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SCM Solifert Limited & Anr. v. Competition Commission of India

Civil Appeal · 2018 INSC 354Decided 17 Apr 2018
Civil Appeal No. 10678 of 2016
Justice Arun Mishra · Justice Navin Sinha

Background

SCM Solifert Limited acquired a 24.46% stake in Mangalore Chemicals and Fertilisers Limited (MCFL) through share purchases in 2013, and later acquired a further 0.8% in 2014 which pushed its total holding above 25%, but it did not notify the Competition Commission of India (CCI) about the first acquisition at all and notified the second one only after the purchase had already happened. The CCI imposed a Rupees Two Crore penalty for this failure to give advance notice as required by Section 6(2) of the Competition Act, and the Competition Appellate Tribunal upheld that penalty on appeal.

Decision Breakdown

The Supreme Court held that the 24.46% share acquisition could not be treated as a mere passive "investment" exempt from notification, because the company's own contemporaneous press release described the deal as "very strategic" and spoke of working closely with MCFL going forward, showing an intent beyond simple investment; acquisitions below 10% may qualify as pure investment, but this one far exceeded that threshold. On the second acquisition, the Court rejected the argument that placing the newly purchased shares in an escrow account excused the late notification, holding that the law requires notice to the CCI before a combination is carried out (ex-ante), not an after-the-fact notification once the transaction is already done. As with the companion case against Thomas Cook decided the same week, the Court held that no proof of bad intent (mens rea) is needed to justify a penalty for this kind of regulatory breach: the penalty follows automatically once the violation is established, with only the amount being discretionary. Finding the Rupees Two Crore penalty (just 0.06% of the group's turnover) to be a modest sanction for a genuine violation, the Court dismissed the appeal and upheld the penalty.

Lesson Learnt

Companies must notify the competition regulator about significant share acquisitions before completing them, not after, describing a transaction internally as "strategic" rather than a simple investment, or routing shares through an escrow account, will not excuse a failure to seek advance regulatory clearance.

Official source (sci.gov.in)View Judgment (PDF)

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