Mandatory demand notice procedure bars automatic interest on delayed penalty recovery under competition law

Interest on delayed payment of a Competition Commission penalty could not be levied unless the prescribed demand notice in Form I was issued and served in accordance with the recovery regulations. The Court treated the notice procedure as mandatory, because the regulations make the demand notice the basis for identifying default and for triggering interest liability. A penalty order by itself did not create automatic liability for interest; the statutory recovery method had to be followed strictly. The impugned direction levying interest was therefore invalid and the demand for interest was set aside.

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Issues: Whether interest on delayed payment of penalty under the Competition Commission of India (Manner of Recovery of Monetary Penalty) Regulations, 2011 could be levied without first issuing and serving the prescribed demand notice in Form I and following the statutory recovery procedure.

Analysis: The Regulations define a demand notice as the notice issued for recovery of penalty, and an enterprise in default as one that has not paid after service of such notice. Regulation 3 requires the Secretary to issue a demand notice in Form I after expiry of the period specified in the penalty order, and Form I itself specifies the time for payment and the consequence of interest on default. Regulation 5 makes interest payable only if the amount specified in the demand notice is not paid within the period specified by the Commission. Reading these provisions together, the demand notice is not a mere formality but the foundation for fastening liability to interest. The statutory scheme was held to be mandatory, and the levy of interest could not be sustained on a theory that liability arose automatically from the original penalty order. The analogy drawn from income tax cases supported the view that interest can be levied only in the manner authorized by statute, and that where a statute prescribes a particular method, it must be followed exclusively.

Conclusion: Interest on the delayed penalty amount could not be levied without compliance with the prescribed demand-notice procedure, and the impugned direction levying interest was invalid.

Final Conclusion: The writ petition succeeded, and the demand for interest on the penalty amount was set aside.

Ratio Decidendi: Where a statute and its regulations prescribe a mandatory demand-notice procedure as the foundation for recovery of penalty and interest, interest cannot be levied except in strict compliance with that prescribed procedure.

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