U M C S (W E) 2016

CODE: C4
UNIVERSITY MOOT COURT SELECTIONS (WINTER EDITION) 2016
BEFORE
THE HONOURABLE SUPREME COURT OF INDIA
CIVIL APPEAL NO. 13 OF 2016

COMPETITION COMMISSION OF INDIA ………………………………………A PPELLANT
V
SHOPKEPPAA .IN PVT. LTD ……………..…………………………………....RESPONDENT
ALONG WITH
CIVIL APPEAL NO. 21 OF 2016

CREDITORS OF SHOPKEPPAA.IN PVT. LTD ………………………..………..…APPELLANT
V
SHOPKEPPAA .IN PVT. LTD ………………………………………………....…RESPONDENT
MEMORIAL FOR THE APPELLANT

COUNSEL APPEARING ON THE BEHALF OF T HE APPELLANTS
UNIVERSITY MOOT COURT SELECTIONS, 2016
TABLE OF CONTENTS
CONTENTS PAGE
LIST OF ABBREVIATIONS 3
INDEX OF AUTHORITIES 5
STATEMENT OF J URISDICTION 9
STATEMENT OF FACTS 10
ARGUMENTS PRESENTED 12
(1) WHETHER THE E-COMMERCE MARKET IS THE RELEVANT PRODUCT MARKET
AND THE ASSESSMENT OF MARKET SHARE SHOULD BE DONE KEEPING IN
MIND THE VERTICAL INTEGRATION?
(2) WHETHER THE VERTICAL INTEGRATION OF SHOPKEPPA AND
MAALGODAAM CAUSE AN ADVERSE EFFECT ON COMPETITION IN THE
ECOMMERCE MARKET?
(3) WHETHER THE BOARD OF DIRECTORS’ DECISION TO TRANSFER AND
MERGE SHOPKEPPAA ’S B 2B BUSINESS WAS BEYOND AUTHORITY AND
POWER CONFERRED UNDER THE COMPANIES ACT, 2013?

(4) WHETHER THE BUY -BACK OF SHARES BY SHOPKEPPA IS AGAINST THE
PROVISIONS OF THE COMPANIES ACT , 2013?
SUMMARY OF ARGUMENTS 13
ARGUMENTS ADVANCED 16
PRAYER 34
Page | 2
-MEMORIAL FOR THE APPELLANT-
LIST OF ABBREVIATIONS
Abbreviations Full Forms

AAEC Appreciable Adverse Effect on Competition
AIR All India Reporter
All ER All England Reports
Anr Another
ASPs Authorized Service Providers
B2B Business to Business
B2C Business to Business
CA Competition Act
CAT Competition Appellate Tribunal (UK)
CC Competition Commission (UK)
CCI Competition Commission of India
CMLR Common Market Law Reports
Co Company
COMPAT Competition Appellate Tribunal
Del Delhi
DG Director General
ECJ European Court of Justice
ECR European Court Reports
Edn Edition
EEC European Economic Community
EWHC High Court of England and Wales
F 2d Federal Reporter, Second Series
F 3d Federal Reporter, Third Series
F Supp Federal Supplement
HHI Herfindahl-Hirschman Index
Inc Incorporated
ISPs Independent Service Providers
Ltd Limited
No Number
Page | 3
OFT Office of Fair Trading

OJ Official Journal
Ors Others
S Section
SCC Supreme Court Cases
Supp Supplement
T&C Terms and Conditions
TFEU Treaty for the Functioning of the European Union
UOI Union of India
US United States
V Versus
WP Writ Petition
Page | 4
INDEX OF AUTHORITIES
Acts, Regulations, Notices and Guidelines

Commission Consolidated Jurisdictional Notice, 2008 O.J. (C 95) 10 20
Council Regulation 139/2004, Control of Concentrations between
20
Undertakings (the E.C. Merger Regulation), O.J. (L 24) 3
Council Regulation 139/2004, Control of Concentrations between
19
Undertakings (the E.C. Merger Regulation), O.J. (L 24) 3
European Commission, Commission notice on the definition of
relevant market for the purposes of Community competition law, 23
1997 O.J. (C 372)
relevant market for the purpose of community competition law, 97/C 18
372/03, ¶ 20
relevant market for the purposes of Community competition law, 1997 18
O.J. (C 372) 20
Guidelines on the assessment of horizontal mergers under the Council
regulation on the control of concentrations between undertakings, 2004 21
O.J. (C 31) 16
Horizontal Merger Guidelines, 57 C.F.R. § 41,552, (1992) 21
Horizontal Merger Guidelines, 57 C.F.R. § 41,552, (1992) 22
The Companies Act, (1956) § 77 32
The Companies Act, 2013 § 230 29
The Companies Act, 2013 § 68 33,34
The Companies Act, 2013 §180 37
The Competition Act, 2002 § 3 cl.4 23
Decisions - Indian Courts, Tribunals and Commissions
Page | 5
Bharat Synthetic Ltd. v. Bank of India, [1995] 82 Comp. Cas. 437

30
(Bom.)
Dattaraj V. Salgaocar v. State of Maharashtra &Anr., 2015 S.C.C
32
OnLineBom. 4594
D-Link (India) Limited v. The Securities and Exchange Board of India,
33
2008 S.C.C. OnLine S.A.T. 123
Holcim Limited, [2015] C.C.I. 81 21, 28
In Ansys Software (P.) Ltd., In re, [2005] 57 S.C.L. 356 30
In Re: Punjab Communications Limited, 2004 S.C.C. OnLine S.E.B.I.
33
141
MannalalKhetan v. KedarNathKhetan, (1977) 2 S.C.C. 424 33
Miheer H. Mafatlal v Mafatlal Industries Lts., (1996) 87 Comp. Cas.
29
705
Ramco Super Leathers Ltd. v. Dhanalakshmi Bank Ltd., (2009) 8 Mad.
29
L.J. 97
Raza Buland Sugar Co. Ltd. v. Municipal Board, Rampur, A.I.R. 1965
32,33
S.C. 895
Decisions - European Union and UK

Aer Lingus Group plc v. Commission, General Court (Third Chamber),
20
judgment of 6 July 2010, Case No. T-411/07
Alcoa/Reynolds, Commission of European Communities, judgment of
26
3 May 2000, Case No. M.1693
Candover/Cinven/Bertelsmann-Springer, Commission of European
18
Communities, judgment of 29 July 2003, Case No. M.3197, ¶14
Candover/Cinven/Bertelsmann-Springer, Commission of European
29
Communities, judgment of 29 July 2003, Case No. M.3197, ¶14
Clydesdale Bank Ltd., Petitioners 1950 S.C. 30 35
E.N.B.W./E.N.I./G.V.S., Commission on European Communities,
25
judgment of 17 December 2002, Case No. M.2822.
E.O.N. v. M.O.L., The Commission of the European Communities, 27
Page | 6
judgment of 21 December 2005, Case No. M.3696

Electrabel/CompagnieNationale du Rhône, Commission of European
20
Communities, judgment of 10 June 2009, Case No. M. 4994
Europemballage and Continental Can v. Commission, E.U. General
17
Court, judgment of 21 February 1973, Case No. 6/72
France v. Commission, E.C.J., judgment of 31 March 1998, Case No.
17
C-68/94, ¶ 116
Irish Sugar, O.J. 1997 L.258/1, ¶ 90 18
Johnson & Johnson/Pfizer Consumer Healthcare, Commission of
European Communities, judgment of 11 December 2006, Case No. 27
M.4314
Kish Glass v. Commission, C.F.I., judgment of 8 November 2001,
18
Case No. T-65/96
Price Waterhouse/Coopers & Lybrand, Commission of European
19
Communities, judgment of 20 May 1998, Case No. IV/M.1016
Re Sandwell Park Colliery Co. Ltd., [1914] 1 Ch. 589 29
Sun Chemical Group and Others v. Commission, C.F.I., judgment of 9
21
July 2007, Case No. T-282/06, ¶ 137
Torras/Sarrio, Commission of European Communities, judgment of 24
19
February 1992, Case No. M.166, ¶18
Vodafone Airtouch/Mannesmann, Commission of European
27
Communities, judgment of 12 April 2000, Case No. M.1795
Decisions - United States

