India’s merger control regime provides a mandatory and suspensory mechanism whereby the parties to a notifiable M&A transaction [1] (i.e., the combination) are mandatorily required to file a notification to the Competition Commission of India (“CCI”) for its prior approval and are restricted from consummating the transaction in the absence of the said approval. In terms of Section 6(2A) of the Competition Act, 2002 (“Act”), the parties to a combination are obligated to observe a standstill period during which they are prohibited from giving effect to the combination until the approval of the CCI is received or 150 (One Hundred and Fifty) days have expired from the date of the filing of the notification. In case, the parties fail to observe the said standstill period and consummate their proposed combination, either in whole or in part, they are considered to have violated the Act and indulged in “gun-jumping”.

Under the Act, an act of gun-jumping can lead to serious consequences in terms of significant penalties under Section 43A and reputational risks. A penalty up to the tune of 1 (one) percent of the total turnover or assets or value of transaction (whichever is higher) may be levied in case of gun-jumping. Over the years, the CCI has developed a well-established jurisprudence on gun-jumping. During 2024-25, the CCI has continued to strengthen its jurisprudence which reveals a consistent and evolving jurisprudence on what constitutes gun-jumping, and the factors influencing the imposition of the penalties.

i) Notification Requirement before Conversion of Debentures Purchased from Stock Exchanges

In Manipal Health System [2], the CCI imposed a penalty of INR 20,00,000/- (~ USD 21,995.24) on the acquirer for its failure to notify and seek approval of the CCI prior to the consummation of the transaction involving acquisition of 39.61% equity shares of the target’s share capital by the acquirer. The said acquisition was triggered upon conversion of debentures held by the acquirer in the target since 10th November 2023. These debentures were purchased by the acquirer from the CBRICS platform of the National Stock Exchange of India Limited. Pursuant to various events of default by the target, the debenture trustee issued the conversion notice on 15th January 2024. A special resolution approving the conversion of the debentures was passed by the shareholders of the target on 25th April 2023. The CCI in its order, noted that the acquirer failed to notify the CCI even after issuance of the conversion notice by the debenture trustee and consummated the same in the absence of the requisite approval of the CCI. In the said order, the CCI reiterated that any transaction crossing the prescribed thresholds is to be mandatorily notified to the CCI, and the parties must wait for the CCI’s approval before taking any steps to close the deal, irrespective of whether or not such transaction is likely to cause an Appreciable Adverse Effect on Competition (“AAEC”) or not.

In its past precedent in Piramal Alternatives Trust [3], the CCI had clarified that in view of Section 2(v)(i) of the Act, the term ‘shares’ would include any security that entitles the holder of such security to “to receive shares with voting rights”. In the absence of such entitlement, such securities including debentures cannot be considered as “shares”. Therefore, debenture subscription without such entitlement (of voting rights) cannot be construed as ‘acquisition of shares’ for the purpose of a combination notification and its approval. However, the notification requirement under section 6(2) of the Act in relation to the acquisition of shares pursuant to conversion of the debentures is to be determined as per the extant law before such conversion.

ii) The “Solely as an Investment” Exemption and Test for “Ordinary Course of Business”

In Goldman Sachs [4], the CCI imposed a penalty of INR 40,00,000/- (~USD 42,846.52) on Goldman Sachs AIF Scheme -1 (“GS AIF”) and its investment manager, Goldman Sachs (India) Alternative Investment Management Private Limited, for failure to notify and seek approval of the CCI for acquisition of Optionally Convertible Debentures (“OCDs”), which, if they had been converted at the time of investment would have amounted to only 3.81% of the shareholding (on a fully diluted basis) in Biocon Biologics Limited (“Biocon”). The said OCDs were subscribed by GS AIF in December 2020 with the final maturity date of 9th January 2026; and the CCI initiated proceedings against GS AIF in 2023.

