Fine for market purchases casts doubt on exemption

The Competition Commission of India (CCI) fined Thomas Cook Insurance Services (India) Limited (TCISIL) and its parent Thomas Cook (India) Limited (TCIL) ₹10 million (US$165,000) for purchasing 9.93% of the shares of Sterling Holiday Resorts (India) Limited (SHRIL) on the stock exchange (market purchases) without notifying the CCI, i.e. for jumping the gun.

The fine may be small in terms of the size of the deal – reported to be around ₹8.7 billion – but the ramifications of this order may be far-reaching because the market purchases were within the de minimis exemption of the combination regulations and the parties denied that the purchases were part of the combination for which the CCI was approached.

Facts of the case

The proposed combination was to be effected by a composite scheme of arrangement whereby: (a) the resorts and time share business of SHRIL were to be transferred by way of a demerger from SHRIL to TCISIL and equity shares of TCIL would be issued to the shareholders of SHRIL; and (b) SHRIL, with its residual business, is proposed to be amalgamated into TCIL, with equity shares of TCIL issued to the shareholders of SHRIL. The CCI approved the proposed combination of which notice was given on 14 February 2014. The market purchases were effected a couple of days prior to the notification and the parties informed the CCI.

Amit Tambe is a partner at Trilegal and Kunal Chandra is a counsel. Trilegal is a full-service law firm with offices in Delhi, Mumbai, Bangalore and Hyderabad.