National Company Law Appellate Tribunal (NCLAT): While deciding the instant appeal filed by NV Investment Holdings LLC challenging the order passed by the Competition Commission of India dated 17-12-2021 [ NV Investment Holdings, In re, 2021 SCC OnLine CCI 71], wherein the CCI had imposed a penalty of INR Two Hundred Crore upon Amazon due to their failure to notify combination in terms of the obligation cast under S. 6(2) of the Competition Act; the Bench of Justice M. Venugopal (Judicial Member) and Dr. Ashok Kumar Mishra (Technical Member) in a 300-page deliberation, upheld the decision taken by the CCI to impose such a penalty. The Tribunal held that Amazon did not make full, whole, fair, forthright and frank disclosure of relevant materials and had furnished only limited details / disclosures, pertaining to its `acquiring strategic rights and interests’ over `FRL’, and executing `Commercial Contracts’ among itself and `FRL’ concerning the ambit and purpose of `Combination’, therefore the penalty imposed is justified. Amazon was directed to furnish the penalty within 45 days from the date of NCLAT’s decision.  

Background: In a recapitulation of facts; the matter revolved around the appellant’s [Amazon] acquisition of 49% shareholding in Future Coupons Private Limited (FCPL). FCPL filed an application stating that Amazon had initiated arbitration proceedings in relation to transfer of assets of FRL, a company in which FCPL holds 9.82% of the shareholding and there are related litigations pending before the constitutional courts. It was alleged that Amazon took completely contradictory stands in the arbitration proceedings and constitutional courts with respect to its investments in FCPL as compared to the representation and submissions made before the Commission. Such contradictions were said to establish false representation and suppression of material facts before the Commission. 

Contentions by Amazon before the NCLAT 

The counsels appearing for Amazon put forth many contentions before the Tribunal, primary among them are as follows- 

  • The `Investor Affiliate’, `Amazon Seller Services Private Limited’ (`ASSPL’) was not acquiring any `Shares’ or `Voting Rights’ or `Assets’ or `Control’ in `Future Retail Limited’ (`FRL’) and as such, therefore S. 5 of the Competition Act, 2002 was not attracted in the instant case. It was contended that the `proviso to S. 20 (1) of the Competition Act, bars the CCI from enquiring into a consummated transaction, more than one year, after the said transaction had taken effect. 
  • The date on which the combination took effect is considered to be the date of payment and that the payment was effected on 26.12.2019 and that `FCPL SHA’ came into effect on 26.12.2019 and that the limitation under S. 20 (1) of the Competition Act, 2002 for the CCI to `inquire’ into the notified Combination, expired on 25.12.2020, being a `Holiday’, the `Limitation’ came to an end on 26.12.2020.  
  • As per the appellant, Competition Act does not empower revisiting or reopening the `approvals’ granted after 210 days in case a notification is filed under S. 6 (2) of the Competition Act or one year from the date on which a combination took effect, in respect of cases covered under `S. 20 (1) of the Competition Act, 2002. 
  • The appellants also contended that the impugned order by the CCI is bad in law because of the fact that it was passed in the absence of a `Judicial Member’, completely disregarding the observations made by the Supreme Court in State of Gujarat v. Utility Users Welfare Association, 2018 (6) SCC 21 
  • It was also argued that there was no fraud in the present case and in reality, the `Finding of Fraud’ necessarily requires a decision that the information/documents purportedly `suppressed/undisclosed’ as a `material impact’ on the assessment of the Combination; i.e., mere mentioning and using the word fraud/ fraudulent without any material particulars, would not amount to pleading of Fraud.   

Contentions by the Respondents 

  • The respondents contended that during the time of `notifying the Combination’, the appellant had stated that the intended ambit and purpose of the `Combination’ vis-a-vis, its investment in `FCPL’ (2nd Respondent) was in view of `FCPL’s potential’ for `Long Term Value Creation’ and providing `Returns’ on its `Investment’; and also, with a view to strengthen and augment the `Business of `FCPL’ that `it does not have any direct or indirect Shareholding’ in `FRL’ and further that it would not acquire directly any rights in `FRL’ and was only acquiring `Limited Investor Protection Rights’ via `FCPL’ (2nd Respondent) with a view to protect the value of its investment in `FCPL’. It was thus contended that the whole attention, as represented, during the time of notifying the `Combination’ was “FCPL and its ‘business’ with ‘rights’ in `FRL’ being reflected as mere `Investor Protection Rights’”. 
  • It was brought to the notice of the `Tribunal’ that the CCI in regard to the considerations for the `Appellant’s Investment’ in `FCPL’, the nature and rationale of the rights, in respect of the `Appellant’ under `FRL SHA’, raised some queries and that the `appellant’ through letter dated 15.11.2019, once again emphasized `FCPL’ to be the `attention of the Combination’. 
  • The respondents submitted that the `Combination Approval Process’ requires the `notifying person’ to submit the true, correct and complete information as regards the actual `Combination’ pursued by the `parties’ and to meet the requirements of the `Competition Act, 2002 and Regulations prescribed thereunder. Only then, the CCI will evaluate the effects of a `Combination’ in a proper perspective. 
  • It was argued that CCI had no possibility for to conduct `Combination Assessment’ from the `point of Strategic Alignments’ between `FRL’ and `Amazon group’. Since the effect of Commercial Contracts entered into between `FRL’ and `Amazon group’ entities in their normal course of `Business’ would be considerably different from `parties’ envisaging `Strategic Alignments’ between their `Business’ though `Strategic Investments’. Therefore, the `Regulatory Process’ of `Notification’ and the nature of `Economic’ and `Legal’ enquiry would differ in the two situations.  
  • As per the respondents, Amazon had failed to submit Key Internal Documents and instead, provided the documents relating to the Coupons and Payments Business of `FCPL’. The appellant was also required to clarify `Economic’ and `Strategic Purpose’ (Rationale) of the `Proposed Combination’ however, the appellant, had stated that its rationale as FCPL’s potential for long term value creation, returns on investment and to strengthen FCPL’s business of loyalty, gift and reward cards.  
  • The appellant repeatedly asserted that its decision to invest in `FCPL’ was based on the `Long Term Potential’ of `FCPL’ and it was submitted that appellant had misrepresented the scope and purpose of the `Proposed Combination’. The `Appellant had deliberately strived to `Misrepresent’ and `Suppress’ material particulars and documents vis-à-vis the `Proposed Combination’ and in short, the `Appellant’ had repeated the same false statements in relation to ambit and purpose of the `Proposed Combination’, etc., even after being asked with the pointed follow up questions.  