In its order, the CCI clarified that convertible securities constitute shares as per the definition of “shares” provided at Section 2(v)(i) of the Act and are to be treated accordingly. Additionally, with respect to availability of an exemption benefit available under Item 1 of Schedule 1 of the erstwhile Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulation, 2011(“Old Regulations”), which provided the yardsticks of “solely as an investment” or “ordinary course of business”, the CCI held that whether a transaction is “solely as an investment” or in “ordinary course of business” is to be assessed in view of the nature and substance of the rights granted to the acquirer.

In its analysis, the CCI noted that GS AIF received rights such as - (i) Reserved Matter Rights; (ii) Information Rights that allowed GS AIF access to certified true copies of minutes of board/committee/shareholder meetings with related records of Biocon, and any information relating to any direct change in certain shareholdings, access to certified true copies of the latest capitalization table of Biocon etc.; and (iii) Access Rights allowed GS AIF to access the premises and personnel of Biocon during normal business hours, upon providing a reasonable prior written notice. It was observed by the CCI that the said Information and Access Rights, in form, go beyond the rights of the ordinary shareholders and, in substance, is indicative of GS AIF considering the transaction as strategic. Additionally, the CCI also noted that OCDs were issued to GS AIF for a long period along with a right to convert the same to equity any time prior to the final maturity date that allowed GS AIF to weigh whether to exit or to convert the OCDs and stay invested. In this regard, CCI held that any transaction which is made with the intent of remaining invested for a relatively longer period involving acquisition of any additional rights (compared to the rights of an ordinary shareholder) cannot be said to be in the ordinary course of business. Accordingly, the CCI held that despite the small shareholding, the transaction was notifiable as the same was not just a passive minority investment but a strategic one as GS AIF received rights beyond ordinary shareholder rights.

In view of the above, it is relevant to note that the Old Regulations have now been replaced. Item 1 now stands modified and appears as Item 2 of the Schedule of the Competition (Criteria for Exemption of Combinations) Rules, 2024, which, among other modifications, no longer includes the “ordinary course of business” test and expressly provides that a transaction will not be considered “solely as an investment” if the acquirer gains rights enabling access to commercially sensitive information.

iii) Interconnected Transactions and the “Single Notice” Rule

In view of Regulation 9(4) of the Competition Commission of India (Combinations) Regulations, 2024 (“Combinations Regulations”), parties are mandated to file a joint “single notice” for all interconnected transactions. In case of interconnected transactions, the CCI takes a ‘substance-over-form’ approach to determine if various steps of a transaction are interconnected or not. In Matrix Pharma [5], the CCI identified multiple transactions (by various entities) that were carried out to fund the acquirer’s holding structure at different levels to facilitate the main & ultimate acquisition of the target by the acquirer, as well as ownership restructuring at the holding level, to be interconnected with the main acquisition. The CCI noted that these steps were deemed necessary to capitalize the acquirer for the main acquisition and were therefore interconnected. The CCI held that since these transactions were interconnected, a single notice covering all of them should have been filed before any of them were consummated. The failure to do so, and the consummation of some of these funding steps before filing, resulted in a nominal penalty of INR 5,00,000/- (~USD 5318.55).

In the said matter, an approval of the CCI for 100% acquisition of the Tianish Laboratories Private Limited (“Target”) by Matrix Pharma Private Limited (“Acquirer”) and investment by Kotak Strategic Situations India Fund II and Kotak Alternate Asset Managers Limited (collectively as “Investors”) in the Acquirer to fund such acquisition was already sought. [6] However, the structure of the said transaction underwent a change after the receipt of the approval of the CCI. The ownership of the Acquirer changed from being jointly held by Mr. Venkata Pranav Reddy Gunapati (“Pranav”) and Mrs. Swati Reddy Gunupati (“Swati”) to a multi-layer ownership chain viz. - (i) the Acquirer was 100% acquired by Mudra Labs Private Limited (“Mudra Labs”); (ii) Mudra Labs was acquired by Mudra Lifesciences Private Limited (“Mudra Lifesciences”) and Mudhra Pharmacorp LLP (“Mudra Pharma”); (iii) Mudra Lifesciences was acquired by Pranav and Kingsman Wealth Fund PCC Aurisse Special Opportunities Fund (“Kingsman”); and (iv) capital contribution in Mudra Pharma by Pranav, Govipri Infra LLP (owned by Pranav’s family) and Sujatha Ravuri. Additionally, the proposed investment by the Investors in Acquirer was also changed and shifted to Mudra Labs.

