Module_11

MODULE 11

THE PENALTIES IN COMPETITION LAW

“I will obey every law or submit to the penalty”

- Chief Joseph

To penalise means to hold one accountable for or to make one pay for the contravention of
the laid-out code of conduct. In India, such breach of code of conduct is to be mandatorily
penalised. Hence the need for penal statutes and penal provisions within other statutes.

The view that penal statutes must be interpreted strictly is a well settled law. But it is vital to
also take into consideration that penal provisions in a statute must also be strictly interpreted.
In the case of Goaplast Pvt. Ltd vs Shri Chico Ursula D'Souza & Anr1, the Supreme Court of
India observed as follows,
“On the question of strict interpretation of penal provisions raised on behalf of the accused it
was observed: "If the interpretation, which is sought for, were given, then it would only
encourage, dishonest persons to issue cheques and before presentation of the cheques, close
the account and thereby escape from the penal consequences of Section 138. Any
interpretation which withdraws the life and blood of the provision and makes it ineffective
and a dead letter, should be averted. It is the duty of the court to interpret the provision
consistent with the legislative intent and purpose so as to suppress the mischief and advance
the remedy.”

The validation to the principle that there must be strict interpretation of penal provisions was
validated prior to the above stated case in 1996 in the case of State of Andhra Pradesh vs
Nagoti Venkataramana. The Apex court stated,

“It is true that in the interpretation of penal provisions, strict construction is required to be
adopted and if any real doubt arises, necessarily the reasonable benefit of doubt would be
extended to the accused.”

Hence the very same line of interpretation is followed in the Competition Act, 2002. The
Penalties have been stated in the 6th Chapter of the Competition Act, 2002. It is stated from
section 42 to 48

1 SLP (Crl.) 2742/02), 7 March 2003

In the case of Mahindra Electric Mobility and Anr vs CCI2, the Delhi High Court stated as
follows,
“191. Chapter VI of the Act deals with various kinds of penalties, such as contravention of
the CCIs order (Section 42); compensation in the case of contravention of CCIs order
(Section 42A); penalty for failure to comply with Commission or DG (Section 43); not
furnishing information (Section 43A); false statement or omission to furnish material
information (Section 45); offences in relation to furnishing of information etc. Each one -
barring Section 46, this Court notices, deals with the consequence of orders made by the
Commission, either substantive or during the course of the proceeding. In one sense, these
are ensuring the enforcement of the CCIs authority to conduct its proceedings.”

Through the above stated case, the court itself has concluded that the penal provisions of the
Competition Act assist the authority in enforcement of its provision in a strict sense.

• Power of the Commission to Impose penalty:

In the Competition Act, Section 27 falls under the head of “Orders by Commission after
inquiry into agreements or abuse of dominant position.” Under this head, section 27(b) is
be noted. Just to reproduce the title of the section and the clause (b),

“27. Where after inquiry the Commission finds that any agreement referred to in section 3 or
action of an enterprise in a dominant position, is in contravention of section 3 or section 4, as
the case may be, it may pass all or any of the following orders, namely: —

(b) impose such penalty, as it may deem fit which shall be not more than ten percent of the
average of the turnover for the last three preceding financial years, upon each of such person
or enterprises which are parties to such agreements or abuse:
Provided that in case any agreement referred to in section 3 has been entered into by a
cartel, the Commission may impose upon each producer, seller, distributor, trader or service
provider included in that cartel, a penalty of up to three times of its profit for each year of the
continuance of such agreement or ten percent. of its turnover for each year of the
continuance of such agreement, whichever is higher.”

