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Tipping the scale: How statutory body meant to thwart monopolies may be flouting regulatory norms, defeating purpose of Insolvency Laws

The smooth functioning of the CCI is imperative to the IBC process – which is to promote healthy businesses, ensure the company remains a going concern, and safeguard the interest of creditors and also, of other smaller companies that may get affected by giants coming together. 

Liberalised economies have the potential to unleash the potential of industries and businesses, however, that potential can only be realised when these markets are fair and competitive. Fundamentally, competition not only pushes companies to maximise their potential but also ensures that the end user is provided with the best services and/or products at the best market price. However, one of the greatest detriments to industry competition is that one big bulwark indulges in predatory practices to drive competition away. 

Let’s simplify that with a sports example. In boxing,  a weight class is the measurement weight range for boxers. There are several weight categories – from Flyweight to Heavyweight. Flyweight is usually about 52 kgs and heavyweight upper limit stands at 91 kgs. Now, why do these weight classes exist and why can’t a heavyweight contender fight in a Flyweight category? It’s pretty simple. If you have two boxers who are 52 kgs, the battle is to determine first among equals. However, if you have a boxer weighing 52 kgs fighting a heavyweight contender weighing 91 kgs, in all probability, it would not even be a fight. There would be no competition at all. It would mostly be the heavyweight contender railroading the fighter weighing 52 kg. These rules in boxing exist so 92 kgs bulwarks cannot railroad 52 kg contenders unfairly, taking advantage of their size and strength, to eliminate any competition in the tournament. 

Businesses are no different. Let’s say in an industry, two business entities control 35% and 45% of the market share of that industry. Now, in their independent rights, they are massive companies. But if either of them attempts to indulge in predatory practices like trying to non-competitive prices in the market, the other companies can get together and outweigh the one bulwark. That is how a healthy market works – where market forces can automatically force a big player to course correct, eliminating predatory practices and market bullying. Now, let’s assume that the two business entities which independently control 35% and 45% of the market come together. Company A acquires Company B or they decide to merge. Post-merger, that one bulwark company would control 80% of the market. With that kind of massive market share, the new company which now controls 80% of the market share of that specific industry can indulge in all kinds of predatory practices rendering any industry competition moot. For example, it can independently, without any market checks, drop the price of the product or serve to such an extent, that no small company would be able to compete. Eventually, predatory practices would ensure that all other companies in that industry segment go out of business even before they get a chance to enter the ‘weight category’, so to speak. 

To ensure that a bear with an axe is not sent into a fight meant to mid-weight cats with a kitchen knife, India passed the Competition Act, of 2002, administered by the Competition Commission – a statutory body under the Ministry of Corporate Affairs. 

The Competition Act, of 2002, as amended by the Competition (Amendment) Act, of 2007, follows the philosophy of modern competition laws. The Act prohibits anti-competitive agreements, and abuse of dominant position by enterprises and regulates combinations (acquisition, acquiring of control, and M&A), which cause or are likely to cause an appreciable adverse effect on competition within India.

The objectives of the Act are sought to be achieved through the Competition Commission of India, which has been established by the Central Government with effect from 14th October 2003. CCI consists of a Chairperson and 6 Members appointed by the Central Government.

The Commission must eliminate practices having adverse effects on competition, promote and sustain competition, protect the interests of consumers, and ensure freedom of trade in the markets of India.

The Commission is also required to give an opinion on competition issues on a reference received from a statutory authority established under any law and to undertake competition advocacy, create public awareness, and impart training on competition issues.

In an earlier article, we analyzed in detail how the Insolvency and Bankruptcy process (IBC) is being manipulated and hijacked by private players for financial gains. Companies like Ernst and Young (EY) along with Edelweiss have been monopolizing and manipulating the process to ensure their stranglehold on the Resolution Professionals, the process of acquiring companies declares insolvent and also, holds immense sway over the decisions of the CCI. 

While we discussed the role of companies like Edelweiss and EY in tarnishing the process of a law that was otherwise designed to inject transparency and fairness into the process along with safeguarding the interest of the creditors and the going concern, it would be remiss if we did not analyze the role of the Competition Commission of India (CCI) and how it sometimes fails to fulfill the objectives for which it was created. 

