Energy & Natural Resources
Amendments to FEMA 20
RBI has, by way of a series of notifications, amended the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 (‘FEMA 20’). The key amendments pursuant to these notifications have been summarized below.
i. Issuance of Convertible Notes by Startups: RBI notification dated January 10, 2017 (‘January Notification’) provides for the issuance of convertible notes by Indian startup companies (‘startups’). A ‘convertible note’ has been defined to mean “an instrument issued by a startup company evidencing receipt of money initially as debt, which is repayable at the option of the holder, or which is convertible into such number of equity shares of such startup company, within a period not exceeding five years from the date of issue of the convertible note, upon occurrence of specified events as per the other terms and conditions agreed to and indicated in the instrument”.
The newly introduced Regulation 6D of FEMA 20 sets out the relevant provisions, which provide that:
a. A person resident outside India (other than an individual who is a citizen of, or an entity registered / incorporated in, Pakistan or Bangladesh), may purchase convertible notes issued by startups for an amount of Rs. 2,500,000 (approximately US$ 39,000) or more in a single tranche;
b. Startups engaged in a sector where foreign investment requires Government approval may issue convertible notes to a non-resident only with Government approval;
c. Issue of shares against convertible notes will be as per Schedule 1 of FEMA 20;
d. Startups issuing convertible notes to a non-resident must receive the consideration by inward remittance through banking channels or by debit to the NRE / FCNR (B) / escrow account maintained as per the Foreign Exchange Management (Deposit) Regulations, 2016 and closed upon the earlier of the requirements having been completed or within a period of six months;
e. Non-resident Indians may acquire convertible notes on non-repatriation basis as per Schedule 4 of FEMA 20;
f. A person resident outside India may acquire or transfer, by way of sale, convertible notes, from or to, a person resident in or outside India, provided the transfer takes place in accordance with the pricing guidelines as prescribed by RBI; and
g. Startup issuing convertible notes are required to furnish reports as prescribed by RBI.
ii. Foreign Investment in Infrastructure Companies: The January Notification also amends conditions relating to foreign direct investment (‘FDI’) under Schedule 1 of FEMA 20 in commodity exchanges, which have been combined with those relating to infrastructure companies in the securities market (namely stock exchanges, commodity derivative exchanges, depositories and clearing corporations). The key revisions introduced by the January Notification are:
a. FDI, including by foreign portfolio investors (‘FPI’), in commodity exchanges will now be subject to guidelines prescribed by RBI in addition to those issued by the Central Government (‘GoI’) and SEBI;
b. FDI in other infrastructure companies in securities market will now be subject to guidelines by GoI and RBI, in addition to those issued by SEBI;
c. the earlier condition permitting FIIs / FPIs to invest in commodity exchanges or infrastructure companies only through the secondary market has been removed; and
d. the restriction on investment by a non-resident in commodity exchanges to a maximum of 5% of its equity shares has been removed.
The Consolidated Foreign Direct Investment Policy dated June 7, 2016 (‘FDI Policy’) has also been amended, by way Press Note 1 of 2017 dated February 20, 2017, to align it with the January Notification.
iii. FDI in LLPs: Pursuant to notification dated March 3, 2017, RBI has amended Regulation 5(9) and Schedule 9 of FEMA 20 to further liberalize FDI in Limited Liability Partnerships (‘LLPs’). Companies having FDI can now be converted into LLPs under the automatic route provided that the concerned company is engaged in a sector where: (a) 100% FDI is permitted under the automatic route; and (b) no FDI linked performance conditions exist. Previously, conversion of companies with foreign investment was only permitted under the approval route. The erstwhile ‘Other Conditions’ stipulated under Schedule 9 of FEMA 20 have been completely omitted resulting in the following key changes:
a. Previously, the designated partner of a LLP having FDI had to satisfy the condition of being “a person resident in India”. Also, a body corporate other than a company registered in India under CA 2013 was not permitted to be a designated partner of a LLP with FDI. These conditions have been removed. Consequently, a LLP having FDI will have to comply only with the provisions of the LLP Act, 2008 for appointment of designated partners;
b. Earlier, designated partners were responsible for compliance with FDI conditions for LLPs and liable for all penalties imposed on a LLP for any contraventions. This condition has now been deleted from Schedule 9 but no corresponding provision has been included in the revised Schedule 9; and
c. Express prohibition on LLPs availing External Commercial Borrowings (‘ECB’) has been removed. However, the extant ECB guidelines have not yet been amended to permit LLPs to avail ECBs. Therefore, LLPs will not be able to avail ECBs until the extant ECB guidelines are amended.
iv. FDI in E-commerce: The Department of Industrial Policy and Promotion had, by way of Press Note 3 of 2016 dated March 29, 2016 (‘Press Note 3’), prescribed that no FDI is permitted in an inventory based model of e-commerce and 100% FDI under the automatic route is permitted in the marketplace model of e-commerce subject to compliance with the guidelines prescribed thereunder. A summary of the key changes introduced through Press Note 3 have been captured in the April 2016 edition of Inter Alia. RBI has, by way of a notification dated March 9, 2017, amended FEMA 20 in line with the changes introduced through Press Note 3. However, RBI has introduced a minor change to Press Note 3 by clarifying that the threshold of 25% of sales emanating from one vendor or their group companies will be computed based on the sale value during the relevant financial year.
 Being a private company incorporated under CA 2013 and recognized as such as per Notification G.S.R. 180(E) dated February 17, 2016 issued by the Department of Industrial Policy and Promotion.
Amendment to SEBI (Real Estate Investment Trusts) Regulations, 2014 and SEBI (Infrastructure Investment Trusts) Regulations, 2014
Pursuant to the meeting of the SEBI board held on September 23, 2016, SEBI has amended the SEBI (Real Estate Investment Trusts) Regulations, 2014 and the SEBI (Infrastructure Investment Trusts) Regulations, 2014. Some of the key amendments include:
i. The minimum holding of the mandatory sponsor in the infrastructure investment trust (‘InvIT’) has been reduced from 25% to 15%;
ii. The existing limit of three sponsors has been removed from both regulations;
iii. The permissible investment limit for investment by real estate investment trusts (‘REIT’) in ‘under construction’ assets has been increased from 10% to 20%; and
iv. InvITs and REITs are allowed to invest in a two-level SPV holding structure, through a holding company.
Meeting of the SEBI Board
The SEBI Board met on September 23, 2016 and took the following decisions:
i. Currently, FPIs are required to transact in securities through stock brokers registered with SEBI, while domestic institutions such as banks, insurance companies, pension funds etc. are permitted to access the bond market directly (i.e. without brokers). SEBI has decided to extend this privilege to Category I and Category II FPIs.
ii. In order to facilitate the growth of Investment Trusts (“InvIT”) and Real Estate Investment Trusts (“REIT”), SEBI has decided to amend the SEBI (Infrastructure Investment Trusts) Regulations, 2014 and the SEBI (Real Estate Investment Trusts) Regulations, 2014 (“REIT Regulations”). The key amendments will include:
a. InvITs and REITs will be allowed to invest in the two level SPV structure through the holding company subject to sufficient shareholding in the holding company and other prescribed safeguards. The holding company would have to distribute 100% cash flows realised from the underlying SPVs and at least 90% of the remaining cash flows.
b. The minimum holding of the mandatory sponsor in the InvIT has been reduced to 15%.
c. REITs have been permitted to invest upto 20% in under construction assets.
d. The limit on the number of sponsors has been removed under the REIT Regulations.
iii. The SEBI Board has approved amendments to the SEBI (Portfolio Managers) Regulations, 1993, to provide a framework for the registration of fund managers for overseas funds, pursuant to the introduction of section 9A in the Income Tax, 1961.
iv. The SEBI Board has decided to grant permanent registration to the following categories of intermediaries: merchant bankers, bankers to an issue, registrar to an issue & share transfer, underwriters, credit rating agency, debenture trustee, depository participant, KYC registration agency, portfolio managers, investment advisers and research analysts.
v. The Securities Contracts (Regulation) (Stock Exchanges and Cleaning Corporations) Regulations, 2012 have been amended to increase the upper limit of shareholding of foreign institutional investors mentioned in the Indian stock exchanges from 5% to 15% and to allow an FPI to acquire shares of an unlisted stock exchange through transactions outside of recognised stock exchange including allotment.
