TMI Blog2023 (4) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... on (1) of Section 3 of the Act shall be void. Such an agreement, which directly or indirectly determined purchase or sale price of goods is also presumed to have an appreciable adverse effect on competition as per sub-section 3 of section 3 - once an agreement has been entered into by parties which is in contravention of the provision of sub-section 1 of section 3, shall be presumed to have an appreciable adverse effect on competition, and there such behaviour is anti-competitive that would invite penalty under section 27 of the Act. Geep Industries is very clearly in a bilateral ancillary cartel with the Panasonic, while Panasonic is found to be member of primary cartel in the dry cell batteries market. Thus, even though Geep is an extremely small player in the dry cell batteries market which may not be capable of influencing the market in any appreciable manner, the fact that it agrees through the PSA to follow market prices as set by Panasonic makes it clear that such behavior is anti-competitive, and Geep Industries being in contravention of Section 3 (1), (2) and (3) is clearly established, as has been adjudicated by the CCI in the impugned order. The Proviso to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e with their offensive behavior as they were the persons responsible for entering into PSA and being knowledgeable persons were supposed to have knowledge and understanding of law in relation to behaviour of corporate entities in a market. Therefore, the penalties imposed on Ms. Pushpa M, Mr. Joeb Thanawala, and Mr. Jainuddin Thanawala by the Impugned Order need no modification. Appeal allowed. - Competition Appeal (AT) No.87, 88,89 & 90 of 2018 - - - Dated:- 31-3-2023 - [Justice Rakesh Kumar] Member (Judicial) And [Dr. Alok Srivastava] Member (Technical) For the Appellant : Mr Balaji Subramanian, Ms Aayushi Sharma, Mr. Akash Kundu, Advocates. For the Respondent : Mr. Naveen R. Nath, Sr. Advocate, Mr Avinash Sharma, Ms Akanksha Kapoor, Mr. Siddhant Chaudhary, Advocates for R1. Ms Shama Nargis, Dy. Director (Law) CCI. JUDGMENT [Per: Dr. Alok Srivastava, Member (Technical)] 1. The appeals considered in this judgment have been filed by the Appellant -Geep Industries (India) Pvt. Ltd. (in short Geep Industries ) under Section 53B(1) of the Competition Act, 2002 (in short the Act ) against impugned order dated 30.08.2018 passed by the Competition Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under the Lesser Penalty Regulation before the CCI on 26.08.2016 and 30.08.2016 respectively. He has added that the applications by Eveready and Nippo were filed subsequent to a search and seizure operation conducted by the Director General, CCI on the premises of the manufacturers. He also added that the existence of a primary cartel comprising of the three major manufactures viz. Eveready, Nippo and Panasonic is admitted by all the parties of the said cartel and the Lesser Penalty Application was filed by R-2 along with R-3 on 07.09.2016 for grant of lesser penalty under Section 46 of the Act r/w Regulation 5 of the Lesser Penalty Regulations with respect to the existence of an ancillary cartel comprising of PECIN and Geep Industries. 6. The Appellant has further added that as is evidenced by Clause 4.3 of the PSA, an understanding was arrived at between R-2 and the Appellant to regulate the sale price of the dry cell batteries in the same market where the primary cartel existed. After the CCI passed an order under Section 26(1) of the Act directing the DG to investigation into the information contained in the Lesser Penalty Application , the DG investigated the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid market. 10. The Ld. Counsel for Appellant/Geep Industries has not pressed his case on merits and argues that in the light of the finding of a bilateral ancillary cartel of Geep and Panasonic, an incommensurately high penalty has been imposed on Geep Industries though its offensive behavior is mitigated by the fact that it is an extremely small player in the market and further it was in no position to refuse the condition suggested by PECIN. He has referred to Clause 4.3 of the PSA to contend that since Panasonic, which was manufacturing and supplying unbranded batteries to Geep, was a major player in the same market it imposed a condition on Geep that it will not take any steps which are detrimental to PECIN s market interests particularly in respect of market prices, and Geep was not in a position to contest this clause as its business was largely depended on the supply of dry cell batteries by Panasonic. 11. The Ld. Counsel for Geep Industries has, therefore, focused his arguments on the quantum of penalty imposed on Geep Industries in the impugned order claiming that since the business of dry cell batteries of Geep Industries is very small and it has not been profita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unambiguously found in the dry cell batteries market. He has further argued that Geep Industries did not participate in the proceedings before the CCI and provided no comments on the DG s report, nor its officers/employees submitted any replies before the CCI, even though the DG s report was forwarded to them and the point about infringement of Section 3 of the Act was clearly made out. The Ld. Sr. Counsel for CCI has thus maintained that the Geep Industries has not attempted to provide any defence to its anti-competitive behavior and has therefore, admitted to infringing Section 3 of the Act and is, therefore, liable for penalty as is laid down in law. 13. The Ld. Sr. Counsel for CCI has referred to Section 3 of the Act to contend that once anti-competitive behavior of a party has been established, there is no option for the CCI but to impose penalty under Section 27 of the Act. He has clarified that the Lesser Penalty Regulations and Section 46 of the Act allow the party making the Lesser Penalty Application to be let off in a lenient manner but Geep industries, which is also a defaulter, cannot be allowed to go scot free since it is found to be contravening the law. He ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have an appreciable adverse effect on competition: Provided that nothing contained in this sub-section shall apply to any agreement entered into by way of joint ventures if such agreement increases efficiency in