On the 9th of February 2024, Finance Minister Nirmala Sitharaman was reportedly set to review the functioning of the CCI over regulatory inaction. This action came after a lack of action by the CCI on complaints by several app developers against Google alleging anti-competitive conduct and non-compliance with CCI’s previous rulings.

Citing sources, BusinessLine reported that the Finance Minister may be set to quiz CCI officials and regulators on the lack of regulatory action and the delay in investigation and disposal of cases. 

That the CCI seems to have not taken any regulatory action even after app developers complained against the anti-competition conduct of Google only seems to be the tip of the iceberg. CCI has failed to, in some cases, fulfill one of its basic functions – which is ensuring that the merger of two companies does not lead to a monopolistic market. 

What is section 31 of the Insolvency and Bankruptcy Code and its interplay with Section 5 of the Competition Act 2002

Section 31 of the Insolvency and Bankruptcy Code, 2016 (IBC) provides for approval of a resolution plan. Sub-section (4) says that resolution applicants shall obtain necessary approval as required under any law within one year from the date of the plan being approved.

The proviso to this subsection (added via the 2018 amendment) reads:

“where the resolution plan contains a provision for combination (under section 5 of the Competition Act, 2002) the resolution applicant shall obtain the approval of the Competition Commission of India (CCI) prior to the approval of such resolution plan by the committee of creditors.”

The section clearly states that in case of combinations, where one entity is acquiring another, CCI approval is required prior to the approval of such resolution plan by the Committee of Creditors (CoC). The law also states that the approval given by the CCI must not be conditional. 

Section 5 of the Competition Act 2002 defines the criterion, upon the fulfillment of which, a merger/acquisition/resolution would be considered a ‘combination’ – which would need the approval of the CCI before the plan is passed by the CoC and then, the NCLT. 

Case Study: How CCI may be flouting regulatory norms and the law when it comes to approving combinations 

Given the inquiry initiated by the Finance Minister, it seems like the CCI has, on occasion failed to comply with regulatory provisions. To understand how the CCI may be flouting legal requirements in the process of IBC, possibly tainting the process to a large extent, we will analyze the case of Hindustan National Glass and the insolvency process against it. 

The case started in 2020 with the DBS Bank initiating insolvency proceedings against Hindustan National Glass & Industries Limited (HNG) in NCLT  Kolkata. Insolvency was admitted in the year 2021. Hindustan National Glass & Industries Limited is an Indian container glassmaker based in Kolkata. The company is the largest and one of the oldest glass manufacturing companies in India.

The IBC process as far as HNG goes is one of the longest resolution processes after the passage of the law – marred with allegations of impropriety on the part of the Resolution Professional (RP), conflict of interest, and hijacking of the process for financial gain by private players like Ernst and Young and Edelweiss, alleged oversight of material facts by the Committee of Creditors (CoC), which included Edelweiss, miscarriage of justice by the NCLT and finally, improper dispensation of the case by the Competition Commission of India (CCI). 

For a deeper understanding of the case and the hijacking of the process by private players like Edelweiss, one can read this detailed article. 

For the purpose of this article, we will focus on CCI, and its alleged missteps in the case of HNG and use it to extrapolate the changes that need to be made in the CCI to ensure that the letter and spirit of the IBC are upheld. 

In the case of HNG, after the issue of Expression of Interest, the RP received 14 bids to acquire HNG. Once the RP received the applications, on the 24th of May 2022, a Request for Resolution Plan was issued and eventually, only three firms expressed interest in purchasing HNG – AGI Greenpac (AGI), International Sugar Corporation (INSCO), and Nirma Chemical. Later, Nirma Chemical dropped out of the process and only two bidders remained – AGI and INSCO. 

Before we move along, it is pertinent to note here that the IBC is an extremely robust system to ensure the market interests are protected as well along with that of the creditors. To that end, one of the rules embedded in IBC is that before a resolution plan is approved by the CoC, the company wishing the acquire the insolvent company has to take unconditional approval from the Competition Commission of India (CCI). This rule has been put in place to ensure that the acquisition does not lead to a monopolistic market situation where other small players in the same market suffer commercially. 

In this case, one of the parties interested in purchasing HNG was AGI – while HNG is the largest in the glass manufacturing segment, AGI is the second largest. Because the combination of the two could lead to a monopolistic market in the glass manufacturing industry, CCI’s role in the process was crucial. 