Brown Shoe Co. v. United States, 370 U.S. 294 (1962) 25
Brown Shoe Co. v. United States, 370 U.S. 294 (1962) 26
Ford Motor Co. v. United States, 405 U.S. 562 (1972 26
Rebel Oil Co. Inc. v. Atlantic Richfield Co., 51 F.3d 1421 (9th Cir.
17
1995)
United States v. Capitol Serv., Inc., 568 F.Supp. 134, 155 (E.D. Wis.
23
1983)
United States v. Country Lake Foods, Inc., 754 F. Supp. 669 (D. Minn. 28
Page | 7
1990)
United States v. Topco Assocs., Inc., 405 U.S. 596, 608 (1972) 23
Books, Journals and Other authorities

27 Halsbury’s Laws of India 420 (LexisNexis Butterworths 2007) 28
3 C.R. Dutta, Company Law with Accounting & Auditing Practices
28
1098 (ed. [6] Wadhwa Nagpur 2008)
Alan A. Fisher & Richard S. Sciacca, An Economic Analysis of
24
Vertical Merger Enforcement Policy, 6 Res. L. & Econ. 1, (1984)
Caronna, Article 81 as a Tool For Controlling Minority Cross-
24
Shareholdings Between Competitor, (2004) 29. E.L. Rev. 485
Dennis Carlton, Market Definition: Use and Abuse, 3(1) Competition
17
Policy International (2007)
Jonathan B. Baker, The F.C.C. Provides A Roadmap For Vertical
25
Merger Analysis, 25 S.P.G. Antitrust 36, (2011)
Palmers Company Law, para 12.027 25th edition 1992 30
Serge Moresi, Steven C. Salop, vGUPPI: Scoring Unilateral Pricing
26
Incentives In Vertical Mergers,79 Antitrust L.J. 185 (2013)
William M. Landes & Richard A. Posner, Market Power In Antitrust
21
Cases, 94 Harvard Law Review 937 (1981)
Page | 8
STATEMENT OF JURISDICTION
The Appellants humbly submit this memorandum for two petitions filed before this
Honourable Court, which have been posted for final hearing by the Honourable Court. The
first Civil Appeal invokes Appellate Jurisdiction of this Honourable Court under Section 53
(t) of The Competition Act, 2002 of India. The second Special Leave Petition invokes the
Appellate Jurisdiction of this Honourable Court specified under Article 136 of the
Constitution of India and concerns itself with Chapter XV and Section 68 of The Companies
Act, 2013.
This memorandum sets forth the facts, contentions and arguments for the appellants/
appellants in the given case.
Page | 9
STATEMENT OF FACTS
I. The association of e-Business Platforms has divided the country for the purpose of
helping the e-commerce business players in running and organizing their business in
two parts namely, Northern India and Southern India. However, government authority
has not officially recognized any such division.
II. Shopkeppaa.in Pvt. Ltd. (shopkeppaa) is an e-commerce company which is engaged in
both B2B and B2C but the b2b activities, which make 30% of its total turnover are
restricted to northern part of India. Shopkeppaa has been gaining only 2% of its profit
from its b2b activities and is losing its competitiveness in the b2b e-commerce that also
affects its b2c business. Keeping the growing e-commerce business in India in mind the
Board of Directors (BOD) of Shopkeppaa decided against closing of b2b as it may have
a negative effect on its b2c business. Thus, the alternative that was proposed was that
the company can transfer the b2b business to some other b2b platform having strong
commercial and financial standing. One of the directors approached NetMercado.com
(Mercado), a German b2b e-commerce company with a proposal to merge
shopkeppaa’s b2b business with Mercado’s wholly owned Indian subsidiary
NetMercadoIndia.com (Mercado India) which is engaged in business across Southern
India and possess 23% market share of total b2b e-commerce market in Indian. German
Mercado accepted shopkeppaa’s proposal of merger.
III. Mercado and Shopkeppaa agreed to incorporate a new company named
MaalGodaam.net Pvt. Ltd. (MaalGodaam) which will be the amalgamated company of
b2b business of shopkeppaa.in and the whole of Mercado India. German Mercado will
hold 59% of shares in it and shokeppaa.in will transfer 11% shares of its remaining b2c
company to German Mercado. 41 % of shares in MaalGodaam will be held by
shopkeppaa and it will also have power to nominate one extra director in
MaalGodaam’s Board of Directors. An approval resolution for transfer of b2b business
along with all the infrastructure available for b2b business was passed by the BOD
while the shareholders and creditors of shopkeppaa were merely informed about the
approved deal along with an offer (to the shareholders not favouring the approved
transfer of business) to sale back their share to the company on the prevalent price.
Every shareholder but three accepted the resolution in entirety without any objection.
The three shareholders having 14% shares accepted the resolution with a reservation
Page | 10
that they must be allowed to sale back their share, on present price, within 2 years of
incorporation of the new company. The company accepted the reservation; however,
one of the three shareholders transferred back his shares to the company before final
execution. Creditors of shopkeppaa objected to the resolution and asked for a
negotiation and corporate debt restructuring accordingly, which could not be finalize.
IV. Mercado, Mercado India and shopkeppaa.in sent a notice to the Competition
Commission of India (CCI) for approval of the combination between them stating that
the new company will have only 36 % market share of relevant market of b2b e-
commerce in India and that it does not cause adverse effect on the competition in the
relevant market. However, the CCI determined the ''e-commerce market in India'' as
relevant market for the purpose of the case and found that after the proposed
combination MaalGodaam and shopkeppaa group will have 43% shares of relevant e-
commerce market in India. CCI observed that there is no other player as strong and
competitive as shopkeppaa and Mercado India and the benefits of the combination
cannot outweigh the adverse impact of the combination. Thus, the combination shall
not take effect. On appeal against the order of CCI, the Competition Appellate Tribunal
(CompAT) reversed the order. Aggrieved by the judgment of the CompAT, the
Commission approached the Supreme Court. The appeal was admitted as Civil Appeal
No. 13 of 2016.
V. Meanwhile, all the creditors initiated a joint proceeding before the National Company
Law Tribunal (NCLT) for the appropriate relief contending that Board of Directors’
decision to transfer and merge shopkeppaa’s b2b business and that buy-back of its
shares by shopkeppaa without resolution by all the shareholders of the company was
beyond authority and power conferred under the Companies Act and challenged the
validity of the scheme on the ground of non-compliance of provisions of Chapter XV of
the Companies Act, 2013. NCLT rejected all contentions of the creditors and upheld
the decision of the company. Aggrieved creditors filed an SLP before the Supreme
Court of India setting aside the decision of NCLT. Their SLP was admitted and
registered as Civil Appeal No. 21 of 2016.
VI. As the bench hearing both the Civil Appeals is the same and the senior advocates
appearing for parties in both the cases are same therefore both the appeals will be taken
up together.
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ARGUMENTS PRESENTED
I. WHETHER THE E-COMMERCE MARKET IS THE RELEVANT PRODUCT MARKET AND
THE ASSESSMENT OF MARKET SHARE SHOULD BE DONE KEEPING IN MIND THE
VERTICAL INTEGRATION?
II. WHETHER THE VERTICAL INTEGRATION OF SHOPKEPPA AND MAALGODAAM CAUSE

