TMI Blog2018 (4) TMI 977X X X X Extracts X X X X X X X X Extracts X X X X ..... eme - It is apparent that in the notification made under section 6(2) on 14.2.2014 notifiable transactions were shown regarding merger and amalgamation. It was also mentioned that parties have also contemplated certain other transactions in view of the notifiable transactions, they were the substitution of equity shares, SPA, open offer and market purchase. It is crystal clear from the aforesaid application itself that all these transactions were part of the same transactions and even before notifying the transactions of purchase from the market on 14.2.2014, it was consummated between 10.2.2014 to 12.2.2014. It is crystal clear that market purchases being a part of the composite combination was consummated before giving notice to the Commission. Market purchases having been consummated between 10.2.2014 to 12.2.2014, which is almost after finalizing the composite combination clearly suggested that market purchases would not have taken place in the absence of scheme and the other acquisitions. In case they were not part of the same scheme that would not have been referred to in the notice filed by them with the Commission on 14.2.2014. Thus, in our considered opinion market purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approved a Scheme for demerger/amalgamation, (referred to as the Scheme'). The said Scheme contemplated the following: (a) Demerger: i.e. Resorts and timeshare business of SHRIL were to be transferred by way of demerger from SHRIL to TCISIL in lieu of which equity shares of TCIL would be issued to shareholders of SHRIL as per the ratio in the Scheme ; and (b) Amalgamation: SHRIL with its residual business would be amalgamated into TCIL in lieu of equity shares to be issued to the shareholders of SHRIL as per the ratio in the Scheme. 3. For the purpose of implementing the above transactions, the Respondents entered into a Merger Cooperation Agreement (for short, the MCA ) on the same day i.e. on 07.2.2014. 4. On the very same day i.e. 07.2.2014, by another resolution of the Boards of Directors of the respondents, the following transactions were approved and executed - (i) Share Subscription Agreement (SSA): TCISIL was to subscribe 2,06,50,000 shares of SHRIL pursuant to a preferential allotment (amounting to 22.86% of SHRIL of equity share capital of SHRIL on fully diluted basis); (ii) Share Purchase Agreement (SPA): TCISIL was to acquire 19.94% of equ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Open Offer by TCIL and the TCISIL to purchase 26% of the equity shares capital from the public shareholders of SHRIL in terms of the SEBI's Regulations and market purchases were also part of the same transaction. TCISIL acquired 90,26,794 equity shares of SHRIL through purchase on Bombay Stock Exchange between 10.2.2014 and 12.2.2014. These market purchases amounted to 9.93% of the equity share capital of SHRIL on the fully diluted basis. Out of the aforesaid transactions, the respondent notified only the Demerger and Amalgamation in terms of section 6(2) of the Act. The Share Subscription Agreement (SSA), Share Purchase agreement (SPA), Open Offer and Market Purchases were not notified and the exemption was claimed under notification S.O. 482 (E), dated 4.3.2011, on the premise that turnover of the company of which shares have been acquired i.e. SHRIL did not have turn over in excess of ₹ 750/crores whereas the other transactions were at the proposal/ agreement stage only. The transaction 6 (Market Purchases) has already been consummated prior to filing of the notice under section 6(2) of the Act on 14.2.2014. As such the Tribunal has rightly taken the view tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imis threshold, the transaction which qualifies under the Target Based Exemption are exempt from the purview of the combination under section 5 of the Act. Therefore, the Share Subscription Agreement (SSA), Share Purchase Agreement (SPA) and open offer are exempted under the Target Based Exemption on account of being acquisition of shares, are also eligible for the Target Based Exemption as admittedly the turnover of SHRIL was below the de minimis threshold. It was also contended that market purchases of 9.94% by TCISIL on the stock exchange were not interdependent on the main Merger Scheme. Merely because they were contemplated contemporaneously, did not mean that all the transactions were interdependent . The said market purchase finds no mention in either the merger scheme or the joint press release issued by respondent No.7 on 7.2.2014. The reference to part equity, part merger deal means the reference to merger scheme and acquisition of shares by way of Share Subscription Agreement, Share Purchase Agreement and open offer and not market purchases which were completely a separate and distinct acquisition. The Commission in the case of Vedanta Aluminium Limited held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ombination for the purposes of Act. Section 5 is extracted hereunder. 5. The acquisition of one or more enterprises by one or more persons or merger or amalgamation of enterprises shall be a combination of such enterprises and persons or enterprises, if- (a) any acquisition where- (i) the parties to the acquisition, being the acquirer and the enterprise, whose control, shares, voting rights or assets have been acquired or are being acquired jointly have,- (A) either, in India, the assets of the value of more than rupees one thousand crores or turnover more than rupees three thousand crores; or (B) [in India or outside India, in aggregate, the assets of the value of more than five hundred million US dollars, including at least rupees five hundred crores in India, or turnover more than fifteen hundred million US dollars, including at least rupees fifteen hundred crores in India; or] (ii) the group, to which the enterprise whose control, shares, assets or voting rights have been acquired or are being acquired, would belong after the acquisition, jointly have or would jointly have,- (A) either in India, the assets of the value of more than rupees four thousand cro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upees