TaxTMI 
TaxTMI 
2023 (4) TMI 56
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....nder Section 53B(1) of the Competition Act, 2002 (in short the "Act") against impugned order dated 30.08.2018 passed by the Competition Commission of India (in short "CCI"). The impugned order was passed by the CCI in suo moto case No. 20 of 2017. 2. The Appellant - Geep Industries is a private company with registered office in Thane, Maharashtra and has interest in multiple sectors including trading of dry cell batteries procure from other manufacturers under the trademark "GEEP". The Respondent No.1-CCI is the Regulatory and quasi-judicial authority which has passed the impugned order, Respondent No.2 is the company Panasonic Corporation, Japan (in short 'Panasonic Corporation') along with Respondent No. 3-Panasonic Energy India Company Limited (in short "PECIN") are both Applicants of Lesser Penalty Application filed by them before the CCI under Section 46 of the Act r/w Regulation 5 of the Competition Commission of India (Lesser Penalty) Regulations, 2009 (in short "Lesser Penalty Regulations"). 3. The conspectus of the case is that the Appellant - Geep Industries used to manufacture dry cell batteries but stopped manufacturing them from the year 2008-09 onwards and inste....
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.... 26(1) of the Act directing the DG to investigation into the information contained in the 'Lesser Penalty Application', the DG investigated the allegations content in the application and submitted the investigation report on 16.10.2017 to the CCI for consideration, whereupon the CCI after due consideration and giving an opportunity to all the parties for hearing, passed the impugned order. 7. We heard the arguments advanced by the Ld. Counsel for the Appellant and Ld. Senior Counsel for R-1 (CCI) and Ld. Counsel for R-3 (PECIN) and perused the record. 8. The Ld. Counsel for the Appellant has argued that Geep Industries is a very small player in the dry batteries market having a minuscule share of about 1% whereas the three major players viz. Eveready, Nippo and Panasonic controlled about 98% of the said market. He has added that since Geep Industries was not in a position to manufacture batteries, it decided to procure the dry cell batteries manufactured by PECIN and a Product Supply Agreement was signed on 01.10.2010 whereby on a 'principal to principal' basis, PECIN would supply the batteries on an agreed price. He has added that since Geep industries is a very small player....
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....ustries in the impugned order claiming that since the business of dry cell batteries of Geep Industries is very small and it has not been profitable in three of the six years when the PSA was operative, the quantum of penalty imposed on it is excessive in view of the facts of the case, and such a high penalty would result in wiping of Geep's business and pushing it out of dry cell batteries market. In support of his argument, he has stated that the Lesser Penalty Application filed by Panasonic has resulted in a 'zero' penalty on Panasonic, but Geep, which is the minor party in the PSA has been made to share the entire burden of the 'bilateral ancillary cartel', which is not fair. In support of his argument, he has pointed to the Table -IV included in Para 34 of the impugned order to show that for year 2010-11, 2011-12 and 2012-13 Geep industries actually made a net loss and it was only from the year 2013-14 till 2016-17 (one month of April, 2016 in the financial year) that Geep made some meagre profits in its entire business. He has further argued that if an excessive penalty of Rs.9,64,06,682/- is paid by the Geep Industries on account of a penalty @4% of the turnover for six year....
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....ient manner but Geep industries, which is also a defaulter, cannot be allowed to go scot free since it is found to be contravening the law. He has further pointed to the quantum of penalty which is @4% of the turnover for each year of the continuation of the cartel from 2010-11 till the first month of the year 2016-17 already takes into account the size and conduct of Geep in the dry cell batteries market and, therefore, it is not excessive or disproportionate by any yardstick. 14. In the light of the fact that the Ld. Counsel for the Appellant has not pressed his case on merit regarding infringement of Section 3 of the Act by Geep industries, we are focusing in the judgment on the quantum of penalty that is imposed on Geep industries. 15. The Ld. Counsel for Appellant, during the course of arguments, cited some orders/judgments of the CCI, where in view of mitigating factors, the quantum of penalty has either been kept very small, or merely direction to 'cease and desist' has been given to the offending party. 16. Section 3 of the Act and Regulation 5 of the Lesser Penalty Regulations are reproduced below for ready reference: Competition Act, 2002 "3. An....
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....chedule, or may contact, orally or through e-mail or fax, the designated authority for furnishing the information and evidence relating to the existence of a cartel. The designated authority shall, thereafter, [within five working days], put up the matter before the Commission for its consideration. (2) The Commission shall thereupon mark the priority status of the applicant and the designated authority shall convey the same to the applicant either on telephone, or through e-mail or fax. If the information received under sub-regulation (1) is oral or through e-mail or fax, the Commission shall direct the applicant to submit a written application containing all the material information as specified in the Schedule within a period not exceeding fifteen days. (3) The date and time of receipt of the application by the Commission shall be the date and time as recorded by the designated authority or as recorded on the server or the facsimile transmission machine of the designated authority. (4) Where the application, along with the necessary documents, is not received [within a period of fifteen days from the date of communication of direction under sub-regulat....