Foreign Investment in Units Issued by REITs, InvITs and AIFs
Salient features of foreign investment permitted by RBI, pursuant to its circular dated April 21, 2016, in the units of investment vehicles for real estate and infrastructure registered with the SEBI or any other competent authority are as under:
i. A person resident outside India (including a Registered Foreign Portfolio Investor (‘RFPI’) and NRIs may invest in units of real estate investment trusts (‘REITs’);
ii. A person resident outside India who has acquired or purchased units in accordance with the regulations may sell or transfer in any manner or redeem the units as per regulations framed by SEBI or directions issued by RBI;
iii. An Alternative Investment Fund Category III with foreign investment can make portfolio investment in only those securities or instruments in which a RFPI is allowed to invest; and
iv. Foreign investment in units of REITs registered with SEBI will not be included in ‘real estate business’.
Guidelines for Public Issue of Units of Infrastructure Investment Trusts
SEBI has, on May 11, 2016, issued Guidelines for Public Issue of Units of Infrastructure Investment Trusts (‘Guidelines’), which amend the provisions of the SEBI (Infrastructure Investment Trusts) Regulation, 2014 (‘SEBI InvIT Regulations’).
The Guidelines set out the procedure to be followed by an infrastructure investment trust (‘InvIT’) in relation to a public issue of its units, which includes the appointment of a lead merchant banker and other intermediaries, procedure for filing of offer documents with SEBI and the stock exchanges, the process of bidding and allotment. Further, the allocation in a public issue is required to be in the following proportion: (i) not more than 75% to institutional investors; and (ii) not less than 25% to other investors; provided that the investment manager has the option to allocate 60% of the portion available for allocation to institutional investors and anchor investors (which includes strategic investors), subject to certain conditions. Further, the investment manager, on behalf of the InvIT is required to deposit and keep deposited with the stock exchange(s), an amount equal to 0.5% of the amount of the units offered for subscription to the public or Rs 5 crores (approximately US$ 7,45,000), whichever is lower. The price of units can be determined either: (i) by the investment manager in consultation with the lead merchant banker; or (ii) through the book building process. However, differential prices are not permitted.
Government Notifies the MMDR (Amendment) Act, 2016
The Central Government has notified the Mines and Minerals (Development and Regulation) Amendment Act, 2016 (‘2016 Amendment’) on May 9, 2016. By virtue of amendments to the Mines and Minerals (Development and Regulation) Act, 1957 (‘MMDR Act’) in 2015, transfer of only those mineral concessions granted by auction was allowed. By virtue of the 2016 Amendment, where a mining lease: (i) has been granted otherwise than through auction; and (ii) the mineral from such mining lease is being used for captive purpose, such mining lease can be transferred subject to compliance with such terms and conditions and payment of transfer charges as may be prescribed. The term ‘used for captive purpose’ has been defined under the 2016 Amendment to mean use of the entire quantity of mineral extracted from the mining lease in a manufacturing unit owned by the lessee.
Government Notifies the Minerals (Transfer of Mining Lease Granted Otherwise than Through Auction for Captive Purpose) Rules, 2016
Pursuant to the 2016 Amendment, the Central Government has notified the Minerals (Transfer of Mining Lease Granted Otherwise than through Auction for Captive Purpose) Rules, 2016 (‘ML Transfer Rules’) on May 30, 2016, which set out the procedure for transfer of mining leases granted otherwise than through auction and for captive purpose (‘ML’). The salient features of ML Transfer Rules are as below:
i. Deemed approval for transfer of ML, if the State Government does not reject the application within 90 days from the application;
ii. Transferee to make an upfront lumpsum payment of 0.5% of the value of estimated resources of the ML upon receipt of approval and execute the mine development and production agreement with the State Government;
iii. Transferee to provide performance security to the State Government for an amount equivalent to 0.5% of the value of estimated resources, to be adjusted every five years to correspond to 0.5% of the reassessed value of estimated resources;
iv. Transferor and transferee to jointly submit a duly registered transfer deed for ML to the State Government within the specified period; and
v. State Government to execute a mining lease deed with the transferee upon registration of the deed of transfer of ML.
The ML Transfer Rules also stipulate that whenever royalty is payable in terms of the second schedule to the MMDR Act, the transferee is to pay to the State Government an amount equal to 80% of the royalty, in addition to the royalty payable, simultaneously with payments of royalty, which will be adjusted against the upfront payment mentioned under (ii) above.
New Construction and Hazardous Waste Management Rules
The Ministry of Environment and Forests has: (i) on March 29, 2016, notified the Construction and Demolition Waste Management Rules, 2016, replacing the Municipal Solid Waste (Management and Handling) Rules, 2000; and (ii) on April 4, 2016, notified the Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016 replacing the erstwhile rules of 2008.
Participation by Strategic Investor(s) in InvITs and REITs
Pursuant to SEBI’s circular dated January 18, 2018 (‘SEBI Circular’), a Real Estate Investment Trust (‘REIT’) / Infrastructure Investment Trust (‘InvIT’) may invite subscriptions from strategic investors subject to inter alia the following:
i. The strategic investors can, either jointly or severally, invest not less than 5% and not more than 25% of the total offer size.
ii. The investment manager or manager is required to enter into a binding unit subscription agreement with the strategic investors proposing to invest in the public issue, which agreement cannot be terminated except if the issue fails to collect minimum subscription.
iii. The entire subscription price has to be deposited in a special escrow account prior to opening of the public issue.
iv. The price at which the strategic investors have agreed to buy units of the InvIT/ REIT should not be less than the public issue price. In case of a lower price, the strategic investors should bring in the additional amounts within two working days of the determination of the public issue price, and in case of a higher price, the excess amount will not be refunded and the strategic investors will be bound by the price agreed in the unit subscription agreement.
v. The draft offer document or offer document, as applicable, will disclose details of the unit subscription agreement, including the name of each strategic investor, the number of units proposed to be subscribed etc.
vi. Units subscribed by strategic investors, pursuant to the unit subscription agreement, will be locked-in for a period of 180 days from the date of listing in the public issue.
Standardisation of Environment Clearance Conditions by MOEF
The Ministry of Environment, Forest and Climate Change (‘MOEF’) had notified the Environmental Impact Assessment Notification, 2006 (‘EIA Notification’) imposing certain restrictions on proposed projects or on the expansion / modernization of existing projects based on their potential environmental impacts. Projects seeking environmental clearance are appraised by the relevant authorities pursuant to a screening, scoping, public consultation and appraisal process by relevant authorities, which then make categorical recommendations to the applicable regulatory authority for grant or rejection of the application for environmental clearance.
By way of an office memorandum dated August 9, 2018 (‘Office Memo’), the MoEF has now prescribed certain standard conditions for consideration by the Expert Appraisal Committee (’EAC’) in relation to 25 specified industrial sectors including, inter alia, integrated iron and steel plants, sponge iron plants, integrated cement plants, coal mines (both open cast and underground), pharmaceutical and chemical industries, off-shore and on-shore oil and gas exploration, development and production and industrial estates, at the time of appraisal of proposals seeking environment clearance. The EAC, after due diligence, can modify, delete and add conditions based on the project specific requirements. The Office Memo has been issued by the MOEF to bring uniformity across various projects and sectors and as a general guidance to the EAC as well as project proponents.
Supreme Court Recognizes Principles of ‘Oligopsony’ under Competition Law and Exonerates 44 Liquefied Petroleum Gas Cylinder Manufacturers
CCI and the Competition Appellate Tribunal (‘COMPAT’) found collusive behavior among the 45 LPG Cylinder manufacturers (‘LPG manufacturers’) holding them in violation of Section 3(1) read with Section 3(3)(a) and Section 3(3)(d) of the Act. CCI imposed a penalty of Rs 165.58 crores on the LPG manufacturers. However, in appeal, the COMPAT directed reduction of penalty.
In appeal, the Supreme Court rejected the two arguments raised by the LPG manufacturers i.e., (i) there is no possibility of competition in this market, therefore the CCI has no jurisdiction to deal with the case; and (ii) the LPG manufacturers have not engaged in ‘collusive bidding’. While rejecting the above two arguments, the Supreme Court observed that the real question in the present case is whether there was a possibility of a collusive agreement having regard to market conditions in the industry, even assuming that the meeting between competitors did take place.
