COMPETITION COMMISSION OF INDIAversusTHOMAS COOK (INDIA) LTD. & ANR.

                        [2018] 3 S.C.R. 391                              391


            COMPETITION COMMISSION OF INDIA                              A
                                  v.
             THOMAS COOK (INDIA) LTD. & ANR.
                  (Civil Appeal No. 13578 of 2015)
                          APRIL 17, 2018                                 B
          [ARUN MISHRA AND NAVIN SINHA, JJ.]
      Competition Act, 2002:
       ss.6(2) and 43A – Imposition of penalty u/s.43A for non-
compliance of provision u/s.6(2) – Propriety of – The three              C
respondent companies decided about de-merger/amalgamation –
Share Subscription Agreement (SSA), Share Purchase Agreement
(SPA), Open Offer and Market Purchases were also part of the
transaction – Respondents sent Notice u/s. 6(2) to appellant-
Commission notifying only ‘Demerger’ and ‘Amalgamation’ and not
                                                                         D
other transactions – Other transactions were, however, disclosed
while claiming exemption u/s. 5 – Appellant-Commission imposed
penalty u/s.43A of Rs. one crore for not notifying other transactions
in terms of s.6(2) – Competition Appellate Tribunal allowed the
appeal against the order of Commission – On appeal, held: All the
transactions were part of the same transaction – All the transactions    E
are intrinsically connected with and interdependent on each other
and form one viable part of business transaction – Regulation 94
of 2011 Regulations acknowledges the possibility of business
transaction being interconnected or interdependent steps of such
transactions – Technical interpretation of isolate two different steps
                                                                         F
of transactions of a composite combination would be against the
sprit and provision of the Act – Regulation 9(4) cannot be interpreted
to enable consummation by a composite combination before giving
notice to the Commission – By applying the ultimate objective test
also, it is apparent that market purchases were within view of the
scheme that was framed – There was no requirement of mens rea or         G
intentional breach as an essential element for levy of penalty u/s.
43A – Mens rea assumes importance in case of criminal and quasi
criminal liability – Penalty u/s. 43A is on account of breach of a
civil obligation and proceedings are neither criminal nor quasi-
criminal – Imposition of penalty u/s.43A by the Commission was
                                                                         H
                                391
392            SUPREME COURT REPORTS                     [2018] 3 S.C.R.


A     just and proper – Competition Commission of India (Procedure in
      Regard to the Transaction of Business Relating to Combinations)
      Regulations, 2011 – Regulation 9(4).
            Allowing the appeal, the Court
             HELD: 1. Once a particular transaction or a series of
B     transactions falls within the purview of combination u/s. 5, it is
      obligatory to report the same to the Competition Commission
      under section 6 of the Act. Section 6(1) prohibits combinations
      which cause or likely to cause an adverse effect on the competition
      and such a combination shall be void. Section 6(2) of the Act
C     requires that advance notice has to be given of the proposal to
      enter into a combination and that has to be given within 30 days
      of approval of the proposal relating to merger or amalgamation,
      execution of any agreement or other document or acquisition
      referred to in section 5(a). Section 6 (2) makes it clear that no
      combination shall come into effect until 210 days have elapsed
D     from the date on which notice has been given to the Commission
      under section 6(2) and the Commission has passed orders under
      section 30(1), whichever is earlier. And once mandatory notice
      is given under section 6(2), the Commission has to deal with the
      same in accordance with the provisions contained in sections 29,
E     30 and 31. Certain exceptions are carved out as to Public Financial
      Institutions, Foreign Investment Institutions, Banks or Public
      Venture Funds etc. funds under section 6(4) of the Act. [Para 19]
      [403-A-C]
            2. The Competition Act and Competition Commission of
F     India (Procedure in Regard to the Transaction of Business
      Relating to Combinations) Regulations, 2011 clearly envisage
      that a combination can consist of one or more transactions. Under
      Regulation 9(4) of the Regulations, 2011, the parties have an
      option of giving either a single notice or multiple notices in
      respect of all the transactions. [Para 22] [404-B]
G
            3. It is apparent in the present case that in the notification
      made under section 6(2) on 14.2.2014 notifiable transactions were
      shown regarding merger and amalgamation. It was also mentioned
      that parties have also contemplated certain other transactions in
      view of the notifiable transactions, they were the subscription of
H     equity shares, SPA, open offer and market purchase. It is crystal
 COMPETITION COMMISSION OF INDIA v. THOMAS COOK                           393
               (INDIA) LTD. & ANR.

