On August 30, 2022, the CCI imposed a penalty of ₹30,00,000 under Section 43A of the Competition Act on Global Infrastructure Partners India Private Limited (‘GIP’), in relation to its acquisition of the infrastructure asset management business of IDFC Alternatives Limited (‘IDFC Alternatives’).^[1]

The CCI observed that IDFC Alternatives entered into a business transfer agreement with GIP inter alia to transfer investment management rights for certain funds managed by it, on a going concern basis for a lump sum consideration (‘Acquisition’). The CCI noted that the Acquisition become effective from July 1, 2018. However, no notice was given to the CCI under Section 6(2) of the Competition Act in respect of the Acquisition. Therefore, GIP was directed to furnish certain information to assess whether any further proceeding is required under Section 20(1) and/or Section 43A of the Competition Act, as the case may be. In response, GIP furnished its written submissions dated February 16, 2022, and April 22, 2022. GIP also voluntarily made another submission dated June 7, 2022.

In its responses, GIP argued that the Acquisition was concluded almost 4 years ago and the proviso to Section 20(1) of Competition Act provides that CCI will not initiate any inquiry into a combination after the expiry of one year from the date on which such combination has taken effect. In this regard, the CCI noted that the instant proceedings are not limited to the inquiry under Section 20(1) of the Competition Act but also under Section 43A of the Competition Act to ascertain whether the parties have failed to give notice to the CCI in terms of Section 6(2) of the Competition Act, in respect of the Acquisition. The CCI further noted that the period of limitation contained in Section 20(1) of the Competition Act is not applicable to proceedings under Section 43A of the Competition Act. To such extent, the contentions of GIP that the instant proceedings are time barred in view of Section 20(1) are misplaced.

By way of its submission dated June 7, 2022, GIP had submitted that at that time of the Acquisition, it had sought advice from its legal counsel. Based on the financials of IDFC Alternatives, India Infrastructure Fund (‘IIF I’) and India Infrastructure Fund II (‘IIF II’), without considering financials of the controlled portfolio entities, GIP was advised that the Acquisition could avail the benefit of the De Minimis exemption and therefore, the Acquisition is not notifiable to the CCI. Accordingly, GIP proceeded to consummate the transaction with a bona fide belief that the Acquisition does not call for a notification under Section 6(2) of the Competition Act. At no point, there was any intention on the part of GIP to avoid compliance or assessment of the transaction by the CCI. At that time, GIP did not have the benefit of findings of the CCI in its recent Order in the Investcorp Case^[2].

However, in the present case, GIP submitted that the Acquisition is a combination in terms of Section 5 of the Competition Act and is not eligible for the benefit of the De Minimis exemption. It has been further submitted that the Acquisition is also not eligible for relaxation provided under Regulation 4 read with Schedule I of Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (‘Combination Regulations’) Accordingly, the Acquisition ought to have been notified under Section 6(2) of the Competition Act and the parties should have complied with the standstill obligation under Section 6(2A) of the Competition Act. However, GIP consummated the Acquisition without giving notice to the CCI under Section 6(2) of the Competition Act. Therefore, GIP has become liable for a penalty in terms of Section 43A of the Act. GIP had requested the CCI to immediately conclude the instant proceeding. It had further waived the right to notice and an opportunity to be provided to it in terms of Regulation 48(1) of the Combination Regulations. GIP has also submitted that it will submit itself to any penalty which may be levied by the CCI in terms of the provision of Section 43A of the Competition Act. Lastly, GIP has requested that its conduct and cooperation in the instant proceeding be taken into consideration for benevolence from the CCI in deciding the amount of penalty.

The CCI, on the question of control, observed that pooled investment schemes generally envisage demutualisation of investment management and ownership, where the subscribers give authority to the investment managers to conduct the operations of the fund. The investment manager of the fund, being the authority to exercise and protect such interest, would invariably enjoy control over the portfolio entities where the shareholding and/or contractual rights of the fund is such as to enable material influence or higher degree of control over such portfolio entities. When the management of such a fund is acquired, the acquirer would gain control over the portfolio entities of the fund. Acquisition of control is one of the forms of combination under Section 5 read with Section 2(a) of the Competition Act. Accordingly, in addition to the target business i.e., management of the fund, the value of assets and turnover of the controlled portfolio entities would also be relevant for the purpose of computing thresholds under Section 5 of the Competition Act as well as the De Minimis exemption. Therefore, the CCI concluded that it is immaterial whether beneficial interest or ownership over the portfolio entities is being acquired or not, noting that GIP has also acknowledged these in its submissions dated June 7, 2022.

The CCI further noted that the assets and turnover of even some of the portfolio companies of IIF I and IIF II, where they have more than 50% shareholding, were more than the financial threshold prescribed under Section 5 of the Competition Act. Financials of these portfolio companies were also in excess of the threshold prescribed for the De Minimis exemption. Thus, the CCI concluded that the Acquisition is a combination in terms of Section 5 of the Competition Act and is not eligible for the benefit of De Minimis exemption. The material available on record also suggest that the Acquisition is not covered under any of the categories of combination contained in Schedule I to the Combination Regulations. However, GIP consummated the Acquisition without giving notice to the CCI under Section 6(2) of the Competition Act, thereby making itself liable for levy of penalty in terms of Section 43A of the Competition Act.

While, considering levying the penalty, the CCI took into account that GIP had extended its co-operation by supplying requisite material/documents, which formed the basis of the above findings of contravention. Further, GIP had admitted the contravention, even before issuance of notice under Regulation 48 of the Combination Regulations, and had thus, saved regulatory resources. Keeping these in mind as well as the submissions of GIP, the CCI considered it appropriate to impose a penalty of ₹30,00,000 on GIP under Section 43A of the Competition Act.

[1] Proceedings against Global Infrastructure Partners India Private Limited under Section 43A of the Competition Act.

[2] Order dated 17th December 2021 of the CCI issued under Section 43A of the Competition Act against Investcorp India Asset Managers Private Limited.