TMI Blog2015 (4) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... and desist from anti-competitive conduct as directed by CCI. In the case of petitioner (RSI) had lost its registration with DGS&D on 21.12.2011. Thus even prior to the information being filed with CCI and CCI recording its prima facie opinion, the petitioner had ceased to be a DGS&D Rate Contractor. Consequently, the petitioner had neither participated in the Rate Contract nor was capable of doing so. In the circumstances, the question of the petitioner entering into any arrangement or bid rigging or indulging in anticompetitive conduct proscribed by CCI, did not arise. - In the given circumstances, it is amply clear there was neither any allegation that the petitioners had failed to comply with the ‘cease and desist’ order nor in fact the petitioners could have indulged in an anti-competitive conduct after CCI’s order of 06.08.2013. Thus, in the present case, CCI has imposed penalty even though CCI’s ‘cease and desist’ order was not violated and had been fully complied with. - impugned order is, clearly, without application of mind and has been passed in wanton exercise of powers, ignoring the relevant factors and the constitutional principles. - Decided in favour of appellant. - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers including the petitioners, inter alia, alleging bid rigging and market allocation. It was alleged that the participation in the tender was pre-determined, collusive and the bidding pattern was restrictive, indicating formation of a cartel by the bidders in violation to the provisions of the Act. 3.3 On 08.05.2012, CCI recorded a prima facie opinion, under Section 26(1) of the Act, that a case of contravention of the provisions of the Act was made out and referred the matter to Director General (DG) to conduct an investigation and submit its report. DG submitted its report to CCI on 26.12.2012. Thereafter, on 06.08.2013, CCI passed an order under Section 27 of the Act, inter alia, directing the bidders to cease and desist from anticompetitive conduct in future and also file an undertaking to that effect within a period of 30 days from the date of receipt of the order. 3.4 The petitioners and others bidders filed appeals against CCI s order of 06.08.2013, under Section 53B of the Act before the Competition Appellate Tribunal (hereafter COMPAT ). By a common order dated 22.04.2014, COMPAT allowed the interim applications by directing the appellants (other than RSI), to depo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s indulging in any anti-competitive conduct. Further, the petitioners did not benefit in any manner from not filing the undertaking in question. 6. It was also contended on behalf of the petitioners that the show cause notices were defective and invalid as the period for which the purported penalty was sought to be imposed was not mentioned in the notice. Consequently, the proceedings emanating therefrom were also contended to be invalid. It was further submitted that the impugned order is violative of Article 14, Article 19(1)(g) and Article 300-A of the Constitution of the India. 7. The learned counsel for CCI submitted that the petitioners have not challenged the order dated 22.04.2014 of COMPAT and the relief of stay of direction of CCI to file undertakings to cease and desist from anticompetitie conduct was rejected. It was submitted that the show cause notice was issued to the petitioners for not complying with the directions of CCI and the penalty was imposed by CCI in view of the admissions made by the petitioners. The learned counsel for CCI referred to Regulation 36 of the Regulations 2009 and stressed that the levy of penalty for non-filing of the undertaking as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h immediate effect and the opposite parties are also directed to file an undertaking to this effect within a period of 30 days from the date of receipt of this order. 12. The petitioners had also sought interim relief from COMPAT and although the imposition of penalty was stayed in the case of RSI, other entities including Rajkumar Dyeing were directed to deposit 5% of the penalty imposed by CCI. However, COMPAT did not stay the cease and desist order of CCI. The relevant extract of COMPAT s order of 22.04.2014 is as under:- 7. Be that as it may. We find that there is a prima facie case for grant of interim orders. While considering the fact as to whether the appellants are entitled to absolute stay of the impugned order, the learned counsel for the appellants urged that they are already facing a dire financial calamity on account of the impugned order and there is every likelihood that the industry would come to a grinding halt. That of course does not seem to be such a possibility at least in the near future. The fact of the matter is that all these manufacturers are small scale industries and there should be at least encouragement to such industries to grow. However, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y pass all or any of the following orders, namely:- (a) direct any enterprise or association of enterprises or person or association of persons, as the case may be, involved in such agreement, or abuse of dominant position, to discontinue and not to re-enter such agreement or discontinue such abuse of dominant position, as the case may be; (b) impose such penalty, as it may deem fit which shall be not more than ten per cent. of the average of the turnover for the last three preceding financial years, upon