clear from the aforesaid application itself that all these transactions   A
were part of the same transactions and even before notifying the
transactions of purchase from the market on 14.2.2014, it was
consummated between 10.2.2014 to 12.2.2014. It is crystal clear
that market purchases being a part of the composite combination
was consummated before giving notice to the Commission. Joint
                                                                          B
Press Release dated 7.2.2014 clearly indicated SPA as an open
offer. The Board of Directors of the respective parties authorized
market purchases on the same day. All the said transactions are
intrinsically connected and interdependent with each other and
form part of one viable business transaction. [Para 26] [405-H;
406-A-C]                                                                  C
      4. While it is open for the parties to structure their
transactions in a particular way the substance of the transactions
would be more relevant to assess the effect on competition
irrespective of whether such transactions are pursued through
one or more step/transactions. Structuring of transactions cannot         D
be permitted in such a manner so as to avoid compliance with the
mandatory provisions of the Act. For ensuring the compliance
with the requirements of the Act it is open to considering whether
the particular step was an individual transaction or part of the
whole of the transaction. It was evident in the facts and
circumstances of the case as respondent No.2 would not have               E
made market purchase in the absence of any one transaction.
Thus, market purchases could not have been termed to be
independent transaction. [Para 28] [406-G-H; 407-A-B]
      5. The provision of Regulation 9(4) of 2011 Regulations
clearly acknowledges the possibility of the business transaction          F
being interconnected or interdependent steps of such
transactions. Technical interpretation to isolate two different steps
of transactions of a composite combination would be against the
spirit and provision of the Act. Market purchases were not
independent and could not be used in isolation for the purpose of         G
any exemption. Regulation 9(4) cannot be interpreted to enable
consummation by a composite combination before giving notice
to the Commission. That would be defeating the intent and
purpose of the Act and in particular section 5 and 6 thereof. [Para
30] [407-E-F]
                                                                          H
394           SUPREME COURT REPORTS                     [2018] 3 S.C.R.


A           6. If the ultimate objective test is applied, it is apparent
      that market purchases were within view of the scheme that was
      framed. As such the subsequent change of law also did not come
      to the rescue of the respondents considering the substance of
      the transaction. The market purchases were part of the same
      transaction of the combination. [Para 31] [407-G]
B
             7. It is not correct to say that there were no mala fides on
      the part of the respondent as such penalty could not have been
      imposed. The mens rea assumes importance in case of criminal
      and quasi criminal liability. For the imposition of penalty under
      Section 43A, the action may not be mala fide in case there is a
C     breach of the statutory provisions of the civil law, penalty is
      attracted simpliciter on its violation. The imposition of penalty
      was permissible and it was rightly imposed. There was no
      requirement of mens rea under section 43A or intentional breach
      as an essential element for levy of penalty. Section 43A of the Act
D     does not use the expression “the failure has to be willful or mala
      fide” for the purpose of imposition of penalty. The breach of the
      provision is punishable and considering the nature of the breach,
      it is open to impose the penalty. The imposition of penalty under
      section 43A is on account of breach of a civil obligation, and the
      proceedings are neither criminal nor quasi-criminal; the penalty
E     has to follow. Only discretion in the provision under section 43A
      is with respect to quantum of penalty. [Paras 32, 33] [407-H; 408-
      A-C; 409-B]
            8. In the facts and circumstances of the case, the order
      passed by the Commission was just and proper and in accordance
F     with law, which the Tribunal set aside on wrong premises. Thus,
      the order of the Tribunal cannot be said to be legally sustainable.
      There is no ground to interfere with the nominal penalty that has
      been imposed in the instant case. [Paras 34, 35] [409-C; 409-D]
            Hindustan Steel Ltd. v. State of Orissa AIR 1970 SC
G           253 : [1970] 1 SCR 753 – relied on.
                            Case Law Reference
      [1970] 1 SCR 753              relied on                 Para 32
            CIVIL APPELLATE JURISDICTION: Civil Appeal No. 13578
H     of 2015.
 COMPETITION COMMISSION OF INDIA v. THOMAS COOK                              395
               (INDIA) LTD. & ANR.

      From the Judgment and Order dated 26.08.2015 of the Appellate          A
Tribunal (COMPAT) in Appeal No. 48 of 2014.
      Salman Khurshid, Sr. Adv., Arjun Krishnan, Ankur Singh, Sumit
Srivastava, Arpit Shukla, Ms. Geetanjali Kapur, Ms. Alisha Panda, Abhay
Kumar, Advs. for the Appellant.
      Ramji Srinivasan, Gopal Subramanium, Sr. Advs., Samir Gandhi,          B
Ms. Roopali Singh, Akshat Kulshrestha, Ms. Anuja Agrawal, Ms. Simran
Bhat, Rahul Satyan, Tushar Bhardwaj, Naveen Hegde, Mayank Pandey,
Advs. for the Respondents.
      The Judgment of the Court was delivered by
                                                                             C
       ARUN MISHRA, J. 1. The Competition Commission of India
(in short, “the Commission”) is in appeal aggrieved by the order passed
by the Competition Appellate Tribunal (in short, “the Tribunal”) setting
aside the order passed by the Competition Commission under section
43A of the Competition Act, 2002 (in short, referred to as “the Act”)
whereby penalty of Rupees One Crore was imposed on the respondents           D
on the ground of non-compliance of provisions contained in section 6(2)
of the Act.
       2. The Thomas Cook India Ltd (for short, “the TCIL”) – respondent
No.1, Thomas Cook Insurance Services India Limited, (for short, “the
TCISIL”) – respondent No.2 and Sterling Holiday and Resorts India            E
Limited (for short, “the SHRIL”) – respondent No.3 is the companies
registered under the Companies Act, 1956. The TCIL is engaged in
travel and travel related services. The TCISIL is also engaged in travel
and travel related services and is a subsidiary of the TCIL and is also a
registered corporate agent of Bajaj Allianz General Insurance Company        F
Limited, which is engaged in the business of selling insurance to outbound
travelers, as well as health insurance, motor insurance, personal accident
insurance etc. SHRIL is engaged in the business of providing premium
hotel services, vacation ownership services, normal hotel services like
renting of rooms, restaurants, holiday activities etc. It also arranges
meetings, incentives, conference and events for its corporate clients.       G
The Board of Directors of the aforesaid three companies on 7.2.2014
approved a Scheme for demerger/amalgamation, (referred to as the
‘Scheme’). The said Scheme contemplated the following:
       (a) Demerger: i.e. Resorts and timeshare business of SHRIL were
to be transferred by way of demerger from SHRIL to TCISIL in lieu of         H
396             SUPREME COURT REPORTS                          [2018] 3 S.C.R.