AN ADVERSE EFFECT ON COMPETITION IN THE ECOMMERCE MARKET?
III. WHETHER THE BOARD OF DIRECTORS’ DECISION TO TRANSFER AND MERGE
SHOPKEPPAA ’S B 2B BUSINESS WAS BEYOND AUTHORITY AND POWER CONFERRED
UNDER THE COMPANIES ACT, 2013?
IV. WHETHER THE BUY - BACK OF SHARES BY SHOPKEPPA IS AGAINST THE
PROVISIONS OF THE COMPANIES ACT , 2013?
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SUMMARY OF ARGUMENTS
I. WHETHER THE E-COMMERCE MARKET IS THE RELEVANT PRODUCT MARKET AND THE
ASSESSMENT OF MARKET SHARE SHOULD BE DONE KEEPING IN MIND THE VERTICAL
INTEGRATION?
The Appellant submits that the correct relevant product market in the present case is the E-
Commerce market and not the B2B market, as erroneously claimed by the Amalgamating
Companies. The weighing in of Supply-side Substitution, which focuses on the extent to
which alternative suppliers would switch, or begin, production in response to a hypothetical
price increase, is crucial to the assessment of the relevant market. The prevalence of In-House
production and the fact that switching between the two forms does not incur ‘significant’
additional cost goes to show that the relevant product market is indeed the e-commerce
market. The change can be rapid and in the ‘short term’.
It is further submitted that MaalGodaam and Shopkeppaa’s shares should be aggregated

because the merger is entailing a horizontal effect, coupled with a vertical effect. The
shareholder’s agreement, practice of cross shareholding and the decisive influence of
Shopkeppaa in MaalGodaam through the appointment of an extra director substantiates our
claim. It clear shows a ‘de facto’ merger taking place between the two Companies.
The Appellant submits that the merger by way of vertical integration is likely to cause an
AAEC in the relevant market because the market share of 44% reflect a position from which
MaalGodaam can raise prices, limit output, suppress innovation, reduce the variety or quality
of goods or services or deprive consumers of choice, all of which are clearly inimical to
consumer welfare. The vertical integration can also bring about customer foreclosure and
input foreclosure because B2B and B2C are vertical markets, i.e. different levels of the
ecommerce market. The HHI index also augers unfavourable conditions in the market.
Page | 13
SHOPKEPPAA’S B2B BUSINESS WAS BEYOND AUTHORITY AND POWER CONFERRED
UNDER THE COMPANIES ACT, 2013.
That, it is humbly submitted before the Hon’ble Supreme Court of India that the Board of
Directors’ decision to transfer and merge Shopkeppaa’s b2b business without resolution by
all the shareholders is invalid and beyond the authority and power conferred to the Board of
Directors.
It is true that Section 230 of the Companies Act, 2013 does not mandate holding of the
meeting of the creditors in a scheme of arrangement between the company and its members
and equally a meeting of the members in a scheme of arrangement between the company and
its creditors. Though not specific provision has been made for ascertaining the wishes of the
creditors in a scheme of arrangement between the company and its members, the Court is
entrusted with the duty to ascertain whether scheme would affect the interest of the creditors
to such an extent that the holding of their meeting is essential.
The court has no power to usurp the right of the class of members or creditors to decide
whether they approve the scheme. If, therefore, a class whose interests are affected by a
scheme neither assents to the scheme nor approves it at a meeting in accordance to the
section, the court cannot confirm the scheme even if it considers that the class is being fairly
dealt with, or that it would approve the scheme. There is no substitute for a meeting that is
attended by the members and creditors and any dispensation from holding of the meeting of
the members and creditors will be clearly an act which is in conflict with the very provisions
of law.
Section 180(1) of the Companies Act, 2013 states that the Board of Directors of a company
shall exercise the following powers to sell, lease or otherwise dispose of the whole or
substantially the whole of the undertaking of the company or where the company owns more
than one undertaking, of the whole or substantially the whole of any of such undertakings,
only with the consent of the company by a special resolution. For this clause the definition of
‘undertaking’ states “or an undertaking which generates twenty per cent. of the total income
of the company during the previous financial year.” Shopkeppaa’s b2b activities makes 30%
of its total turnover.Therefore, the Board of Directors are restricted in their power to authorise
the scheme of incorporating a new company which will be the amalgamated company of b2b
Page | 14
business of Shopkeppaa and the whole of Mercado India, without the consent of the company
by a special resolution.
IV. WHETHER THE BUY-BACK OF SHARES BY SHOPKEPPAA IS AGAINST THE PROVISIONS

OF THE COMPANIES ACT, 2013?
The conditions on how a company can buy-back its own shares from its shareholders are
provided in Section 68 of the Companies Act, 2013. The conditions state that there has to be
the buy-back has to be authorized by the articles and by a special resolution and it should be
twenty-five per cent. or less of the aggregate of paid-up capital and free reserves of the
company. The appellants submit that the provision has been negatively worded and this
means that these provisions have to be mandatorily followed and not just substantial
compliance is enough. However, in the present case the shares of shareholders holding 14%
of the total share capital is being bought back and the procedure for this involves
authorization of the buy-back by a special resolution in the general meeting. This has not
been done by the respondents and that leads to violation of these mandatory provisions. The
provisions have been strictly followed in many cases and it is clear from this also that there
has to be strict compliance with Section 68 of the Companies Act, 2013.
Secondly, the respondent submits that the buy-back of that one shareholder which has already
happened is against the provisions of the Companies Act. This one shareholder held shares
less than 10% and therefore this buy-back did not need to be approved by a special resolution
by in the general meeting but the proviso to Section 68(2) (b) clearly states that this requires
authorization by means of a resolution passed at the Board meeting. The appellants also
submit that Section 68(4) of the Companies Act, 2013 has also been violated by the
respondent in the process of offering buy-back option to the shareholders.
Page | 15
ARGUMENTS ADVANCED
I. WHETHER THE E-COMMERCE MARKET IS THE RELEVANT PRODUCT MARKET AND THE
ASSESSMENT OF MARKET SHARE SHOULD BE DONE KEEPING IN MIND THE VERTICAL
INTEGRATION?
The Appellant submits that the correct relevant product market in the present case is the E-
Commerce market and not the B2B market, as erroneously claimed by the Amalgamating
Companies. Proper definition of the relevant market is a necessary precondition for any
assessment of the effect of a concentration on competition1. Market definition provides a
framework within which to assess the critical question of whether a firm or firms possess
market power2 and ‘to identify in a systematic way the competitive constraints that the
undertakings involved face’.3
1.1 On the basis of the Supply-Side Substitution assessment, the relevant product
market is Ecommerce.
The Appellant submits that E-Commerce market is the relevant product market in the present
case. Defining the market on the basis of demand considerations alone is erroneous. A
reasonable market definition must also be based on ‘supply elasticity.’ Supply-side
Substitution focuses on the extent to which alternative suppliers would switch, or begin,
production in response to a hypothetical price increase4. In Continental Can, the Court of
Justice ruled that supply side substitution forms an essential element of market definition5. In
a merger case concerning academic publishing, the Commission found on the demand-side
that there was little substitution between subjects, but identified a broader market on the basis
of supply-side considerations6
1
France v. Commission, E.C.J., judgment of 31 March 1998, Case No. C-68/94, ¶ 116.
2
Dennis Carlton, Market Definition: Use and Abuse, 3(1) Competition Policy International (2007).
3
European Commission, Commission notice on the definition of relevant market for the purposes of Community
competition law, 1997 O.J. (C 372).
4
Rebel Oil Co. Inc. v. Atlantic Richfield Co., 51 F.3d 1421 (9th Cir. 1995).
5
Europemballage and Continental Can v. Commission, E.U. General Court, judgment of 21 February 1973,
Case No. 6/72.
6
Candover/Cinven/Bertelsmann-Springer, Commission of European Communities, judgment of 29 July 2003,
Case No. M.3197, ¶14.
Page | 16
In the present case, the Competition Commission of India has correctly evaluated the
possibility of B2C firms entering the B2B market or vice versa, in case one of the markets
becomes more profitable.
A. Switching between B2B and B2C does not incur significant additional cost
The Appellant submits that the firms in either market do not have to bear ‘significant’
additional cost in order to start production or distribution in the other market. These
additional costs include changes to manufacturing equipment, training of staff, marketing
cost and any distribution cost7. When the suppliers are able to switch production to other
products and to market them without incurring significant additional costs or risks in
response to small and permanent changes in relative prices, then the market may be
broadened to include the products that those suppliers are already producing8.
In the present case, the B2B market can be sub-divided into markets for manufacturing goods
and consumer goods. The B2C market cannot be sub-dived on that basis because it is only a
market for manufacturing goods. No additional costs will be incurred in the case of consumer
goods because there is no need of changes to manufacturing equipment, training of staff,
marketing cost or any distribution cost9. If a B2C producer wants to enter into the B2B
market for the production of manufacturing goods, no ‘significant’ additional costs will be
required to start the business. The infrastructure and the logistics are identical. Established
distribution networks will also help in reaching out to customers without the need of heavy
promotion and advertising.
B. Switching between B2B and B2C is possible in the short term.