In sum, the Supreme Court agreed that the presence of an active trade association, a meeting of the bidders held in Mumbai just before the submission of the tenders, submission of identical bids despite varying cost, products being identical and the presence of a small number of suppliers with few new entrants are supporting factors which may be suggestive of collusive bidding. However, these factors are to be analyzed keeping in mind the ground realities, namely:
i. There were only three buyers in the market for cylinders, namely Indian Oil Corporation Limited (‘IOCL’), Bharat Petroleum Corporation Limited (‘BPCL’) and Hindustan Petroleum Corporation Limited (‘HPCL’);
ii. All the LPG manufacturers manufacture 14.2 kg gas cylinders to the three buyers. If a LPG manufacturer fails to sell its product to any of the three buyers, it won’t able to survive in the market;
iii. The market is not attractive for new entrants to manufacture the cylinders in the market on account of presence of a very limited number of buyers;
iv. The manner in which the tenders are floated by IOCL and the rates at which these are awarded, are an indicator that it is IOCL which calls the shots insofar as price control is concerned. Negotiations are held with a L-1 bidder generally leads to further reduction of price than the one quoted by L-1. Thereafter, the other bidders who may be L-2 or L-3 etc. are awarded the contract at the rate at which it is awarded to L-1;
v. Entry of 12 new entrants in the relevant market shows low entry barriers in the market;
vi. Since there are few manufacturers and supplies are needed by the three buyers on regular basis, IOCL ensures that all the LPG manufacturers whose bids are technically viable, are given some order for the supply of specific cylinders;
vii. The price at which the LPG cylinder is to be supplied to the consumer is controlled by the Government vide LPG (Regulation and Distribution) Order, 2000;
viii. Just a few days before the tender in question, another tender was floated by BPCL and on opening of the said tender the rates of L-1, L-2 etc. came to be known. This obviously becomes a guiding factor for the other bidders to submit their bids;
ix. The meetings prior to submission of the bids were attended by only 19 LPG manufacturers. The LPG manufacturers who were not a member of the association or who did not attend the meetings also submitted identical bid quotes.
Therefore, the Supreme Court held that the reason for identical bids is the prevalent market conditions and not the meetings of the association. Market conditions led to the situation of an oligopsony because of limited buyers and the influence of these buyers in fixing prices. In an oligopsony, a manufacturer with no buyers will have to exit from the trade. Therefore, the first condition of oligopsony stands fulfilled in this case.
The other condition for the existence of oligopsony is also fulfilled in this case, i.e., whether the buyers have some influence over the price of their inputs. It is also to be seen as to whether the seller has any ability to raise prices or it stood reduced/eliminated by the aforesaid buyers. Since both the conditions were fulfilled, the Supreme Court concluded that the LPG manufacturers were able to demonstrate that the parallel behaviour was not the result of any concerted practice.
For the abovementioned reasons, the Supreme Court concluded that there is no sufficient evidence to hold that there was any agreement between the LPG manufacturers for bid rigging.
Allegations against PSU OMCs
CCI in its assessment of the investigation report, at the outset, confirmed DG’s conclusion on the lack of culpability of PSU OMCs. In its opinion, CCI observed that the Government was a majority shareholder in each of the PSU OMCs. CCI primarily relied on the various efficiencies that resulted from the issuance of a joint tender. As per CCI’s observation, the issuance of joint tender by the PSU OMCs prevented wastage of money, time and resources that otherwise would have been spent, in the event that separate tenders would have been issued. More specifically, CCI observed that a joint tender ensured that the limited quantity of available Ethanol was equitably distributed among the OMCs. This was essential considering that in the event of inequitable distribution, certain OMCs would have been forced to procure Ethanol at higher prices (given the excessive demand and decreased availability of Ethanol). An inequitable distribution of Ethanol would also have resulted in potential anti-competitive effects, whereby OMCs with Ethanol may have sold Ethanol-blended petrol to the exclusion of the OMCs without Ethanol. Lastly, CCI re-affirmed the scheme of Section 3(3) of the Act, to the extent that it only raised a rebuttable presumption of AAEC that may be sufficiently offset by demonstrable efficiencies etc.
CCI Imposes Penalty on Members of the ‘Ethanol’ Cartel
On September 18, 2018, CCI imposed a penalty on various sugar mills and sugar mills trade associations (namely Indian Sugar Mills Association (‘INSA’), National Federation of Cooperative Sugar Factories Ltd. (‘NFCSF’) and Ethanol Manufacturers Association of India (‘EMAI’)),  operating in Uttar Pradesh, Gujarat and Andhra Pradesh, for rigging bids in relation to tenders floated by Public Sector Oil Marketing Companies (‘PSU OMCs’/ ‘OMCs’), for procurement of anhydrous alcohol (‘Ethanol’) pertaining to 110 depots of the OMCs, spread across the country. The tenders were floated pursuant to the Ethanol Blended Petrol Programme (‘EBP Programme’) that was initiated by the Government of India.
The violations came to light pursuant to two separate complaints filed by India Glycol Ltd. and Ester India Chemicals Ltd., respectively (‘Informants’). Notably, the Informants had also alleged that even the act of issuing a joint tender for the purposes of procuring Ethanol, by the PSU OMCs was in violation of Section 3(1) and 3(3)(a) of the Act, in light of it being an agreement amongst horizontal players. CCI, based on its prima facie view of violations having taken place, clubbed the complaints together and directed the DG to investigate the allegations raised in the complained, through an order dated May 27, 2013 (‘DG Order’). Pursuant to its investigation, DG submitted an investigation report to CCI, upholding the allegations raised in the complaints, however, NFCSF, PSU OMCs and Kisan Sahkari Chini Mills Ltd. were exonerated of the allegations.
 Sahakari Khand Udyog Mandal Ltd., Shree Ganesh Khand Udyong Mandali Ltd., Shri Kamrej Vibhag Sahaari khand Udyong Mandali Ltd., Shree Mahuva Pradesh Sahakari Khand Udyog Mandali Ltd., The Andhra Sugars Ltd., The Sarvarya Sugars Ltd., Bajaj Hindusthan Ltd, Triveni Engineering Industries Ltd., Simbhaoli Sugars Ltd., Avadh Sugar & Energy Ltd., Dhampur Sugar Mills Ltd., Balrampur Chini Mills Ltd., Mawana Sugars Ltd., KM Sugar Mills Ltd., Uttam Sugar Mills Ltd., Dalmia Bharat Sugar & Industries Ltd.., Seksaria Biswan Sugar Factory Ltd., Sir Shadi Lal Enterprises Ltd.
 India Glycols Limited v. Indian Sugar Mills Association & Ors., Case No. 21 of 2013; Ester India Chemicals Limited v. Bajaj Hindusthan Limited & Ors., Case No. 29 of 2013; Jubilant Life Sciences Limited v. Bharat Petroleum Corporation Limited & Ors., Case No. 36 of 2013; A B Sugars Limited v. Indian Sugar Mills Association & Ors., Case No. 47 of 2013; Wave Distilleries and Breweries Limited v. Indian Sugar Mills Association & Ors., Case No. 48 of 2013; and Lords Distillery Limited v. Indian Sugar Mills Association & Ors., Case No. 49 of 2013 (through common Order dated September 18, 2018)
 Indian Oil Corporation Ltd., Bharat Petroleum Corporation Ltd. and Hindustan Petroleum Corporation Ltd.
 Subsequently, Case Nos. 36 of 2013, 47 of 2013, 48 of 2013 and 49 of 2013 were also clubbed with the ongoing DG investigation.
CCI Dismisses Swarna Properties’ Complaint Against Vestas Wind Technology India Private Limited
On August 7, 2018, CCI dismissed information filed by Swarna Properties (‘SP’) – owner of a wind energy generator system in Karnataka against Vestas Wind Technology India Private Limited (‘Vestas’). Vestas is engaged in the business of manufacture, sales, marketing and maintenance of wind power systems in India.
SP contended that Vestas made the supply of wind turbines equipment conditional upon executing an annual maintenance contract (‘AMC’) with Vestas. This exclusivity condition, SP alleged, resulted in a contravention of Section 3 and resulted in a denial of market access under Section 4 of the Act. It was also alleged that Vestas was using its dominant position in one market to enter into or protect other market in contravention of Section 4(2)(e) of the Act.
