Manipal Health Systems Private Limited and MEMG Family Office LLP

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Page 1 of 14 COMPETITION COMMISSION OF INDIA Combination Registration No. C-2024/05/1142 NON-CONFIDENTIAL 31stJuly 2025 Proceedings under Section 43A of the Competition Act, 2002 (Act) in relation to notice filed under sub-section (2) of Section 6 of the Act by Manipal Health Systems Private Limited and MEMG Family Office LLP CORAM: Ms. Ravneet Kaur Chairperson Mr. Anil Agrawal Member Ms. Sweta Kakkad Member Appearances: Mr. Samir Gandhi, Advocate, Mr. Ankit Majumdar, Advocate, Mr. Anicham Tamilnani, Advocate and Mr. Ravi Gangal, Advocate Order under Section 43A of the Competition Act, 2002 A. BACKGROUND 1. The Competition Commission of India (Commission) in its meeting held on 23rd July 2024 had considered the notice dated 09th May 2024 received under sub-section (2) of Section 6 of the Act filed by Manipal Health Systems Private Limited (Acquirer 1/ Combination Registration No. C-2024/05/1142 Page 2 of 14 MHSPL) and MEMG Family Office LLP (Acquirer 2/ MEMG FO) [Acquirer-1 and Acquirer-2 are together referred to as ‘Acquirers’] and passed an order under sub- section (1) of Section 31 of the Competition Act, 2002 (Act) approving the combination without prejudice to any proceeding under Section 43A of the Act (Order). Description of the Parties 2. Acquirer 1: Acquirer-1 is a privately held healthcare company in which Manipal Global Health Services, Manipal Education and Medical Group India Pvt. Ltd. and Acquirer-2 hold shareholding. It provides a diverse range of services, including hospital services, research services, telemedicine, home healthcare, and medical tourism. 3. Acquirer 2: Acquirer-2, incorporated in India, is a limited liability partnership firm and ultimately belongs to the Pai Family Group. Its designated partners include Dr. Ranjan Ramdas Pai and Mrs. Shruti Ranjan Pai and Manipal Education and Medical Group India Pvt. Ltd. It is engaged in the provision of management consultancy services and advisory activities to customers in India and does not have any operations other than in India. 4. Pai Family: The Pai Family comprises Dr. Ranjan Pai, Mrs. Shruti Pai, Ms. Sanya Pai and Ms. Rhea Pai (together referred to as “Pai Family”). The Pai Family is treated as the ultimate parent of the Pai Family Group, including the Acquirers. The Pai Family and Pai Family Group, including through their affiliates, are engaged in (i) running and managing hospitals and providing health care services; (ii) providing management business consultancy and other related services; (iii) providing services in finance, management, administration, legal, human resources development and other related fields; (iv) management and administration of teaching hospitals; (v) operating various hospitals or clinics for providing healthcare services; and (vi) providing educations and related services. It is submitted in the notice that educational institutions operated by the Acquirer Group offer their services primarily in the formal education segment and not in the market for non-formal education. Combination Registration No. C-2024/05/1142 Page 3 of 14 5. Target: The Target is Aakash Educational Services Limited (Target/AESL). Aakash Edutech Private Limited (AEPL) is the 100% subsidiary of the Target. The Target operates classroom centres (including its franchisee centres) (Aakash Centres) across India. Further, the Target offers its services through multiple modes such as classroom- based coaching, online learning, distance learning and hybrid learning programmes. The Target (directly or through its subsidiary or its franchisees) provides following services: (i) coaching services supplementing their classroom learning curated learning resources for class 8; (ii) preparatory coaching services for junior competitive scholarship tests and merit-based entrance tests, such as Olympiads and NTSE; (iii) coaching services supplementing their classroom learning curated learning resources for class 9 to 10; and (iv) coaching services supplementing their classroom learning curated learning resources for science stream for classes 11 and 12 [hereinafter, the Acquirers and the Target are collectively referred to as the ‘Parties’]. Transaction 6. The Commission in its Order dated 23rd July 2024 approved the following Combination: i. Acquisition by the Acquirer-1 of 39.61% of the share capital of the AESL, on post issue fully diluted basis, pursuant to the conversion of the debentures to equity shares of the Target in accordance with the Debenture Trust Deed (Transaction-1); and ii. Acquisition by Acquirer-2 of up to an additional 8.25% of the share capital of the Target on a post issue basis (or such additional shares as decreed by the arbitral tribunal at the date of transfer) pursuant to the occurrence of an event of default under loan agreement dated 13th October 2023 (Transaction-2). Transaction-1 and Transaction-2 are together referred to as the “Combination”. Post the completion of Transaction-2, the Acquirers together would hold up to approximately 48% of the Target’s share capital on a post issue fully diluted basis. Combination Registration No. C-2024/05/1142 Page 4 of 14 Submissions in the Notice (a) Transaction 1 7. With respect to Transaction 1, it was submitted in the notice that AESL had issued 20,000 debentures of aggregate face value of INR 2000 crore to DKP India Scheme I, an alternative investment fund registered with the Securities and Exchange Board of India, under the terms of the debenture trust deed dated 25th April 2023 as amended on 2nd June 2023 (Debenture Trust Deed). 