The Competition Commission of India vide its order dated 15 March 2023, under section 31(1) of the Competition Act, 2002, provided conditional approval to AGI for the acquisition of HNG. The CCI order granting conditional approval on 15th March itself had several issues – issues which are now pending adjudication in the Supreme Court after INCSO filed a case against it. 

Background of the CCI approval to the AGI plan 

First and foremost, it is important to know that when the RP presented the AGI and INSCO plan to the CoC for voting, the AGI plan did not have prior CCI approval. CCI approval is mandatory per law. The watering down of this requirement by the RP has been questioned by experts since it favored AGI Greenpac’s plan. In fact, UP Glass Manufacturer Syndicate had approached the NCLT against the approval by the CoC to the AGI plan where NCLT, Kolkata had affirmed that the CCI approval is mandatory before the CoC approves the plan. The said order was passed on the 21st of September 2022. 

Section 29(1) of the Competition Act, 2002 mandates that “where the Commission is of the prima facie opinion that a combination is likely to cause, or has caused an appreciable adverse effect on competition within the relevant market in India, it shall issue a notice to show cause to the parties to the combination ”.

In this case, the CCI approval of the AGI plan was necessary because the combination of AGI and HNG would create a monopolistic market, owing to the two companies being number 1 and 2 in the market. 

After the NCLT order, AGI did seek the approval of CCI thereafter, however, there was a catch. It filed ‘Form-1’ with the CCI instead of ‘Form-2’. 

Form-1 is like the ‘green channel’ of immigration. Essentially, it tells the CCI that there are no considerations of monopolistic market creation if the said company acquires the insolvent entity. Form-2 is the ‘red channel’ – declaring the scale of the company’s business. 

AGI is the second largest player in the market wishing to acquire the largest player – there are clear considerations of the merger creating a monopolistic situation and therefore, AGI should have submitted their application to CCI under Form 2 – they did not. INSCO on the other hand filed Form-1 too and got the CCI approval since it is a foreign firm with no prior presence in India in this industry segment. CCI, as expected, rejected AGI’s application terming it ‘not valid’, disqualifying them from the process. 

After the CCI rejection of AGI’s application, the authorized signatory of AGI wrote to the RP saying that the CCI had asked them to file for approval under Form 2 and that they were in the process of doing so. AGI said that they would ‘hopefully’ they would get CCI approval by November 2022. The email was sent on the 27th of October 2022. 

Based on this ‘assurance’ by AGI, the RP went ahead and put the two resolution plans by AGI and INSCO respectively to vote in the CoC. It is to be kept in mind that at this stage, INSCO had already got CCI approval and AGI had not. In the CoC, the AGI plan was passed, specifically with the help of Edelweiss ARC. 

In the CoC, each credit can vote for multiple plans or no plan at all and therefore, the percentages don’t add up to 100%. Edelweiss had 4 votes, thanks to the chicanery by the RP. One of the votes it cast was against INSCO which resulted in AGI winning by 8.30% difference owing to Edelweiss ARC’s vote. 

Interestingly, the role of Edelweiss in this fiasco cannot be underscored. In our previous article, we had explained how private players like Edelweiss are hijacking the IBC process for financial gain. Edelweiss was essentially a Creditor of the insolvent company (HNG) and also a major funding partner of the Acquirer (AGI). 

This revelation was made during the proceedings in the NCLT when a letter came to the fore, from Edelweiss Alternate Asset Advisors to AGI promising Rs 1,100 crore for the acquisition of HNG. In fact, one of the key clauses of the funding that Edelweiss was providing to AGI Greenpac was that the funding would only be approved if their proposal was approved by the CoC. Edelweiss Alternate Asset Advisors, in their letter, had told AGI that they would fund the acquisition of HNG by AGI only after the CoC approval. At the same time, Edelweiss ARC was a part of the CoC, influencing the decision of the AGI proposal being accepted by voting in their favor. 

Further, the rush with which the AGI plan was passed, flouting laws and rules, could be for a specific reason. Edelweiss in its letter to AGI had also mentioned a deadline. It had said that if the AGI plan does not get CoC approval within 60 days, then the offer to fund the acquisition would not hold valid. The strict timeline imposed by Edelweiss on AGI also seems to have played a role in the rush with which the AGI plan was passed by the CoC, with the help of Edelweiss ARC. 