CCI noted that the generation of electricity using wind turbines, owing to their distinct way of functioning, cannot be substituted with any other form of power generating equipment. Accordingly, CCI defined the relevant market as the “market for supply of wind turbines in India”. As there existed several players in the market, many of which had a greater or similar market share as Vestas, CCI concluded that Vestas was not in a dominant position. Absent dominance, CCI found no case of abuse of dominance may be said to exist.
CCI also noted that there existed no prima facie case for an anti-competitive tie-in arrangement or exclusive supply agreement. CCI noted that even if Vestas made the sale of wind turbines contingent on entering into an AMC with it, there existed several other suppliers of wind turbines. SP therefore had the choice to procure wind turbines from vendors that didn’t require similar conditions to be satisfied. Noting that SP was restrained for a period of five years from procuring services or spare parts from other vendors, CCI held that SP had the additional option of terminating the agreement for non-performance of duties. As there existed several other vendors in the market, CCI held that SP was not precluded from switching to another vendor. Observing that vertical restrictions were not a per se contravention and having found no evidence of the agreement resulting in AAEC. CCI dismissed the information against Vestas.
CCI Reiterates its Findings against Coal India Limited
On December 3, 2018, CCI disposed information filed by Hindustan Zinc Limited (‘HZL’) against Western Coalfields Limited (‘WCL’) and Coal India Limited (‘CIL’) alleging inter alia contravention of the provisions of Section 4 of the Act.
HZL is in the business of producing zinc, lead and silver, and WCL is a subsidiary of CIL. On August 1, 2017, HZL had entered into three Fuel Supply Agreements (‘FSAs’) with WCL. However, within a year of the FSAs, WCL failed to supply the agreed quantity and quality of coal, as laid down under the FSA. It was alleged that due to this, HZL had borne losses worth approximately INR 264 crores. HZL drew CCI’s attention to the following conduct of WCL:
(i) supply of coal below 30% of the contracted quantity, and diversion of coal supply to Independent Power Producers as also non-payment of compensation therefor;
(ii) unilateral revision of contracted grade of coal from G-9 to G-10;
(iii) lock-in period of 2 years to terminate the contract;
(iv) unilateral appointment of a third party agency by WCL for sampling at the time of delivery of coal; and
(v) failure of WCL to adjust the excess royalty and contributions to District Mineral Foundation and National Mineral Exploration Trust paid by HZL.
Based on the above, HZL alleged that by imposing such unilateral and unfair conduct, WCL was abusing its dominant position, in contravention of Section 4(2)(a) of the Act.
CCI determined the relevant market as the market for ‘production and sale of non-coking coal to thermal power producers including captive power plants in India’. In its analysis of the alleged conduct, CCI noted that it had previously found CIL and its subsidiaries to be in a dominant position in the relevant market, therefore there was no need for a separate assessment of dominance in the present case.
CCI noted that in the previous coal cases, similar issues as those raised by HZL had been substantially addressed by issuing appropriate directions to CIL and its subsidiaries. On the issue concerning the lock-in period, CCI found that the FSAs entitled HZL to terminate the agreement without being bound by the lock-in period if such termination was occasioned due to the default at the seller’s end. On issues regarding excessive royalty, CCI held that they were not competition-related issues, therefore outside the purview of CCI. CCI relied on its previous orders dealing with the conduct of CIL and its subsidiaries to state that CCI’s orders are passed in rem, therefore, once an order is issued by CCI to address market failure, it need not order investigations based on successive information brought in by different parties agitating the same issues. An action to the contrary is likely to strain CCI’s and the DG’s limited resources, without achieving any tangible public good. CCI directed CIL and its subsidiaries to abide by the orders of the higher judicial forums in the appeals preferred there. Accordingly, the information was dismissed by CCI.
 Case No. 46 of 2018.
 Case Nos. 03, 11 & 59 of 2012; Case Nos. 05, 07, 37 & 44 of 2013 and Case No. 08 of 2014.
CCI Dismisses Abuse of Dominance Allegations against GAIL (India) Limited
On November 8, 2018, CCI dismissed a batch of information filed against GAIL (India) Ltd. (‘GAIL’) alleging contravention of Section 4 of the Act. It was alleged that GAIL had imposed unfair and one-sided conditions in gas supply agreements (‘GSA’) entered into with seven companies (‘Informants’) in relation to the supply of Re-gasified Liquified Natural Gas (‘RLNG’).
The following actions of GAIL were alleged to amount to abuse of dominance under the Act:
(i) suspension of gas supply, without notice, to the Informants;
(ii) denial of dispute resolution mechanism envisaged under the GSA to the Informants;
(iii) arbitrarily and unilaterally doing away with the requirement of seven banking days envisaged under the GSA, after buyer’s due date, for issuance of notice for suspension of gas. Further, the invoices issued by the GAIL stated that gas supplies would be disconnected, if the amount due was not paid within three days of receipt;
(iv) GAIL arbitrarily and unilaterally substituted the term ‘disconnection’ for ‘suspension’ of gas supplies in its invoices raised on Informants thereby avoiding the compliance requirements for suspension of gas;
(v) Informants were forced to make payments against incomprehensible invoices, drawn up arbitrarily by GAIL, without indicating the requisite details stipulated in the GSA;
(vi) invocation of Letter of Credit by GAIL in respect of amounts beyond time limits prescribed under the GSA;
(vii) imposition of a new arbitrary obligation on the Informants of ‘pay for if not taken’, computed on a basis not contemplated in the GSA; and
(viii) advancing buyers due date in the invoices.
Based on the above, CCI directed the DG to conduct an investigation against GAIL. In the investigation report (‘Report’) submitted to CCI, the relevant market was delineated as: (i) the ‘market for supply and distribution of natural gas to industrial consumers in the district of Gurgaon’; (ii) the ‘market for supply and distribution of natural gas to industrial consumers in the district of Alwar’; (iii) the ‘market for supply and distribution of natural gas to industrial consumers in the district of Ghaziabad’; and (iv) the ‘market for supply and distribution of natural gas to industrial consumers in the district of Rewari’.
In its assessment of GAIL’s dominance, the DG noted that GAIL was the only supplier of natural gas in the relevant geographic markets, and was therefore found to be dominant. Based on this, the DG concluded that GAIL had abused its dominant position by imposing unfair terms on the Informants, in contravention of Section 4(2)(a)(i) of the Act.
CCI, in its analysis of GAIL’s alleged conduct, differed with the DG’s findings.
First, CCI found that the between GAIL and the Informants did not foreclose competition in the relevant market. It noted that clauses, including the ‘take or pay’ liability (‘ToP’) are common in energy sector including the natural gas markets, therefore, such contracts cannot be held to be inherently anti-competitive. CCI relied on its decision in the case of Tata Power Distribution Ltd v. NTPC Ltd, where it was held that a violation of Section 4(2)(a)(i) of the Act was not made out since: (i) the Informant entered into the agreement with the OP being fully aware of the terms of the agreement, including the long term obligation stipulated thereunder; (ii) there was a rational basis for binding the Informant and other procurers in the long term agreements as the generating companies invest in establishing the generating stations based on allocation and the agreements entered into with the parties (which are to be served through period agreed upon); and (iii) the Informant and other procurers had the option to approach the central government for reallocation of power allocated to them.
Second, there was no evidence to support that GAIL had limited or restricted production of goods/markets by abusing its dominant position. The Informants had not challenged the ToP clause itself, but the calculation of liability by GAIL. GAIL’s conduct to mitigate its losses was found to not raise any competition concerns. Moreover, CCI observed that the Informants had not raised a concern with the ToP till the time GAIL was operating in their favor. The issue was raised only when a ToP was imposed on the Informants. For this finding, CCI relied on its previous decision in on the case of Paharpur Cooling Towers Ltd. v. GAIL (India) Ltd, where it was held that “safeguarding commercial interest or invoking contractual cases which are not unfair per se cannot be termed as unfair just because they are invoked by one of the parties to the contract”.
Third, in relation to the Informants’ allegation that GAIL had forced them to maintain a letter of credit (‘LC’) to cover the amount of Minimum Guarantee Offtake (‘MGO’) and ToP, CCI stated that it was incorrect to use MGO and ToP synonymously in the LC. CCI held that GAIL had erroneously used the term ‘MGO’ in the LC, and therefore such a mistake could not be deduced to be a contravention of provisions of Section 4(2)(i)(a) of the Act.