Observations- In deciding the appeal, the Bench perused the concerned provisions of the Competition Act, 2002 [definitions of ‘agreement’, ‘market’, ‘relevant product market’, ‘combination’ etc.] and Combination Regulations, 2011. The Bench noted that Competition Commission of India has a duty to “institute a system of undistorted competition which is commensurate to the promotion of the interest of the Consumers”. The Bench delved into the scope of CCI’s authority as enshrined in the 2002 Act- “CCI can take `suo moto cognisance’ of the case based on an anonymous complaint. But the Commission must be satisfied that there exists a prima facie case for ordering into the allegation of violation of S. 3 (1) or S. 4 (1) of the 2002 Act”. The provisions concerning ‘combinations’, ‘penalty to be imposed by CCI [Ss. 44 and 45] were also perused. The Bench also observed that it is up to the CCI after considering the facts on records, (details provided in `Notice’ and `Response’ filed by the `Parties’) may form a prima facie opinion that the `Proposed Combination’ is likely to cause an Appreciable Adverse Effect within `relevant market’ in India.  

Examining the transactions that were involved in the Amazon-Future Deal, the Tribunal noted that Amazon’ had mentioned that it does not have any direct or indirect shareholding in `FRL’ and further it would not acquire directly any rights in `FRL’ based on which CCI’ had issued the `Approval Order’ on 28.11.2019 as per S. 31 (1) of the Competition Act based on the `Competition Assessment’ arriving at the opinion that the `Combination’ is not likely to cause any appreciable adverse effect on `competition’ in India. However, all that changed when FCPL in its letter dated 25-03-2021 raised major issues with the deal. “It cannot be brushed aside that if an individual had entered into or intended to enter into any `Transaction’ being a `Combination’, within the `purview of S. 5 of the Competition Act, 2002’, then that `person’ compulsorily enjoined to file a `Notice’ as per S. 6 (2) of the Competition Act, 2002 coupled with the concerned `Combination Regulations, 2011’. No wonder, an individual who had not notified a `Combination’ as per the ingredients of  S. 6 (2) of the Competition Act, 2002, cannot press into service the ingredients of S. 6 (2-A) of the Act”.  

It was observed that, `Appellant/Amazon’ would enter into `Commercial Agreements’ with `FRL’ to expand the coverage, while also involving in `strategic’ discussions for `call option’ over shares held by `FRL’s Promoters with a view to leave the `Appellant/Amazon’, `well positioned to become the single largest shareholder of FRL’. In fact, the number of Equity Shares of `FRL’ to be held by `FCPL’ `was calculated’ such that `Amazon’ can indirectly hold the same number of shares of `FRL’ at a price per share representing a 25% premium on the minimum Regulatory Price”   

The Tribunal pointed out that on the part of the  Amazon’ there is a `Misstatement of Fact’/`Misrepresentation’ in not exhibiting the internal emails which make known the real ambit and purpose of the notified transactions, thereby misleading the CCI in approving the `Proposed Transaction’.  

The Tribunal perusing the internal communications/emails of  Amazon pointed out that the appellant had projected in `FRL’, `FCPL’ only a vehicle, for which, no intention was assigned- “This `Tribunal’ comes to an inevitable and inescapable conclusion that Amazon had not fulfilled its obligation as per ingredients of S. 6 (2) of the Competition Act, 2002, attracting imposition of penalty under S. 43A of the Act, extending to 1% of the total turnover or the Assets whichever is higher of such a `Combination’ 

Conclusion and Decision- The Tribunal held that Amazon had indeed hidden the true objective behind the combination and justified the penalty imposed by the CCI. However, the Tribunal opined that the imposition of maximum penalty of Rs.1 Crore each, as per the `impugned order’ passed by the `CCI’, as per Ss. 44 and 45 of the Competition Act, is slightly on the excessive side.   

[ NV Investment Holdings LLC v. CCI, 2022 SCC OnLine NCLAT 238, decided on 13-06-2022] 

For Appellant :  Gopal Subramanium, Arun Kathpalia and  Amit Sibal, Senior Advocates  

For Respondent [CCI]: N. Venkataraman, ASG with Manu Chaturvedi, Chandrashekhar Bharathi and Sanyat Lodha, Advocates  

Shama Nargis, Deputy Director Law, CCI

*Sucheta Sarkar, Editorial Assistant has reported this brief.

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