NCLAT Stays CCI Penalty on NTPC for Acquisition of Ratnagiri Gas & Power Shares

NCLAT Stays CCI Penalty on NTPC for Acquisition of Ratnagiri Gas & Power Shares

The National Company Law Appellate Tribunal (NCLAT) has stayed an order issued by the Competition Commission of India (CCI) which imposed a penalty on state-owned power producer National Thermal Power Corporation Limited (NTPC) for failing to disclose its acquisition of a 35.47 per cent equity share in Ratnagiri Gas & Power Private Ltd (RGPPL).

On August 22, 2023, the CCI levied a penalty of ₹40 lakh on NTPC for not disclosing the acquisition, which increased its stake in RGPPL from 25.51 per cent to 60.98 per cent.

NTPC disputed the CCI’s decision and appealed to the NCLAT, the designated appellate authority for reviewing CCI orders.

A two-member panel at NCLAT, comprised of Justice Anant Bijay Singh (Member Judicial) and Dr Alok Srivastava (Member Technical), has instructed to schedule the next hearing on NTPC’s appeal for February 27, 2024. Additionally, they have issued a stay on the enforcement of the order issued by the CCI.

NCLAT, in its order, has declared that the execution of the challenged order dated August 22, 2023, issued by the CCI, will remain suspended until the next scheduled hearing date.

NCLAT directed CCI to submit a reply to NTPC’s appeal within four weeks. The power producer was granted the opportunity to file a rejoinder, if necessary, within four weeks of the CCI’s response.

NTPC had acquired 35.47 per cent of the equity share capital of RGPPL without notifying the CCI, increasing its stake from 25.51 per cent to 60.98 per cent. This acquisition raised concerns about potential anti-competitive practices and led to the investigation and subsequent penalty by the CCI.

CCI later issued a notice on October 27, 2022, citing NTPC’s failure to notify the transaction under the combination regulations. The CCI deemed the transaction to be notifiable.

However, NTPC submitted that the acquisition of an additional 35.47 per cent stake in RGPPL was integral to a resolution plan designed to settle the company’s outstanding debt. They asserted that the primary objective of the transaction was not to acquire equity shares or control RGPPL, but to facilitate the debt settlement.

Even after the transaction was completed, NTPC did not acquire any additional rights and maintains joint control over RGPPL along with GAIL and Maharashtra State Electricity Distribution Company Ltd, the Public Sector Undertaking stated.

While rejecting NTPC’s argument, the CCI held that the failure to notify the transaction before its consummation constituted a violation of the provisions of Section 6(2) of the Competition Act. Therefore, the CCI deemed NTPC liable for a penalty under Section 43A of the Act and imposed a fine of ₹40 lakh, leading to the NTPC challenging it before NCLAT.