Research and Articles

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• The Green Channel mechanism envisages a deemed approval route for certain combinations, but must be utilised with due caution to all the prerequisites

• In this article, we discuss the penalty levied by CCI for improper application of the Green Channel route and oversight / error in disclosure of overlaps in the relevant markets

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Background

On June 26, 2025, the Competition Commission of India (“CCI”) issued a penalty order¹ that adds to the evolving jurisprudence on India’s Green Channel mechanism². Introduced in 2019, the Green Channel is a fast-track approval route for combinations that, based on the parties’ own assessment, do not involve any horizontal, vertical, or complementary overlaps and therefore raise no competition concerns.

Once notified under this route, the transaction is deemed approved upon filing. However, this mechanism operates entirely on self-certification, placing the onus on parties to undertake rigorous due diligence and ensure complete and accurate disclosure. The Commission’s latest order serves as a reminder that even in the context of deemed approvals, failure to meet these standards can attract regulatory scrutiny and penalties.

In this penalty order, the CCI imposed a monetary penalty on the Acquirers for omitting relevant overlaps, reaffirming that the Green Channel is not a free pass but a responsibility-laden privilege.

The Transaction Framework

The proposed transaction involved two acquirer entities, one a Mauritius-based investment vehicle (“Acquirer I”), indirectly controlled by funds managed by the affiliates of its ultimate parent entity (the “Acquirer Group”) along with a Cayman-based holding entity of the Target’s co-founder (“Acquirer II”) (collectively, the “Acquirers”) proposed to acquire equity stake of 23.6% (twenty three point six percent) and 9.17% (nine point one seven percent), respectively, in a Singapore-based engineering and research & development (“ER&D”) company (“Target”) (the “Proposed Combination”).

The Target’s primary business is the provision of engineering services, design and development of aircrafts, engines, automotive cars, gas turbines, X-ray machines etc. The business of the Target was further divided into the following categories, (a) embedded and software engineering; (b) mechanical engineering; (c) silicon engineering; (d) digital engineering; and (e) operations and supply management.

The Acquirer Group is a Delaware registered global asset manager primarily engaged in (i) global private equity, (ii) global credit and (iii) investment solutions with wide-ranging investments in aerospace, defence, retail, financial services, technology and business services, with more than 60 (sixty) portfolio investments in India and one Indian subsidiary as well. On the other hand, Acquirer II does not have any business activities, and its sole purpose is to hold shares of the Target. By virtue of such holding, Acquirer II holds indirect economic interest in six Indian subsidiaries of the Target.

The investment was notified to the CCI via the Green Channel route, on the basis that there were no horizontal, vertical or complementary overlaps between the Acquirer Group and the Target. The Target had a significant presence in aerospace, automotive, and electronics design services. Meanwhile, the Acquirer Group held investments in companies engaged in overlapping areas of industrial design and engineering services, both in India and abroad.

Red Flags and Regulatory Scrutiny

Following receipt of the Green Channel notice, the CCI initiated a suo motu review of the Proposed Combination. Its concerns stemmed from the possibility of competitive overlaps between the Target’s activities and those of certain portfolio companies of the Acquirer Group, particularly in the ER&D space. In the course of its review, the CCI identified prima facie indicators of horizontal overlaps, such as the provision of similar engineering solutions in the automotive and aerospace sectors and also flagged complementary overlaps, including the provision of ancillary technology services and cross-utilization of customer platforms between entities in the Acquirer Group and the Target. These findings suggested that the Proposed Combination might not have qualified for the Green Channel route in the first place.

The CCI then issued a detailed information request to the notifying parties, seeking clarity on the extent and nature of their business activities and whether these gave rise to overlaps. In response, the Acquirers acknowledged that while they had initially concluded that no overlaps existed, a subsequent review revealed the presence of vertical and complementary overlaps with the Target. These overlaps, they submitted, had been omitted inadvertently and were not significant enough to impact competition. This admission was crucial and led the CCI to issue a formal show-cause notice under Sections 43A³ and 44⁴ of the Competition Act, 2002 (the “Act”). The notice asked the Acquirers to demonstrate why the Green Channel notice should not be declared void ab initio due to the ineligibility of the Proposed Combination for the deemed approval route, and why a penalty should not be levied for furnishing information that was either incomplete or incorrect.

