On 8 May, 2017, in a landmark judgment, the Hon’ble Supreme Court upheld the principle of “relevant turnover” for determination of penalties in competition law contraventions; and settled a critical issue in India’s antitrust jurisprudence, which was heavily debated amongst all stakeholders for over five years.
The ruling arises out of a proceeding involving an alleged contravention of Competition Act in the public procurement of Aluminium Phosphide Tablets by the Food Corporation of India (FCI) and imposed a penalty at the rate of 9% of the total turnover of the concerned ALP manufacturers – namely, Excel Corp Care Limited (Excel), United Phosphorus Limited (UPL) and Sandhya Organic Chemicals Private Limited (Sandhya).
The COMPAT in its final order upheld the CCI’s order as to the existence of the contravention under the Competition Act. However, it significantly reduced the penalties imposed by the CCI. COMPAT’s modification of penalties was based on the principle that the reference to the term “turnover” in Section 27(b) of the Competition Act would, in the facts and circumstances of the case, mean “relevant turnover”, i.e. turnover derived from the sales of goods or services, which are found to be the subject of contravention.
COMPAT’s order was challenged by the CCI before the Supreme Court. CCI contended that the term “turnover” as used in the Competition Act must always be interpreted as “total turnover” of the enterprise in contravention. The CCI contended that the COMPAT had added words to the Competition Act by inserting the word “relevant” before the term “turnover”. ALP tablets manufacturers, led by Excel, on the other hand, opposed the same by contending that it was the interpretation extended by the CCI, which led to adding the word “total” or “entire” before the term “turnover”.
This judgment, from the highest court of the land, is likely to be followed in all cases where the issue of “relevant turnover” is pending or raised either before the DG/CCI or at the Appellate Stage or even before the Supreme Court itself. The judgment lays the foundation for penalty imposition under the competition law regime in India, leading to greater certainty and transparency in penalty imposition. The same will benefit all stakeholders functioning within the framework of the Competition Act.