Failure to comply with Demand Notice Provisions Attracts Liability for Penal Interest: Delhi HC Sets Aside CCI’s order [Read Order]

The Delhi High Court has set aside the Competition Commission of India's (CCI’s) order, stating that failure to adhere to notice provisions incurs liability for penal interest. The proceedings were initiated against Petitioner No.1/Geep Industries (India) Pvt. Ltd and Petitioners Nos.2, 3 and 4, who were directors of the Petitioner No.1/Company under the Competition Act, 2002. Inquiry was conducted and the Respondent/CCI vide Order dated 30.08.2018 directed the Petitioner No.1 and their directors and employees identified in the proceedings to cease and desist from indulging into any act of cartelisation in the Dry Cell Batteries market in India The Respondent/CCI also held that penalties will be imposed on the Petitioners, under Section 27(b) of the 2002 Act. Penalty of Rs.9,64,06,682/- was imposed on Petitioner No.1, Rs.1,29,839 was imposed on Petitioner No.2, Rs.1,10,386/- was imposed on Petitioner No.3 and Rs.2,40,452 was imposed on Petitioner No.4. The penalties were to be deposited within a period of 60 days of the receipt of the Order. The said Order dated 30.08.2018 was challenged by the Petitioners by filing Competition appeals being No.88/2018 etc. before the National Company Law Appellate Tribunal (NCLAT). The NCLAT vide its Order dated 31.03.2023 upheld that the Petitioners are guilty of abusing their dominant position in the market, however, the penalty qua Petitioner No.1 was reduced to 1% of the total turnover for each year of continuance of cartelisation The Respondent/CCI issued demand notices directing the Petitioners to deposit the penalty amount with simple interest @ 1.5% for every month or part of a month in the period commencing from 10.12.2018 till the date on which the demand is paid. It is pertinent to mention here that the Petitioner No.1 continuously renewed the FDR of Rs.10 lakhs that had been deposited as a condition precedent for grant of stay by the Ld. NCLAT. The Petitioners requested the Respondent/CCI to withdraw the demand notices in so far as it related to the demand of payment of simple interest @ 1.5% for every month or part of a month in the period commencing from 10.12.2018 till the date on which the demand is paid. The Petitioners also requested for payment of penalty amount by way of installments. The Petitioners have, therefore, approached court by filing the instant writ petition under Article 226 of the Constitution of India challenging the power of the Respondent/CCI to levy interest on the payment of penalty Mr. Tarun Gulati, Senior Advocate, representing the petitioners that the interest can be levied on any penalty amount only in accordance with the 2011 Regulations. It was stated that unless the procedure laid down under the 2011 Regulations are followed, the Respondent/CCI cannot direct payment of interest on any delayed payment of penalty Per contra, Ms. Aakanksha Kaul representing the Respondent/CCI contends that the liability to pay the amount of penalty arose from the date of the Final Order which is 30.08.2018. She states that the NCLAT did not come to the conclusion that penalty was not to be levied on the Petitioners. Further stated that there was a reduction only as far as Petitioner No.1 is concerned regarding the quantum of penalty. It was stated that the demand notice was only Consequential wherein the Petitioners have been directed to pay interest on the penalty amount from the date of which the penalty was to be paid. The bench observed that the interest can be levied only in a manner provided by the statute. Further, the Apex Court in a number of judgments has held that when there was 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. This principle was first laid down in Taylor v. Taylor. Subsequently, it was upheld by the Privy Council in Nazir Ahmad v. Emperor. The Apex Court has subsequently relied on this principle in various judgments such as Shiv Kumar Chadha v. Municipal Corporation of Delhi and Ramchandra Keshav Adke v. Govind Joti Chavare, making it mainstream in the India Legal Jurisprudence The bench noted that there being no notice of demand, it was held that the liability to pay penal interest did not arise. It is necessary to emphasise that this was not a case of payment of interest at the ordinary statutory rate but a case of penal interest and therefore, that the Act provided that the liability to pay the same arises only after there has been a failure to comply with the provisions of a notice in that behalf, Therefore, the Coram of Justice Subramonium Prasad concluded that Impugned Order dated 18.07.2023 was set aside as it levies interest on the delayed payment of penalty amount from 10.12.2018 till the date of payment. Accordingly, the writ petition was allowed. Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates