Competition Act, PMLA, Benami Law and Foreign Trade Policy

Part A of Paper 6 gathers four separately administered regulatory regimes — competition law, anti-money-laundering law, anti-benami law, and foreign trade policy — each with its own regulator, its own institutional machinery, and its own small set of precise numeric thresholds worth learning exactly. The Foreign Exchange Management Act, covered as its own chapter elsewhere in this subject, is the fifth regime in this cluster.

1. The Competition Act, 2002 — the combination-notification test

The Competition Act, 2002 prohibits anti-competitive agreements, abuse of dominant position, and requires certain large mergers and acquisitions ("combinations") to be notified to the Competition Commission of India (CCI) before they can be completed.

Traditionally, whether a transaction counts as a notifiable "combination" turned on asset and turnover thresholds of the parties involved (measured both in India and, for larger groups, worldwide).

The Competition (Amendment) Act, 2023 added a genuinely new, parallel test: a deal-value threshold of ₹2,000 crore, effective from 10 September 2024 — meaning a transaction can now require CCI notification purely because of its deal value, even where the parties' assets and turnover would not, by themselves, have crossed the older thresholds.

This closed a real gap the older test had: a target with high strategic value but comparatively low current assets or turnover (typical of many digital and technology acquisitions) could previously complete a large-value deal without CCI scrutiny.

2. The Prevention of Money Laundering Act, 2002 (PMLA)

Section 3 of the PMLA defines the offence of money laundering broadly: directly or indirectly dealing with "proceeds of crime" and projecting or claiming it as untainted property. Indian courts have held money laundering to be a continuing offence — meaning the offence is treated as ongoing for as long as the tainted property continues to be possessed, concealed or enjoyed, not merely a one-time act completed at the moment of the original transaction.

Section 5 empowers a designated authority to provisionally attach property suspected to be proceeds of crime, even before a formal prosecution concludes. The enforcement process then runs through a defined chain: the Adjudicating Authority confirms or reverses the provisional attachment, an aggrieved party can appeal to the Appellate Tribunal, and further appeal lies to the High Court and ultimately the Supreme Court.

"Reporting entities" under the PMLA — banks, financial institutions and financial intermediaries, and a progressively widened list of specified professionals, real-estate and precious-metals dealers, and virtual-asset service providers — are obligated to maintain prescribed records and report suspicious transactions to the Financial Intelligence Unit-India (FIU-IND), the central agency that receives and analyses this reporting.

3. The Benami Transactions (Prohibition) Act, 1988 (as amended 2016)

A benami transaction is one where property is held by one person (the "benamidar") but the consideration for it was paid by another person (the real, beneficial owner), typically structured specifically to conceal the true ownership of the property.

The 2016 Amendment Act, in force from 1 November 2016, created the Act's current institutional machinery, running through five stages: an Initiating Officer provisionally attaches suspected benami property, an Approving Authority reviews that attachment, an Adjudicating Authority then makes the final determination confirming or reversing whether the property is genuinely benami.

Confirmed benami property is then confiscated by the government, and an Administrator subsequently manages the confiscated property — with an Appellate Tribunal available to hear appeals against the Adjudicating Authority's order.

The substantive penalty for entering a benami transaction, under the Act as amended in 2016, is rigorous imprisonment of 1 to 7 years, together with a fine of up to 25% of the property's fair market value — a materially harsher penalty than the shorter imprisonment term sometimes still (incorrectly) cited from the Act's pre-2016 form.

4. Foreign Trade Policy

Foreign trade policy is administered by the Directorate General of Foreign Trade (DGFT), under the Ministry of Commerce and Industry, through a Foreign Trade Policy document periodically issued (the current policy being FTP 2023, effective 1 April 2023) and a supporting Handbook of Procedures.

Two export-promotion schemes recur in this topic's examinable content. The Advance Authorisation Scheme permits duty-free import of inputs that are physically incorporated into an export product — the exemption is tied specifically to inputs that go into the exported goods, not general-purpose imports.

