NUJS Kolkata Hosts Inaugural Panel Discussion On Competition Law & Corporate Insolvency: Nuances & Challenges

NUJS Kolkata has hosted the inaugural edition of a panel discussion on competition law and corporate insolvency: nuances and challenges.

The Insolvency and Bankruptcy Code (IBC) of 2016 and the framework of Competition Law shape different aspects of the business environment. In a rapidly growing economy like India's, it is crucial for young professionals to understand how businesses operate both domestically and internationally, as well as how these laws influence market dynamics. Competition Law aims to prevent anti-competitive practices and ensure fairness, while the IBC provides a structured resolution process for corporate insolvency and bankruptcy.

In light of this, the Society for International Trade and Competition Law at the National University of Juridical Sciences (NUJS), Kolkata, in collaboration with the Centre for Competition Laws, hosted the inaugural edition of the SITC Panel Discussion on 28th September, 2024.

The panel discussion revolved around the challenges and nuances of “Competition Law and Corporate Insolvency”. The event featured a panel of four experts who shared their insights and experiences with the attendees.

Dr. Tillotama Raychaudhuri, Associate Professor of Law at NUJS and Director of the Centre for Competition Laws was the moderator of the panel discussion.

The panel of speakers included:

Mr. Shounak Mitra, Partner in the Dispute Resolution practice group at Khaitan & Co. With over fifteen years of experience, Mr. Mitra specializes in commercial and intellectual property litigation.

Mr. Arka Majumdar, Partner at Argus Partners. A 2008 graduate of NUJS, Mr. Majumdar wields expertise in the ever-evolving jurisprudence relating to the Insolvency and Bankruptcy Code, 2016.

Dr. V.K. Unni, Professor of Public Policy and Management at the Indian Institute of Management, Kolkata, who is a seasoned academician and an expert at antitrust laws.

The objective of the event was to raise awareness among students from diverse fields, such as law, business, and science, about the role of laws governing businesses and the importance of fair market practices. The conference also highlighted the legal framework companies must follow during insolvency proceedings.

The event saw participation from more than 180 delegates representing institutions such as Sister Nivedita University, Department of Law, Calcutta University, South Calcutta Law College, Xavier Law School, and NUJS. The conference generated significant enthusiasm among law students, fostering active engagement and collaboration between participants from various esteemed universities.

The conference opened with a welcome address and an overview by Dr. Raychaudhuri. Dr. V.K. Unni addressed the gathering by delving into the concept of competition and tracing the origins of competition law to Articles 38 and 39 of the Directive Principles of State Policy in the Indian Constitution, which guide the nation's economic policies. He further discussed the Competition Commission of India (CCI) regulations, introduced in 2011, which outline the procedures for transactions involving business combinations.

Dr. Unni illustrated his points with the landmark case Committee of Creditors of Essar Steel India Ltd. vs. Satish Kumar and Ors., in which the Supreme Court upheld the authority of the Committee of Creditors to approve resolution plans in insolvency proceedings under the IBC. India follows an adversarial model under the Insolvency and Bankruptcy Code (IBC), where if a company fails to make payments to its creditors, the National Company Law Tribunal (NCLT) oversees the Insolvency Resolution Process. This was exemplified in the Committee of Creditors of Essar Steel India Ltd. vs. Satish Kumar and Ors. case, where the Supreme Court invoked Article 142 of the Constitution to accept creditor claims, emphasizing the judiciary's role in ensuring just outcomes in complex insolvency matters.

Dr. Unni also discussed key aspects of Competition Law, focusing on two types of agreements—vertical and horizontal—and their implications for market competition. He explored the significance of mergers and acquisitions, emphasizing that parties involved in mergers are required to inform the Competition Commission of India (CCI) for review. Additionally, he touched upon the ex-ante regime, which aims to prevent anti-competitive practices through general guidelines before violations occur, rather than focusing on punitive measures after the fact.

One notable malpractice highlighted was cartelization, where businesses collaborate to control or regulate a market by forming a "cartel." This leads to artificially inflated prices for goods or services, severely impacting consumers and undermining fair competition in the market.

Later in the conference, various examples of businesses involved in mergers or acquisitions were discussed, highlighting the dynamics of such combinations. It was emphasized that combinations have two critical aspects: the potential to significantly and sustainably grow the market, and the risk of eliminating a vigorous competitive element.

Mr. Arka Majumdar then took over the session, addressing how the Competition Commission of India (CCI) regulates mergers and acquisitions (M&A) involving firms undergoing the Corporate Insolvency Resolution Process (CIRP). He clarified the meaning of company combinations and explained the distinction between acquisitions and mergers, emphasizing their different legal and business implications.

During his discussion, terms like “gun jumping”—which refers to parties proceeding with a merger or acquisition without CCI approval—and “horizontal overlap”—which involves companies operating in the same market or sector—were introduced. Mr. Majumdar also explained the procedural nuances of filing for combinations, shedding light on the legal and regulatory requirements that businesses must follow to ensure compliance with competition laws.

Mr. Majumdar discussed the "deal value test," explaining that when certain financial thresholds are met, businesses involved in mergers or acquisitions become subject to the Competition Act. He also highlighted Regulation 37 of the CIRP Regulations, which outlines measures under the resolution plan aimed at maximizing the value of a corporate debtor's assets. He noted the inherent conflict between the Insolvency and Bankruptcy Code (IBC) and the Competition Act in balancing asset maximization and competition regulation.

Mr. Majumdar provided examples of companies like Dalmia Cement and Ultratech Cement to illustrate how such cases are managed. He also referenced the AGI Greenpac case, where the company failed to obtain the mandatory CCI approval, underscoring the importance of compliance. Section 20(4) of the Competition Act was also discussed, which assesses whether a combination could have, or is likely to have, an appreciable adverse effect on competition in the relevant market. Additionally, Mr. Majumdar touched upon the Toys "R" Us insolvency case, offering further insights into the intersection of insolvency proceedings and competition law.

Mr. Shounak Mitra began by outlining the Insolvency and Bankruptcy Code (IBC) and its critical role in addressing corporate insolvency. He explained that when a company's management is unable to repay its debts, it should be replaced to allow for an efficient resolution process. The company's assets are then auctioned to maximize their value, ensuring that the interests of stakeholders, including creditors and workers, are protected.

Mr. Mitra also referred to the "dirty dozen"—12 high-profile insolvency cases under the IBC, which involved large corporations and set important precedents for the resolution process in India. These cases highlighted the IBC's effectiveness in tackling significant corporate defaults while safeguarding the financial system.

In essence, this panel discussion provided an opportunity for discussions, where the panellists, as well as the participants, enthusiastically exchanged thoughts on some of the contemporary topics.

Report prepared with inputs by students from NUJS, Kolkata.