2 W.P.(C) 11467/2018, CM APPL. 44376-44378/2018, 10 April 2019

This section coupled with Chapter 6 of the Act does provide the statutory back up to penalise.
Also, has been laid out in cases acknowledging the same. In the case of Jindal Steel and
Power Ltd. & Anr vs Union of India & Anr,3 the Delhi High Court held as follows,

“23. In the pursuit of globalisation, India has responded to opening up its economy,
removing
controls and resorting to liberalisation. The natural corollary of this is that the Indian market
should be geared to face competition from within the country and outside. The need to shift
the focus from curbing monopolies to promoting competition was recognised by The
Competition Bill, 2001, whose notable objects are as under: -
a) The Competition Bill, 2001 seeks to ensure fair competition in India by prohibiting trade
practices which cause appreciable adverse effect on competition in markets within India and,
for this purpose, provides for the establishment of a quasi- judicial body to be called the
Competition Commission of India (Hereinafter referred to as CCI) which shall also
undertake competition advocacy for creating awareness and imparting training on
competition issues.

b) The Bill also aims at curbing negative aspects of competition through the medium of CCI.
CCI will have a Principal Bench and Additional Benches and will also have one or more
Merger Benches. It will look into violations of the Act, a task which could be undertaken by
the Commission based on its own knowledge or information or complaints received and
references made by the Central Government, the State Governments or statutory authorities.
The Commission can pass orders for granting interim relief or any other appropriate relief
and compensation or an order imposing penalty, etc.

c) The Bill confers power upon the CCI to levy penalty for contravention of its orders, failure
to comply with its directions, making of false statements or omission to furnish material
information, etc. The CCI can levy upon an enterprise a penalty of not more than ten per
cent. of its average turn-over for the last three financial years. It can also order division of
dominant enterprises. It will also have power to order demerger in the case of mergers and
amalgamations that adversely affect competition.

3 W.P. (C) No.8531/2008, 19 December 2011

24. Upon close scrutiny of the provisions of the Competition Act, 2002, it transpires that it is
a complete Code in itself which even provides for award of compensation to the
affected/aggrieved party.”

➢ Section 42:(1) The Commission may cause an inquiry to be made into compliance of
its orders or directions made in exercise of its powers under the Act.

(2) If any person, without reasonable clause, fails to comply with the orders or directions of
the Commission issued under sections 27, 28, 31, 32, 33, 42A and 43A of the Act, he shall be
punishable with fine which may extend to rupees one lakh for each day during which such
non-compliance occurs, subject to a maximum of rupees ten crore, as the Commission may
determine.

(3) If any person does not comply with the orders or directions issued, or fails to pay the fine
imposed under sub-section (2), he shall, without prejudice to any proceeding under section
39, be punishable with imprisonment for a term which may extend to three years, or with fine
which may extend to rupees twenty-five crore, or with both, as the Chief Metropolitan
Magistrate, Delhi may deem fit:

Provided, that the Chief Metropolitan Magistrate, Delhi shall not take cognizance of any
offence under this section save on a complaint filed by the Commission or any of its officers
authorized by it.

Sub section (1) of Section 42 talks about the power of the Competition commission’s power
to make an inquiry as to whether there has been a compliance with its orders or directions as
commanded by it in the course of exercising its adjudicatory function. Although it is obvious,
the section in its entirety shows the authoritativeness of the Commission’s orders.

Sub section (2) of section 42 states the consequences the party has to face in case of non-
compliance of the Commission’s orders. These orders are specified under sections 27, 28, 31,
32, 33, 42A and 43A. Section 27 talks about the post inquiry stage where the inquiry process
has affirmed that there has been an abuse of dominant position, then the Commission has the
power to pass certain orders like to order the enterprise to discontinue its functioning, impose
such penalty which shall be not more than ten percent of the average of the turnover for the
last three preceding financial years, upon each of such person or enterprises which are parties
to such agreements or abuse etc. Similarly, Section 28 talks of an order to initiate “division of

an enterprise”. What constitutes division has been explained 28(2) of the Act. It may be
transfer of property, rights, liabilities etc, surrender, allotment or cancellation of shares,
amendment of the Memorandum of Association (MoA) or Articles of Association (AoA) of
the enterprise etc. Non-Compliance with such orders will indeed attract penalty. Also, if we
look into Section 31 closely, it is vital to note that the Act lays emphasis in the word
“combination”. Combination as per Section 20(1) of the Act refers to any Acquisition,
Merger, Amalgamation etc which would subsequently have an adverse effect on the
competition.

