Summary
| Category | Data |
|---|---|
| Court | Supreme Court of India |
| Case Number | C.A. No.-009726-009726 – 2016 |
| Diary Number | 24408/2016 |
| Judge Name | HON’BLE MR. JUSTICE K.V. VISWANATHAN |
| Bench |
|
| Precedent Value | Binding authority on notice requirements for penalty hearings under the Competition Act |
| Overrules / Affirms |
|
| Type of Law | Competition Law |
| Questions of Law | Whether forwarding the DG report and furnishing a single show-cause notice satisfies natural justice for imposing penalties under Sections 27 and 48 on office-bearers |
| Ratio Decidendi |
The Act’s scheme under Section 26(8), read with Section 48, Regulation 21 and Regulation 48 of the CCI General Regulations (2009), does not mandate a separate notice detailing proposed penalties. Forwarding the DG report and inviting replies on contravention fulfills the principles of natural justice. Section 48’s deeming provision authorises penalties and incidental behavioural remedies against office-bearers of an association without a second show-cause. The Commission’s power under Section 27 to impose monetary, behavioural or structural remedies must be exercised proportionately. Precedents in SAIL v. CCI and Excel Crop Care v. CCI support time-bound inquiries and absence of a two-stage penalty notice requirement. |
| Judgments Relied Upon |
|
| Logic / Jurisprudence / Authorities Relied Upon |
|
| Facts as Summarised by the Court |
Crown Theatre alleged KFEF boycotted distributors dealing with it, leading CCI to direct DG investigation. DG report found contravention of Section 3(1) r/w 3(3)(b) and named the President and General Secretary as “key decision makers.” CCI forwarded the report on 10.06.2015 inviting replies and financial data, then on 08.09.2015 imposed 10% monetary penalties and behavioural remedies barring office-bearers from association for two years. COMPAT upheld contravention but quashed penalties on Respondents 2 and 3 for lack of separate notice; Supreme Court restored the full CCI order. |
Practical Impact
| Category | Impact |
|---|---|
| Binding On | All courts and tribunals in competition matters |
| Persuasive For | High Courts and competition appellate bodies (COMPAT/NCLAT) |
| Overrules | COMPAT judgment dated 19.04.2016 setting aside penalties on office-bearers |
| Distinguishes | Need for separate penalty notice as held in Mahindra & Mahindra Ltd. v. CCI (Delhi HC) |
| Follows |
|
What’s New / What Lawyers Should Note
- Clarifies that forwarding the DG report under Section 26 and a single show-cause notice satisfy natural justice for imposing penalties under Sections 27 and 48.
- Holds that the Competition Act does not require a separate notice detailing proposed penalties to office-bearers.
- Confirms that behavioural remedies imposing incidental governance restrictions on individuals flow validly from penalties on enterprises.
- Emphasises the doctrine of proportionality in selecting monetary, behavioural or structural remedies from the statutory menu.
- Affirms appellate bodies can directly review and modify penalties without remitting for a fresh penalty hearing.
Summary of Legal Reasoning
- Section 26(8) of the Act and Regulation 21/48 permit forwarding the DG report and inviting replies to constitute the statutory show-cause process.
- Section 48’s deeming provision renders office-bearers liable alongside the company without mandating a second notice.
- The statutory scheme discloses no two-stage procedure separating liability and penalty hearings.
- Natural justice is satisfied by opportunity to answer the contravention, not by notice of proposed penalty quantum.
- Reliance on SAIL v. CCI and Excel Crop Care v. CCI for absence of separate penalty notice requirement and importance of time-bound disposal.
- Proportionality doctrine limits CCI’s penalty choice to what is necessary to discipline and deter similar contraventions.
Arguments by the Parties
Petitioner (Competition Commission of India)
- The DG report named Respondents 2 and 3 as “key decision makers,” establishing liability under Section 48.
- Forwarding the DG report and inviting replies constitutes the required show-cause notice; no separate penalty notice is mandated by the Act.
- A single hearing fulfils natural justice; CCI General Regulations allow reliance on DG report for penalty imposition.
- COMPAT erred in demanding a second notice and setting aside penalties on procedural grounds.
Respondents (KFEF and Office-Bearers)
- Argue that principles of natural justice require a specific show-cause notice detailing proposed penalties to individuals.
- Contend that supply of DG report alone did not provide adequate hearing on penalty quantum and behavioural remedies.
- Assert that penal restrictions on administration and governance constitute significant personal sanctions requiring separate opportunity.
- Maintain that monetary penalties are disproportionate to their role and income.
Factual Background
An information was filed by M/s Crown Theatre alleging that the Kerala Film Exhibitors Federation (KFEF) and its office-bearers pressured film distributors to boycott Crown Theatre, contravening Section 3(1) r/w 3(3)(b) of the Competition Act. The CCI directed the Director General to investigate, and the DG report dated 22.05.2015 found appreciable adverse effect on competition and identified the President and General Secretary as key decision makers. On 10.06.2015, CCI forwarded the report to KFEF and the two office-bearers for replies and financial data, held hearings on 22.07.2015, and on 08.09.2015 imposed 10% penalties and behavioural remedies barring them from association for two years. COMPAT upheld contravention but quashed penalties on procedural grounds; the Supreme Court restored the full CCI order.
Statutory Analysis
- Section 26 prescribes inquiry procedure: the DG report and forwarding to parties invoke show-cause obligations; no second notice for penalties.
- Section 27 empowers CCI to impose monetary, behavioural and structural remedies without a separate penalty hearing requirement.
- Section 48 deems office-bearers guilty alongside the association if in charge during contravention; proviso allows defence of lack of knowledge or due diligence.
- CCI General Regulations (2009) required forwarding DG report and opportunity to reply for penalty; no provision for separate show-cause on penalty quantum.
- Competition Law Review Committee (2019) confirmed the Act provides adequate safeguards and did not recommend a separate penalty hearing.
Alert Indicators
- ✔ Precedent Followed