COMPETITION COMMISSION OF INDIA (MANNER OF RECOVERY OF MONETARY PENALTY) REGULATIONS, 2011

[Mr. M. GOVINDARAJAN]

Chapter VI of the Competition Act, 2002 deals with penalties.   The quantum of penalties imposed under this Act for violation of the provisions of this Act is on the higher side. Section 39(1) of the Act provides that if a person fails to pay any monetary penalty imposed on him under this Act the Commission shall proceed to recover such penalty in such manner as may be specified by the regulation.  Sec. 36 of the Act gives power to the Commission to regulate its own procedure.   Section 64(g) of the Act gives powers to the Commission to make regulations for the manner in which penalty shall be recovered.

By virtue of the above said powers the Commission made the regulation called as ‘Competition Commission of India (Manner of Recovery of Monetary Penalty) Regulations, 2011.  These regulations came into effect from 08.02.2011. 

The responsibility of recovering the penalty amount is imposed on the Secretary and the Recovery Officer.   Secretary is appointed under Sec. 17(1) of the Act and includes an Officer of the Commission authorized by it to function as Secretary.  Recovery Officer is an officer authorized by the Commission to recover the penalty from the enterprise or the ‘enterprise in default’ as the case may be, as defined under these regulations.

The ‘enterprise in default’ is defined by Regulation 2(3) as an enterprise which has not paid the penalty imposed on it within the stipulated time despite the demand notice duly service upon. 

The recovery procedures as per these regulations are as follows:

-          Issuance of Demand notice by Secretary

-          Issuance of recovery certificate;

-          Reference to income tax authority.

ISSUANCE OF DEMAND NOTICE:

• Where a penalty has been imposed on an enterprise by the Commission, the Secretary shall issue a demand notice in Form I and shall serve it through the recovery officer to the enterprise concerned after expiry of the specified period at its last address known to the Commission and in the case of a joint account to all the joint holders of such account at their last addresses known to the Commission;
• The demand note shall provide a time of 30 days from the date of service of the demand notice to deposit the penalty in the manner specified in the notice;
• Where the Commission has reason to believe that it will be detrimental if the full period of 30 days is allowed, it may direct to pay the penalty within the time specified in the notice which is less than 30 days;
• The Commission may, at any time, rectify any clerical or arithmetical mistake made in the demand notice.
• The recovery officer shall ensure that the demand notice is duly served on the enterprise concerned;
• In case of non service of the demand notice, the recovery officer shall immediately inform the Secretary.
• On payment one copy of the challan shall be submitted by the enterprise to the recovery officer immediately but not later than 7 days of the payment and the recovery officer shall make an entry in the penalty recovery register to the same effect;
• The recovery officer shall bring the details of payment to the notice of the Secretary;
• Likewise in case of default he shall intimate to the Secretary so as to issue recovery certificate to such an enterprise in default.

Extension of Time Limit:

On an application made by the enterprise concerned before the due date, the Commission may extend the time for payment or allow payment by installments, subject to such conditions as the Commission may think fit to impose in the circumstances of the case.  If the enterprise fails to make the payment within the time so extended the enterprise concerned shall be deemed to be an enterprise in default.    In a case where payment by installments have been allowed and the enterprise concerned commits default in paying any of the installments within the time fixed, the enterprise concerned shall also be deemed to have been due on the same date as the installment actually in default.

Interest on penalty:

If the amount specified in any demand notice is not paid within the period specified by the Commission, the enterprise concerned shall be liable to pay simple interest at one and one half per cent, for every month or part of a month comprised in the period commencing from the day immediately after the expiry of the period mentioned in demand notice and ending with the day on which the penalty is paid.  The Commission may reduce or waive the amount of interest payable by the enterprise concerned if it is satisfied that default in the payment of such amount was due to circumstances beyond the control of the enterprise concerned.   Where a result of an order of the Competition Appellate Tribunal or the High Court or the Supreme Court of India, as the case may be the amount of penalty payable has been reduced, the interest shall be reduced accordingly and the excess interest paid, if any, shall be refunded in accordance with regulation 14.