Section 20(4) of the Act talks about what the Commission must keep in mind while
adjudicating on the same. If all the criteria laid under section 20(4) are is the affirmative, then
the Commission may pass an order it may deem fit. If the order so passed is not complied
with, then the penal stage commences. The types of orders that can be passed are stated under
section 31 are also to be considered. An order stating that such combination will not take
effect, or an order stating that such combination may be modified within a reasonable time,
or, the limitation period set out by the Commission so that the modification may be made, or,
additional limitation may be granted by the Commission etc are some of the orders that can
be passed by the Commission. A Non-Compliance with such orders will indeed attract penal
provisions as stated in the Act.

Section 32 of the Act talks acts which take place outside India but have an adverse effect on
Competition in India. It states that any agreements entered to Which are anti-Competitive in
its nature(Section 3), any party abusing its dominant position is outside India, any
combination which is outside India, etc and where an inquiry to the same has been made by
the Commission in accordance with Section 19, 20, 26, 29, 30 is likely to have an adverse
effect on competition in India, then the commission may pass any order it may deem fit. If
such orders re not complied with, then it was be subject to laid out penalties of the Act.

Finally, as the last part of Section 42, Section 33 of the act too has predominant importance
when it comes down to penalties. Section 33 talks about Interim orders passed by the
Commission. It states that in the course of inquiry, it is found that an contravention of sub-
section (1) of section 3 or sub-section (1) of section 4 or section 6 has been committed and
continues to be committed or that such act is about to be committed, the Commission may, by
order, temporarily restrain any party from carrying on such act until the conclusion of such
inquiry or until further orders, without giving notice to such party, where it deems fit. In

section 33 it is vital to note the Commission must be able to have finality in concluding that
an anti-competitive act is about to take place before the interim order is passed. In the case of
Competition Commission of India vs Steel Authority of India & Anr4, the Supreme Court of
India stated as follows,
“The power under Section 33 of the Act to pass temporary restraint order can only be
exercised by the Commission when it has formed prima facie opinion and directed
investigation in terms of Section 26(1) of the Act, as is evident from the language of this
provision read with Regulation 18(2) of the Regulations.

5) In consonance with the settled principles of administrative jurisprudence, the Commission
is expected to record at least some reason even while forming a prima facie view. However,
while passing directions and orders dealing with the rights of the parties in its adjudicatory
and determinative capacity, it is required of the Commission to pass speaking orders, upon
due application of mind, responding to all the contentions raised before it by the rival
parties.”

Hence when there is no compliance with such an order, the penal provision must be read.
Section 42(3) is can be construed as a back up for section 42(2). It states that if there is failure
in compliance with the fine to be paid, then the severity of the penal provision shall increase
to an extent that it will lead to imprisonment or fine or even both.
In the case of Rajasthan Cylinders vs Competition Commission of India 5, the Delhi High
Court stated as follows,
“14. The Commission, per contra, seeks to justify the initiation of criminal action arguing
that the penal clause contained in Section 42(3) covers the event of non-compliance with all
kinds of orders or directions of the Commission, including those specified in sub-section (2)
of Section 42, besides failure to pay the fine as additionally imposed under the last said
clause.”

Additionally, the court also stated that,

4 CIVIL APPEAL NO.7779 OF 2010, 9 September 2010
5 CRL.M.C. 4363/2018, 29 March 2019

“20. The failure to comply with the directions, or orders, of the Commission under Sections
27, 28, 31, 32, 33, 42-A and 43-A is made punishable with fine to be determined by the
Commission, in terms of Section 42(2). The provision contained in Section 42(3) renders non-
compliance with the orders or directions issued, or failure to pay fine imposed under Section
42(2), a penal offence which is triable by the court of Chief Metropolitan Magistrate, Delhi
(CMM), cognizance thereof be taken on a complaint.”