A     which equity shares of TCIL would be issued to shareholders of SHRIL
      as per the ratio in the ‘Scheme’; and
            (b) Amalgamation: SHRIL with its residual business would be
      amalgamated into TCIL in lieu of equity shares to be issued to the
      shareholders of SHRIL as per the ratio in the Scheme.
B           3. For the purpose of implementing the above transactions, the
      Respondents entered into a Merger Cooperation Agreement (for short,
      ‘the MCA’) on the same day i.e. on 07.2.2014.
            4. On the very same day i.e. 07.2.2014, by another resolution of
      the Boards of Directors of the respondents, the following transactions
C     were approved and executed -
             (i) Share Subscription Agreement (SSA): TCISIL was to subscribe
      2,06,50,000 shares of SHRIL pursuant to a preferential allotment
      (amounting to 22.86% of SHRIL of equity share capital of SHRIL on
      fully diluted basis);
D            (ii) Share Purchase Agreement (SPA): TCISIL was to acquire
      19.94% of equity share capital of SHRIL on the fully diluted basis from
      certain existing shareholders and promoters of SHRIL.
            (iii) Open Offer by TCIL and TCISIL to purchase 26% of the
      equity share capital from public shareholders of SHRIL, in terms of the
E     SEBI (Substantial Acquisition of Shares and Takeovers) Regulations,
      2011 (in short, “the SEBI’s Regulations”).
             5. In addition to the above, TCISIL acquired 90,26,794 equity
      shares of SHRIL through purchase on the Bombay Stock Exchange.
      These purchases (hereinafter referred to as “market purchases”)
F     amounted to 9.93% of the equity share capital of SHRIL on the fully
      diluted basis. The market purchases were made between 10.2.2014
      and 12.2.2014.
             6. On 14.2.2014, the respondents sent a notice under section 6(2)
      of the Act to the Appellant – Commission, notifying only the ‘Demerger’
G     and ‘Amalgamation’. Other transactions were, however, disclosed, while
      claiming exemption from section 5 of the Act.
             7. On 20.02.2014, the Commission asked the Respondents to
      remove certain defects in their application and provide further information,
      inter alia on, whether the notified and non-notified transactions were
H     interrelated.
 COMPETITION COMMISSION OF INDIA v. THOMAS COOK                              397
       (INDIA) LTD. & ANR. [ARUN MISHRA, J.]

       8. On 5.3.2014, the Commission passed an approval order under         A
section 31(1) of the Act. However, it observed that the same would not
affect the action proposed under section 43(A) of the Act for imposition
of penalty in separate proceedings.
      9. On 10.3.2014, the Commission issued a show cause notice
asking the respondents as to why they should not be penalized under          B
section 43A for failing in notifying the ‘market purchase’ under section
6(2) of the Act.
      10. On 25.3.2014, the respondents filed their reply to the show
cause. After hearing the respondents, on 21.5.2014, the Commission
imposed a penalty of Rupees One crore under section 43A of the Act.          C
As against the same the appeal was preferred. The Tribunal has allowed
the appeal filed under section 53 B of the Act and has set aside the order
passed by the Commission. Aggrieved thereby, the appeal has been
preferred by the Commission under section 53 B of the Act.
       11. It was urged by the learned senior counsel appearing on behalf    D
of appellants that on 7.2.2014, the Board of Directors of the three
respondent companies have decided about the de-merger/ amalgamation,
Share Subscription Agreement (SSA), Share Purchase Agreement (SPA),
Open Offer by TCIL and the TCISIL to purchase 26% of the equity
shares capital from the public shareholders of SHRIL in terms of the
SEBI’s Regulations and market purchases were also part of the same           E
transaction. TCISIL acquired 90,26,794 equity shares of SHRIL through
purchase on Bombay Stock Exchange between 10.2.2014 and 12.2.2014.
These market purchases amounted to 9.93% of the equity share capital
of SHRIL on the fully diluted basis. Out of the aforesaid transactions,
the respondent notified only the “De-merger” and “Amalgamation” in           F
terms of section 6(2) of the Act. The Share Subscription Agreement
(SSA), Share Purchase agreement (SPA), Open Offer and Market
Purchases were not notified and the exemption was claimed under
notification S.O. 482 (E), dated 4.3.2011, on the premise that turnover of
the company of which shares have been acquired i.e. SHRIL did not
have turn over in excess of Rs.750/- crores whereas the other                G
transactions were at the proposal/ agreement stage only. The transaction
6 (Market Purchases) has already been consummated prior to filing of
the notice under section 6(2) of the Act on 14.2.2014. As such the
Commission has rightly taken the view that all the above transaction
being interconnected transactions or steps with the same ultimate effect     H
398             SUPREME COURT REPORTS                          [2018] 3 S.C.R.


