CCI imposes Rs 40 lakh fine on Axis Bank for not meeting regulatory requirements in CSC e-Governance stake acquisition

The specific involved Axis Bank acquiring a 9.91 percent stake in CSC e-Governance, and this deal was finalized in November 2020, as confirmed by the

As per the regulatory requirements, Axis Bank was obligated to provide notification to the fair trade regulator regarding this transaction. However, it was found that Axis Bank did not meet this obligation, the order said.

"It is apparent that the acquisition of stake in CSC e-Governance by Axis Bank was neither solely as an investment nor can be considered to be in ordinary course of business.

"Therefore, the AxisCSC e-Governance acquisition is not eligible for the benefit of the Item 1 of Schedule I (combination regulation) and accordingly, it is immaterial whether the transaction led to acquisition of control or not," the regulator said.

In this context, the Competition Commission of India (CCI) determined that it was not necessary to assess whether the transaction resulted in the acquisition of control or not.

The CCI observed that Axis Bank did not comply with the regulations pertaining to the acquisition of CSC e-Governance.

The combination rules stipulate that for an acquirer to qualify for the benefits of these rules, certain conditions must be met.

These conditions include that the acquirer should not hold a position on the board of directors, should not have the right to nominate a director, and should not be involved in the management or affairs of the entity whose shares or voting rights are being acquired.

In the specific case of Axis Bank's acquisition of CSC e-Governance, it was noted that Axis Bank held a position on the board of directors of CSC e-Governance and also expressed the intention to secure representation on the company's board of directors and actively participate in its management and operations. Consequently, Axis Bank did not fulfill the conditions necessary to qualify for the benefits outlined in the combination rules.

As per the order issued on August 9, Axis Bank is obligated to pay the penalty amount within a period of 60 days from the date of the order.

Notably, CSC e-Governance Services India Ltd functions as a special-purpose entity established by the Ministry of Electronics and Information Technology to supervise the implementation of the common services centre scheme.

Private lender Axis Bank informed, "The Competition Commission of India (CCI) vide its letter dated August 17, 2023, has imposed a penalty amounting to Rs 40 lakhs under Section 43A of Competition Act, 2002," the company said in a stock exchange filing on Friday.