Finally, the court conclusively stated that,

“33. It may be that the marginal heading of Section 42 refers to contravention of orders of
the Commission. But, noticeably, only the first two sub-sections of Section 42 refer to "the
Commission", such words being conspicuously missing in sub-section (3), the clause which
provides for the offence. It is clear that the legislature intended the offence thus provided to
have a larger sweep, covering failure to comply with the orders or directions issued under
the law, irrespective of whether they had been issued by the Commission or by its
functionaries, like Director General.”

The quantum of penalty is expressly put in the provisions. Under section 42(2), the penalty is
as stated, “he shall be punishable with fine which may extend to rupees one lakh for each day
during which such non-compliance occurs, subject to a maximum of rupees ten crore, as the
Commission may determine.”
Similarly, in case there is a failure to comply with 42(2), the statute goes a step further to
state that the quantum of penalty shall increase as stated, “be punishable with imprisonment
for a term which may extend to three years, or with fine which may extend to rupees twenty-
five crore, or with both, as the Chief Metropolitan Magistrate, Delhi may deem fit.”

If you look closely in 42(3) there is a shift from a penalty to a punishment. It is an indicator
that the non-compliance may be construed an extreme violation than a mere violation. This
shows to prove that the penal consequences are far severe in 42(3) and precautionary in
nature for in case of failure of compliance in 42(2). In the above stated matter, the court
conceded with the Commission’s submissions and the petitioner was asked to pay the
penalty. This encompasses the severity of penal provisions, not just in the Competition Act
but every legislation. Penal provisions are the key to give enforceability to any statute and
emphasise on every aspect that the legislature intended to create.

➢ Section 43: Penalty for failure to comply with directions of Commission and Director
General

43. If any person fails to comply, without reasonable cause, with a direction
given by—
(a) the Commission under sub-sections (2) and (4) of section 36; or
(b) the Director General while exercising powers referred to in sub-section (2) of section 41,
such person shall be punishable with fine which may extend to rupees one lakh for each day
during which such failure continues subject to a maximum of rupees one crore, as may be
determined by the Commission.

On a primary reading of the above stated provision we will realize that there is a mention of
two authorities. Firstly, the commission and secondly the Director general. Section 43(a)
states that if any person fails to comply without a reasonable clause with a direction issued by
Commission under 36(2) and 36(4) of the Act, then such person may be punished with a fine
which may extend to one lakh for each day. However, this sum of penalty could not exceed
one crore rupees.
36(2) states that the commission may discharge its functions as a civil court does, whether it
be taking evidence, summoning attendance, issuing commissions for the examination of
witnesses or documents, requiring the discovery and production of documents etc.
Similarly, under section 36(4), the commission may direct a person to produce before the
Director General or the Secretary or an officer authorized by it, such books, or other
documents in the custody or under the control of such person for the purpose of the act or
direct a person to furnish to the Director General or the Secretary or any other officer
authorized by it, as respects the trade or such other information as may be in his possession in
relation to the trade carried on by such person, as may be required for the purposes of this
Act.
The orders arising from the exercise of these functions is the primary subject here. Any Non-
Compliance with above stated order will attract the penalty expressly stated in the provision.
Similarly, in the case of the Director General, as stated in section 41(2) that the Director
general will exercise all the powers that the commission exercises under 36(2), i.e. the power

equivalent to the civil court in its functioning, then all directions given by the Director
General must be adhered to and must be complied with.
The Quantum of Penalty has been expressly stated in the provision itself. It stated that it may
extend to one lakh a day but the total amount must not exceed 1 crore.

➢ Section 43A: Power to impose penalty for non-furnishing of information on
combinations

If any person or enterprise who fails to give notice to the Commission under sub- section (2)
of section 6, the Commission shall impose on such person or enterprise a penalty which may
extend to one percent, of the turnover or the assets, whichever is higher, of such a
combination.