A     were part of the single composite combination, therefore, non-notification
      of the part of the said combination, particularly, the consummation of
      market purchases was a violation of the Act. Thus, a penalty of Rupees
      One crore was rightly imposed by the Commission under section 43 A of
      the Act.
B            12. It was further urged that the Tribunal erred in holding that said
      transactions were not inter-dependent on each other. Tribunal also erred
      in holding that market purchases fell within the ambit of exemption
      notification i.e. S.O. 482 (E). The Tribunal has committed a gross error
      while not correctly identifying the issue as to combination. The
      combination was clearly a composite one, comprised of entire series of
C     transaction/ steps and not any one transaction on a stand-alone basis.
      The penalty was rightly levied on the respondents for their failure to
      notify the entire combination and avoiding regulatory scrutiny by notifying
      only a part thereof. Even if the market purchases could be said to be
      exempted, if taken in isolation, the entire composite combination could
D     never be stated to be exempted, as the whole of it had to be notified in
      terms of section 6(2). The violations were not purely technical, thus, the
      order passed by the tribunal be set aside.
             13. Per contra, on behalf of the respondents learned senior counsel
      contended that section 5 of the Act defines the combination especially in
E     terms of providing asset and turnover thresholds, is to ensure that the
      only transaction between enterprises or groups of enterprise above a
      specified critical size are scrutinized by the Commission, as these
      transactions are more likely to have a measurable market effect or an
      AAEC factors in the relevant market, therefore, may be required to be
      preempted and corrected by the Commission. It was further contended
F     that a target based exemptions exempt certain transactions from the
      purview of the term ‘combination’ as defined under section 5 of the Act.
      Under the Ministry of Corporate Affairs Notification S.O. 482 (E) dated
      4.3.2011, certain transactions (in the nature of ‘acquisition’) are exempted
      from a requirement to mandatorily notify to the Commission. If the
G     value of the assets or turnover of the target enterprise does not exceed
      a specified de minimis threshold, the transaction which qualifies under
      the Target Based Exemption are exempt from the purview of the
      “combination” under section 5 of the Act. Therefore, the Share
      Subscription Agreement (SSA), Share Purchase Agreement (SPA) and
      open offer are exempted under the Target Based Exemption on account
H
 COMPETITION COMMISSION OF INDIA v. THOMAS COOK                                399
       (INDIA) LTD. & ANR. [ARUN MISHRA, J.]

of being “acquisition” of shares, are also eligible for the Target Based       A
Exemption as admittedly the turnover of SHRIL was below the de
minimis threshold. It was also contended that market purchases of
9.94% by TCISIL on the stock exchange were not interdependent on
the main Merger Scheme. Merely because they were contemplated
contemporaneously, did not mean that all the transactions were “inter-
                                                                               B
dependent”. The said ‘market purchase’ finds no mention in either the
merger scheme or the joint press release issued by respondent No.7 on
7.2.2014. The reference to part equity, part merger deal means the
reference to merger scheme and acquisition of shares by way of Share
Subscription Agreement, Share Purchase Agreement and open offer
and not market purchases which were completely a separate and distinct         C
acquisition. The Commission in the case of Vedanta Aluminium Limited
held that transactions in a series of transactions which are inter-related
and inter-dependent shall be considered as a composite whole if the
“ultimate objective” can be achieved only on the successful completion
of all such transactions in a series of transactions which are interrelated
                                                                               D
or interdependent. In the instant case, the Market Purchases do not
satisfy this fundamental tenet established by the Commission as the
Merger Scheme was in no way dependent upon the market purchases
and would have been implemented irrespective of the market purchases.
       The learned counsel further pointed out that there is a subsequent
change in law with effect from March 28, 2014, after show cause notice         E
but before passing the penalty order, the Commission introduced a new
provision in the Combination Regulations. Regulation 9(5) which provides
that requirement of filing notice shall be determined with respect to the
substance of the transactions and any structure of the transaction(s)
comprising a combination that has the effect of avoiding notice in respect     F
of whole or part of the combination shall be disregarded. Thus, it was
incumbent upon the Commission to look into the substance of the
transaction.
      14. Lastly, it was contended that there were no malafides on the
part of the respondents. Notification to the Commission filed by the           G
respondents on 14.2.2014, did contain information about the market
purchases under the heading “Exempt Transactions” on the basis that
the Target Based Exemptions covered the market purchases. Thus,
imposing a penalty on the respondents for not having specifically identified
the market purchases has been part of “Notifiable Transaction” is nothing
                                                                               H
400            SUPREME COURT REPORTS                           [2018] 3 S.C.R.


