In its first decision on substantive aspects of merger control, the Competition Appellate Tribunal (COMPAT) by its order dated August 26, 2015 has set aside the penalty of INR 1 Crore imposed on Thomas Cook (India) Limited&others.

In its scheme of acquisition and amalgamation as it is notified to the CCI, the CCI noticed that certain market purchases which were disclosed in the notice filed by the parties had already been consummated. The parties submitted that the market purchases were an unrelated transaction from the proposed combination and were exempted from notification by the CCI vide the de-minimis exemption granted by the Central Government.

The De Minimis Exemption exempts an enterprise, whose control, shares, voting rights or assets are being acquired, which has either assets of the value of not more than INR 250 Crore in India or turnover of not more than INR 750 Crores in India, from the provision of Section 5 of the Act. Accordingly, such transaction do not qualify as combination within the meaning of Section 5 of the Act and hence not require notification to the CCI before consummation. The notifying parties submitted that since the turnover of the target enterprise, Sterling Holiday Resorts (India) Limited, in the financial year ended March 31, 2013 in INR 116.67 crores, the market purchase is exempt from the notification requirement.

CCI considered that even though transactions qualifying for de-minimis exemption are not required to be notified to the CCI, the market purchases in the present case were part of a ‘composite combination’(along with other transactions in the proposed combination) and hence could not be consummated before approval by the CCI. CCI imposed a penalty by observing that the scheme of combination and marketpurchases are interconnected and interdependent and the parties were under an obligation to file separate application in respect of market purchases, which they failed to do.

Although the resolutions authorizing the market purchases were passed by the Board of Directors of Thomas Cook on the same day, the same is not sufficient to deny the benefit of the exemption to the parties in so far as the market purchases were concerned.

COMPAT noted that transactions in a series, or transactions which are inter-related and inter-dependent, shall be considered as a composite whole, if the ultimate objective can be achieved on successful completion of all such transaction in a series of transactions which are inter-related or interdependent. The market purchases are separate from the proposed combination is so far as the notified transaction would still have taken place irrespective of the market purchase. The violation, even if one is assumed, would only be technical. Even if the parties had filed a notification for the market purchases the same would, in all probability, have been approved by the CCI.

COMPAT concluded that the penalty imposed under Section 43A by CCI is legally unsustainable and liable to be set-aside