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Lack of quorum at CCI may not stall mergers

NEW DELHI : Approvals for mergers and acquisitions (M&As) are unlikely to be impacted by the lack of quorum at the Competition Commission of India (CCI), a government official said.

The development assumes significance as a similar situation last year had held up several combination deals for nearly six months.

According to the rules, at least three members are needed to approve a combination deal. The commission currently has one chairperson and two members; but both members are likely to retire in another month, which would lead to a lack of quorum.

Last October, former CCI chairperson Ashok Kumar Gupta retired, reducing the commission to two members. In February, the CCI sought the law ministry’s opinion on whether it could pass combination orders without a quorum for the time being. The ministry responded that the commission had powers under the Competition Act to undertake time-sensitive matters even in the absence of a quorum.

“The opinion given by the law ministry is still valid, and lack of a quorum is not likely to disrupt approvals for combinations,” the official cited above said on condition of anonymity.

As per the rules, a quorum is also mandatory for taking up investigation reports and passage of adjudication orders by CCI. Last year, the commission could not take cognizance of investigation reports due to a lack of quorum. However, this time, the lack of quorum is unlikely to impact investigations either, thanks to a recent judgement of Delhi high court, said legal experts.

In an appeal filed by technology company Google, the court opined that a vacancy in the commission would not invalidate any adjudicatory proceedings before it.

“Earlier also, the CCI has invoked the ‘doctrine of necessity’ to continue examining and clearing combination (M&A) cases, despite a lack of quorum,” said Vaibhav Choukse, head of competition practice, JSA Associates. “The Delhi high court (ruling) in the Google Play Store case makes it clear that a vacancy or defect in the CCI’s constitution would not invalidate any adjudicatory proceedings before it; hence, it is business as usual for the CCI for both combination as well as enforcement and investigation cases.”

Legal experts added that the Delhi high court judgement would act as a precedent, and the CCI can rely on observations made by the court to pass orders when there is a lack of quorum.

In February, the law ministry had based its opinion on so-called doctrine of necessity, which allows a regulator to decide on a matter even in the absence of authority if the issue is important. In the current context, since combinations are time-sensitive matters, the commission can pass orders even if it does not meet the requirements to pass such orders as per rules.

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Updated: 27 Aug 2023, 11:56 PM IST

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