Combination has been explained under section 5 of the Act. As per section 5, in a nut shell, a
combination could be an acquisition, merger or amalgamation which has an impact on the
market.
Section 6 talks about the regulation of such combinations, and to be specific, sub section (2)
of Section 6 states as follows,

6(2) Subject to the provisions contained in sub-section (1), any person or enterprise, who or
which proposes to enter into a combination, [shall] give notice to the Commission, in the
form as may be specified, and the fee which may be determined, by regulations, disclosing the
details of the proposed combination, within [thirty days] of—
(a) approval of the proposal relating to merger or amalgamation, referred to in clause (c) of
section 5, by the board of directors of the enterprises concerned with such merger or
amalgamation, as the case may be;
(b) execution of any agreement or other document for acquisition referred to in clause (a) of
section 5 or acquiring of control referred to in clause (b) of that section.
(2A) No combination shall come into effect until two hundred and ten days have passed from
the day on which the notice has been given to the Commission under sub-section (2) or the
Commission has passed orders under section 31, whichever is earlier.]

A reference has been made to 6(1) of the Act which states that any combination so formed
which would have an adverse effect on the market will be construed as a void combination.
According to section 43A, the notice to be served is a vital procedure post the formation of
the combination and when there is a failure of the serving of this notice within the limitation
period i.e. within 30 days {stated in section 6(2)}, then penal provisions will be applicable.

In the case of SCM Solifert Limited & Anr. vs Competition Commission of India6, the Apex
court held as follows,

“The expression “proposes to enter into a combination” in section 6(2) and further details to
be disclosed in the notice to the Commission are of the ‘proposed combination’ and the
specific
provisions contained in section 6(2A) of the Act provides that no combination shall come into
effect until 210 days have passed from the date on which notice has been given or passing of
orders under section 31 by the Commission, whichever is earlier. The intent of the Act is that
the Commission has to permit combination to be formed and has an opportunity to assess
whether the proposed combination would cause an appreciable adverse effect on
competition. In case combination is to be notified ex-post facto for approval, it would defeat
the very intendment of the provisions of the Act.”

In the case, the CCI initiated proceedings against the appellants on whom due to the failure to
notify a proposed combination as required under section 6(2) of the Act, the penalty of
Rupees Two crores was imposed under section 43A of the Act.
The issue that fell for consideration before the Court was “whether notifying within 30 days
of the purchase was compliance of the provision as per provisions of section 6(2) it should
have been notified before the acquisition?”
The Supreme Court in appeal noted that from section 6(2) of the Act that the proposal to
enter into combination is required to be notified to the Commission. The legislative mandate
is apparent that the notification has to be made before entering into the combination. The
Preamble of the Act contains that the Commission has been established to prevent practices
having an adverse effect on the competition.

6 CIVIL APPEAL NO(S). 10678 OF 2016, Supreme Court

Also, in this case the question of whether “mens rea” must be considered for imposition of
penalty under Section 43A was taken into consideration. The Apex court held as follows,

“23. There was no requirement of mens rea under section 43A or an intentional breach as an
essential element for levy of penalty. The Act does not use the expression "the failure has to
be wilful or mala fide” for the purpose of imposition of penalty. The breach of the provisions
of the Act is punishable and considering the nature of the breach, it is discretionary to
impose the extent of penalty. Mens rea is important to adjudge criminal or quasi-criminal
liability, not in case of violation of the civil statutory provision.”

The court conclusively stated that,

“24. The imposition of penalty under section 43A is on account of breach of a civil
obligation, and the proceedings are neither criminal nor quasi criminal. Thus, a penalty has
to follow. Discretion in the provision under section 43A is with respect to quantum.”

Hence penalty over here has served as a means to protect the legislative intent and is a
mandate of the statute.

