The government today expressed its commitment to make it mandatory for companies to seek anti-monopoly watchdog Competition Commission of India's (CCI) approval for mergers and acquisitions (M&A), saying the move would benefit India Inc.
Seeking to allay industry concerns that sections 5 and 6 of the CCI Act are hindrance to growth, Corporate Affairs Minister Salman Khurshid also said that these particular sections are rather beneficial to industry.
These clauses make it mandatory for companies to obtain CCI approval for M&As.
"We have tried to ensure that there is greater consensus as possible.
"We have been talking to stakeholders and we hope that everybody will understand that this (sections 5 and 6) is beneficial for industry and will not in anyway restrict or be counter-productive for them," Khurshid said at the international conference on competition law here.
The two sections of the Act empowers the CCI to vet M&As that can have a bearing on competitions in a particular sector and their notification is being awaited.
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"We are committed to notifying sections 5 and 6 of the Competition Act, but there are real and imaginary issues. One of them being the 210-day period for approvals," he said.
Industry has been expressing concern about the 210-day period, which the CCI would take to approve mergers and acquisitions, saying the time is too long.
The Minister, however, did not say anything about when the sections would be notified.
After notification of sections 5 and 6, all mergers which would increase the combined assets of the two entities to more than Rs 1,000 crore or raise the turnover to Rs 3,000 crore would require the CCI's nod.
The need for competition law becomes all the more evident when foreign direct investment takes the form of a foreign corporation acquiring a domestic enterprise or establishing a joint venture, World Council on Corporate Governance President Madhav Mehra said at the conference.
"By making such an acquisition the foreign investor may substantially lessen competition and gain a dominant position in the relevant market thus charging higher prices," Mehra said.
The international conference was organised to disseminate information on competition law in various jurisdictions and was attended by competition body representatives from countries like the UK, Singapore and India.