Acquirers’ Defence and Mitigating Arguments

In response to the show-cause notice, the Acquirers put forth a detailed defence, which revolved around the assertion that the initial Green Channel filing was made based on an extensive internal and external due diligence process, which did not identify any material overlaps. Upon receiving the CCI’s notice and conducting a second review, the Acquirers discovered that certain recent acquisitions by the Target had not been fully integrated at the time of filing, and the overlaps were not apparent. They further contended that the overlaps identified were not significant in scope or value as the activities of the Target are not required or necessary for the core business activities of the Acquirers and the overlaps do not raise any appreciable adverse effect on competition in the relevant markets. The Acquirers subsequently admitted the inadvertent error in disclosing the overlaps to the Commission, which occurred as a result of non-integration of systems and operations data for certain new portfolio acquisitions of the Target, tendering an unconditional apology to CCI for the oversight.

Emphasis was laid on the fact that the Acquirers acted in a bona fide manner and voluntarily disclosed the inadvertent omissions as soon as they came to light. Given that the investment was a minority, non-controlling interest, they argued that the potential for competitive harm was limited. The Acquirers also drew attention to the Competition (Amendment) Act, 2023⁵, and the newly introduced Competition (Criteria for Exemption of Combinations) Rules, 2024⁶, which allow for the re-filing of invalid Green Channel notices within a period of 30 (thirty) days.

Commission’s Findings and Legal Reasoning

The Commission took note of the Acquirers’ admission of the overlaps and held that the Proposed Combination failed to meet the threshold criteria under Regulation 5A of the erstwhile Competition Commission of India (Procedure in regard to the transaction of Business relating to Combinations) Regulations, 2011⁷ (“2011 Combination Regulations”). As per the Green Channel framework, parties are required to certify the absence of any horizontal, vertical or complementary overlaps. The Acquirers’ failure to disclose the overlaps, irrespective of their materiality, meant that the deemed approval granted under the Green Channel was invalid.

Section 43A and Section 44 of the Act are triggered automatically when a defective Green Channel notice is filed. The CCI rejected the argument that the Competition (Amendment) Act, 2023 and the Competition (Criteria of Combinations) Rules, 2024 provided a basis to excuse the lapses, noting that the Proposed Combination had been notified under the 2011 Combination Regulations and hence would be assessed under the law under which such filing had been made⁸.

Considering the mitigation of penalty as a result of the inadvertent error, the conduct of the Acquirers and the unconditional apology by the Acquirers, the CCI imposed a penalty of INR 4,00,000 (Indian Rupees Four Lakh) (approx. USD 4,651) for violation of Sections 6(2) and 43A of the Act, while choosing not to impose any penalty under Section 44 of the Act. The Commission also directed the Acquirers to file a fresh notice providing complete information within 30 (thirty) days of the receipt of such notice.

Looking Ahead

While the introduction of the re-filing mechanism under the Competition (Amendment) Act, 2023 and the Competition (Criteria of Combinations) Rules, 2024 does offer a safeguard for genuine errors, its prospective application means that past transactions remain vulnerable to scrutiny. Going forward, parties must carefully evaluate whether a Proposed Combination truly qualifies for Green Channel treatment. In conclusion, the June 2025 penalty order reinforces the criticality of robust competition analysis and accurate self-certification in Green Channel filings.

 

Authors

Gurkeerat Singh, Member, M&A and Private Equity

Palomita Sharma, Member, M&A and Private Equity

Nishchal Joshipura, Co-Lead, M&A and Private Equity

You can direct your queries or comments to the relevant member.

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¹Available at https://www.cci.gov.in/combination/order/details/order/1603/0/orders-section43a_44.

²Section 6(4) of the Act.

³Section 43A of the Act prescribes a penalty of up to 1% of the total turnover or assets of such a combination, whichever is higher.

⁴Section 44 of the Act grants the CCI power to impose penalty upon parties giving notice to a combination, for failure / omission to disclose material facts.

⁵Available at https://www.cci.gov.in/images/legalframeworkact/en/the-competition-amendment-act-20231681363446.pdf.

⁶Available at https://www.cci.gov.in/combination/legal-framwork/notifications/details/23/0.

⁷Available at https://www.cci.gov.in/combination/legal-framwork/regulations/details/1/0.

⁸Proviso to Regulation 33 of the Competition Commission of India (Combinations) Regulations, 2024.