AGI filed Form 2 for approval with CCI only 5 days after their plan got approved by the CoC.

Before they got approval, the RP filed the resolution plan with the NCLT. While his circumvention of the CCI approval provision by the RP was overridden by NCLT, the RP seems to have disregarded that and filed the proposal with NCLT before the CCI approval came through. It is an agreed convention that no plan which has conditionalities can be filed before the NCLT per a judgment of the Supreme Court, however, the RP, in this case, seems to have acted questionably. Since the matters are sub-judice in the Supreme Court, the AGI plan is yet to be approved by NCLT. 

By November 2022, Glassex (India) Pvt. Ltd one of the private players in the industry wrote a letter to CCI pointing out that the combination of AGI and HNG would create an anti-competition environment in the industry – a grievance which was ignored by the CCI. UP Glass Manufacturer Syndicate also raised similar grievances, which were ignored.

When INCSO then approached the NCLT praying that the selection of AGI should be set aside, CCI seems to have contravened the law further in favour of AGI, according to legal experts. 

CCI, realizing that the combination of AGI and HNG would lead to AAEC, issued a show-cause notice to AGI asking why it should not initiate action against AGI. In response to CCI’s show-cause notice, AGI responded on the 10th and 15th of March 2023 and said that under the Voluntary Modification Scheme, it would divest the Rishikesh Plant of HNG so the combination does not lead to AAEC. 

Interestingly, CCI issued a show-cause notice only to AGI when the law mandates under section 29 of the Competition Act that the CCI must seek an explanation from all parties involved in the resolution process – that is the acquirer and the company getting acquired. 

On 15th March 2023, the very next day after AGI submitted its modified proposal, CCI gave conditional approval to the plan even though it allegedly did not have the quorum and had not independently verified the information provided by AGI – which we will see later – was mired with misrepresented facts, according to legal experts.

The problems with the approval granted by CCI to the AGI plan in 2023 

The most glaring problem with the CCI approval of the AGI plan seems to be that when the said plan was approved, CCI allegedly did not have the required quorum to pass the decision. The minimum number of members of the CCI that are required to be present for any plan to get approval is 3. When the AGI plan was passed, only 2 members were present. There is a provision by way of which plans can be approved even if there are 2 members present. The provision is called the ‘doctrine of necessity’. This doctrine comes into play in serious and urgent cases where waiting for the quorum would lead to catastrophic market repercussions and therefore, the invocation of this doctrine is limited to the rarest of rare cases. In this case, it would appear that there was no such urgency, and therefore, the invocation of the doctrine by the CCI has come into question.

Further, as discussed in the previous article and earlier in this article, the CCI seems to have erred in issuing a show-cause notice only to AGI and not to HNG. The law mandates that a show-cause notice is issued to the target and the acquirer. This provision of the IBC has been put in place to ensure that there is no misrepresentation of facts by the acquirer and that the target company (HNG in this case) can be a counter-check for any misrepresentation of facts that could lead to a monopolistic market owing to the combination. 

As mentioned above, on 10th February 2023, when CCI issued a show-cause notice to AGI, and thereafter, AGI responded with an undertaking to divest one plant of HNG should it get CCI approval. The plan that AGI undertook to divest under the Voluntary Modification Scheme was the Rishikesh Plant, which belonged to HNG. The AGI contended that if they divest the Rishikesh Plant of HNG, then the combination would not lead to a monopolistic market (given that the share in the market would reduce). It is based on this commitment that the CCI conditionally approved the AGI plan in 2023. 

Since the CCI issued the show-cause notice only to AGI and not HNG also proved detrimental given that AGI seems to have misrepresented facts to get the conditional approval by CCI. The law that mandates sending the show-cause notice to the target and acquirer was breached, according to legal experts. Had it been followed, the misrepresentation of facts by AGI would have been checked, since HNG would have had an opportunity to respond as well. 

What are some of the facts that were misrepresented by AGI and how the CCI failed to independently check facts before granting approval? 

Rishikesh Plant only contributes 8% in the Food and Beverage (F&B) sector of its total sales. However, as per the CCI order, the combined share of HNG and AGI in the F&B sector would be 80-85% if the combination were to happen. Given that the Rishikesh plant only contributed 8% of the total sales, its divestment would also not cure the Appreciable Adverse Effect on Competition (AAEC) as a result of the combination. 

