India: SEBI Clears Jet-Etihad Deal

  • Jet- Etihad deal cleared by SEBI
  • SEBI holds no open offer required under the Takeover Code
  • The ambit of 'control' under the Competition Act is wider than that under the Takeover Code
  • Acquirer cannot be 'person acting in concert' with the target company

Securities Exchange Board of India ("SEBI"), by way of its order dated May 8, 2014 ("Order") has given a green signal for the proposed investment by Etihad Airways PJSC ("Etihad") in Jet Airways (India) Limited ("Jet").1 With this, the proposed transaction seems to have cleared all regulatory hurdles finally.


In September 2012, foreign investment in aviation industry in India was liberalized. In January 2013, Jet was the first airline to make a public announcement when it informed the Bombay Stock Exchange of talks with Etihad of potential investment by Etihad in Jet. The transaction was to be carried out by way of preferential allotment of 27,263,372 shares of Jet to Etihad ("Transaction"). For the purpose of consummating the Transaction, the parties entered into (a) investment agreement dated April 24, 2013 ("IA"), (b) a shareholders' agreement between the promoters of Jet, Jet and Etihad ("SHA"), (c) a commercial cooperation agreement dated April 24, 2013 ("CCA") and (d) a corporate governance code pursuant to the SHA ("CGC"). The IA, SHA and the CCA were amended on September 19, 2013 on the basis of certain issues raised by regulators (the amended agreements and the CGC are collectively referred to as the "Transaction Documents" hereinafter). The proposed preferential allotment was approved by the board of directors and the shareholders of Jet on April 24, 2013 and May 24, 2014, respectively.

The Transaction required the approval of a number of regulators, including the Cabinet Committee on Economic Affairs ("CCEA"), Foreign Investment Promotion Board ("FIPB"), the Competition Commission of India ("CCI") and SEBI.



The FIPB was to consider approving the Transaction in its meeting on June 14, 2013.2 However, the decision was deferred by FIPB stating that more clarity was required with respect to Etihad's rights under the Transaction Documents. Subsequently, the Transaction was approved by FIPB in its July 29, 2013 meeting. The approval was conditional requiring certain conditions as mentioned therein to be satisfied.


SEBI had approved the Transaction on October 1, 2013 stating that the Transaction would not trigger open offer obligations under the SEBI (Substantial Acquisition of Shares and Takeovers Regulations), 2011 ("Takeover Code"). However, SEBI did not comment on the CCA, and had specifically stated that it would be guided by the decision of the other regulators in this regard.


On October 3, 2013, the CCEA approved the Transaction.3


The CCI approval ("CCI Order") for the Transaction was received on November 12, 2013.4


The CCI Order5, in light of the surrounding facts, including (a) Jet and Etihad were in the business of providing air transport services, (b) the terms of the CCA which, inter alia, laid the framework for co-operation in operations, pricing, joint marketing, sales, and distribution, joint airport handling, (c) Etihad's recommendation of candidates for Jet's senior management and (d) utilization of Abu Dhabi as an executive hub, stated:

It is observed that the Parties have entered into a composite combination comprising inter alia the IA, SHA and the CCA, with the common/ultimate objective of enhancing their airline business through joint initiatives. The effect of these agreements including the governance structure envisaged in the CCA establishes Etihad's joint control over Jet, more particularly over the assets and operations of Jet.

In light of the above observation of the CCI, SEBI served show cause notices dated February 11, 2014 ("SCN") on the promoters of Jet, namely Naresh Goyal, Anita Goyal and Tail Winds Limited ("Promoters") and Etihad ("Noticees") alleging joint control over Jet by Etihad and the Promoters under the Takeover Code requiring an open offer under regulation 4 of the Takeover Code by Etihad.



With respect to Tail Winds, it was contended that since it was no longer a shareholder of Jet, the question of joint control with it would not arise.

Naresh Goyal and Anita Goyal

  • SEBI should not rely on the CCI's decision since the purpose of the Competition Act, 2002 ("CA 2002"), i.e. to regulate combinations which cause appreciable adverse effect on competition in the market was completely different from that of the Takeover Code, which aims at providing an exit to shareholders in the case of a change in the target company. CCI holding that the proposed Transaction is not exempted from the CCI (Procedure in regard to the Transaction of Business Relating to Combinations) Regulations, 2011 would not tantamount to the same being an acquisition of control under the Takeover Code.
  • The Transaction Documents do not give Etihad any veto or affirmative rights, right to appoint only 2 out of 12 directors on the board of Jet, any casting vote, any quorum rights at the board or shareholder level or any pre-emptive / tag rights.


  • The CCA has been entered into to exploit synergies and expand their respective networks. These agreements facilitates rationalization of costs, efficiencies of scale and leverages presence of partner airlines in the market
  • The provisions of the Transaction Documents are to be carried out in a manner that is in compliance with applicable Indian laws. Under the Department of Industrial Policy and Promotion's Press Note No.6 of 2012 ("PN 6")6, while rationalizing investment in Indian airlines by foreign airline operators, one of the conditions laid down were:

    "A Scheduled Operator's permit can be granted only to a company:
    (c) the substantial ownership and effective control of which is vested in Indian nationals"
    While giving the approval for the Transaction, FIPB had implied that the 'effective control' of Jet remained with Indian nationals.
  • With respect to the CCA, which has been entered into between Jet and Etihad and not the Promoters, Etihad relied on the decision of the Supreme Court of India in Daiichi Sankyo v. Jayaram Chigurupati7 to state that an 'acquirer' cannot be a 'person acting in concert' with the target company itself under the Takeover Code.
  • The rights of Etihad under the Transaction Documents indicate that it does not have any control over Jet under the provisions of the Takeover Code. In particular, the shareholders' agreement is not indicative of control being transferred, lack of any veto rights or any pre-emptive rights.
  • The parties to the various agreements executed amendment agreements to remove contentious clauses which were questioned by the regulators from a 'control' perspective, such as:

    • Removal of the right to recommend candidates to senior management positions of Jet;
    • Abu Dhabi no longer the exclusive hub for flights flying towards Africa, North America, South America and UAE;
    • Etihad's lead role in negotiations for acquisition of aircrafts now replaced by reciprocal arrangements subject to approval of both Jet and Etihad's boards.


