Competition Commission of India v. Thomas Cook (India) Ltd., (2018) 6 SCC 549

The leading decision on interconnected transactions and gun jumping. A corporate reorganisation was carried out through a series of steps: a demerger, an amalgamation, share subscription and purchase agreements, an open offer and purchases of shares on the market. The market purchases were completed before the combination was notified, the parties contending that those purchases were independently exempt. The Supreme Court held that the steps formed a single composite combination, that an exemption must be assessed for the whole and not step by step, and that the penalty under Section 43A does not require any mala fide intent.

1. The Facts

Thomas Cook Insurance Services and related entities acquired Sterling Holiday Resorts through a structure comprising a demerger of one business, an amalgamation of the residual entity, agreements to subscribe for and to purchase shares, a mandatory open offer under the takeover regulations, and purchases of shares in the open market. Notice of the combination was given to the Commission in respect of the demerger and the amalgamation, the parties claiming that the acquisitions of shares fell within the exemption then available for small targets and for minority acquisitions. By the time the notice was given, the market purchases had already been completed.

2. The Question

Whether the market purchases were an independent transaction, to be assessed on their own and exempt from notification, or a step in a single interconnected transaction, in which case completing them before approval was consummation of part of a combination and therefore a breach of the standstill obligation.

3. The Holdings

1. Composite combination. Where a series of transactions are interrelated and interdependent, in the sense that the ultimate commercial objective can be achieved only if all of them are completed, they constitute a single composite combination. The Court applied the test the Commission had earlier articulated in its own decisions.
2. Exemptions are assessed for the whole. A step which, taken alone, would fall within an exemption does not escape notification if it is part of such a composite transaction. The exemptions must be applied to the combination as a whole, not to each step in isolation. Any other view would allow parties to divide a notifiable transaction into exempt fragments.
3. Consummating one step is gun jumping. Completing the market purchases before the Commission's approval was consummation of part of the combination and a contravention of the obligation in Section 6(2).
4. No mens rea. The penalty under Section 43A is imposed for breach of a civil obligation. Neither mala fide intent nor deliberate concealment need be established, the Court applying the principle stated in the securities context in SEBI v. Shriram Mutual Fund, (2006) 5 SCC 361.
5. The companion case. The same principles were applied in the connected appeal concerning SCM Soilfert, where the acquirers had similarly completed market purchases forming part of a larger transaction.

4. Why the Case Is Still Cited

• Interconnected transactions. It is the authority for treating a series of steps as one combination, and the principle is carried into the Competition Commission of India (Combinations) Regulations, 2024, which require interconnected steps to be notified together and aggregate their value for the deal value threshold.
• Gun jumping. It establishes that the obligation is strict, so that a party which misjudges the position in good faith is nonetheless liable.
• Structuring advice. It is the reason transaction documents now provide expressly that no step will be completed until the Commission has approved, and the reason interim covenants are drafted carefully.

5. Related Topics and Provisions