Fourth, CCI differed from DG’s finding against GAIL in relation to the invocation of LCs beyond the contractual terms of the GSA as akin to unilateral conduct. CCI held that while such an invocation of LC was against the terms of the GSA, the Informants had failed to establish the loss caused (if any) by such multiple invocations.
Fifth, CCI held that GAIL had not contravened the GSA in relation to the timelines given to the Informants in making payments, post raising of an invoice. CCI noted that as per the GSA, the payment is to be made within 4 banking days from the receipt of invoice, and GAIL’s invoices had only reduced this time to three days.
Sixth, CCI found no evidence in support of the allegation that GAIL had arbitrarily and unilaterally substituted the term “disconnection” in place of “suspension” of gas supplies in its invoices raised on the Informants, thereby avoiding the compliance requirements for suspension of gas.
Accordingly, the information was dismissed by CCI.
 Case Nos. 16-20 & 45 of 2016, 02, 59, 62 & 63 of 2017.
 Case no. 17 of 2016 and Case no. 18 of 2016.
 Case no. 17 of 2016 and Case no. 18 of 2016.
CCI approves acquisition of EPC Constructions India Limited by ArcelorMittal India Private Limited
On January 10, 2019, CCI approved the acquisition of 100% equity shares of EPC Constructions India Limited (‘EPCC’) by ArcelorMittal India Private Limited (‘AMIPL’). The said transaction is subject to the corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016.
AMIPL is a part of ArcelorMittal group (‘AM Group’). AM Group does not have a steel manufacturing unit in India but is engaged in sale of steel products through other channels.
EPCC is a part of the Essar Group. EPCC is engaged in the supply of Engineering Procurement Construction (‘EPC’) services, which includes undertaking and executing projects involving industrial plants, civil and infrastructure projects, laying onshore pipeline for oil, gas and water, and working in marine constructions.
In its competitive assessment, CCI noted that there were no horizontal and vertical overlaps between EPCC and AMIPL. CCI, however, observed that AMIPL had also filed a resolution plan with respect to acquisition of Essar Steel India Limited (‘ESIL’). If the acquisition of ESIL by AMIPL were to be successful, the services of EPCC could also be utilized by ESIL. In this regard, CCI noted that this potential vertical relationship may not cause any potential competition concerns due to lack of ability and incentive to foreclose the market by EPCC.
In light of the above, CCI approved the combination since it was not likely to have any AAEC in India in any of the markets.
 Combination Registration No. C- 2018/12/624
CCI approves acquisition of Usha Martin Limited by Tata Steel Limited
On December 7, 2018, pursuant to a business transfer agreement signed on September 22, 2018 and novation agreement signed on October 24, 2018, CCI approved the acquisition of the steel division of Usha Martin Limited (‘UML’) by Tata Steel Limited (‘TSL’) through Tata Sponge Iron Limited (‘TSIL’) (collectively referred to as ‘Parties’).
CCI, relying on its previous decisional practice, noted the technical characteristics, intended use, price levels, etc. for each of the product segments/sub-segments of steel, concluding that each steel product would form its separate relevant product market. However, the exact definition of the relevant market was left open.
The Parties overlapped in the market for manufacturing and sale of certain steel products in India, i.e., (i) sponge iron; (ii) long carbon steel products, in particular carbon wire rods; (iii) pig iron; (iv) alloy billets; and (v) special steel products.
In its competition assessment, CCI observed that this combination was unlikely to cause AAEC since in the market for manufacturing/sale of sponge iron, carbon steel wire rods, pig iron and alloy billets, the combined marked share was less than 20% and the increment was within the range of 0-5 %. Specifically, in the market for special steel, the overlaps were found to be insignificant. Additionally, in the vertically linked markets, the Parties were unlikely to have any ability/ incentive to foreclose. Based on the above, CCI decided to approve this combination.
 Combination Registration No. C-2018/10/608
CCI approves acquisition of Prayagraj Power Generation Company Limited by Renascent Power Ventures Private Limited
On December 27, 2018, CCI approved the acquisition of 75.01% of the total paid up equity share capital and 270 million optionally convertible redeemable preference shares of Prayagraj Power Generation Company Limited (‘PPGCL’) by Renascent Power Ventures Private Limited (‘Renascent’) (collectively referred to as ‘Parties’) pursuant to the execution of share purchase agreement dated November 13, 2018. 
PPGCL is engaged in the business of thermal power generation. Renascent, a wholly owned subsidiary of Resurgent Power Ventures Pte. Ltd. (‘Resurgent’), did not have any investments in the power sector in India. Further, Resurgent or any of its subsidiaries, prior to this transaction, did not have any investments in the power sector in India. However, in its competitive assessment, CCI considered the overlaps between the shareholders of Resurgent (including Tata Power International Ltd.) and PPGCL.
CCI noted that the Parties were engaged in the similar business and involved vertically linkages in the market for power generation. In the competitive assessment, CCI noted that the combined market share of the Parties was within the range of 0-5% and the increment was less than a percent. Additionally, PPGCL had a long term obligation to supply a large part of its power generation to Uttar Pradesh power distribution utilities and had entered into interconnection agreement with Uttar Pradesh power transmission utilities.
Given the particulars of this transaction, CCI concluded that this transaction was unlikely to cause AAEC in India.
 Combination Registration No. C-2018/11/616
CCI approves the transaction between Nippon Steel & Sumitomo Metal Corporation and Sanyo Special Steel Company Limited
On November 30, 2018, CCI approved (i) the acquisition of 51.5% shares in Sanyo Special Steel Company Limited (‘Sanyo’) by Nippon Steel & Sumitomo Metal Corporation (‘NSSMC’); and (ii) transfer of Ovako AB (‘Ovako’) from NSSMC to Sanyo. NSSMC, Ovaka and Sanyo are collectively referred to as ‘Parties’. 
In its competition assessment, CCI found that the Parties overlapped in respect of sale of certain special steel products in India i.e., (i) specialty steel bars; (ii) seamless pipes; and (iii) rings. The combined market share of the Parties in the specialty steel bars segment was within the range of 15%-20% with less than 5% increment. In the segment of seamless pipes, the combined market share was under 5%. In the segment of rings, it was noted that Ovaka supplied rings for wind power bearings whereas Sanyo sells bearings for only automobiles. One of Sanyo’s subsidiaries was found to be in the process of entering the market for the manufacture and sale of fabricated materials for wind power bearings and had started manufacturing. However, the combined market share was found to be insignificant. Therefore, CCI concluded that this transaction was unlikely to cause AAEC in India.
 Wholly owned subsdiairy of NSSMC
 Combination Registration No. C-2018/09/597
National Company Law Appellate Tribunal
NCLAT affirms CCI’s order dismissing allegations of collusive bid-rigging against Bharat Heavy Electricals Limited, IL&FS Technologies Limited, and Hitachi Systems Micro Clinic Private Limited
On February 26, 2019, the National Company Law Appellate Tribunal (‘NCLAT’) dismissed an appeal filed by Reprographic India (‘Appellant’) filed against the order of CCI dismissing allegations of collusive bid-rigging against Bharat Heavy Electricals Limited (‘BHEL’), IL&FS Technologies Limited (‘ILFS’), and Hitachi Systems Micro Clinic Private Limited (‘Hitachi’) (collectively ‘Respondents’), in violation of Section 3(3) of the Act.
The Appellant was an ancillary to BHEL’s Haridwar unit, engaged in the manufacture of folding and finishing systems as well as the manufacture and distribution of information technology (‘IT’) products and provision of services. The Appellant had been supplying IT products to BHEL directly, or through System Integrators (‘SI’) of Original Equipment Manufacturers (‘OEMs’). ILFS and Hitachi were SIs, which sourced Hewlett Packard (‘HP’) products and provided IT solutions. As per the Appellant, BHEL floated a tender on April 1, 2017, for supply, installation and maintenance of personal computers (‘PCs’) and peripherals for more than 20 locations, for a period of five years on lease basis on ‘Corporate Rate Contract’ (‘Tender’). The total items which were being sought pursuant to the Tender were grouped into two categories, namely, group-A comprising 24 items pertaining to PCs and peripherals, and group-B comprising 47 items pertaining to ‘Enterprise Equipment’. The bidders were at liberty to bid for either group A or both groups A and B. As per the conditions of the Tender, with regard to group A, only OEMs and SIs were eligible to bid. Further, all items in each group were supposed to be of the same OEM. Pursuant to the Tender, only two bids, i.e., of ILFS and Hitachi were received with regard to group A products and ultimately the Tender was awarded to Hitachi. As per the Appellant, both Hitachi and ILFS acted in collusion through out this process in violation of Section 3(3) of the Act.
