TaxTMI 
TaxTMI 
2018 (4) TMI 977
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....CIL") - respondent No.1, Thomas Cook Insurance Services India Limited, (for short, "the TCISIL") - respondent No.2 and Sterling Holiday and Resorts India Limited (for short, "the SHRIL") - respondent No.3 is the companies registered under the Companies Act, 1956. The TCIL is engaged in travel and travel related services. The TCISIL is also engaged in travel and travel related services and is a subsidiary of the TCIL and is also a registered corporate agent of Bajaj Allianz General Insurance Company Limited, which is engaged in the business of selling insurance to outbound travelers, as well as health insurance, motor insurance, personal accident insurance etc. SHRIL is engaged in the business of providing premium hotel services, vacation ownership services, normal hotel services like renting of rooms, restaurants, holiday activities etc. It also arranges meetings, incentives, conference and events for its corporate clients. The Board of Directors of the aforesaid three companies on 7.2.2014 approved a Scheme for demerger/amalgamation, (referred to as the 'Scheme'). The said Scheme contemplated the following: (a) Demerger: i.e. Resorts and timeshare business of SHRIL were to ....
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....alty in separate proceedings. 9. On 10.3.2014, the Commission issued a show cause notice asking the respondents as to why they should not be penalized under section 43A for failing in notifying the 'market purchase' under section 6(2) of the Act. 10. On 25.3.2014, the respondents filed their reply to the show cause. After hearing the respondents, on 21.5.2014, the Commission imposed a penalty of Rupees One crore under section 43A of the Act. As against the same the appeal was preferred. The Tribunal has allowed the appeal filed under section 53 B of the Act and has set aside the order passed by the Commission. Aggrieved thereby, the appeal has been preferred by the Commission under section 53 B of the Act. 11. It was urged by the learned senior counsel appearing on behalf of appellants that on 7.2.2014, the Board of Directors of the three respondent companies have decided about the demerger/ amalgamation, Share Subscription Agreement (SSA), Share Purchase Agreement (SPA), Open Offer by TCIL and the TCISIL to purchase 26% of the equity shares capital from the public shareholders of SHRIL in terms of the SEBI's Regulations and market purchases were also part of the sa....
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....espondents learned senior counsel contended that section 5 of the Act defines the combination especially in terms of providing asset and turnover thresholds, is to ensure that the only transaction between enterprises or groups of enterprise above a specified critical size are scrutinized by the Commission, as these transactions are more likely to have a measurable market effect or an AAEC factors in the relevant market, therefore, may be required to be preempted and corrected by the Commission. It was further contended that a target based exemptions exempt certain transactions from the purview of the term 'combination' as defined under section 5 of the Act. Under the Ministry of Corporate Affairs Notification S.O. 482 (E) dated 4.3.2011, certain transactions (in the nature of 'acquisition') are exempted from a requirement to mandatorily notify to the Commission. If the value of the assets or turnover of the target enterprise does not exceed a specified de minimis threshold, the transaction which qualifies under the Target Based Exemption are exempt from the purview of the "combination" under section 5 of the Act. Therefore, the Share Subscription Agreement (SSA), Shar....
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....under the heading "Exempt Transactions" on the basis that the Target Based Exemptions covered the market purchases. Thus, imposing a penalty on the respondents for not having specifically identified the market purchases has been part of "Notifiable Transaction" is nothing more than a mere technicality. The respondent was under a bona fide and genuine belief that market purchases were unconnected and moreover, exempt. Further, no malafides have been attributed to the respondents even in the penalty order passed by the Commission on 21.05.2014 and when Commission had passed the Approval Order on 6.5.2014 and observed that market purchases would not result in an appreciable adverse effect on competition in the market, penalty ought not to have been imposed by the Commission. The Tribunal has rightly set it aside. 15. Before proceedings to deal with the rival submissions, it is necessary to note the statutory framework of the Act. Section 5 of the Act defines the combination for the purposes of Act. Section 5 is extracted hereunder. "5. The acquisition of one or more enterprises by one or more persons or merger or amalgamation of enterprises shall be a combination of such e....
