The factum of the approval of the combination subsequently by the Commission is not going to provide insulation when the provisions of the Act have been violated and prior notice had not been given under section 6(2), said the bench.
The Supreme Court, in SCM Solifert Limited vs. Competition Commission of India, has observed that ex post facto notice is not contemplated under the provisions of section 6(2) of the Competition Act and the same would be in violation of the Act.
In this case, the CCI, though it approved the combination, penalized the company for its failure to notify the first and second acquisitions of shares in accordance to section 6(2) of the Act. The Company, apart from its other factual justifications, contended that after approval of the proposed combination, penalty ought not to have been imposed and violation, if any, was technical, not willful, deliberate or mala fide.
The bench of Justice Arun Mishra and Justice Navin Sinha observed that it is apparent from section 6(2) of the Act that the proposal to enter into combination is required to be notified to the Commission.
“The legislative mandate is apparent that the notification has to be made before entering into the combination. The Preamble of the Act contains that the Commission has been established to prevent practices having an adverse effect on the competition. The combination cannot be entered into and shall come into effect before order is passed by Commission or lapse of certain time from date of notice is also apparent from the terminology used in section 12 6(2A) which provides that no combination shall come into effect until 210 days have passed from the date of notice or passing of orders under section 31 by the Commission, whichever is earlier,” the bench said.
The court further observed that the intent of the act is that the commission has to permit combination to be formed, and has an opportunity to assess whether the proposed combination would cause an appreciable adverse effect on competition.
“The factum of the approval of the combination subsequently by the Commission is not going to provide an insulation when the provisions of the Act have been violated and prior notice had not been given under section 6(2). It was open to impose a penalty under section 43A. Merely by grant of approval by the Commission violation of provisions does not become condonable ipso facto,” the bench said.
The bench also rejected the argument that penalty ought not to have been imposed as there have been no malafides. There was no requirement of mens rea under section 43A or an intentional breach as an essential element for levy of penalty, the bench said.