United India Insurance Company Limited v. Competition Commission of India

1. National Insurance Co. Ltd.

7.89 20.95 31.10 19.98 0.20

2. New India Assuranc e Co. Ltd.

7.89 20.95 31.10 19.98 0.20

3. Oriental Insurance Co. Ltd.

11.84 3.94 0.04

4. United India Insurance Co. Ltd.

51.30 167.61 248.84 155.91 1.56

16. Admittedly, the said penalty as reduced was deposited by the petitioner on 04.01.2017.

17. Thereafter, in January 2017, the CCI sent another demand notice dated 17.01.2017 calling upon the petitioner to deposit a sum of ₹32,76,000/- as interest on account of a delay of fourteen months in payment of penalty. In response, the petitioner sent a letter dated 30.01.2017 denying the liability to pay interest; it contended that the question of delay would not arise, since the order dated 10.07.2015 levying of penalty was stayed and subsequently the penalty was substantially reduced by the COMPAT. In this view, the petitioner requested the CCI to withdraw the aforesaid demand notice.

18. Thereafter, the CCI filed an appeal (being Civil Appeal NO. 3342/2017) before the Supreme Court under Section 53T of the Act, assailing the order dated 19.12.2016 passed by COMPAT. The said appeal is currently pending before the Supreme Court.

19. In December, 2018, the CCI passed an order dated 06.12.2018 directing the petitioner to deposit a sum of ₹32,76,000/- as interest. Pursuant to the aforesaid order, the petitioner received a recovery notice dated 14.12.2018 calling upon the petitioner to deposit the aforesaid amount within a period of fifteen days, failing which the petitioner would be liable “for appropriate action under the provisions of the Act and the relevant regulations” The aforesaid notice was issued in view of the decision of National Company Law Appellate Tribunal (NCLAT) in Competition Appeal (AT) NO. 590/2015 captioned “SCM Soilfert Ltd. & Anr. v. CCI” on the issue of payment of penalty notwithstanding the pendency of an appeal before the appellate court. In the aforesaid matter, by an order dated 8.08.2018, it was held that the petitioner is liable to pay the interest in terms of the demand notice issued by the CCI.

20. Aggrieved, the petitioner filed the present petition.

21. As observed hereinbefore, the only question that arises for consideration of this Court is whether the demand of interest on the penalty imposed by CCI, is sustainable. Submissions

22. Mr Udayan Jain, the learned counsel appearing for the petitioner submitted that COMPAT had stayed the order imposing penalty, subject to the condition of depositing 10% of the said amount. The petitioner had complied with the said condition and therefore, the demand notice dated 01.10.2015 issued by CCI was unsustainable. He submitted that if the said demand is ignored – since it was contrary to the orders of COMPAT – there was no demand of penalty outstanding against the petitioner. He referred to Regulation 3(3) of the Competition Commission of India (Manner of Recovery of Monetary Penalty) Regulations, 2011 (the Recovery Regulations) and contended that in terms of the said regulation, a demand notice is required to provide time of thirty days from the date of service of the demand notice to the enterprise concerned, to deposit the penalty. He submitted that since a valid demand notice had not been issued prior to the petitioner paying the penalty, no interest was payable since there was no delay. He submits that there has been no delay in paying the penalty.

23. Next, he submitted that the order dated 10.07.2015 passed by the CCI stood merged with the judgment dated 09.12.2016 passed by COMPAT and therefore the period of delay, if any, was required to be reckoned after the said decision was rendered. He relied on the decision of the Supreme Court in Khoday Distilleries Limited v. Shri Mahadeshwara Sahakara Sakkare Karkhane Limited, Kollegal: (2019) 4 SCC 376. He stated that since COMPAT had modified the earlier order passed by CCI, the same ceased to subsist and stood merged with the order dated 09.12.2016 passed by COMPAT. Lastly, he submitted that the respondent cannot take advantage of its own inaction. He contended that the petitioner had complied with the order of COMPAT and had deposited 10% of the penalty amount, as was the condition imposed by COMPAT for staying CCI’s order. He submitted that no notices were issued by CCI immediately after the judgment of COMPAT and CCI had accepted the penalty deposited by the petitioner without raising any objection as to any outstanding interest. He further submitted that CCI had raised the demand for interest after significant delay and it cannot be permitted to take advantage of such delay.

24. He also countered the submission that Regulation 5 of the Recovery Regulations indicated that interest was required to be paid even if the demand had been stayed by a superior court.

25. Mr Bansal, learned counsel appearing for CCI countered the submissions made on behalf of the petitioner. He referred to Regulation 5 of the Recovery Regulations and contended that interest on delayed penalty was statutorily payable. He also contended that if the penalty was reduced or modified and interest had been collected on the entire penalty, an amount commensurate with the reduction was required to be refunded to the concerned enterprise. According to him, it also emphasized the statutory scheme of levy of interest on delayed payment of penalties. He relied upon the decision of the Supreme Court in the State of Rajasthan and Anr. v. J.K. Synthetics Limited: (2011) 12 SCC 518 in support of his contention that interest was liable to be paid even for the period when the demand had been stayed, if the interim stay of the demand is ultimately vacated. He contended that the petitioner was not absolved of its payment liability solely for the reason that it had preferred an appeal against the said demand. Reasons and Conclusion

26. At the outset, it is relevant to refer to Regulation 5 of the Recovery Regulations, which reads as under:- “Interest on penalty.

5. 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: Provided that 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: Provided further that where as 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.”

27. It is clear from the plain reading of the said Regulation that simple interest at the rate of one and one half per cent for every month, or part of the month, commencing from the date immediately after expiry of the period mentioned in the demand notice, is payable. The contention that since the order passed by CCI had been stayed, there was no delay in making the penalties, is unsustainable. The said issue is no longer res integra. In the State of Rajasthan and Anr. v. J.K. Synthetics Limited (supra), the Supreme Court had examined several other decisions and had authoritatively reiterated the position that wherever an interim order or stay is granted, the beneficiary of the interim order is bound to pay interest on the amount withheld or not paid by virtue of the interim order unless the final order indicates otherwise. The relevant extract of the said decision is set out below: -

28. It is material to note that the CCI had found the petitioner to be falling foul of Section 3 of the Act. This finding was not disturbed by COMPAT. The COMPAT had merely reduced the penalty and had modified CCI’s order dated 10.07.2015 to that extent. Such modification would, obviously, relate back to CCI’s order, that is, the order dated 10.07.2015. The contention that the order of CCI had merged with the order passed by COMPAT is correct. However, the COMPAT order reaffirmed CCI’s decision to levy penalty and that decision, having been sustained, cannot be considered as inoperative or non-existent for the period during which it was suspended on account of the stay order. The said stay order having been lifted, the CCI’s order imposing penalty, albeit to a reduced extent, would require to be enforced.

29. The interest on such penalty being a statutory levy is required to be paid.

30. The contention that the demand notice dated 01.10.2015 was illegal, is unpersuasive.

COMPAT had stayed the operation of the order passed by CCI; it had not obliterated the same. By virtue of the said order, the petitioner was not obliged to immediately pay penalty subject to depositing 10% of the said amount. The petitioner availed the benefit of the said order. However, on vacation of the stay, the order passed by CCI as well as the consequential demand notice became operative, albeit, to a reduced extent. Plainly, the petitioner is required to pay interest on the delayed payment.

31. In view of the above, the petition is unmerited and is, accordingly, dismissed. The pending application is disposed of.

VIBHU BAKHRU, J SEPTEMBER 11, 2019 pkv