CCI Cannot Levy Interest without Demand Notice as per Regu. 3: Delhi HC rules in Favor of Geep Industries

The Delhi High Court, in a ruling in favour of Geep Industries, held that Competition Commission of India (CCI) cannot levy interest without a demand notice as per Regulation 3 of the Competition Commission of India (Manner of Recovery of Monetary Penalty) Regulations, 2011.

The bench upheld the Single Judge's decision that set aside an order demanding interest on a penalty imposed.

The appeal addressed the core legal issue of whether the CCI could levy interest on a delayed penalty payment without first issuing a formal "Demand Notice" as stipulated in Regulation 3 of the Competition Commission of India (Manner of Recovery of Monetary Penalty) Regulations, 2011.

The CCI had found Geep Industries guilty of cartelization, and after the National Company Law Appellate Tribunal (NCLAT) modified the penalty, the CCI issued a demand notice for the reduced amount plus interest calculated retrospectively from 2018.

The CCI, represented by an Additional Solicitor General, argued that the Single Judge's order was erroneous. They contended that the Competition Act is a unique law and that the imposition of interest serves as a deterrent, which should accrue automatically upon the expiry of the payment period specified in the original penalty order, regardless of a separate notice.

The CCI further argued that the principle of restitution should apply, placing them in the position they would have occupied had a court stay not been in effect.

Counsel for Geep Industries countered that the 2011 Regulations prescribe a mandatory and sequential procedure. They argued that Regulation 3 requires a formal demand notice to be issued and served, providing the enterprise with a 30-day window to pay.

It is only upon failure to comply with this specific notice that the liability for interest under Regulation 5 arises. They maintained that in the absence of this foundational notice, the levy of interest was procedurally ultra vires and unsustainable.

Regulation 3 of the Competition Commission of India (Manner of Recovery of Monetary Penalty) Regulations, 2011, outlines the procedure for issuing a demand notice for penalties. It specifies that a demand notice must provide a minimum of 60 days to deposit the penalty and requires the notice to be in strict compliance with its provisions for the CCI to legally claim interest on a defaulted penalty. The notice must give the recipient at least 60 days from the date of receipt to pay the penalty.

A Division Bench of Justice Anil Kshetarpal and Justice Harish Vaidyanathan Shankar , after analyzing the relevant provisions and precedents, concurred with the Single Judge's reasoning. The court held that Regulations 3 and 5 create a clear, mandatory sequence where the issuance of a demand notice is a condition precedent to the accrual of any interest.

The court viewed that Regulation 5 explicitly links the interest liability to the non-payment of the "amount specified in the demand notice," making the notice an indispensable step. The court rejected the CCI's reliance on other judgments, distinguishing them on the basis that those cases involved statutes with explicit provisions for automatic interest accrual, which is absent in the present framework.

Consequently, the court found the CCI's action to be without jurisdiction and in violation of the statutory scheme, leading to the dismissal of the appeal.

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