A     more than a mere technicality. The respondent was under a bona fide
      and genuine belief that market purchases were unconnected and
      moreover, exempt. Further, no malafides have been attributed to the
      respondents even in the penalty order passed by the Commission on
      21.05.2014 and when Commission had passed the Approval Order on
      6.5.2014 and observed that market purchases would not result in an
B
      appreciable adverse effect on competition in the market, penalty ought
      not to have been imposed by the Commission. The Tribunal has rightly
      set it aside.
            15. Before proceeding to deal with the rival submissions, it is
      necessary to note the statutory framework of the Act. Section 5 of the
C     Act defines the combination for the purposes of Act. Section 5 is
      extracted hereunder.
            “5. The acquisition of one or more enterprises by one or more
            persons or merger or amalgamation of enterprises shall be a
            combination of such enterprises and persons or enterprises, if—
D
               (a) any acquisition where—
                      (i) the parties to the acquisition, being the acquirer and
            the enterprise, whose control, shares, voting rights or assets have
            been acquired or are being acquired jointly have,—
E                    (A) either, in India, the assets of the value of more than
            rupees one thousand crores or turnover more than rupees three
            thousand crores; or
                       (B) [in India or outside India, in aggregate, the assets of
            the value of more than five hundred million US dollars, including
F           at least rupees five hundred crores in India, or turnover more than
            fifteen hundred million US dollars, including at least rupees fifteen
            hundred crores in India; or]
                       (ii) the group, to which the enterprise whose control,
            shares, assets or voting rights have been acquired or are being
G           acquired, would belong after the acquisition, jointly have or would
            jointly have,—
                      (A) either in India, the assets of the value of more than
            rupees four thousand crores or turnover more than rupees twelve
            thousand crores; or
H
COMPETITION COMMISSION OF INDIA v. THOMAS COOK                              401
      (INDIA) LTD. & ANR. [ARUN MISHRA, J.]

              (B) [in India or outside India, in aggregate, the assets of   A
   the value of more than two billion US dollars, including at least
   rupees five hundred crores in India, or turnover more than six
   billion US dollars, including at least rupees fifteen hundred crores
   in India; or]
   (b) acquiring of control by a person over an enterprise when such        B
   person has already direct or indirect control over another enterprise
   engaged in production, distribution or trading of similar or identical
   or substitutable goods or provision of a similar or identical or
   substitutable service, if—
              (i) the enterprise over which control has been acquired
   along with the enterprise over which the acquirer already has            C
   direct or indirect control jointly have,—
            (A) either in India, the assets of the value of more than
   rupees one thousand crores or turnover more than rupees three
   thousand crores; or
                                                                            D
              (B) [in India or outside India, in aggregate, the assets of
   the value of more than five hundred million US dollars, including
   at least rupees five hundred crores in India, or turnover more than
   fifteen hundred million US dollars, including at least rupees fifteen
   hundred crores in India; or]
                                                                            E
             (ii) the group, to which enterprise whose control has
   been acquired, or is being acquired, would belong after the
   acquisition, jointly have or would jointly have,—
             (A) either in India, the assets of the value of more than
   rupees four thousand crores or turnover more than rupees twelve
                                                                            F
   thousand crores or
              (B) [in India or outside India, in aggregate, the assets of
   the value of more than two billion US dollars, including at least
   rupees five hundred crores in India, or turnover more than six
   billion US dollars, including at least rupees fifteen hundred crores
   in India; or]                                                            G

      (c) any merger or amalgamation in which—
       (i) the enterprise remaining after the merger or the enterprise
   created as a result of the amalgamation, as the case may be,
   have,—                                                                   H
402            SUPREME COURT REPORTS                           [2018] 3 S.C.R.