fifteen hundred crores in India; or] (ii) the group, to which the enterprise remaining after the merger or the enterprise created as a result of the amalgamation, would belong after the merger or the amalgamation, as the case may be, have or would have,- (A) either in India, the assets of the value of more than rupees fourthousand crores or turnover more than rupees twelve thousand crores; or (B) [in India or outside India, in aggregate, the assets of the value of more than two billion US dollars, including at least rupees five hundred crores in India, or turnover more than six billion US dollars, including at least rupees Fifteen Hundred Crores in India 16. Under section 5(a), a combination is formed if the acquisition by one person or enterprise of control, shares, voting rights or assets of another person or enterprise subject to certain threshold requirement that is minimum asset valuation or turn over within or outside India. 17. Under Section 5(b) of the Act the combination is formed if the acquisition of control by a person over enterprise when such person has already acquired direct or indirect control over another enterprise engaged in the production, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke Regulations. Under section 64(3), the Regulations are to be placed before the Houses of Parliament. On 11.5.2011, the Commission framed the Competition Commission of India (Procedure in Regard to the Transaction of Business Relating to Combinations) Regulations, 2011 (for short, the Regulations, 2011 ). Regulation 9(4) as it stood at the relevant time, is as under: 9(4). Where the ultimate intended effect of a business transaction is achieved by way of a series of a steps or smaller individual transactions which are interconnected or interdependent on each other, one or more of which may amount to a combination, a single notice, covering all these transactions, may be filed by the parties to the combination. 22. It is relevant to note here that the Act and Regulations, 2011 clearly envisage that a combination can consist of one or more transactions. Under Regulation 9(4) of the Regulations, 2011, the parties have an option of giving either a single notice or multiple notices in respect of all the transactions. On 30.5.2011, sections 5 and 6 of the Act were brought into force. 23. It is apparent that between the three respondent companies demerger of the resort of SHRI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 63 Cr. The merger will involve shares of TCIL being issued to Sterling shareholders at a defined swap ratio or 120:100 The merger brings significant synergies to both partners with Thomas Cook India gaining access to Sterling Resorts' network of 19 resorts in 16holiday destinations across India. The company also has 15 additional sites where it plans to add new resorts in the coming years. Serling's affiliation with Resort Condominiums International (RCI)the global expert in exchange vacations, also allows its members to vacation in over 4000 RCI affiliated resorts all over the world. 25. The resolution passed by the Board of Director of TCIL on 7.02.2014. Share Subscription Agreement etc. and similar resolutions were passed by TCISIL and SHRIL. 26. It is apparent that in the notification made under section 6(2) on 14.2.2014 notifiable transactions were shown regarding merger and amalgamation. It was also mentioned that parties have also contemplated certain other transactions in view of the notifiable transactions, they were the substitution of equity shares, SPA, open offer and market purchase. It is crystal clear from the aforesaid applicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suring the compliance with the requirements of the Act it is open to considering whether the particular step was an individual transaction or part of the whole of the transaction. It was evident in the facts and circumstances of the case as TCISIL would not have made market purchase in the absence of any one transaction. Thus, market purchases could not have been termed to be independent transaction. 29. Coming to the submission with respect to the effect of regulation 9(4) of the combination regulation. It is apparent that there is power under the Regulation 9(4) to consider the ultimate intended effect of transaction achieved by series of steps which are interconnected or interdependent on each other, it would depend upon the facts and circumstances of the case and a single notice may be filed by the parties to a combination. The Regulation envisages the possibility of a business transaction may be achieved by a combination by way of interconnected or interdependent steps/ transactions. Enabling provision to file single notice would not mean that in what particular manner transaction has taken place, same is to be determined on the facts and circumstances. The market purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y obligations as contemplated by the Act is established and, therefore, the intention of the parties committing such violation becomes immaterial. In other words, the breach of a civil obligation which attracts penalty under the provisions of an Act would immediately attract the levy of penalty irrespective of the fact whether the contravention was made by the defaulter with any guilty intention or not. This apart that unless the language of the statute indicates the need to establish the element of mens rea. It is generally sufficient to prove that a default in complying with the statute has occurred. The penalty has to follow and only the quantum of penalty is discretionary. x x x In our considered opinion, a penalty is attracted as soon as the contravention of the statutory obligation as contemplated by the Act and the Regulation is established and hence intention of the parties committing such violation becomes wholly irrelevant. x x x We also further hold that unless the language of the statute indicates the need to establish the presence of mens rea , it is wholly unnecessary to ascertain whether such a violation was intentional or not. On a careful perusal of Se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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