MOST OF CC'S PENALTIES ARE STUCK IN COURT

(MINT)

Since its inception in 2009, the Competition Commission of India (CCI) has levied ₹ 13,900
crore in penalties on companies for violating rules. The regulator’s success rate in recovering the
money is, however, alarmingly dismal at ₹ 82.1 crore, CCI data shows.
A CCI order levying a ₹ 6,300 crore penalty on 11 of the country’s largest cement makers for
alleged cartelization is a case in point. On Friday, the Competition Appellate Tribunal (Compat)
set aside CCI’s 21 June 2012 order and directed the regulator to hear the matter afresh.
This has been the fate of many such orders. Judicial appeals have either delayed or blocked CCI
from recovering penalty money, making the regulator appear ineffective.
“The reason for a small recovery of penalty vis-à-vis the total collection is that 97% of the
penalty (approximately) has been stayed by the courts/appellate authority," said Smita Jhingran,
secretary at the CCI, explaining the gap between the penalty levied and the amount recovered.
Since the fines imposed are large, firms will always want to appeal the orders rather than just pay
the penalty, say legal experts. “It is easier for a party to try and seek a stay on a large amount,"
said Sandeep Parekh, founder, Finsec Law Advisors. “It pinches the bottomline."
The fine imposed on the 11 cement firms in 2012 was, in fact,the highest penalty imposed by
CCI.
In a recent 17 November order, it imposed a combined penalty of ₹ 257.91 crore on three of
India’s largest airlines—Jet Airways (India) Ltd, Interglobe Aviation Ltd(which runs IndiGo)
and SpiceJet Ltd.
The amount was arrived at by calculating 1% of each airline’s annual revenue. The fine was
imposed after investigating a complaint over the fixing of fuel surcharges in cargo transport.
Some experts say CCI may be partly to blame for the poor track record in collecting penalties.
“The reason why penalty cases are stayed or sent back for fresh investigation is the lack of sound
reasoning for the fine in the CCI orders," said Ramesh Vaidyanathan, founder and managing
partner at Advaya Legal.
“Discretion to impose penalty should be exercised judiciously and orders well reasoned so that it
can be defended right up to the appellate levels."
Vaidyanathan suggests that companies should also be forced to deposit a significant portion of
the penalty before an appeal.
Big companies have an inherent advantage as they have more resources to defend themselves
during a review, said Shriram Subramanian, founder and managing director of InGovern, a proxy
advisory firm.
“The sophistication is higher, the resources are higher to counter (the regulator)," he said.
To be sure, CCI’s poor track record in recovering fines is not unique. Many other such
institutions have found it difficult to counter delays caused because of the time-consuming
judicial review system.
For instance, attempts made by banks to recover dues using debt recovery tribunals (DRTs) have
not met with much success.
Close to 60,000 cases pending with DRTs involving bank dues worth ₹ 3.74 trillion are stuck.
DRTs were set up to provide expeditious adjudication and recovery of debt by banks and
financial institutions.
As many as 58,906 cases were pending in the Supreme Court as on 1 December, law minister
D.V. Sadananda Gowda said in a written reply to Parliament. Orders of quasi-judicial forums
being challenged in high courts was among the reasons cited for the pendency of cases in courts,
according to the reply by Gowda.
However, the low success rate in executing its own orders has not deterred CCI from pursuing
new cases. It has taken up 27 suo motu cases so far, CCI secretary Jhingran said in an emailed
response to a query.
The total number of cases handled by CCI has also risen— from 271 cases as of June 2012 to
590 as of March 2015, according to data available on CCI website. “The number of cases
received over the years has steadily increased since the awareness among the general public
about the Competition Commission has increased," said Jhingran.