each of such person or enterprises which are parties to such agreements or abuse: Provided that in case any agreement referred to in section 3 has been entered into by a cartel, the Commission may impose upon each producer, seller, distributor, trader or service provider included in that cartel, a penalty of up to three times of its profit for each year of the continuance of such agreement or ten per cent. of its turnover for each year of the continuance of such agreement, whichever is higher. (d) direct that the agreements shall stand modified to the extent and in the manner as may be specified in the order by the Commission; (e) direct the enterprises concerned to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) If any person, without reasonable cause, fails to comply with the orders or directions of the Commission issued under sections 27, 28, 31, 32, 33, 42A and 43A of the Act, he shall be punishable with fine which may extend to rupees one lakh for each day during which such non-compliance occurs, subject to a maximum of rupees ten crore, as the Commission may determine. (3) If any person does not comply with the orders or directions issued, or fails to pay the fine imposed under subsection (2), he shall, without prejudice to any proceeding under section 39, be punishable with imprisonment for a term which may extend to three years, or with fine which may extend to rupees twenty-five crore, or with both, as the Chief Metropolitan Magistrate, Delhi may deem fit: Provided that 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 authorised by it. 16. It is apparent from the above that penalties as contemplated under Section 42(2) of the Act are levied as a punitive measure for noncompliance of orders including orders under Section 27 of the Act. Given the nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of orders of Commission.-The Commission shall have power to direct the parties concerned to file an affidavit of compliance of its order or such other documents in the manner specified in its order. 20. The plain language of Regulation 36 of the Regulations 2009 clearly supports the view that the direction to file an undertaking was, in substance, a direction seeking compliance of the substantive orders passed under Section 27 of the Act, namely, the directions to cease and desist from anticompetitive conduct. 21. It was contended on behalf of CCI that COMPAT had rejected the interim prayer for stay of the direction for filing an undertaking to cease and desist from anti-competitive conduct as directed by CCI. However, this is not entirely accurate. COMPAT had not found the necessity to interfere with CCI s direction to cease and desist and had declined to stay the same; the question of filing the undertaking was not commented upon by COMPAT as the same was merely in aid to ensure compliance to the cease and desist order; COMPAT did not in any manner either enhance or dilute the substantive direction to cease and desist from anti-competitive conduct as issued by CCI. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cerned with the process, method or manner in which the decision-maker has ordered his priorities, reached a conclusion or arrived at a decision. The very essence of decision-making consists in the attribution of relative importance to the factors and considerations in the case. The doctrine of proportionality thus steps in focus true nature of exercise-the elaboration of a rule of permissible priorities. 19. de Smith states that proportionality involves balancing test and necessity test . Whereas the former (balancing test) permits scrutiny of excessive onerous penalties or infringement of rights or interests and a manifest imbalance of relevant considerations, the latter (necessity test) requires infringement of human rights to the least restrictive alternative. [Judicial Review of Administrative Action (1995), pp. 601-05, para 13.085; see also Wade Forsyth: Administrative Law (2005), p. 366.] xxxx xxxx xxxx xxxx xxxx 28. Applying the doctrine of proportionality and following CCSU [(1984) 3 All ER 935 (HL)], Venkatachaliah, J. (as His Lordship then was) observed: (SCC p. 620, para 25) The question of the choice and quantum of punishment is within the jurisdicti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n must, so to speak, direct himself properly in law. He must call his own attention to the matters which he is bound to consider. He must exclude from his consideration matters which are irrelevant to what he has to consider. If he does not obey those rules, he may truly be said, and often is said, to be acting unreasonably. 29. The Supreme Court in the case Indian Rly. Construction Co. Ltd. v. Ajay Kumar: (2003) 4 SCC 579 also considered and noted the decision of Wednesbury Corporation (supra) and held has under:- 18. Therefore, to arrive at a decision on reasonableness the court has to find out if the administrator has left out relevant factors or taken into account irrelevant factors. The decision of the administrator must have been within the four corners of the law, and not one which no sensible person could have reasonably arrived at, having regard to the above principles, and must have been a bona fide one. 30. It is well settled that discretion with the public authority must be applied after taking into account relevant considerations. In the present case, CCI failed to apply its mind to most of the relevant considerations. First of all, CCI has not taken i ..... 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