The whole time member of SEBI held that the Transaction would not attract the provisions of the Takeover Code. In concluding the same, it relied on the following points.

  • The Ministry of Finance ("MoF") has clarified that the mandate of FIPB/ CCEA is merely to ensure compliance with the FDI Policy. The FDI Policy has been revised by PN 6 to state 'A Scheduled Operator's permit can be granted only to a company the substantial ownership and effective control of which is vested in Indian nationals".8 Accordingly, FIPB and CCEA's approval is evident that the Transaction is in compliance with the FDI Policy.
  • Comparing the definitions of 'control' under the FDI Policy and the Takeover Code, the Order mentioned that the definitions are para materia. While comparing the Takeover Code definition of control with that under the CA 2002, the Order held that the definition as under CA 2002, which deals with 'controlling the affairs and management' is of much wider import than that under the Takeover Code, which includes the right "to appoint majority of the directors" or controlling 'the management or policy decisions'. Accordingly, the decision of CCI would not be the guiding factor for SEBI in determining if control has been acquired under the Takeover Code.
  • In determining whether Etihad was a person acting in concert, the Order emphasized that the definition of persons acting in concert, read with Justice P.N. Bhagwati committee's observations9 required a common objective of acquisition of shares or voting rights or control of the target company. Unless the commonality of objective of acquisition of shares/ voting rights/ control was established, the concerned persons would not be persons acting in concert. The objective of the CCA was merely to exploit synergies by detailing operational modalities.
  • Since the Promoters were not parties to the CCA, and as per the Supreme Court's verdict in Daiichi Sankyo, an acquirer cannot be a person acting in concert with the target company itself, it was held that the Etihad and Jet are not persons acting in concert.
  • The right to control the decisions rests with the Cooperation Committee and the four Facilitation Groups (formed under the CCA), which would make recommendations, and such recommendations would need to be approved by the boards of both Jet and Etihad. Since the recommendation would also need to be approved by Jet's board, the CCA does not affect the right to control policy decisions.
  • The Order also relied on the lack of substantial controlling powers with Etihad, which included, inter alia:

    • Etihad's right to nominate only 2 out 12 directors;
    • Promoters being able to nominate the chairman of the board of Jet, who shall have a casting vote;
    • Etihad not having any quorum rights at the board or general meeting;
    • Lack of any veto/ affirmative voting rights with Etihad;
    • Any pre-emptive/ tag along rights with Etihad.


SEBI's verdict is a welcome move, since it has clarified that while interpreting the respective statutes, the intent and the objective of the statute needs to be looked into. While with this verdict, the Transaction has been cleared by all regulators, a public interest litigation is pending before the Supreme Court in India alleging, inter alia, lack of transparency in the entering of the bilateral agreement entered into by India with UAE for increase in passenger seat capacity. The Supreme Court has already clarified that the Transaction may be quashed if irregularities are discovered. This might result in complicating the Transaction further since the shares have already been allotted to Etihad on November 20, 2013 post approval from the CCI.10

At a macro level, our regulators and the government need to ensure that deal timelines do not get stretched on account of delay in decision making. Certainty in law, faster decision making by regulators and better coordination amongst regulators is quintessential for a robust M&A regime in India. With the election results around the corner, it would be important for the incoming government to give comfort to international investors on ease of doing deals in India. As far as the regulatory hurdles to the Jet-Etihad partnership is concerned, it seems the sky is clear for the time being. However, time will tell whether a smooth take off also results in smooth landing.

For a detailed analysis of the Transaction, please refer to our M&A Lab here.


1Order in the matter of acquisition of shares of Jet Airways (India) Limited (hereinafter referred as "Jet") by Etihad Airways PJSC (hereinafter referred as "Etihad") available online at

2 FIPB Approval would be required as under Paragraph 6.2.9. 3.1 (c) (i) of the FDI Policy, any investment by a foreign airline into an Indian company providing scheduled air transport services would be under the Government Route, i.e. with the prior approval of FIPB.

3 Under the FDI Policy any transaction involving more than INR 12,000 million requires CCEA approval.

4 For a detailed analysis of the approval from CCI, please refer to our hotline available here.

5 Available online at


7 AIR 2010 SC 3089

8 Paragraph (c) (iv) (c) of the FDI Policy 2014.

9 Para 2.2 of the Justice P.N. Bhagwati Committee Report on Takeovers states

"To be acting in concert with an acquirer, persons must fulfill certain "bright line" tests. They must have commonality of objectives and a community of interests which could be acquisition of shares or voting rights beyond the threshold limit, or gaining control over the company and their act of acquiring the shares or voting rights in a company must serve this common objective. Implicit in the concerted action of these persons must be an element of cooperation. And as has been observed, this cooperation could be extended in several ways, directly or indirectly, or through an agreement - formal or informal"

The report is available online at


The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions