In a significant ruling, Delhi High Court has said that interest on penalties imposed by the Competition Commission of India (CCI) can only be calculated after the competition watchdog makes demand for penalty recovery and not when it initially finds infringement of the Competition Act.  

Put simply, Delhi HC has in the Geep Industries order held that CCI cannot charge interest on penalty unless it had raised demand notice. 

Interest on penalties will not accrue from the date of CCI’s initial finding of infringement. Instead, interest will start only when CCI issues a demand notice for penalty recovery, the Delhi High Court has ruled.

Demand notices

This is going to affect Competition Commission of India (CCI)  in a number of old cases where demand notices have not gone out, said competition law experts. 

This is because demand notices are issued upon expiry of limitation. Where cases are stuck in appeal, no demand notices are issued. 

Geep Industries case

In the Geep Industries case, the company challenged the CCI’s demand for interest on the penalty from the date of the original decision of infringement finding in 2018. 

The Delhi HC however sided with Geep Industries, stating that interest should be calculated from the date CCI’s formal demand notice was issued in 2023 for recovery of penalty after an appellate court confirms the infringement funding, but reduces the penalty.

Dinoo Muthappa, Partner, Talwar, Thakore & Associates (TT&A), a law firm, said “On the issue of accrual of interest on CCI penalties, the Court has ruled that penalty interest is not payable until the CCI seeks recovery of penalty from infringing companies. Interest will not automatically accrue from the date of the original CCI decision”

The CCI typically gives parties 60 days, which is the limitation period for pursuing an appeal, to deposit penalties levied. The CCI’s demand notice for penalty payment can (per its regulations) only be issued after the expiry of the period granted by CCI. 

In many cases parties have preferred an appeal and appellate courts have stayed the CCI order and penalty payment. As a result, CCI is unable to issue a demand notice. 

“This judgment creates a unique situation where despite potential decades-long appeals, no interest burden is imposed on infringing parties until the highest court’s final decision and the CCI’s subsequent notice for recovery”, Muthappa told businessline.

Some legal experts also said that this Delhi HC judgment may allow corporates to optimise their legal strategy in a sense they will quickly appeal before expiry of period of payment of penalty, as a result of which interest will be payable only after final case.