By laying a significant emphasis on Capex and Energy Transition, the FM has provided the foundation for strong anti-cyclical momentum that should enable robust domestic economic growth and help counter the expected global headwinds. The focus on making India future-ready by way of AI labs, Agri-tech, and R&D in healthcare, further boosting Digital Public Infrastructure and holistically expanding physical infrastructure, auger very well for sustained long-term economic growth.
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The Bill reflects the recommendations of the Competition Law Review Committee in 2019 and introduces key changes in merger control as well as anti-trust-related provisions such as deal value thresholds, expedited merger review timelines; settlements and commitments; leniency plus, hub and spoke cartels, etc. The Bill streamlines and updates the Competition Act by providing it with more teeth and flexibility, in line with the changing economic and business reality. In relation to the anti-trust provisions, the Bill addresses the issue that all anti-competitive agreements may not fall within the current pigeon-hole provisions of the Act. It recognises hybrid anti-competitive agreements (such as hub and spoke cartels) and empowers the Competition Commission of India (CCI) to now punish the cartel facilitators also. Additionally, the Bill provides for introduction of settlements and commitments mechanism, which will allow the parties to apply to the CCI to settle/ make commitments in various anti-trust cases. The proposed amendments are a welcome change, which will: (i) ensure swift correction of anti-competitive behaviour and practices in the market; (ii) spare willing and legally compliant companies to face the rigours of an extensive CCI investigation; and (iii) ease the pressure on the CCI’s resources. As such, the Bill provides that the procedure for conducting the commitments or settlements will be laid down in the regulations to be issued under the Act in due course. However, it will be prudent that such regulations also provide clarity on issues such as admission of liability for availing commitment or settlement, etc. The Bill also seeks to bring crucial amendments to the existing merger control regime. Given that many transactions in the digital markets have escaped the CCI's scrutiny owing to the low turnover generated by the target company, the Bill empowers the CCI to review transactions exceeding a certain ‘deal value’ threshold (i.e., (a) where the deal value is in excess of INR 2,000 crore (approx. USD 252 million); and (b) where either party has “substantial business operations in India”) which will bring a number of M&A transactions in the digital market under the CCI’s radar. Since, the proposed ‘deal value’ threshold is fairly low, it will be important to lay down the test to determine ‘substantial business operations in India’ through regulations and/or FAQs. Moreover, to prevent benign transactions from getting scrutinised due to this threshold, the regulations or FAQs should also specify: (i) the sectors / industries to which this threshold will apply; and (ii) methodology for computation of ‘deal value’ (especially in transactions involving non-cash consideration such as share swap). The proposed amendment also specifies that the ‘substantial business operations’ of the ‘parties’ will be considered to review any transaction which meets the deal value threshold. However, international jurisprudence suggests that substantial business operations of only the target is considered. Otherwise, a lot of transactions with no impact on competition in India (as the target's business operations are entirely overseas) will also come under scrutiny, resulting in an unwarranted burden over the regulator. Additionally, to align the Act with the CCI’s decisional practice, the Bill also aims to codify the CCI’s expansive interpretation of ‘control’, which includes the lowest standard of ‘control’, i.e., exercise of ‘material influence’. However, no such corresponding amendment is proposed in the ‘control’ limb of group’s definition. Hence, this may have far reaching consequences for: (i) mapping of overlaps between parties for competition assessment; (ii) computing thresholds for determining notifiability to the CCI; and (iii) availability of the intra-group exemption. Further, in order to ensure a business-friendly approach in line with the Government of India’s motto of ‘ease of doing business’, the Bill seeks to expedite the merger review timelines across the board by reducing the timeline for CCI’s: (i) formation of prima facie view (from 30 working days to 20 calendar days); and (ii) approving a combination (from 210 calendar days to 150 calendar days). While the shortening of timelines may result in speedy approval of transactions, it may increase pressure on the CCI which in turn may result in an added burden on the parties. The Bill also seeks to remove hurdles for transactions involving open market purchases and other transactions undertaken on stock exchanges by exempting them from standstill obligations. However, such exemption is subject to: (i) the transaction being timely notified to the CCI; and (ii) the acquirer not exercising any ownership/ beneficial rights/interest in such shares or securities till CCI’s approval. Conclusively, the Bill is in line with the international best practices and intends to achieve its broader objectives of economic development, protecting the interests of consumers and to ensure freedom of trade in the markets. The Bill has now been referred to the Standing Committee on Finance for further evaluation and asked to submit its report in 3 months. The Standing Committee may seek comments from industry experts, businesses and legal professionals to understand the challenges in various sectors and fine-tune the Bill accordingly. Therefore, it is unclear whether the Standing Committee’s report will be finalised before the winter session of the Parliament.
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Key Changes Proposed In The Competition Amendment Bill: Deal value test: The CCI will have to precisely define what constitutes substantial business operations. Since different sectors will relate to this expression differently. For eg, for tech platforms, value of operations may lie in the user base or customers located in India, while for an infrastructure company, having plants and equipment itself is valueable even though not operational. Commitment and settlement: a lot will depend on the fine print of the associated regulations that CCI is to come up with. Effect on the compensation claims by persons who have suffered from the anti-competitive will also also have to be seen for parties who have settled the matter. Reduced Timelines: Compressing merger review timelines to 20 days could mean a higher burden on parties to do pre-filing consultations or face repeated questions from the CCI or suffer invalidations.
