Competition Commission Of India vs Thomas Cook (India) Ltd. .

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:

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 ­

(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.

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.

11. It was urged by the learned senior counsel appearing on behalf of appellants   that   on   7.2.2014,   the   Board   of   Directors   of   the   three 6 respondent   companies   have   decided   about   the   de­merger/ amalgamation,   Share   Subscription   Agreement   (SSA),   Share   Purchase Agreement (SPA), 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 Rs.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  that   all  the   above   transaction 7 being interconnected transactions or steps with the same ultimate effect were part of the single composite combination, therefore, non­notification of the part of the said combination, particularly, the consummation of market purchases was a violation of the Act.  Thus, a penalty of Rupees One crore was rightly imposed by the Commission under section 43 A of the Act.

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 19 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. Joint   Press   Release   dated   7.2.2014   clearly   indicated   SPA   as   an   open offer. The Board of Directors of the respective parties authorized market purchases on the same day.   All the said transactions are intrinsically connected   and   interdependent   with   each   other   and   form   part   of   one viable business transaction.

 Post­merger, Sterling Holiday Resorts to continue operations under   the   leadership   of   Ramesh   Ramanathan   with   an independent Board  Based   on   equity   investments   and   merger   ratios   the aggregate   value   of   the   two   companies   is   approximately Rs.3000 Cr.

The   part   equity,   part   merger   deal   –   estimated   to   be valued   at   Rs.870   Cr.,   is   structured   as   a   multi­stage process:

33. The   imposition   of   penalty   under   section   43A   is   on   account   of breach of a civil obligation, and the proceedings are neither criminal nor quasi­criminal; the penalty has to follow. Only discretion in the provision under section 43A is with respect to quantum of penalty.

34. We find that in the facts and circumstances of the case, the order passed by the Commission was just and proper and in accordance with law, which the Tribunal set aside on wrong premises.  Thus, the order of the Tribunal cannot be said to be legally sustainable.

36. Resultantly,   the   appeal   filed   by   the   Commission   is   allowed,   the order passed by the Tribunal is set aside, and passed by the Commission imposing penalty of Rupees One crore is hereby restored. No costs.