A                    (A) either in India, the assets of the value of more than
            rupees one thousand crores or turnover more than rupees three
            thousand crores; or
                       (B) [in India or outside India, in aggregate, the assets of
            the value of more than five hundred million US dollars, including
B           at least rupees five hundred crores in India, or turnover more than
            fifteen hundred million US dollars, including at least rupees fifteen
            hundred crores in India; or]
                      (ii) the group, to which the enterprise remaining after
            the merger or the enterprise created as a result of the amalgamation,
C           would belong after the merger or the amalgamation, as the case
            may be, have or would have,—
                      (A) either in India, the assets of the value of more than
            rupees four-thousand crores or turnover more than rupees twelve
            thousand crores; or
D                     (B) [in India or outside India, in aggregate, the assets of
            the value of more than two billion US dollars, including at least
            rupees five hundred crores in India, or turnover more than six
            billion US dollars, including at least rupees Fifteen Hundred Crores
            in India”
E             16. Under section 5(a), a combination is formed if the acquisition
      by one person or enterprise of control, shares, voting rights or assets of
      another person or enterprise subject to certain threshold requirement
      that is minimum asset valuation or turn over within or outside India.
             17. Under Section 5(b) of the Act the combination is formed if the
F     acquisition of control by a person over enterprise when such person has
      already acquired direct or indirect control over another enterprise engaged
      in the production, distribution or payment of a similar or identical or
      substitutable good provided that the exigencies provided in section 5(b)
      in terms of asset or turnover are met.
G            18. Under section 5(c) merger and amalgamation are also within
      the ambit of combination. The enterprise remaining after merger or
      amalgamation subject to a minimum threshold requirement in terms of
      assets or turnover is covered within the purview of section 5(c).
            19. Once a particular transaction or a series of transactions falls
H     within the purview of combination, it is obligatory to report the same to
 COMPETITION COMMISSION OF INDIA v. THOMAS COOK                              403
       (INDIA) LTD. & ANR. [ARUN MISHRA, J.]

the Commission under section 6 of the Act. Section 6(1) prohibits            A
combinations which cause or likely to cause an adverse effect on the
competition and such a combination shall be void. Section 6(2) of the
Act requires that advance notice has to be given of the proposal to enter
into a combination and that has to be given within 30 days of approval of
the proposal relating to merger or amalgamation, execution of any
                                                                             B
agreement or other document or acquisition referred to in section 5(a).
Section 6 (2) makes it clear that no combination shall come into effect
until 210 days have elapsed from the date on which notice has been
given to the Commission under section 6(2) and the Commission has
passed orders under section 30(1), whichever is earlier. And once
mandatory notice is given under section 6(2), the Commission has to          C
deal with the same in accordance with the provisions contained in sections
29, 30 and 31. Certain exceptions are carved out as to Public Financial
Institutions, Foreign Investment Institutions, Banks or Public Venture
Funds etc. funds under section 6(4) of the Act.
       20. On 4.3.2011, Central Government in the exercise of its powers     D
under section 54(a) of the Act issued notification No. SO. 482 E dated
4.3.2011, commonly known as target-based exemptions, which reads as
under:
      “In exercise of the powers conferred by clause (a) of section 54
      of the Competition Act, 2002 (12 of 2003) the Central Government,      E
      in public interest hereby exempt an enterprise, whose control,
      shares, voting rights or assets are being acquired has assets of
      the value of not more than INR 250 crores in India or turnover of
      not more than INR 750 crores in India from the provisions of
      Section 5 of the said Act for a period of 5 years.”
                                                                             F
       21. Section 64 of the Act confers upon the Commission power to
make Regulations. Under section 64(3), the Regulations are to be placed
before the Houses of Parliament. On 11.5.2011, the Commission framed
the Competition Commission of India (Procedure in Regard to the
Transaction of Business Relating to Combinations) Regulations, 2011
(for short, “the Regulations, 2011”). Regulation 9(4) as it stood at the     G
relevant time, is as under:-
      9(4). Where the ultimate intended effect of a business transaction
      is achieved by way of a series of a steps or smaller individual
      transactions which are inter-connected or inter-dependent on each
                                                                             H
404              SUPREME COURT REPORTS                           [2018] 3 S.C.R.


A            other, one or more of which may amount to a combination, a single
             notice, covering all these transactions, may be filed by the parties
             to the combination.”
              22. It is relevant to note here that the Act and Regulations, 2011
      clearly envisage that a combination can consist of one or more
B     transactions. Under Regulation 9(4) of the Regulations, 2011, the parties
      have an option of giving either a single notice or multiple notices in respect
      of all the transactions. On 30.5.2011, sections 5 and 6 of the Act were
      brought into force.
            23. It is apparent that between the three respondent companies
C     de-merger of the resort of SHRIL on time-share basis took place. It
      was to be transferred to TCISIL in view of the equity shares of TCIL
      were to be issued to shareholders of SHRIL as per the ratio provided in
      the scheme. There was an amalgamation of SHRIL with its residual
      business into TCIL. There was shares subsequent transfer agreement.
      The TCISIL was to subscribe 2,06,50,000 shares of SHRIL to preferential
D     allotment amounting to 22.86 of the equity share capital.
             24. TCISIL was to acquire 19.94% of equity share capital of
      SHRIL. ‘Open Offer’ by TCIL and TCISIL was to purchase 26% of
      the equity share capital from public shareholders of SHRIL in terms of
      SEBI’s regulations and market purchases. TCISIL acquired 90,26,794
E     equity shares of SHRIL through purchase in Bombay Stock Exchange
      amount to 9.93% of equity share capital on the fully diluted basis. Public
      notice was published to the following effect:
             “Sterling Holiday Resort (India) Limited

F              Thomas Cook (India) Limited & Sterling Holiday Resort (India)
             Limited, announce merger
             •   Merger focused on synergies and jointly leveraging
                 growing Domestic & Inbound travel, Vacation Ownership
                 & Hospitality opportunities.
G            •    Post-merger, Sterling Holiday Resorts to continue
                  operations under the leadership of Ramesh Ramanathan
                  with an independent Board
             •   Based on equity investments and merger ratios the
                 aggregate value of the two companies is approximately
H                Rs.3000 Cr.
 COMPETITION COMMISSION OF INDIA v. THOMAS COOK                              405
       (INDIA) LTD. & ANR. [ARUN MISHRA, J.]