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The changes proposed in the competition amendment bill are quite significant and far-reaching. One of the driving factors of the amendments proposed is to address concerns in the digital economy. Mergers and acquisitions in the digital economy often escaped scrutiny by the CCI as such transactions were exempt from notification to the competition regulator on account of assets or turnover of the target entity being below specified financial thresholds. The introduction of the deal value threshold would ensure that significant acquisitions in the digital space are scrutinized by the CCI. The intent of the legislature is that only those acquisitions in the digital economy should be notified to the CCI where a party to the transaction has substantial business operations in India. Clarity is awaited from the CCI on what constitutes ‘substantial business operations’ in India. The other issue on which certainty is required is the theory of harm in assessing and analyzing M&A’s in the digital economy as the dynamics of competition in such markets differs from the traditional markets that the CCI has been scrutinizing in the last decade. The existing criteria of assessing M&A’s in the traditional markets may not be relevant or rational in the context of digital markets. The amendments propose to reduce timelines for approval of M&A’s notified to the CCI. On the face of it, such proposal appears to be business friendly. However, such reduced timelines are likely to impose significant burden on the combination department of the CCI and may prove to be counter-productive in the long run. Such reduced timelines are unnecessary considering that the CCI has done a stellar job in the last decade by approving M&A’s within prescribed statutory timelines and in an expedited manner. The bill also proposes to introduce a settlements and commitments mechanism whereby the CCI may accept settlements and commitments from the parties and close investigations quicker. This is beneficial for both the CCI as well as the parties under investigation as it reduces the litigation time and cost. The other significant amendments include provisions for penalizing third parties which may facilitate a cartel such as a ‘hub-and-spoke’ cartel; introduction of a limitation of 3 years; significant increase in maximum penalty for not disclosing facts or giving false information; and, codifying the ‘material influence’ test as the standard for control. Overall, the proposed amendments are significant and are being introduced to further the ‘ease of doing business’ objective of the Government. However, the success of the amendments depend on the regulations to be introduced by the CCI to give effect to these proposed amendments as well as the legal certainty that such regulations would provide to businesses.
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Rape is Rape. Marriage is no defence. Marital Rape Exception has no place in any civilised jurisprudence. The anxiety over misuse of law can be better allayed by preventing illegal arrests, making bail easier, & having very strong disincentives on filing of false complaints.
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“This is a good sequel to last year’s pathbreaking budget. The biggest point is the capex spending, and it comes from a position of confidence. The other aspects are the focus on ESG, and promotion of domestic industry. The growth aspiration of 9.2% is exciting. Announcements around private equity investments are interesting, and should help removing regulatory cholesterol. Announcements on GIFT City should provide additional impetus to the existing initiatives," says Cyril Shroff, Managing Partner, Cyril Amarchand Mangaldas on Budget 2022.
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"We welcome the Govt's decision to set up Int'l Arbitration Centre in GIFT City in Gujarat. Arbitration is one of the foremost alternate Dispute resolution mechanisms worldwide, and Govt's initiative is yet another step in strengthening dispute resolution through arbitration in India. As Indian enterprises go global and many foreign enterprises enter India for business, this initiative will help ease the dispute resolution process. Hopefully, others will too be encouraged to set up such arbitration centres in other cities to give this initiative a further push," says Gunita Pahwa, Joint Managing Partner, S&A Law Offices.
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"The proposal to set up an expert committee to suggest measures to help attract more PE/VC investments in the Budget is a welcome move. At present, PE/VC investments have to comply with statutory process/compliances governed by the Companies Act, foreign exchange regulations, and applicable SEBI regulations for AIFs. In our view, the Government will look at the committee to provide suggestions to address the long-standing issues raised by the PE/VC industry, since it acknowledges the significant contribution of PE/VC investors in the growth of the start-up and sunrise sectors. In addition, the proposal for the creation of thematic funds by the Government (as Fund of Funds) for providing blended finance in Climate Action, Deep-Tech, Digital Economy, Pharma, and Agri-Tech sectors should see increased investments and M&A in these sectors," says L .Badri Narayanan, Executive Partner, Lakshmikumaran & Sridharan Attorneys.
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Budget 2022 is just around the corner. Expectations are high from all stakeholders given the hardship people have been facing since the last two years. Mr. Justin M Bharucha, Managing Partner, Bharucha & Partners has identified proposals that Budget 2022 should pick up: "This Budget needs to focus on the aggregate benefit to the country and the Government’s finances from deeper and more robust market developments. I’d like to see the rationalisation of fossil fuel costs. Our economy is hugely dependent on fossil fuel and rationalising costs will likely allow for an increase in economic activity including for sectors that have suffered during the pandemic. The other important change I look forward to is ‘Process Change’. Executive action on-site must match the enabling and forward-looking policy statements made in Parliament. While this is not strictly part of a ‘budget’ speech, this is an excellent time to announce (and hopefully subsequently implement) that the Government will ensure that the executive enables and does not hinder economic activity."
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The ITAT has followed its orders for the earlier years to hold that once the Indian entity has been remunerated on arm’s length basis, no further profit attribution can be made in the hands of the non-resident entity by alleging that the Indian entity constitutes a Permanent Establishment (PE) of the non-resident. Moreover, the ITAT has also followed the Supreme Court ruling in E-funds case to hold that the mere fact the Indian entity is a 100% subsidiary of the non-resident or that the non-resident has outsourced its business entirely to the Indian entity cannot lead to a conclusion that there is a PE.
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