IMPORTANT POINT
Market purchase of shares under scheme of combination cannot be considered as independent transaction and cannot qualify for target exemption under notification dated 4.3.2011.

JUDGMENT

Arun Mishra, J.

The Competition Commission of India (in short, "the Commission") is in appeal aggrieved by the order passed by the Competition Appellate Tribunal (in short, "the Tribunal") setting aside the order passed by the Competition Commission under section 43A of the Competition Act, 2002 (in short, referred to as "the Act") whereby penalty of Rupees One Crore was imposed on the respondents on the ground of non-compliance of provisions contained in section 6(2) of the Act.

2. The Thomas Cook India Ltd (for short, "the TCIL") - respondent No.1, Thomas Cook Insurance Services India Limited, (for short, "the TCISIL") - respondent No.2 and Sterling Holiday and Resorts India Limited (for short, "the SHRIL") - respondent No.3 is the companies registered under the Companies Act, 1956. The TCIL is engaged in travel and travel related services. The TCISIL is also engaged in travel and travel related services and is a subsidiary of the TCIL and is also a registered corporate agent of Bajaj Allianz General Insurance Company Limited, which is engaged in the business of selling insurance to outbound travelers, as well as health insurance, motor insurance, personal accident insurance etc. SHRIL is engaged in the business of providing premium hotel services, vacation ownership services, normal hotel services like renting of rooms, restaurants, holiday activities etc. It also arranges meetings, incentives, conference and events for its corporate clients. The Board of Directors of the aforesaid three companies on 7.2.2014 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 equity share capital of SHRIL on the fully diluted basis from certain existing shareholders and promoters of SHRIL.

(iii) Open Offer by TCIL and TCISIL to purchase 26% of the equity share capital from public shareholders of SHRIL, in terms of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (in short, "the SEBI's Regulations").

5. In addition to the above, TCISIL acquired 90,26,794 equity shares of SHRIL through purchase on the Bombay Stock Exchange. These purchases (hereinafter referred to as "market purchases") amounted to 9.93% of the equity share capital of SHRIL on the fully diluted basis. The market purchases were made between 10.2.2014 and 12.2.2014.

6. On 14.2.2014, the respondents sent a notice under section 6(2) of the Act to the Appellant - Commission, notifying only the 'Demerger' and 'Amalgamation'. Other transactions were, however, disclosed, while claiming exemption from section 5 of the Act.

7. On 20.02.2014, the Commission asked the Respondents to remove certain defects in their application and provide further information, inter alia on, whether the notified and non-notified transactions were interrelated.

8. On 5.3.2014, the Commission passed an approval order under section 31(1) of the Act. However, it observed that the same would