         Mumbai, February 7, 2014                                            A
         Thomas Cook (India) Ltd. (TCIL) – India’s leading integrated
         travel and travel related financial services company, and the
         27-year-old vacation ownership pioneer, Sterling Holiday
         Resorts India Limited announced a merger between the
         companies today. The transaction is expected to close by the        B
         fourth quarter of 2014, subject to customary closing conditions
         and regulatory approval as required.
         The part equity, part merger deal – estimated to be valued at
         Rs.870 Cr., is structured as a multi-stage process:
      
TCIL Group will make a Preferential Allotment Investment             C
             for approximately 23.24% of approximately Rs.190 Cr. into
             Sterling.
      
 TCIL Group purchases 23.63 % stake from Sterling
             shareholders for Rs.207 Cr.
                                                                             D
      
TCIL Group will make a mandatory open offer for buying
             up to 26% stake in Sterling for Rs.230 Cr.
      
TCIL Group has an option to buy an additional 7.22%
             stake from shareholders for Rs.63 Cr.
      
The merger will involve shares of TCIL being issued to               E
             Sterling shareholders at a defined swap ratio or 120:100
      The merger brings significant synergies to both partners – with
      Thomas Cook India gaining access to Sterling Resorts’ network
      of 19 resorts in 16-holiday destinations across India.
                                                                             F
      The company also has 15 additional sites where it plans to add
      new resorts in the coming years.
      Serling’s affiliation with Resort Condominiums International (RCI)-
      the global expert in exchange vacations, also allows its members
      to vacation in over 4000 RCI affiliated resorts all over the world.”   G
      25. The resolution passed by the Board of Director of TCIL on
7.02.2014. Share Subscription Agreement etc. and similar resolutions
were passed by TCISIL and SHRIL.
      26. It is apparent that in the notification made under section 6(2)
on 14.2.2014 notifiable transactions were shown regarding merger and         H
406             SUPREME COURT REPORTS                             [2018] 3 S.C.R.


A     amalgamation. It was also mentioned that parties have also contemplated
      certain other transactions in view of the notifiable transactions, they
      were the subscription of equity shares, SPA, open offer and market
      purchase. It is crystal clear from the aforesaid application itself that all
      these transactions were part of the same transactions and even before
      notifying the transactions of purchase from the market on 14.2.2014, it
B
      was consummated between 10.2.2014 to 12.2.2014. It is crystal clear
      that market purchases being a part of the composite combination was
      consummated before giving notice to the Commission. Joint Press
      Release dated 7.2.2014 clearly indicated SPA as an open offer. The
      Board of Directors of the respective parties authorized market purchases
C     on the same day. All the said transactions are intrinsically connected
      and interdependent with each other and form part of one viable business
      transaction.
             27. Though market purchases have no references in MCA, SA,
      SPA and the scheme, the facts, and circumstances of the case, as the
D     scheme was prepared on the same day and the three companies passed
      the resolution on the same day. All other acquisitions were made on the
      same day. Market purchases having been consummated between
      10.2.2014 to 12.2.2014, which is almost after finalizing the composite
      combination clearly suggested that market purchases would not have
      taken place in the absence of scheme and the other acquisitions. In
E     case they were not part of the same scheme that would not have been
      referred to in the notice filed by them with the Commission on 14.2.2014.
      Thus, in our considered opinion market purchases were not independent
      and were intrinsically related to the scheme and other acquisitions.
             28. Coming to the question of the exemption that was claimed,
F     the market purchases do not qualify as a combination in view of the
      target exemption notification which exempts an enterprise if ‘assets’
      are of the value not more than INR Rs.250 crores in India or ‘turnover’
      of not more than INR Rs.750 crores in India. When series of transactions
      is envisaged to accomplish a combination, all the transactions have to be
G     taken into consideration by the Commission, not an isolated transaction.
      While it is open for the parties to structure their transactions in a particular
      way the substance of the transactions would be more relevant to assess
      the effect on competition irrespective of whether such transactions are
      pursued through one or more step/transactions. Structuring of transactions
      cannot be permitted in such a manner so as to avoid compliance with the
H
 COMPETITION COMMISSION OF INDIA v. THOMAS COOK                                   407
       (INDIA) LTD. & ANR. [ARUN MISHRA, J.]

