Competition Act, 2002 – Sections 3, 27, 36 & 48 – Anti-competitive agreement – Liability of office-bearers – Requirement of notice – Penalty.
– Kerala Film Exhibitors Federation (KFEF) and its office-bearers (President & General Secretary) engaged in anti-competitive conduct by threatening distributors and boycotting screening at Crown Theatre.
– DG Report specifically identified office-bearers as “key decision makers” personally involved. Commission imposed penalty under §27 read with §48, and directed them to dissociate from KFEF for 2 years.
– COMPAT upheld contravention but set aside penalty on office-bearers for lack of specific notice of penalty.
Held, reversing COMPAT:
-
Notice under Section 26 & Regulations 21, 22, 48 sufficient. Furnishing DG Report and forwarding notice dated 10.06.2015 to individuals to file objections and produce income details constituted adequate opportunity. Law does not contemplate a “second show-cause notice” before penalty.
-
Commission not bound by DG findings. Commission can differ with DG; but when it concurs, forwarding report suffices. No separate penalty hearing mandated – procedure is a “rolled-up” hearing.
-
Principles of natural justice satisfied. Notice is to answer contravention, not to proposed punishment. No prejudice caused.
-
Section 48 – Deeming liability. Persons in charge of and responsible for affairs of association at the time of contravention are statutorily deemed guilty. Burden on them to prove lack of knowledge or due diligence – not discharged.
-
Proportionality. Penalty of 10% of average income of individuals, and behavioural remedy debarring them from KFEF for 2 years, held proportionate. Monetary penalty meagre; prior similar contravention (Case No.45/2012) justified enhanced behavioural remedy.
-
No violation of Article 19(1)(c). Reasonable restrictions permissible; unethical practices of associations can be checked.
-
Time is of essence in competition law. No requirement of second-stage penalty notice; back-and-forth would frustrate Act’s object.
Result: Appeal allowed – COMPAT order set aside insofar as it interfered with penalty/directions against Respondent Nos.2 & 3. Commission’s order of 08.09.2015 restored in entirety. Two-year debarment of office-bearers to operate prospectively from 01.12.2025.
2025 INSC 1167
1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 9726 OF 2016
COMPETITION COMMISSION
OF INDIA APPELLANT (S)
VERSUS
KERALA FILM EXHIBITORS
FEDERATION & ORS. RESPONDENT(S)
J U D G M E N T
K.V. Viswanathan, J.
A. BRIEF FACTS .............................................................................................................3
B. REPORT OF THE DIRECTOR GENERAL............................................................5
C. NOTICE TO PARTIES BY THE COMMISSION ..................................................6
D. PROCEEDINGS BEFORE COMMISSION AND ORDER ...................................6
E. APPELLATE PROCEEDINGS ...............................................................................12
F. CONTENTIONS OF LEARNED COUNSEL ........................................................15
G. QUESTION FOR CONSIDERATION....................................................................18
2
H. ANALYSIS AND REASONS....................................................................................19
i. SURVEY OF THE RELEVANT PROVISIONS OF THE STATUTE ..........19
ii. ANALYSIS OF THE PROVISIONS .................................................................32
iii. COMMISSION CAN DIFFER WITH THE DG..............................................35
iv. NOTICE DATED 10.06.2015..............................................................................41
v. CONTRAST OF THE ACT WITH THE MRTP ACT, 1969..........................45
a. BEHAVIOURAL REMEDIES...............................................................46
b. STRUCTURAL REMEDIES..................................................................47
vi. PRINCIPLE OF PROPORTIONALITY IN PENALTY IMPOSITION.......50
vii. NO SECOND NOTICE CONTEMPLATED UNDER THE STATUTE........52
viii. REPORT OF THE ‘REVIEW COMMITTEE’................................................52
ix. TIME IS OF ESSENCE – NO NOTICE NEEDED OF PROPOSED
PENALTY ............................................................................................................57
x. NOTICE IS TO ANSWER THE CONTRAVENTION – NOT THE
PROPOSED PENALTY......................................................................................60
xi. PENALTY ON FACTS - PROPORTIONATE.................................................63
I. CONCLUSION-.........................................................................................................67
3
1. An important question involving the interpretation of certain
provisions of the Competition Act, 2002, (for short “the Act”) arises
for consideration in this case.
2. The present statutory appeal, under Section 53T of the Act, has
been filed against the judgment and order dated 19.04.2016 passed by
the Competition Appellate Tribunal (for short the “COMPAT”). By
the said judgment, the findings of the Competition Commission of
India (for short the “Commission”) that Respondent No.1-Kerala Film
Exhibitors Federation (for short the “KFEF”) acted in contravention
of Section 3(1) read with Section 3(3)(b) of the Act and the penalty
imposed on Respondent No.1 was upheld. The COMPAT set aside
the penalty imposed on Respondent Nos.2 and 3 and also the
directions which were in the nature of behavioural remedies,
contained in clause (d) and (e) of para 9 of the order of the
Commission. Aggrieved against that portion of the order of the
COMPAT, the Commission is before us in appeal.
BRIEF FACTS: -
3. An information was filed by Respondent No.4-M/s Crown
Theatre before the Commission alleging anti-competitive activities by
4
Respondent No.1-KFEF and its office-bearers –Mr. P.V. Basheer
Ahamed, President (Respondent No. 2), and Mr. M.C. Bobby, General
Secretary (Respondent No. 3). The information was registered vide
Case No.16 of 2014 and the gravamen of the allegation was that film
distributors were threatened that their films would not be screened at
the cinema halls belonging to members of Respondent No.1, if those
distributors offered their films for exhibition at Crown TheatreInformant (Respondent No.4). It was further alleged that KFEF
(Respondent No.1) and Mr. Basheer Ahamed (Respondent No.2) took
steps to ensure that whenever new Tamil and Malayalam movies were
released, it would not be screened at Crown Theatre. KFEF
(Respondent No.1) called for a strike/ban on exhibition of films by its
members in their cinema halls. Respondent No.4-Crown Theatre
even resigned from the membership of KFEF. In accordance with the
provisions of the Act, vide order dated 08.05.2014, the Commission
directed the Director General (DG) to investigate the matter. Specific
direction was given to investigate the role of the persons who were in
charge of KFEF for their conduct with respect to the affairs of the
Federation.
5
REPORT OF THE DIRECTOR GENERAL: -
4. The Director General, pursuant to the order passed by the
Commission, investigated the matter and submitted his report dated
22.05.2015. According to the appellant, after collecting various
incriminating materials which pointed to the role of Respondent Nos.
2 and 3 herein, the DG, in his report, made specific references to the
same and highlighted their personal involvement in the anticompetitive measures undertaken by Respondent No.1. According to
the appellant, the evidence and material showed that Respondent
Nos.2 and 3 played an active role in anti-competitive activities of
Respondent No.1-KFEF. It, in fact, has been claimed that there was
not even a denial on the said score.
5. The DG concluded that Respondent No.1-KFEF contravened
Section 3(3) of the Act and particularly its decision to boycott
distributors if they had dealings with Respondent No.4-Crown
Theatre, was anti-competitive causing appreciable adverse effect on
competition. Respondent Nos.2 and 3 were described as key
persons/key decision makers who played an active role in Respondent
6
No.1 (KFEF), in Chapter 6 of the Report titled “Role and liability of
office-bearers.”
NOTICE TO PARTIES BY THE COMMISSION: -
6. The Commission, by its order of 10.06.2015, upon consideration
of the DG Report decided to forward a copy of the report, apart from
Respondent No.1, to Mr. Basheer Ahamed (Respondent No.2), and
Mr. M.C. Bobby (Respondent No.3), who were the President and the
General Secretary of the KFEF (Respondent No.1) respectively, with
a direction that the parties, including the individuals file their replies.
Not only this, Respondent No.1 and the individuals were directed to
furnish their audited balance sheet and profit and loss account for F.Y.
2011-12, 2012-13 and 2013-14 on or before 14.07.2015. Parties were
further directed to appear before the Commission for oral hearing on
22.07.2015. A notice came to be issued on 10.06.2015, in terms of the
order of the Commission.
PROCEEDINGS BEFORE COMMISSION AND ORDER: -
7. The Commission heard the parties on their objections. The three
respondents were represented by common counsel who was heard by
the Commission. The Commission passed its final order on
7
08.09.2015 under Section 27 of the Act. The Commission found that
KFEF (Respondent No.1) had violated Section 3(3)(b) of the Act, and
Respondent Nos.2 and 3, being the President and the General
Secretary of Respondent No.1, were found to be in charge of the
affairs of KFEF, liable under Section 48. The relevant portion of the
Commission order dated 08.09.2015 is set out herein below:-
“6.10 In view of the foregoing, the Commission is of the
view that the conduct of OP amounts to contravention of
section 3(1) read with section 3(3)(b) of the Act.
6.11 With regard to the liability of the office bearers of
OP under section 48 of the Act, the DG has identified Mr.
Basheer Ahmed and Mr. M. C. Bobby, President and
General Secretary of OP, respectively, to be the key
decision makers of OP. Section 48(1) of the Act provides
that where a person committing contravention of any of
the provisions of this Act is a company (including a firm
or an association), every person who, at the time the
contravention was committed, was in charge of, and was
responsible for the conduct of the business of the
company/association, shall be deemed to be guilty of the
contravention and shall be liable to be proceeded against
and punished accordingly. Further the proviso to that subsection entails that such person shall not be liable to any
punishment if he proves that the contravention was
committed without his knowledge or that he had exercised
all due diligence to prevent the commission of such
contravention. As such the Commission notes that Mr.
Basheer Ahmed and Mr. M.C. Bobby, being the President
and General Secretary of OP, respectively, are responsible
for the conduct of OP. It is evident that they were involved
in the key decisions of OP. Mr. Mukesh Mehta of M/s E4
Entertainment had also categorically stated he was
8
directed by Mr. Basheer Ahmed over the phone to stop
providing Tamil movies to the Informant. As a result, a
movie namely, “Raja Rani” which was released at the
Informant’s theatre was taken down after three days. As
such, it is evident that Mr. Basheer Ahmed played an
active role in enforcing the directives of OP in controlling
and restricting the exhibition of new movies across
Kerala. Further, Mr. M.C. Bobby, General Secretary of
OP, is also responsible for the conduct of OP being in a
key position. Moreover, in spite of ample opportunity
given to them, they failed to adduce any evidence to
establish that the anti-competitive decisions were made
without their knowledge or that they had exercised all
due diligence to prevent their commissioning.
6.12 In view of the foregoing, the Commission is of the
view that both Mr. Basheer Ahmed and Mr. M.С. Bobby,
being in-charge of and responsible for the conduct of
business of OP under section 48 of the Act, are liable to
be penalised.
