A question of quorum

Understrength CCI undermines business climate

CCI
Business Standard Editorial Comment
3 min read Last Updated : Feb 12 2023 | 9:52 PM IST
Although the World Bank’s Ease of Doing Business ranking has been scrapped for irregularities in the process, the government had reiterated it would maintain a relentless focus on this dimension to activate the investment environment in India. At odds with this stated intention is the recent move by the Competition Commission of India (CCI) to invoke the “doctrine of necessity” to clear six deals involving mergers & acquisitions (M&A) and investment proposals, though it lacked the requisite three-member quorum after Chairperson Ashok Kumar Gupta retired on October 25, 2022. The Competition Act stipulates there should be at least three members to approve deals but the CCI obtained the workaround for a two-member quorum following a green signal from the law ministry to the corporate affairs ministry, which is the CCI’s administrative ministry.
 
To be sure, the CCI’s actions were in no way a violation of the law — Section 15 of the Competition Act states 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”. On January 24, the corporate affairs ministry issued an official notification extending the term of acting chairperson Sangeeta Verma till further notice, even though Ms Verma had been in this role since the full-time chairman demitted office at the end of October.
 
Though the mass approval after a gap of about four months has been greeted with relief by the companies concerned, three questions suggest themselves from this serial disarray.  The first is the delay in the appointment of a new chairperson. The previous incumbent did not demit office suddenly; the date of his retirement must have been known as soon as he was appointed in November 2018. Given that a number of deals worth Rs 10,000 crore were pending at the time of his retirement, the government, which is working to create a conducive business environment, should have had a successor in place before the incumbent retired. The second is that if the government had been unable to find a suitable successor by the time Mr Gupta retired — an unusual development in itself, considering that it had about four years to do so — a reference to the law ministry on the issue of a quorum ahead of the event would have also reduced the anxiety for companies and investors waiting for their deals to be cleared. The third is whether a two-member commission has the wherewithal and bandwidth to scrutinise with due diligence the merits or otherwise of so many deals.
 
In the larger picture, a four-month delay in approving deals is not an aberration, given that the CCI takes 210 days on average to clear a deal. Now a parliamentary panel is reported to be scrutinising changes to the Act to enable the CCI to clear M&A deals within 20 days of reporting the transaction to the regulatory body provided no irregularities are reported. The starting point for such sweeping changes must, surely, be that the commission has a functioning quorum at all times.

 

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Topics :Competition Commission of India CCIMerger and AcquisitionEase of Doing BusinessCCI

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