8. The Acquirer-1 purchased the aforesaid 20,000 debentures by payment of aggregate consideration of INR 1452.60 crores through the CBRICS platform of the National Stock Exchange of India Limited (NSE) on 10th November 2023. 9. Pursuant to various events of default under the terms of the Debenture Trust Deed, and in accordance with the terms thereof, Catalyst Trusteeship Limited (Debenture Trustee), issued a conversion notice dated 15th January 2024 to the Target, calling upon the Target to convert INR 2184.70 crores of the debenture obligations into equity shares of the Target, representing 39.61% of the share capital of the Target on a post issue fully diluted basis in accordance with clause 8.2(g) of the Debenture Trust Deed. Theshareholders of the Target approved this conversion through the Special Resolution dated 25th April 2023. 10. As to the date of special resolution being prior to date of conversion notice, it was clarified that along with the execution of the Debenture Trust Deed, the shareholders of the Target had also passed a special resolution on 25th April 2023, to enable its board of directors to effectuate the conversion of shares as contemplated therein, in the event a default was to occur in the future. 11. Further, regarding date of default under the terms of the Debenture Trust Deed, it is submitted that a demand notice was issued on 7th September 2023 from the Debenture Combination Registration No. C-2024/05/1142 Page 5 of 14 Trustee to Think & Learn Private Limited (T&L). Pursuant to the event of default and acceleration dated 26th June 2023, from the Debenture Trustee, inter alia, the Target was called upon to forthwith pay and repay the entire debenture obligations with respect to the Series A Debentures and Series B Debentures. Therefore, the date of default was 26th June 2023 pursuant to which the conversion notice dated 15th January 2024 was issued. 12. Pursuant to the conversion notice dated 15th January 2024, the Target allotted equity shares to the Acquirer-1 on 22nd January 2024 representing 39.61% of the share capital of the Target on a post issue fully diluted basis (Transaction-1). (b) Transaction 2 13. It was stated in the notice that, apart from above, the Acquirer-1 and other entities of MEMG Group (namely, Manipal Health Initiative Private Limited, MNI Ventures, and MEMG FO) had disbursed loans to AESL and its related entities (collectively, the “Loan Agreements”). 14. With respect to Loan Agreement dated 13th October 2023 (LA-3), it is stated that this Loan was provided as an advance payment for the purchase consideration towards purchase of equity shares of AESL amounting to 6% ownership (at the time of the loan) of the Target (Sale Shares). However, these equity shares amounting to 6% (at the time of the loan) in the Target were not transferred to MEMG FO. Further, LA-3 also gave MEMG FO the right to receive additional 2.25% of equity shares of AESL (Additional Shares). 15. Due to non-payment of the outstanding amounts by the specified date with respect to LA- 3, Acquirer-2 issued a notice on 18th March 2024 referring the dispute to arbitration seated in Bangalore to be conducted in accordance with rules of the Singapore International Arbitration Centre (SIAC), seeking transfer of Sale Shares and Additional Shares. By way of an interim order dated 4th April 2024 (SIAC Interim Order), the Combination Registration No. C-2024/05/1142 Page 6 of 14 arbitrator has restrained the sellers from disposing or encumbering Sale Shares of AESL until further orders in these arbitration proceedings. 16. Accordingly, in addition to the shares already acquired (39.61%) pursuant to the Transaction-1, Acquirer-2 sought approval for the acquisition of up to an additional 8.25% equity shares of AESL’s share capital (or such additional number of shares as decreed by the arbitral tribunal at the date of the transfer) (Transaction-2). B. ISSUE OF SHOW CAUSE NOTICE (SCN) 17. The Commission considered the matter in its meeting held on 23rd July 2024 and observed that Transaction-1, as mentioned above, was completed on 22nd January 2024 without filing notice with the Commission. Regarding the sequence of events, it was noted that the event of default in respect of Transaction-1 occurred on 26th June 2023, in furtherance of which the demand notice was issued by the Debenture Trustee on 7th September, 2023. Acquirer-1 purchased the said debentures on 10th November 2023. Subsequently, the Debenture Trustee issued the conversion notice dated 15th January 2024 pursuant to which the equity shares of the Target were allotted to Acquirer-1 on 22nd January 2024. Notably, even though the conversion notice was issued before acquisition of shares, the notice was not filed with the Commission prior to allotment of shares. The instant notice was filed with the Commission only on 09th May 2024 i.e., much after the allotment of 39.61% equity shares of the Target to Acquirer-1. 