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CS Professional · Corporate Restructuring, Valuation and Insolvency · Regulation of Combinations

Veda Capital, a SEBI-registered Category I alternative investment fund, subscribes to shares of Kaveri Foods Ltd. under a covenant of an investment agreement it signed with the company. Kaveri's counsel asks whether a notice must be filed with the Competition Commission under section 6. What is the correct position?

Section 6 does not apply. Under section 6(9), share subscription or acquisition by a Category I alternative investment fund pursuant to a covenant of an investment agreement is outside the combination regulation provisions, so no notice to the Commission is required for Veda Capital's subscription.

  1. ASection 6 does not apply, because the subscription is by a Category I AIF pursuant to a covenant of an investment agreementCorrect
  2. BNotice is mandatory, but only after the subscription is completed
  3. CNotice is mandatory, but the 150-day standstill period is waived
  4. DSection 6 applies, but the penalty under section 43A is capped at Rs 1 crore

Explanation

Section 6(9) says the provisions of section 6 do not apply to share subscription or financing facility or any acquisition by a public financial institution, foreign portfolio investor, bank or Category I AIF, pursuant to a covenant of a loan or investment agreement. Veda Capital fits this. The other options assume section 6 applies, which is wrong, and notice after consummation is never what the section requires.

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