Penalty for anti-trust violations to be based on 'relevant' turnover: Supreme Court

In a major relief to companies found violating anti-trust laws, the Supreme Court has said that penalty imposed by the Competition Commission of India, the anti-trust regulator, on companies should be based on turnover of relevant product or services under enquiry and not on the total turnover.

At present, the CCI imposes a penalty of 10 per cent of the average three years turnover of a company.

In a judgement passed in the Excel Crop Care Limited v Competition Commission of India, the apex court clarified that the term 'turnover' under Section 27(b) must be interpreted as 'relevant turnover', that is, only the turnover from the relevant product/service in respect of which the violation has been committed.  

The Supreme Court emphasized the doctrine of proportionality in the imposition of penalties, to hold that penalties imposed on total turnover would have inequitable and disproportionate results.  The Court also applied the principle of strict construction of penal provisions to hold that there would be no justification for including other products/services of an enterprise when imposing penalties for contraventions committed in respect of only one product/service.

In the Excel Corp Vs CCI, the anti-trust regulator has found three Aluminium Phosphide Tablet manufacturers guilty of rigging tenders issued by Food Corporation of India (FCI) and imposed a penalty to Rs 318 crore.

When the manufacturers appealed at the Competition Appellate Tribunal (Compat), the appellate tribunal reduced the penalty to Rs 10 crore arguing that the penalties imposed on the companies having multiple products should be based on the turnover derived from the product/service under inquiry and not on the total turnover.

The Supreme court upheld the Compat decision on the quantum of the penalty.