18. Consequently, based on the information disclosed in the notice, it was evident that Transaction-1 was consummated and given effect to without notifying the same to the Commission. Thus, the Commission was of the prima facie opinion that there is a contravention of the provisions of sub-section (2) of Section 6 and sub-section (2A) of Section 6 of the Act in the instant matter. Hence, the Commission decided to issue SCN to the Acquirers under Section 43A of the Act read with Regulation 48 of the Competition Commission of India (General) Regulations, 2009. Combination Registration No. C-2024/05/1142 Page 7 of 14 19. Accordingly, an Order dated 23rd July 2024 (SCN Order) was passed by the Commission directing the Acquirers, to explain, in writing, within a time period of 15 days from the receipt of the SCN Order as to why: (i) they should not be found in contravention of the provisions of the Act and (ii) no penalty in terms of Section 43A of the Act should be imposed upon them.The SCN Order was communicated to the Acquirers vide letter dated 29th August 2024 and the Acquirers submitted their response on 11th October 2024 (SCN Response), after seeking extension of time. C. RESPONSE TO SCN (i) Submissions with respect to Transaction 1 by Acquirer 1: 20. It is stated in the SCN Response that Transaction 1 which comprises Acquirer-1’s acquisition of 39.61% of the Target’s equity share capital on a post issue fully diluted basis was triggered since the Debenture Trustee issued a conversion notice dated 15th January 2024 under Clause 8.2(g) of the Debenture Trust Deed dated 25thApril 2023 as amended on 2ndJune 2023, calling upon AESL to convert the debenture obligations into equity shares, representing 39.61% of its total equity shareholding on a post issue fully diluted basis. The Debenture Trustee was constrained to issue the Conversion Notice due to AESL having failed, despite multiple notices by the Debenture Trustee, to rectify several breaches, each of which constituted an event of default under Clause 8.1 of the Debenture Trust Deed. 21. The critical and extenuating circumstances underpinning Transaction 1, necessitate a purposive and holistic interpretation of Sections 6(2), 6(2A) and 43A of the Act. Such an approach would mean that Acquirer-1’s pro-competitive action of acquiring shares of AESL pursuant to Transaction 1 neither warrants a finding of infringement of Sections 6(2) and 6(2A) of the Act nor requires imposition of any penalty on it under Section 43A of the Act. Combination Registration No. C-2024/05/1142 Page 8 of 14 22. AESL had issued 20,000 debentures of aggregate face value of INR 2,000 crore to DKP India Scheme I under the terms of the Debenture Trust Deed. At the time Acquirer-1 purchased the aforesaid debentures, various events of default under the terms of the Debenture Trust Deed had taken place which AESL had failed to cure. The terms of the debentures themselves provided for conversion of the debentures in such circumstances, and in accordance with the terms thereof, the Debenture Trustee issued a conversion notice dated 15th January 2024 to AESL. 23. Acquirer-1 was constrained to proceed with the conversion as described above without any delay for the following reasons: a. Financial Distress of Key Shareholder: One of the shareholders of the AESL, T&L, has been in significant financial difficulty, with media reports suggesting that T&L’s creditors would initiate recovery proceedings against T&L. In fact, a petition seeking initiation of corporate insolvency resolution proceedings was also pending against T&L at the time. It was therefore essential for Acquirer-1 to secure the conversion of thedebentures before any of the financial difficulties affecting T&L affected AESL. b. AESL’s Financial Vulnerability: AESL’s own financial position has been weakened significantly and its outstanding debt impacted its operations to an extent that the ability of AESL to carry on as a going concern was at risk. If the debentures had not been converted into equity shares, AESL would have ceased to be able to continue as a going concern and almost 4 lakh students who relied on AESL’s educational services would be adversely affected. By avoiding a scenario where AESL was unable to continue as a going concern, Transaction 1 maintained a competitive landscape in the relevant market(s). c. Protection of Acquirer-1’s rights: The conversion was a consequence of the default by AESL, and hence Acquirer-1, to protect its rights and interests, was constrained Combination Registration No. C-2024/05/1142 Page 9 of 14 to convert the debentures into equity shares. Transaction 1 also improved AESL’s financial position, increasing the likelihood of meeting obligations to its creditors. (ii) Mitigating Circumstances: 24. It is submitted