On April 17, 2018, in the matter of SCM Solifert Limited v. CCI, SC upheld COMPAT’s order which affirmed CCI’s decision imposing a penalty of ₹ 2 crore (approx. US$ 0.3 million) on SCM Solifert India Limited (‘SCM’) and Deepak Fertilizers and Petrochemicals Limited (‘DFPL’) under Section 43A of the Competition Act for failure to notify the acquisition of shares in Mangalore Chemicals and Fertilizers Limited (‘MCFL’).[1]On July 3, 2013, SCM along with DFPCL had purchased 24.46% of the share capital of MCFL on the Bombay Stock Exchange (‘First Acquisition’). This was followed by a press release on the same day by DFPCL, which was filed with the stock exchanges, in compliance with the requirements of the Listing Agreement (‘Press Release’). Thereafter on April 23, 2014, SCM and DFPCL made a purchase in the open market for 0.8% of the shares of MCFL (‘Second Acquisition’) and subsequently, an open offer was made for acquiring up to 26% of the shares of MCFL in terms of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (‘Public Announcement’).SCM filed a notice disclosing details of the First Acquisition and notifying the Second Acquisition within 30 days of the Public Announcement. CCI passed an order approving the proposed combination. However, because SCI and DFPL did not seek approval prior to consummating the First Acquisition, CCI commenced proceedings for filing the belated notice. In this regard, SCM claimed that the First Acquisition was exempt, under Schedule 1 of the CCI (Procedure in regard to the Transaction of Business relating to Combinations) Regulations, 2011 (‘Combination Regulations’). SCM argued that the First Acquisition was as an acquisition of shares less than 25% in MCFL solely as an investment. On this basis, SCM assumed that the First Acquisition would qualify for the Item 1 exemption available under Schedule 1 of Combination Regulations. In any event, SCM submitted that a notice was filed within the 30 days of the Public Announcement made pursuant to the Second Acquisition. Further, it was submitted that with regard to the Second Acquisition, the shares were credited to an escrow account, created specifically to avoid consummation prior to CCI approval.CCI dismissed SCM’s submissions after noting that the First Acquisition was notifiable. This was because the acquisition of shares was not made solely as an investment. By its own admission, SCM in the Press Release and the Public Announcement had claimed that the investment was ‘very strategic’. Further, CCI noted that MCFL was not very profitable, which further went to show that the First Acquisition could not be considered to be an investment by a prudent investor.SC while agreeing with CCI’s rationale held that SCM had not complied with Section 6(2) of the Competition Act and there was a failure to file notice for the First Acquisition. In relation to the Second Acquisition, SC held that SCM ought to have notified the transaction prior to the acquisition and rejected SCM’s claim that it was enough to hold the shares in an escrow account, which could not be accessed prior to CCI approval. SC observed that the Competition Act does not contemplate post facto notice as this would defeat CCI’s opportunity to assess whether the propose combination could cause any appreciable adverse effect on competition. Accordingly, SCM was required to notify the proposed combination without giving effect to it prior to CCI approval or the end of the 210-day period, whichever is earlier.On SCM’s submission that the violation, if any, was technical, not willful, deliberate or mala fide, SC observed that CCI had already imposed a nominal penalty of ₹ 2 crore (approx. US$ 0.3 million) (even though it had the discretion to go up to 1% of the value of the transaction, which would have been ₹ 33.22 crore (approx. US$ 5 million) in the instant case). SC further observed that CCI approval of a transaction cannot by itself condone gun-jumping violations. SC also held that CCI was not required to demonstrate mens rea or intentional breach as an essential element for imposing penalty as this was not a requirement in case of violation of the civil statutory provision. On this basis, SC concluded that the order passed by CCI as affirmed by COMPAT, is in accordance with the law and dismissed SCM’s appeal as being devoid of any merit.[1] Civil Appeal No. 10678 of 2016.