HC Pulls Up CCI For Steep Penalties – Livemint – 21-Nov-2014

November 21, 2014 - Uncategorized

The Delhi high court on Wednesday reprimanded the Competition Commission of India (CCI) for imposing what it called “shockingly disproportionate” penalties on two small-scale manufacturers of jungle boots—used by the military and paramilitary forces while operating in the wild. Justice Vibhu Bakhru set aside the penalties saying CCI’s order was “clearly, without application of mind and has been passed in wanton exercise of powers, ignoring the relevant factors and the constitutional principles”. CCI in August 2013 fined 11 companies a total of Rs.6.25 crore and issued a cease-and-desist order. The case related to bid-rigging and market allocation in a tender for supplying jungle boots. The companies were also asked to file an undertaking within 30 days of the final order that they will comply with the order. The companies challenged the order before the Competition Appellate Tribunal (Compat), which stayed the penalty to a large extent but did not interfere with the cease-and-desist order. While the case was pending before Compat, CCI on 6 August imposed penalties of Rs.14.1 lakh on M/s R. S. Industries and Rs.13.65 lakh on M/s Rajkumar Dyeing and Printing Works Pvt. Ltd. for not filing the undertakings within the time period as directed by CCI. Following this, the companies moved the Delhi high court. A cease-and-desist order is a regular feature in any order passed by CCI where it finds contravention of provisions of the Competition Act. In this judgement, the court laid down the factors that should be considered by CCI while imposing penalties for noncompliance of orders to ensure that its penalties are proportionate to the offence they are imposed for. CCI should take into account whether the directions were “substantive or merely formal, the effect of such non-compliance, the intention of the parties accused of non-compliance, the benefit derived by such parties, causes for non-compliance”. Recognizing the “wide discretion and extensive powers” of CCI, the court said the “greater the powers, larger the responsibility on the authority vested with it to exercise the same judicially and in public interest”. The court found “CCI has imposed penalty even though CCI’s ‘cease-and-desist’ order was not violated and had been fully complied with”. The companies claimed they were incapable of indulging in anti-competitive behaviour since they had been deregistered—or blacklisted—and could no longer participate in tenders. CCI claimed that its regulations allowed it to levy such penalty and that it had acted well within its powers.

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