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....g after the acquisition, jointly have or would jointly have,- (A) either in India, the assets of the value of more than rupees four thousand crores or turnover more than rupees twelve thousand crores or (B) [in India or outside India, in aggregate, the assets of the value of more than two billion US dollars, including at least rupees five hundred crores in India, or turnover more than six billion US dollars, including at least rupees fifteen hundred crores in India; or] (c) any merger or amalgamation in which- (i) the enterprise remaining after the merger or the enterprise created as a result of the amalgamation, as the case may be, have,- (A) either in India, the assets of the value of more than rupees one thousand crores or turnover more than rupees three thousand crores; or (B) [in India or outside India, in aggregate, the assets of the value of more than five hundred million US dollars, including at least rupees five hundred crores in India, or turnover more than fifteen hundred million US dollars, including at least rupees fifteen hundred crores in India; or] (ii) the group, to which the enterprise remaining after ....
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.... under section 30(1), whichever is earlier. And once mandatory notice is given under section 6(2), the Commission has to deal with the same in accordance with the provisions contained in sections 29, 30 and 31. Certain exceptions are carved out as to Public Financial Institutions, Foreign Investment Institutions, Banks or Public Venture Funds etc. funds under section 6(4) of the Act. 20. On 4.3.2011, Central Government in the exercise of its powers under section 54(a) of the Act issued notification No. SO. 482 E dated 4.3.2011, commonly known as targetbased exemptions, which reads as under: "In exercise of the powers conferred by clause (a) of section 54 of the Competition Act, 2002 (12 of 2003) the Central Government, in public interest hereby exempt an enterprise, whose control, shares, voting rights or assets are being acquired has assets of the value of not more than INR 250 crores in India or turnover of not more than INR 750 crores in India from the provisions of Section 5 of the said Act for a period of 5 years." 21. Section 64 of the Act confers upon the Commission power to make Regulations. Under section 64(3), the Regulations are to be placed before the Hou....
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....r the leadership of Ramesh Ramanathan with an independent Board • Based on equity investments and merger ratios the aggregate value of the two companies is approximately Rs. 3000 Cr. Mumbai, February 7, 2014 Thomas Cook (India) Ltd. (TCIL) - India's leading integrated travel and travel related financial services company, and the 27yearold vacation ownership pioneer, Sterling Holiday Resorts India Limited announced a merger between the companies today. The transaction is expected to close by the fourth quarter of 2014, subject to customary closing conditions and regulatory approval as required. The part equity, part merger deal - estimated to be valued at Rs. 870 Cr., is structured as a multistage process: • TCIL Group will make a Preferential Allotment Investment for approximately 23.24% of approximately Rs. 190 Cr. into Sterling. • TCIL Group purchases 23.63% stake from Sterling shareholders for Rs. 207 Cr. • TCIL Group will make a mandatory open offer for buying up to 26% stake in Sterling for Rs. 230 Cr. • TCIL Group has an option to buy an additional 7.22% stake from shareholders for....
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.... acquisitions. In case they were not part of the same scheme that would not have been referred to in the notice filed by them with the Commission on 14.2.2014. Thus, in our considered opinion market purchases were not independent and were intrinsically related to the scheme and other acquisitions. 28. Coming to the question of the exemption that was claimed, the market purchases do not qualify as a combination in view of the target exemption notification which exempts an enterprise if 'assets' are of the value not more than INR Rs. 250 crores in India or 'turnover' of not more than INR Rs. 750 crores in India. When series of transactions is envisaged to accomplish a combination, all the transactions have to be taken into consideration by the Commission, not an isolated transaction. While it is open for the parties to structure their transactions in a particular way the substance of the transactions would be more relevant to assess the effect on competition irrespective of whether such transactions are pursued through one or more step/transactions. Structuring of transactions cannot be permitted in such a manner so as to avoid compliance with the mandatory provisions of the....
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.... respondent as such penalty could not have been imposed. We are unable to accept the submission. The mens rea assumes importance in case of criminal and quasi criminal liability. For the imposition of penalty under section 43A, the action may not be mala fide in case there is a breach of the statutory provisions of the civil law, penalty is attracted simpliciter on its violation. The imposition of penalty was permissible and it was rightly imposed. There was no requirement of mens rea under section 43A or intentional breach as an essential element for levy of penalty. Section 43A of the Act does not use the expression "the failure has to be willful or mala fide" for the purpose of imposition of penalty. The breach of the provision is punishable and considering the nature of the breach, it is open to impose the penalty. In Hindustan Steel Ltd. v. State of Orissa AIR 1970 SC 253, with respect to imposition of penalty on failure to comply with the civil obligation this Court has laid down thus: "In our opinion, mens rea is not an essential ingredient for contravention of the provision of a civil act. In our view, the penalty is attracted as soon as the contravention of ....