In view of the above alterations and the multi-layer ownership chain, the CCI noted that transaction approved by the CCI earlier had undergone a material change, and that the respective above-mentioned transactions being inter-connected should have been notified to the CCI prior to their consummation. The CCI noted that apart from Kingsman Funding (for which a green channel notice was filed) and Investors funding in Mudra Labs (for which no steps for consummation were taken), all other inter-connected transactions were consummated in violation of Section 6(2) of the Act.

iv) Invalid Green Channel Notification is void ab initio and attracts “gun-jumping” penalty

India’s extant merger control regime provides for an automatic system of approval known as “Green Channel” route whereby the parties receive a deemed approval of the CCI upon filing of the notice and are not required to observe the statutorily prescribed standstill obligation. However, a Green Channel notification is available only for those transactions which satisfy the requirement of “no” vertical, horizontal or complementary overlaps between the parties as stipulated under the Competition (Criteria of Combination) Rules, 2024. Before filing a Green Channel notification, the parties are required to ensure that their proposed transaction is eligible for the same. In case of incorrect filing, the said notice may be declared void ab initio by the CCI and a penalty for gun-jumping may also be imposed.

In CA Plume Investments/Bequest Inc [7], the CCI found that the acquirers had filed an invalid Green Channel notification, asserting that no horizontal, vertical, or complementary overlaps existed between the parties. The transaction was subsequently consummated on the basis of this deemed approval. However, upon review of the said notification, the CCI observed that there existed potential vertical and complementary overlaps between the acquirer’s portfolio entities and the target, which had not been disclosed in the notice. In this regard, the CCI sought clarifications from the acquirers, in response to which they admitted to an “inadvertent error” in their overlap analysis. Accordingly, the CCI concluded that the combination did not qualify for the Green Channel as the statutory requirement of “no” overlaps was not satisfied. Consequently, the notice and deemed approval were held void ab initio by the CCI, and a penalty of INR 4,00,000/- (~USD 4259.06) under Section 43A for gun-jumping was imposed on the acquirers. Further, the CCI also found a contravention of Section 44 of the Act for non-disclosure and incorrect filing, but decided not to impose any penalty for the same.

v) Jurisdictional Overlap with Sectoral Regulators

The CCI has asserted its jurisdiction over competition matters even in regulated sectors. In Torrent Power [8], the CCI re-affirmed its jurisdiction in matters concerning the electricity sector. It rejected the acquirer’s argument that the transaction being specific to electricity sector was subject to the exclusive jurisdiction of the Joint Electricity Regulatory Commission (“JERC”) under the Electricity Act, 2003 (“Electricity Act”) on the grounds that the Competition Act, 2002, is a special legislation enacted to regulate competition in all sectors including electricity that provides a complete, detailed code for reviewing combinations. Additionally, the CCI also noted that nothing in the Electricity Act excludes or overrides CCI’s authority over combinations, allowing both statutes to coexist without conflict. In the said order, the CCI reiterated its position previously established in Tata Power Company Limited [9] , whereby it confirmed its jurisdiction to review combinations in electricity sector.