6.13 It is relevant to mention that in Case no. 45/2012,
Kerala Cine Exhibitors Association vs. Kerala Film
Exhibitors Federation and Others, the Commission had
already found these two office bearers responsible under
section 48 of the Act and imposed a penalty @ 7% of their
average income accordingly.
ORDER
7. Considering the findings elucidated in the earlier part of
this order, the Commission finds that OP has indulged in
anti-competitive conduct in violation of the provisions of
section 3 of the Act. Further, two of its office bearers,
namely, Mr. P.V. Basheer Ahmed and Mr. M.C. Bobby have
continued with the said anti-competitive conduct despite the
on-going investigation by the DG in Case no. 45 of 2012. It
is thus clear that these persons have been repeatedly
indulging in anti-competitive conduct to the detriment of
competition in the market.
9
8. Section 27 of the Act empowers the Commission to pass
all or any of the orders enumerated therein, and issue such
other order or direction as it may deem fit in case of
contravention of the provisions of section 3 or 4 of the Act.
Further, in case of an anti-competitive conduct committed by
a company, including a firm or other association of
individuals, the Commission may proceed under section 48
of the Act to penalise the individuals responsible for the anticompetitive conduct on the part of such company. The
Commission observes that OP has been penalised in Case no.
45/2012, Kerala Cine Exhibitors Association vs. Kerala
Film Exhibitors Federation and Others for indulging in
anti-competitive conduct which was of similar nature.
Further, in various earlier cases pertaining to anticompetitive conduct by film associations, this Commission
has taken a stern view that such activities are antithetic to
competition and fair-play in the market.
9. With regard to the penalty, it may be noted that the
objective of imposing a penalty under section 27 of the Act
is two-fold. Firstly, to discipline the erring party for its anticompetitive conduct and, secondly, as a deterrence to stall
future contraventions. Such deterrence is not only for the
concerned erring entity which has been found guilty of
contravention, but also for all other entities which are
operating under similar circumstances and are indulging in
similar anti-competitive conduct. As spelt out earlier, in
numerous cases pertaining to anti-competitive conduct by
film associations, the Commission has imposed heavy
financial penalties. As a matter of record, information in one
such case was filed by the present OP against Film
Distributors Association, Kerala. Further, the allegations
against the anti-competitive conduct by OP was first reported
to the Commission in mid-2012 in Case no. 45 of 2012
wherein the Commission directed the DG to initiate an
investigation vide its prima facie order 09.01.2013. The
Commission was seized of the matter in Case no. 45 of 2012
when OP further indulged in the similar anti-competitive
conduct. However, it appears that OP has turned a blind eye
to the past orders of the Commission against like film
10
associations in other states for similar anti-competitive
conduct as well as the on-going investigation against it in
Case No. 45 of 2012. In view of these, the Commission
issues the following directions under section 27 of the Act:
a. OP and its office bearers, namely, Mr. P.V. Basheer
Ahmed and Mr. M.C. Bobby shall immediately cease and
desist from indulging in anti-competitive conduct which
they have been found to be indulging in contravention of
section 3 of the Act, as explained in earlier paragraphs.
This shall come into effect immediately, i.e., on the day of
receipt of this order by them.
b. OP shall pay penalties as worked out hereunder and
deposit the penalties calculated at the rate of 10% of its
average income within 60 days from the receipt of the
order by them:
Year Turnover/Income
during the Year
(in rupees)
2011-2012 824145.24
2012-2013 Not submitted
2013-2014 Not submitted
Total 824145.24
Average 824145.24
10% of Average Turnover
(Penalty Amount)
82414.52
c. Further, Mr. P.V. Basheer Ahmed and Mr. M.С.
Bobby shall pay penalties calculated at the rate of 10%
of their average income as worked out hereunder and
deposit the penalties within 60 days from the receipt of
the order by them:
11
Year P.V. Basheer
Ahmed
M.C. Bobby
2011-2012 920227
2012-2013 771685 490490
2013-2014 0 683510
Total 1691912 1433358
Average 563970.67 477786
10% of Average
Income (Penalty
Amount)
56397.07 47778.6
d. OP shall not associate Mr. P.V. Basheer Ahmed and
Mr. M.C. Bobby with its affairs, including
administration, management and governance, in any
manner for a period of two years. This shall be
complied with before expiry of 60 days from the
receipt of the order by OP.
e. Mr. P.V. Basheer Ahmed and Mr. M.C. Bobby shall
not associate with OP, including its administration,
management and governance, in any manner for a
period of two years. This shall be complied with before
expiry of 60 days from the receipt of the order by
them.
f. OP shall organize, in letter and spirit, at least five
competition awareness and compliance programmes over
next six months in the State of Kerala for its members.
The compliance of this shall commence before expiry of
60 days from the receipt of the order by OP.
10. The OP and the office bearers of the OP, namely, Mr.
P.V. Basheer Ahmed and Mr. M.C. Bobby shall file with the
Commission a report of compliance each with the above
directions, pertaining to them, within 90 days of receipt of
this order by them.
12
11. Secretary is directed to inform the parties accordingly.”
(Emphasis supplied)
APPELLATE PROCEEDINGS : -
8. The three respondents filed a common appeal before the
erstwhile COMPAT being Appeal No. 99 of 2015 against the order of
the Commission dated 08.09.2015. By virtue of the impugned order
dated 19.04.2016, the COMPAT, while upholding the findings on
merits, set aside the penalty and directions only insofar as Mr.
Basheer Ahamed (Respondent No.2) and Mr. M.C. Bobby
(Respondent No.3) were concerned. The reasoning of the COMPAT
on this score is as follows:-
“20. A reading of the investigation report shows that on
receipt of order dated 08.05.2014 passed by the Commission
under Section 26(1), the Addl. DG issued notice to Appellant
No. 1 under Section 41(2) read with Section 36(2) to enable
it to explain its stand viz. a viz. the allegations contained in
the information. He also issued summons to various persons
and recorded their statements. Not only this, he confronted
Appellant No. 2 with the statements/affidavits of Shri
Mukesh R. Mehta, Ms. Sandra Thomas and Shri Lal Jose to
enable him to admit/deny and to explain the position of
Appellant No. 1. Not only this, he confronted Appellant No.
2 with the statements made by the representative of
Respondent No. 2 and various film distributors and gave
opportunity to him to explain the same. After recording the
statements and considering the material collected during
investigation, the Addl. DG submitted report with the finding
13
that Appellant No. 1 had acted in contravention of Section
3(1) read with Section 3(3)(b) of the Act.
21. We have minutely gone through the statements of Shri
Roopesh G. Makhija, Manager of R.M. Films, Shri Mukesh
R. Mehta (Proprietor of M/s. E4 Entertainment), Ms. Sandra
Thomas (Managing Director of M/s. Friday Ticket) and
others along with the explanation given by Appellant No. 2
when he was confronted with the statements of these persons
and are convinced that Appellant No. 1 had
directly/indirectly pressurized the film distributors not to
release the films to Respondent No. 2 or withdraw the film
already released because it refused to participate in the
agitation held under the aegis of Appellant No. 1 in 2012 and
also resigned from its membership.
The findings recorded by the Addl. DG, which have been
approved by the Commission by independently taking
cognizance of the statements made by the persons to
whom summons were issued, are based on a
comprehensive analysis of the evidence collected by him
and we do not find any error either procedural or
substantive in the investigation conducted by the Addl.
DG and the findings/conclusion recorded by him. On its
part, the Commission independently considered the
statements of three of the persons who were summoned
by the Addl. DG and agreed with the conclusion recorded
by the Addl. DG that the conduct of Appellant No. 1 was
contrary to Section 3(1) read with Section 3(3)(b). The
view taken by the Commission is quite plausible and
reasonable and the findings recorded by it do not suffer
from any such legal infirmity which may call for
interference under Section 53-B(2) of the Act.
22. We shall now consider whether the penalty imposed by
the Commission on Appellants Nos. 2 and 3 and the
directions given that Appellant No. 1 shall not associate
them with its affairs including administrative, management
and governance in any manner for a period of two years and
the corresponding directions given to Appellants Nos. 2 and
3 are legally sustainable.
14
23. The admitted factual matrix of the case shows that after
considering the information filed by Respondent No. 2 under
Section 19(1)(a) of the Act, the Commission ordered an
investigation against Appellant No. 1. The Addl. DG
conducted investigation and returned a finding that the
conduct of Appellant No. 1 was in contravention of Section
3(1) read with Section 3(3)(b). In Chapter 6 of his report, the
Addl. DG discussed the role of Appellants Nos. 2 and 3 and
opined that they were the key decision-makers on behalf of
Appellant No. 1 and that they were instrumental in anticompetitive activities of Appellant No. 1. These findings
were recorded by the Addl. DG without issuing notice to
Appellants Nos. 2 and 3 that on the basis of the material
collected during the investigation, he proposes to make
observations adverse to their conduct. The Commission
also did not issue any notice to Appellants Nos. 2 and 3
proposing to debar them from discharging the functions
as important functionaries of Appellant No. 1.
24. No doubt, under Section 27(g), the Commission is
vested with omnibus powers to pass such other order or
issue such direction as it may deem fit, but that power
has to be exercised in consonance with the principles of
natural justice which the Commission bound to comply
with in view of Section 36(1) of the Act.
25. Admittedly, no notice was given by the Commission
to Appellants Nos. 2 and 3 proposing to impose penalty
on them and to debar them from participating in the
affairs of Appellant No. 1 and no opportunity of hearing
was afforded to them to represent their cause. Thus,
there is no escape from the conclusion that the directions
contained in Clauses (d) and (e) of paragraph 9 of the
impugned order are vitiated due to violation of the
principles of natural justice and the same are liable to be
quashed.
26. In the result, the appeal is partly allowed. The finding
recorded by the Commission that Appellant No. 1 has acted
in contravention of Section 3(1) read with Section 3(3)(b)
and penalty imposed on it is upheld. However, the penalty
15
imposed on Appellants Nos. 2 and 3 as also directions
contained in Clauses (d) and (e) of paragraph 9 of the
impugned order are set aside”.
(Emphasis supplied)
9. Aggrieved by that portion of the order setting aside the penalty
and directions on the ground that no opportunity of hearing was
afforded to Respondent Nos.2 and 3, the appellant is before us in
appeal.
CONTENTIONS OF LEARNED COUNSEL: -
10. We have heard Mr. Arjun Krishnan, learned counsel for the
appellant-Commission and Mr. Harshad V. Hameed, learned counsel
for the Respondent Nos. 1 to 3.