The Export Promotion Capital Goods (EPCG) Scheme permits zero-duty import of capital goods used for pre-production, production or post-production, in exchange for the importer undertaking a specified export obligation — an authorisation under this scheme is ordinarily valid for 24 months from the date of issue.

Exports made to units in a Special Economic Zone (SEZ) can, subject to conditions (such as realisation of payment from the SEZ unit's foreign-currency account), count toward discharge of the export obligation under these schemes.

Worked Examples

Example 1. A technology acquisition has a deal value of ₹2,500 crore, but the target's current assets and turnover fall well below the Competition Act's traditional asset/turnover notification thresholds. Does this transaction require CCI notification?

Yes — since the Competition (Amendment) Act, 2023, a transaction crossing the ₹2,000 crore deal-value threshold requires CCI notification regardless of whether the traditional asset/turnover thresholds are independently crossed, precisely to catch high-value deals involving targets with comparatively low current assets or turnover.

Example 2. A person continues to possess and enjoy property that constitutes proceeds of crime, years after the original tainted transaction occurred. Can this person still be prosecuted for money laundering today, or does the offence only cover the moment of the original transaction?

The person can still be prosecuted — Indian courts have held money laundering to be a continuing offence, so possessing, concealing or enjoying tainted property remains part of the offence for as long as that possession, concealment or enjoyment continues, not merely at the moment of the original transaction.

Example 3. An authority provisionally attaches property suspected to be proceeds of crime, before any criminal prosecution has concluded. Which PMLA provision empowers this, and what is the next step in the enforcement chain?

Section 5 empowers the provisional attachment. The next step is confirmation or reversal of the attachment by the Adjudicating Authority, with further appeal available to the Appellate Tribunal and thereafter the High Court and Supreme Court.

Example 4. A property is held in one person's name, but a different person entirely funded its purchase, specifically to conceal the true ownership. Identify the arrangement and the two parties' roles under the Benami Act.

This is a benami transaction. The person in whose name the property is held is the benamidar; the person who actually funded the purchase is the real, beneficial owner — the arrangement exists specifically to conceal that real owner's true ownership.

Example 5. A property is confirmed by the Adjudicating Authority as genuinely benami. What happens to the property next, and who subsequently manages it?

The property is confiscated by the government, and an Administrator is appointed to manage the confiscated property thereafter.

Example 6. An exporter wants to import capital goods duty-free for use in producing goods for export, accepting an export obligation in return. Which FTP scheme applies, and what is the standard validity period of the authorisation?

The Export Promotion Capital Goods (EPCG) Scheme — the authorisation is ordinarily valid for 24 months from the date of issue.

Example 7. An exporter imports raw materials duty-free, intending to physically incorporate them into a product it will export. Which scheme applies, and how does it differ in scope from the EPCG Scheme?

The Advance Authorisation Scheme applies — it covers duty-free import of inputs physically incorporated into the export product, which is narrower in scope than the EPCG Scheme, which instead covers capital goods (machinery and equipment) used in production rather than inputs incorporated into the product itself.

Summary

The Competition Act, 2002's combination-notification test now runs on two parallel tracks — the traditional asset/turnover thresholds and, since 10 September 2024, a separate ₹2,000 crore deal-value threshold added by the 2023 amendment — specifically to catch high-value deals the older test could otherwise miss.

The PMLA treats money laundering as a continuing offence, empowers provisional attachment under Section 5 with a defined appeal chain (Adjudicating Authority, Appellate Tribunal, courts), and obligates a progressively widened list of reporting entities to report suspicious transactions to FIU-IND, while the Benami Act's 2016-amended machinery (Initiating Officer, Approving Authority, Adjudicating Authority, confiscation, Administrator, Appellate Tribunal) carries a substantially harsher current penalty (1-7 years' rigorous imprisonment plus a fine up to 25% of fair market value) than its pre-2016 form.

Foreign trade policy, administered by the DGFT under the current FTP 2023, offers the Advance Authorisation Scheme (duty-free inputs incorporated into export products) and the EPCG Scheme (zero-duty capital goods against an export obligation, 24-month authorisation validity), with SEZ exports able to count toward discharging that export obligation subject to conditions.