2024 (5) TMI 1 - HC - Law of Competition

CCI cannot levy interest on penalty during stay period without following prescribed regulatory procedures

Geep Industries (India) Pvt. Ltd. & Ors. Versus Competition Commission Of India

Delhi HC set aside CCI's order levying interest on penalty amount from the date initial order was stayed until payment. Court held that CCI failed to ... Interest on the penalty amount - for the period when the initial order was stayed - demand on the ground that Respondent/CCI could not have directed payment of interest on the penalty amount without following the procedure laid down under the Competition Commission of India (Manner of Recovery of Monetary Penalty) Regulations, 2011 - HELD THAT:- It is pertinent to mention that the amount of interest which is stipulated in the notice is the amount that is stipulated in Regulation 5 of the 2011 Regulations. Regulation 5 also specifically states that if the amount specified in the demand notice is not paid within the period specified then interest is leviable. It is further fortified that the demand notice also stipulates that the amount has to be paid within 30 days of the receipt of the demand notice under Form-I. These provisions are, therefore, completely mandatory. The Apex Court in SRI MOHAN WAHI VERSUS COMMISSIONER OF INCOME-TAX AND OTHERS [2001 (3) TMI 4 - SUPREME COURT] while considering on the power to impose interest on the delayed payment of penalty amount, has observed 'once the demand ceased to exist and the fact was brought to the notice of the Tax Recovery Officer by the assessee, the former should have cancelled the recovery certificate and, therefore, with effect from that date till the date of refund, the interest should be paid by revenue.' The interest can be levied only in a manner provided by the statute. Further, the Hon’ble Apex Court in a number of Judgments has held that when there is a power, coupled with duties, to do a thing in a particular way it should be done in that way only and other modes are forbidden. The Impugned Order is set aside inasmuch as it levies interest on the delayed payment of penalty amount from 10.12.2018 till the date of payment - Petition allowed. Issues Involved:1. Legality of the Competition Commission of India (CCI) directing the Petitioners to deposit interest on the penalty amount.2. Whether the procedure laid down under the Competition Commission of India (Manner of Recovery of Monetary Penalty) Regulations, 2011 ('2011 Regulations') was followed.Summary:1. Legality of CCI Directing Petitioners to Deposit Interest on Penalty Amount:The Petitioners challenged the Order dated 18.07.2023 by the Respondent/CCI directing them to deposit interest on the penalty amount for the period from 10.12.2018 to 07.07.2023. The Petitioners argued that the CCI could not have directed payment of interest without following the procedure under the 2011 Regulations. The CCI had initially imposed penalties on the Petitioners for cartelisation in the Dry Cell Batteries market in India, which was upheld by the NCLAT with a reduced penalty for Petitioner No. 1. The Petitioners contended that interest could only be levied in accordance with the 2011 Regulations.2. Procedure Under 2011 Regulations:The Petitioners argued that the CCI must follow the procedure laid down in the 2011 Regulations before levying interest. Specifically, Regulation 3(1) requires a demand notice in Form-I to be served on the enterprise after the penalty period expires. Regulation 3(2) provides a 30-day period for the enterprise to deposit the penalty. Regulation 5 states that interest is payable if the penalty is not paid within the specified period. The Petitioners contended that without following these procedures, interest could not be imposed.Respondent's Argument:The Respondent/CCI argued that the liability to pay the penalty arose from the Final Order dated 30.08.2018, and the demand notice was only consequential. They contended that the original demand revived upon dismissal of the appeals, and interest on delayed payment was automatic under Regulation 5. The CCI further argued that Regulation 3 is procedural and directory, not mandatory.Court's Analysis:The Court examined the relevant provisions of the 2011 Regulations, including Regulations 2(c), 2(e), 2(g), 3, 4, and 5, and Form-I. It concluded that the issuance of a demand notice in Form-I is mandatory before levying interest. The Court cited several Supreme Court judgments emphasizing that interest can only be levied in the manner provided by statute and that mandatory procedures must be followed.Judgment:The Court set aside the Impugned Order dated 18.07.2023 to the extent it levied interest on the delayed payment of the penalty amount from 10.12.2018 till the date of payment. The writ petition was allowed, and any pending applications were disposed of.