11. Mr. Arjun Krishnan, learned counsel for the appellantCommission, who very ably presented the case submitted that
Respondent Nos. 2 and 3 being the President and the General
Secretary of Respondent No.1 (KFEF) are, by virtue of the office held
by them, responsible for the affairs of the Federation. The use of the
phrase “key persons” and “key decision makers”, while referring to
Respondent Nos.2 and 3 in the DG Report itself, clearly indicates that
they were in charge of and responsible. Alternatively, it is argued by
16
Mr. Arjun Krishnan, learned counsel, that in view of the anticompetitive conduct, consent and connivance of Respondent Nos.2
and 3 with Respondent No.1 is clearly attracted. Learned counsel
contends that Respondent Nos.2 and 3 are covered either under
Section 48(1) of the Act and, if not, definitely under Section 48(2) of
the Act. Learned counsel contends that in the absence of any
challenge to the order of the COMPAT on merits, those findings have
attained finality. Learned counsel contends that the Act did not
contemplate a two-stage procedure, namely, one for liability and
another for imposing penalty. According to the learned counsel, the
COMPAT committed a serious error in setting aside the penalty and
directions against Respondent Nos.2 and 3 on the erroneous ground
that no notice was issued to them. According to the learned counsel,
the scheme of the Act contemplates a single hearing. Learned
counsel, to buttress the submission, argued that what is contemplated
is a reasonable opportunity of hearing and that there is no obligation
to inform the proposed penalty to Respondent Nos.2 and 3. Adequate
opportunity was given to Respondent Nos.2 and 3 when the DG
Report was furnished to them and their comments were called for.
17
Learned counsel draws attention to the appellant-Commission calling
for the Income Tax Returns of Respondent Nos.2 and 3 to reinforce
his submission. Learned counsel adverted to the conduct of
Respondent Nos.2 and 3 in an earlier proceeding being Case No. 45
of 2012 to show the consistent course of anti-competitive conduct by
them. Learned counsel relied on certain authorities in support of his
proposition.
12. Learned counsel contended that the impugned order of
COMPAT deserves to be set aside. Alternatively, it was contended
that there was no justification for setting aside the monetary penalty
imposed on Respondent Nos.2 and 3.
13. Refuting the submissions of the appellant, equally ably, Mr.
Harshad V. Hameed, learned counsel for Respondent Nos. 1, 2 and 3
contended that the COMPAT was justified in passing the order.
According to the learned counsel, regulatory authorities ought to
provide adequate notice and opportunity before imposing penalties
failing which their orders would be vulnerable on the ground of
violation of principles of natural justice.
18
14. According to the learned counsel, merely supplying a copy of
the DG Report did not constitute sufficient notice for the purpose of
imposing penalty. Learned counsel contends that a specific show
cause notice addressing the proposed penalty as the office-bearers was
required to be issued to Respondent Nos.2 and 3. According to the
learned counsel, making office-bearers personally responsible for
decisions collectively taken by bodies would “cripple and fetter” if
not altogether take way the right to form associations, a guaranteed
fundamental right under Article 19 of the Constitution of India.
Learned counsel contended that penalty, in any event, is
disproportionate. So contending, learned counsel vehemently
defended the order of the COMPAT.
QUESTION FOR CONSIDERATION: -
15. In the above background, the question that arises for
consideration is whether the notice issued by the appellant to
Respondent Nos.2 and 3 on 10.06.2015, constitutes sufficient notice
and/or whether the Respondent Nos. 2 and 3 were entitled to a second
show cause notice proposing to impose the penalty under Section 27
of the Act?
19
ANALYSIS AND REASONS: -
SURVEY OF THE RELEVANT PROVISIONS OF THE STATUTE
16. As the preamble to the Act indicates, the Act was enacted to
provide, keeping in view the economic development of the country,
the establishment of a Commission to prevent practices having
adverse effect on competition; to promote and sustain competition in
markets; to protect the interests of consumers and to ensure freedom
of trade carried on by other participants in markets, in India, and for
matters connected therewith and incidental thereto. The precursor to
the Act was the Monopolies and Restrictive Trade Practices Act, 1969
(for short “the MRTP Act”). The MRTP Act had become obsolete in
certain respects in the light of international economic developments
and there was a felt need to shift the focus from curbing monopolies
to promoting competition.
17. A High-Level Committee on Competition Policy and Law was
constituted by the Central Government and the Committee submitted
its report on 22.05.2000. The Act established a quasi-judicial body
called the Competition Commission of India which was to undertake
20
competition advocacy for creating awareness and imparting training
on competition issues. The Act aimed at curbing negative aspects of
competition through the medium of Commission. The Commission
was to look into violations of the Act based on its own knowledge or
information or complaints received and references received by the
Central Government, the State Governments or statutory authorities.
The Commission was empowered to pass orders for granting interim
relief or any other appropriate relief and compensation or to pass
orders imposing penalties. An appeal was to lie to the Competition
Appellate Tribunal. Originally, the Act proposed an appeal to the
Supreme Court directly. However, thereafter an appeal was provided
by Section 53A to the COMPAT. Since 26.05.2017, the National
Company Law Appellate Tribunal (for short “NCLAT”) was
designated as the Appellate Tribunal for matters arising out of the area
of the Commission.
18. The Act provides for investigation by the DG on directions
issued by the Commission. The Act empowers the Commission to
impose penalties. For the purpose of the present case, we need to
briefly refer to Section 3 which deals with anti-competitive
21
agreements; Section 4 which deals with abuse of dominant position;
Section 19 which speaks of inquiry into certain agreements and
dominant position of enterprise; Section 26 which talks of procedure
for inquiry under Section 19; Section 27 which provides for order by
Commission after inquiry into agreements or abuse of dominant
position; Section 28 which speaks of division of enterprise enjoying
dominant position, and Section 48 which deals with contravention by
companies (which definition was to include a body corporate, a firm
or other association of individuals).
19. Section 48 deals with how every person who, at the time of the
contravention was in charge of, and was responsible to the company
was to be deemed in contravention of the Act and as to how the
Commission was empowered to impose penalty on such persons as it
may deem fit which shall not be more than 10% of the average
income for the last preceding three years.
20. In this background, we deem it appropriate to set out Sections
26, 27, 36, 48 of the Act and Regulation 21, 22 and 48 of the
Competition Commission of India (General) Regulations, 2009, as it
then stood.
22
“26. Procedure for inquiry under section 19.—
(1) On receipt of a reference from the Central Government or a
State Government or a statutory authority or on its own
knowledge or information received under section 19, if the
Commission is of the opinion that there exists a prima facie
case, it shall direct the Director General to cause an
investigation to be made into the matter:
Provided that if the subject matter of an information
received is, in the opinion of the Commission, substantially the
same as or has been covered by any previous information
received, then the new information may be clubbed with the
previous information.
(2) Where on receipt of a reference from the Central Government
or a State Government or a statutory authority or information
received under section 19, the Commission is of the opinion
that there exists no prima facie case, it shall close the matter
forthwith and pass such orders as it deems fit and send a copy
of its order to the Central Government or the State
Government or the statutory authority or the parties concerned,
as the case may be.
(3) The Director General shall, on receipt of direction under subsection (1), submit a report on his findings within such period
as may be specified by the Commission.
(4) The Commission may forward a copy of the report referred to
in sub-section (3) to the parties concerned:
Provided that in case the investigation is caused to be made
based on a reference received from the Central Government or
the State Government or the statutory authority, the
Commission shall forward a copy of the report referred to in
sub-section (3) to the Central Government or the State
Government or the statutory authority, as the case may be.
(5) If the report of the Director General referred to in sub-section
(3) recommends that there is no contravention of the
provisions of this Act, the Commission shall invite objections
or suggestions from the Central Government or the State
Government or the statutory authority or the parties concerned,
as the case may be, on such report of the Director General.
23
(6) If, after consideration of the objections or suggestions referred
to in sub-section (5), if any, the Commission agrees with the
recommendation of the Director General, it shall close the
matter forthwith and pass such orders as it deems fit and
communicate its order to the Central Government or the State
Government or the statutory authority or the parties concerned,
as the case may be.
(7) If, after consideration of the objections or suggestions referred
to in sub-section (5), if any, the Commission is of the opinion
that further investigation is called for, it may direct further
investigation in the matter by the Director General or cause
further inquiry to be made in the matter or itself proceed with
further inquiry in the matter in accordance with the provisions
of this Act.
(8) If the report of the Director General referred to in sub-section
(3) recommends that there is contravention of any of the
provisions of this Act, and the Commission is of the opinion
that further inquiry is called for, it shall inquire into such
contravention in accordance with the provisions of this Act.
27. Orders by Commission after inquiry into agreements or
abuse of dominant position.- Where after inquiry the
Commission finds that any agreement referred to in section 3 or
action of an enterprise in a dominant position, is in contravention
of section 3 or section 4, as the case may be, it may pass all or any
of the following orders, namely:—
(a) direct any enterprise or association of enterprises or
person or association of persons, as the case may be,
involved in such agreement, or abuse of dominant
position, to discontinue and not to re-enter such
agreement or discontinue such abuse of dominant
position, as the case may be;
(b) impose such penalty, as it may deem fit which shall be not
more than ten percent of the average of the turnover for
the last three preceding financial years, upon each of such
person or enterprises which are parties to such
agreements or abuse:
[Provided that in case any agreement referred to in
section 3 has been entered into by a cartel, the
Commission may impose upon each producer, seller,
24
distributor, trader or service provider included in that
cartel, a penalty of up to three times of its profit for each
year of the continuance of such agreement or ten per cent
of its turnover for each year of the continuance of such
agreement, whichever is higher.
* * *
(d) direct that the agreements shall stand modified to the
extent and in the manner as may be specified in the order
by the Commission;
(e) direct the enterprises concerned to abide by such other
orders as the Commission may pass and comply with the
directions, including payment of costs, if any;
* * *
(g) pass such other order or issue such directions as it may
deem fit: -
Provided that while passing orders under this section, if the
Commission comes to a finding, that an enterprise in
contravention to section 3 or section 4 of the Act is a member of a
group as defined in clause (b) of the Explanation to section 5 of
the Act, and other members of such a group are also responsible
for, or have contributed to, such a contravention, then it may pass
orders, under this section, against such members of the group.
36. Power of Commission to regulate its own procedure
(1) In the discharge of its functions, the Commission shall be
guided by the principles of natural justice and, subject to the
other provisions of this Act and of any rules made by the
Central Government, the Commission shall have the powers
to regulate its own procedure.
(2) The Commission shall have, for the purposes of discharging
its functions under this Act, the same powers as are vested
in a Civil Court under the Code of Civil Procedure, 1908 (5
of 1908), while trying a suit, in respect of the following
matters, namely:-
(a) summoning and enforcing the attendance of any person
and examining him on oath;
(b) requiring the discovery and production of documents;
25
(c) receiving evidence on affidavit;
(d) issuing commissions for the examination of witnesses or
documents;
(e) requisitioning, subject to the provisions of sections 123
and 124 of the Indian Evidence Act, 1872 (1 of 1872),
any public record or document or copy of such record or
document from any office.
