Penalty For Anti-Trust Violations Must Be Based On Relevant Turnover, Not Total Turnover: SC [Read Judgment]

It cannot be said that purpose of the Act is to ‘finish’ those industries altogether by imposing those kinds of penalties which are beyond their means, the bench observed.

Observing that penal provisions in the Competition Act is only to ‘teach a lesson’ and not to ‘finish off’ industries, the Supreme Court, in Excel Crop Care Limited vs CCI, has held that penalty imposed under Section 27 of the Competition Act for anti-trust violations should be based on the relevant turnover.

A bench comprising of Justice AK Sikri and Justice NV Ramana was considering an appeal against the Competition Appellate Tribunal order which had found three Aluminium Phosphide Tablet manufacturers guilty of rigging tenders issued by Food Corporation of India (FCI) and imposed a penalty to Rs 318 crore. The court dismissed the appeals, upholding the penalty imposed.

“If we adopt the criteria of total turnover of a company by including within its sweep the other products manufactured by the company, which were in no way connected with anti-competitive activity, it would bring about shocking results not comprehended in a country governed by Rule of Law,” the bench observed.

Justice NV Ramana, in his concurring judgment, observed that the starting point of determination of appropriate penalty should be to determine relevant turnover and thereafter, the tribunal should calculate appropriate percentage of penalty based on facts and circumstances of the case taking into consideration various factors while determining the quantum.

“But such penalty should not be more than the overall cap of 10% of the entity’s relevant turnover. Such interpretation of Section 27 (b) of the Act, wherein the discretion of the commission is guided by 94 principles established by law would sub-serve the intention of the enactment,” the judge said.

Justice NV Ramana also described a two-step calculation which is to be followed while imposing the penalty under Section 27 of the Act. The first is about determination of the relevant turnover and the second is of determination of appropriate percentage of penalty based on aggravating and mitigating circumstances.

Read the Judgment here.