The Appellant submits that that the firms in either market can start production or distribution
in the other market in the ‘short term’. The market should broadened when the suppliers are
able to switch production to other products and to market them ‘in the short term’ in response
to small and permanent changes in relative prices10. In Kish Glass11, the Court of First
Instance upheld the Commission’s decision that since production of 4mm glass is technically
almost identical to that of glass of other thickness, glass manufacturers can convert
7
Irish Sugar, O.J. 1997 L.258/1, ¶ 90.
8
European Commission, Commission notice on the definition of relevant market for the purpose of community
competition law, 97/C 372/03, ¶ 20.
9
Candover/Cinven/Bertelsmann-Springer, Commission of European Communities, judgment of 29 July 2003,
Case No. M.3197, ¶14.
10
European Commission, Commission notice on the definition of relevant market for the purposes of Community
competition law, 1997 O.J. (C 372) 20.
11
Kish Glass v. Commission, C.F.I., judgment of 8 November 2001, Case No. T-65/96.
Page | 17
production rapidly. Similarly producers of one grade of paper can readily adjust their output
to supply a different quality then the market comprises papers of all grades.12
In the present case, as mentioned earlier, the infrastructure, logistics and in many cases, the
products will be identical. Logistics is similar in the form of storage facilities, distribution
system set-up and system supporting the whole logistic set-up. This will ensure rapid entry,
production and distribution of goods.
C. The prevalence of In-House Production

The Appellant submits that there is a prevalence of In-House Production in the E-Commerce
market. This would further strengthen the supply-side substitution argument. Majority of the
players in the Ecommerce market are present in both B2B and the B2C market. This would
enable a firm in either of the two markets to readily adjust output to supply products of the
other market because it would be more profitable for the firms.
The Appellant submits that the broader market should be identified and adopted as the
relevant market based on supply-side considerations. In most cases, the facts of the case show
us that firms have a share in both B2B and the B2C market. The relevant product market
should be E-Commerce in India because majority of the firms have in house productions (an
upstream business coupled with a downstream business). Firms without in house productions
can potentially start a business in either market because of similarity in infrastructure, assets
and logistics.
1.2 The market shares of MaalGodaam and Shopkeppa should be aggregated for the
purpose of assessment of market power and concentration because they are
under the same control
The Appellant submits that MaalGodaam and Shopkeppa’s shares should be aggregated
because the merger is entailing a horizontal effect, coupled with a vertical effect.
A merger may occur where, in the absence of a legal merger, the combining of the activities
of previously independent undertakings results in the creation of a single economic
unit.13 This may arise in particular where two or more undertakings, while retaining their
individual legal personalities, establish contractually a common economic management 14 or
the structure of a dual listed company. If this leads to a de facto amalgamation of the
12
Torras/Sarrio, Commission of European Communities, judgment of 24 February 1992, Case No. M.166, ¶18.
13
Council Regulation 139/2004, Control of Concentrations between Undertakings (the E.C. Merger Regulation),
O.J. (L 24) 3.
14
Price Waterhouse/Coopers & Lybrand, Commission of European Communities, judgment of 20 May 1998,
Case No. IV/M.1016.
Page | 18
undertakings concerned into a single economic unit, the operation is considered to be

a merger. The claim of the merger can also be reinforced by cross-shareholdings between the
undertakings forming the economic unit.15
In the present case, a de-facto amalgamation is taking place between Shopkeppa and
MaalGodaam. Even though the two undertakings are retaining their legal personalities but
they are falling under a common economic management. For the purpose of evaluation, it is
necessary to aggregate the market share of both, MaalGodaam and Shopkeppa because they
will be under the same ‘control’16.
The Appellant submits that acquisition of control by Shopkeppa can be established by

keeping in mind the shareholder’s agreement and it can be further substantiated by the cross
shareholding taking place. It is also possible to obtain control by being a minority
shareholder, provided that the shares held allow the owners to determine the strategy of the
acquired company (for example the power to nominate more than half of the administrative
board). It has been clearly mentioned in the fact sheet that Shopkeppa “will also have the
power to nominate one extra director in MaalGodaam’s Board of Directors”17. This will give
them the power to have a decisive influence in MaalGodaam’s meetings.
In Electrabel/CompagnieNationale du Rhone18 the Commission concluded that Electrabel

had acquired sole control over CNR, despite being a minority shareholder, on the basis of a
number of different considerations, including that it was assured of a de facto majority at
CNR’s General Meeting. Similarly, in Aer Lingus Group plc v Commission19 it was stated a
transaction which brings about ‘a change of control on a lasting basis’ by conferring ‘the
possibility of exercising decisive influence on the undertaking concerned’ is a concentration
which is deemed to have arisen for the purposes of the merger regulation.
In the present case, Shopkeppa has become a controlling entity of MaalGodaam ‘on a lasting
basis’, even though it has a minority shareholding (41%), because it will “also have power to
15
Commission Consolidated Jurisdictional Notice, 2008 O.J. (C 95) 10.
16
Council Regulation 139/2004, Control of Concentrations between Undertakings (the E.C. Merger Regulation),
O.J. (L 24) 3.
17
Moot Proposition, ¶ 3.
18
Electrabel/CompagnieNationale du Rhône, Commission of European Communities, judgment of 10 June
2009, Case No. M. 4994.
19
Aer Lingus Group plc v. Commission, General Court (Third Chamber), judgment of 6 July 2010, Case No. T-
411/07.
Page | 19
nominate one extra director in MaalGodaam’s Board of Directors”20 therefore assuring