(3) The Commission may call upon such experts, from the
fields of economics, commerce, accountancy, international
trade or from any other discipline as it deems necessary to
assist the Commission in the conduct of any inquiry by it.
(4) The Commission may direct any person-
(a) to produce before the Director General or the Secretary or
an officer authorized by it, such books or other documents
in the custody or under the control of such person so
directed as may be specified or described in the direction,
being documents relating to any trade, the examination of
which may be required for the purposes of this Act;
(b) to furnish to the Director General or the Secretary or any
other officer authorized by it, as respects the trade or such
other information as may be in his possession in relation to
the trade carried on by such person as may be required for
the purposes of this Act.
48. Contravention by companies.
(1) Where a person committing contravention of any of the
provisions of this Act or of any rule, regulation, order
made or direction issued thereunder is a company, every
person who, at the time the contravention was committed,
was in charge of, and was responsible to the company for
the conduct of the business of the company, as well as the
company, shall be deemed to be guilty of the contravention
and shall be liable to be proceeded against and punished
accordingly:
Provided that nothing contained in this sub-section
shall render any such person liable to any punishment if he
proves that the contravention was committed without his
26
knowledge or that he had exercised all due diligence to
prevent the commission of such contravention.
(2) Notwithstanding anything contained in sub-section (1),
where a contravention of any of the provisions of this Act,
or of any rule, regulation, order made or direction issued
thereunder has been committed by a company and it is
proved that the contravention has taken place with the
consent or connivance of, or is attributable to any neglect
on the part of, any director, manager, secretary or other
officer of the company, such director, manager, secretary
or other officer shall also be deemed to be guilty of that
contravention and shall be liable to be proceeded against
and punished accordingly.
Explanation.—For the purposes of this section,—
(a) ”company” means a body corporate and includes a firm or
other association of individuals; and
(b) ”director”, in relation to a firm, means a partner in the
firm.”
COMPETITION COMMISSION OF INDIA (GENERAL)
REGULATIONS, 2009 (as it stood at the relevant time)
21. Procedure for Inquiry under Section 26 of the Act.-
* * *
(7) If the report of the Director General mentioned
under sub-regulation (1) finds contravention of any of the
provisions of the Act, the Secretary shall obtain the orders of
the Commission for inviting objections or suggestions from the
Central Government or the State Government or the statutory
authority or the parties concerned, as the case may be.
(8) On consideration of the objections or suggestions
from the Central Government or the State Government or the
statutory authority or the parties concerned, or the report of
further investigation of further inquiries, as the case may be, if
the Commission is of the opinion that further inquiry is called
for, the Secretary shall fix the meeting of the Commission for
consideration thereof, after issue of notice as per Regulation
22, to the Central Government or the State Government or the
27
statutory authority or the parties concerned, as the case may
be.
* * *
22. Mode of service of notice, etc.–(1) Every notice or
other document required to be served on or delivered to any
person, under these regulations, may be served personally or sent
by registered post, or by speed post or by courier service at the
address furnished by him or her or it for service, or at the place
where the person ordinarily resides or carries on business or
occupation or works for gain.
* * *
48. Procedure for imposition of penalty under the Act.–
(1) Notwithstanding anything to the contrary contained in any
regulations framed under the Act, no order or direction imposing a
penalty under Chapter VI of the Act shall be made unless the
person or the enterprise or a party to the proceeding, during an
ordinary meeting of the Commission, has been given a show cause
notice and reasonable opportunity to represent his case before the
Commission.
(2) In case the Commission decides to issue show cause
notice to any person or enterprise or a party to the proceedings, as
the case may be, under sub-regulation (1), the Secretary shall issue
a show cause notice giving not less then fifteen days asking for
submission of the explanation in writing within the period
stipulated in the notice.
(3) The Commission shall, on receipt of the explanation,
and after oral hearing if granted, proceed to decide the matter of
imposition of penalty on the facts and circumstances of the case.”
21. With effect from 18.05.2023, amendments to Sections 26, 27
and 48 of the Act read as under: -
“26. Procedure for inquiry under section 19.—
(2A) The Commission may not inquire into agreement referred to
in section 3 or conduct of an enterprise or group under section 4,
28
if the same or substantially the same facts and issues raised in the
information received under section 19 or reference from the
Central Government or a State Government or a statutory
authority has already been decided by the Commission in its
previous order.
(3A) If, after consideration of the report of the Director General
referred to in sub-section (3), the Commission is of the opinion
that further investigation is required, it may direct the Director
General to investigate further into the matter.
(9) Upon completion of the investigation or inquiry under
sub-section (7) or sub-section (8), as the case may be, the
Commission may pass an order closing the matter or pass an
order under section 27, and send a copy of its order to the
Central Government or the State Government or the
statutory authority or the parties concerned, as the case may
be:
Provided that before passing such order, the
Commission shall issue a show-cause notice indicating the
contraventions alleged to have been committed and such
other details as may be specified by regulations and give a
reasonable opportunity of being heard to the parties
concerned.
27. Orders by Commission after inquiry into agreements or
abuse of dominant position.— Where after inquiry the
Commission finds that any agreement referred to in section 3 or
action of an enterprise in a dominant position, is in contravention
of section 3 or section 4, as the case may be, it may pass all or
any of the following orders, namely:—
(a) direct any enterprise or association of enterprises or person or
association of persons, as the case may be, involved in such
agreement, or abuse of dominant position, to discontinue and not
to re-enter such agreement or discontinue such abuse of dominant
position, as the case may be;
(b) impose such penalty, as it may deem fit which shall be not
more than ten per cent. of the average of the turnover or
income, as the case may be, for the last three preceding
financial years, upon each of such person or enterprise which
29
is a party to such agreement or has abused its dominant
position:
Provided that in case any agreement referred to in
section 3 has been entered into by a cartel, the Commission
may impose upon each producer, seller, distributor, trader or
service provider included in that cartel, a penalty of up to
three times of its profit for each year of the continuance of
such agreement or ten per cent. of its turnover or income, as
the case may be, for each year of the continuance of such
agreement, whichever is higher.
Explanation 1.— For the purposes of this clause, the expression
“turnover” or “income”, as the case may be, shall be determined
in such manner as may be specified by regulations.
Explanation 2.—For the purposes of this clause, “turnover”
means global turnover derived from all the products and services
by a person or an enterprise.
* * * * *
(d) direct that the agreements shall stand modified to the extent
and in the manner as may be specified in the order by the
Commission;
(e) direct the enterprises concerned to abide by such other orders
as the Commission may pass and comply with the directions,
including payment of costs, if any;
* * * * *
(g) pass such other [order or issue such directions] as it may deem
fit:
Provided that while passing orders under this section, if the
Commission comes to a finding, that an enterprise in
contravention to section 3 or section 4 of the Act is a member of
a group as defined in clause (b) of the Explanation to section 5 of
the Act, and other members of such a group are also responsible
for, or have contributed to, such a contravention, then it may pass
orders, under this section, against such members of the group.
30
48. Contravention by companies.— (1) Where a person
committing contravention of any of the provisions of this Act or
of any rule, regulation, order made or direction issued thereunder
is a company, every person who, at the time the contravention
was committed, was in charge of, and was responsible to the
company for the conduct of the business of the company, as well
as the company, shall be deemed to be in contravention of this
Act and unless otherwise provided in this Act, the
Commission may impose such penalty on such persons, as it
may deem fit which shall not be more than ten per cent. of the
average of the income for the last three preceding financial
years:
Provided that in case any agreement referred to in subsection (3) of section 3 has been entered into by a cartel, the
Commission may unless otherwise provided in this Act, impose
upon such persons referred to in sub-section (1), a penalty of up
to ten per cent. of the income for each year of the continuance of
such agreement.
(2) Nothing contained in sub-section (1) shall render any
such person liable to any penalty if he proves that the
contravention was committed without his knowledge or that he
had exercised all due diligence to prevent the commission of such
contravention.
(3) Notwithstanding anything contained in sub-section (1),
where a contravention of any of the provisions of this Act or of
any rule, regulation, order made or direction issued thereunder
has been committed by a company and it is proved that the
contravention has taken place with the consent or connivance of,
or is attributable to any neglect on the part of, any director,
manager, secretary or other officers of the company, such
director, manager, secretary or other officers shall also be deemed
to be in contravention of the provisions of this Act and unless
otherwise provided in this Act, the Commission may impose
such penalty on such persons, as it may deem fit which shall
not be more than ten per cent. of the average of the income
for the last three preceding financial years:
Provided that in case any agreement referred to in subsection (3) of section 3 has been entered into by a cartel, the
31
Commission may, unless otherwise provided under this Act,
impose upon such person a penalty as it may deem fit which
shall not exceed ten per cent. of the income for each year of
the continuance of such agreement.
Explanation.—For the purposes of this section,—
(a) “company” means a body corporate and includes a firm
or other association of individuals;
(b) “director”, in relation to a firm, means a partner in the
firm;
(c) “income”, in relation to a person, shall be
determined in such manner as may be specified by
regulations.”
(Emphasis supplied)
22. With effect from 17.09.2024, the Competition Commission of
India (General) Regulations, 2024 introduced the following
amendments to Regulation 22 and renumbered Regulation 48 as 49
with certain additions which reads thus:-
“22. Procedure for inquiry under section 26 of the Act –
(8) Upon completion of further inquiry in terms of subsections (7) or (8) of section 26 of the Act, the Commission
may pass a final order closing the matter under sub-section
(9) of section 26 of the Act or pass an order under section
27, before which it shall issue a show-cause notice to the
parties concerned, in terms of the proviso to sub-section (9)
of section 26 of the Act, indicating the contraventions
alleged to have been committed and the time period for
responding to the notice.
32
(9) Upon receipt of reply to the show-cause notice referred to
in sub-regulation (8) from the parties concerned, and after
giving them a reasonable opportunity to be heard, the
Commission may pass a final order closing the matter of pass
an order under section 27 of the Act.
49. Procedure for imposition of penalty under the Act.
(1) Notwithstanding anything to the contrary contained in any
regulations framed under the Act, no order or direction
imposing a penalty under Chapter VI of the Act shall be made
unless the person or the enterprise or a party to the proceeding,
during an ordinary meeting of the Commission, has been given
a show cause notice and reasonable opportunity to represent his
case before the Commission.
(2) In case of persons proceeded against in terms of section
48 of the Act, forwarding of the investigation report and/or
the supplementary investigation report or issue of showcause notice under sub-regulation (8) of regulation 22 of
these regulations, as the case may be, to such persons, shall
be deemed to be the show cause notice in terms of subregulation (1) above.