CCI in its observation noted that the Tender was an open tender with no embargo on any SI or OEM to participate. Moreover, various SIs and OEMs had participated in the pre-bid discussions. It further observed that only ILFS and Hitachi submitted bids with regard to group A since the Tender with regard to group A mandated a provision for maintenance and other services for a five year lease period. CCI noted that the stringent requirements of group A may have resulted in low bidding. Additionally, it stated that the facts on record did not support the allegation of supportive bidding on part of ILFS, or that ILFS and Hitachi were engaged in bid rotation. Moreover, the fact that both ILFS and Hitachi had common business links with HP was not in itself sufficient to confirm an allegation of collusion. Further, CCI also did not consider the fact that some employees of one Respondent were working with the other Respondent at some point of time, as relevant for the purposes of the allegations, clarifying that this was a routine affair in the IT industry. In sum, CCI was of view that a meeting of minds for purposes of bid rigging/collusive bidding could not be inferred from mere proximity and the Appellant had failed to furnish any evidence that would suggest otherwise. Accordingly, CCI through an order under Section 26(2) of the Act had dismissed the allegations.
NCLAT at the outset clarified that directing an investigation to be conducted by the DG is entirely dependent on existence of a prima facie case warranting such investigation, and unless CCI is so satisfied, the informant has no vested right to seek investigation into the alleged contravention of the provisions of the Act. It further clarified that it was the obligation of the informant to make out a prima facie case based on proven facts warranting an investigation by the DG. Further, NCLAT stated that as the successful bidder, Hitachi had the discretion to quote products of any OEM, especially given that it would have to provide maintenance and other services during the entire lease period. Additionally, it reiterated that there may have been business links between ILFS and Hitachi; however, in the absence of any material to suggest any collusion between ILFS and Hitachi, no adverse inference suggesting collusive bidding could be drawn against them. Accordingly, NCLAT affirmed CCI’s observations and dismissed the appeal filed by the Appellant.
 Case No. 41/2018.
CCI Approves Acquisition by BCP Acquisitions LLC, and CDPQ Fund 780 L.P. and CDP Investissements Inc. (collectively) of the Global Power Solutions Business of Johnson Controls International Plc
On February 14, 2019, CCI approved the acquisition by BCP Acquisitions LLC (‘BCP’), CDPQ Fund 780 L.P. (‘CDPQ Fund’) and CDP Investissements Inc. (‘CDP’) (collectively) of the global power solutions business (‘Target Business’) of Johnson Controls International plc (‘JCI’) (‘Proposed Combination’). BCP is a part of Brookfield Assets Management Inc. (‘Brookfield’) whereas both CDPQ Fund and CDP are wholly owned by Caisse de dépôt et placement du Québec (‘CDPQ’). Pursuant to the Proposed Combination, Brookfield (through BCP) and CDPQ (through CDPQ Fund and CDP) will own 70% and 30% of the Target Business, respectively. The Proposed Combination was notified to CCI pursuant to the share and asset purchase agreement dated November 13, 2018, executed between JCI and BCP (‘SAPA’), and a binding term sheet, entered into between Brookfield and CDPQ pursuant to which both Brookfield and CDPQ had proposed to enter into a shareholders agreement (‘SHA’). (BCP, CDPQ Fund, CDP and JCI are collectively referred to as ‘Parties’). 
BCP is a special purpose vehicle (‘SPV’) formed for the purposes of the Proposed Combination, and is not engaged in any business activity in India. Brookfield has various investments across multiple sectors such as real estate, infrastructure etc. in India and elsewhere. CDPQ Fund and CDQ do not have any direct presence in India and CDPQ is a Canadian institutional investor that manages funds primarily for public and para-public pension and insurance plans. The Target Business is engaged in the business of inter alia manufacturing and distribution of low voltage energy storage products using lead-acid and lithium-ion technologies, primarily for use in passenger vehicles, trucks and other motive applications. The Target Business’ products are sold to, or distributed through, original equipment manufacturers and aftermarket retailers and distributors, and the Target Business is present in India only through its 26% equity shareholding in Amara Raja Batteries Limited (‘ARBL’).
Based on the information provided by the Parties, CCI noted that Brookfield does not have any portfolio investments in India in the same business as that of the Target Business. Further, CDPQ holds certain investments in entities engaged in manufacturing and sale of lead acid-based batteries in India or may have potential vertical linkages with the Target Business. However, given that these investments of CDPQ were of less than five percent of the total equity share capital and in the absence of any special veto/governance rights, CCI approved the Proposed Combination in light of there being no substantial horizontal or vertical overlap between the Parties.
 Combination Registration No.C-2019/01/630
CCI Approves the Acquisition by Power Finance Corporation Limited of 52.63% equity stake along with management control in REC Limited
On January 31, 2019, CCI approved the acquisition by Power Finance Corporation Limited (‘PFC’) of 52.63% equity stake along with management control in REC Limited (‘REC’, collectively with PFC as ‘Parties’) (‘Proposed Combination’). The Proposed Combination was notified to CCI pursuant to the decision of the Cabinet Committee on Economic Affairs dated December 06, 2018 granting in-principle approval for strategic sale of Government of India’s (‘GoI’) 52.63% shareholding in REC to PFC along with a resolution dated December 20, 2018 passed by the board of directors of PFC granting an in-principle approval to the Proposed Combination.
PFC is a public sector enterprise, which is registered with the Reserve Bank of India (‘RBI’) as a Non-banking Finance Company – Infrastructure Finance Company, since 1990 and was declared as a Public Financial Institution (‘PFI’) in 2010. It provides (directly and indirectly) various financial products and services from the project conceptualization stage to the post commissioning stage, for clients in the power sector. PFC is also a nodal agency for various schemes of GoI in the power sector, including; (i) Ultra Mega Projects (‘UMPPs’); (ii) Restructured Accelerated Power Development and Reforms Program (‘R-APDRP’)/ Integrated Power Development Scheme (‘IPDS’); and (iii) Independent Transmission Projects (‘ITPs’).
REC is also a public sector enterprise, registered as a Non-banking Finance Company – Infrastructure Finance Company with RBI since 2010. REC is engaged in financing projects/schemes for inter alia power generation, transmission, distribution, etc. REC is also designated as a nodal agency for various schemes of GoI in the power sector such as; (i) Pradhan Mantri Sahaj Har Ghar Yojna; and (ii) Deendayal Upadhyaya Gram Jyoti Yojna; etc.
Based on the business activities of the Parties, CCI identified overlaps between the Parties in two product segments, as detailed below. However, CCI did not provide the exact market definition, since the Proposed Combination would not have led to any AAEC in India.
i. Provision of credit for power sector in India: CCI observed that this market may be further classified based on varied criteria such as instrument of financing, type of loan products, nature of power project such as generation, transmission or distribution etc. For assessing the presence of the Parties, CCI stated that market share estimates in terms of gross loan assets would not provide a fair indication of current competition dynamics, and assessed the Parties presence based on bidding data. Accordingly, based on the bidding data of the Parties (including the winning bids), CCI observed that the presence of the Parties was not significant and was constrained by the presence of various enterprises, especially banks.
ii. Provision of consultancy services in the power sector in India: CCI noted that the Parties did not have a significant presence in this market, with a less than 10% combined market share pursuant to the Proposed Combination. Further, the market was also characterized by significant competitors such as WAPCOS Limited, Tata Consulting Engineers Limited, etc.
In its assessment, CCI also noted that the Parties had common shareholding in certain entities namely, Energy Efficiency Services Limited (‘EESL’), Shree Maheshwar Hydel Power Corporation Limited (‘SMHPCL’) and NHPC Limited (‘NHPC’). However, given that (i) EESL was not engaged in any business activity as that of the Parties; (ii) SMHPCL had been classified as a non-performing asset (‘NPA’); (iii) SMHPCL had limited capacity under implementation; and (iv) NHPC’s total installed capacity constituted an insignificant part of the total installed capacity in India, CCI observed that the common shareholding would not be likely to cause any AAEC in any market in India.
