Allcargo Logistics Limited

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Page 1 of 11 COMPETITION COMMISSION OF INDIA Ref. No. M&A/2022/11/01(03)/CD NON-CONFIDENTIAL 8th January 2026 In re: Proceedings against Allcargo Logistics Limited under Section 43A of the Competition Act, 2002 CORAM: Ms. Ravneet Kaur Chairperson Mr. Anil Agrawal Member Ms. Sweta Kakkad Member Mr. Deepak Anurag Member Appearances during the hearing For Allcargo Logistics Limited Mr. Dhruv Rajain, Ms. Ananya Mahant, Mr. Varun Singh, Advocates Mr. Bhardwaj Pandya, Vice President (Head) – Legal (Group), Allcargo Logistics Limited Order under Section 43A of the Competition Act, 2002 1. This order shall dispose of the proceedings against Allcargo Logistics Limited (Allcargo), under Section 43A of the Competition Act, 2002 (Act) in relation to acquisition of 30 % stake in Gati-Kintetsu Express Private Limited1 (Gati 1 The name of the company was changed on 27th July 2023 as Gati Express & Supply Chain Private Limited. Page 2 of 11 Express/Target) by Allcargo from KWE-Kintetsu World Express (S) Pte. Ltd. (KWE Singapore) and KWE Kintetsu Express (India) Private Limited (KWE India) (collectively, ‘KWE’) [Transaction]. Allcargo Gati Limited (AGL) is a subsidiary company of, and under the management and control of Allcargo. AGL held remaining 70 % stake in Gati Express. Accordingly, the Transaction resulted in Allcargo owning 100 % of the Target, directly or indirectly. I. Initiation of proceedings under Section 43A of the Act 2. The Competition Commission of India (Commission) in its meeting held on 18th July 2024 had noted that as per information available in public domain, Allcargo had completed the Transaction. Accordingly, the Commission directed AGL to furnish certain information and documents in relation to the Transaction under Section 36(4) of the Act to assess whether further proceeding is required under Section 20(1) and/or Section 43A of the Act. The directions of the Commission were communicated to AGL vide letter dated 25th July 2024 (Section 36(4) Directions). AGL submitted the response to Section 36(4) directions on 23rd August 2024 (Response). 3. In its meeting held on 24th December 2024, the Commission considered the Response and made the following observations: • Prior to 8th June 2023, AGL held 70 % stake in Gati Express and KWE held balance 30 % stake. • The Board of Directors of Allcargo, the ultimate holding company of Gati Express, at their meeting held on 9th November 2022 approved the Transaction and, in this regard, signed the Share Purchase Agreement on 27th March 2023 (SPA) with KWE. • The Transaction was concluded on 8th June 2023. • The Transaction meets the jurisdictional thresholds prescribed under Section 5 of the Act. Page 3 of 11 4. The Commission further examined the Transaction for being covered under Schedule I of the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (Combination Regulations, 2011) which specifies certain categories of combinations which are ordinarily not likely to cause an appreciable adverse effect on competition (AAEC) in India and accordingly, notice for the same under Section 6(2) of the Act need not normally be filed. The Commission observed that the subject matter of the Transaction needs to be considered for conformity with Item 2 of Schedule I of the Combination Regulations, 2011, which reads, "An acquisition of shares or voting rights, referred to in sub-clause (i) or sub-clause (ii) of clause (a) of section 5 of the Act, where the acquirer, prior to acquisition, has fifty percent (50%) or more shares or voting rights in the enterprise whose shares or voting rights are being acquired, except in the cases where the transaction results in transfer from joint control to sole control. " 5. The Commission observed that as Allcargo indirectly held more than 50 % shareholding in Gati Express, the crux of the issue of requirement to notify the Transaction hinges on change in control over Gati Express from joint control to sole control. In this regard, as a part of Response, it was stated that by Allcargo acquiring a minority stake of KWE in Gati Express, no change in the management and control of Gati Express has taken place considering that Allcargo is already a majority shareholder (by virtue of AGL’s 70 % stake in Gati Express) and in any event manages and controls Gati Express. 6. The Commission observed that ‘control’ is a matter of degree and can be expressed as positive control or majority control, negative control, sole control, joint control etc. Further, control can be gained either by negotiating and acquiring control conferring rights under the inter se agreements/arrangements between the parties or by acquiring a shareholding which by itself is sufficient to confer control. As regards the Transaction, the Commission observed that without prejudice to any control conferring rights that KWE might have had in terms of their agreements/arrangements, it appears that while Allcargo did have majority control over Gati Express but as the shareholding of KWE Page 4 of 11 exceeded 25 %, it also follows that KWE had the ability to 'veto' the decisions which required passing of special resolution as conferred by the Companies Act, 2013. This ability of KWE raises presumption of its 'negative control' over Gati Express and resultantly Gati Express prior to the Transaction appears to be under the joint control of Allcargo and KWE, and with the Transaction, Allcargo's control over Gati Express appears to have changed from majority but joint control (with more than 50 % existing shareholding) to sole control. 