that there are several mitigating and exonerating circumstances existing in this matter, which the Commission, in its discretion, may deem appropriate for a favourable view. These factors are outlined below and are relevant to the present case. a. Absence of Special Rights: Acquirer-1 has not entered into any shareholders’ agreement with AESL or its shareholders and accordingly does not enjoy any special contractual rights which are not available to an ordinary shareholder. b. Protection of Stakeholder Interests: Notably, the consummation of Transaction 1 was critical, important and absolutely necessary considering that it was safeguarding the future of almost 4 lakh students and more than 10,000 employees, which was put in jeopardy due to default by AESL on the debentures issued to it by the Acquirer-1. Despite facing financial challenges and potential legal proceedings, AESL’s continuation as a going concern is crucial for the future of its students and other stakeholders. Acquirer-1 was therefore constrained to convert its debentures into equity shares to reduce the financial burden of AESL, thereby ensuring its sustained operation for the benefit of students and staff. c. Transaction 1 did not result in any Appreciable Adverse on Competition (AAEC) in any markets in India: Transaction 1 did not result in any AAEC within any markets in India. The sole purpose behind Transaction 1 was to ensure that AESL remained operational, given its financial difficulties and the interests of various stakeholders, particularly students and employees. d. Acquirer-1 has acted in a bona fide manner: Acquirer-1 submits that its continued engagement with the Commission including through the pre-filing Combination Registration No. C-2024/05/1142 Page 10 of 14 consultations.demonstrates its bona fide endeavour of absolute transparency and cooperation with the Commission. 25. Accordingly, Acquirer-1 requests the Commission to neither hold Acquirer-1 guilty of any contraventions of the Act nor impose any penalty on it. (iii) Submissions with respect to Transaction 2 by Acquirer 2: 26. It is submitted that Transaction 2 was notified by Acquirer-2 on 09th May 2024 and the Commission’s prior approval was sought before taking any steps towards its consummation. Transaction 2 is yet to be consummated by Acquirer-2. Accordingly, there is no legal or factual basis for initiating any proceedings in relation to Transaction 2. Only Transaction 1, involving the Acquirer-1's acquisition of 39.61% of AESL's equity share capital on a post-issue fully diluted basis, was completed prior to submitting the Notice to the Commission. Further, Acquirer-2 was neither a party to Transaction 1 nor acquired AESL’s shares through it. Therefore, there is no reason or factual basis to conclude that Acquirer-2 violated Section 6(2) or 6(2A) of the Act. (iv) Prayer 27. Without prejudice to the foregoing, Acquirer-1 has requested the Commission to not impose any penalty on it for any alleged contravention of the Act that the Commission considers that Acquirer-1’s actions may have caused. Further, Acquirer-2 has requested the Commission to delete its name from the list of parties to the inquiry initiated pursuant to the SCN and/or hold that it has not contravened the provisions of Sections 6(2) and 6(2A) of the Act. D. OBSERVATIONS OF THE COMMISSION 28. The Commission has considered the material on record and heard the arguments of the learnedcounsel in the matter on 24th June 2025. Given the submissions made in the Combination Registration No. C-2024/05/1142 Page 11 of 14 Notice, the SCN Response and the arguments presented before it, the observations of the Commission on the issue of contravention of the provisions of Section 43A read with Section 6(2) and Section 6(2A) of the Actin the instant matter are set forth in following paras. Transaction – 1 29. Upon perusal of theSCN Response and hearing the learned counsel in the matter, it is evident that Transaction 1 involving the acquisition of 39.61% of AESL's equity share capital by Acquirer-1 on a post-issue fully diluted basis was completed prior to submission of the notice to the Commission.Neither in the SCN response nor during the hearing the learned counsel has denied consummation of Transaction 1 prior to filing the notice with the Commission. The arguments have mainly been extended to consider the critical and extenuating circumstances underpinning Transaction 1 due to which Acquirer-1 was constrained to proceed with Transaction 1 without notifying to the Commission. Further, various mitigating and exonerating circumstances have also been outlined, such as, absence of any special contractual rightsto Acquirer-1, conversion of debentures into equity shares being crucial for sustained operation of the Target for the benefit of students and other stakeholders, no AAEC from Transaction-1 within any markets in India and the Acquirers’ bona fide conduct of continued engagement with the Commission including through the pre-filing consultations, torequest the Commission to not hold Acquirer-1 guilty of any contraventions of the Act or impose penalty on it. 30. It