CCI Penalises Allcargo Logistics ₹50 Lakh For Closing Gati Express Deal Without Prior Approval

The Competition Commission of India (CCI) has recently imposed a penalty of Rs 50 lakh on Allcargo Logistics Limited after finding that its acquisition of the remaining stake in Gati Express led to a change from joint control to sole control and was completed without prior notification.

Before the deal, Allcargo held a 70% stake in Gati Express through its subsidiary, while KWE owned the remaining 30%. Even so, the Commission noted that KWE's holding gave it the power to block special resolutions.

Because of this veto right, the CCI said, Gati Express was under the joint control of Allcargo and KWE before the transaction.

Once Allcargo acquired KWE's stake, the Commission found that control shifted from joint control to sole control.

The competition watchdog held that such a shift in control is legally significant and takes the transaction outside the exemption available under Item 2 of Schedule I of the Combination Regulations.

Allcargo maintained that the deal only increased its shareholding and did not change control, saying it already exercised “decisive control.” The Commission disagreed, holding that control under competition law also includes legal rights such as veto powers, not just day-to-day management.

The regulator also rejected the argument that the transaction caused no harm to competition, clarifying that the duty to notify a deal is independent of its appreciable adverse effect on the competition. 

As the transaction was completed on June 8, 2023, without prior notification, the Commission held Allcargo liable under Section 43A and directed it to pay a Rs 50 lakh penalty within 60 days.

For Allcargo Logistics Limited: Advocates Dhruv Rajain, Ananya Mahant, Varun Singh