Shopkeppa to have de facto majority at the General Meetings.
The Appellant submits that the merger by way of vertical integration is likely to cause an
AAEC in the relevant market because the market share of 44% reflect a position from which
MaalGodaam can raise prices, limit output, suppress innovation, reduce the variety or quality
of goods or services or deprive consumers of choice, all of which are clearly inimical to
consumer welfare21. The vertical integration can also bring about customer foreclosure and
input foreclosure because B2B and B2C are vertical markets, i.e. different levels of the
ecommerce market. The HHI index also augers unfavourable conditions in the market.
2.1 The Herfindahl-Hirschman Index indicates that the merger will make the
Ecommerce market highly concentrated and would pass the first test to label the
merger to have an appreciable adverse effect on the competition.
The Appellant submits that the Herfindahl-Hirschman Index shows a high level of
concentration22post merger. It is an indication that the amalgamation is likely to cause an
AAEC in the relevant market.
Herfindahl-Hirschman Index sums up the squares of the individual market shares of all the
competitors in a market: the higher the total, the more concentrated the market. The
concentration level will be low where the total is below 1,000; moderate if between 1,000 and
1,800; and high where it is above 1,80023. The greater the margin by which those thresholds
are exceeded, the more the HHI values will be indicative of competition concerns24
In Holcim Limited 25the Competition Commission of India observed that market

concentration is a useful indicator of the likely competitive effects of a combination and
20
21
William M. Landes & Richard A. Posner, Market Power In Antitrust Cases, 94 Harvard Law Review 937
(1981).
22
Horizontal Merger Guidelines, 57 C.F.R. § 41,552, (1992).
23
Guidelines on the assessment of horizontal mergers under the Council regulation on the control of
concentrations between undertakings, 2004 O.J. (C 31) 16.
24
Sun Chemical Group and Others v. Commission, C.F.I., judgment of 9 July 2007, Case No. T-282/06, ¶ 137.
25
Holcim Limited, [2015] C.C.I. 81.
Page | 20
Herfindahl Hirschman Index (“HHI”) is one of the indices used to assess the level of market
concentration and the changes in the concentration due to a combination.
In terms of current installed capacity, pre-combination market share of Holcim in the relevant
market for the Eastern region is around 25 percent and that of Lafarge is around 16 percent,
thus resulting in a market share of around 41 percent, post combination. Accordingly, pre-
combination HHI of around 1500 will increase to post combination HHI of around 2280, with
change in HHI of 780. This HHI was seen as substantial and the proposed combination has
the impact of significantly increasing concentration in the relevant market.
In the present case, similar facts and numbers are surfacing. The pre combination market
share of Shopkeppa in the relevant market is 32% and that of Mercado India is 12%, coming
to a total of 44%. The pre combination HHI of 1712 will increase to post combination HHI of
2480. Over here, just like the Holcim case, the change in HHI is substantial and the proposed
merger will have an adverse effect on competition in India. In such highly concentrated
markets the Federal Trade Commission considers an increase in the HHI of more than 100
points likely to create or enhance market power or facilitate its exercise 26. In our case, just
like in the Holcim case, there is an increase in HHI of just above 750 points and therefore it
should be seen as substantial and passes the first test for it to be considered to have an
adverse effect on competition in India.
2.2 The division of the market into the North and South, created by the Association
of E-Business Platforms would further facilitate the concentration of
MaalGodaam because it creates a territorial restraint which in turn creates an
Entry Barrier and also reduce competition.
The Appellant submits that the market division and customer allocation which is in place in
the e-commerce market would further facilitate the concentration and dominance of the
amalgamating firms because of their countrywide presence
A. Anti-Competitive nature of the Agreement
26
Horizontal Merger Guidelines, 57 C.F.R. § 41,552, (1992).
Page | 21
The Appellant submits that the Association of E-commerce Platform’s decision to divide the
country into two parts for ‘e-business strategies, facilities and for the purpose of
administration’27 causes restrictive competition by conferring territorial protection to E-
Commerce players. This agreement in itself is anti-competitive. As the Supreme Court stated
in Topco, “an agreement between competitors at the same level of the market structure to
allocate territories in order to minimize competition, is violative antitrust law.”28
B. The agreement would further facilitate MaalGodaam’s concentration

The Appellant submits that the agreement would enable MaalGodaam to have a higher
concentration in both the North and the South market. MaalGodaam has its presence in both,
the North and the South, while Shopkeppa’s B2C would be active in the North. This ensures
a countrywide presence of the integrating firms. The market division or exclusive distribution
agreement29 would protect MaalGodaam from facing competition from the other
geographical region. This restrictive market division prevents firms from the Northern market
to enter into the Southern market and vice versa. Firms are obliged to refrain from any
marketing specifically aimed at the other geographical location.
Higher market concentration will be afforded to MaalGodaam because-

(a) The anti-competitive activities of MaalGodaam in one of the regions would not be quelled
by the competitive restraints of the players of the other region. This means minimized
competition.
(b) The agreement would restrict the entry of potential entrants from the other region of
power.
(c) MaalGodaam’s products will not face competition from products of firms belonging to the
other region (Territorial protection against parallel imports)
(d) Countervailing buyer power of the other region will also not prevent dominance.
This goes to show that the allocated territory of North and South reduces competition and
further accentuates the already powerful MaalGodaam and Shopkeppa which is a
countrywide player. The members by agreeing not to compete with one another, in effect
agree to minimize competition.30
27
28
United States v. Topco Assocs., Inc., 405 U.S. 596, 608 (1972).
29
The Competition Act, 2002 § 3 cl.4.
30
United States v. Capitol Serv., Inc., 568 F.Supp. 134, 155 (E.D. Wis. 1983).
Page | 22
C. An adverse effect will also be created in the B2C market

The Appellant submits that there will also be an adverse effect on competition in the B2C
market. We have already noted that Shopkeppa and MaalGodaam is essentially a single
economic unit and B2B and B2C are vertical markets. The embargo that is created by the
division will not prohibit Shopkeppa, which is in the North from acquiring supplies from
MaalGodaam, which is in the South (also present in the North). They can internally source
their supplies and will enjoy resources from all over the country.
2.3 A possibility of foreclosures arises because of the vertical integration between

Shopkeppa and MaalGodaam.
The Appellant submits that vertical integration between Shopkeppa and MaalGodaam would
potentially cause foreclosures which in turn would have an adverse effect on competition in
the E-Commerce market. The Counsel has already attempted to establish that Shopkeppa and
MaalGodaam come under the same control. Interlocking Directorships that is taking place
will have the potential for foreclosure31.
The Appellant submits that that Shopkeppa has a high degree of concentration in decision-
making and has financial interests in MaalGodaam. As has been stated earlier, they should be
looked at as a single economic entity. Looking at the two firms as a single economic unity
would lead us to believe that the merger entails a vertical effect in the form of “self-dealing”
that is the predicate for the antitrust claim32. This signifies that the merger is having both, a
horizontal and vertical effect. This entails that there is a loss of direct competition between
Shopkeppa (b2b) and Mercado but can also potentially cause non coordinated effects.
A. B2B & B2C are vertical markets and the non-existence of Bricks and Mortar stores
31
Caronna, Article 81 as a Tool For Controlling Minority Cross- Shareholdings Between Competitor, (2004) 29.
E.L. Rev. 485.
32
Alan A. Fisher & Richard S. Sciacca, An Economic Analysis of Vertical Merger Enforcement Policy, 6 Res.
L. & Econ. 1, (1984).
Page | 23
In Brown Shoe Co. v. United States33, the Supreme Court was of the opinion that “the
primary vice of a vertical merger” is “foreclosing the competitors of either party from a
segment of the market otherwise open to them.”
The Appellant submits that B2B and B2C form a vertical e-commerce market. They are
different stages of production and distribution. The facts also mention that no other player
exists in India. Since no other player exists in India, B2B cannot make sales to Bricks and
Mortar stores and can either sell their supplies to B2B or B2C. Eventually all businesses are
undertaken to make sales to the final consumers and therefore Businesses cannot keep selling
to Businesses.
The B2C market is reliant on the B2B market for-
(a) Manufacturing goods and components in order to manufacture goods
(b) Consumer goods for the purpose of resale.
B. The vertical integration will result in customer foreclosure

