Interconnected Transactions in Indian Merger Control
Ravi Gangal, Counsel, Axiom5 Law Chambers LLP
Definition
In the context of Indian merger control, an 'interconnected' transaction refers to a situation where two or more distinct agreements, arrangements, or acquisitions are interconnected in design, timing, or commercial rationale. They are assessed as a single 'combination' for the purposes of the Competition Act, 2002 (as amended by the Competition Amendment Act, 2023) (Competition Act).
Regulation 9(4) of the Competition Commission of India (Combinations), Regulations, 2024 (Combination Regulations) fleshes out this principle in its operative form. It requires parties to file a single notice for all interconnected steps of a transaction, including steps that may themselves be exempt from notification.
The operative concern is regulatory circumvention. Parties may structure a single economic transaction across multiple formal instruments so that each transaction individually falls below the jurisdictional thresholds prescribed under Section 5 of the Competition Act, or to otherwise fall outside the mandatory premerger notification requirement under Section 6 of the Competition Act. Therefore, the Competition Commission of India (CCI) is empowered to look beyond legal form and assess the economic substance of the arrangement as a whole. This mandate is explicitly codified in the “substance rule” under Regulation 9(5) of the Combination Regulations.
Interconnected transactions may manifest in several forms:
Serial acquisitions of stakes in the same target by the same acquirer, structured to remain below jurisdictional thresholds at each individual step.
Simultaneous or sequentially linked transactions involving different parties or different assets that together effectuate a change in market dynamics (for instance, multiple acquisitions in the same sector).
A primary acquisition accompanied by ancillary agreements designed to be exercised once a trigger event occurs, such as call options, put options, or convertible instruments.
Transactions outside India, notifiable in foreign jurisdictions but with Indian components that may be notifiable in India.
The CCI will typically check if, in the absence of one component, the other component would not have been entered into on the same terms or at all (and vice versa).
Commentary
The Substance Rule
The foundational principle governing interconnected transactions is the substance rule. This rule states that the obligation to notify a transaction is determined by its true economic substance rather than its formal legal structure.
Operating as a key anti-avoidance mechanism, this empowers the CCI to look past artificially segregated deal steps and fragmented contracts. If the commercial reality reveals that legally distinct instruments are collectively designed to achieve a single commercial objective, the regulator may collapse them into a unified, notifiable whole.
Statutory and Regulatory Framework
The Competition Act, read with the CCI (Procedure in regard to the transaction of business relating to Combinations) Regulations, 2011 (2011 Combination Regulations), originally required parties to notify interconnected transactions through a composite filing, using the phrase 'inter-connected or inter-dependent'. Following the Thomas Cook [C-2014/02/153, Order under Section 43A of the Competition Act] case, where parties argued that their separate transaction steps lacked strict conditionality and therefore were not inter-dependent, the 2016 amendment to the 2011 Combination Regulations removed the phrase 'inter-dependent'. This left 'inter-connected' as the operative standard.
The Supreme Court in CCI v. Thomas Cook [Civil Appeal No. 13578 of 2015] authoritatively settled the ingredients of the interconnection test. The Supreme Court held that where a series of transactions is intrinsically linked and designed to achieve a single business objective, they form a composite scheme. Technical arguments based on the absence of formal conditionality were rejected. Parties could not isolate individual steps by arguing that market purchases were not expressly mentioned in the scheme documents or were capable of being executed on a standalone basis. The 'ultimate intended effect' of the composite transaction was determinative, not the isolated mechanics of each step.
The CCI in CPPIB / ReNew Power / Ostro Energy [Order under Section 43A and 44 of the Competition Act] (CPPIB/ReNew) provided further significant guidance. CPPIB had invested in ReNew Power without disclosing that ReNew’s contemporaneous acquisition of Ostro Energy was a key driver for the upstream investment. At the time, no binding document had yet been executed for the acquisition of Ostro Energy. The CCI held that an interconnected step cannot escape notification on the technical pretext that a binding agreement has not yet been executed. The CCI relied on internal emails and press releases to establish the commercial interdependence, and CPPIB was penalised for non-disclosure.
The converse position was illustrated in SVF Doorbell / Delhivery [C-2019/01/633] (SVF/Delhivery). The acquirer’s composite notice covered both tranches of its proposed acquisition of the target. Yet, the CCI approved only the first tranche (22.44%) and declined to review the second tranche (15.43%) on the basis that its price and terms had not yet crystallised.
Read together, the two cases mark the twin boundaries of the composite filing obligation. A step need not have a binding document to require disclosure if interconnection is evident, but the CCI will not itself grant approval to a step that lacks a sufficiently crystallised trigger at the time of assessment.
The 2024 Combination Regulations and the CCI's revised ‘frequently asked questions’ (2025) (FAQs) have brought greater clarity to the interconnection standard. The primary consideration for assessing interconnection is now whether there is a 'meeting of minds' or shared intent among the parties to achieve a common ultimate effect. The FAQs identify relevant factors, including:
Mutual conditionality (cross conditions precedent or linked closing obligations).
The existence of common agreements covering multiple steps.
Functional links between deal steps; and
The internal commercial logic and strategic rationale of the investors.
Importantly, the FAQs also clarify the limits of the concept. Purely contemporaneous investments by unrelated investors in the same funding round are not deemed interconnected merely by virtue of timing, provided the investors have not taken the investment decision as a single unit and have independent commercial rationales.
