PENALTIES UNDER COMPETITION ACT, 2002

[Mr. M. GOVINDARAJAN]

Chapter VI of the Competition Act, 2002 (‘Act’ for short) provides for the penalties that can be imposed under the Act.  The provisions of Chapter VI came into effect from 20.05.2009 except section 44 which came into effect from 01.06.2011.  Nearly all the provisions of this section met amendment to the original provisions with effect from 20.05.2009.

Penalty for contravention of orders of Competition Commission

Section 42 provides penalty for contravention of orders of Competition Commission (‘Commission’ for short)    The Commission may cause an inquiry to be made into compliance of the orders or directions made in exercise of its powers under this Act.   If any person fails to comply with the orders or directions of the Commission issued under-

• Section 27 –  Orders by Commission after inquiry into agreements or abuse of dominant position;
• Section 28 – Division of enterprise enjoying dominant position;
• Section 31 –  Orders of Commission on certain combinations;
• Section 32 –  Acts take place outside India but having an effect on competition in India;
• Section 33 – Interim orders issued by Commission;
• Section 42A – Compensation in case of contravention of order of Commission;
• Section 43A – Order for penalty for non furnishing of information on combination.

of the Act, he shall be punishable with fine which may extend to ₹ 1 lakh for each day during which such non compliance occurs, subject to a maximum of ₹ 10 crore, as the Commission may determine.

If any person does not comply with the orders or directions issued, or fails to pay the fine imposed under this section, he shall be punishable with imprisonment for a term which will extend to three years, or with fine which may extend to ₹ 25 corres or with both, as the Chief Metropolitan Magistrate, Delhi may deem fit.  This action is without prejudice to any proceedings to be taken under Section 39, which deals with execution of orders of Commission imposing monetary penalty.

The Chief Metropolitan Magistrate, Delhi shall not take cognizance of any offence under this section save on a complaint filed by the Commission or any of its officers authorized by it.

Compensation in case of contravention of orders of Commission

Section 42A of the Act provides that any person may file an application to the Appellate Tribunal for an order for the recovery of compensation from any enterprise for any loss or damage caused for the contravention of the orders of the Commission issued under Sections 27, 28, 31, 32 and 33 or any condition or restriction subject to which any approval, sanction, direction or exemption in relation to any matter has been accorded, given, made or granted under this Act or delaying in carrying out such orders or directions of the Commission.

Penalty for failure to comply with directions of Commission and Director General

Section 36 (2) provides that the Commission shall have, for the purposes of discharging its functions of this Act, the same powers as are vested in a Civil Court under the Code of Civil Procedure, 1908 while trying a suit, in respect of the following matters, namely:-

• summoning and enforcing the attendance of any person and examining him on oath;
• requiring the discovery and production of documents;
• receiving evidence on affidavit;
• issuing commission for the examination of witnesses or documents;
• requisitioning, subject to the provisions of Sections 123 and 124 of the Indian Evidence Act, 1872 any public record or document or copy of such record or document from any office.

Section 36(4) provides that the Commission may direct any person-

• to produce before the Director General or the Secretary or an officer authorized by it, such books or other documents in the custody or under the control of such person so directed as may be specified or described in the direction, being documents relating to any trade, the examination of which may be required for the purpose of this Act;
• to furnish to the Director General or the Secretary or any other officer authorized by it, as respects the trade or such other information as may be in his possession in relation to the trade carried on by such person, as may be required for the purposes of this Act.

Section 41(2) provides that the Director General shall have all the powers as are conferred upon the Commission under Section 36(2) of the Act.

Section 43 provides that if any person fails to comply without reasonable cause, with a direction by the Commissioner under Section 36(2) and Section 36(4) and the directions of the Director General while exercising his powers under Section 41(2), such person shall be punishable with fine which may extend to ₹ 1 lakh for each day during which such failure continues subject to a maximum of ₹ 1 crore as may be determined by the Commission.

Penalty for non furnishing of information on combination

Section 43A provides that if any person or enterprise who fails to give notice to the Commission under Section 6(2) of the Act, the Commission shall impose on such person or enterprise a penalty which may extend to 1% of the total turnover or the assets, whichever is higher, of such a combination.

Penalty for making false statement or omission to furnish material information

Section 44 provides that if any person, being a party to a combination makes a statement which is false in any material particular or knowing it to be false or omits to state any material particular knowing it to be material, such person shall be liable to a penalty which shall not be less than ₹ 50 lakhs but which may extend to ₹ 1 crore, as may be determined by the Commission.

Penalty for offences in relation to furnishing of information

Section 45 provides that without prejudice of the provisions of Section 44, if a person, who furnishes or required to furnish any particulars, documents or any information-

• makes any statement or furnishes any document which he knows or has reason to believe to be false in any material particular; or
• omits to state any material fact knowing it to be material; or
• willfully alters, suppresses or destroys any document which is required to be furnished as aforesaid,

such person shall be punishable with fine up to ₹ 1 crore as may be determined by the Commission.  Further the Commission pass such order as it deems fit.

Power to impose lesser penalty

Section 46 gives powers to the Commission to impose lesser penalty than specified in the provisions meant for imposing penalties.   The said section provides that the Commission may, if it is satisfied that any producer, seller, distributer, trader or service provider included in any cartel, which is alleged to have violated Section 3, has made a full and true disclosure in respect of the alleged violations and such disclosure is a vital, impose upon such producer, seller, distributor, trader or service provider a lesser penalty as it may deem fit, than leviable under this Act or rules or the regulation.

The lesser penalty shall not be imposed by the Commission in case where the report of investigation has been received before making such disclosure.   The lesser penalty shall not be imposed if the person making the disclosure does not continue to co-operate with the Commission till the completion of the proceedings before the Commission.

The lesser penalty shall be imposed only in respect of a producer, seller, distributor, trader or service provider including in the cartel who has made the full, true and vital disclosures under this Section.  If the Commission is satisfied that such producer, seller, distributor, trader or service provider included in the cartel had in the course of proceedings-\

• not complied with the condition on which the lesser penalty was imposed by the Commission; or
• had given false evidence; or
• the disclosure made is not vital and thereupon such producer, seller, distributor, trader or service provider may be tried for the offence with respect to which the lesser penalty was imposed and shall also be liable to the imposition of penalty to which such person have been liable,

lesser penalty not been imposed.

Contravention by companies

Section 48 provides that where a person committing contravention of any of the provisions of this Act or of any rule, regulation, order made or direction issued there under is a company, every person who at the time of the contravention was committed, was in charge of and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the contravention and shall be liable to be preceded against and punished accordingly.  If such person proves that the contravention was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such contravention then he will not be punishable.