2025 (5) TMI 1762 - AT - Law of Competition

Tribunal Strikes Down CCI Penalty Order, Demands Transparent Reasoning and Fair Hearing for Appellants

The National Company Law Appellate Tribunal (NCLAT) reviewed a Competition Commission of India (CCI) penalty order. The Tribunal found procedural ... Prayer to release of the Fixed Deposit Receipts deposited by the Appellants - It is submitted by the appellant since the CCI is deciding about the quantum of penalty afresh hence the FDR deposited in pursuance to the order dated 06.08.2018 be released - HELD THAT:- Considering the submissions the application is allowed and the Ld. Registrar, NCLAT may release the FDR alongwith interest accrued thereon in favour of the Appellant. Application disposed off. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Tribunal in this matter are:Whether the Fixed Deposit Receipts (FDRs) deposited by the appellants as security against the penalty imposed by the Competition Commission of India (CCI) should be released pending the reconsideration of penalty quantum by the CCI.Whether the CCI exercised its discretionary power reasonably and in accordance with law while imposing the maximum penalty of 10% of turnover under Section 27(b) of the Competition Act.Whether the appellants were afforded a fair opportunity to be heard regarding the imposition of the maximum penalty.The procedural propriety and legal correctness of remitting the matter back to the CCI for reconsideration of the penalty quantum.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Release of Fixed Deposit Receipts (FDRs) deposited as security pending penalty reconsiderationRelevant legal framework and precedents: The deposit of FDRs was pursuant to the Tribunal's interim order dated 06.08.2018, which stayed the operation of the penalty order upon deposit of the penalty amount in the form of FDRs. The principle underlying such deposits is to secure the amount in dispute during the pendency of appeal proceedings.Court's interpretation and reasoning: The Tribunal noted that since the CCI is reconsidering the quantum of penalty afresh after remand, the purpose of retaining the FDRs as security has diminished. The CCI itself did not oppose the release of the FDRs.Key evidence and findings: The appellants deposited amounts of Rs. 9,06,388/- and Rs. 1,38,570/- as FDRs along with accrued interest. The CCI's appeal against the remand order was dismissed by the Supreme Court, confirming the remand and fresh consideration by CCI.Application of law to facts: Given the dismissal of CCI's appeal and ongoing reconsideration, the Tribunal found it appropriate to release the FDRs with interest to the appellants.Treatment of competing arguments: The CCI raised no objection to the release, and the appellants sought release on the ground that penalty quantum is yet to be decided.Conclusions: The Tribunal allowed the application and directed release of the FDRs along with interest in favour of the appellants.Issue 2: Reasonableness and legality of imposition of maximum penalty (10% of turnover) by CCI under Section 27(b) of the Competition ActRelevant legal framework and precedents: Section 27(b) of the Competition Act empowers the CCI to impose penalties up to 10% of the turnover of the enterprise for contraventions. The exercise of discretion in imposing penalty must be reasonable, not arbitrary or indiscreet, and the affected parties must be given an opportunity to be heard especially when maximum penalty is considered.Court's interpretation and reasoning: The Tribunal observed that while the CCI has the power to impose up to 10% penalty, it must provide detailed reasons for choosing the maximum penalty and afford the parties an opportunity to address this aspect. The impugned order lacked any indication that the appellants were heard on the question of exemplary penalty or that detailed reasons were assigned for the maximum penalty.Key evidence and findings: The Tribunal scrutinized the impugned order of the CCI and found absence of any recorded reasons or hearing on the quantum of penalty, especially regarding imposition of the maximum 10% penalty.Application of law to facts: The Tribunal held that discretion vested in CCI must not be exercised in an indiscreet manner. The failure to provide opportunity and reasons rendered the penalty imposition procedurally unfair and legally unsustainable.Treatment of competing arguments: The CCI contended that the discretion was lawfully exercised. However, the Tribunal emphasized settled legal principles requiring reasoned orders and fair hearing on penalty quantum.Conclusions: The Tribunal remanded the matter to the CCI for reconsideration of penalty quantum, directing CCI to afford full opportunity to the appellants and pass a reasoned order in accordance with law.Issue 3: Procedural propriety of remanding the matter to CCI for reconsideration of penalty quantumRelevant legal framework and precedents: The appellate jurisdiction of the Tribunal includes the power to remit matters back to the CCI for fresh consideration if the original order is found deficient in procedure or reasoning.Court's interpretation and reasoning: The Tribunal found that the absence of reasons and opportunity on the maximum penalty issue constituted a procedural infirmity warranting remand.Key evidence and findings: The Tribunal relied on the impugned order's silence on the issue of hearing and reasoning for maximum penalty.Application of law to facts: The Tribunal applied the principle that discretion must be exercised reasonably and with due procedure and that failure to do so vitiates the order.Treatment of competing arguments: The CCI's appeal to the Supreme Court against remand was dismissed, reinforcing the Tribunal's view.Conclusions: The remand was upheld as proper and necessary to ensure fair adjudication.3. SIGNIFICANT HOLDINGS'Though CCI is empowered to take turnover up to 10% but while taking up such percentage i.e. maximum as prescribed in the Act it was required for the CCI to elaborately assign reason for coming to the conclusion for maximum penalty.''It may not be held that CCI in no case can impose higher penalty up to 10% but in such situation it would be required for the CCI to afford full opportunity to the concerned party to address the CCI as to why such higher penalty may not be imposed.''Discretion may not be exercised in an indiscreet manner.''In view of facts and circumstances particularly the fact that discretion by the CCI in the present case has not been exercised in a reasonable manner it would be a fit case for remanding back the matter to CCI to examine the issue to afford opportunity to the appellants to address on the point as to whether instead of exemplary penalty i.e. upper limit of 10%, the appellants are entitled to get the said percentage reduced or not.''The Ld. Registrar, NCLAT may release the FDR along with interest accrued thereon in favour of the Appellant.'Core principles established include the necessity for reasoned orders when imposing maximum penalties under the Competition Act, the requirement of affording an opportunity to the