SC: Notice of Contravention is Sufficient for Penalty under Competition Act
The case arose from an information filed by M/s Crown Theatre before the Competition Commission of India (CCI), alleging that the Kerala Film Exhibitors Federation (KFEF) and its office-bearers, Mr. P.V. Basheer Ahamed (President) and Mr. M.C. Bobby (General Secretary), engaged in anti-competitive conduct. It was alleged that the Federation threatened distributors and pressurised them not to supply films to Crown Theatre, ultimately leading to the informant’s resignation from the Federation.
The CCI ordered an investigation. The Director General’s report found KFEF guilty of contravention of Section 3(3)(b) of the Competition Act, 2002, and identified the President and General Secretary as key decision-makers liable under Section 48. Based on these findings, the CCI imposed penalties on KFEF and its office-bearers, including a monetary penalty of 10% of their average income and a two-year debarment from the Federation’s affairs. COMPAT upheld the contravention against KFEF but set aside the penalty and debarment on the two office-bearers, holding that no separate notice proposing a penalty had been issued. The CCI appealed this finding before the Supreme Court.
Main Issue: Whether a notice forwarding the DG’s investigation report to office-bearers is sufficient for penalty and debarment under Section 48 of the Competition Act, or whether a second show-cause notice specifically proposing a penalty is mandatory.
SC Held: The Supreme Court allowed the appeal and set aside the COMPAT’s order insofar as it had relieved the two office-bearers from penalty and directions. It restored the CCI’s order in full. The Court held that the notice issued by the CCI, together with the DG’s report fixing personal liability under Section 48, was adequate compliance with the principles of natural justice and with the statutory scheme.
The Court clarified the framework of the Competition Act and observed that the law envisages a single consolidated hearing, which ends with both the finding of contravention and the imposition of a penalty. A second show-cause notice only on the proposed penalty is not required. The purpose of the notice is to respond to the charge of contravention itself, not to debate the penalty quantum. Requiring a second notice, the Court cautioned, would cause avoidable delay and defeat the Act’s mandate of speedy adjudication.
Therefore, the Court on the merits, upheld the penalty of 10% of average income and the two-year debarment, finding them proportionate and justified, particularly in view of the office-bearers’ repeated involvement in anti-competitive conduct in earlier matters. It directed that the two-year debarment shall take effect from December 1, 2025.
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