AGI also seems to have given problematic data on the installed capacity and operational capacity of the Rishikesh Plant, which it said it would divest to cure AAEC. As per the CCI approval, AGI claimed that the operational capacity of HNG is 2325 Tonnes Per Day (TDP), however, according to the Information Memorandum submitted by the RP, the operational capacity of HNG is 2625 TPD. Further, according to the CCI order, the total Installed Capacity of AGI is 1600 TPD whereas, according to AGI’s website, the Total Installed Capacity of AGI was 1754 TPD as of 1st January 2023. 

It would seem that AGI misrepresented data to the CCI, reducing the operational capacity of HNG and the installed capacity of AGI to project as if the combination would not lead to AAEC. 

AGI further claimed that the combined entity will have a market presence of 80-85% in the F&B segment which can be cured by divesting the Rishikesh plant of HNG. However, per IM, the Rishikesh plant has only 7-8 % sales for the F&B segment and contributes only 1.1% of revenue. This seems to have been misrepresented as a cure for the AAEC, however, given the whopping market share of 80-85% of the combined entity, a divesture of a plant that contributes only 8% of sales and 1.1% of the revenue does not seem to cure the monopolistic combination at all. 

CCI also recorded based on the information provided by AGI that the reduction of 400 TPD by the divestment of the Rishikesh Plant was 17% of the total utilized capacity of HNG and the reduction of 400 TPD by the divestment of Rishikesh Plant was 25% of the incremental capacity of AGI. However, according to the IM, 400 TPD is only 15% of the operational capacity of HNG and 22% of the operational capacity of AGI. This too, seemingly, would not cure the AAEC resulting from the combination of AGI and HNG. 

Apart from the alleged misrepresentation of the facts by AGI, the CCI seems to have not considered some logical fallacies in its order. CCI has given conditional approval based on the current operational capacity and not the total installed capacity of HNG and AGI.

Logically, if my installed capacity is 10 and I am functioning right now at an operational capacity of 5, there is no guarantee that after the merger, I will not improve my operational capacity and function at a level of 10 (the installed capacity). Therefore, to ascertain whether the AGI and HNG combination would lead to a monopoly and whether the divesture of the Rishikesh Plant would fix the AAEC, the CCI should have evaluated the installed capacity (which is the total capacity of the plant or the company itself) and not the operational capacity (the capacity which is being utilized by the company or the plant). 

There was also a strange circular logic that was applied by the CCI to conditionally approve the AGI-HNG combination plan. This circular logic is revealed after a reading of Para 104 of the CCI order, granting conditional approval to AGI for the combination. 

Para 104 of the CCI order says, “In case the Acquirer fails to comply with the Modification as provided in the Annexure, the Proposed Transaction would be deemed to have caused an appreciable adverse effect on competition in India and the Acquirer shall render itself liable for being proceeded under the relevant provisions of the Act.”

Here, the CCI, while granting conditional approval to AGI for the combination has said that in order to get directed that the combination will only be approved if AGI complies with its undertaking to divest the Rishikesh Plant of HNG, and only then the same will result in a cure to AAEC, failing which AGI shall be liable for proceedings under the act.

However, the Rishikesh Plant cannot be sold until AGI completes the full acquisition of HNG, which cannot be acquired unless AGI obtains absolute approval of combination from CCI, as required under the statutory provisions of Insolvency and Bankruptcy Code, 2016, Competition Act, 2002 and the RFRP. Given the conditionality in Para 104, AGI cannot get absolute approval from CCI unless it divests the Rishikesh Plant (which it can’t unless it acquires HNG since the plant belongs to HNG). 

This CCI order leads to the creation of a chicken and egg problem. One has to wonder why the CCI did not ask AGI to simply divest its plant to cure AAEC instead of proposing to divest a plant it does not even own – that of HNG – that company it wishes to acquire. 

While this circular logic was applied to give conditional approval to the AGI proposal, it also seems true that it was done based on misrepresentations made by AGI and with no opportunity given to HNG to be heard. Experts believe that CCI erred on several levels as far as the conditional approval to AGI was concerned.

Interestingly, on the website of AGI, it has itself said that it would increase its operational capacity over time. What is far more intriguing is that in September 2022, INSCO had already received approval from the CCI after they had applied through the green channel. When INSCO had already gotten approval after due process, the additional steps to give AGI conditional approval based on alleged misrepresented facts and circular logic made little sense when it already was of the prima facie opinion that the combination of AGI and HNG would lead to AAEC. 

