The last couple of weeks have created a buzz in the business sector following a notification of an amendment by the government to the CCI regulations. In an interesting development, the government has amended the Competition Commission of India (Manner of Recovery of Monetary Penalty) Regulations to include an interest on the unpaid amount of the fines. This has been done to ensure that the penalties imposed on erring entities are duly recovered.
The said change to the Competition Commission Regulations as notified on July 30th seeks to impose a simple interest of 1.5% per month on any penalty imposed by the CCI, in case of delay in payment, which will be specified in the demand notice issued to the fined entities.
The CCI acts as a watchdog of fair trade practices across different business sectors and imposes fines on those found to have indulged in anti-competitive practices. To ensure that the fines imposed on any erring bodies are duly recovered, the CCI regulations have been amended, and a special provision has been added to the demand notice, which is annexed as Form 1, warning the entities of the consequences of non payment of the penalties. Until now, there were no explicit details of the interest mentioned in the demand notices.
A new paragraph inserted in the demand notices reads that if the entity fails to deposit the penalised amount, it would be liable to pay a simple interest at the rate of 1.5% on the unpaid amount, “for every month or part of a month comprised in the period commencing from the date immediately after the expiry of the period mentioned in this demand notice and ending with the date on which the demand is paid”. The demand notice also states that besides initiating action for the non compliance of order(s), the CCI shall take necessary steps for the recovery of the unpaid amount.
Although the CCI has imposed severe fines for a range of violations across sectors, it has failed to actually recover most of the amount due. By an estimate, about penalties worth thousands of crores are yet to be recovered, as several of the COMPAT’s ruling are still being litigated upon. According to reports, as of December last year, the CCI had recovered only Rs. 20 crore out of Rs. 8000 crore due to it from 154 different entities.
It is evident that this step has been taken with a view to apprise the recipients of the demand notice of the possible consequences of defaulting on the payment of the fines imposed. Clearly, the CCI is sending a message to the business sector. “Pay up or pay the price”, seems to be the agenda of the youngest regulator in India. Moreover, the latter part of the amendment seems like an indication that the use of regulation 10 of the CCI regulations might be imminent in future cases of default.
Regulation 10 enumerates the “Other Modes of Recovery” that can be undertaken by the CCI apart from the issuance of recovery certificate, which are attachment and sale of moveable as well as immoveable property of the enterprise. This small amendment undoubtedly gives teeth to the CCI like never before.
This comes as a long awaited and much welcome change. The powers that the amendment confers upon the CCI will certainly ensure that erring entities will toe the line when it comes to following the orders passed by the Commission. It may also reduce lengthy and frivolous litigation as, the longer an enterprise takes to pay the penalty, the more it costs the enterprise, irrespective of the decision of the appellate body. And given the unpaid amount that is yet to be recovered by the fair trade watchdog, this move couldn’t have come a day sooner.
This post has been authored by Rishabhdev Jain and Aishwaria Iyer, students at the West Bengal National University of Juridical Sciences.
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