30 October, 2019
On September 11, 2019, the Delhi High Court passed a judgment stating that enterprises penalized by CCI which have the benefit of a stay order by the appellate court are also liable to pay interest on penalty for the period during which the stay was operational.[1]
In July 2015, CCI had imposed a penalty of Rs. 1,570 million on United India Insurance Company Limited (‘UIICL’) for contravention of Section 3 of the Act (‘CCI Order’). CCI then issued a demand notice to UIICL for deposition of penalty, failing which UIICL would have been liable to pay a simple interest of 1.5% per month on the penalty amount. Subsequently, UIICL filed an appeal against the CCI Order before the Competition Appellate Tribunal (‘COMPAT’). During the pendency of UIICL’s appeal, COMPAT stayed the penalty imposed by CCI, subject to a deposit of 10% of the penalty amount. In December 2016, COMPAT upheld CCI’s substantive findings under Section 3(3) of the Act, but substantially reduced the penalty imposed on UIICL.
Post COMPAT’s order, UIICL deposited the principal penalty amount with CCI. However, CCI directed UIICL to also pay interest on the reduced penalty for the 14 month period between the payment deadline per CCI’s demand notice and the COMPAT’s final order. UIICL challenged CCI’s demand for interest before the Delhi High Court through the instant writ petition. Before the court, UIICL inter alia argued that there was no delay on its part in paying the penalty since COMPAT had issued a stay on the CCI Order, and the penalty was paid within the prescribed time post COMPAT’s order.
In its judgment, the Delhi High Court agreed with CCI’s demand for interest. It found the interest to be a statutory levy which has to be paid, especially since COMPAT had re-affirmed CCI’s decision to levy penalty in the first place. It also found that COMPAT had issued a stay only on the operation of the CCI Order and had not obliterated it. While dismissing UIICL’s writ petition, the court held that the demand notice as well as CCI’s demand for interest became operative, albeit to a reduced extent, as soon as the stay was lifted by the COMPAT. The court accordingly dismissed the writ petition.
For further information, please contact:
Zia Mody, Partner, AZB & Partners
zia.mody@azbpartners.com
[1] United India Insurance Company Limited v. Competition Commission of India, Writ Petition (Civil) 1100 of 2019.
