NCLAT Sets Aside CCI Penalty On ITC For Not Furnishing Info On Savlon Deal

The National Company Law Appellate Tribunal (NCLAT) has set aside the penalty imposed on multi-conglomerate ITC by fair trade regulator CCI for not notifying for the acquisition of brands 'Savlon' and 'Shower to Shower' in 2017.

ITC had 2017 acquired the antiseptic brand Savlon and the personal care product brand Shower To Shower from Johnson & Johnson Private.

The Competition Commission of India (CCI) had on December 11, 2017, imposed a fine of Rs 5 lakh on ITC for alleged failure to give notice under sub-section 2 of Section 6 of the Competition Act.

The section mandates the enterprise, which proposes to enter into a combination, to give notice to the CCI disclosing the details of the proposed combination, within 30 days.

However, the CCI's order was challenged by ITC before the NCLAT, which is an appellate authority contending that the value of the deal was Rs 68.37 crore, hence, as per the rules and regulations, there was no need for any such notification.

They were exempted under the de minimis notification, which says any combination which involves the target company having an asset value or turnover below Rs 350 crore or Rs 1,000 crore, respectively, falls within its scope.

Consenting to it, a two-member NCLAT bench said "no penalty was required" to be imposed on the ITC and set aside the impugned order passed by the Competition Commission of India (CCI).

"We, therefore, hold that the penalty imposed by the CCI on ITC for the reason it did not notify the transactions I and II under section 6(2) of the Act, should not have been imposed and to that extent, we set aside the impugned order of the CCI," said NCLAT in its judgement passed on April 27, 2023.

However, it also added, "insofar as other issues relating to the 'combination' and which have not been pressed in the present appeal during arguments are concerned, we only wish to mention that those issues are left open and not decided in this judgment".

Interestingly, almost 9 months before the penalty, CCI had on March 22, 2017, unconditionally approved the transactions under Section 31(1) of the Act after finding that there was no 'appreciable adverse effect on competition' in the defined relevant markets.

But thereafter it issued a show cause notice on March 29, 2017 to ITC under Section 43A, directing it to file a response to the show cause notice for not filing the transactions under Section 6(2) for approval of the CCI.

Section 43A grants CCI power to impose penalty for non-furnishing of information on combinations.

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