[By Shourya Mitra and Ishaan Saraswat]

The authors are students of Jindal Global Law School.

 

Introduction 

Upon perusing the National Company Law Appellate Tribunal’s (NCLAT) approach to competition appeals, it appears that there is a trend of requiring a 10% deposit to the NCLAT as a prerequisite for hearing penalties resulting from an order of the CCI. However, questions arise regarding the imposition and impact of this mandate. In the case of Make My Trip (“MMT-GO“), the NCLAT sought a 10% deposit of the penalty as a precondition for hearing the appeal, but no stay was granted by the NCLAT regarding the remaining fine. The Delhi High Court had to clarify that no recovery could be initiated on the remaining 90% penalty amount after MMT-GO deposited 10% of the penalty amount to the NCLAT. However, in the case of Google, the NCLAT did not stay the order or elaborate further on the penalty despite seeking a 10% deposit. This piece analyzes the validity of such a condition and discusses inconsistencies in the imposition of the 10% penalty by the NCLAT in the aforesaid cases involving MMT-GO and Google.

The Saga of an Appeal

Section 53B of the Competition Act, 2002 (“the Act”) provides for the right to appeal against the decision of the CCI before the NCLAT. It is a settled position in law that the right to appeal is created by the statute, which means that the right to appeal can only be limited or restricted by the provisions of the statute that creates it. In other words, the right to appeal is not an absolute right, and it can be subject to certain conditions or restrictions.

Under the Act, the aggrieved party must file the appeal within sixty days of the decision being appealed against. Apart from this, the Act does not impose any other requirements or limitations on the aggrieved party.

We can trace the inception of the 10% of penalty amount to the case of Ultratech Cement Ltd. v. Competition Commission of India, wherein an ancillary question before the Supreme Court of India  was whether the NCLAT  can direct the aggrieved party to deposit ten percent of the penalty imposed as a condition precedent to hearing the appeal. The Supreme Court opined that decisions or penalties involving the payment of money are seldom overturned since the affected party can usually be compensated if the decision is later found to be flawed. Therefore, according to the Apex Court, if the Tribunal decides to require the appellants to pay ten percent of the penalty owed, it would be appropriate, even if it’s only an interim measure. Rather, it would be an equitable way to handle the matter.

Additionally, as per the Supreme Court in Himmatlal Agrawal v. Competition Commission of India (“Himmatlal”), the NCLAT is a legal body created by a statute, and its actions are limited by the provisions of the law. The Act does not state that the Tribunal has the power to require an appellant to deposit a specific amount before hearing their appeal. Rather, the condition to deposit ten percent of the penalty was only imposed in relation to the stay of the penalty order issued by the CCI. Therefore, in the event that a deposit is not made, the Tribunal has the authority to lift the stay on the CCI’s decision and continue with the appeal, rather than dismissing the appeal itself. In this regard, the NCLAT has the authority to mandate that a portion of the penalty be deposited as security to stay the decision of the CCI.

A Fork in the Road

Having discussed the jurisprudence of the 10% penalty, it is clear that the imposition of the 10% penalty as a precondition to hearing the appeal cannot be sustained as a mandate and that the lack of an explicit stay on the penalty would go against the settled position of law. However, such an inconsistent application of law will now be shown through the contrasting orders of MMT-GO and Google.

The CCI on October 19, 2022, imposed penalties on MMT-GO for violating the provisions of the act, as it was abusing its dominant position. The Commission also found that MMT-GO had contravened the provisions of Section 3(4)(d) read with Section 3(1) as MMT-Go had entered into Vertical anti-competitive agreements with the service providers.

On appeal to the NCLAT, the Tribunal directed MMT-GO to deposit 10% of the fee as a precondition to hearing the appeal. However, this was challenged before the Delhi High Court as the NCLAT did not impose any stay on the recovery of the remaining penalty.. The Court noted that the pre-deposit of the 10% could not be merely for the admission of the appeal. The Court felt the need to clarify the stay on the order and consequently, it confirmed that no recovery could be initiated with respect to the 90% remaining penalty amount.

The outlier in a similar time period as the case of MMT, is the case of Google. Therein, the CCI had imposed penalties on Google for contravening the provisions of the Act. One of them pertained to the abuse of dominance via mandatory installation of apps (Competition Appeal (AT) No. 1 of 2023) while the other was for imposition of payment methods on the developers (Competition Appeal No.4 of 2023).

Across the two orders, NCLAT sought the deposition of 10% fine. However, the NCLAT did not stay the order in either of the cases. In Competition Appeal (AT) No. 01 of 2023, NCLAT stated that there was no requirement for an interim stay with respect to the order of the CCI. It did not elaborate on the penalty nor any consequent stay. The tribunal simply held that there was no need for passing any interim order. The question that the authors are proposing is whether there could be any forceful deposition of the 10% penalty as a precondition to hearing the appeal and without any stay on recovery of the penalty.

Ideally, the penalty imposed by the NCLAT as a precondition cannot be sustained as a mandate. As the Apex Court in Himmatlal has clearly ruled, the NCLAT, as a creation of the statute, cannot make the deposit a precondition. The 10% of the amount can only be sought in relation to the stay. The Delhi High Court also reiterated the need for an explicit stay, the lack of which on the part of the NCLAT led the High Court to stay the recovery of the amount itself. On a bare reading of the Google order of the NCLAT, it is limpid that there is no stay on the penalty despite the 10% deposit, as can be seen below:

“So far as the second part of the order i.e. penalty is concerned, the appellant is directed to deposit 10% of the penalty amount within three weeks… We are of the opinion that, at the moment, considering the voluminous nature of the appeal and the fact that the date of final hearing is fixed on 03.04.2023, there is no need to pass any interim order.”

Further, the NCLAT has possibly erred in not staying the recovery of the 90%. The 10% deposit sought by the NCLAT should have had reasons in the Google cases, as the Delhi High Court pointed out with respect to the penalty in the MMT-GO matter. The NCLAT should have at the very least, deliberated upon the stay with respect to penalty in the order of the Google case. The same is against the principle of judicial discipline and stare decisis and disobeys both the order of the Delhi High Court in the MMT-GO case, as well as fails to appreciate the stand of the Apex court in the Himmatlal.

The Way Forward

In conclusion, the inconsistent application of the 10% penalty by the NCLAT highlights  the need for greater clarity on the role of the appellate authority in enforcing penalties imposed by the CCI. Effectively, cases like Google result in paying a hefty amount to exercise a statutory right while the penalty is not even stayed, which may lead to financial strain on the party amidst the legal proceedings. Moreover, as elucidated above, this is not in conformity with  the established position of law.

The proposed Competition Amendment Bill, 2022, which seeks to amend the Competition Act, 2002, provides a way forward by requiring a higher deposit of 25% of the penalty amount before any appeal can be entertained by the NCLAT. However, the amended provision does not mention a stay on the CCI penalty, meaning that the 25% may simply become a precondition for an appeal rather than a precondition for staying the penalty. This silence, for now, stands to legislatively overrule Himmatlal.

It is crucial for the legislature to provide clear guidelines on the enforcement of penalties imposed by the CCI to ensure consistency in their application. The proposed amendment, if passed, will strengthen the enforcement mechanism and bring greater transparency and predictability to the competition law regime in India. Overall, the proposed amendment is a step towards the effective implementation of competition law in India, provided the legislature clarifies its stance regarding the stay on the penalty imposed.