Most of CCI’s penalties are stuck in court

Mumbai: India’s competition regulator has netted a paltry 0.6% of the total amount of fines that it has imposed on companies as lengthy judicial reviews and overturned orders have rendered the anti-trust watchdog almost toothless.

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.