On June 20, 2023, the CCI penalized Bank of Baroda (‘BOB’) under Section 43A of the Competition Act, in relation to its acquisition of 21% shares of India First Life Insurance Company Limited (‘IFLIC’) ^[1]

Parties

BOB is a public sector bank, headquartered in Gujarat providing various services such as loans, banking services, and insurance.

IFLIC is a public company carrying out business in the areas of life insurance, health insurance, and pension.

Transaction

BOB filed a notice in Form III under Section 6(5)^[2] of the Competition Act on May 2, 2022. However, on CCI’s directions, a notice in Form I (‘Form I Notice’) was filed by BOB under Section 6(2) of the Competition Act. As part of the Form I Notice, BOB submitted that the concerned combination was consummated on March 31, 2022, pursuant to which IFLIC’s shareholding comprised 65% held by BOB, 9% held by Union Bank of India, and 26% held by Carmel Point Investment India Private Limited. The CCI approved the combination on September 29, 2022, without prejudice to proceedings under Section 43A of the Competition Act.

Proceedings under Section 43A

Show Cause Notice: The CCI initiated an inquiry of gun jumping against the BOB and issued a show cause notice for consummation of the transaction on March 31, 2022, before the approval of the CCI which was granted on September 29, 2022.

Submissions by BOB: BOB submitted that the belated filing of the Form I Notice was due to an incorrect understanding of Section 6(2) of the Competition Act. BOB explained that it understood Section 6 of the Competition Act to not be applicable to any acquisition by a bank. BOB further submitted that it took the view that the transaction would fall under the ambit of acquisition in terms of Section 6(4) of the Competition Act. Accordingly, BOB understood that it would be exempted from filing a prior notification with the CCI and an intimation would only be required to be made to the CCI post consummation of the combination.

Additionally, BOB submitted that the combination was triggered on account of the amalgamation of Andhra Bank with Union Bank of India, which was carried out in public interest and in furtherance of the statutory obligation on Union Bank of India to reduce its shareholding in IFLIC below 10%. Accordingly, BOB did not have any intent to increase its shareholding in IFLIC or to profit/ benefit from such increased shareholding.

Apart from this, BOB also made arguments to consider its lack of mala fide intention, the conduct being a first instance, and its full cooperation with the CCI as mitigating factors if penalty is levied.

CCI’s Findings: Based on a reading of Sections 6(2) and 6(2A) of the Competition Act, the CCI held that BOB was required to give a notice of the combination to the CCI before consummating the same. However, BOB failed to comply with the statutory requirement and instead filed Form III after consummation. As regards mitigating factors submitted by BOB, the CCI noted that while such factors may be considered, they do not absolve BOB of its obligation to file a notice prior to the consummation of the combination.

Accordingly, the CCI penalized BOB for violating the provisions of Section 6(2) of the Competition Act with a penalty of INR 5,00,000 (approx. US$ 6,000).

^[1]       Proceedings against Bank of Baroda, Combination Registration No. C-2022/08/962.

^[2]       As per Section 6(5) of the Competition Act, any public financial institution, foreign institutional investor, bank or venture capital fund, shall, within seven days from the date of the acquisition, file in the form as may be specified by regulations (i.e., Form III), with the CCI along with details of the acquisition including details of control, the circumstances for exercise of such control and the consequences of default arising out of such loan agreement or investment agreement, as the case may be.