This has been reiterated in the case of COMPETITION COMMISSION OF INDIA vs
THOMAS COOK (INDIA) LTD. & ANR,7 where the court stated that,

“The imposition of penalty under section 43A is on account of breach of a civil obligation,
and the proceedings are neither criminal nor quasi criminal; the penalty has to follow. Only
discretion in the provision under section 43A is with respect to quantum of penalty.”

In conclusion, the subject matter of Section 43A of the Act, is to penalise if there is a failure
in furnishing the information pertaining to the Commission within the limitation period
prescribed in the Act. This section must be read with section in order to understand the
meaning of “combination” for reference.

7 CIVIL APPEAL NO.13578 OF 2015, Supreme Court

➢ Section 44: Penalty for making false statement or omission to furnish material
information

44. If any person, being a party to a combination, —
(a) makes a statement which is false in any material particular, or knowing it to be false; or
(b) omits to state any material particular knowing it to be material,
such person shall be liable to a penalty which shall not be less than rupees fifty lakhs but
which may extend to rupees one crore, as may be determined by the Commission.

On a plain reading of this, the headnote of this section does not state the word,
“combination”, but on a gradual read through, the body of the section specifies that this
section will be applicable to a person who is a “party to a combination”.

As an example, in the instance of Ultratech Cement Limited8,the Combination registration
disclosure came into question and the Commission held as follows,

“13. Based on the aforesaid assessment, the Commission observes that UltraTech had
omitted to provide information regarding shareholding/control of KM Family over Century
and Kesoram and had made a factually incorrect submission indicating Century as its
competitor. The same attracts penalty under Section 44 of the Act.”

The penalty imposed was as follows,

“14. Accordingly, in terms of Section 44 of the Act, the Commission can levy a minimum
penalty of rupees fifty lakhs and a maximum penalty of rupees one crore. Considering the
facts of the case, the Commission considers it appropriate to impose a penalty of INR
50,00,000/- (INR Fifty Lakhs only) on the Acquirer.”

Through this example, it is vital to note that the Commission had indeed given prime
importance to disclosure of information pertaining to combinations by the parties to it.
The quantum of penalty is expressly stated in the section. The penalty is a minimum of 50
Lakhs but can only be a maximum of 1 crore as per the Commission’s discretion.

8 Combination Registration No. C-2015/02/246, 12.03.2018

➢ Section 45: Penalty for offences in relation to furnishing of information

45.(1) Without prejudice to the provisions of section 44, if a person, who furnishes or is
required to furnish under this Act any particulars, documents or any information, —
(a) makes any statement or furnishes any document which he knows or has reason to believe
to be false in any material particular; or
(b) omits to state any material fact knowing it to be material; or
(c) wilfully alters, suppresses or destroys any document which is required to be furnished as
aforesaid,
such person shall be punishable with fine which may extend to rupees one crore as may be
determined by the Commission.
(2) Without prejudice to the provisions of sub-section (1), the Commission may also pass
such other order as it deems fit.

Section 45 in many is similar to section 44 but the primary difference is Section 44 is
applicable only to a part to a combination whereas section 45 is applicable to any person who
is bestowed with a legal duty to furnish information.
Similarities in both sections are that the penalty is for not furnishing information or for
furnishing false information. Similarly, the persons are penalised if they are completely aware
of thee false information they have submitted.
Additionally, Section 45(1)(c) also adds that if a person wilfully alters, suppresses or destroys
any document which is required to be furnished, then it will attract penalty.