The Appellant submits that there is a possibility of foreclosure of unaffiliated upstream rivals
from access to the integrated firm's downstream business34. For customer foreclosure to be a
concern, the vertical merger should involve a company which is an important customer with
significant degree of market power in the downstream market. 35Shopkeppa which is in the
downstream market of E-commerce is an important customer with significant degree of
market power because they possess 35% of the B2C market share.
In the present case, the following are the ways in which customer foreclosure can take place-
(a) Shopkeppa may decide to source all of its required goods from MaalGodaam and, as a
result, may stop purchasing from MaalGodaam’s competitors.
(b) It may reduce its purchases from upstream rivals of MaalGodaam or,
(c) Purchase from those rivals on less favourable terms than it would have, absent the merger.
33
Brown Shoe Co. v. United States, 370 U.S. 294 (1962).
34
Jonathan B. Baker, The F.C.C. Provides A Roadmap For Vertical Merger Analysis, 25 S.P.G. Antitrust 36,
(2011).
35
E.N.B.W./E.N.I./G.V.S., Commission on European Communities, judgment of 17 December 2002, Case No.
M.2822.
Page | 24
The Appellant submits that Customer Foreclosure by Shopkeppa can lead to higher input
prices. This customer foreclosure and the corresponding loss of output for the upstream rivals
will increase their variable cost of production, which may result in an upward pressure on the
prices they charge to their customers operating in the downstream market.
It is further submitted that customer foreclosure may also render entry upstream by potential
entrants unattractive by significantly reducing the revenue prospects. Input prices will remain
high because of this deterrence, thereby raising the cost of input supply to downstream
competitors of the merged firm. The fact that revenue streams of upstream rivals will be
primarily affected, it will significantly reduce their ability and incentive to invest in cost
reduction, R&D and product quality. This will reduce their ability to compete in the long run
and possibly even cause their exit from the market.
A 10% foreclosure of the total industry output by a Ford, through the acquisition of an
upstream automotive parts manufacturer was seen as a barrier to entry in the auto industry36.
In the present case, Shopkeppa can purchase 36% of the total B2B industries output thereby
creating a barrier to entry into the ‘’ecommerce market’’.
C. The vertical integration will result in input foreclosure
The Appellant submits that there is a possibility of foreclosure of unaffiliated downstream

rivals from access to the integrated firm's upstream product37. For input foreclosure to be a
concern, the vertically integrated firm resulting from the merger must have market power in
the upstream market. The market share of MaalGodaam which stands at 36% and a post
merger HHI of 2040 makes it the most powerful player in the upstream market. It is more
than double of that of flipsnap.cm which comes in 2nd with 17% of market share. It can create
unilateral incentives for the supplier to raise the price of its inputs to one or several “targeted”
competitors of the manufacturer38.
In the present case, the following are the ways in which input foreclosure can take place-
(a) MaalGodaam may decide not to deal with Shopkeppa’s actual or potential competitors in
the B2C market39
36
Ford Motor Co. v. United States, 405 U.S. 562 (1972).
37
Brown Shoe Co. v. United States, 370 U.S. 294 (1962).
38
Serge Moresi, Steven C. Salop, vGUPPI: Scoring Unilateral Pricing Incentives In Vertical Mergers,79
Antitrust L.J. 185 (2013).
39
Alcoa/Reynolds, Commission of European Communities, judgment of 3 May 2000, Case No. M.1693.
Page | 25
(b) It may decide to restrict or raise the price it charges for supplies to Shopkeppaa’s actual or
potential competitors in the B2C market.
(c) MalGodaam could also make the conditions of supply less favourable than they would
have been, absent the merger40
(d) In order to diminish Shopkeppa’s competition in the downstream market, it may, in a

subtle- way degrade the quality of inputs supplied.41
The Appellant submits that another possible adverse scenario could be that the decision of
MaalGodaam to restrict access to its inputs reduces the competitive pressure exercised on
remaining input suppliers, which may allow them to raise the input price they charge to
nonintegrated downstream competitors. In essence, input foreclosure by MalGodaam may
expose its downstream rivals to non-verticallly integrated suppliers with increased market
power.
It is further submitted that the mere likelihood that the merged entity would carry out a
foreclosure strategy post-merger may already create a deterrent effect on potential entrants.
Effective competition on the downstream market may be significantly impeded by raising
barriers to entry, in particular if input foreclosure would entail for such potential competitors
the need to enter at both the downstream and upstream level in order to compete effectively
on either market.42
For the sake of argument, if we consider B2B to be the relevant market-

