Delhi High Court to review CCI’s ‘green channel’ consent to Independent Sugar to acquire Hindusthan National Glass

Delhi High Court to review CCI’s ‘green channel’ consent to Independent Sugar to acquire Hindusthan National Glass

The matter will be heard on 20 August

In a high stakes battle, the Delhi High Court will revisit the Competition Commission of India's (CCIs) ‘green channel’ approval for Independent Sugar Corporation Limited (INSCO) to acquire Hindusthan National Glass & Industries Limited (HNGIL).

The proposed acquisition is a central component of HNGIL's ongoing Corporate Insolvency Resolution Process (CIRP). The re-examination follows a writ petition filed by rival bidder AGI Greenpac Limited. Early this year, its resolution plan (RP) for HNGIL was declared unsustainable by the Supreme Court.

AGI Greenpac challenged the recent CCI order, dismissing its objections and upholding the procedural validity of INSCO's green channel filing.

AGI's cited the apex court’s judgment stating that prior CCI approval under Section 31(4) of the Insolvency and Bankruptcy Code (IBC) was mandatory before the Committee of Creditors' (CoC) approval of a RP.

The ruling had invalidated AGI's previously approved RP for HNGIL due to lack of CCI approval in October 2022, the date of the CoC voting.

The top court had directed the CoC to reconsider INSCO's plan only if it "possessed the requisite CCI approval as on 28.10.2022" and was compliant with all applicable laws.

AGI contended that INSCO's green channel approval, received on September 2022, was procedurally deficient due to an alleged violation of mandatory joint filing requirements and concerns of inter-connected transactions of a 5 percent equity sale to creditors.

Appearing for AGI, Senior Advocate D.S. Naidu, asserted that INSCO's ‘green channel’ application was unilaterally filed, without involving HNGIL or the CoC, despite them being party to the proposed combination.

The company submitted that Regulation SA of the Combination Regulations, 2011, mandated a joint filing by all ‘parties to the combination.’ It cited the Supreme Court judgment that the term 'to the parties to the combination' could not be restricted to the proposed acquirer alone. It added that the unilateral filing constituted a ‘blatant and foundational breach’ of Regulation 5A, rendering the deemed approval ‘void ab initio’ due to a procedurally deficient and materially misleading declaration.

In its recent order, the CCI had countered the argument. It stated that Section 6(2) of the Competition Act required notice by the 'person or enterprise, who or which proposed to enter into a combination' and ‘does not envisage filing of notice of a proposed combination by the parties to a combination.’

The Commission cited Regulation 9, which differentiates filing obligations based on the combination. It specified, “In case of an acquisition, the acquirer shall file the notice.” It further explained the Supreme Court's interpretation of ‘parties to a combination’ by stating that it was in the context of a show-cause notice under Section 29, and ‘not the obligation to file a notice’ under Section 6(2).

Thus, the CCI dismissed AGI's request to declare INSCO's deemed approval void ab initio, asserting ‘no merit’ in the case.

However, AGI highlighted that INSCO's RP included an offer of a 5 percent non-controlling minority equity shareholding to certain lenders (HNGIL), who were members of the CoC. It added that the acquisition of shareholding by INSCO and the CoC members constituted ‘inter-connected transactions under Regulation 9(4). It mandated a ‘single notice, covering all transactions,’ to be filed by all ‘parties to the combination.’

Furthermore, AGI alleged that the Commission failed to examine the CoC's involvement or investigate whether the structuring was designed to evade filing obligations.

While the Commission's order acknowledged the submission, it asserted that ‘assenting financial creditors were to be identified and offered shares in the resulting entity post consummation of the HNG acquisition. Until then, there were no known additional acquirers.’

The CCI noted INSCO's clarification that assenting financial creditors would not have any special rights. And in the absence of such rights, the shares acquisition would not constitute a combination. Thus, INSCO's filing was consistent with Regulation 9(4) and Regulation 9(5) of the Combination Regulations.

INSCO RP HNGIL is currently disputed despite the Supreme Court directives and Committee of Creditors (CoC) actions. After the top court invalidated AGI's plan and directed the CoC to reconsider INSCO's plan, the latter submitted a modified RP of Rs.2,752 crores. It included Rs.2,200 crore in upfront cash and Rs.550 crores in equity.

This revision was to match the previous commercial offering by AGI Greenpac. And, subsequently, the CoC approved INSCO's RP.

Meanwhile, the National Company Law Appellate Tribunal (NCLAT) recently cleared the path for the resolution process, setting aside the decision of the National Company Law Tribunal (NCLT) to replace the Resolution Professional and directing the tribunal to proceed with hearing and deciding the plan approval application as per the 16 May Supreme Court directions.

The apex court had also set strict timelines, directing the CoC to reconsider INSCO's plan within two weeks and the entire CIRP to be completed within six weeks.

AGI is being represented by a Saraf and Partners team led by Partners Sanjeev Kumar Sharma and Akshayy Nanda. They are being assisted by Partner designate Sanya Sud and Associates Praniti Ganjoo and Aditye Arora.