Safiya Malik

The Competition Commission of India (CCI) has imposed a penalty of ₹40,00,000 on Goldman Sachs (India) Alternative Investment Management Private Limited for failing to notify a transaction involving an investment in Biocon Biologics Limited. The Commission ruled that the transaction, which granted Goldman Sachs certain rights beyond those available to an ordinary shareholder, should have been notified under Section 6(2) of the Competition Act, 2002. The penalty was imposed under Section 43A of the Act, which penalizes enterprises that consummate notifiable transactions without seeking prior approval from the CCI.

The Commission found that the transaction provided Goldman Sachs with access to commercially sensitive information and certain reserved matter rights that could influence strategic decisions of Biocon Biologics. The CCI held that these rights were indicative of a strategic investment rather than a passive financial investment and, therefore, required notification under the merger control provisions of the Act.

The case arose from an investment made by Goldman Sachs (India) Alternative Investment Management Private Limited (GS AIMPL), which manages Goldman Sachs AIF Scheme-1 (GS AIF), into Biocon Biologics Limited (Biocon). The investment was executed through optionally convertible debentures (OCDs), which, if converted at the time of investment, would have amounted to 3.81% of the fully diluted shareholding of Biocon.

The investment was formalized through a Securities Subscription Agreement and a Shareholders’ Agreement (SHA) executed on November 7, 2020, with the transaction closing on December 9, 2020. As part of the transaction, Goldman Sachs AIF obtained certain reserved matter rights, access rights, and information rights, including access to minutes of board meetings, shareholding records, and other sensitive financial and operational information of Biocon.

The CCI, upon examining the transaction, issued a letter on February 4, 2022, under Section 36(4) of the Act, seeking information from Goldman Sachs to assess whether further proceedings were warranted under Sections 20(1) and 43A of the Act. Goldman Sachs responded to the initial query on February 24, 2022, but the Commission found the response incomplete and issued another request on June 29, 2022. Further clarifications were submitted by Goldman Sachs on August 16, 2022, and September 21, 2022.

After examining the responses, the CCI, in a meeting held on May 18, 2023, observed that the rights acquired by Goldman Sachs were not available to an ordinary shareholder and could potentially provide access to commercially sensitive information. As a result, the Commission determined that the transaction was strategic in nature and should have been notified under the merger control regime. A show cause notice was subsequently issued on May 25, 2023, under Section 43A of the Act, directing Goldman Sachs to explain why a penalty should not be imposed for failing to file a notification.

Goldman Sachs responded to the notice on June 29, 2023, and requested an oral hearing, which was granted on July 23, 2024. The company submitted written arguments on July 30, 2024.

Goldman Sachs argued that the investment was made solely as a financial investment and did not confer any control or material influence over Biocon Biologics. It contended that the investment fell within the exemption under Item 1 of Schedule 1 of the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (Combination Regulations).

The company further argued that its investment did not exceed the 10% shareholding threshold and that it did not have any board representation or intention to participate in the management of Biocon Biologics. Goldman Sachs maintained that its rights under the SHA were standard minority investor protection rights and did not amount to control under competition law.

The Commission, however, observed that the rights acquired by Goldman Sachs, particularly the access to board minutes and financial information, went beyond those available to an ordinary shareholder. It stated, “The Minutes Right is a right which is not available to an ordinary shareholder. Such an arrangement in substance may enable the provision of confidential and commercially sensitive information and strategic information of Biocon to Goldman Sachs.”

The Commission further noted that the reserved matter rights and access rights suggested that the transaction was strategic in nature and not a mere passive investment. It recorded, “The Transaction may not be covered under Item 1 of Schedule 1 of the Combination Regulations and ought to have been notified in terms of Section 6(2) of the Act.”

Goldman Sachs also argued that similar investments had not been penalized in the past and that the rights it acquired were standard protections for minority investors. The Commission rejected this argument, stating that the presence of commercially sensitive information and strategic rights necessitated a notification, regardless of past practices.

After considering the facts and the submissions made by Goldman Sachs, the CCI concluded that the company had violated Section 6(2) of the Competition Act, 2002, by failing to notify the transaction. Consequently, under Section 43A, the Commission imposed a penalty of ₹40,00,000, directing Goldman Sachs to pay the amount within 60 days from the date of receipt of the order.

The order stated, “Considering the facts and circumstances of the instant matter, the conduct of Goldman Sachs during the proceedings, the Commission considers it appropriate to impose a penalty of INR 40,00,000 (Rupees Forty Lakhs Only) on Goldman Sachs, which is directed to pay the penalty within 60 days from the date of receipt of this order.”

The Commission clarified that nothing in the order should be deemed confidential under Section 57 of the Act and directed the Secretary to communicate the order to Goldman Sachs accordingly.

Case Number: M&A/10/2020/01/CD

Case Title:  In re: Proceedings against Goldman Sachs (India) Alternative Investment Management Private Limited

                  under Section 43A of the Competition Act, 2002

Bench: Chairperson Ravneet Kaur, Members:  Anil Agrawal, Sweta Kakkad, and Deepak Anurag

[Read/Download order]