➢ Section 46: Power to impose lesser penalty

46. The Commission may, if it is satisfied that any producer, seller, distributor, trader or
service provider included in any cartel, which is alleged to have violated section 3, has made
a full and true disclosure in respect of the alleged violations and such disclosure is vital,
impose upon such producer, seller, distributor, trader or service provider a lesser penalty as
it may deem fit, than leviable under this Act or the rules or the regulations:

Provided that lesser penalty shall not be imposed by the Commission in cases where the
report of investigation directed under section 26 has been received before making of such
disclosure.
Provided further that lesser penalty shall be imposed by the Commission only in respect of a
producer, seller, distributor, trader or service provider included in the cartel, who [has]
made the full, true and vital disclosures under this section.
Provided also that lesser penalty shall not be imposed by the Commission if the person
making the disclosure does not continue to cooperate with the Commission till the completion
of the proceedings before the Commission.
Provided also that the Commission may, if it is satisfied that such producer, seller,
distributor, trader or service provider included in the cartel had in the course of proceedings,
—
(a) not complied with the condition on which the lesser penalty was imposed by the
Commission; or
(b) had given false evidence; or
(c) the disclosure made is not vital,
and thereupon such producer, seller, distributor, trader or service provider may be
tried for the offence with respect to which the lesser penalty was imposed and shall
also be liable to the imposition of penalty to which such person has been liable, had
lesser penalty not been imposed.

This Section is construed to be an act of leniency. The Commission has the discretionary
power, i.e. upon its satisfaction impose a lesser penalty upon the person if it finds that the
individual has complied with its procedures and has made all disclosures of such violation
made by it. In a way this section in a simple language states that if an individual has
voluntarily assisted the court in the adjudicatory process by himself disclosing all information
in order to ease the burden of the court, then the court may consider a decreased penalty
taking into consideration the bona fide intentions of the person.

In the case of Mahindra Electric Mobility and Anr vs CCI9, the Delhi High Court had
interpreted section 46 in the following manner,

9 W.P.(C) 11467/2018, CM APPL. 44376-44378/2018, 10 April 2019

“190. If these principles are kept in mind, the CCIs determinations are not only declaratory
of what constitutes anti-competitive or impermissible dominant behaviour in the marketplace,
but also ensure that such behaviour is appropriately sanctioned. In this regard, the court
notices that Section 46 of the Act embodies a very salient principle, i.e. that at the initial
stage, if an entity or an entity trader, manufacturer or dealer etc. makes full disclosure, it can
be imposed with lesser penalty in the ultimate analysis of a finding with respect to
objectionable behaviour either under Sections 3 or 4.”

Hence it is apt to assume that the operation of section 46 is inclined to the willingness of the
parties to confide and submit to the proceedings of the Commission.

This has very clearly been explained in the case of Nagrik Chetna Manch vs Fortified
Security Solutions & Ors10, the opposite Part had made an application for Lesser Penalty
under section 46. They had submitted documents and information about a cartel which at the
time of submission was already in the possession of the Commission. Keeping this in mind,
the Commission conclusively stated,

“132. It is observed that at the time OP-1 furnished evidence and documents under Section
46 of the Act, the Commission was already in possession of evidence gathered by the DG and
the evidence provided by OP-4 with respect to tender no. 33, 34 and 44 of 2014. Therefore,
Lesser Penalty Application of OP-1 did not make any significant value addition to the
evidence gathered during the investigation.

133. The Commission is of the view that OP-1, no doubt, supported the investigation and co-
operated with the investigation/ inquiry throughout and accepted information indicating the
modus operandi of the cartel and evidence in its possession or available to it. But all this
made no significant value addition to the evidence gathered.

134. In view of the foregoing, the Commission decides not to grant any reduction in penalty
to OP-1.”
A similar line of judgement has been followed in the case of, In Re: Cartelization In Tender
Nos. 21 and 28 of 2013 of Pune Municipal Corporation vs Saara Traders Private Limited &

10 Case No. 50 of 2015, May 2018, Competition Commission of India

Ors11, the Commission had accepted the information so provided by Opposite Party 1(OP 1)
did indeed have an impact on the adjudicatory process and was construed to be “value
addition” and of assistance to the Commission. The Commission expressed its appreciation as
follows,

“77. The Commission finds that the information provided by OP-1 made reasonable value
addition to the ongoing investigation as it provided a better picture of the operation of cartel.
The evidence provided in the Lesser Penalty Application and statement of Shri Deepak
Bhaskar Phatangare before the DG accepting the existence of cartel substantiated the
evidence in the possession of the DG/ Commission and completed the chain of events. The
investigation report of the DG shows that the information and evidence furnished by OP-1
were relied upon to establish the existence of the cartel in Tender nos. 21 and 28 of 2013.