CCI also observed that the Parties work closely with GoI, and even pursuant to the Proposed Combination would continue to follow the mandate as decided by GoI. Given that the Proposed Combination does not lead to any AAEC in any of the markets identified above, CCI approved the Proposed Combination under Section 31(1) of the Act.
Guidelines for the Public Issue of Units of InvITs and REITs
SEBI has introduced amendments to the guidelines for public issue of units of Infrastructure Investment Trusts and Real Estate Investment Trusts (together, ‘Investment Vehicles’) in order to further rationalise and ease the process of public issue of units of Investment Vehicles. Key highlights amongst them are:
i. the definition of ‘institutional investors’ has been updated to refer to the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018;
ii. Mutual funds, alternative investment funds (‘AIFs’), FPIs other than category III FPIs sponsored by associate entities of the merchant bankers, insurance companies promoted by, and pension funds of, associate entities of the merchant bankers have been permitted to invest under the category of anchor investors;
iii. Bidding period may be extended on account of force majeure, banking strike or similar circumstances, subject to total bidding period not exceeding 30 days;
iv. Time period for announcement of the floor price or the price band by the investment manager has been reduced from five days to two days prior to the opening of the bid (in case of initial public offer); and
Investment Vehicles are required to accept bids using only the application supported by blocked amount (‘ASBA’) and consequent changes in bidding process have been made.
Revised Framework for Trade Credits
RBI has, pursuant to the circular dated March 13, 2019, introduced changes and rationalised the extant framework for trade credits (‘TC’), with effect from the date of the circular. Some of the key additions and amendments introduced by the circular are set out below.
i. TC can now be raised in any freely convertible foreign security as well as in Indian Rupees.
ii. The circular has increased the limits under which TC could be raised under the automatic route and provides for a higher limit for sectors such as for oil / gas refining & marketing, airline and shipping where the transaction value is generally larger, and has specified the persons who can grant TC depending on the type of TC proposed to be availed.
iii. The circular has aligned the tenure of TC for import of capital goods, non-capital goods and shipyards / shipbuilders with the changes in the minimum average maturity for external commercial borrowings.
iv. The circular has also reduced the all-in cost ceiling for raising TC and borrowers availing TC are now permitted to hedge their exposure created by the TC.
v. The circular now permits change of currency of TC from one freely convertible foreign currency to any other freely convertible foreign currency as well as to Rs, but not from Rs to any freely convertible foreign currency.
In addition to guarantees, the circular now permits creation of security over certain movable and immovable assets for the TC.
CCI Dismisses the Allegations of Anti-Competitive Agreements and Abuse of Dominant Position against Maharashtra Seamless Limited
On May 23, 2019, CCI dismissed the allegations of refusal to deal and denial of market access against Maharashtra Seamless Limited (‘MSL’) filed by Oil Country Tubular Limited (‘Informant’).
The Informant was in the business of purchasing unprocessed, plain end seamless pipes (‘Green Pipes’) and processing them into ‘seamless casing pipes’, according to specifications of the American Petroleum Institute, to be supplied to Oil and Natural Gas Corporation Limited (‘ONGC’), OIL India Limited and other such enterprises. In accordance with the government’s steel policy (which provided for a preference to domestically manufactured iron and steel products in government procurement contracts valued at more than INR 50 crores (approx. USD 7 million)), ONGC/OIL India Limited tenders required the Green Pipes to be procured from Indian manufacturers only and import was prohibited.
According to the Informant, MSL, besides being a competitor of the Informant was also the only manufacturer of Green Pipes above the size of 7”OD, since the other registered manufacturers either did not produce Green Pipes of such size or had exited the market. For an ONGC tender in the month of October 2018, the Informant approached MSL thrice through email, requesting the supply of Green Pipes but MSL did not respond. Therefore, the Informant filed information with CCI alleging refusal to deal and denial of market access.
CCI noted that the Informant approached MSL each time at the last minute or at a belated stage which was inconsistent with ordinary business behavior. The Informant’s conduct was therefore, held not to be diligent and lacking bona fides. Furthermore, MSL highlighted that the Informant had never approached them before October, 2018 and that the guidelines for tenderers prohibited such agreements between enterprises who were competitors/bidders for the ONGC tender. Accordingly, CCI observed that the allegations against MSL were unsubstantiated, and dismissed the case.
 Case No. 48 of 2018
SEBI Discussion Paper on Review of Buy-Back of Securities
SEBI has issued a discussion paper on May 22, 2019 to seek public comments on the suggestions relating to review of conditions for buy-back of securities (last date for which has elapsed). Under the SEBI (Buy-back of Securities) Regulations, 2018, one of the main conditions for buy-back of securities is that the aggregate of secured and unsecured debts owed by the company after buy-back should not be more than twice the paid-up capital and free reserves of such a company (however, if a higher ratio is specified under the Companies Act, 2013, the higher threshold would prevail). SEBI is of the view that the financial statements considered for evaluating compliance with the aforesaid test would be considered on a conservative basis (i.e., both standalone and consolidated basis).
Given that non-banking financial companies (‘NBFCs’), housing finance companies (‘HFCs’) and infrastructure companies have higher debts because of the nature of their businesses, the primary markets advisory committee of SEBI has proposed adoption of a different approach in case of listed companies with NBFCs, HFCs and infrastructure companies as subsidiaries, the key proponents of which are: (i) the post buy-back debt to capital and free reserves ratio of 2:1 for the listed company (other than for companies for which such ratios have been notified under the Companies Act, 2013) should be considered on a consolidated basis, after excluding such subsidiaries which are regulated and have issuances with AAA ratings; and (ii) such subsidiaries should have debt to equity ratio of not more than 5:1 on standalone basis.
Orissa High Court Allows Input Tax Credit on Construction Services of a Shopping Mall
Under Section 17(5)(d) of the Central Goods and Services Tax Act, 2017 (‘CGST Act’) input tax credit (‘ITC’) is not allowed on goods or services received by a taxable person for construction of an immovable property (other than plant or machinery) including when such goods or services are used in the course or furtherance of a business.
However, recently, the Orissa High Court has allowed ITC on inputs and input services used for construction of a shopping mall wherein such mall is intended to be let-out upon construction, on the following grounds: (i) The very purpose of the Goods and Services Tax (‘GST’) regime is to prevent cascading of taxes, which objective should not be frustrated by adopting a narrow interpretation of the aforesaid Section 17(5)(d) of the CGST Act; and (ii) the shopping mall would not be used for personal business, and would instead be let-out, which is an activity covered under GST.
 Safari Retreats Private Limited, W.P. (C) No. 20463 of 2018.
CCI Dismissed a Complaint Alleging Abuse of Dominance by the Indian Railways
On June 28, 2019, CCI dismissed an information filed by Consumer Educational and Research Society (‘IP-1’) and its member, Ms. Parul Choudhary (‘IP-2’) (collectively, referred to as ‘IPs’), against Union of India, Ministry of Railways (‘MoR’) and the Indian Railway Catering and Tourism Corporation Limited (‘IRCTC’) (collectively, referred to as ‘Indian Railways’) alleging contravention of the provisions of Section 4 of the Act.
The allegation in the information pertained to Indian Railways abusing its alleged dominant position in the railways sector in India and challenged the ticket refund rules as being arbitrary, unjust and against public interest. The IPs alleged that the rule regarding refund under the Railway Passengers (Cancellation of Tickets and Refund of Fare) Rules, 2015 (‘Refund Rules’), empowered the Indian Railways to forfeit the full ticket fare even in cases where the passengers fail to cancel the ticket for reasons attributable solely to the Indian Railways and/or circumstances beyond the control of the passenger.
CCI first noted and agreed that as a result of the statutory and regulatory framework, Indian Railways is dominant in the market of ‘transportation of passengers through railways across India’, but dismissed the information on the ground that no anti-competitive conduct could be said to have arisen for the allegations made. The Refund Rules have been notified in the Gazette by the Central Government in exercise of its powers under the provisions of the Railways Act, 1989 and if there is deficiency in service on part of Indian Railways, IPs can initiate action before an appropriate forum. CCI however mentioned that the Indian Railways may consider reviewing the existing rules of refund of fare and make them more consumer friendly.