The Appellant submits that 36% shares of MaalGodaam would also indicate a highly
concentrated market43. The post merger HHI is 2040 which is also well above the normal
threshold. Also the increase in 598 points from pre-merger to post merger, indicates a
concentrated market. Again we can assess the decision of the Holcim case which has similar
facts. In terms of installed capacity likely to be in operation by the end of 2015, pre
combination market share of Holcim is around 24 percent and that of Lafarge is around 13
40
Vodafone Airtouch/Mannesmann, Commission of European Communities, judgment of 12 April 2000, Case
No. M.1795.
41
Johnson & Johnson/Pfizer Consumer Healthcare, Commission of European Communities, judgment of 11
December 2006, Case No. M.4314.
42
E.O.N. v. M.O.L., The Commission of the European Communities, judgment of 21 December 2005, Case No.
M.3696.
Page | 26
percent with a post combination market share of around 37 percent. The pre combination
HHI of 1328 will increase to post combination HHI of 1953 with a change in HHI of 625 44.
Similarly, in a market of fluid milk suppliers, consisting of eight local dairies, the merger of
Country Lake and Superior which were the second-and third-largest sellers, with shares of
18.2% and 17.8%, (36% total) respectively, triggered the government’s motion for injunctive
relief. The acquisition would increase the HHI of the market from 2186 to 2832.45
It is further submitted that the assessment of only the B2B market will have no bearing on the
possible foreclosure effect that would come about because of the interlocking of directorship
and the single economic management being created. The market share of Shopkeppa will still
remain 35% in the B2C market while MaalGodaam will enjoy 36% of the market share in the
upstream market. Furthermore, the argument of accentuated concentration because of the
market division will remain unaffected by the assessment of B2B as the relevant product
market.
SHOPKEPPAA ’S B 2B BUSINESS WAS BEYOND AUTHORITY AND POWER CONFERRED
UNDER THE COMPANIES ACT, 2013.
It is humbly submitted before the Hon’ble Supreme Court of India that the Board of
Directors’ decision to transfer and merge shopkeppaa’s b2b business without resolution by all
the shareholders is invalid and beyond the authority and power conferred to the Board of
Directors.
3.1 On the ground of non-compliance of Chapter XV of the Companies Act, 2013.
With a view to affording opportunities to the Central Government, the shareholders and the
creditors to examine whether such Compromise, Arrangement, Reconstruction or
Amalgamation is in the interest of the shareholders, creditors, workers, the industry and the
public, elaborate procedural measures have been laid down.46 The first step in the basic
44
Holcim Limited, [2015] C.C.I. 81.
45
United States v. Country Lake Foods, Inc., 754 F. Supp. 669 (D. Minn. 1990).
46
3 C.R. Dutta, Company Law with Accounting & Auditing Practices 1098 (ed. [6] Wadhwa Nagpur 2008).
Page | 27
procedure as has been laid down for compromise or arrangement requires direction of
tribunal for meetings of members or creditors.47
The interest of creditors must always be safeguarded48; and in the case of a scheme which
involves the application of the provisions of the Companies Act for facilitating such
reconstructions or amalgamations, the protection of creditors is to be left to the procedure in
relation to such provisions.49
Section 230(1) states, “Where a compromise or arrangement is proposed:
(a) between a company and its creditors or any class of them; or
(b) between a company and its members or any class of them,
the Tribunal may, on the application of the company or of any creditor or member of the
company, or in the case of a company which is being wound up, of the liquidator, order a
meeting of the creditors or class of creditors, or of the members or class of members, as the
case may be, to be called, held and conducted in such manner as the Tribunal directs.”50
The provisions of sections 391 and 393 of the Companies Act show that compromise or
arrangement can be proposed between a company and its creditors or any class of them or
between a company and its members or any class of them. Such a compromise would also
take in its sweep any scheme of amalgamation/merger of one company with another.51
In the case of Ramco Super Leathers Ltd. v. Dhanalakshmi Bank Ltd.52 it was held that, “It is
true that Section 391 of the Companies Act does not mandate holding of the meeting of the
creditors in a scheme of arrangement between the company and its members and equally a
meeting of the members in a scheme of arrangement between the company and its creditors.
Though not specific provision has been made for ascertaining the wishes of the creditors in a
scheme of arrangement between the company and its members, the Court is entrusted with
the duty to ascertain whether scheme would affect the interest of the creditors to such an
extent that the holding of their meeting is essential, and if the Court is entrusted with the duty
to ascertain whether scheme would affect the interest of the creditors to such an extent that
the holding of their meeting is essential, and if the Court in appraisement of the facts and
47
27 Halsbury’s Laws of India 420 (LexisNexis Butterworths 2007).
48
Re Sandwell Park Colliery Co. Ltd., [1914] 1 Ch. 589.
49
Clydesdale Bank Ltd., Petitioners 1950 S.C. 30.
50
The Companies Act, 2013 § 230.
51
Miheer H. Mafatlal v Mafatlal Industries Lts., (1996) 87 Comp. Cas. 705.
52
(2009) 8 Mad. L.J. 97.
Page | 28
circumstances is of the view that the interest of the creditors would be adversely affected if
the scheme is approved, then it has to refuse to sanction the scheme since what is involved is
a public interest.”
The creditors of shopkeppaa had been merely informed about the approved deal by the Board
of Directors to the scheme of merger. They had objected to the resolution and asked for a
negotiation and corporate debt restructuring accordingly, which was not finalized.53
The court has no power to usurp the right of the class of members or creditors to decide
whether they approve the scheme. If, therefore, a class whose interests are affected by a
scheme neither assents to the scheme nor approves it at a meeting in accordance to the
section, the court cannot confirm the scheme even if it considers that the class is being fairly
dealt with, or that it would approve the scheme.”54
In the case of Bharat Synthetic Ltd. v. Bank of India55 it was held that meetings of creditors
and shareholders are mandatory requirement for granting sanction under section 391. In
Ansys Software (P.) Ltd., In re56the court declared that, “A situation where non-adherence to
the letter of law construing a substantial compliance as a fulfilment of the requirement of law
by resorting to the interpretative process of directory and mandatory requirements, depending
on the words used being ‘may’ or ‘shall’, is different from a situation where the entire
requirement in itself is sought to be done away with. A substantial compliance, being
construed as a fulfilment of a requirement of law, is not the same as no compliance at all also
being construed as a fulfilment of the requirement of law. The whole object of making an
application under section 391(1) is for permission to hold a meeting. The holding of a
meeting, the deliberations that can take place in such a meeting, the discussion, the exchange
of ideas amongst the members and after discussion of the pros and cons of the proposal or the
merits of the scheme, the members voting upon it, cannot be said to be the same as of a mere
consent letter issued by such members or creditors by themselves. There is no substitute for a
meeting that is attended by the members and creditors and any dispensation from holding of
the meeting of the members and creditors will be clearly an act which is in conflict with the
very provisions of law.”
53
54
Palmers Company Law, para 12.027 25th edition 1992.
55
[1995] 82 Comp. Cas. 437 (Bom.).
56
[2005] 57 S.C.L. 356.
Page | 29
3.2 Restrictions on powers of the Board of Directors.
Section 180(1) of the Companies Act, 201357 states that, “The Board of Directors of a
company shall exercise the following powers only with the consent of the company by a
special resolution, namely: —
(a) to sell, lease or otherwise dispose of the whole or substantially the whole of the
undertaking of the company or where the company owns more than one undertaking, of the
whole or substantially the whole of any of such undertakings.”
For purpose of this clause an explanation has been provided as to the definition of
“undertaking” which states that “undertaking” shall mean an undertaking in which the
investment of the company exceeds twenty per cent. of its net worth as per the audited
balance sheet of the preceding financial year or an undertaking which generates twenty per
cent. of the total income of the company during the previous financial year.
Shopkeppaa’s b2b activities makes 30% of its total turnover.58 Therefore, the Board of
Directors are restricted in their power to authorise the scheme of incorporating a new
company which will be the amalgamated company of b2b business of shopkeppaa and the
whole of Mercado India, without the consent of the company by a special resolution. The
creditors and shareholders of shopkeppaa were merely informed about the proposed deal and
the objections of the creditors and their demand on a negotiation was disregarded.
That, it can be submitted that there has been a clear violation of the provision of Section 180
of The Companies Act, 2013.
IV WHETHER THE BUY-BACK OF SHARES BY SHOPKEPPA IS AGAINST

THE PROVISIONS OF THE COMPANIES ACT, 2013?
57
The Companies Act, 2013 §180.
58
Page | 30
The petitioner submits that the provisions of Section 68 of the Companies Act, 2013 which
deals with the buyback of shares by a company are mandatory in nature. Therefore, the
provisions have to be strictly followed and just substantial compliance is not enough59. This
submission of the petitioners is three-fold:
4.1 The mandatory provisions for buy-back of shares have not been followed.
The company Shopkeppaa informed the shareholders and creditors about the approved deal
of merger along with an offer to sell back their share to the company on the prevalent price.
The company’s board of directors discussed and passed an approval resolution in which the
buy-back of shares was authorised.60The provisions of Section 68(2) of the Companies Act,
2013 deals with the conditions of buy-back of shares where it is clearly stated that for a buy-
back of shares more than ten per cent. or less of the total paid-up equity capital and free
reserves of the company there has to be authorisation in the articles and a special resolution
has to be passed at a general meeting of the company. In the present case, there are three
shareholders who have taken up the offer to sale back their shares to the company and these
shareholders have 14% shares together61 and it is this 14% shares that the respondent
Shopkeppaa is buying back. The petitioners submit that the respondent has clearly violated
the buy-back provisions of the Companies Act, 2013 by moving forward with the buy-back
of shares without passing a special resolution at a general meeting.
Section 77(A) of the Act62( Section 77(A) is the corresponding section of Section 68 in
Companies Act, 1956) is only an enabling provision and all that it mandates is that no
company shall buy-back its own securities unless it is authorized by its articles and also by its
shareholders.63A company may purchase its own shares only if the buy-back is authorized by
its articles and sanction of the shareholders by means of a special resolution is obtained if the
buy-back is in excess of the specified limit of 10 per cent of its total paid up equity capital
and free reserves.64 The shareholders of PunCom had, by a special resolution, approved
amendment to the Articles of Associations of the company so as to enable it to buy back its
shares and also approved the buy-back offer. The Board of Directors of the PunCom also had
59
Raza Buland Sugar Co. Ltd. v. Municipal Board, Rampur, A.I.R. 1965 S.C. 895.
60
61
62
The Companies Act, (1956) § 77.
63
Dattaraj V. Salgaocar v. State of Maharashtra &Anr., 2015 S.C.C OnLineBom. 4594.
64
D-Link (India) Limited v. The Securities and Exchange Board of India, 2008 S.C.C. OnLine S.A.T. 123.
Page | 31
approved the proposal.65 These cases show that the procedure is strictly followed generally
and the petitioners submits that thus provisions relating to buyback are not merely directory
and are mandatory.
In Raza Buland Sugar Co. Ltd. v. Municipal Board, Rampur66 (which was also relied upon in
MannalalKhetan v. KedarNathKhetan67) this Court referred to various tests for finding out
when a provision is mandatory or directory. The purpose for which the provision has been
made, its nature, the intention of the legislature in making the provision, the general
inconvenience or injustice which may result to the person from reading the provision one way
or the other, the relation of the particular provision to other provisions dealing with the same
subject and the language of the provision are all to be considered. Prohibition and negative
words can rarely be directory. It has been aptly stated that there is one way to obey the
command and that is completely to refrain from doing the forbidden act. Therefore, negative,
prohibitory and exclusive words are indicative of the legislative intent when the statute is
mandatory. In the present case, the wording of the statute contains negative words and this
makes it unequivocally clear that the provisions of the Section 6868 are mandatory and that
these provisions have been contravened by the buy-back of shares by the respondent.
4.2 The buy-back of shares by the one shareholder has not been authorised
Section 68(2)69 provides for the conditions of the buy-back of shares by a company. In the
present case the respondents have bought back shares from one shareholder who has shares
less than ten per cent. of the of the total paid-up equity capital and free reserves of the
company. According to the provision, for the authorisation of a buy-back of less than ten per
cent., a resolution has to be passed by the Board at its meeting. This has not been done by the
respondents and these provisions are mandatory as stated previously. Therefore, the
petitioners submit that there is a clear violation of the provisions of the statute by the
respondent.
65
In Re: Punjab Communications Limited, 2004 S.C.C. OnLine S.E.B.I. 141.
66
Raza Buland Sugar Co. Ltd. v. Municipal Board, Rampur, A.I.R. 1965 S.C. 895.
67
MannalalKhetan v. KedarNathKhetan, (1977) 2 S.C.C. 424.
68
69
Page | 32
4.3 Every buy-back shall be completed within one year of passing of resolution
Section 68 (4) of the Companies Act, 201370, “Every buy-back shall be completed within a
period of one year from the date of passing of the special resolution, or as the case may be,
the resolution passed by the Board under clause (b) of sub-section (2).”
This provision provides that there should be a time period of only one year from the date of
passing of the resolution and the buy-back of shares. In the present case the respondents have
accepted the shareholder’s reservation allowing them the option to sell back their shares
within two years after the incorporation of the new company. This would mean that, if the
shareholders choose to, then they could sell their shares back to the company after a year
from the date of passing the resolution and this would be in violation of Section 68 (4)71.
70
71
Page | 33
PRAYER
In the light of arguments advanced and authorities cited, the Appellants humbly submit
that the Hon’ble Court may be pleased to adjudge and declare that:
1. The e-commerce market is the relevant product market and the assessment of market
share should be done keeping in mind the vertical integration.
2. The vertical integration of Shopkeppa and Maalgodaam will cause an adverse effect on
competition in the ecommerce market and therefore the order which was given by the
Competition Appellate Tribunal should be reversed.
3. The Board of Directors’ decision to transfer and merge Shopkeppaa’s b2b business was
beyond authority and power conferred under the Companies Act, 2013.
4. The buy-back of shares by Shopkeppa is against the provisions of the Companies act,
2013.
Or any other order as it deems fit in the interest of equity, justice and good
conscience.
Sd/-
(Counsels for the Appellants)
Page | 34

