On a proper construction of Section 6(2) of the Competition Act, 2002 read with Regulations 9(4) and 9(5) of the Combination Regulations, the Supreme Court has that the requirement is to place before the CCI, in a single notice, the inter-connected steps and agreements that explain the substance of the composite arrangement, and that requirement is satisfied where the relevant instruments and linkages are on the CCI’s record and are capable of assessment in the same review process. A later disagreement as to legal or economic characterisation of disclosed material does not convert such disclosure into non-notification so as to attract Section 43A.

Further, the Apex Court held that penal action under Sections 44 and 45 can be sustained only upon strict proof of the specific statutory ingredients, including material falsity or material omission and the requisite mental element; internal deliberative material cannot, by itself, substitute for that inquiry where the executed agreements and review record were already before the CCI. The proviso to Section 20(1) is a jurisdictional limitation which bars the CCI, after one year from the date the combination has taken effect, from taking steps which in substance reopen the combination for fresh merits review.

The Competition Act does not contemplate an extra-statutory power to keep an approval in abeyance or compel re-notification of the same approved transaction, and such power cannot be sourced in Section 45(2), Regulation 5(5), or an approval condition. In proceedings of this nature, fair notice must extend not only to the allegations but also to the nature of the adverse action proposed, added the Court.

Accordingly, the Supreme Court allowed the appeal, set aside the NCLAT’s and the CCI’s order in revoking the approval for the 2019 Amazon -Future Coupons investment, in entirety, and directed that if any amount had been deposited or recovered from Amazon pursuant to the impugned orders, the same be refunded within eight weeks together with simple interest at 6% per annum from the date of deposit/recovery until actual refund. The Court further directed that if the refund was not made within that eight-week period, the unpaid amount would thereafter carry simple interest at 9% per annum from the expiry of eight weeks until payment.

A Two-Judge Bench comprising Justice Vikram Nath and Justice Sandeep Mehta observed that merger control under the Competition Act is an ex-ante, disclosure-based regime, but the CCI, being a creature of statute, must act strictly within the limits of the Act and the Combination Regulations. On the contemporaneous record, the Bench found that the Form I notice, annexed executed agreements, and responses furnished during review had placed before the CCI the FRL-linked aspects, the FRL shareholders’ agreement, and the business commercial arrangements as part of the same review process, and that the approval order itself showed that the CCI had in fact examined retail-market overlaps involving FRL.

The Bench therefore held that this was not a case of absence of a composite notice in substance, but at most a later dispute over characterisation of disclosed arrangements. It further held that Section 43A, being a penal provision, could not be invoked where notice had in fact been filed, processed, and approved, and that Sections 44 and 45 required strict satisfaction of statutory ingredients including materiality and the prescribed mental element, which had not been established merely by relying on internal communications predating the final transaction documents.

The Bench also held that the proviso to Section 20(1) imposed a jurisdictional bar against reopening combination review after one year from the date the combination took effect, and that the proceedings culminating in approval abeyance and a direction to file Form II were, in substance, an impermissible reopening of the combination review. It additionally held that the Act did not confer any power on the CCI to keep an approval under Section 31(1) in abeyance or compel a fresh Form II filing after approval, whether under Section 45(2), Regulation 5(5), or any condition in the approval order.

Finally, the Bench found breach of natural justice because the final findings and consequential directions rested on a materially sharpened case and consequences not fairly foreshadowed in the show cause notice.

Briefly, the appeal arose from proceedings initiated by the Competition Commission of India (CCI) against Amazon.com NV Investment Holdings LLC in relation to its Sep 23, 2019 notice under Section 6(2) of the Competition Act, 2002 for Amazon’s proposed acquisition of 49% of the equity share capital of Future Coupons Private Limited (FCPL) on a fully diluted basis under the FCPL share subscription agreement and the associated shareholders’ arrangement. The notified structure also referred to intra-group steps involving FCPL and Future Corporate Resources Private Limited (FCRPL), FCPL’s existing and proposed holding in Future Retail Limited (FRL), the FRL shareholders’ agreement, and certain business commercial arrangements between Amazon group entities and Future group entities.

The CCI approved the combination on Nov 28, 2019 under Section 31(1) of the 2002 Act. Thereafter, upon an application dated March 25, 2021, the CCI issued a show cause notice dated June 04, 2021 under Sections 43A, 44 and 45, alleging that Amazon had failed to notify the combination in its true scope and had made false statements and/or omitted material particulars. By order dated Dec 17, 2021, the CCI kept the earlier approval in abeyance, directed Amazon to file a fresh notice in Form II, and imposed penalties. The NCLAT substantially affirmed that order, leading to the present appeal under Section 53T of the 2002 Act.

Appearances:

For Appellants: Gopal Subramanium, Sr. Adv., Arvind Varma, Sr. Adv., Anand Swarup Pathak, Adv., Shashank Gautam, Adv., Sreemoyee Deb, Adv., Anubhuti Mishra, Adv., Param Tandon, Adv., Nandini Sharma, Adv., Anisha Bothra, Adv., Pavan Bhushan, Adv., Smridhi Sharma, Adv., Mahima Chauhan, Adv., Jayavardhan Singh, Adv., Raghav Kohli, Adv., Ankit Malhotra, Adv., Hima Lawrence, Adv., Kunal Chatterji, AOR, Shrayani Shekhar, Adv., Nileena Thomas V., Adv.

For Respondents: Venkataraman, A.S.G., Sanyat Lodha, AOR, Manu Chaturvedi, Adv., Chandrashekhara Bharati, Adv., Shivani Mehta, Adv., Mahesh Agarwal, Adv., Ankur Saigal, Adv., Ayushi Gaur, Adv., E. C. Agrawala, AOR, Rajat Sehgal, AOR, Samyak Jain, Adv.