 Case no. 20 of 2019
CCI Dismisses Information against Bentley Systems for Violation of Sections 3 and 4 of the Competition Act
On July 2, 2019, CCI passed an order dismissing an information filed by SOWiL Limited (‘Sowil’), a consultancy, against Bentley Systems India Pvt. Ltd. (‘Bentley’) alleging, inter alia, contravention of the provisions of Sections 3 and 4 of the Act. Sowil provides consultancy in preliminary planning, feasibility studies, traffic studies, railway works, bridges, structures and tunneling. Bentley is a subsidiary of Bentley Systems, Incorporated, registered in the United States of America, and is engaged in the business of providing software solutions to engineers, architects, etc. for design construction, and allied operation of infrastructure.
Sowil had purchased certain software from Bentley and had also entered into a ‘SELECT Agreement’ with Bentley, which enabled Sowil to acquire licensing privileges and services. Sowil primarily alleged that the SELECT agreement imposed a condition to compulsorily renew all licenses, even in a case where Sowil wished to renew three out of the eight licenses it owned because of financial difficulties. Further, to prove dominant position of Bentley, Sowil submitted that: (i) Bentley has a market share of more than 80% in the field of providing ‘software services to more than 170 countries’, without defining a specific relevant market in the information; and (ii) purchase of Bentley’s softwares is a mandatory pre-condition to participate in the tenders floated by State Government and Central Government agencies including Railways, National Highways Authority of India and Rail Vikas Nigam Limited etc.
CCI dismissed the information on the following grounds:
i. No Anti-Competitive Agreement: CCI held that under Section 3(3) of the Act, only agreements entered into between entities involved in similar trade of goods and services can be tested. Considering Sowil had purchased licenses over Bentley’s software, this arrangement could not qualify as a horizontal relationship. Further, since the licensing services availed by Sowil were in the capacity as a captive consumer, the arrangement could also not be an agreement entered into between entities at different stages/levels of the production chain.
ii. Test under Section 4: To test violation of Section 4 of the Act, CCI defined the relevant market as the ‘supply of computer-aided design (CAD) software services in civil engineering works in India’, bearing in mind that CAD software used in different fields are not substitutable and the software used by Sowil is related to designing for use in civil construction. CCI held that in this relevant market, Bentley was not in a dominant position considering that there were many competitors in the market providing CAD disabling (e.g., AutoDesk, Carlson, Site3D, SierraSoft, Trimble etc.).
iii. Other Allegations to Prove Dominance: After considering the tenders and documents relied on by Sowil, CCI concluded that they did not support Sowil’s allegation that only Bentley’s software have to be used to qualify for participation in the tender process as a pre-condition, since the tenders allowed other products viz., AutoDesk’s Civil 3D or other similar software for designing of railway projects without any exclusivity.
 Case no. 8 of 2019
NCLAT Dismisses Appeal Filed Challenging the Shell-BG Combination
On July 2, 2019, the National Company Law Appellate Tribunal (‘NCLAT’) dismissed an appeal filed by Mr. Piyush Joshi (‘Appellant’), a third party alleging CCI’s inaction on the information(s) submitted by the Appellant regarding the acquisition of BG Group Plc by Royal Dutch Shell Plc (‘Combination’). The Combination was duly considered and approved by CCI, as not likely to cause any AAEC vide order dated September 17, 2015(‘Order’).
The Appellant filed an information with CCI after the Combination was already approved, alleging that the parties to the Combination had not provided complete information on the relevant markets involved in the Combination, along with allegations under Section 4 of the Act. The Appellant further alleged that CCI failed to follow the procedure under sections 29 and 30 of the Act (as per which CCI is required to issue a show-cause notice to the parties to the combination, only if CCI is of the prima facie opinion that the combination is likely to cause AAEC), in order to conduct a thorough assessment of a proposed combination.
NCLAT dismissed the appeal and made the following observations:
i. Procedure Adopted by CCI: NCLAT held that the procedure under sections 29 and 30 of the Act is initiated by CCI only if it first forms a prima facie opinion that a combination has or is likely to cause AAEC. Appreciating the fact that CCI had not formed a prima facie opinion on AAEC in this case, NCLAT held that there is no procedural violation by CCI in approving the Combination without issuing a show cause notice to the parties to the Combination under sections 29 and 30 of the Act.
ii. Allegations on Abuse of Dominance Cannot be Considered at the time of Approving the Combination: While hearing the Informant on merits of his information, NCLAT held that allegations regarding abuse of dominance under Section 4 can only be heard by CCI after the stage of approval of the Combination under Section 6 of the Act. Therefore, CCI’s dismissal of the information was also upheld by the NCLAT since it could not have been required to assess Section 4 violations while at the stage of approval of the proposed Combination under Section 6 of the Act.
iii. Maintainability of the appeal and locus standi of the Appellant: NCLAT held that it can hear and dispose of appeals under Section 53B of the Act against any ‘direction issued or decision made or order passed’ by CCI under the relevant provisions under Section 53A(a) of the Act. NCLAT noted that the Appellant did not file the appeal against the Order and that CCI did not consider the information since it had already approved the Combination (‘Intimation’). Considering this, NCLAT held that this Intimation by CCI did not qualify as a ‘direction issued or decision made or order passed’ and was therefore not a valid ground for appeal under Section 53B read with Section 53A(a) of the Act.
iv. NCLAT also held that the Appellant failed to show that the Combination resulted in AAEC.
 TA (AT) (Competition) No. 32 of 2017
CCI Approves Joint Acquisition of Uttam Galva Metallics Limited and Uttam Value Steel Limited by CarVal Funds and Nithia
On June 3, 2019, CCI approved the proposed joint acquisition of up to 100% of the total issued and paid up share capital of each of Uttam Galva Metallics Limited (‘UGML’) and Uttam Value Steel Limited (‘UVSL’) by CVI CVF IV Master Fund II LP, CVI AA Master Fund II LP, CVI AV Master Fund II LP, CVIC Master Fund LP, Carval GCF Master Fund II LP, CarVal GCF Lux Securities S. à r. l., CVI AA Lux Securities S. à r. l., CVI AV Lux Securities S. à r. l., CVI CVF IV Lux Securities S. à r. l., CVIC Lux Securities Trading S. à r. l (collectively, referred to as ‘Carval Funds’) and Nithia Capital Resources Advisors LLP (including Mr. Jai Saraf) (‘Nithia’) (‘Proposed Combination’). The notice for the proposed acquisition was filed pursuant to resolution plans submitted by Carval Funds and Nithia in relation the insolvency proceedings initiated under the Insolvency and Bankruptcy Code, 2016 for corporate insolvency resolution process of UGML and UVSL.
Carval Funds are global investment funds managed by CarVal Investors, LLC (‘Carval’), a global investment fund manager that invests in distressed securities belonging to various sectors, globally. Carval has a minor, non-control conferring 0.7% investment in Tata Steel BSL Limited, as a result of conversion of debt investment. Nithia is engaged in providing advisory services in relation to, inter alia, distressed companies globally, and is not currently present in India either directly or indirectly. UGML is a public company incorporated in India, engaged in the business of manufacture of hot metal/pig iron and UVSL is a public company, engaged in the business of manufacture and sale of finished flat carbon steel products.
CCI approved the Proposed Combination given that it did not change the competition dynamics in any market in India and is thus not likely to result in AAEC in any of the markets in India.
 Combination Registration No. C-2019/04/659
CCI Approves Acquisition of Approximately 7.98% of the Total Outstanding Equity Share Capital of Ajax by Kedaara
On June 20, 2019, CCI approved the acquisition of approximately 7.98% of the total outstanding equity share capital of Ajax Engineering Private Limited (‘Ajax’) by Kedaara Capital Fund II LLP (‘Kedaara’) along with right of representation on the Board of Directors of Ajax (‘Proposed Combination’).
While Kedara is a private equity fund having no current presence in India, Ajax is a private limited company, engaged in the manufacture and sale of concreting equipment within India, under the brand name of Ajax.
CCI approved the Proposed Combination, considering that there were no direct or indirect horizontal or vertical overlaps between the business activities of Ajax and Kedaara. Therefore, the Proposed Combination was unlikely to cause any AAEC in India.
 Combination Registration No. C-2019/06/666