The notice has been issued for violation of provisions of Section 108A of the Companies Act, the official said. Provisions of Section 108A is applicable in cases were the acquisition of shares leads to a dominant position in the market. According to estimates, Kingfisher Airlines and Air Deccan post-acquisition together have a market share of about 32 per cent, which made both of them among the top two airlines in the industry.
Any apparent violation of the provision of the Companies Act attracts severe penalties. Asked whether any violation, if found, would impact the stake purchase, official sources said, "Currently, it is a grey area. It is up to the Ministry to take a view." According to Section 9 of the Companies Act any agreement in violation of the Act becomes .
When contacted, Mr Vijay Mallya, Chairman of the UB Group, said, "The Regional Director had issued a notice to UB Holding Ltd (UBHL) asking for a confirmation that UBHL has sought prior approval of the Central Government before taking 26 per cent initial stake in Deccan.
"UBHL has contested this saying that Section 108A does not apply as such it is not required to seek the approval under the section. It is also clarified that this is the matter between UBHL and the Company Law Board and does not in any way affect the merger, which was approved by the Karnataka High Court."