7. Accordingly, the Commission formed a prima facie view that the submission of AGL that by Allcargo acquiring a minority stake of KWE in Gati Express, no change in the management and control of Gati Express has taken place, does not appear to be correct. Further, the Transaction does not appear to be in conformity with Item 2 of Schedule I of the Combination Regulations, 2011 and therefore a notice under Section 6(2) of the Act should have been filed by Allcargo before the consummation of Transaction. 8. On the basis of the aforesaid, the Commission directed to issue a show cause notice to Allcargo under Section 43A of the Act read with Regulation 48 of the Competition Commission of India (General) Regulations, 2009. Pursuant to direction of the Commission, a show cause notice was issued to Allcargo on 9th January 2025 (SCN) vide which it was called upon to show cause, in writing, within fifteen (15) days of the receipt of the SCN as to why penalty should not be imposed upon it, in terms of Section 43A of the Act for failure to file notice for the Transaction in terms of Section 6(2) of the Act. II. Submissions of Allcargo 9. Allcargo filed the response to the SCN on 27th February 2025 after seeking an extension of time, along with a request for an oral hearing in the matter (Response to SCN). The Commission heard Allcargo at length on 16th September 2025 (Oral Hearing). The key submissions made by Allcargo as part of the Response to SCN and Oral Hearing are set out below. Page 5 of 11 Allcargo had decisive control/sole control over Gati Express prior to the Transaction 10. Allcargo submitted that it was of the bona fide view that the Transaction does not trigger the requirement of filing a notice with the Commission since AGL (being a subsidiary of Allcargo) exercised decisive control over the Target, and hence, as a result of the Transaction, there was no change in the degree of control that rested with Allcargo. In this regard, Allcargo, inter alia, made the following supporting submissions: • KWE, in practice and in essence, did not exercise any influence over the affairs or management of the Target and was merely an investor. • The Shareholder’s Agreement (SHA) of Gati express defines KWE as an investor, and their role in the Target was limited to the same. Defining KWE as an investor underscores the intent between the parties to the SHA, indicating that KWE’s primary interest was financial success of the Target, and not its governance. • --------------------- ------------------- ------------------- ----------------- -------- ---- -- -------------------- ------------------- -------------------- ----------------- ---------------- -------------- ----------- -------------- --------------- -------------- --------- ------------- ---------------- ---------------- --------------- ---------------- --------------- ------------- ------------- ------------- -------------- ------------ ----------- ------- -------------------- ---------- • The practical implications of KWE's position as an investor can be observed in their interactions with Target's management and other shareholders. KWE's involvement was primarily through financial commitments, such as capital injections or equity purchases, without any direct engagement in policy-making or executive functions and that this is evident from KWE’s voting pattern during board and shareholder’s meetings. --------- ---------- ----------- -------- ------------ ------------- ------------ -------------- ------------ -------------- ------ ----- -------------- ------------- --------------- ------------- -------- ----------- ------------ ------------------ -------- --------- -- --- -- --- -- ----------- -- --- ------- Page 6 of 11 Based on the aforesaid, it has been stated that Allcargo effectively exercised sole control over Gati Express prior to the Transaction and that ------- ------- ----------- -------- ------ --- ------- --- ---------- -- ---------- -- --- ------ 11. As regards the question of ability of KWE to block special resolutions, Allcargo confirmed that KWE could under the provisions of the Companies Act, 2013 block special resolutions. However, as submitted, given the practice of conducting affairs at the Target, Allcargo was under the bona fide belief that it exercised sole control over the Target wherein KWE was only engaged in the capacity of an investor. There was no change in quality of control 12. As submitted, the concept of ‘control’ is crucial in determining whether a transaction or arrangement constitutes a concentration that may significantly impede effective competition. As stated, the quality of control should be interpreted as the manner in which control is exercised and that includes the effectiveness, consistency, and integrity with which the controlling entity manages the undertaking. It has been stated that if the quality of control remains constant, it implies that the way the undertaking is managed does not change significantly. 