Interest on CCI penalties begins from
demand notice date, rules Delhi HC
Delhi High Court's clarity on interest calculation
alters CCI penalty dynamics in a significant ruling, Delhi High Court has said
that interest on penalties imposed by the Competition Commission of India (CCI)
can only be calculated after the competition watchdog makes demand for penalty
recovery and not when it initially finds infringement of the Competition Act.
Put simply, Delhi HC has in the Geep Industries
order held that CCI cannot charge interest on penalty unless it had raised
demand notice.
Interest on penalties will not accrue from the date
of CCI's initial finding of infringement. Instead, interest will start only
when CCI issues a demand notice for penalty recovery, the Delhi High Court has
ruled.
Demand notices
This is going to affect Competition Commission of
India (CCI) in a number of old cases where demand notices have not gone out,
said competition law experts.
This is because demand notices are issued upon
expiry of limitation. Where cases are stuck in appeal, no demand notices are issued.
Geep Industries case
In the Geep Industries case, the company challenged
the CCI's demand for interest on the penalty from the date of the original
decision of infringement finding in 2018.
The Delhi HC however sided with Geep Industries,
stating that interest should be calculated from the date CCI's formal demand
notice was issued in 2023 for recovery of penalty after an appellate court
confirms the infringement funding, but reduces the penalty.
Dinoo Muthappa, Partner, Talwar, Thakore &
Associates (TT&A), a law firm, said On the issue of accrual of interest on
CCI penalties, the Court has ruled that penalty interest is not payable until
the CCI seeks recovery of penalty from infringing companies. Interest will not
automatically accrue from the date of the original CCI decision .
The CCI typically gives parties 60 days, which is
the limitation period for pursuing an appeal, to deposit penalties levied. The
CCI's demand notice for penalty payment can (per its regulations) only be
issued after the expiry of the period granted by CCI.
In many cases parties have preferred an appeal and
appellate courts have stayed the CCI order and penalty payment. As a result,
CCI is unable to issue a demand notice.
This judgment creates a unique situation where despite
potential decades-long appeals, no interest burden is imposed on infringing
parties until the highest court's final decision and the CCI's subsequent
notice for recovery , Muthappa told businessline.
Some legal experts also said that this Delhi HC
judgment may allow corporates to optimise their legal strategy in a sense they
will quickly appeal before expiry of period of payment of penalty, as a result
of which interest will be payable only after final case.
www.thehindubusinessline.com
dt. 06-05-2024