The Common Filing Requirement and Its Procedural Tensions
The mandate to file a single, composite notice for interconnected transactions has historically generated procedural complexity. Two key questions arise: first, when is an interconnected step sufficiently crystallised to require disclosure, and second, when does the absence of a binding trigger for that step relieve parties of the obligation to include it in the primary notification?
These tensions are well illustrated by comparing CPPIB / ReNew with SVF / Delhivery. In the former, the CCI rejected the argument that the Ostro acquisition need not be disclosed simply because no binding document existed at the time of filing, on the ground that the commercial reality of interconnection was sufficient. In the latter, the CCI declined to review the uncrystallised second tranche because no trigger existed at the relevant time.
More recently, the CCI demonstrated procedural flexibility in Matrix Pharma / Tianish Laboratories [Combination Registration No. C-2024/04/1139, Order under Section 43A of the Competition Act]. Following original approval in February 2024, the acquirer restructured its transaction. This introduced new holding entities and a new investor (Kingsman Wealth Fund (Kingsman)). While Kingsman's specific investment was notified via the green channel, the broader structural changes and associated funding steps were consummated without prior notification. The CCI held that all the funding steps were interconnected with the approved combination and that the structural changes were material, triggering a fresh composite notification obligation. A show-cause notice was issued, and a nominal penalty was imposed, which was mitigated by the parties' voluntary disclosure.
However, the CCI’s order notes that Kingsman had separately notified its investment through a Green Channel filing. The CCI did not penalise Kingsman because it notified its investment and completed its acquisition after receiving the CCI’s deemed approval. This shows that in certain cases, the CCI may relax the strict common filing requirement, provided the interconnected leg is still properly notified to the CCI prior to completion.
Global Interconnected Transactions
The interconnected transaction framework is particularly important in global deals. A recurring structuring device in cross-border transactions is the use of local implementation agreements to defer closing in certain jurisdictions - i.e., the transaction proceeds to close globally while India-specific steps are reserved for a subsequent instrument. This mechanism is typically used to streamline jurisdiction-specific regulatory approval timelines.
The CCI has consistently rejected such structures as a basis for deferring or avoiding notification requirements in India. In Baxter International / Baxalta [C-2015/07/297, Order under Section 43A of the Competition Act] (Baxter / Baxalta), the parties entered into a global separation agreement and carved out India as a 'deferred jurisdiction' under a separate local implementation agreement. The CCI held that the global agreement constituted the notification trigger for India and that the global transaction could not be closed without CCI approval, notwithstanding the carve-out. The CCI imposed a penalty for gun-jumping.
As such, where a global transaction meets Indian jurisdictional thresholds, global and India-specific implementation steps are treated as interconnected. No part of the composite combination may be consummated pending CCI clearance.
Comparative Perspectives: EU and US
The European Union Merger Regulation [Regulation 139/2004] addresses the same problem through the concept of a 'single concentration'. The European Commission's Consolidated Jurisdictional Notice [2008/C 95/01] provides that two or more transactions form a single concentration where they are unitary in nature, meaning one would not have been concluded without the other. The doctrine applies to both simultaneous and formally sequential transactions linked by conditional interdependence. Its effect, like that of the Indian composite filing rule, is to prevent an artificial split closing from removing a transaction from jurisdictional scrutiny. Under EU law, two cumulative conditions must be met to treat multiple steps as a single concentration:
The transactions must be linked by conditionality, either legally (de jure) or factually (de facto); and
The interdependent transactions must ultimately result in the same undertaking, or group of undertakings, acquiring control over one or more targets.
In the United States, the regulatory approach to disaggregated transactions relies on a combination of threshold aggregation rules and evolving substantive frameworks. The Merger Guidelines (2023), finalised by the Department of Justice and the Federal Trade Commission, state that when a transaction is part of a broader corporate strategy of serial acquisitions, agencies will assess the cumulative anticompetitive impact of the entire series (Guideline 8).
This indicates that India’s legal framework for interconnected transactions is aligned with global practice. They are designed to assess transactions based on their true economic substance rather than their strict legal form.
The Deal Value Threshold and Interconnected Transactions
The recent introduction of the deal value threshold (DVT) under Section 5(d) of the Competition Act has a significant interaction with the interconnection rule. The DVT is triggered when the global value of a transaction exceeds INR 2000 crore (approximately USD 234 million), and the target has substantial business operations (SBO) in India.
Critically, for the purposes of computing deal value, the 2024 Combination Regulations require that the value attributable to all interconnected steps be considered, not merely the headline consideration for the primary leg. This means that a transaction which individually falls below the DVT at the primary acquisition level may nonetheless cross the threshold once the value of commercially linked ancillary arrangements, option packages, or funding steps is aggregated.
The DVT is therefore both reinforced by and dependent upon the interconnected transaction concept. Parties seeking to assess notifiability under the DVT must first map all interconnected steps and then aggregate their values. Conversely, the DVT serves as a secondary jurisdictional catch for transactions structured so that the interconnected components are separated to fall below jurisdictional thresholds. This is particularly relevant in deals where target revenue is low, but enterprise value is high, such as in digital markets.
(Views are personal. This commentary is intended for academic purposes and does not constitute legal advice.)