production, supply, distribution, storage, acquisition or control of goods or provision of services. Explanation. For the purposes of this sub-section, bid rigging means any agreement, between enterprises or persons referred to in sub-section (3) engaged in identical or similar production or trading of goods or provision of services, which has the effect of eliminating or reducing competition for bids or adversely affecting or manipulating the process for bidding. Competition Commission of India (Lesser Penalty) Regulations, 2009 Regulation 5. Procedure for grant of lesser penalty. (1) For the purpose of grant of lesser penalty, the applicant or its authorized representative may make an application containing all the material information as specified in the Schedule, or may contact, orally or through e-mail or fax, the designated authority for furnishing the information and evidence relating to the existence of a cartel. The designated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed above, as in the case of first applicant, shall apply mutatis mutandis. (9) The decision of the Commission of granting or rejecting the application for lesser penalty shall be communicated to the applicant. 17. We note that sub-section (1) of section 3 of the Act prohibits an enterprise to enter into any agreement in respect of supply of goods or services which causes or is likely to cause an appreciable adverse effect on competition within India and sub-section (2) of Section 3 of the Act lays down that any agreement entered into in contravention of provisions of sub-section (1) of Section 3 of the Act shall be void. Such an agreement, which directly or indirectly determined purchase or sale price of goods is also presumed to have an appreciable adverse effect on competition as per sub-section 3 of section 3. 18. Thus, it is lucidly clear that once an agreement has been entered into by parties which is in contravention of the provision of sub-section 1 of section 3, shall be presumed to have an appreciable adverse effect on competition, and there such behaviour is anti-competitive that would invite penalty under section 27 of the Act. 19. In the present ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount of profits made out of such agreement by the cartel or ten per cent of the average of the turnover of the cartel for the last preceding three financial year, whichever is higher; 22. The Proviso to Section 27(B) empowers the CCI to impose upon a cartelizing company a penalty which can be upto three times of its profits for each year of the continuance of such agreement or 10% of its turnover for each year of the continuance of such agreement, whichever is higher. It is not disputed that the duration during which the bilateral ancillary cartel was operating by virtue of the PSA was from 01.10.2010 to 30.04.2016. On this basis the CCI relied on the figures of turnover and profits provided by Geep Industries to infer that penalty of upto 10% of its turnover for each year of the continuance of the cartel is found to be more than the penalty of upto three times of its profits for each year of continuance of the cartel, and in such a situation, the CCI decided to impose upon Geep Industries a penalty @ 4% of its turnover for each year of the continuance of the cartel each year of the continuance of the cartel which amount to Rs. 9,64,06,682/-. 23. We now consider the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l the cases cited above, was dependent on the facts and circumstances of each of the cited cases and the quantum of penalty was reduced in some cases. In the facts and circumstances of the present cases, we are, persuaded to hold the view that in the present case Geep Industries which holds a miniscule share of the total market, which is less than 1%, was not in a position to influence competition in the market by resorting to price fixation by participating in the bilateral ancillary cartel and, therefore, this would be a mitigating factor while imposing penalty on Geep Industries. 27. Ld. Counsel for the Appellant has also cited the judgment of Hon ble Supreme Court in S.N.Mukherjee V. Union of India [1990 4 SCC 594] which is as follows: 36. Reasons, when recorded by an administrative authority in an order passed by it while exercising quasi-judicial functions, would no doubt facilitate the exercise of its juris- diction by the appellate or supervisory authority. But the other considerations, referred to above, which have also weighed with this Court in holding that an administrative authority must record reasons for its decision, are of no less significance. These consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute. Those in charge of the affairs of the Company in failing to register the Company as a dealer acted in the honest and genuine belief that the Company was not a dealer. Granting that they erred, no case for imposing penalty was made out. 30. According to the above-mentioned judgment, penalty should be imposed for failure to perform statutory obligations using the as a discretion of the Authority. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew that the market share of the Appellant in the relevant market was only about 1%, and it was barely able to function with meagre profit, an exorbitant fine would have been fatal for the business of the Appellant and may have thrown the Appellant out of the market. In the present case, we note that the Appellant has been imposed a penalty @4% amounting to Rs. 9,64,06,682/- which is certainly exorbitant looking to the annual turnover and profits of the Appellant from 2010-11 to 2016-17 as is evident from para 34 of the impugned order. In such a situation, we feel that this would be a mitigating factor with respect to Geep Industries in the present case. 33. We also take note of the fact that Geep Industries has turned in losses for the years 2010-11, 2011-12 2012-13 and given small profits in later years, and therefore it has barely managed to hold on to its meagre market share to survive in the said market. Thus, Geep Industries is only a minor player in the dry cell batteries market which, in order to run its business, was buying unbranded batteries from PECIN. PECIN, being the complainant of the Lesser Penalty Application, has received benefit and no penalty has been impos ..... X X X X Extracts X X X X X X X X Extracts X X X X
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