In Excel Crop Care Ltd v Competition Commission of India and Another, the Supreme Court of India upheld an order passed by the Competition Appellate Tribunal (COMPAT) recognizing the concept of “relevant turnover” for calculation of penalties for indulging in anti-competitive practices, i.e. penalties are to be based on turnover of the product for which the cartel was formed and supplies made and not the violator’s total turnover.
The Competition Commission of India (CCI) previously based the penalty on a company’s total turnover.
Food Corporation of India had alleged that four manufacturers had submitted identical bids for eight years for supply of aluminium phosphide tablets. Based on a report by the CCI’s Director General and after hearing the parties, the CCI in 2012 concluded that the four companies had violated section 3 of the Competition Act, 2002, and imposed a penalty of 9% of the companies’ average total turnover for the latest three years.
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The COMPAT in 2013 rejected appeals by the companies except on the issue of penalty, holding that penalty can be only on the companies’ relevant turnover. The companies appealed before Supreme Court against the COMPAT order holding them in violation of the statute, while the CCI appealed against the ruling on penalty.
The Supreme Court upheld the conclusions of the CCI and COMPAT on the aspect of cartelization. Noting that section 2(y) of the act only mentions that turnover includes value of goods or services, the court observed that adopting the criteria of “relevant turnover” for the purpose of imposition of penalty would be in tune with the ethos of the act and the legal principles which surround matters pertaining to imposition of penalties.
When the agreement leading to contravention of section 3 involves one product, there would be no justification for including other products of an enterprise for the purpose of imposing penalty.
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The dispute digest is compiled by Bhasin & Co, Advocates, a corporate law firm based in New Delhi. The authors can be contacted at lbhasin@bhasinco.in or lbhasin@gmail.com. Readers should not act on the basis of this information without seeking professional legal advice.
