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2014 Supreme(Del) 2457
High Court of Delhi
VIBHU BAKHRU, J.
Rajkumar Dyeing & Printing Works Private Limited & Another
Versus
Competition Commission of India & Another
W.P.(C). Nos. 5947 & 6260 of 2014 & CM. Nos. 14538 & 15146 of 2014
Decided on: 19-11-2014
For the Petitioners:Rakesh Sinha, Pradeep Gupta, Rana S. Biswas, Sunil Sharma, Advocates.
For the Respondents:R1, Vaibhav Gaggar, Abhimanyu Chopra, Reena kumara, Naveen Kumar, R2, Anuj Aggarwal, Niti Jain, Gaurav Khanna, Vineet Malhotra, Advocates.
The main legal point established in the judgment is that penalties imposed by regulatory authorities must be reasonable, proportionate, and consider relevant factors, public interest, and mitigating circumstances.
Headnote:
Penalties - Competition Commission of India - Section 42 of the Competition Act, 2002 - Summary
Fact of the Case:
The case involved penalties imposed by the Competition Commission of India (CCI) on two petitioners for non-filing of undertakings to cease and desist from anti-competitive conduct. The petitioners participated in a tender and were alleged to have engaged in bid rigging and market allocation. CCI directed them to file undertakings within 30 days, failing which penalties were imposed.
Finding of the Court:
The court found that the penalties imposed by CCI were shockingly disproportionate as the petitioners had complied with the substantive 'cease and desist' order. CCI failed to consider relevant factors, public interest, and mitigating circumstances, and misquoted the order of the Competition Appellate Tribunal (COMPAT). The impugned order was set aside.
Issues: The main issue was whether the penalties imposed by CCI were arbitrary and unreasonable, considering the compliance with the substantive order and the mitigating circumstances.
Ratio Decidendi: The court held that the penalties imposed by CCI were disproportionate and failed the test of reasonableness and proportionality. CCI's failure to consider relevant factors and misquoting COMPAT's order led to the setting aside of the impugned order.
Final Decision: The petitions were allowed, and the impugned order was set aside. The court found that CCI's imposition of penalties was without application of mind and in wanton exercise of powers, ignoring relevant factors and constitutional principles.
Vibhu Bakhru, J.
1. These petitions call into question the penalties imposed by the Competition Commission of India (hereafter ‘CCI’) for non-filing of undertakings to cease and desist from anti-competitive conduct, within the time period as directed by CCI. As the petitions impugn a common order, the same have been taken up together.
2. The petition, W.P.(C) No.6260/2014 has been filed by M/s R S Industries (hereafter ‘RSI’) and the petition, W.P.(C) No.5947/2014 has been filed by M/s Rajkumar Dyeing & Printing Works Pvt. Ltd. (hereafter ‘Rajkumar Dyeing’) inter alia seeking quashing of a common order dated 06.08.2014 (hereafter the ‘impugned order’) passed by CCI in Ref. Case No.1/2012 whereby CCI imposed a penalty of a sum of Rs.5000/- per day on each of the petitioners, which works out to Rs.14,10,000/- in the case of RSI and Rs.13,65,000/- in case of Rajkumar Dyeing. The said penalties were imposed under Section 42 of the Competition Act, 2002 (hereafter the ‘Act’) for failure on part of the petitioners to comply with the direction to file an undertaking to cease and desist from anti- competitive conduct in future, as ordered by CCI in its order of 06.08.2013 passed under section 27 of the Act.
3. Briefly stated, the relevant facts necessary for addressing the controversy are as under:-
3.1 The Directorate General of Supplies & Disposals (DGS&D) issued parallel Rate Contract tenders for supply of Polyster Blended Duck Ankle Boot with Rubber Sole (hereafter ‘the product’) for the period 01.12.2011 to 30.11.2012. Amongst others, both the petitioners also participated in the tender which was opened on 29.07.2011.
3.2 DGS&D noticed that the difference in the prices quoted by different bidders was in a very narrow range and all the bidders, barring one, had restricted the quantity to be supplied by it during the Rate Contract period. This led DGS&D to file a reference (Ref. Case No.1/2012) before CCI under Section 19(1)(b) of the Act, against all the bidders including the petitioners, inter alia, alleging bid rigging and market allocation. It was alleged that the participation in the tender was pre-determined, collusive and the bidding pattern was restrictive, indicating formation of a cartel by the bidders in violation to the provisions of the Act.
3.3 On 08.05.2012, CCI recorded a prima facie opinion, under Section 26(1) of the Act, that a case of contravention of the provisions of the Act was made out and referred the matter to Director General (DG) to conduct an investigation and submit its report. DG submitted its report to CCI on 26.12.2012. Thereafter, on 06.08.2013, CCI passed an order under Section 27 of the Act, inter alia, directing the bidders to cease and desist from anticompetitive conduct in future and also file an undertaking to that effect within a period of 30 days from the date of receipt of the order.
3.4 The petitioners and others bidders filed appeals against CCI’s order of 06.08.2013, under Section 53B of the Act before the Competition Appellate Tribunal (hereafter ‘COMPAT’). By a common order dated 22.04.2014, COMPAT allowed the interim applications by directing the appellants (other than RSI), to deposit 5% of the penalty imposed by CCI. In the case of RSI, COMPAT granted a complete stay of penalty. However, CCI’s direction to cease and desist from anti-competitive conduct was not interfered with.
3.5 CCI, thereafter, issued show cause notices dated 30.05.2014, under Section 42 of the Act read with Regulation 48 of the Competition Commission of India (General) Regulation, 2009, (hereafter the ‘Regulations 2009’) to the petitioners who had failed to file the undertakings to cease and desist from anti-competitive conduct. After receipt of the notices, the petitioners filed the requisite undertakings.
3.6 By the impugned order, CCI observed that the petitioners had failed to file the undertakings as directed because Rajkumar Dyeing and RSI were required to file their respective undertakings on 20