In the aforesaid matter, the acquirer, namely Torrent Power Limited, acquired 51% shareholding of Dadra and Nagar Haveli and Daman and Diu Power Distribution Corporation Limited, pursuant to a scheme formulated under the relevant sections of the Electricity Act. Under the said scheme, the target was created on 9th March 2022 by way of merger of two entities - (i) the Electricity Department of the Union Territory (“UT”) of Dadra and Nagar Haveli and Daman and Diu (“DNH-DD”) engaged in power distribution & retail supply of electricity in Daman & Diu districts of UT (“Electricity Department - DD”); and (ii) DNH Power Distribution Corporation Limited (a wholly owned entity of the UT of DNH-DD). On 8th December 2020, a request for proposal to consolidate the assets, liabilities, rights, functions, obligations, proceedings, and personnel of the Electricity Department-DD and DNH PDCL to form the target and subsequently, sell 51% shareholding in the Target to a third party. The acquirer won the bid and a letter of intent was issued to it on 7th February 2022 and was required to submit the consideration amount of INR 555 crore to the bid authority within 30 days. Pursuant to the said letter, the acquirer submitted the consideration amount without notifying the CCI. In its analysis, CCI found that the said transaction was a notifiable one and ought to have been notified to the CCI for its approval immediately after the issuance of the letter of intent. Be that as it may, considering the ambiguity and other mitigating factors, the CCI decided not to impose a penalty in this specific case.

Penalty Imposition: Mitigating Factors

Under Section 43A of the Act, the CCI can impose a penalty up to one percent of the total turnover or assets of the combination (whichever is higher). While imposing such penalty, the CCI exercises discretion in determining the quantum of the penalty, considering both aggravating and mitigating factors. It has been clarified by the Supreme Court that the imposition of a penalty is attracted “simpliciter on its violation” and mala fide intent is not a prerequisite. Additionally, whether a transaction results in AAEC or not is also immaterial. Such factors are generally considered by the CCI as mitigating factors while determining the quantum of penalty to be imposed by it. In the above discussed orders, the CCI considered ample mitigating factors such as voluntary disclosure and cooperation, bona fide belief, commercial exigencies, absence of AAEC, admission of default, unconditional apology, proactive identification of additional overlaps, previous track record of compliance, absence of special rights under the transaction documents, structural issues and constraints inherent in the bidding process, undertaking by the acquirer to give up certain rights etc.

Conclusion

The recent CCI orders underscore the critical importance of adhering to the statutory and procedural requirements of the merger control regime as laid down under the Act. The CCI maintains a strict stance on gun-jumping, emphasizing that the obligation to notify is absolute. The parties to a Combination must conduct thorough due diligence to identify all interconnected parts of a transaction, carefully assess the applicability of any exemptions, and be certain before utilizing the Green Channel. While the CCI has shown a willingness to consider mitigating factors when determining penalties, the risk of significant financial and reputational damage remains a powerful incentive for compliance.

References:

  1. A M&A Transaction becomes notifiable to the CCI if it falls within the ambit of Section 5 of the Competition Act, 2002 on account of meeting either of the two prescribed thresholds, namely, jurisdictional / financial thresholds and/or deal value threshold, provided the proposed M&A transaction is not otherwise exempted.
  2. Combination Registration No. C-2024/05/1142 Order dated 31st July 2025
  3. Combination Registration No. C-2024/01/1108 Order dated 2nd April 2024
  4. Ref. No.: M&A/10/2020/01/C Order dated 14th January 2025
  5. Combination Registration No. C-2024/04/1139 Order dated 7th March 2025
  6. Combination Registration No. 2024/01/1100
  7. Combination Registration No. C-2023/10/1066 Order dated 26th June 2025
  8. Proceedings against Torrent Power Limited under Section 43A of the Competition Act, 2002, Order dated 14th January 2025
  9. Combination Registration No. C-2021/03/826 Order dated 17th March 2022

Authors:

Milind Jha, Partner

Aditya Bhardwaj, Partner

Rinki Singh, Senior Associate

Disclaimer:

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.