The juggernaut created by the CCI has also led to an inordinate delay in the IBC process as far as the HNG case is concerned. The inordinate delay because of the conditional approval to AGI has led to litigation in the Supreme Court. As of date, the HNG case has dragged on for over 600 days. Under IBC, the maximum time charted for resolution of insolvency cases is 270 days. 

IBC as a law was introduced to ensure transparency and expediency along with ensuring the interest of creditors. In the HNG case, it would appear that because of the lapses by the RP and the CCI, the very letter and spirit of the IBC have been disregarded. 

The SEBI order which proves AGI misrepresented facts 

In May 2024, SEBI slapped a ₹5 lakh penalty on packaging products company AGI Greenpac for “failure to provide accurate, adequate, and explicit disclosure resulting in misrepresentation to the stock exchanges”. In the SEBI order against AGI Greenpac, the market regulator said that the company withheld crucial information regarding its deal to acquire Hindustan National Glass. It also failed to disclose material developments with respect to disclosures made by it to the exchanges “dated October 31, 2022, and March 16, 2023”.

SEBI further stated that AGI Greenpac failed to disclose crucial information related to a show-cause notice issued by the Competition Commission of India (CCI) to it in the HNG acquisition case. Before the SEBI order, Justice Vikramajit Sen, the former Chief Justice of the Karnataka High Court and judge of the Supreme Court had said that AGI made “partial and deceitful disclosure” about the CCI approval.

The SEBI that AGI hid material information in the modification to the application filed by AGI to the CCI and litigation related to the CCI order approving the proposed combination of AGI and HNG.

When the SEBI spoke about the misrepresentation of facts in the medication plan, SEBI referred to the divestment of the Rishikesh Plant and the information that AGI provided to CCI after the show-cause notice was issued it, based on which the CCI conditionally approved the combination of AGI and HNG. 

Judicial opinions on the errors by CCI 

Justice Ramana gave a detailed opinion on the matter holding the process followed by the RP and the CCI with respect to approval granted to AGI as contravenous to the law. 

About the AGI plan being approved by the CoC without the prior approval of the CCI, Justice Ramana said, “The RP published the Request for Resolution Plan (“RFRP”) on 24.05.2022 whereby the express precondition under clause 3.3 read with clause 4.1.1(k) required the approval from the Competition Commission of India (“CCI”) for approval of any Combination under Section 5of the Competition Act, 2002 to be taken prior to the approval of the Resolution Plan by the Committee of Creditors (CoC) of HNG. The RFRP further read

that the CoC shall have the right to not consider a Resolution Plan/reject the Resolution Plan in case the approval of the CCI (where required) is not obtained”. 

About the conditional plan being put to vote by the RP to the CoC, Justice Ramana said, “It is not in dispute that the CCI Order dated 15.03.2023, is a conditional one subject to fulfillment of certain criteria by the SRA. Whether the compliance by the SRA with these conditions would affect the implementation of the Resolution Plan/or would lead to a change in the interpretation of any of the terms of the Resolution Plan has to be examined in detail by the CoC. Hence, the action of the RP in presenting this Plan before the Adjudicating Authority, seeking its approval, is ultra vires to the provisions of the Code, as the Plan in the present state, without the approval of the CCI in its totality cannot be said to have been approved by the CoC without making any modifications. Speed is the essence of IBC and the situation where a Resolution Plan is approved and then later is subjected to modifications and alterations and sent back to the CoC would only lead to further loss of time and more complications”. 

On the CCI approval of the plan, Justice Ramana was scathing, saying that the approved plan by the CCI of AGI and HNG combination should be set aside if AGI had misrepresented the facts about the capacity of AGI, HNG, and the Rishikesh Plant. “Aforementioned submissions of AGI, if proved to be false, would render the basis of the CCI order dated 15.03.2023 as wrong and liable to be set aside”. 