mandatory provisions of the Act. For ensuring the compliance with the             A
requirements of the Act it is open to considering whether the particular
step was an individual transaction or part of the whole of the transaction.
It was evident in the facts and circumstances of the case as TCISIL
would not have made market purchase in the absence of any one
transaction. Thus, market purchases could not have been termed to be
                                                                                  B
independent transaction.
       29. Coming to the submission with respect to the effect of regulation
9(4) of the combination regulation. It is apparent that there is power
under the Regulation 9(4) to consider the ultimate intended effect of
transaction achieved by series of steps which are interconnected or inter-
dependent on each other, it would depend upon the facts and                       C
circumstances of the case and a single notice may be filed by the parties
to a combination. The Regulation envisages the possibility of a business
transaction may be achieved by a combination by way of interconnected
or interdependent steps/ transactions. Enabling provision to file single
notice would not mean that in what particular manner transaction has              D
taken place, same is to be determined on the facts and circumstances.
The market purchases were not independent could not have been viewed
in isolation for the purpose of the exemption.
       30. The provision of Regulation 9(4) clearly acknowledges the
possibility of the business transaction being interconnected or                   E
interdependent steps of such transactions. Technical interpretation to
isolate two different steps of transactions of a composite combination
would be against the spirit and provision of the Act. Market purchases
were not independent and could not be used in isolation for the purpose
of any exemption. Regulation 9(4) cannot be interpreted to enable
consummation by a composite combination before giving notice to the               F
Commission. That would be defeating the intent and purpose of the Act
and in particular section 5 and 6 thereof.
      31. If the ultimate objective test is applied, it is apparent that market
purchases were within view of the scheme that was framed. As such
the subsequent change of law also did not come to the rescue of the               G
respondents considering the substance of the transaction. The market
purchases were part of the same transaction of the combination.
       32. Lastly, the submission raised that there were no malafides on
the part of the respondent as such penalty could not have been imposed.
                                                                                  H
408             SUPREME COURT REPORTS                            [2018] 3 S.C.R.


A     We are unable to accept the submission. The mens rea assumes
      importance in case of criminal and quasi criminal liability. For the imposition
      of penalty under section 43A, the action may not be mala fide in case
      there is a breach of the statutory provisions of the civil law, penalty is
      attracted simpliciter on its violation. The imposition of penalty was
      permissible and it was rightly imposed. There was no requirement of
B
      mens rea under section 43A or intentional breach as an essential element
      for levy of penalty. Section 43A of the Act does not use the expression
      “the failure has to be willful or mala fide” for the purpose of imposition
      of penalty. The breach of the provision is punishable and considering the
      nature of the breach, it is open to impose the penalty.
C            In Hindustan Steel Ltd. v. State of Orissa AIR 1970 SC 253,
      with respect to imposition of penalty on failure to comply with the civil
      obligation this Court has laid down thus:
             “In our opinion, mens rea is not an essential ingredient for
             contravention of the provision of a civil act. In our view, the penalty
D            is attracted as soon as the contravention of the statutory obligations
             as contemplated by the Act is established and, therefore, the
             intention of the parties committing such violation becomes
             immaterial. In other words, the breach of a civil obligation which
             attracts penalty under the provisions of an Act would immediately
E            attract the levy of penalty irrespective of the fact whether the
             contravention was made by the defaulter with any guilty intention
             or not. This apart that unless the language of the statute indicates
             the need to establish the element of mens rea. It is generally
             sufficient to prove that a default in complying with the statute has
             occurred. The penalty has to follow and only the quantum of penalty
F            is discretionary.
             xxx
                  In our considered opinion, a penalty is attracted as soon as
             the contravention of the statutory obligation as contemplated by
G            the Act and the Regulation is established and hence intention of
             the parties committing such violation becomes wholly irrelevant.
             xxx
                 We also further hold that unless the language of the statute
             indicates the need to establish the presence of mens rea, it is
H
 COMPETITION COMMISSION OF INDIA v. THOMAS COOK                                409
       (INDIA) LTD. & ANR. [ARUN MISHRA, J.]

       wholly unnecessary to ascertain whether such a violation was            A
       intentional or not. On a careful perusal of Section 15(D) (b) and
       Section 15-E of the Act, there is nothing which requires that mens
       rea must be proved before a penalty can be imposed under these
       provisions. Hence once the contravention is established then the
       penalty is to follow.”
                                                                               B
      33. The imposition of penalty under section 43A is on account of
breach of a civil obligation, and the proceedings are neither criminal nor
quasi-criminal; the penalty has to follow. Only discretion in the provision
under section 43A is with respect to quantum of penalty.
      34. We find that in the facts and circumstances of the case, the         C
order passed by the Commission was just and proper and in accordance
with law, which the Tribunal set aside on wrong premises. Thus, the
order of the Tribunal cannot be said to be legally sustainable.
       35. The nominal penalty has been imposed by the Commission of
Rupees One crore only considering the facts and circumstances of the           D
case and that there was a violation of the provision. Thus, we find no
ground to interfere with the nominal penalty that has been imposed in
the instant case.
       36. Resultantly, the appeal filed by the Commission is allowed, the
order passed by the Tribunal is set aside, and passed by the Commission        E
imposing penalty of Rupees One crore is hereby restored. No costs.


Kalpana K. Tripathy                                          Appeal allowed.


                                                                               F




                                                                               G




                                                                               H