(3) In case the Commission decides to issue show cause notice
to any person or enterprise or a party to the proceedings, as the
case may be, under sub- regulation (1), the Secretary shall issue
a show cause notice giving not less than 15 (fifteen) days
asking for submission of the explanation in writing within the
period stipulated in the notice.
(4) The Commission shall, on receipt of the explanation, and
after oral hearing if granted, proceed to decide the matter of
imposition of penalty on the facts and circumstances of the
case.”
ANALYSIS OF THE PROVISIONS
23. A careful examination of Section 26 of the Act, as it stood at the
relevant time, indicates the following:- On receipt of a reference from
33
the Central Government or a State Government or a Statutory
Authority or on its own knowledge or information received under
Section 19, if the Commission forms an opinion that there exists a
prima facie case, the Commission shall direct the Director General to
cause an investigation to be made into the matter. On the contrary, if
the Commission forms an opinion, that there is no prima facie case, it
shall close the matter forthwith and pass such orders as it deems fit
and send a copy of its order to the Central Government or the State
Government or the Statutory Authority or the parties concerned, as the
case may be.
24. The Director General on receipt of a direction under sub-Section
(1) from the Commission shall submit a report on his findings within
such period as may be specified by the Commission.
25. On receipt of the report the Commission has to forward a copy
of the report to the Central Government or the State Government or
the Statutory Authority or the parties concerned.
26. Thereafter, certain crucial sub-sections occur in Section 26. In
the report if the Director General recommends that there is no
contravention, the Commission shall invite objections or suggestions
34
from the Central Government or the State Government or the
Statutory Authority or the parties concerned, as the case may be, on
such report of the Director General.
27. If after consideration of the objections or suggestions received
from the Central Government or the State Government or the
Statutory Authority or the parties concerned the Commission agrees
with the recommendation of the Director General that there is no
contravention, the Commission shall close the matter forthwith and
pass such orders as it deems fit and communicate its orders to the
Central Government or the State Government or the Statutory
Authority or the parties concerned, as the case may be.
28. Now, if after consideration of the objections or suggestions sent
by the Central Government, State Government or the Statutory
Authority or the parties concerned the Commission is of the opinion
that further investigation is called for, it may direct further
investigation in the matter by the Director General or cause further
inquiry to be made in the matter or itself proceed with further inquiry
in the matter in accordance with the provisions of the Act.
35
29. Similarly, if the report of the Director General referred to in subsection 3 recommends that there is contravention of any of the
provisions of the Act, and the Commission is of the opinion that
further inquiry is called for, it shall inquire into such contravention in
accordance with the provisions of the Act.
COMMISSION CAN DIFFER WITH THE DG:-
30. It will be seen that if the Director General finds no
contravention, still the Commission can not only direct further
investigation by Director General but, can also cause further inquiry
to be made in the matter or itself proceed with further inquiry in the
matter. This would mean that even in cases where Director General
has not found any contravention, the Commission may find
contravention after the inquiry. Similarly, if the Director General finds
contravention and the Commission is of the opinion that further
inquiry is called for it shall inquire into such contravention.
31. Under the Regulations, as it then stood, in case the Commission
decides to inquire into the matter under Section 26 of the Act, a copy
of the report is forwarded to the Central Government or the State
Government or the Statutory Authority or the parties concerned.
36
32. Thereafter, a meeting is fixed of the Commission after service of
notice under Regulation 22. Additionally, Regulation 48, as it then
stood, prescribed that no order or direction imposing a penalty under
Chapter VI of the Act (which includes Section 48) shall be made
unless the person or the enterprise or a party to the proceeding, during
an ordinary meeting of the Commission, has been given a show cause
notice and reasonable opportunity to represent his case before the
Commission.
33. We will also briefly notice this position post the amendment of
Section 26 w.e.f. 18.05.2023 and of the Regulations in 2024. SubSection (9) has been added to Section 26 which provides that upon
completion of the investigation or inquiry under sub-section (7) or
sub-section (8), the Commission may pass an order closing the matter
or pass an order under Section 27, and send a copy of its order to the
Central Government or the State Government or the Statutory
Authority or the parties concerned, as the case may be. The proviso to
sub-section 9 states that before passing such order, the Commission
shall issue a show cause notice indicating the contraventions alleged
to have been committed and such other details as may be specified by
37
Regulations and give a reasonable opportunity of being heard to the
parties concerned.
34. The new Regulations, notified on 17.09.2024, provided in
Regulation 49 with slight modifications what was provided in
Regulation 48 earlier. The modification was that an express provision
was incorporated in sub-Regulation 2 to the effect that in case of
persons proceeded against in terms of Section 48 of the Act,
forwarding of the investigation report and/or the supplementary
investigation report or issuance of show-cause notice under subregulation 8 of Regulation 22 shall be deemed to be show cause
notice in terms of sub-Regulation 1 of Regulation 48. Sub-Regulation
8 of Regulation 22 provided that upon completion of further inquiry
in terms of sub-section (7) or (8) of Section 26 of the Act, the
Commission may pass a final order closing the matter under subsection 9 of Section 26 of the Act or pass an order under Section 27,
before which it shall issue a show-cause notice to the parties
concerned, in terms of the proviso to sub-section (9) of Section 26 of
the Act, indicating the contraventions alleged to have been committed
and the time period for responding to the notice.
38
35. Hence, it will be clear that prior to the amendment of Section 26
in 2023, once the Director General files the report, and the
Commission does not feel the need for a further investigation/inquiry,
all that is required is to issue a notice to the party by forwarding the
report eliciting an answer to the contravention. In case the parties are
not able to give a satisfactory answer and violation of the Act is
found, penalty may be imposed under Section 48. It may happen that,
in the event of the Director General not finding a contravention and
the Commission on further investigation or inquiry finding
contravention, mere forwarding of the report of the Director General
or the supplementary report of DG will be of no avail. In that
situation the notice should set out the new findings arrived at which
are the aspects where the Commission has differed with the Director
General. This principle is akin to the situation prevalent in service
jurisprudence about the Disciplinary Authority being obligated to
serve a notice setting out the areas where such authority differs from
the inquiry officer.
39
36. In Yoginath D. Bagde v. State of Maharashtra and Another1
,
this Court held as under:
“28. In view of the provisions contained in the statutory rule
extracted above, it is open to the disciplinary authority either to
agree with the findings recorded by the enquiring authority or
disagree with those findings. If it does not agree with the
findings of the enquiring authority, it may record its own
findings. Where the enquiring authority has found the delinquent
officer guilty of the charges framed against him and the
disciplinary authority agrees with those findings, there would
arise no difficulty. So also, if the enquiring authority has held
the charges proved, but the disciplinary authority disagrees and
records a finding that the charges were not established, there
would arise no difficulty. Difficulties have arisen in all those
cases in which the enquiring authority has recorded a positive
finding that the charges were not established and the delinquent
officer was recommended to be exonerated, but the disciplinary
authority disagreed with those findings and recorded its own
findings that the charges were established and the delinquent
officer was liable to be punished. This difficulty relates to the
question of giving an opportunity of hearing to the delinquent
officer at that stage. Such an opportunity may either be provided
specifically by the rules made under Article 309 of the
Constitution or the disciplinary authority may, of its own,
provide such an opportunity. Where the rules are in this regard
silent and the disciplinary authority also does not give an
opportunity of hearing to the delinquent officer and records
findings different from those of the enquiring authority that the
charges were established, “an opportunity of hearing” may have
to be read into the rule by which the procedure for dealing with
the enquiring authority's report is provided principally because it
would be contrary to the principles of natural justice if a
delinquent officer, who has already been held to be “not guilty”
by the enquiring authority, is found “guilty” without being
afforded an opportunity of hearing on the basis of the same
1
(1999) 7 SCC 739
40
evidence and material on which a finding of “not guilty” has
already been recorded.”
37. As far as the present case is concerned, the Director General’s
report was concurred with by the Commission and hence a notice in
the nature of the one issued on 10.06.2015 which is traceable to
Regulation 21 read with Regulation 48 and 22 and Section 26 of the
Act is enough compliance with the provisions of the Act, for the
purpose of imposition of a penalty under Section 27.
38. In Competition Commission of India vs. Steel Authority of
India Limited And Another2
, this Court observed as under:-
“71. The intimation received by the Commission from any
specific person complaining of violation of Section 3(4) read
with Section 19 of the Act, sets into motion, the mechanism
stated under Section 26 of the Act. Section 26(1), as already
noticed, requires the Commission to form an opinion whether or
not there exists a prima facie case for issuance of direction to the
Director General to conduct an investigation. This section does
not mention about issuance of any notice to any party before or at
the time of formation of an opinion by the Commission on the
basis of a reference or information received by it. Language of
Sections 3(4) and 19 and for that matter, any other provision of
the Act does not suggest that notice to the informant or any other
person is required to be issued at this stage. In contradistinction
to this, when the Commission receives the report from the
Director General and if it has not already taken a decision to
close the case under Section 26(2), the Commission is not only
expected to forward the copy of the report, issue notice, invite
objections or suggestions from the informant, the Central
2
(2010) 10 SCC 744
41
Government, the State Government, statutory authorities or the
parties concerned, but also to provide an opportunity of hearing
to the parties before arriving at any final conclusion under
Sections 26(7) or 26(8) of the Act, as the case may be. This
obviously means that wherever the legislature has intended
that notice is to be served upon the other party, it has
specifically so stated and we see no compelling reason to read
into the provisions of Section 26(1) the requirement of notice,
when it is conspicuous by its very absence. Once the proceedings
before the Commission are completed, the parties have a right to
appeal under Section 53-A(1)(a) in regard to the orders termed as
appealable under that provision. Section 53-B requires that the
Tribunal should give, parties to the appeal, notice and an
opportunity of being heard before passing orders, as it may deem
fit and proper, confirming, modifying or setting aside the
direction, decision or order appealed against.”
(Emphasis supplied)
NOTICE DATED 10.06.2015: -
39. It is undisputed that the DG who investigated the complaint
concluded that Respondent No.1-KFEF contravened Section 3(3) of
the Act causing appreciable adverse effects on competition. The
report also by name found Respondent Nos.2 and 3 as the key
persons/key decision makers who played active role in Respondent
No.1-KFEF. It is also undisputed that the appellant, by its order of
10.06.2015, upon consideration of the DG Report forwarded the
Report to Respondent No.2, Mr. Basheer Ahamed, President of
Respondent No.1, and Respondent No.3 Mr. M.C. Bobby, General
42
Secretary of Respondent No.1, with a direction to the individuals to
file their replies and also furnish their audited balance sheet and profit
and loss account for the F.Y. 2011-12, 2012-13, 2013-14 on or before
14.07.2015. They were also asked to appear for oral hearing on
22.07.2015. They were heard through common counsel by the
Commission on the said date. The notice dated 10.06.2015 is set out
hereinbelow:-
“In the present case the commission vide its order dated 8th May
2014 under section 26 (1) of the Completion Act. 2002 (Act) had
Director General (DG) to cause an investigation into the matter.