Justice Ramana further says that the plan to divest the Rishikesh Plant of HNG was proposed by AGI to CCI only on 10.03.2023 and 14.03.2023 and was not disclosed to the RP and CoC when the resolution plan was proposed or voted on by the CoC. To this, Justice Ramana says, “This is therefore a clear case of non-disclosure and concealment on the part of AGI in failure to inform the RP and CoC and to also make appropriate disclosures in the Resolution Plan. The disclosures regarding ‘business plan’ of the CD post-acquisition form part of the mandatory requirement of the Code under Regulation 83 of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (“CIRP Regulations”) and the disclosure regarding the sale of any assets of the CD forms part of mandatory disclosure under Regulation 37. Non-disclosure regarding the proposed divestment would tantamount to violation of mandatory requirements under the Code and is a clear case of misrepresentation by AGI”. 

Justice Sikri too says “The modification proposed by AGI in respect of divestment of assets of HNG was also without the approval or even intimation to the CoC of HNG. The CoC ought to have considered the resolution plan of AGI with complete disclosures. This is also the mandate under Section 30 of the Code read with 38 of the IBBI (CIRP) Regulations, 2016”. 

He further says, ‘The subsequent modification of the plan by the successful resolution applicant after approval by the CoC but before the approval by the NCLT, is a serious irregularity of the provisions of the IBC Code. Such an irregularity cannot be cured ex-post facto by virtue of the NCLT requesting the CoC to peruse the modification proposed by AGI which was not challenged by the CoC”.

Justice Nariman considered an authority in this field, said that the decisions by the CCI and the NCPT were bad in law. He opined, “There is no doubt that the approval to the resolution plan of AGI by the CoC and the Adjudicating Authority would be contrary to law, in as much as, it is clear that AGI was declared a successful resolution applicant on 28.10.2022, whereas conditional approval from the Commission was obtained only on 15.03.2023”. 


Based on the opinions of several prominent legal luminaries and the facts of the case, it would seem that the CCI has not followed due process and passed the AGI plan in contravention of the law. Several questions arise out of the alleged conduct by the CCI. 

  1. Why did the CCI believe that it had to pass the order urgently even without the quorum being present? 
  2. Why did CCI not independently verify the data submitted by AGI in its order dated March 15, 2023? Why did the CCI not take steps to assess the reliability of the data?
  3. The CCI in its order acknowledged that prima facie, the combination of AGI and HNG would lead to AAEC. If that was the conclusion by CCI, why was conditional approval granted to AGI, that too, on the basis of the divestment of a plant that belonged to HNG – which AGI had not acquired yet? 
  4. How can the CCI approval for HNGIL be based on a capacity of 2325 TPD when a document from RP, presumably reviewed during the approval process, clearly states 2625 TPD?
  5. AGI Greenpac allegedly misrepresented its installed capacity to the Competition Commission of India (CCI) during an assessment period. Why has action not been initiated by the CCI against the errant party? 
  6. Does the Competition Commission of India’s (CCI) approval of divesting the Rishikesh plant, which contributes only 8% to sales, adequately address its own finding of an 80-85% market concentration in the F&B sector after the merger?
  7. Why did the CCI focus on the operational capacity while granting conditional approval rather than operational capacity? In the past, the CCI has categorically focussed on the installed capacity to evaluate if a combination leads to AAEC or not. In the JSW-Neo Energy case, for example, the CCI had based its evaluation on Installed/Rated capacity to calculate Market share and AAEC. In this order, CCI has also considered additional capacity to be added over and above-installed capacity. In the Holicim-Lafarge combination as well, the CCI depended on the installed/rated capacity to calculate market share and whether the combination would lead to AAEC. If in the past, the CCI has focussed on one method of evaluation, why was the method changed in the case of AGI-HNG? 
  8. Why did the CCI not give a show-cause notice to AGI and HNG as per the law? 
  9. Why has the CCI gone to court to challenge the petition by INSCO against the approval which was given without quorum? Are there other cases where combinations have been approved without the necessary quorum? 

The CCI is a body constituted as a barrier to monopolistic practices. It would seem that in this case, the core function of CCI was overlooked to facilitate the acquisition of HNG by AGI even though INSCO taking over HNG would create no contingencies or monopolistic practices.

The smooth functioning of the CCI is imperative to the IBC process – which is to promote healthy businesses, ensure the company remains a going concern, and safeguard the interest of creditors and also, of other smaller companies that may get affected by giants coming together. 

Ayodhra Ram Mandir special coverage by OpIndia

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Nupur J Sharma
Nupur J Sharma
Editor-in-Chief, OpIndia.

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