13. Allcargo submitted that the aforesaid interpretation of change in quality of control is consistent with the decisional practice of the Commission. Allcargo made reference to the decisions of the Commission in Keimed Private Limited2 and Ms. Shobana Kamineni / Prime Time Logistics3. In Keimed Private Limited, the Commission noted that: “ 5. The key aspect for examination from competition perspective in cases involving change in control from joint to sole or changes in degree or quality of control is the change in ability/incentive of the entity acquiring sole control resulting from lifting of 2 Order under Section 31(1) of the Competition Act, 2002 dated 9th February 2023 in Combination Regn. No. C- 2022/10/979 3 Order under Section 31(1) of the Competition Act, 2002 dated 9th February 2023 in Combination Regn. No. C- 2022/10/978 Page 7 of 11 restraining influence of other shareholders arising from their potentially different interests. It may also be noted that such potential differences in interests are more likely in the event of entities involved having separate presence in the related area(s) apart from the entity(ies) which is/are under joint control. Further, such potential differences would also depend upon various factors viz., inter-alia, extent of shareholding, nature of rights, overall presence of the entity etc.” (emphasis added) In Ms. Shobana Kamineni / Prime Time Logistics, the Commission noted that: “One of the key aspects for examination from the competition perspective in cases involving change in control from joint to sole or changes in degree or quality of control is the change in the ability/incentive of the entity acquiring sole control resulting from lifting of the restraining influence of exiting shareholder(s), arising from their potentially different interests. It may also be noted that such potential differences in interests are more likely in the event of involved entities having separate presence in related area(s) apart from entity(ies) under joint control.” (emphasis added) 14. In the backdrop of aforesaid observations of the Commission, it has been stated that the interests of KWE and AGL were aligned, as evident from their voting pattern and that even prior to the Transaction, AGL’s nominee directors have always cast majority votes during the Target’s annual general meetings and the shareholder meetings with respect to both the ordinary and special resolutions for at least the last 3 years. Accordingly, it has been stated that even if it were to be considered that Allcargo acquired sole control as a result of the Transaction, there is no change in the ability/incentive of Allcargo, after the exit of KWE, to influence the Target. Allcargo’s bona fide view on the interpretation of ‘control’ 15. As submitted, the Commission has made this assumption of KWE exercising control over Gati Express on the basis of KWE’s shareholding of more than 25 %, which grants KWE the ability to ‘veto’ the decisions which require passing of a special resolution as conferred by the Companies Act, 2013. In this regard, Allcargo made a reference to the FAQs on the Commission’s website which explains: Page 8 of 11 “…special rights/veto rights are not the only basis for inferring the ability to manage/control the affairs of an enterprise and there can be other sources of control as well, viz., status and expertise of an enterprise or person, board representation, structural/financial arrangements, etc. In competition law practice, control is considered a matter of degree. However, all degrees and forms of control nonetheless constitute control. International jurisprudence considers “material influence” as the lowest form of control, alongside other higher forms such as de facto control and controlling interest (de jure control), in that order.” (emphasis added) In the backdrop of aforesaid FAQ, Allcargo submitted that the Commission recognizes three degrees of control, namely de jure control, de facto control, and material influence. Allcargo submitted that given its shareholding and that of KWE and considering the aforesaid aspects on decisive control, Allcargo was under the bona fide belief that it solely exercised de jure control (through AGL) over the Target. No AAEC as a result of the Transaction 16. It has been stated that no AAEC on competition within India has been caused and/or is likely to be caused as a result of the Transaction. Acquisitions within the same group, where there is no change in control, are exempt from notification and that such transactions do not alter the competitive dynamics outside the group and are unlikely to adversely affect competition. Mitigating factors 17. Allcargo has submitted that if the Commission decides to impose a penalty, the Commission may, inter alia, consider that Allcargo was of the bonafide view that there was no requirement to make a merger filing and there was no deliberate mal-intent to circumvent a filing requirement and that it has also now further initiated the process to enforce a robust competition compliance program (CCP) within its premises, ensuring compliance with competition law. Page 9 of 11 III. Observations and Findings of the Commission 18. The key aspect of the SCN was non-applicability of Item 2 of Schedule I of the Combination Regulations, 2011 on the Transaction as the same had the effect of changing the control over Gati Express from joint control of Allcargo and KWE to sole control of Allcargo. The basis of such prima facie finding was the extent of shareholding of KWE (30 %) which conferred KWE with the ability to 'veto' the decisions which required passing of special resolution as per the Companies Act, 2013 raising the presumption of negative control. While Allcargo has made submissions on having decisive control over Gati Express, it has also conceded that KWE had the ability to 'veto' the decisions which required passing of special resolution. 