Disproportionate penalty for delayed compliance undertaking was found arbitrary where no substantive cease-and-desist breach was shown.

Penalty under Section 42 of the Competition Act for delayed filing of an undertaking was treated as distinct from any violation of the underlying cease-and-desist direction under Section 27. The text states that the authority was required to assess the nature of the default, absence of gain, lack of prejudice to public interest, mitigating circumstances, and whether the non-compliance was intentional. It further records that these factors were ignored and the daily penalty was found to be shockingly disproportionate, arbitrary and without application of mind, leading to it being set aside.

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Issues: Whether the penalty imposed under Section 42 of the Competition Act, 2002 for delayed filing of an undertaking to comply with a cease-and-desist direction was arbitrary, unreasonable and disproportionate.

Analysis: The penalty was imposed not for continuation of any anti-competitive conduct, but only for failure to file an undertaking that merely facilitated compliance with the substantive cease-and-desist direction under Section 27 of the Competition Act, 2002. The substantive direction itself had not been violated, and the petitioners had already ceased to be capable of participating in the relevant tender process or were otherwise disabled from doing so. The Authority was required to consider the nature of the default, the absence of gain, the absence of prejudice to public interest, the mitigating circumstances noticed by the appellate tribunal, and whether the non-compliance was intentional. In imposing a daily penalty of Rs. 5,000, these relevant factors were ignored, while the direction of the appellate tribunal was also misread.

Conclusion: The penalty was held to be shockingly disproportionate, arbitrary and without application of mind, and was set aside in favour of the petitioners.

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