By way of an April 13 2017 order, the Competition Commission of India (CCI) imposed a penalty of Rs500,000 on Cairnhill CIPEF Limited and Cairnhill CGPE Limited (collectively referred to as 'the investors') for violation of Section 43A of the Competition Act. The decision related to the investors' acquisition of 11% of equity shares in Mankind Pharma Limited, comprising 10.77% from Monet Limited and 0.23% from Dinaz Kaul. Share purchase agreements were entered into between the investors and each shareholder on March 31 2015 and April 2 2015, respectively.


The investors argued that, on a standalone basis, entering into the two share purchase agreements would not violate Section 6 of the Competition Act on account of a specific exemption under Schedule I of the CCI (Procedure in Regard to the Transaction of Business Relating to Combinations) Regulations 2011. Subsequently, on May 6 2015 a shareholder agreement was entered into between the investors, Mankind and Mankind's promoters. Pursuant to the agreement, certain minority shareholders' rights were conferred on the investors, which did not result in their acquisition of control over Mankind. According to the investors, the acquisition was covered under Item 1 of Schedule I of the CCI regulations. They argued that the acquisition notice was filed out of abundant caution and that the cause of action, if any, to file the notice under Section 6(2) of the Competition Act arose only on May 6 2015 (ie, on execution of the shareholder agreement).


The CCI held that the acquisition did not fall under any of the items in Schedule I of the regulations. In relation to the applicability of Item 1 specifically, it observed that an acquisition may be considered to be made solely as an investment if the acquirer has no intention to participate – directly or indirectly – in the formulation and determination of the business decisions of the target. The shareholder agreement entitled the investors to appoint one director on Mankind's board of directors and conferred on the investors certain affirmative rights, including the right to commence new lines of business, which constituted control. Thus, the CCI held that the investors' acquisition of 11% of equity share capital in Mankind could not be treated solely as an investment and was not covered under Item 1 of Schedule I of the regulations.

Further, the CCI observed that the investors failed to file the acquisition notice within 30 days of signing the binding document (ie, the first share purchase agreement) for the purposes of the Competition Act. Instead, they had filed it after entering into the shareholder agreement, by which time the 30-day period prescribed under Section 6(2) of the Competition Act had expired. The CCI found that the requirement to file notice arose from the execution of the first share purchase agreement, not the shareholder agreement. Pursuant to the share purchase agreements, execution of the shareholder agreement was a condition precedent to the acquisition. Therefore, in relation to CCI Regulation 9(4), the executions of the share purchase agreements and the shareholder agreement were interconnected steps in the acquisition process. As such, notice should have been filed within 30 days of entering into the first share purchase agreement.

In view of its findings, the CCI referred to the Supreme Court decision in The Chairman, SEBI v Shriram Mutual Fund, stating:

"The penalty is attracted as soon as contravention of the statutory obligations as contemplated by the [Competition] Act is established and, therefore, the intention of the parties committing such violation becomes immaterial. In other words, the breach of a civil obligation which attracts penalty under the provisions of an Act would immediately attract the levy of penalty irrespective of the fact whether the contravention was made by the defaulter with any guilty intention or not."

In this case, the investors had failed to file notice to the CCI in accordance with Section 6(2) of the Competition Act, which is subject to penalty under Section 43A of the act. Pursuant to Section 43A, a maximum penalty of 1% of the combined value of the parties' worldwide assets can be imposed for such a violation. However, considering the facts of the case and the submissions made by the investors, the CCI imposed a penalty of Rs500,000.

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For further information on this topic please contact MM Sharma at Vaish Associates by telephone (+91 11 4249 2525) or email ( The Vaish Associates website can be accessed at