SEBI
Topic80 Securities Laws Competition Act IBC Intersection
Securities Laws & Competition Act / IBC — Intersection & Overlap
Supplementary Topic — CCI Approval in Takeovers, IBC + SAST, Delisting & SEBI's Cross-Regulatory Role | SEBI Law Officer
Large-scale corporate transactions — mergers, acquisitions, and insolvency resolutions — sit at the intersection of multiple regulatory frameworks. A major acquisition may simultaneously require CCI (Competition Commission) approval under the Competition Act 2002, open offer compliance under SAST Regulations, SEBI approval for listed company restructuring, and NCLT oversight under the Insolvency and Bankruptcy Code 2016. Understanding how these frameworks interact — who has primacy, what happens when they conflict, and how timing obligations are managed — is essential for SEBI Law Officer examinations.
1. Competition Act 2002 & SAST Regulations — CCI Approval in Takeovers
Acquisitions that cross the Competition Act's thresholds require prior CCI approval — these thresholds are prescribed under Section 5 of the Competition Act:
Threshold | Trigger |
|---|---|
Assets > ₹2,000 crore OR Turnover > ₹6,000 crore (combined — India) | CCI approval required for the acquisition |
Global assets > USD 1 billion (or USD 500 million in India) | CCI approval required |
Global turnover > USD 3 billion (or USD 1.5 billion in India) | CCI approval required |
How CCI approval interacts with SAST open offer:
- PA cannot be delayed: SAST Regulation 13 requires PA within 2 working days of triggering event — this cannot be delayed pending CCI approval. Daiichi Sankyo v. Zenotech (SAT 2009) confirmed this.
- CCI approval as a condition: The PA and open offer can be conditional on receipt of CCI approval — if CCI refuses, this is a valid ground for withdrawal under SAST Regulation 23(1).
- Timeline management: The open offer tendering period can be scheduled after CCI approval is obtained — provided the PA and DPS timelines are adhered to.
2. IBC 2016 & SAST Regulations — Resolution of Listed Companies
When a listed company undergoes Corporate Insolvency Resolution Process (CIRP) under the IBC:
Issue | Position |
|---|---|
Does SAST apply to resolution applicant? | Yes — if resolution plan results in acquisition of 25%+ or control in listed company. However, NCLT-approved scheme is exempt under SAST Regulation 10(1)(c)/(k). |
IBC vs SAST conflict | IBC Section 238: IBC provisions override any other law, including SEBI regulations. NCLT-approved resolution plan = primacy over SAST open offer. Arcelor Mittal v. Satish Kumar Gupta (2019 SC). |
SEBI participation in NCLT proceedings | SEBI should be notified and given opportunity to present views in NCLT proceedings regarding listed companies — protects shareholder interests. |
Moratorium under IBC (Section 14) | During CIRP, moratorium prevents: suits; enforcement of security interests; transfer of assets. Question: does moratorium prevent trading in listed company's shares? NCLT has held moratorium does not restrict secondary market trading. |
3. SEBI (Delisting) Regulations 2021 — Interaction with SAST
Delisting — voluntary removal of a company's shares from stock exchanges — is governed by SEBI (Delisting of Equity Shares) Regulations 2021. Key interactions with SAST:
- Delisting ≠ Open offer: Delisting under SEBI (Delisting) Regulations is a separate process from a SAST open offer. A delisting is exempt from SAST open offer obligation (SAST Regulation 10(1)(g)).
- Reverse book building (RBB): The delisting price is determined through reverse book building — shareholders bid the minimum price they will accept; the acquirer discovers the 'discovered exit price'.
- Floor price: The delisting floor price is determined as per SEBI formula (similar to SAST offer price formula); the final delisting price = highest of RBB discovered price and floor price.
- 90% threshold: Delisting succeeds only if the acquirer + PAC + tendering shareholders collectively hold 90% of total shares post-delisting offer. If not reached, the delisting is considered failed.
4. FEMA Compliance in Cross-Border Acquisitions
Foreign acquirers acquiring shares in Indian listed companies must comply with both SAST Regulations and FEMA 1999 (Foreign Exchange Management Act):
- Sectoral caps under FDI policy: certain sectors have foreign investment limits (e.g., media, defence, insurance) — a foreign acquirer must ensure their post-acquisition holding does not breach sectoral FDI limits.
- Mode of payment: FEMA prescribes permissible modes of payment for acquisition of Indian shares by foreigners — generally through NRI/FPI/FDI routes only.
- Reporting requirements: all acquisitions above prescribed thresholds must be reported to RBI under FEMA.
- Combined SEBI-RBI oversight: SEBI processes the open offer compliance; RBI monitors the foreign exchange implications of the transaction.
5. Key Cross-Regulatory Cases
📖 Arcelor Mittal India Pvt. Ltd. v. Satish Kumar Gupta (2019) 2 SCC 1 Facts: Arcelor Mittal's acquisition of Essar Steel (a listed company) through IBC CIRP raised the question of whether SAST open offer was required and whether IBC's Section 238 'notwithstanding' clause overrode SAST obligations. Held: The Supreme Court held that IBC's Section 238 gives resolution plans approved by NCLT supremacy over all other laws including SEBI's SAST Regulations. SEBI must be notified and given opportunity to be heard in NCLT proceedings. The resolution applicant is entitled to the SAST Regulation 10(1)(c) exemption for NCLT-approved schemes. Ratio: IBC SECTION 238 SUPREMACY: NCLT-approved resolution plan overrides SAST open offer obligations. SEBI must participate in NCLT to protect shareholder interests. Resolution plan acquisition = Regulation 10(1)(c) exemption from open offer. |
6. Model Examination Questions
Q1. How do the Competition Act 2002 and IBC 2016 interact with the SAST Regulations 2011? What is the significance of Section 238 of IBC?
Competition Act + IBC vs SAST — Cross-Regulatory Interaction Model Answer — COMPETITION ACT + SAST: Acquisitions above Section 5 thresholds require prior CCI approval. However, the SAST PA cannot be delayed pending CCI approval — it must be made within 2 working days of the triggering event (Daiichi Sankyo v. Zenotech SAT 2009). CCI approval is built in as a condition of the open offer — if CCI refuses, SAST Regulation 23(1)(a) permits withdrawal of the offer. IBC + SAST: When a listed company undergoes CIRP, the resolution applicant who acquires control/25%+ equity under the resolution plan would normally trigger SAST. However, Regulation 10(1)(c) exempts NCLT-approved schemes from open offer obligations. SECTION 238 IBC (Supremacy Clause): 'The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.' In Arcelor Mittal (2019 SC), the Court applied Section 238 to hold that an NCLT-approved resolution plan overrides SAST — SEBI must participate in NCLT proceedings to protect listed company shareholders. DELISTING INTERACTION: Delisting under SEBI (Delisting) Regs 2021 is exempt from SAST (Regulation 10(1)(g)). Delisting uses reverse book building; succeeds only on 90% holding threshold. FEMA: foreign acquirers must simultaneously comply with SEBI's SAST and RBI's FEMA requirements — sectoral caps, mode of payment, and reporting obligations run concurrently. |
🎯 EXAM POINTERS — Topic 80: Securities Laws & Competition Act / IBC
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