In a most significant development, we saw as recently as on June 13, 2022 that the National Company Law Appellate Tribunal (“NCLAT”), New Delhi Bench, comprising of Justice M Venugopal (Judicial Member) and Shri Ashok Kumar Mishra (Technical Member), while adjudicating an appeal in Amazon.com NV Investment Holdings LLC v Competition Commission of India & Ors., Company Appeal (AT) No. 1 of 2022 With Competition Appeal (AT) No. 2 of 2022 With Competition Appeal (AT) No. 3 of 2022 has decisively upheld the order dated 17.12.2021 passed by the Competition Commission of India (“CCI”) whereby Amazon was directed to pay Rs 200 crores penalty under Section 43A of the Competition Act, 2002. The NCLAT has directed Amazon to deposit the penalty within 45 days and comply with the CCI order. It must comply with accordingly as directed.
At the outset, this extremely laudable, learned, landmark and latest judgment by NCLAT sets the ball rolling by first and foremost putting forth in para 1 that, “The Appellant/Amazon.com NV Investment Holdings LLC has preferred the instant Competition Appeal (AT) No. 01 of 2022 as an ‘Aggrieved Person’ (under Section 53 (B) of the Competition Act, 2002) on being dissatisfied with the ‘impugned order’ dated 17.12.2021 (vide Ref No.C-2019/09/688/7099), passed by the ‘1st Respondent/Competition Commission of India (CCI)’ in proceedings under Sections 43A, 44 and 45 of the Competition Act, relating to certain findings of the ‘1st Respondent/CCI’ and the consequential directions imposing a penalty of INR Rs.202 Crores and a further direction that the ‘Approval’ accorded to the Combination Registration No. 688 was kept in abeyance till disposal of the ‘Notice’ under Form I with a direction to the ‘Appellant’ to refile ‘for Approval’ in Form II.”
It is stated in para 119 that, “The Learned Additional Solicitor General for the 1st Respondent/Competition Commission of India’ submits that the ‘Appellant’ (a direct Subsidiary of Amazon.com Inc (ACI), was issued with a ‘Show Cause Notice’ dated 04.06.2021, by the 1st Respondent/Commission and that the ‘impugned order dated 17.12.2021 was passed against the ‘Appellant’/‘Amazon’ under Sections 43A, 44 and 45 of the Competition Act, 2002.”
It is then stated in para 120 that, “According to the 1st Respondent/CCI, the ‘Appellant’ wanted to notify a ‘Combination’ (Bearing Combination Registration No. C-2019/09/688 to it (1st Respondent/CCI), through ‘Notification’ dated 23.09.2019 (‘Notice’) as per Section 6 (2) of the Competition Act, 2002, in Form I of Schedule II to the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (Combination Regulations).”
Also, it is then mentioned in para 121 that, “It is represented on behalf of the 1st Respondent/CCI that the ‘Proposed Combination’, as sought to be notified by the ‘Appellant’ to the ‘1st Respondent/CCI’ caused acquisition of 49% shares of the ‘FCL’ by the ‘Acquirer’ (Transaction III), constituent steps among other things concerning Intra-promoter group transactions between 1) ‘Future Coupons Private Limited’ 2) ‘Future Corporate Resources Private Limited’ (‘FCRPL’) and 3) ‘Future Retail Limited’ (‘FRL’).”
It deserves mentioning that it is then enunciated in para 123 that, “On behalf of the 1st Respondent/CCI, it is submitted that the ‘Appellant’/‘Amazon.com NV Investment Holdings LLC’, had mentioned that ‘it does not have any direct or indirect Shareholding’ in ‘FRL’ and further that it would not acquire directly any rights in ‘FRL’ and was only acquiring ‘Limited Investor Protection Rights’ via ‘FCPL’ (2nd Respondent) with a view to protect the value of its investment in ‘FCPL’. That apart, it was also mentioned that rights were derived from the rights granted to ‘FCPL’ (2nd Respondent) in terms of the ‘FRL SHA’, which was negotiated by the ‘Promoters’, ‘FRL’ and ‘FCPL’, independent of the investment by ‘Appellant’ in ‘FCPL’ (2nd Respondent) and with a view to unlock value for ‘FCPL’ (2nd Respondent). Therefore, a plea is taken on behalf of the ‘1st Respondent/CCI’ that the whole attention, as represented, during the time of notifying the ‘Combination’ was ‘FCPL’/‘2nd Respondent’ and its ‘Business’ with ‘rights’ in ‘FRL’ being reflected as mere ‘Investor Protection Rights’.”
