functions of Commission) of the Act read with Sections 6 (Regulation of combinations) and 29 of the Act. CCI has not examined the proposed combination and has not approved it.

The Appellant has questioned the Impugned Order, claiming that it violated principles of natural justice. The Appellant argued that there was no consideration of the concerns raised by it at the time of the Impugned Order, indicating that principles of natural justice were violated.

Contentions of the Respondents:

The Respondents argued that the Appellant has no locus to challenge the Impugned Order, as they cannot be considered aggrieved persons under Section 53B of the Act, as the term ‘aggrieved’ refers to a person directly affected by an order, and therefore, their appeals are liable to be rejected.

The Respondents relied on the judgment of Jasbhai Motibhai Desai v. Roshan Kumar, Haji Bashir Ahmed and Others [AIR 1976 SC 578], wherein it was held that the appellant has not been denied or deprived of a legal right. He has not sustained injury to any legally protected interest. In fact, the order does not operate as a decision against him, much less does it wrongfully affect his title to something. He has suffered no legal grievance. He has no legal peg for a justiciable claim to hang on. Therefore, he is not a ‘person aggrieved’ and has no locus standi to challenge the order.

The Respondents relying upon the said judgement have contended that since the Appellant has not suffered any legal injury, they have no right to challenge the Impugned Order.

The Respondent contended that Section 30 (Procedure in case of notice under sub-section (2) of section 6) of the Act requires that after any person or enterprise has given a notice under Section 6(2) of the Act, CCI shall examine such notice and form its prima facie opinion as provided in Section 29(1) of the Act, and thereafter CCI is to proceed as per the provisions contained in Section 30 of the Act. Section 30 of the Act cannot be read to mean that even if, prima facie opinion at the second stage is not formed by CCI, CCI should direct publication of details of the combination. Hence, the submission of the Appellant cannot be accepted.

Observation of NCLAT

The Supreme Court’s judgment in A. Subash Bhai v. State of Andhra Pradesh [(2011) 7 SCC 616], emphasized that the term ‘aggrieved person’ is an elusive concept that depends on the content and intent of the statute alleged, emphasizing the importance of considering these factors when addressing the issue of the Appellant.

NCLAT held that the Act and its regulations, particularly the Combination Regulations, provide a detailed procedure for participation in competition appeals. CCI can call for information from other enterprises to determine if a combination has an AAEC. However, this does not entitle anyone other than those who have given notice to participate in the appeals. The right to public participation arises when CCI directs parties to publish the details of the combination. In this case, the stage for filing objections or providing information by the public did not arise. The Appellant, thus, was appropriately communicated that they cannot be allowed to participate.

It was further observed that CCI’s inquiry procedure under Section 6(2) of the Act does not violate principles of natural justice.

Decision of NCLAT

It was held that the Impugned Order followed the procedure outlined in the Act and its regulations. In exercising its competence under Section 31(1) (Orders of Commission on combinations) of the Act, CCI approved the combination after carefully considering all relevant features and materials on the record. Thus, the Appeal was dismissed.

VA View:

This case is the first in which an approval order issued by the CCI regarding the target entity’s CIRP has been challenged before the NCLAT. The NCLAT found no substance in the arguments of the Appellant and no procedural defect in the Impugned Order. Furthermore, this is a milestone decision under Section 29 of the Act, in which the NCLAT considered the interaction between Phase I and Phase II investigations for the first time.

This unusual challenge to an acquisition approval under IBC demonstrates the regulatory framework’s tenacity under the Competition Act, 2002, in the face of legal scrutiny.

For any query, please write to Mr. Bomi Daruwala at [email protected]

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