Cyril Amarchand MangaldasExperts Corner

The enactment of the Insolvency and Bankruptcy Code, 2016 (IBC) in 2016 was one of the most significant reforms introduced by the Government of India (GoI) in the recent years. However, it lacked clarity on its interface with various other regulatory authorities, particularly the Competition Commission of India (CCI). Pertinently, the IBC did not contemplate the timelines for a resolution applicant to notify and seek the approval of the CCI, thereby posing several complex questions, in particular—what would qualify as a binding agreement for insolvency cases? Whether notification process can be triggered prior to approval of a resolution plan? Whether IBC related cases would be granted an expedited approval? Whether preferential treatment would be granted to companies approaching the CCI post obtaining an approval from the Committee of Creditors (CoC)?

With the notification of the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018 (Second Amendment), the Ministry of Corporate Affairs has provided much needed clarity to all stakeholders in relation to the above issues. The Second Amendment by way of introduction of a new provision, mandates the approval of the CCI prior to the approval of a resolution plan by the CoC, thereby taking away the discretion exercised earlier by resolution applicants as to the timelines of notifying the CCI. In this backdrop, the article touches upon the merits of the amendment, active role of the CCI in the past two years and the way forward.

Legal Framework

The corporate insolvency resolution process (CIRP) is initiated with the admission of an application against a corporate debtor to the National Company Law Tribunal (NCLT). Thereafter, a resolution professional issues request for resolution plans inviting the interested bidders to submit resolution plans in relation to resolution of the corporate debtor. This is followed by approval of such resolution plan by the CoC and stamping of final approval by the NCLT. The IBC mandates a 180-day period which can be extended to 90 days for the completion of the CIRP.

In the construct of Section 5 of the Competition Act, 2002 (Competition Act), where certain jurisdictional thresholds prescribed under it are breached, a transaction under the CIRP would trigger a mandatory approval from the CCI before closing such a transaction. Under the Competition Act, the CCI is required to form a prima facie opinion of whether a transaction notified to it causes an appreciable adverse effect on competition (AAEC) within a period of 30 working days from the date of such notification. Besides the 30 working day period, the CCI is required to approve/reject/approve with modification any notified transaction within 210 days from the date of such notification, which can be extended to 60 days in limited cases where remedies are warranted. It is important to note that a majority of the cases notified to the CCI have been approved in Phase I of the review period i.e. within the preliminary 30 working day period.

Reasons for the Second Amendment vis-à-vis Competition Act

The Ministry of Corporate Affairs by way of its Notification dated 17-8-2018 added Section 31(4) to the IBC, which inter alia provides that—

… where the resolution plan contains a provision for combination, as referred to in Section 5 of the Competition Act, 2002 (12 of 2003), the resolution applicant shall obtain the approval of the Competition Commission of India under that Act prior to the approval of such resolution plan by the committee of creditors.

The above amendment is a welcome step as it clarifies the trigger event for a transaction under the CIRP i.e. essentially the stage at which the CCI approval should be sought. Having a clear mandate to obtain approval from the CCI will go a long way in preventing complex situations which have come up due to the regulatory uncertainties around the CCI approval process.

In the past, we have seen certain cases being notified to the CCI both prior to and post the approval of the CoC. For instance, in the acquisition of Binani Cement Limited (BCL) (one of the first few IBC matters examined by the CCI) two resolution applicants i.e. Dalmia Cement Limited (Dalmia) and UltraTech Cement Limited (UltraTech), both filed separate notifications with the CCI prior to receiving an approval from the CoC. The CCI accorded an approval, finding no AAEC to both Dalmia and UltraTech. However, the approval to UltraTech was accorded by the CCI post the CoC’s approval of the Dalmia resolution plan, thereby making CCI’s approval of UltraTech immaterial.

In another case on point relating to the acquisition of Electrosteel Steels Limited (Electrosteel) by Vedanta Limited (Vedanta), the CCI was notified post the approval of the resolution plan by the CoC. Importantly, Vedanta’s resolution plan was subsequently approved by the NCLT during the CCI’s review process. Such a situation i.e. approval by the NCLT pending the CCI approval could possibly lead to two issues — (1) disqualification of Vedanta and ultimately liquidation of Electrosteel assuming that CCI’s approval took more than 270 days (mandated under the IBC); and (2) potential gun-jumping concerns under the Competition Act because of the conflict between the IBC and the Competition Act resulting from the implementation of “control” provisions under a resolution plan (pursuant to the approval of NCLT).

CCI, IBC and the Way Forward

The CCI has up until now expeditiously assessed a number of IBC transactions and approved such transactions, with an average of 20 days per transaction. As mentioned above, the Second Amendment is a welcome step given that it clarifies the exact timelines for notifying the CCI in the CIRP framework. The Second Amendment emphasises the intent of the GoI to ensure expedited clearances for transactions, defined roles for the various regulators and harmony between the implementation of the statutes.

More importantly, the mandate of the Second Amendment requiring a resolution applicant to obtain approval from the CCI prior to the CoC approval of a resolution plan ensures that the two potential issues highlighted above are avoided, even if it results in multiple filings for the same transaction before the CCI by different resolution applicants.

While the Second Amendment (to the extent it applies to the Competition Act) is an outcome of the need for streamlining regulatory approval process, it would also be interesting to see whether further amendments will be rolled out in this regard or, whether the GoI, following the suit of Securities and Exchange Board of India, would resort to exempting such transaction from the purview of CCI altogether.


*Anshuman Sakle is a Partner with the Competition Law Practice at Cyril Amarchand Mangaldas and can be contacted at anshuman.sakle@cyrilshroff.com.  Dhruv Rajain, Senior Associate can be contacted at dhruv.rajain@cyrilshroff.com and Ruchi Verma, Associate, can be contacted at ruchi.verma@cyrilshroff.com with the Competition Law Practice at Cyril Amarchand Mangaldas.

Legislation UpdatesNotifications

No. SEBI/LAD-NRO/GN/2019/08.— In exercise of the powers conferred under Section 30 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Board hereby makes the following Regulations to further amend the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018, namely:-

1. These regulations may be called the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) (Second Amendment) Regulations, 2019.

2. They shall come into force on the date of their publication in the Official Gazette.

3. In the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 –

   I. in Regulation 2, in sub-regulation (1),-

                      i. clause (x), shall be substituted with the following, namely,-
“ “innovators growth platform” means the trading platform for listing and trading of specified securities of issuers that comply with the eligibility criteria specified in Regulation 283;”

                     ii. in clause (y), the words “institutional trading platform” shall be substituted with the words  “innovators growth platform”.

II. in Regulation 3, in clause (i), the words “institutional trading platform” shall be substituted with the words “innovators growth platform”.

III. in CHAPTER X, in the heading, the words “INSTITUTIONAL TRADING PLATFORM” shall be substituted with the words “INNOVATORS GROWTH PLATFORM”.

IV. in Regulation 282, in sub-regulation (3), the words “and not to retail individual investors” shall be omitted.


Please follow the link for detailed notification: NOTIFICATION