Be it noted, it is then disclosed in para 124 that, “The stand of the 1st Respondent/CCI is that as per terms of ‘Part V’, description of the ‘Combination’ of the abovementioned ‘Notice’, the ‘Combination’ notified by the ‘Appellant’ encompassed the under-mentioned three transactions:
i) Transaction I: The issue of 9,183,754 Class A voting equity shares of Future Coupons Private Limited (FCPL) to Future Coupons Resources Private Limited (FCRPL). Prior to, and immediately post issuance of such equity shares, FCPL will be a wholly owned subsidiary of FCRPL (This was presented as being nothing but an internal reorganization within the Future Group); and
ii) Transaction II: Transfer of 13,666,287 shares of FRL held by FCRPL (representing Two decimal Five Two Percent (2.52%) of the issued, subscribed and paid-up equity share capital of Future Retail Limited (FRL), on a Fully Diluted Basis) to FCPL (This was also presented as being nothing but an internal re-organization within the Future Group); and
iii) Transaction III: The acquisition of the Subscription Shares representing Forty Nine percent (49%) of the total issued, subscribed and paid-up equity share capital of FCPL (on a Fully Diluted Basis) by the Appellant, by way of a preferential allotment and coupon business with a view to unlock value for FCPL as it showed potential for long terms value creation and return on investment).”
It is then revealed in para 125 that, “On behalf of the 1st Respondent/CCI it is brought to the notice of this ‘Tribunal’ that the Appellant’s ‘Notice’ among other things had mentioned the following:
i) The Appellant and the relevant entities and persons, belonging to the Future Group had entered into: (a) a share subscription agreement dated 22.08.2019 (FCPL SSA); and (b) a shareholders agreement dated 22.08.2019 to determine respective rights and obligations as shareholders of FCPL (FCPL SHA).
ii) The parties had only executed FCPL SSA and FCPL SHA in relation to the Combination. (As aforementioned, it was represented that FCPL’s potential for long term value creation and providing returns on its investment, with a view to strengthen and augment the business of FCPL).
iii) The Appellant would acquire certain rights in terms of FCPL SHA to protect its investment in FCPL.
iv) Before the ‘Combination’, ‘FCPL’ had acquired equity warrants of ‘FRL’, Convertible into ‘Equity Shares’ representing 7.30% of the share capital of ‘FRL’, within 18 months of the date of allotment (Warrants Transaction). FCPL and FRL had entered into FRL SHA, which sets forth inter se mutual rights and obligations of the parties as shareholders.
v) The Appellant had submitted a presentation captioned ‘Taj Coupons – Business Plan for Five Years’ in response to Item 8.8 of Form I, which require the ‘notifying party’ to disclose documents, material (including reports, studies, plan, latest version of other documents, etc.) considered by and/or presented to the board of directors and/or key managerial person, in relation to the ‘proposed combination’.
vi) Existing and contemplated business arrangement/agreements between FRL and Amazon Seller Services Private Limited (ASSPL) (Business Solutions Agreement, Prime Now Program Terms, Prime Now FRL Amendment Agreement and Softlines FRL Agreement, referred to in paras 62 to 66, pages 46 to 48 of the Notice at pages 54 to 56, Convenience Compilation-II); agreement between Amazon Retail India Private Limited (ARIPL) and Future Consumer Limited (Future Consumer); Memorandum of Understanding among Amazon Pay (India) Private Limited (APIPL) and FRL; collectively referred to as Commercial Arrangements or Business Commercial Agreements.
But it was mentioned that all these ‘Business Commercial Agreements’ were neither inter connected with, nor part of the ‘Combination’; or not related to the ‘Combination’ whatsoever.”