Accordingly, the DG, after completion of the investigation, had
filed the investigation report.
The commission considered the investigation report filed by
the DG in its ordinary meeting held today the commission decided
to forward an electronic copy of the investigation report of the
parties for filing their replies. The commission also decided to
forward electronic copy of the investigation report of the DG
to Shri Basheer Ahamed, president of OP and Shri M.C.
Bobby, General Secretary of OP (the persons identified by the
DG as office bearers of OP who at the time of contravention
of the provisions of the Act were found to be the key decision
makers among the office bearers of OP) for filing their replies
/objections. The commission directed the parties including the
said individuals to file their replies/objections latest by 14th
July 2015. The informant is directed to provide a copy of its
replies/objections to the Opposite parties and each of the
opposite parties is directed to provide a copy of its replies
/objections to the informant.
The OP is directed to furnish its audited balance sheet
and profit and loss account/turnover for the financial years
2011-12, 2012-13 and 2013-14 latest by 14th July 2015. The
aforesaid individuals are directed to file their income details
43
including their Income Tax Returns for the financial years
2011-12, 2012-13 and 2013-14 latest by 14th July 2015.
The parties are directed to appear before the commission,
either in person or through their duly authorized representative, for
an oral hearing on 22 July 2015 at 10:30 AM.
The Secretary is directed to inform all concerned for
necessary compliance.”
(Emphasis supplied)
40. This notice is in terms of Section 26 of the Act read with
Regulation 21 as it then stood. Equally, the notice also fulfils the
requirement of Section 48 of the Act read with Regulation 21 and
Regulation 48 of the Commission (General) Regulations, 2009, as it
then stood.
41. After hearing the parties and analyzing the evidence, the
Commission, by its order of 08.09.2015, found Respondent Nos. 1-3
to have indulged in anti-competitive conduct in violation of Section 3
of the Act. Thereafter, it imposed penalties on Respondent Nos. 1-3
including the monetary penalty. Apart from monetary penalty,
Respondent No.1 was directed not to associate Respondent Nos. 2 and
3 with its affairs including administration, management and
governance in any manner for a period of two years.
44
Correspondingly, Respondent Nos.2 and 3 were also directed not to
associate with Respondent No.1 for a period of two years.
42. Under Section 48, every person who, at the time of the
contravention, was in charge of, and was responsible along with the
company was deemed to be guilty of the contravention and was liable
to be proceeded and punished. The liability was fixed by the statute
itself. The notice of 10.06.2015 was categoric in pointing out the fact
that there are contraventions alleged in the DG Report and it was clear
in fixing the individuals who were the key personnel in charge of the
affairs of Respondent No.1. A clear opportunity was given to file
reply/objections. Respondent Nos.2 and 3 can complain of no
prejudice if on the basis of this notice, the Commission held them
guilty for contravening the Act and proceeded to impose penalty
under Section 27. We are fully convinced that the notice dated
10.06.2015 issued in the present case fulfils the requirement in law as
it then stood.
43. Since we are not concerned with the amended statute w.e.f.
18.05.2023 and the regulations w.e.f. 17.09.2024, we make no
comment on the same.
45
CONTRAST OF THE ACT WITH THE MRTP ACT, 1969 : -
44. To understand the nature of penalties that can be imposed under
the Act, one has to necessarily contrast the penalty provisions of the
Act with its precursor, the MRTP Act. Under the MRTP Act, the
Commission had limited powers of passing only cease and desist
orders. Only after the cease-and-desist orders are passed and if there
was a violation, certain penalties were prescribed. The net result was,
a violator could violate the law with impunity and on receipt of a
cease-and-desist order, cease the activity. There was no deterrent
inasmuch as there was no penalty for the violation and only a penalty
for violation of an order passed by the Commission was
contemplated. This was found to be very ineffective.
45. It will be noticed that under Section 27, the Commission apart
from monetary penalty, can also direct imposition of cease and desist
orders and other behavioural and/or structural remedies.
46. In an erudite monograph titled “Remedies and Commitments in
Abuse Cases” by Dr. Anna Renata Pisarkiewicez (Consultant, OECD),
presented as a Background Note to OECD Competition Policy
Roundtable, the concept of behavioral remedies and structural
46
remedies that are imposed by competition agencies to penalize anticompetitive behavior is lucidly discussed. They are reproduced
hereunder: -
“3.2. Behavioural remedies
In contrast to structural remedies, which seek to restore
competition by requiring changes in the structure of the dominant
firm’s business, behavioural or conduct remedies alter how a
dominant firm conducts its operations. Depending on whether the
implementation of behavioural remedies involves third parties,
such as other market participants, or not, behavioural remedies can
be broadly divided into internal and external. The former does not
involve third parties and relate to firm’s internal management and
organisation. For example, a dominant firm might be required
to introduce a compliance programme or change its corporate
governance provisions. The latter, on the other hand, concern a
firm’s interaction with third parties, and may require the dominant
firm, for example, to modify or terminate its existing contracts or
alter its pricing schemes. There are also behavioural remedies that
concern firm’s internal operations, but are prone to affect third
parties, or the market in general. A pre-installation of a dominant
firm’s own software might be a case in point.
Behavioural or conduct remedies can be
positive/declaratory or negative/prohibitor, depending on whether
they require a company to do or to stop doing something, or both.
Negative remedies, which typically take the form of a cease-anddesist order simply require the defendant to stop the abusive
behaviour. Positive remedies tend to reflect the abusive behaviour.
For example, a remedy to a refusal to supply would be a duty to
supply. The countermeasure to anti-competitive self-preferencing
would be an obligation not to discriminate. Of course, the
distinction between positive and negative remedies can be seen as
purely semantic as any prohibition can be easily translated into a
positive obligation, i.e. a prohibition not to engage in abusive
47
tying corresponds to a positive obligation to untie jointly sold
produces or services. Moreover, negative and positive remedies
can be applied jointly, i.e. a negative cease-and-desist order might
be complemented by a set of positive remedies that prescribe a
specific behaviour.
As behavioural remedies are tailor made, allowing
competition agencies to shape them according to the needs of a
specific case, they can come in many forms. Examples of
behavioural remedies that have been imposed in past abuse of
dominance decisions include obligations to:
• Modify or terminate existing contracts (these might include, for
example, extension of the notice period to inform about intention
to discontinue commercialisation or amendment of license
conditions);
• Eliminate exclusivity provisions;
• Introduce and comply with new pricing schemes or conditions;
• Enable customers’ or consumers’ switching;
• Adopt compliance programmes or set up trainings in competition
law;
• Amend corporate governance provisions.
While a competition authority might choose to impose just
one behavioural remedy, in practice often a set of complementary
remedies is imposed on dominant firms. Moreover, behavioural
remedies can complement structural remedies with a view to
ensuring the effective implementation of the latter.
3.1. Structural remedies
Structural remedies require firms to divest, release or carve-out
certain tangible or intangible assets they own. They have several
important advantages. By removing the very source of a dominant
firm’s ability and incentive to engage in an anticompetitive conduct,
they help to eliminate, or at least decrease the dominant firm’s market
power and create conditions favourable to entry and competition.
They are also relatively simple to devise and implement as due to
their one-off nature they do not typically require extensive, time- and
48
resource-consuming monitoring, so typical of behavioural remedies.
Moreover, they are difficult for companies to circumvent and avoid.”
(Emphasis supplied)
47. Section 48, as it stood at the relevant time, provided that with
regard to body corporates, firms and association of individuals
(compendiously referred to as a Company in the statute), every person
who, at the time the contravention was committed, was in charge of,
and was responsible to the company for the conduct of the business of
the Company, as well as the Company, was deemed to be guilty of
contravention and was liable to be proceeded against and punished
accordingly. The proviso to Section 48(1) stated that if the concerned
individual proves that the contravention was committed without his
knowledge or that he had exercised all due diligence to prevent the
commission of such contraventions, such person would not be held
liable. Sub-section 2 of Section 48 provided that even with regard to
any Director, Manager, Secretary or other Officer of the Company,
they shall also be deemed to be guilty if the contravention has been
committed by the Company and it is proved that the contravention
had taken place with consent or connivance of the said individual or if
49
the contravention is attributable to any negligence on the part of any
Director, Manager, Secretary or other Officer of the Company. By the
2023 Amendment, a cap on monetary penalty of 10 per cent of the
average income for the last 3 preceding financial years was fixed.
48. The Act which is intended to provide teeth to the regulator,
namely, the Commission to check anti-competitive agreements and
abuse of dominant position empowers the Commission, under Section
27, to pass monetary penalties as well as behavioural and structural
remedies and such power is traceable to the opening clause of Section
27 read with Section 27(a) (b) (d) (e) and (g). The idea was that the
contravention be effectively brought to an end, keeping in mind the
principle of proportionality.
49. A behavioural remedy or a structural remedy is principally
imposed on the enterprise. When a behavioural remedy impinges on
corporate governance, corollary orders to give effect to the
behavioural remedy may have to be made on individuals. Stricto
senso the penalty is on the enterprise and the corollary direction is a
consequential direction to give effect to the penalty imposed on the
enterprise. Without such powers to impose corollary directions,
50
behavioural remedies and structural remedies imposed on enterprises
which incidentally impinge on individuals could never be given effect
to. The behavioural remedy imposed on Respondent No. 1 can never
be given effect to unless the corollary part of that direction, directing
the Respondent No. 2 and 3 not to associate themselves with
Respondent No.1 (KFEF), is given effect to. This also reinforces the
holding that the penalty of a behavioural remedy is primarily on
Respondent no. 1 with incidental consequences on Respondent Nos. 2
and 3.
PRINCIPLE OF PROPORTIONALITY IN PENALTY
IMPOSITION : -
50. As the study by Dr. Anna Renata Pisarkiewicz sets out, a
proportional remedy is one that addresses the identified competition
concern, without going beyond what is necessary to remedy it. This
implies that in abuse cases proportional remedies should restore, as
much as possible, the competitive situation that existed before the
abuse occurred, without seeking to improve the market structure that
existed prior to the abuse. Further, length of the application of
remedies should be balanced inasmuch as while it should be long
51
enough to allow intended effects to materialize and short enough to
account for the dynamic nature of the markets.
51. In Excel Crop Care Limited vs. Competition Commission of
India And Another3
, this Court recognized the doctrine of
proportionality in the context of Section 27 of the Act in the following
terms:-
“92. Even the doctrine of “proportionality” would suggest
that the court should lean in favour of “relevant turnover”.
