NCLAT judgment in Amazon-Future case sends a strong message, say experts

“The order has proved the dictum ‘truth always prevail’ as right and gives a strong signal to one and all that India is not a banana republic and the laws are not weak,” CAIT national president B.C. Bhartia and secretary general Praveen Khandelwal said in a joint statement.

Legal experts say the judgment sends out a strong message. Senior advocate Ramji Srinivasan, the lawyer representing FCPL in the case, said, “It’s an extremely significant judgment from NCLAT because it recognises the need for every entity to remain compliant with Indian laws.”

One of the roles of the CCI is to prevent activities that may adversely affect fair competition. This forms the basis for entities seeking regulatory approval from this body that the proposed transaction is in line with the provisions of Indian competition law. This approval has to be obtained within the stipulated deadline laid down in the law.

Srinivasan added that the NCLAT’s judgment also “recognises the scheme of legislation that requires full and complete disclosure of material details when an approval is sought to ensure that CCI has the ability to faithfully and properly discharge its statutory obligation in a time-bound manner”.

The setback faced by Amazon is also likely to act as a cautionary tale for others who are likely to seek CCI approval in line with regulatory compliance. “With CCI getting a thumping from the appellate tribunal, the companies involved in M&A (merger and acquisition) activities will be on their toes when evaluating deals and the level of disclosures,” said Vaibhav Choukse, partner and head of practice (competition law) at JSA Advocates & Solicitors.

Ritika Ganju, partner, Phoenix Legal, said that the CCI in its order of December 17, 2021, had reflected upon the significance of holistic reporting of the combination. “This includes not just commercial contracts directly dealing with the transaction but any contemplated strategic alliances and alignments between the acquirer and target groups which would impact CCI’s assessment of the transaction,” said Ganju. This view of the CCI endorsed by the NCLAT “will certainly make the applicant companies and their advisors cautious about the scope and ambit of disclosures”, she added.

One thing that has been made clear in the NCLAT judgment is the scope of the CCI’s powers, experts said. Not only did the tribunal reject Amazon’s defence that it had made all the requisite disclosures but in doing so, it also rejected its argument that the CCI could not have kept the approval in abeyance.

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The NCLAT has laid down that the statutory authority under Competition Act, which is the CCI, has an “inbuilt, an implied residual power to annul, modify, vary or to keep the earlier order passed by it in abeyance / putting it on hold” in cases where the objective is to prevent any activity that may have an adverse effect on competition. “There is no express fetter in this regard, in the considered opinion of this ‘Tribunal’,” the NCLAT said in its written order.

“It’s a big win for CCI… The tribunal has upheld the order of CCI in its entirety, thereby confirming CCI’s wide powers, which includes directions to refile the approval application and even suspend the approval under exceptional circumstances,” said Choukse.

Amazon now has the legal remedy to approach the country’s apex court in appeal against this judgment or take the route of filing a fresh Form 2 under competition law rules and regulations to seek fresh approval in line with the CCI and NCLAT judgments.