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....of section 3, shall be 'presumed' to have an appreciable adverse effect on competition, and there such behaviour is anti-competitive that would invite penalty under section 27 of the Act. 19. In the present case, the PSA entered into between Geep Industries and PECIN, while being about the manufacture and supply of dry cell batteries by PECIN to Geep Industries, it is Clause 4.3 that has been found to be offensive by the CCI, clause 4.3 of PSA is as follows: "4.3- Since price to GBIPL is very special price and that PECIN too is in the business of selling dry cell batteries of the same category in the same market, it is advised and agreed that GBIPL will not take steps which are detrimental to PECIN's market interest particularly with respect to the market prices which shall be reviewed and maintained at agreed levels from time to time." 20. The Clause 4.3 of the PSA as reproduced above, is in the form of an advice which is agreed TO by Geep Industries to not take steps detrimental to PECIN's market interest particularly with respect to market prices. Further, by the application of said clause 4.3, Geep Industries also agreed to comply with the level of prices as agre....
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....CI decided to impose upon Geep Industries a penalty @ 4% of its turnover for each year of the continuance of the cartel each year of the continuance of the cartel which amount to Rs. 9,64,06,682/-. 23. We now consider the quantum of penalty which the Appellant has argued to be very high and disproportionate to its offensive behavior, and sought reduction in the penalty amount. We note that the impugned order, in paragraph 37, records that Geep Industries is a 'very small player' having insignificant market share in the market for dry cell batteries and was not in a bargaining/ negotiating position with PECIN. Thus, the Impugned Order recognizes that while Geep Industries is an offender of Section 3 of the Act, it was neither in a bargaining position vis-à-vis PECIN nor having a significant market share to be able to influence prices in the said market. Therefore, it was not in a position to disagree with clause 4.3 of the PSA in view of Panasonic's interest in influencing the prices in the dry cell batteries market as a big market shareholder. We are of the opinion that the offensive behavior of Geep Industries should be seen in this context and background, and it would b....
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....supervisory authority. But the other considerations, referred to above, which have also weighed with this Court in holding that an administrative authority must record reasons for its decision, are of no less significance. These considerations show that the re- cording of reasons by an administrative authority serves a salutary purpose, namely, it excludes chances of arbitrariness and ensures a degree of fairness in the process of decision-making. The said purpose would apply equally to all decisions and its application cannot be confined to decisions which are subject to appeal, revision or judicial review. In our opinion, therefore, the requirement that reasons be recorded should govern the decisions of an administrative authority exercising quasi-judicial functions irrespective of the fact whether the decision is subject to appeal, revision or judicial review. It may, however, be added that it is not required that the reasons should be as elaborate as in the decision of a Court of law. The extent and nature of the reasons would depend on particular facts and circumstances. What is necessary is that the reasons are clear and explicit so as to indicate that the authority has given....
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....ealer. Granting that they erred, no case for imposing penalty was made out." 30. According to the above-mentioned judgment, penalty should be imposed for failure to perform statutory obligations using the as a discretion of the Authority. In the present case while discretion has been exercised, is not clear about the basis for exercising such a discretion which has resulted in a penalty @4% of average turnover of last three years. We are, therefore, of the view that sufficient reasons should have been cited by CCI while imposing a certain quantum of penalty, which has not been done in the instant case. 31. Another argument of the Learned Counsel for the Appellant is that twice the annual turnover of the Appellant is quite small, a high quantum of penalty will be onerous and will wipe out this. Appellant form the market of dry cell batteries. Such a view has been held in the case of Rajasthan Cylinders and Containers Ltd. Vs. Union of India & Anr. (2020) 17 SCC 615 wherein the following was held by the Hon'ble Supreme Court: "92.When we keep in mind the aforesaid fact situation on the ground, those very factors on the basis of which the CCI has come to the conclusion ....
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....ly a minor player in the dry cell batteries market which, in order to run its business, was buying unbranded batteries from PECIN. PECIN, being the complainant of the Lesser Penalty Application, has received benefit and no penalty has been imposed on it by the CCI, though it is a significant player in the market. It was, through the clause 4.3 of the PSA, attempting to save its interest in the said market and also imposing an anti-competitive condition in the PSA, but Geep was not in a position to resist or contest the clause 4.3, in view of its business interest in continuing to sell dry cell batteries even if with an insignificant and miniscule market presence. 34. In view of the extenuating conditions as discussed in preceding paragraphs, we are of the view that while the quantum of penalty should be such that it acts as a deterrent and regulate anti-competitive behavior. We consider Geep Industries business dynamics and situation in the market to be such that it was neither in a negotiating strength vis-à-vis PECIN nor having a market share that could actually influence the price in the said market. In view of such a situation, and fully conscious of the fact that Gee....