It is worth noting that it is then postulated in para 317 that, “In pith and substance, the ‘Appellant/Amazon’ had provided the presentation ‘Taj Coupons – Business Plan for five years’ which incorrectly formulated the Appellant/Amazon’s elemental intent of the ‘Combination’ as permitting it to enter the ‘Gift Voucher Business of FCPL, etc.’, without any indication to ‘FRL’ and had not provided the internal email correspondences as mentioned supra which is clearly an unfavourable circumstance to and in favour of ‘Appellant/Amazon’ in the earnest opinion of this ‘Tribunal’. Furthermore, the ‘Appellant/Amazon’ had omitted to present the other documents covering the actual purpose depicted in the internal emails, in any of the materials furnished against Item 8.8 of Form I or Question 2.1 of the 1st Respondent/CCI’s letter dated 24.10.2019 seeking additional information in regard to the submissions made against Item 8.8 (presentation captioned ‘Taj Coupons – Business Plan for five years’ vide Page 219 – Convenience Compilation of 1st Respondent/CCI (Vol. 1 (Part-II)). As such, on the part of the ‘Appellant/Amazon’ there is a ‘Misstatement of Fact’/‘Misrepresentation’ in not exhibiting the internal emails which make known the real ambit and purpose of the notified transactions, thereby misleading the ‘1st Respondent/CCI’ in approving the ‘Proposed Transaction’ (through an ‘Approval Order’ dated 28.11.2019), presented by the ‘Appellant/Amazon’, all the more, when the ‘Appellant/Amazon’ had not presented the ‘Business Transaction’, as opined by this ‘Tribunal’.”
It ought to be stated that it is then envisaged in para 318 that, “Dealing with the ‘aspect of Misrepresentation’ by the ‘Appellant/Amazon’, in regard to the description of the ‘Approval’ accorded by the ‘1st Respondent/CCI’, by virtue of its ‘Order’ dated 28.11.2019, this ‘Tribunal’ pertinently points out that the ‘Appellant/Amazon’ through its ‘Claim Statement’ dated 04.07.2021 before the ‘Arbitral Tribunal’ (pertaining to the ‘Arbitration Proceedings’) had expressed that the ‘1st Respondent/CCI’ had approved the ‘Proposed Combination’ after taking into account the ‘Appellant/Amazon’ consistent stand that ‘FRL’, its ‘Retail Assets’ were a material inducement for the ‘investment’.”
It is then stipulated in para 319 that, “However, the ‘Appellant/Amazon’ before the Hon’ble High Court of Delhi in its ‘Appeal’ had submitted that its ‘Notice’ exhibited that it was (‘Appellant/Amazon’), the ultimate beneficiary of the ‘rights’ granted to ‘FCPL’ under the ‘FRL SHA’ (vide Annexure 8 to 2nd Respondent/FCPL’s complaint filed before the 1st Respondent/CCI, at Page 1384 of Volume No.6 of Convenience Compilation of the ‘Appellant/Amazon’).”
As a corollary, it is then pointed out in para 320 that, “From the above, it is candidly clear that just opposite to the ‘Factum of Approval’ of the ‘Proposed Transaction’, the ‘Appellant/Amazon’ had made a ‘Misstatement/Misrepresentation’ before the aforesaid ‘Forums’ that the ‘Business Transaction’ was notified to the ‘1st Respondent/CCI’ and approved by it.”
