2024 (10) TMI 835 - AT - Companies Law

Seeking waiver of interest amount payable on monetary penalty - It is submitted since the instant Appeal is pending consideration since 2019, the interest is mounting, hence the appellant thought it appropriate it should pay the penalty and get a waiver of interest - power to waive interest under Regulation 5 of CCI (Manner of Recovery of Monetary Penalty) Regulations, 2011 - HELD THAT - Admittedly Godrej was a small player in the field of dry cell market and had an insignificant market share like Geep. Godrej, admittedly, was not in a bargaining/negotiating position as compared to Panasonic. Further, Godrej suffered losses in the market for dry cell batteries and though Geep had also suffered losses for the years 2010-13 but made small profits in later years. Both the present appellant and M/s Geep were found in contravention of the Act by the Ld. CCI on the basis of the Product Supply Agreement(s) and e- mail correspondences between them and Panasonic - The impugned order notes that Godrej had also filed a complaint dated 25.11.2015 before the Director General of Anti-Dumping and Allied Duties on the possibility of cartelisation in the dry cell batteries market. In Excel Crop Care Ltd V CCI Anr 2017 (5) TMI 542 - SUPREME COURT , the Hon ble Supreme Court of India held that the penalty imposed by the CCI must (a) relate to the relevant turnover of the relevant business in the relevant market alone, and (b) determination of percentage of penalty should be based on aggravating and mitigating factors. Thus the observation in impugned order where it notes that the losses suffered by the appellant on account of sale of dry cell batteries may have been compensated by the profits made by the appellant in another produces, is wrong, per Excel Crop s case. There would be no relevance of considering the overall turn over of Godrej from any businesses other than the dry cell battery business. The dry cell battery market is an oligopoly with three predominant players i.e. Eveready Industries India Ltd, Indo National Ltd and Panasonic which form a primary cartel members, controlling the market with combined market share of 88% as against miniscule 2% market share of appellant. Admittedly, the turnover of the appellant qua dry cell battery was lesser than M/s Geep and rather it suffered losses in this business, though Geep was in profits in later years. Both the appellant company and M/s Geep were in similar position and asking M/s Geep to pay 1% of the turn over as a penalty and the present appellant to pay 4% to our mind did not synchronize - the penalty imposed upon the appellant reduced to 2% of the turn-over, while maintaining the penalty imposed upon its officials. However, we are not inclined to waive interest as pendency in appeal and continuation of stay would not be a ground for waiver. The penalty reduced is considering the peculiar facts of this case and be not treated as a precedent. Appeal disposed off.

Issues Involved:

1. Waiver of interest on the monetary penalty.
2. Reduction of the penalty imposed on the appellant.
3. Alleged involvement in a cartel with Respondents No.2 and 3.
4. Comparison with co-accused Geep Industries regarding penalty imposition.

Issue-Wise Detailed Analysis:

1. Waiver of Interest on the Monetary Penalty:

The appellant sought a waiver of the interest on the monetary penalty, citing Regulation 5 of the CCI (Manner of Recovery of Monetary Penalty) Regulations, 2011. The regulation allows for the reduction or waiver of interest if the default was due to circumstances beyond the control of the enterprise. The appellant argued that the interest was mounting due to the pendency of the appeal since 2019. However, the Tribunal was not inclined to waive the interest, stating that the pendency in appeal and continuation of stay would not be a ground for waiver.

2. Reduction of the Penalty Imposed on the Appellant:

The appellant argued that the penalty of 4% on the turnover was excessive, given its minor role in the alleged cartel and its insignificant market share. The Tribunal considered the appellant's position similar to that of co-accused Geep Industries, which was subjected to a reduced penalty of 1% due to its small market share and lack of bargaining power. The Tribunal noted that although the appellant suffered losses in the dry cell battery business, it was not in a position to influence market prices. Consequently, the penalty was reduced to 2% of the turnover, acknowledging the appellant's limited role and financial losses in the dry cell battery market.

3. Alleged Involvement in a Cartel with Respondents No.2 and 3:

The appellant was accused of being part of a bi-lateral ancillary cartel with Panasonic Energy India Co Ltd, similar to Geep Industries. The evidence included the Product Supply Agreement (PSA) and email correspondences that suggested anti-competitive practices. The Tribunal noted that the appellant, like Geep, had an insignificant market share and was not in a position to dictate terms in the market. The PSA contained clauses that restricted the appellant from taking steps detrimental to Panasonic's market interests, indicating a lack of competitive autonomy. Despite these findings, the Tribunal acknowledged the appellant's limited influence in the cartel's operations.

4. Comparison with Co-Accused Geep Industries Regarding Penalty Imposition:

The Tribunal drew parallels between the appellant and Geep Industries, both being small players in the dry cell battery market with minimal market influence. In Geep's case, the penalty was reduced to 1% due to its insignificant market share and inability to influence competition. The Tribunal recognized that the appellant's turnover from the dry cell battery business was even less than Geep's, and it suffered losses, unlike Geep, which made profits in later years. Therefore, the Tribunal found it inconsistent to impose a higher penalty on the appellant and decided to reduce it to 2% of the turnover, aligning with the principle of proportionality in penalty imposition.

In conclusion, the Tribunal's judgment addressed the appellant's concerns regarding the penalty and interest, ultimately reducing the penalty to 2% while maintaining the interest obligation. The decision took into account the appellant's minor role in the cartel, financial losses, and comparison with Geep Industries, ensuring a fair and proportionate outcome. All pending applications were disposed of accordingly.

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