is pertinent to note that the merger control regime in India is mandatory andsuspensory in nature. This means that combinations are notifiable unless they can avail any exemptions and cannot be consummated, either entirely or in part, before an approval from the Commission has been obtained. Section 5 of the Competition Act provides the assets and turnover criteria for acquisitions of control, shares, voting rights or assets as well as mergers and amalgamations that amount to a combination. Section 6(2) of the Competition Act requires/ mandates parties to give notice in respect of their proposed Combination Registration No. C-2024/05/1142 Page 12 of 14 combination. Section 6(2A) of the Act provides that a combination notified to the Commission shall not come into effect for a period of 210 days 1from the date of notification or approval by the Commission, whichever is earlier. It is also pertinent to mention here thatthe mandatory regime for notifying a proposed combination to the Commission is applicable, irrespective of whether the combination causes AAEC in India or not. 31. It is clear from the submissionsin the Notice that Transaction-1 was a notifiable transaction and was neither exempted by any Government of India notification nor covered under Schedule I of Competition Commission of India (Procedure in Regard to the Transaction of Business Relating to Combinations) Regulations, 2011 (Combination Regulations). Thus, it was incumbent upon the Acquirer-1 to be in conformity with all relevant provisions of the Act and applicable Regulations. However, there was consummation of Transaction-1 without filing notice and withoutapproval of the Commission. Transaction – 2 32. With respect to Transaction 2, it is noted that the notice was filed in relation to the same before its consummation. Rather Transaction 2 is yet to be consummated even after the approval of the Commission. Thus, there appears to be no contravention of the provisions of the Act with respect to Transaction 2. E. CONTRAVENTION AND PENALTY 33. In view of the foregoing, the Commission is of the opinion thatthere is contravention of the provisions of sub-section (2) of Section 6 and sub-section (2A) of Section 6 of the Actby Acquirer-1 as a result of the consummation of the Transaction 1 prior to filing notice with the Commission. 1Prior to issue of notification regarding coming into effect of relevant provisions of the sections i.e.,6 to 8 (both inclusive), 21 to 24 (both inclusive), 28, 30, 34 & 38 of the Competition (Amendment) Act, 2023. Combination Registration No. C-2024/05/1142 Page 13 of 14 34. It is to be noted that failure to give notice in accordance with sub-section (2) of Section 6 of the Act attractspenalty under Section 43A of the Act. Section 43A2 of the Act states: “Power to impose penalty for non-furnishing of information on combinations 43A. If any person or enterprise who fails to give notice to the Commission under sub- section (2) of section 6, the Commission shall impose on such person or enterprise a penalty which may extend to one percent, of the total turnover or the assets, whichever is higher, of such a combination.” 35. The Hon’ble Supreme Courtin‘Competition Commission of India v Thomas Cook (India) Ltd. & Anr.’3 has held that: “For the imposition of penalty under section 43A, the action may not be mala fide in case there is a breach of the statutory provisions of the civil law, penalty is attracted simpliciter on its violation.” In terms of Section 43A of the Act, a maximum penalty of one per cent of the combined value of turnover of the Parties in India can be imposed. 36. It is to be noted that Section 43A of the Act prescribes the maximum extent of penalty that can be levied for failure to file notice; however, the Commission can consider the conduct of the parties and circumstances of the case to arrive at an appropriate amount of penalty. 37. In the instant matter, the consummation of Transaction-1 without filing a notice contravened the provisions of Section 43A read with Section 6(2) and Section 6(2A) of the Act and Combination Regulations. However, the Commission has considered the mitigatingcircumstances mentioned in para 24 above and the conduct of the parties 2Prior to issue of notification regarding coming into effect of relevant provisions of the sections i.e.,6 to 8 (both inclusive), 21 to 24 (both inclusive), 28, 30, 34 & 38 of the Competition (Amendment) Act, 2023. 3Civil Appeal No.13578 OF 2015 (17 April 2018) Combination Registration No. C-2024/05/1142 Page 14 of 14 whereby they disclosed the transaction voluntarily and extended cooperation and provided the material/documents as sought by the Commission. 38. Thus, considering the facts and circumstances of the case and the conduct of the parties in the matter, the Commission decides to take a lenient view and impose a nominal penalty of INR 20,00,000 (INR Twenty Lakh only) in the matter. The penalty shall be paid within 60 days from the date of receipt of this order. 39. 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. 40. The Secretary is directed to communicate to the Acquirers, accordingly.