Quite significantly, the Bench then notes in para 371 that, “Although, the ‘Appellant’ (‘AICPDF’) in Comptn. App (AT) No. 02 of 2022, has prayed for setting aside the ‘Approval Order’ dated 28.11.2019 to the limited extent stating that the ‘1st Respondent/CCI’ cannot examine a ‘Transaction’ which is an ‘illegality’ and further that the ‘1st Respondent/CCI’ cannot approve a ‘Transaction’ which is in ‘negation to law’ and as such, the ‘Commission’ should have revoked the ‘Approval Order’ dated 28.11.2019, all the more, when there was no valid ‘Notice’ at all, in the ‘eye of law’, there was blatant suppression and misrepresentation and moreover, in the absence of a valid ‘Notice’, the Appellant/Amazon’s ‘Proposed Combination’ could not at all take effect or exist, in the ‘eye of law’ and is ‘void ab initio’ and that apart, the `1st Respondent/CCI’ should not have `kept on hold’ the `Approval Order’ dated 28.11.2019, etc., it is pertinently pointed out by this ‘Tribunal’ that the ‘1st Respondent/CCI’ (as a ‘Statutory Regulator’), keeping in tune with the objectives of ‘Competition Law’ in our Country, to reach the highest sustainable level of economic growth, entrepreneurship, to promote sustainable and economic development, support good governance, etc., has wide powers to keep the ‘Approval’ granted by it ‘on Hold’/‘Abeyance’, etc., as per Section 45 (2) of the Competition Act, 2002, when the ‘Commission’, earlier, came to a conclusion that Section 44 of the Competition Act, 2002, was breached vis-à-vis ‘Combination Approval’ by the ‘Appellant/Amazon’. Suffice it for this ‘Tribunal’, to point out that the ‘Power’ given to the ‘1st Respondent/CCI’ to even annul an ‘Approval Order’, takes within its purview to ‘keep on hold, the ‘Approval Order’ dated 28.11.2019 in ‘Abeyance’, when it provided an opportunity to the ‘Appellant/Amazon’ to present ‘Form II’ afresh. Looking at from any angle, the Comptn. App (AT) No. 02 of 2022 sans merits.”
As an inevitable fallout, it is then held in para 372 that, “In the result, the Competition Appeal (AT) No. 02 of 2022 is dismissed. No costs. IA Nos. 127, 128 and 129 of 2022 in Competition Appeal (AT) No. 02 of 2022 are closed.”
Furthermore, the NCLAT then hastens to add in para 375 that, “In the instant ‘Appeal’ (Comptn. App (AT) No. 03 of 2022 notwithstanding the fact that the ‘Appellant/CAIT’ has prayed for setting the ‘impugned order’ dated 17.12.2021 passed by the ‘1st Respondent/CCI’ (to a limited extent), to set aside the ‘Approval Order’ dated 28.11.2019, passed by the ‘1st Respondent/CCI’ in ‘Notice’ dated 23.09.2019 (Registration No.C-2019/09/688) filed by the ‘Appellant/Amazon’, among other grounds that a ‘Party’ cannot get away from the consequences of ‘suppression’, ‘false statements’ and ‘misrepresentations’, and that the direction of the ‘1st Respondent/CCI’ in permitting a ‘Notification’ is in effect, condoning the serious offences of the ‘Appellant/Amazon’, etc.”
Of course, the NCLAT then hastens to add in para 376 that, “This ‘Tribunal’ taking note of the fact that the ‘1st Respondent/CCI’ has wide powers (including the residuary powers) as per Section 45 (2) of the Competition Act, 2002, besides, the ‘inherent implied powers’ as a ‘Statutory Regulator’, to satisfy the aim and objective of the Competition Act, 2002, is of the cock sure opinion that the power of the ‘1st Respondent/CCI’ to grant an ‘Approval’ includes the power to keep its ‘Order’ in ‘Abeyance’, when the ‘Appellant/Amazon’ had breached vis-à-vis ‘Combination Approval’ and as such, even though the ‘Appellant’ as a ‘Stakeholder’/‘Aggrieved’ has filed the instant Comptn. App (AT) No. 03 of 2002, the same being maintainable, is not entitled to the ‘Reliefs’ prayed for in the subject matter in issue, in the present ‘Appeal’. Consequently, the Comptn. App (AT) No. 03 of 2022 is devoid of merits.”
Finally, NCLAT then concludes by holding in para 377 that, “In fine, the Competition Appeal (AT) No. 03 of 2022 is dismissed. No costs. IA Nos. 140, 141 and 142 of 2022 in Competition Appeal (AT) No. 03 of 2022 are closed. The ‘Office of the Registry’ is directed to send copy of this ‘Judgment’ to the ‘Parties’ in Comptn. App (AT) No. 1, Comptn. App (AT) No. 2 and Comptn. App (AT) No. 3 of 2022, accordingly.”
In sum, we thus see that the NCLAT clearly, cogently and convincingly upholds the imposition of Rs 200 crores penalty on Amazon by CCI as “fair and sensible” and assigns adequate reasons for it. We have already discussed this quite in detail as stated hereinabove. We thus see that the NCLAT did not find anything invariably wrong in what the CCI held and thus very rightly upheld it in its learned judgment which we have discussed exhaustively. No denying it!