IMPORTANT POINTS
Any acquisition of shares in excess of 10% requires notice u/s 6(2).
Competition Commission can impose penalty for violation of provisions of the Act.
Mere approval of combination by Commission does not condone the violation.
Mens rea is not a requirement for imposing penalty u/s 43A.

JUDGMENT :

Arun Mishra, J.

1. The appellants SCM Solifert Limited and another are in appeal under section 53T of the Competition Act, 2002 (hereinafter referred to as “the Act”) as against the final judgment and order dated 30.08.2016 passed in Appeal No.59 of 2015 by the Competition Appellate Tribunal thereby affirming the order passed by the Competition Commission of India under section 43A of the Act.

2. The Competition Commission of India initiated the proceedings against the appellants on whom due to the failure to notify a proposed combination as required under section 6(2) of the Act, the penalty of Rupees Two crores was imposed under section 43A of the Act. On 3.07.2013, the appellants had purchased 2,89,91,150 shares of Mangalore Chemicals and Fertilisers Limited (in short referred to as “the MCFL”) constituting 24.46 paid up share capital of the MCFL on the Bombay Stock Exchange.

3. The first transaction of the acquisition of the shares was by way of the purchase of shares conducted through bulk and block deals. It was followed by press release dated 3.7.2013 by Deepak Fertiliser and Petrochemicals Corporation Limited filed with the Stock Exchanges, in compliance with the requirements of the Listing Agreement.

4. On the second acquisition of the shares on 23.04.2014 the appellants made a purchase order in the open market for the purchase of up to 20 lacs equity shares representing 1.7 percent shares of the MCFL. Subsequently, an open offer in terms of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (for short, "the Regulations, 2011") was made for acquiring up to 26 percent of shares of the MCFL.

5. The appellants filed a notice disclosing details of the first acquisition and notifying the second acquisition under Section 6(2) of the Act with the Commission on 22.04.2014 within thirty days of the public announcement pursuant to the Regulations, 2011 for the acquisition of 1.7 percent of the MCFL. The Competition Commission vide its order dated 30.07.2014 under section 31(1) of the Act approved the proposed combination, however, directed to initiate penalty proceedings against the appellants under section 43A of the Act. Pursuant to that, a show cause notice was issued on the ground of failure to notify in accordance to section 6(2) of the Act, in regard to first and second acquisitions of shares.

6. It was the case on behalf of the appellants that first acquisition was made solely for the purpose of investment under Entry I of Schedule I of the CCI (Procedure in regard to the Transaction of Business Relating to Combinations) Regulations, 2011, (hereinafter referred to as "the Competition Regulations"). Thereby, it assumed exemption from the notification. It was also urged that the second acquisition was notified to the Commission within the stipulated time of 30 days as specified in section 6(2) of the Act. The purchase was not consummated because as per the Escrow Agreement dated 28.04.2014, the shares purchased in the second acquisition were credited to a specifically designated Escrow account of J.M. Financial Services Limited. The sole purpose of entering into an escrow agreement was that the transaction was not consummated prior to approval of the Commission. The Commission has imposed the penalty of 2 crores; the appellate tribunal has affirmed the order. The Commission has held that the appellants have violated section 6(2) of the Act by failing to notify the proposed combination.

7. It was urged by learned counsel on behalf of the appellants that first acquisition did not fall within the purview of Entry 1 Schedule 1. The interpretation made by the Commission of the Entry 1 of Schedule 1 is incorrect. With respect to the second acquisition of shares, it was urged that the sole purpose of creation of Escrow Account was to ensure that the appellants could not exercise the legal and beneficial rights accruing through the shares, as the account was operatable solely on the basis of instructio