19. Based on the perusal of SHA along with the Response to SCN, the Commission further observed that KWE not only had negative control in terms of shareholding but also in terms of veto rights on reserved matters. The reserved matters, inter alia, included rights such as ----------- ---------- ------------ ---------------- ------------- -------------- ----------- - ----------- ------------ ------------ ------------ ----------- ----------- ------------ ----------- ------ ------------ ------------- ------- all of which are considered as control conferring rights. 20. Considering the explicit change in control of Gati Express from joint control to sole control as reflected in the extent of shareholding and nature of rights under the SHA, any further submissions as regards decisive control, degree or quality of control are not tenable and examination of the same is otiose. Nonetheless, the Commission considered the submissions of Allcargo and made the following observations. 21. As regards the submissions of Allcargo having decisive control, the Commission observed that ‘control’ means and implies the ability to control ------- ------ -------- ---- ------------ ------------- ----- --------- --------- --------- ------ ----------- --------- ----------- -- ------------------- ------- ------ ---- the same does not dilute the ability of such shareholder to exercise control over the management and affairs of a company. The submissions of Allcargo on having decisive influence and the details of voting patterns submitted does not imply lack of control of KWE and is merely representative of existing operational dynamics which may or may not subsist or persist in future. The Commission further Page 10 of 11 observed that ‘control’ includes both de facto and de jure aspects and in the present case, KWE did have de jure negative control over Gati Express arising from its shareholding and rights under the SHA. 22. The Commission considered the references made to its decisional practice wherein importance has been accorded to the change in the ability/incentive of the entity acquiring sole control resulting from lifting of the restraining influence of exiting shareholder(s), arising from their potentially different interests and wherein the Commission has also noted that such potential differences in interests are more likely in the event of involved entities having separate presence in related area(s) apart from entity(ies) under joint control. The Commission noted that the observations referred by Allcargo are in context of assessment of a combination transaction for likelihood of AAEC, which is a separate exercise undertaken subsequent to the notification of a combination. It is neither substantively appropriate nor tenable under the Act to conflate the issues of notification and assessment. Whether a transaction has caused or is likely to cause AAEC cannot be made the basis for requirement of filing notice of a transaction. Accordingly, the submissions of Allcargo in this regard are misplaced. 23. Further, the reference to FAQs is also misconceived. The FAQ referred by Allcargo provides that special rights/veto rights are not the only basis for inferring the ability to manage/control the affairs of an enterprise and there can be other sources of control as well, viz., status and expertise of an enterprise or person, board representation, structural/financial arrangements, etc. In competition law practice, control is considered a matter of degree. However, all degrees and forms of control nonetheless constitute control. Thus, while considering control as a matter of degree, the FAQ gives due emphasis to veto rights and furthers the same by highlighting other sources of control. The FAQ clearly records that all degrees and forms of control nonetheless constitute control and accordingly the belief that if an entity has de jure control, the other forms of control become irrelevant is incorrect. 24. On the basis of the aforesaid, the Commission is of the opinion that the Transaction was notifiable and by consummating the same without filing a notice, Allcargo has contravened the provisions of Section 6(2) of the Act and is liable to penalty under Page 11 of 11 Section 43A of the Act. Section 43A of the Act provides that if any person or enterprise fails to give notice to the Commission under Section 6(2) of the Act, the Commission shall impose on such person or enterprise a penalty which may extend to 1 % of the total turnover or the assets, whichever is higher, of such a combination. Thus, Section 43A of the Act empowers the Commission to determine the appropriate amount of penalty in a matter, subject to the maximum of 1% of the total turnover or the assets, whichever is higher. 25. Considering the facts and circumstances of the instant matter and the conduct of Allcargo during the proceedings, the Commission considers it appropriate to impose a penalty of INR 50,00,000 (Rupees Fifty Lakhs Only) on Allcargo. Allcargo is directed to pay the penalty within 60 days from the date of receipt of this order. 26. It is made clear that nothing used in this order shall be deemed to be confidential or deemed to have been granted confidentiality, as the same has been used for the purposes of the Act in terms of the provisions contained in Section 57 thereof. 27. The Secretary is directed to communicate to Allcargo accordingly.