No doubt the objective contained in the Act viz. to
discourage and stop anti-competitive practices has to be
achieved and those who are perpetrators of such practices
need to be indicted and suitably punished. It is for this reason
that the Act contains penal provisions for penalising such
offenders. At the same time, the penalty cannot be
disproportionate and it should not lead to shocking results.
That is the implication of the doctrine of proportionality
which is based on equity and rationality. It is, in fact, a
constitutionally protected right which can be traced to
Article 14 as well as Article 21 of the Constitution. The
doctrine of proportionality is aimed at bringing out
“proportional result or proportionality stricto sensu”. It is a
result-oriented test as it examines the result of the law in fact
the proportionality achieves balancing between two
competing interests : harm caused to the society by the
infringer which gives justification for penalising the
infringer on the one hand and the right of the infringer in not
suffering the punishment which may be disproportionate to
the seriousness of the Act.”
3
(2017) 8 SCC 47
52
NO SECOND NOTICE CONTEMPLATED UNDER THE
STATUTE: -
52. In this background, reverting to the question at hand, it will be
clear that all that the Act contemplates after the receipt of a report
from the DG indicating contravention is to set the procedure in
motion under Section 26(8) of the Act, as it then stood, read with
Section 48 of the Act, Regulation 21 and 48 of the Commission
(General) Regulations, 2009. This aspect has already been dealt with.
There is no mandate in the statute for the issuance of a second show
cause notice setting out the proposed penalty.
REPORT OF THE ‘REVIEW COMMITTEE’: -
53. This view that no second notice is contemplated is reinforced by
the Report of the Competition Law Review Committee (for short the
“Review Committee”) July, 2019. That Review Committee adverted
to the judgment of the Division Bench of Delhi High Court in
Mahindra and Mahindra Ltd. v. Competition Commission of India
and Another4
. We should immediately point out that we are only
referring to this judgment since it is referred to as a part of the
4
(2019) SCC Online Del 8032
53
findings of the 2019 Report of the Review Committee. This judgment
is pending in appeal before this Court and we should not be taken to
have observed one way or the other on the correctness or otherwise of
the said judgment. That judgment dealt with the constitutional
validity of Section 27 since the argument in that case was that the
provision is unconstitutional for want of a prescription for a separate
penalty hearing. The Division Bench of the High Court held the
provision to be constitutional. In the present matter, we are not
concerned with the constitutional validity of Section 27 and the case
has been placed only on the anvil of its interpretation.
54. The Review Committee dealing with the aspect of separate
penalty hearing from para 3.14 to 3.19 observed as under:-
“Separate Penalty Hearing
3.14. Currently, the Competition Act does not mandate the CCI
to provide a separate penalty hearing and the CCI hears the
parties on merits and penalties together. In this regard, a concern
that was flagged before the Committee was that parties may not
get adequate opportunity to be heard on penalties, including on
mitigating and aggravating factors. Accordingly, the Committee
considered whether a separate hearing should be provided to the
parties before the CCI passes its orders on penalties.
3.15. Notably, the Delhi High Court in Mahindra & Mahindra
Ltd. v. Competition Commission of India dealt with a similar
issue where the petitioner alleged that Section 27(b) of the
Competition Act is unconstitutional inter-alia on the ground that
no separate penalty hearing is provided under the provision.
54
After reviewing the procedure for conducting investigation,
inquiry and passing of final orders under the Competition Act,
the High Court held that the absence of a second specific hearing
before imposition of a penalty under Section 27(b) does not
expose the provision to the vice of arbitrariness and
unconstitutionality. The Court observed that:
“197. If these considerations are kept in mind, the fact
that certain types of penalties (which are predetermined quantum for specific violations of the Act)
elicit show cause notice as prelude to penalty on the
one hand, and absence of any compulsion to issue a
separate show cause notice preceding a penalty under
Section 27(b) (although a show cause notice and full
hearing is provided with opportunity to submit against
the report of DG) does not in the opinion of this Court,
render that provision arbitrary.
198. The court is cognizant of the fact that there are
several adjudications - quasi judicial and by judicial
tribunals, which envision a “rolled up” hearing which
visualizes only one show cause notice - that can
culminate in both an adverse finding and a
consequential penalty.”
3.16. In the instant case, the Delhi High Court analysed the
procedure adopted by the CCI and held that this procedure gives
sufficient safeguard to parties likely to be affected adversely,
both as regards findings and sanctions. The Court observed that:
“However, a deeper analysis of the nature of the
proceeding before the CCI would reveal that the
procedure it adopts- and is required to adopt gives
sufficient safeguard to parties likely to be affected
adversely, both as regards findings and the sanctions.
The first step, of course, is to decide whether to issue
notice. Excel Crop Care (supra) and the later decisions
have now held conclusively that this step is
administrative and does not contemplate any prior
notice or hearing to the opposite parties. The next
stage is investigation by the DG. At this stage, the
parties – whenever needed – receive notice and
opportunity; if it is denied, they can seek directions to
the DG from the CCI. This stage includes evidence
55
gathering and wherever necessary, cross-examination
on behalf of one or more individuals, before the DGand later, before the CCI, if the complaint is that
cross-examination is not granted. The next stage is the
report of the DG, which is shared by the parties, who
then make their comments, and are granted full
opportunity of hearing. This step is very significant,
because when the parties do address the CCI and
submit their contentions, they have foreknowledge of
all the materials, including adverse materials and
comments made in the DG’s report. This stage is a
“full blown” hearing, when the parties know and have
a fair awareness of the range of options available with
the CCI in terms of both findings and the sanctions
(such as orders enjoining some activity, or requiring
positive steps to be taken). This forewarning, as it
were, and the statutory cap (of not more than 10
percent) is a broad guideline within which both CCI
and the parties before it, operate.”
3.17. Against this background, the Committee deliberated on the
need to have a separate hearing over and above the hearing as is
contemplated under the Competition Act. While the Committee
noted that such a separate notice / hearing is provided for in the
EU and the UK, it felt that the procedure as envisaged under the
Competition Act currently provides a fair opportunity of hearing
to parties against whom an order of penalty is passed. This has
also been confirmed by the Delhi High Court in the Mahindra
case, as discussed above. Further, the Committee felt that its
recommendation regarding mandatory requirement for the CCI to
issue penalty guidance along with reasons in case of deviation
from the guidance will add another layer of safeguard to the
already existing process that has been upheld by the Delhi High
Court to be constitutionally valid. On the basis of this and in
light of the observations of the Delhi High Court as discussed
above, the Committee felt that a separate penalty hearing
may not be recommended.
Quantum of Penalty for individuals
3.18. Currently, the Competition Act does not provide any
mechanism or quantum of penalty that may be imposed on
individuals. In the absence of any guidance, it was pointed out to
the Committee that the CCI has been using the same standard as
56
used for enterprises under Section 27 for the purpose of imposing
penalties on individuals i.e. imposition of penalty up to 10% of
the average income for the past three years of the individual.
3.19. The Committee deliberated on these issues and
recommended that unless otherwise stated in the Competition
Act, a provision should be introduced to reflect the quantum
of penalty that may be imposed on individuals for the
purposes of the contraventions of the Competition Act. The
Committee recommended that unless otherwise stated in the
Competition Act, such a provision should specify that in case
of a contravention of the provisions of the Competition Act,
in terms of Section 48, the concerned individual will be liable
to a penalty of up to 10% of the average income for the last
three preceding financial years. However, for any
contravention relating to cartels, the amount of penalty that
may be imposed should be up to 10% of the income of each
year of the continuance of the cartel.”
(Emphasis supplied)
55. As would be clear from the recommendation at para 3.17 above,
the Review Committee specifically deliberated on the issue but
concluded that the Act as it stood provided a fair opportunity and in
view of that it felt that a separate penalty hearing was not
recommended. The Review Committee, no doubt, recommended that
mandatorily Commission should issue penalty guidelines along with
reasons in case of deviation from the guidelines. That does not detract
from the fact that the Act did not contemplate a second notice at the
time of imposition of penalty.
57
56. With the furnishing of the DG Report and the opportunity being
given to the parties which have been duly complied with in this case,
a fair opportunity has been given to Respondent Nos.2 and 3 to
address on all aspects of the contravention. It should also not be
forgotten that notice and the supply of DG Report is to enable the
parties to answer on the contravention. It is for the Commission to
maintain the principles of proportionality in the imposition of penalty
as prescribed in section 27 of the Act, which may include monetary
penalty and behavioural and structural remedies.
TIME IS OF ESSENCE – NO NOTICE NEEDED OF PROPOSED
PENALTY:-
57. Considering the importance of fair competition and the ultimate
goal of protecting the interest of the consumers, these internationally
recognized remedies, the power to impose which is statutorily
engrafted in the different sub-sections of Section 27, are within the
powers of the Commission to impose. This is the only way that the
change that was desired from the erstwhile MRTP regime which only
rest contented with the cease-and-desist orders, could be achieved. If
these penalties are not recognized in the statute, the purpose of
58
enacting the Competition Act, 2002, would be defeated and the
Commission, like the MRTP Commission would continue to be a
toothless body. It is also to be emphasized that both in SAIL’s case
(supra) and in Excel Crop’s case (supra), timebound disposal of
proceedings before the Commission has been emphasized.
58. In SAIL’s case (supra), the following was held in paragraph 134
and 136:
“134. The scheme of the Act and the Regulations framed
thereunder clearly demonstrate the legislative intent that the
investigations and inquiries under the provisions of the Act
should be concluded as expeditiously as possible. The various
provisions and the Regulations, particularly Regulations 15 and
16, direct conclusion of the investigation/inquiry or proceeding
within a “reasonable time”. The concept of “reasonable time”
thus has to be construed meaningfully, keeping in view the object
of the Act and the larger interest of the domestic and
international trade.
136. In our considered view the scheme and essence of the Act
and the Regulations are clearly suggestive of speedy and
expeditious disposal of the matters. Thus, it will be desirable that
the competent authority frames regulations providing definite
time-frame for completion of investigation, inquiry and final
disposal of the matters pending before the Commission. Till such
regulations are framed, the period specified by us supra shall
remain in force and we expect all the authorities concerned to
adhere to the period specified.”
59. In Excel Crop’s case (supra), the findings in SAIL’s case
(supra) about the need for dealing with matters relating to
59
contravention of the Act expeditiously and in a timebound manner
were reiterated.
60. The ecosystem of competition law provides for behavioural and
structural remedies to be imposed depending on the facts of the case.
As to what remedy will best address the mischief in the individual
case and act as a deterrent not only for the violator but also generally
would be for the Commission to decide. Internationally, these
remedies are well accepted and our statute in Section 27 vests the
power in the Commission to pass such orders as deemed necessary to
check the malaise. The ecosystem of the Competition Act is sufficient
notice to the violator that the regulating body has vast discretion and
depending on the factual scenario can fashion an appropriate remedy.
