Law ministry allows CCI to clear pending mergers without full quorum

16 applications pending; corporate affairs ministry studying proposal, say sources

The law ministry has given its nod to the Competition Commission of India (CCI) to take decisions on pending combination applications without full quorum by invoking the doctrine of necessity, a senior government official said.

At present, applications for 16 combinations or mergers, several of them involving global companies, have been pending approval at the CCI as it lacks quorum. To approve combinations, the CCI needs a quorum of three members. After the retirement of the former CCI chairperson Ashok Gupta, there are only two members.

The doctrine of necessity enables legal authorities to take certain actions at a particular moment, which would otherwise not be regarded within the scope of the law in a general legal situation.

Some of the combination deals pending include Ardor Holding Pte and Hero Future Global Energies; AGI Greenpack and Hindustan National Glass; Megha Engineering and Infrastructure and Lanco Anpara Power; Cummins and Meritor; Dalmia Cement and certain businesses of Jaiprakash Associates, among others.

The corporate affairs ministry is examining the law ministry’s suggestion and it could allow the CCI to start clearing the applications from next week, according to sources.

The law ministry’s suggestion comes in the backdrop of various industry bodies flagging the issue to the government that the delay at CCI’s end had kept thousands of crores worth of deals hanging.

Of the 16 deals that are pending, one is a major global deal that has received approvals in 11 jurisdictions and is only awaiting the CCI’s clearance. Ten deals involve a foreign enterprise.

Section 22 of the Competition Act says, “...All questions which come up before any meeting of the Commission shall be decided by a majority of the Members presiding and voting…Provided that the quorum for such meeting shall be three members.”

The deals have been pending since September, a month before Gupta retired. “With more members’ positions getting vacant in the coming weeks, it is unlikely that quorum will be achieved anytime soon,” the official said.

Legal experts are concerned that invoking the doctrine of necessity to clear the merger applications might lead to more uncertainty as other parties could challenge these decisions in courts.