On December 18, 2018, a division bench of Delhi High Court has passed a judgement in the matter of Mahyco Monsanto Biotech (India) Private Limited & Anr. v. Competition Commission of India, inter alia, holding that simultaneous inquiry can be held against both the company and its directors/officers for alleged violation of the Competition Act, 2002 (“Act”). Further, it has specified that penalties can be imposed against the individuals on the basis of their income derived from the company in terms of Section 27 of the Act.
Issue 1: Whether no notice can be issued to the Directors / Persons In-charge of the Company till the CCI returns a finding against the Company that it has indulged in anti-competitive activities under Sections 3 and 4 of the Act?
The Court held that notice can be issued to the directors, even de hors a finding against the company and relied on the following observation of the Delhi High Court in Pran Mehra v. Competition Comission of India and Anr.,:
“there cannot be two separate proceedings in respect of the company (i.e. VeriFone) and the key-persons as the scheme of the Act, to my mind, does not contemplate such a procedure…It is no doubt true that the petitioners can only be held liable if, the CCI, were to come to a conclusion that they were the key-persons, who were in-charge and responsible for the conduct of the business of the company. In the course of the proceedings qua a company, it would be open to the key-persons to contend that the contravention, if any, was not committed by them, and that, they had in any event employed due diligence to prevent the contravention. These arguments can easily be advanced by keypersons without prejudice to the main issue, as to whether or not the company had contravened, in the first place, the provisions of the Act.”
Issue 2: Whether vicarious liability of persons-in-charge (as contained in Section 48 of the Act) be applicable to a contravention of Sections 3 and 4 of the Act?
On the second issue the Court held that such vicarious liability can be imputed even upon a contravention of Sections 3 and 4 of the Act and noted as follows:
“the Officers / Directors can be proceeded against, along with Company. We also say that the Officers / Directors can only be liable if the CCI were to come to the conclusion that they were the key persons who were In-charge and responsible for the conduct of the business of the Company. On a perusal of Section 27 of the Act, it is clear that it stipulates, the CCI on a finding that there is a contravention of Section 3 or Section 4, can pass orders against an ‘enterprise’ and a ‘person’ i.e individual, who has been proceeded against, imposing penalty.”
Further, the plea taken by the appellants was that the penalty under Section 27 (b) of the Act, being 10% of the average ‘turnover’ for the last 3 preceding years cannot be applicable to a person / individual / director / official as there is no ‘turnover’ of a person. On this issue, the Division Bench relying on the judgement of the Supreme Court in Board of Muslim Wakfs Rajasthan v. Radha Krishna(1979) 2 SCC 468, to explain the general meaning of the word ‘turnover’, held that, the turnover, in the context of officers / directors has to be interpreted as the income of the officers / directors from the company, as there cannot be an income of an officer / director from an infringing product.
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