NCLAT stays CCI penalty on NTPC for non-disclosure of stake purchase in Ratnagiri Gas

NTPC said it did not acquire any additional rights and enjoys joint control in RGPPL along with GAIL and Maharashtra State Electricity Distribution Company Limited even on completion of the transaction

The National Company Law Appellate Tribunal (NCLAT) recently stayed a Rs 40 lakh penalty imposed by the Competition Commission of India (CCI) on National Thermal Power Corporation (NTPC) for non-disclosure of  its acquisition of 35.47 percent of the equity share capital in Ratnagiri Gas & Power Private Limited (RGPPL)

According to the NCLAT order, the penalty has been stayed as NTPC has submitted "Term Deposit Advice of Rs 10 lakh drawn on State Bank of India, which comes to 25 percent of the total penalty amount." The case is now likely to come up for a hearing on February 27, 2024.

NTPC acquired equity shares of RGPPL in 2020 from its lenders instead of some repayment, as a result of this acquisition, its share capital in RGPPL increased from 25.98 percent to a little over 60 percent. This made NTPC a majority shareholder in RGPPL. CCI, on coming to know of this transaction, had sent a notice to NTPC to show cause why it had acquired the equity share capital of RGPPL without intimating it.

As per the Competition Act, enterprises have to obtain the permission of the CCI before they acquire a controlling stake in another enterprise involved in the same line of business. Not obtaining such consent would result in CCI imposing a penalty.

During the course of the CCI proceedings, NTPC informed the regulator that the acquisition of a 35.47 percent stake in RGPPL was a part of the resolution plan for the settlement of the company's outstanding debt. Furthermore, NTPC told CCI that it had not intended to acquire equity shares or control of RGPPL, but only wanted to settle its debts. According to NTPC, it did not acquire any additional rights and enjoys joint control in RGPPL along with GAIL and Maharashtra State Electricity Distribution Company Limited even on completion of the transaction.

The CCI, however, noted that such transactions are mandatorily notifiable unless they are specifically exempted from doing so by the government of India. CCI further held that irrespective of whether NTPC gained additional control and even if the transaction did not result in adverse competition in India, it should have been notified. Owing to this, the CCI imposed a penalty of Rs 40 lakh on NTPC.