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Trending: Call for Papers Volume 3 | Issue 2: International Journal of Advanced Legal Research [ISSN: 2582-7340]

‘Green Channel Route’- A Fast-Track Merger Approval By The CCI

Introduction

 The Competition Commission of India (CCI) which is a monitoring power safeguards the fair and impartial conduct by the parties or entities in the market. Green channel route is a way advancing approach which has been determined by the CCI for granting the automatic or deemed approval to the parties incoming into the proposed transaction or combination by filing the notice in form I and prescribing the certain conditions are within the scope of schedule III and would not cause or likely to cause any appreciable adverse effects on the competition (AAEC) in the market.

An amendment notified on 13 August 2019 inserted the section 5A to the regulations of the CCI due to which the mechanism of the green channel route came into effect which is a deemed an automatic approval by the Competition Commission of India for the parties applying for such a regime who are entering into the proposed transaction or combination. The Competition Commission of India has sanctioned various combination dealings through the mechanism of green channel route from the date of enforcement till date.

Aptness for the Green Channel Direction

The parties or entities applying for the green channel route for the proposed transaction or combination before the Competition Commission of India (CCI) are eligible for such deemed approval by the competition authority i.e. CCI if they meet the certain conditions which are or should be within the scope of schedule III of the amended combination regulations and there should not be any:

  • Horizontal overlaps- Horizontal overlaps mean that the entities or enterprises entering into the proposed combination or transaction do not provide the goods or services which are identical or similar or substitutable in nature.
  • Vertical overlaps- Vertical overlaps mean that the parties or entities entering into the proposed transaction or combination are not engaged in such an activity which are in relation to the production, distribution, supply, storage, sale or service or trade-in products at a different level of production or stage. 
  • Complimentary overlaps- The parties or entities in the proposed transaction are not allowed to perform any activity with relation to the production, distribution, supply, storage, sale, or services of such goods that are complementary to one another. 

Moreover, the green channel route in which the parties or entities are entering into the proposed transaction or combination does not only restricts the check of overlapping whether horizontal, vertical, or complimentary between the parties to the proposed combination but also focus on any entity in which they may directly or indirectly hold or control any share of 10% or more.

Also, it includes entities where the party has a right or ability to exercise any right which is not available to any ordinary shareholder and any right to nominate an observer or director in any other enterprise.

Not causing any AAEC

Any entities or acquirers or target company applying for the green channel route for the proposed combination to be in effect should attach the declaration as mentioned in schedule IV that the proposed combination is within the scope of schedule III and would not cause or likely to cause any appreciable adverse effects on the competition (AAEC) in the market.

A way forward approach by the CCI

Filing for the green channel notification is a way advancing and an advantageous tactic for both the competition authority i.e. the CCI and as well as for the parties who are entering into the proposed transaction or combination applying through the green channel route as it eradicates the time and practice which is prescribed under the combination regulations.

The Green channel route is a less time-consuming approach initiated by the Competition Commission of India as under this appliance the parties do not have to undergo the time and the procedure which is prescribed in the regulations for a normal combination or transaction.

Fees for Filing a Green Channel notification

The parties or entities applying for the green channel notification has to file the notice under Form-I and with a declaration enshrined under schedule IV of the regulations signifying that such a proposed transaction or combination would not amount to any overlapping whether horizontal, vertical or complimentary, and is not likely to cause any appreciable adverse effect on the competition in the market.

The fees for filing a notice in Form-I is INR 20,00,000/- (Rs. Twenty Lakhs Only) as prescribed under section 11 of the regulations of the Competition Commission of India (CCI).

Possibility of risk or penalty in availing such a mechanism

The parties or entities entering into the proposed transaction or combination through the mechanism of green channel route have to undergo the self-assessment check by filing a declaration under schedule IV along with the form-I indicating that the proposed transaction does not amount to any overlaps or is not likely to cause any appreciable adverse effect on the competition in the market.

If the competition authority i.e. The CCI finds the information or material or particulars furnished by the parties or entities are not within the scope of the prescribed rules mentioned under the regulations or are of improper nature, then such a sanction would be held void-ab-initio i.e. null by the Competition Commission of India.

According to section 44 of the Competition Act, 2002 if any party or enterprise furnishes the false information or omits to furnishes the material which should be furnished in terms of combinations, then for that the commission may levy a weighty penalty on the parties for such conduct which is not less than INR 50,00,000/- and can further be extended up to Rs.1,00,00,000. Also, if any party or entity consummate any combination without getting approval from the Competition Commission of India and for such a demeanor the commission may execute a hefty price on the parties which can be 1% of the total assets or the total turnover, whichever is greater as per the section 43A of the Act.

Conclusion

The merging parties applying for the green channel route instrument is a way forward approach which has been initiated by the Competition Commission of India (CCI) as it eradicates the time for both the competition authority as well as for the merging parties applying for such a regime. The CCI has approved many instances regarding the combinations (mergers and acquisitions) through the green channel route to date. Furthermore, the parties applying for such a regime should ensure that there should not be any overlapping in terms of horizontal, vertical, and complimentary. In addition to that, the proposed combination coming into the effect through the green channel route should not cause or likely cause an appreciable adverse effect on the competition in the market. 

Any parties or entities not furnishing the material information which is required to be furnished or furnish the amount of information which the commission thinks that such a piece of information provided by the parties or entities is false and incorrect, then in such a scenario the merging parties would be held liable for the hefty penalty which will be imposed by the Competition Commission of India under section 44 of the Competition Act, 2002. Also, the appeal can be filed by the merging parties from the decision of the Competition Commission of India at the appellate tribunal i.e. National Company Law Appellate Tribunal (NCLAT) within 60 days from the decision passed by the CCI. Concluding the above-mentioned information provided, we can say that the mechanism of the green channel route is a time-consuming process as it eliminates the entire or full-fledged procedure which is required under the provisions of the Act.
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Author: Sanyam Juneja

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