The only check is that it should be proportionate and should have
nexus with the object sought to be achieved- namely to punish the
recalcitrant party and also ensure that the penalty acts as a deterrent.
Providing a back and forth between the regulator and the person in
breach to arrive at an appropriate penalty can defeat the purpose of
the Act and can be a source of great abuse as the time given can be
used to even present the Commission with a fait accompli, defeating
60
the object of the Act. That will also result in enormous loss of time
when time is of essence under the statute.
NOTICE IS TO ANSWER THE CONTRAVENTION – NOT THE
PROPOSED PENALTY:-
61. Associated Cement Companies Ltd. vs. T.C. Shrivastava &
Others5
, is a matter arising under the Labour Jurisprudence, where the
aspect of second opportunity was dealt with. It was highlighted
therein that the opportunity given was to explain the charges and not
the proposed punishment. The following paragraphs makes the
position abundantly clear:-
“8. At the outset the legal position as has been clarified by this Court in
the Saharanpur Light Railway Co. case may be stated. In the context of
certain modification sought to be introduced in a Standing Order
requiring a second show-cause notice this Court has observed thus:
As regards the modification requiring a second show-cause notice,
neither the ordinary law of the land nor the industrial law requires an
employer to give such a notice. In none of the decisions given by
courts or the tribunals such a second show-cause notice in the case
of removal has ever been demanded or considered necessary. The
only class of cases where such a notice has been held to be necessary
are those arising under Article 311. Even that has now been removed
by the recent amendment of that article. To import such a
requirement from Article 311 in industrial matters does not appear to
be either necessary or proper and would be equating industrial
5 1984 Supp SCC 87
61
employees with civil servants. In our view, there is no justification
on any principle for such equation. Besides, such a requirement
would unnecessarily prolong disciplinary enquiries which in the
interest of industrial peace should be disposed of in as short time as
possible. In our view it is not possible to consider this modification
as justifiable either on the ground of reasonableness or fairness and
should therefore be set aside.
It is thus clear that neither under the ordinary law of the land nor
under industrial law a second opportunity to show cause against the
proposed punishment is necessary. This, of course, does not mean that a
Standing Order may not provide for it but unless the Standing Order
provides for it either expressly or by necessary implication no enquiry
which is otherwise fair and valid will be vitiated by non-affording of such
second opportunity. The question is whether para 3 of the Standing
Order 17 provides for such second opportunity being given to the
delinquent? The relevant words are “all dismissal orders shall be
passed by the manager … after giving the accused an opportunity to
offer any explanation”. The italicised words are wholly inappropriate
to convey the idea of a second hearing or opportunity on the question
of punishment but appropriate in the context of seeking an
explanation in regard to the alleged misconduct charged against him.
An ‘explanation’ is to be called from the ‘accused’ which suggests
that the same is to be called for prior to the recording of a finding
that the delinquent is guilty of misconduct; it is the alleged
misconduct that is to be explained by him and not the proposed
punishment. On a plain reading of the relevant words no second
opportunity of showing cause against the proposed punishment is
contemplated either expressly or by necessary implication. In other
words, it is clear to us that the opportunity spoken of by para 3 of
Standing Order 17 is the opportunity to be given to the delinquent to
meet the charges framed against him. In this connection it will be
pertinent to mention that the concerned Standing Order was framed and
came into force on March 1, 1946 and was duly certified on October 16,
1952 under the Industrial Employment (Standing Orders) Act, 1946 i.e.
prior to the enunciation of the law by courts regarding the observance of
the principles of natural justice such as issuance of a charge-sheet,
holding of an enquiry, opportunity to lead evidence, etc. and it is wellknown that after the enunciation of these principles model Standing
Orders have been framed to provide for the detailed steps required to be
undertaken during a domestic enquiry. Since the instant Standing Order
was certified prior to the formulation of the above principles it merely
contains a bald provision for “giving the accused an opportunity to offer
62
any explanation”. In other words, different stages in domestic enquiry
were never in the contemplation of the framers of the Standing Order.
That being the position it would be difficult to attribute any intention to
the framers thereof to provide for a second opportunity being given to the
delinquent of showing cause against the proposed punishment. The latter
part of para 3 merely casts a unilateral obligation on the concerned
authority or the officer to give due consideration to the gravity of the
misconduct and the previous record of the delinquent in awarding the
maximum punishment.”
(Emphasis supplied)
62. Once the explanation is offered, it is for the Commission to
conclude whether there is breach of the Act or not. As to what penalty
to impose, it will be guided by the doctrine of proportionality, when it
chooses the penalty or penalties from the menu of penalties available.
63. Furthermore, appeal is provided under section 53A and 53T of
the Act. The appellate body also shall examine whether the penalty
imposed by the original authority is proportionate. By doing so, the
appellate authority/court is not curing the violation of natural justice
since there is no violation of natural justice by the original
authority/court but what it does is to review whether the penalty is
proportionate. Being an appellate authority, its powers are coordinate with original authority and it can even modify the penalty. It
is not bound by the constraints a judicial review court exercising
powers under Article 226 may be faced with. There is no need to
63
remit the matter to the original authority for imposition of an
appropriate penalty. The appellate Tribunal can itself substitute the
penalty. This itself is a salutary safeguard. The behavioural and
structural remedy to be imposed should be dependent on what the
facts of the case warrant, depending on the nature of the
contravention. The most appropriate remedy that will prevent the
recurrence is for the Commission to decide. The only requirement is
that it should be proportionate and should have the objective of
preventing the recurrence of the contravention.
PENALTY ON FACTS - PROPORTIONATE: -
64. Coming to the facts of the case, we find that the penalty is not
disproportionate. The Commission in its order noted that both
Respondent Nos.2 and 3 played an active role in enforcing the
directives of Respondent No.1 in controlling and restricting the
exhibition of new movies across the State of Kerala. Further, even
after giving ample opportunity, no evidence was adduced to establish
that the anti-competitive decisions were made without their
knowledge or that they had exercised all due diligence to prevent
them from being committed. The Commission also relied on the
64
evidence of Mr. Mukesh Mehta, of M/s E-4 Entertainment, and Mr.
Rupesh Makhija, Manager of M/s RM Films, Calicut. Further, Ms.
Sandra Thomas, Managing Partner of M/s Friday Tickets had given
evidence to the effect that M/s Friday Tickets did not distribute films
to the informant because of the ban imposed by Respondent No.1 on
the informant. Except for stating that the evidence of Ms. Sandra
Thomas was baseless, nothing concrete was adduced to counter the
statement. Relying on this evidence, contravention was found and
penalty was imposed. Penalty imposed was 10 percent of the average
income which worked out to Rs.56,397.07 in the case of Respondent
No.2 Mr. P.V. Basheer Ahamed, and Rs. 47,778.60 in the case of Mr.
M.C. Bobby, Respondent No.3. Further, Respondent No.1 was
directed not to associate with Respondent Nos.2 and 3 with its affairs
including administration, management and governance, in any manner
for a period of 2 years and corresponding directions were issued to
Respondent Nos.2 and 3 to not to associate with Respondent No.1.
65. We do not find that the penalty is disproportionate.The monetary
penalty was meagre. The acts committed had serious and deleterious
effect on the informant and the general public and unless deterrent
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penalties were imposed prejudice to public would have been
enormous. The penalty imposed, as above, cannot be said to be of
such a nature as to shock the conscience of a judicially trained mind.
66. Respondent Nos.2 and 3 were also found to have indulged in
similar anti-competitive conduct in Case No.45/2012 before the
Commission, and in that case, a penalty of 7 percent of their average
income for the past 3 years was imposed. In spite of that, they
continued with their anti-competitive conduct resulting in the present
case being lodged. It is very clear that mere monetary penalty has not
acted as a deterrent on Respondent No.2 and 3 as well as Respondent
No.1. A behavioural remedy like the one ordered in the present case
would alone protect the interest of the consumers and uphold the
majesty of law. For this additional reason, we find the penalty
imposed by Commission to be proportionate. In State Bank of India
And Others vs. Mohammad Badruddin6
, this Court, while holding
that there cannot be a bar to take into consideration the previous
penalty even in the context of Article 311 after the 42nd Amendment
Act, held as under in para 23:
6
(2019) 16 SCC 69
66
“23. The previous punishments could not be subject-matter of the
charge-sheet as it is beyond the scope of inquiry to be conducted
by the inquiry officer as such punishments have attained finality
in the proceedings. The requirement of second show-cause notice
stands specifically omitted by the 42nd Amendment. Therefore,
the only requirement now is to send a copy of Inquiry Report to
the delinquent to meet the principle of natural justice being the
adverse material against the delinquent. There is no mandatory
requirement of communicating the proposed punishment.
Therefore, there cannot be any bar to take into consideration
previous punishments in the constitutional scheme as interpreted
by this Court. Thus, the non-communication of the previous
punishments in the show-cause notice will not vitiate the
punishment imposed.”
67. We are not impressed with the argument of violation of Article
19(1)(c) of the Constitution. Unethical practices can always be
checked since the right under article 19(1)(c) is not absolute and
reasonable restrictions can be imposed under Article 19(4). In the
present case there is no challenge to the validity, and we have to
proceed on the basis that the statute is valid. Equally, the holding of
the COMPAT that the findings recorded by the Additional DG against
Respondent Nos.2 and 3 were without issuing notice to them stating
that he proposes to make observations adverse to their conduct, is in
the teeth of Section 48. It is undisputed that the Additional DG issued
notice to Respondent No.1, and Respondent No.2 who was present
before the Additional DG, was confronted with the evidence. In any
67
event Respondent Nos.2 and 3 are being roped-in and rendered liable
for the contravention in view of the deeming provision in Section 48
since it is undisputed that they were, at the time when the
contravention was committed, in charge of and were responsible for
the affairs of Respondent No.1
CONCLUSION: -
68. For the reasons stated above, we allow the appeal and set aside
the judgement of the COMPAT dated 04.02.2016 in Appeal
No.99/2015 insofar as it set aside the penalty and directions against
Respondent Nos.2 and 3 and the direction contained in clauses (d) and
(e) of para 9 of the order of the Commission. We restore the findings
of the Commission dated 08.09.2015 in its entirety. The directions to
Respondent No.1 not to associate with Respondent No.2 and 3 with
its affairs including administration, management and governance of
Respondent No.1 and the directions to Respondent Nos.2 and 3 not to
associate with Respondent No.1 in the administration, management
and governance of Respondent No.1 for a period of 2 years shall
commence from 01.12.2025 and continue till the period of 2 years is
68
over. Compliance to be filed before the Commission within three
months from today with regard to all the directions imposed by the
Commission in its order dated 08.09.2015. No order as to costs.
……….........................J.
[MANOJ MISRA]
.……….........................J.
[K. V. VISWANATHAN]
New Delhi;
26th September, 2025