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CODE: C4

UNIVERSITY MOOT COURT SELECTIONS (WINTER EDITION) 2016

CIVIL APPEAL NO. 13 OF 2016

SHOPKEPPAA .IN PVT. LTD ……………..…………………………………....RESPONDENT

CIVIL APPEAL NO. 21 OF 2016

SHOPKEPPAA .IN PVT. LTD ………………………………………………....…RESPONDENT

MEMORIAL FOR THE APPELLANT

MIND THE VERTICAL INTEGRATION?

(2) WHETHER THE VERTICAL INTEGRATION OF SHOPKEPPA AND

MAALGODAAM CAUSE AN ADVERSE EFFECT ON COMPETITION IN THE

(3) WHETHER THE BOARD OF DIRECTORS’ DECISION TO TRANSFER AND

MERGE SHOPKEPPAA ’S B 2B BUSINESS WAS BEYOND AUTHORITY AND

POWER CONFERRED UNDER THE COMPANIES ACT, 2013?

PROVISIONS OF THE COMPANIES ACT , 2013?

Abbreviations Full Forms

OFT Office of Fair Trading

Acts, Regulations, Notices and Guidelines

Decisions - Indian Courts, Tribunals and Commissions

Bharat Synthetic Ltd. v. Bank of India, [1995] 82 Comp. Cas. 437

Decisions - European Union and UK

judgment of 21 December 2005, Case No. M.3696

Decisions - United States

Books, Journals and Other authorities

I. WHETHER THE E-COMMERCE MARKET IS THE RELEVANT PRODUCT MARKET AND

THE ASSESSMENT OF MARKET SHARE SHOULD BE DONE KEEPING IN MIND THE

II. WHETHER THE VERTICAL INTEGRATION OF SHOPKEPPA AND MAALGODAAM CAUSE

III. WHETHER THE BOARD OF DIRECTORS’ DECISION TO TRANSFER AND MERGE

SHOPKEPPAA ’S B 2B BUSINESS WAS BEYOND AUTHORITY AND POWER CONFERRED

UNDER THE COMPANIES ACT, 2013?

IV. WHETHER THE BUY - BACK OF SHARES BY SHOPKEPPA IS AGAINST THE

PROVISIONS OF THE COMPANIES ACT , 2013?

It is further submitted that MaalGodaam and Shopkeppaa’s shares should be aggregated

II. WHETHER THE VERTICAL INTEGRATION OF SHOPKEPPA AND MAALGODAAM CAUSE

AN ADVERSE EFFECT ON COMPETITION IN THE ECOMMERCE MARKET?

III. WHETHER THE BOARD OF DIRECTORS’ DECISION TO TRANSFER AND MERGE

SHOPKEPPAA’S B2B BUSINESS WAS BEYOND AUTHORITY AND POWER CONFERRED

UNDER THE COMPANIES ACT, 2013.

IV. WHETHER THE BUY-BACK OF SHARES BY SHOPKEPPAA IS AGAINST THE PROVISIONS

B. Switching between B2B and B2C is possible in the short term.

C. The prevalence of In-House Production

undertakings concerned into a single economic unit, the operation is considered to be

The Appellant submits that acquisition of control by Shopkeppa can be established by

In Electrabel/CompagnieNationale du Rhone18 the Commission concluded that Electrabel

nominate one extra director in MaalGodaam’s Board of Directors”20 therefore assuring

II. WHETHER THE VERTICAL INTEGRATION OF SHOPKEPPA AND MAALGODAAM CAUSE

AN ADVERSE EFFECT ON COMPETITION IN THE ECOMMERCE MARKET?

In Holcim Limited 25the Competition Commission of India observed that market

A. Anti-Competitive nature of the Agreement

B. The agreement would further facilitate MaalGodaam’s concentration

Higher market concentration will be afforded to MaalGodaam because-

C. An adverse effect will also be created in the B2C market

2.3 A possibility of foreclosures arises because of the vertical integration between

The B2C market is reliant on the B2B market for-

(a) Manufacturing goods and components in order to manufacture goods

(b) Consumer goods for the purpose of resale.

B. The vertical integration will result in customer foreclosure

C. The vertical integration will result in input foreclosure

The Appellant submits that there is a possibility of foreclosure of unaffiliated downstream

(d) In order to diminish Shopkeppa’s competition in the downstream market, it may, in a

For the sake of argument, if we consider B2B to be the relevant market-

III. WHETHER THE BOARD OF DIRECTORS’ DECISION TO TRANSFER AND MERGE

SHOPKEPPAA ’S B 2B BUSINESS WAS BEYOND AUTHORITY AND POWER CONFERRED

UNDER THE COMPANIES ACT, 2013.

3.1 On the ground of non-compliance of Chapter XV of the Companies Act, 2013.

Section 230(1) states, “Where a compromise or arrangement is proposed:

(a) between a company and its creditors or any class of them; or