78. Further, OP-1 supported the investigation and co-operated fully and expeditiously on a
continuous basis throughout the investigation/ inquiry into the matter with the DG as well as
the Commission. The Commission is satisfied with the cooperation offered by OP-1 and
acknowledges that the evidence and cooperation provided by it helped the Commission's
investigation in establishing the existence of a cartel in Tender nos. 21 and 28 of 2013. No
doubt, OP-1 was first to file an application under Section 46 of the Act, but he came when
some evidence was already in possession of the DG.

79. Thus, considering the above, Commission decides to grant a reduction in penalty of Fifty
percent to OP-1 than would otherwise have been leviable on it.”

In the very same case, OP2, OP3 and OP4 too had submitted evidence but the Commission
did not find any added value in these submissions. Hence their petitions were rejected.

In addition to the above stated explanations, there is one regulation that must be read along
with Section 46 of the Act. It is called The Competition Commission of India (Lesser
Penalty) Regulations, 2009. This regulation has been passed as a part of a “leniency
programme” Leniency programme is a type of whistle-blower protection, i.e. an official

11 Suo Motu Case No. 03 of 2016, 31 May 2018, CCI

system of offering lenient treatment to a cartel member who reports to the Commission about
the cartel.
Competition authorities have framed various leniency programmes to encourage and
incentivize various actors connected with the commission of such competition infringements
to come forward and disclose such anticompetitive agreements and assist the competition
authorities in lieu of immunity or lenient treatment. a Leniency programme is a protection to
those who come forward and submit information honestly, who would otherwise have to face
stringent action by the Commission if existence of a cartel is detected by the Commission on
its own.

To carry out the leniency provisions in the Act, section 64 empowers the Commission to draft
regulations for matters in respect of which provisions is to be made by regulations. In
pursuance of such powers, the Competition Commission of India (Lesser Penalty)
Regulations, 2009 were brought out in August 2009. These Regulations provide the
framework in which the Commission can give lower punishments than statutorily provided in
the case of cartel membership. There are three main components of a leniency programme.
These are - a set of conditions to be satisfied for getting benefits under the leniency
programme, the procedure for grant of lesser penalty, and the quantum of penalties that are
waived when lenient treatment is meted out to the cartel member who cooperates with the
Commission by submitting information on the cartel.

Conditions to avail Benefits of Leniency Provisions
The applicant must:

• Provide the information before the receipt of the report of investigation directed under
section 26 of the Act

• Cease to further participate in the cartel from the time of its disclosure unless
otherwise directed by the Commission

• Provide vital disclosure in respect of violation under subsection (3) of section 3 of the
Act

• Provide all relevant information, documents and evidence as may be required by the
Commission

• Co-operate genuinely, fully, continuously and expeditiously throughout the
investigation and other proceedings before the Commission

• Not conceal, destroy, manipulate or remove the relevant documents in any manner,
which may contribute to the establishment of a cartel.

•
The reduction in monetary penalty will depend upon following situations: -

• The stage at which the applicant comes forward with the disclosure
• The evidence already in possession of the Commission
• The quality of the information provided by the applicant
• The entire facts and circumstances of the case

The benefits of such a leniency provision and regulation are aplenty. The fact that a person
wilfully discloses all information pertaining to his violation in a way is participation in the
adjudicatory process by the wrongdoer. Admitting to one’s faults, voluntarily submitting to
the law and willingness to take on penal consequences is greatly appreciated by the law.
Hence, such co-operation must be applauded and will be awarded and appreciated with a
lesser penalty. It is indeed a win- win situation for both ends and fulfils the ultimate objective
of justice delivery.