ISSUANCE OF RECOVERY CERTIFICATE:

If an enterprise is in default or deemed to be in default the Commission shall issue recovery certificate through the Secretary to be executed by the recovery officer in Form III mentioning the amount of penalty and interest thereon along with the modes of recovery therein, giving 15 days time to deposit the penalty.   The Commission may, at any time rectify any clerical or arithmetical mistake made in the recovery certificate issued or extend the time for making any payment in pursuance of such recovery certificate.

The recovery officer shall execute the recovery certificate to realize the amount of penalty imposed upon the enterprise in default in the manner specified in the regulations.

Modes of recovery:

• The enterprise of receipt of intimation from the recovery officer is to pay the penalty within the time stipulated in the notice and in the prescribed manner.  If the said enterprise fails to pay the said amount then it shall also be treated in the manner as an enterprise in default;
• A recovery certificate may be issued to any enterprise who holds or may subsequently hold any money for or on account of the enterprise in default jointly with any other enterprise and for the purposes of this regulation, the shares of joint holders in such account shall be presumed, until the contrary is proved, to be equal;
• Any claim respecting any property, in relation t o which a recovery certificate  has been issued, arising after the date of the demand notice shall be void as against the demand contained in the recovery certificate;
• Where an enterprise objects to the certificate then it should be brought to the notice of the Commission for its consider;
• The recovery officer may apply, for payment of the amount sufficient to discharge the penalty due to enterprise in default, to the court in whose custody there is money belonging to such enterprise;
• Where an enterprise in default has property in a country outside India the Commission may propose to that country to take out such action thereon as the Commission may deem appropriate having regard to the terms of the said agreement with such country and to remit any sum so recovered to the Commission, and thereafter the secretary shall take appropriate steps to deposit the same in the account earmarked for that purpose;
• Where during the pendency of any proceedings, or after the decision but before the service of the notice any enterprise in default creates or parts with the possession by way of sale, mortgage, gift, exchange or any other mode of transfer whatsoever of any of its assets in favor of any other person or enterprise, such charge or transfer shall be void as against any claim in respect of any penalty payable by such enterprise in default as a result of the decision of the said proceeding or otherwise.  Such charge or transfer shall not be void if it is made for adequate consideration and without notice to the pendency of such proceedings or with the previous permission of the Government.
• The penalty may be recovered in accordance with the rules laid down in the second schedule of Income tax Act, 1961 by attachment and sale of moveable property of the enterprise and by attachment and sale of immovable property of the enterprise.

REFERENCE TO THE INCOME TAX AUTHORITY:

Where the Commission is of the opinion, for reasons to be recorded in writing, that it would be expedient to recover the penalty in accordance with the provisions of the Income Tax Act, 1961 it shall make reference to the concerned Income tax Authority under  Sec. 39(2) in Form V.  The Tax Recovery Officer shall ensure that recovery officer records it in the penalty recovery register immediately but not later than five days from the date of having received such intimation.  The Secretary shall obtain progressive report from the Tax Recovery Officer once in three months and place the same before the Commission.

REFUND OF EXCESS PENALTY:

Where by any order of the Competition Appellate Tribunal or the High Court or the Supreme Court of India, as the case may be, it has been that an enterprise is not liable to pay any penalty or liable to pay penalty less than the amount mentioned in any order or notice, the demand notice or the recovery certificate shall be withdrawn or modified and the amount of penalty, if paid, shall be refunded.  The Secretary shall issue a refund order for such amount under his signature and seal.

Thus it is the duty of the Secretary to review all the cases and he has to submit the report to the Commission giving the details of action in each case and to ensure the recovery of the penalty or refund of excess penalty.

Discussions to this article

[CA GOPALJI AGRAWAL]

Dear Sir,

Could you please provide the details as to what is the procedure of claiming the refund of the excess penalty paid apart from the regulation 14?

[MARIAPPAN GOVINDARAJAN]

If there is excess penalty is paid, for the purpose of refund, Secretary is to be addressed for the claim of refund with documentary evidences. The Secretary will decide whether the penalty has been recovered in excess and he will issue a refund order under his signature and seal. There is no form prescribed for this purpose.