CCI should Impose penalty on relevant turnover not on whole Turnover: SC

No doubt, the aim of the penal provision is also to ensure that it acts as deterrent for others. At the same time, such a position cannot be countenanced which would deviate from ‘teaching a lesson’ to the violators and lead to the ‘death of the entity’ itself. If we adopt the criteria of total turnover of a company by including within its sweep the other products manufactured by the company, which were in no way connected with anti- competitive activity, it would bring about shocking results not comprehended in a country governed by Rule of Law. Cases at hand itself amply demonstrate that the CCI’s contention, if accepted, would bring about anomalous results. In the case of M/s. Excel Crop Care Limited, average of three years’ turnover in respect of APT, in respect whereof anti-competitive agreement was entered into by the appellants, was only 32.41 crores. However, as against this, the CCI imposed penalty of Rs. 63.90 crores by adopting the criteria of total turnover of the said company with the inclusion of turnover of the other products as well. Likewise, UPL was imposed penalty of 252.44 crores by the CCI as against average of the three years’ turnover of APT of Rs. 77.14 crores. Thus, even when the matter is looked into from this angle, we arrive at a conclusion that it is the relevant turnover, i.e., turnover of the particular product which is to be taken into consideration and not total turnover of the violator.

The doctrine of ‘purposive interpretation’ may again lean in favor of ‘relevant turnover’ as the appropriate yardstick for imposition of penalties. It is for this reason the judgment of Competition Appeal Court of South Africa in the Southern Pipeline Contractors Conrite Walls as quoted above, becomes relevant in Indian context as well inasmuch as this Court has also repeatedly used same principle of interpretation. It needs to be repeated that there is a legislative link between the damage caused and the profits which accrue from the cartel activity. There has to be a relationship between the nature of offense and the benefit derived therefrom and once this co-relation is kept in mind, while imposing the penalty, it is the affected turnover, i.e., ‘relevant turnover’ that becomes the yardstick for imposing such a penalty. In this hue, doctrine of ‘purposive interpretation’ as well as that of ‘proportionality’ overlaps.

In fact, some justifications have already appeared in this behalf while discussing the matter on the application of doctrine of proportionality. What needs to be repeated is only that the purpose and objective behind the Act is to discourage and stop anti-competitive practice. Penal provision contained in Section 27 of the Act serves this purpose as it is aimed at achieving the objective of punishing the offender and acts as deterrent to others. Such a purpose can adequately be served by taking into consideration the relevant turnover. It is in the public interest as well as in the interest of national economy that industries thrive in this country leading to maximum production. Therefore, it cannot be said that purpose of the Act is to ‘finish’ those industries altogether by imposing those kinds of penalties which are beyond their means. It is also the purpose of the Act not to punish the violator even in respect of which there are no anti-competitive practices and the provisions of the Act are not attracted.

We may mention that Mr. Kaul, learned Additional Solicitor General had referred to the statutory regimes in various other countries in his endeavor to demonstrate that it is the concept of total turnover which was recognized in other jurisdictions as well. The attempt was to show that the principle of ‘total turnover’ was prevalent across the globe wherever such laws are enforced. On the contrary, the learned counsel for the appellants pointed out the provision contained in similar statutes of some countries where the concept of relevant turnover had been adopted. South Africa is one such example and, in fact, COMPAT has referred to the judgment of Southern African Competition Appeal Court in this behalf, i.e., Southern Pipeline Contractors Conrite Walls (Pty) Ltd. case. In such a scenario, it may not be necessary to deal with the statutory provisions contained in different countries. In view of interpretation that is given by us to the provision at hand, we would, however, like to comment that in some of the jurisdictions cited by Mr. Kaul, learned Additional Solicitor General, the guidelines are also framed which ensure that the penalty does not become disproportionate, for example, in the UK, the Office of Fair Trade (OFT) has ‘guidelines as to the appropriate amount of penalty’. In contrast, there are no similar guidelines issued as far as India is concerned and in the absence thereof imposition of penalty, taking into consideration total turnover, may bring about disastrous results which happened in the instant case itself with the imposition of penalty by the CCI.