Competition Commission to invoke 'doctrine of necessity' for M&A deals

In a significant move, the Competition Commission in the absence of requisite quorum will soon invoke the 'doctrine of necessity' principle to examine merger and acquisition deals, according to sources.

Currently, the Competition Commission of India (CCI) has only two members and the post of Chairperson is vacant since Ashok Kumar Gupta retired on October 25, 2022.

For examining mergers and acquisitions, also known as combinations in the CCI parlance, the fair trade regulator needs a quorum of three members. Since there is a lack of quorum, many deals are awaiting approvals.

Against this backdrop, the sources said that Attorney General R Venkataramani has given a favourable opinion to the corporate affairs ministry with respect to the CCI invoking the 'doctrine of necessity' for examining combinations.

Generally, the 'doctrine of necessity' allows carrying out certain activities which are not permitted in the normal course.

The corporate affairs ministry is the administrative ministry of the CCI.

Mergers and acquisitions beyond a certain threshold require the approval of the CCI under the Competition Act, 2022. Section 5 and 6 of the Act relate to regulation of combinations in the country.

Recently, various industry players sought measures to address the current situation, flagging that lack of quorum was causing delays in clearances for combinations that have been notified to the regulator.

Section 15 of the Competition Act refers to certain situations where a proceeding of the CCI cannot be considered as invalid.

The section mentions that no act or proceeding of the Commission shall be invalid merely due to "any vacancy in, or any defect in the constitution of, the Commission" or "any defect in the appointment of a person acting as a Chairperson or as a Member" or "any irregularity in the procedure of the Commission not affecting the merits of the case".